Annual Report Reference document AAA/Aaa/AAA

Transcription

1 Annual Report 2004 Reference document AAA/Aaa/AAA

2 ANNUAL REPORT 2004 /PAGE 1 table of contents Profile PAGE 1 Profile PAGE 2 Message from the Chairman PAGE 4 Interview PAGE 6 Key figures PAGE , a favourable economic environment 2004, a year of transition Credit market The covered bond market in 2004 The challenges of the covered bond market in 2004 PAGE 15 Legal, economic and institutional safeguards Legal safeguards Economic safeguards Institutional safeguards Rated AAA, Aaa, AAA due to the legal framework and quality of management at Compagnie de Financement Foncier PAGE 21 Top-quality assets The quality of the assets results from the law on Sociétés de Crédit Foncier and reflects the quality of the production of Crédit Foncier de France A secure and expert loan acquisition process PAGE 29 Secure risk management Compliance with total overcollateralisation Management of credit risk Management of interest rate risk Management of currency risk Management of liquidity risk PAGE 35 A recognised issuance policy 2004 overview of the issuance policy A flexible issuance policy adapted to investor demand Financial communication & Investor relations PAGE 41 Financial report 42 Management report 77 Corporate financial statements 128 Report of the Chairman of the Board of Directors according to the Financial Security Act 140 Legal information 168 AMF cross reference index This document is a full translation of the original French text. The original document was filed with the Autorité des Marchés Financiers (French Financial Markets Authority) on April 8, 2005, in accordance with articles to of its general regulations and enregistred under the number D , and represents the French document de référence of the Compagnie de Financement Foncier. As such, it may be used in support of a financial transaction when accompanied by a prospectus duly approved by the AMF. a Société de Crédit Foncier (scf) created by groupe crédit foncier de france in 1999 In compliance with the Savings and Financial Security Act of June 1999, Crédit Foncier de France, a financial institution founded in 1852, created the SCF ( Société de Crédit Foncier ) Compagnie de Financement Foncier on July 23, At this time, the existing stock of bonds and eligible assets was transferred to this new entity from Crédit Foncier de France and refinanced. As the Société de Crédit Foncier of Groupe Crédit Foncier de France (AA-/ Aa3/AA-) and its parent company Groupe Caisse d Épargne (AA/Aa2/AA), Compagnie de Financement Foncier is their dedicated AAA/Aaa/AAA refinancing vehicle. france s leading private issuer in 2004 With an issue volume of 11.2 billion ( 9.6 billion in 2003), the Company became France s leading private issuer in Within the covered bonds market, Compagnie de Financement Foncier is the principal issuer of obligations foncières (with a market share of close to 50%), and is one of Europe s top ten issuers of covered bonds. Since its creation in 1999, it has issued 43.7 billion worth of obligations foncières. As at December 31, 2004, the outstanding amount of obligations foncières totalled 41.1 billion. activities strictly regulated by the 1999 act Compagnie de Financement Foncier s sole activity is to acquire and refinance eligible assets. These assets are comprised of loans with a first rank mortgage, local authority and public sector loans, securities issued or guaranteed by local authorities and public entities and senior securisation units of mortgage loans or loans to public sector. In order to refinance these assets, the Société de Crédit Foncier is able to issue AAA/Aaa/AAA-rated obligations foncières. highly secure rules for selection of assets Compagnie de Financement Foncier does not directly produce the loans included on its balance sheet and buys or underwrites eligible assets which have earned the highest ratings (mortgage-backed securities FCC and securities issued by public entities): the Société de Crédit Foncier acquires mortgage and/or public sector loans from its parent company, Crédit Foncier de France, and is gradually implementing a similar procedure for Groupe Caisse d Épargne. Crédit Foncier de France remains responsible for the distribution, management and recovery of loans included on the Société de Crédit Foncier s balance sheet, and the management of all liabilities and derivative instruments. maximum protection for holders of obligations foncières By providing holders of obligations foncières bonds with a priority right of payment and ensuring that the Société de Crédit Foncier is protected from the risk of bankruptcy of its parent company, the French Act of June 1999 gives investors a level of financial security that is unparalleled in Europe.

3 ANNUAL REPORT 2004 /PAGE 2 ANNUAL REPORT 2004 /PAGE 3 Message from the chairman Under the new Crédit Foncier/Entenial combination, the secured refinancing activity is unique in its technical expertise and the key role that it plays with respect to the competitive position of all Groupe Crédit Foncier activities. Compagnie de Financement Foncier provides financing to European and local French authorities as well as loans to public entities or mortgages originated by Groupe Crédit Foncier, and this is gradually being extended to Caisses d Épargne. In fact, Compagnie de Financement Foncier is becoming a major player operating under the multiple banners of Groupe Caisse d Épargne, the 3rd largest banking group in France. As a result, all of the opportunities presented by the Act of 1999 on Sociétés de Crédit Foncier have allowed for the sustained growth of covered bonds issuance, which registered a 17% increase in volumes issued in This development was fuelled by the appeal of Compagnie de Financement Foncier s economic model, the strength of its signature and the flexibility of its issuance policy. For this reason, more and more investors, including an increasing number from Asia and Japan (32%), are showing their confidence in Compagnie de Financement Foncier. Asian central banks now constitute a highly active investor base, with their investment share increasing to 23% in However, Compagnie de Financement Foncier was not content to rest on its laurels as it diversified its pool of investors through, for example, the launching of an issuance program in Australian dollars at the end of Under the alliance with Entenial, and in order to allow the entire Group to benefit from optimal refinancing conditions, the Company has refinanced Entenial originated loans that were eligible to be purchased by a Société de Crédit Foncier, through a residential mortgage back securisation. As a result, Compagnie de Financement Foncier purchased close to 4.1 billion in loans originated by the Group in Compagnie de Financement Foncier therefore achieved its objective of increasing the Group s market share while ensuring the security of margins. It is in this context of strong development of its activity that Compagnie de Financement Foncier begins 2005 with the confidence of a solid position and a focus on the creativity expected by all its stakeholders. François Drouin In 2004, the Company bought close to 10.7 billion worth of eligible assets. Crédit Foncier concluded 12 loan sale transactions with the Compagnie de Financement Foncier amounting to a total of 2.9 billion. Since Compagnie de Financement Foncier s creation in 1999, it has purchased nearly 160,000 loans from Crédit Foncier de France, which have been added to the 380,000 loans transferred in 1999, and has enabled the Group to increase its market share of mortgage loans to individuals, and public or semi-public entities. françois drouin CHAIRMAN OF THE BOARD OF DIRECTORS

4 ANNUAL REPORT 2004 /PAGE 4 ANNUAL REPORT 2004 /PAGE 5 Interview What is your strategic positioning within Groupe Crédit Foncier? sandrine guérin: Compagnie de Financement Foncier finances loans, produced by Crédit Foncier, Groupe Caisse d Épargne or other European lending institutions. It selects the loans it would like to purchase based on whether they are eligible to be owned by a Société de Crédit Foncier and their risk quality. The company then buys the loans at market price and hedges them against interest rate risk. These transactions, which are carried out by Compagnie de Financement Foncier at a particularly low resource cost, due to its excellent AAA/Aaa/AAA rating, benefit both Crédit Foncier and Groupe Caisse d Épargne. They are therefore in a position to be competitive with respect to the loans offered and can thereby increase production while maintaining margins. In 2004, Compagnie de Financement Foncier issued 11.2 billion worth of covered bonds. What are your objectives for 2005? thierry dufour: As the leading private issuer in France in 2004, Compagnie de Financement Foncier confirmed its position as a top issuer of obligations foncières (with a market share of close to 50%). In terms of activity, it is one of the leading European issuers of covered bonds on the Swiss franc and Japanese yen markets. It has also established an issuance program in Australian dollars, which resulted in an inaugural issue at the beginning of The year therefore confirmed Compagnie de Financement Foncier s sound positioning among the world s largest financial investors, particularly the Asian Central Banks. Finally, as our issues have an average maturity of approximately 9 years, we remain one of the issuers with the longest terms. For 2005, we expect to issue close to 12 billion worth of obligations foncières. and the subsidiary and allows for the use of another type of analysis, namely structured rating. Moreover, in order to offer more security to bearers of obligations foncières and guarantee the stability of our ratings, we have assumed additional commitments under guidelines for a structured rating: we have signed an undertaking with the Rating Agencies to provide several additional levels of overcollateralisation, above and beyond simple compliance with the legal overcollateralisation ratio, and to reinforce risk management by implementing strict management rules to complement the regulatory framework currently in effect. What exactly is a structured rating? thierry dufour: The structured rating is based on studies on resistance to stress scenarios. It separates the rating of the Société de Crédit Foncier from that of its parent company, Crédit Foncier de France. Analyses that focus on credit, interest rate and liquidity risks help to determine the amount of the overcollateralisation required to cover the various risks and define the level of non-preferred debt (shareholders equity, subordinated debt and unsecured debt) required to obtain a rating of AAA/Aaa/AAA. For the second straight year, you decided to publish your commitments under guidelines for a structured rating. Why? sandrine guérin:compagnie de Financement Foncier benefits from the best AAA/Aaa/AAA ratings granted by Standard & Poor s, Moody s and FitchRatings. As a general rule, the rating method for a bank subsidiary is based on a bank-type analysis, which links the subsidiary s rating to that of its parent company. In our case, the Act on Sociétés de Crédit Foncier separates the parent company thierry dufour CHIEF EXECUTIVE OFFICER sandrine guérin DEPUTY CHIEF EXECUTIVE OFFICER

5 ANNUAL REPORT 2004 /PAGE 6 ANNUAL REPORT 2004 /PAGE 7 Key figures issuer information Issuer: Compagnie de Financement Foncier Parent company: Crédit Foncier de France (100%), a subsidiary of Groupe Caisse d Épargne Type of bond issued: obligations foncières Issue programs: EMTN & AMTN Size of programs: EMTN: 50 billion / AMTN: AUD $5 billion (approximately 3 billion) privileged debts obligations foncières at December 31, 2004 Issued in 2004: 11.2 billion, average maturity of 8.7 years Total issuance since 1999: 43.7 billion Outstanding bonds: 41.1 billion Positioning: Leading private issuer in France and leading issuer of obligations foncières (47% market share) RATING AGENCY LONG-TERM RATING OUTLOOK Standard & Poor s AAA stable Moody s Aaa stable FitchRatings AAA stable Origination: Crédit Foncier de France, Entenial and Groupe Caisse d Épargne Servicing: Crédit Foncier de France simplified balance sheet as at December 31, 2004 (total balance sheet: 49.2 billion) assets M % OF BALANCE SHEET liabilities and equity M % OF BALANCE SHEET Mortgage loans 26, % Privileged debts 43, % State subsidised mortgage loans 3, % Mortgage loans guaranteed by FGAS Other mortgage loans 7, % Senior mortgage backed securisation units Other assets secured by real estate % Loans to public sector entities 12, % Public loans of the subsidised sector % Other public loans 8, % Debt of public entities 3, % Senior securitisation units of public debt % Other assets 2, % Replacement securities 7, % obligations foncières (French covered bonds) % 6, % Other privileged debts 2, % 8, % Non-preferred debts 5, % Of which unsecured senior debt 1, % Of which subordinated and similar debt capital 3, % Of which shareholders equity, provisions and FRBG % TOTAL ASSETS 49, % TOTAL LIABILITIES 49, % Insurers Central banks/ Supras DISTRIBUTION BY TYPE OF INVESTOR JUMBO ISSUES IN 2004 source: banks, at the time of issuance Central banks represent a significant portion (23%) of Compagnie de Financement Foncier s investor base. indicators and performance 72.9 M Net income 112.2% Overcollateralisation ratio 50.6% Average LTV 32% 23% 2% 16% 27% 0.7% Doubtful loan rate (non subsidised sector) Other Banks Asset management/ Pension funds Switzerland Germany Japan Asia GEOGRAPHIC DISTRIBUTION OF INVESTORS JUMBO ISSUES IN % 10% 17% 15% 6% 3% source: banks, at the time of issuance 26% 13% Asia (including Japan) represents the leading geographic zone for investing in Compagnie de Financement Foncier s jumbo issues (32%). eligible assets Europe (Other) COMPOSITION OF ASSETS AS AT DECEMBER 31, 2004 (TOTAL 49.2 BILLION) Other eligible assets Senior securitisation units Loans to public entities 17.8% 25.9% 5.5% 15.2% 20.3% 15.3% France Scandinavia Benelux Replacement securities (A1+/P1/F1+) Mortgage loans (first-rank guarantee) Loans guaranteed by the State (PAP, FGAS) Close to 50% of assets come from loans guaranteed by or granted to public entities.

6 ANNUAL REPORT 2004 /PAGE , a favourable economic environment In the face of the economic and financial uncertainties of 2004, covered bonds demonstrated that they are attracting growing confidence from institutional investors. Compagnie de Financement Foncier s obligations foncières (AAA/Aaa/AAA, stable outlook) confirmed their robustness and the issuer s intrinsic quality, both by the levels of refinancing achieved and by the diversification of their investor base.

7 ECONOMIC ENVIRONMENT/PAGE 10 ANNUAL REPORT 2004/PAGE , a year of transition 2004 was a transition year for the international financial markets, with conflicting signals from the commodities markets (tensions relating to the price of oil), unrealised expectations of higher interest rates, and the uncertain consequences of an appreciating euro versus the dollar. The scenario of a sustained economic recovery did not materialise during the course of On the credit market, interest rates were expected to move higher. Although this was partially affirmed by a rise in long-term rates (the 30-year rate crossed the symbolic threshold of 5% of the French yield rate curve), the expected increase in interest rates was contradicted during the summer of Indeed, disappointing statistics in Europe, the marked decline of the US dollar, which hurt European exports, and soaring oil prices altered the economic scenarios, negating the assumption of an increase in short-term interest rates. Credit market After its historic performance in 2003, the credit market experienced a consolidation phase. Credit spreads continued to narrow on the strength of a favourable credit cycle, marked by the continued decline of the default rate and the improved quality of ratings obtained by borrowers in the United States and Europe. In this context, the rate curve continued to flatten, with short-term rates remaining unchanged at low levels while long-term rates relaxed significantly, to the point that some institutional investors (pension funds) invested much higher proportions in long-term of risk-free signatures (AAA ratings). The covered bond market in 2004 Once again, covered bonds were the centre of attention. The European covered bond market now represents the leading European debt market after that of the government: covered bonds represent 15% of total outstanding of euro denominated bonds which represents an outstanding amount of close to 1,500 billion*. Spreads between covered bonds and OATs narrowed considerably. * Source: European Mortgage Federation, 2004 PERFORMANCE OF THE EURO AGAINST THE DOLLAR 10-YEAR COVERED BONDS VERSUS OATs 1,4 1,2 1 0, , Spreads between covered bonds and OATs (French Treasury Bonds) ended 2004 at historically low levels. 10-year covered bonds vs. OAT January 2002 May 2002 September 2002 January 2003 May 2003 September 2003 January 2004 May 2004 September 2004 January 2005 January 2004 March 2004 May 2004 July 2004 September 2004 November 2004 January 2005 Source: Bloomberg Source: Reuters, Bloomberg TREND IN THE YIELD CURVE (OAT) January 2004/December 2004 (in %) 5,5 5 4,5 4 3,5 10-YEAR AND 30-YEAR INTEREST RATE PERFORMANCE January 2004/December 2004 (in %) 13,5 11,0 8,5 6,0 3,5 1,0 COMPAGNIE DE FINANCEMENT FONCIER VS OTHER SEGMENTS OF THE 10-YEAR COVERED BOND MARKET/SPREADS VERSUS SWAPS - (January 2004 to February 2005) Basis points (bp), In the covered bond segment, Compagnie de Financement Foncier is now one of the best performing and most stable issuers, especially with respect to mid- and long-term maturities. 1 3 months 1 year 3 years December years 7 years 9 years January years 30 years 3 01/01/04 03/01/04 05/01/04 07/01/04 09/01/04 11/01/04 10 year rate (swap) 30-year rate (swap) - 1,5-4,0 January 2004 May 2004 September 2004 February year UK CB 10-year Cedulas 10-year Pfandbriefe 10-year Compagnie de Financement Foncier Source: Reuters Source: Reuters Source: Reuters, Bloomberg, Compagnie de Financement Foncier

8 ECONOMIC ENVIRONMENT/PAGE 12 ANNUAL REPORT 2004 /PAGE 13 SUSTAINED ACTIVITY ESPECIALLY FOR OBLIGATIONS FONCIÈRES In 2004, the volume of jumbo issues (those exceeding 500 million) on the European covered bond market totalled close to 110 billion and 200 billion for all categories. Moreover, 2004 was marked by the high volume of repayments of old issues, especially among German issuers. The growth in the overall outstanding debt was consequently limited to roughly 25 billion (+2%). In this context, Compagnie de Financement Foncier was able to maintain a strong grow thrate with a 17% increase in issued volumes ( 11.2 billion) and, in terms of net issues, close to 6 billion in 2004, which was close to 25% of net issues of covered bonds. The most active covered bonds sectors were French obligations foncières, Spanish Cedulas and Irish Asset-Covered Securities. The challenges of the covered bond market in was marked by the emergence of new covered bond issuers and by improvements to national regulations, particularly in Germany and Spain. In Germany, the introduction of a new general law on Pfandbriefe, passed at the beginning of 2005, nullified the rule relating to Bank specialisation and created an authorisation system for issuing Pfandbriefe. In Spain, regulatory changes designed to improve the priority rank of bearers of Cedulas were introduced should also see the introduction of preliminary draft legislation on covered bonds in Italy, Belgium, Portugal and Norway; other European countries, such as Sweden and Austria, are also amending existing texts. In Europe, just as preliminary work relating to the transposition of the new Basel 2 Accord into EU legislation started (CAD III directive), the European Commission began updating article 22.4 of the UCITS directive of 1985, which defines the minimum legal framework for covered bonds. Under this provision, issuers complying with this directive were able to allow banks investing in these securities to benefit from a 10% weighting of shareholders equity and grant other investors (UCITS, insurance companies and pension funds) favourable risk dispersion ratios which reflect to the quality of these securities. STRUCTURE OF THE EURO BOND MARKET AT THE END OF 2004* (Total 4,366 billion) Sub-sovereign and other Agencies/Supra Covered bonds Other collaterised bonds Financial Institutions Non-financials 1% 5% 4% 11% 6% 8% 65% EU Sovereign * EU sovereign: outstanding equal to or greater than 2 billion Sub-sovereign and other: outstanding equal to or greater than 1 billion Agencies/supra: outstanding equal to or greater than 1 billion Covered bonds: outstanding equal to or greater than 1 billion Other collaterised bonds: outstanding equal to or greater than 500 million Financials institutions: outstanding equal to or greater than 500 million Non-financials: outstanding equal to or greater than 500 million,with a market share of close to 11% of the outstanding euro bond market, covered bonds (outstanding equal to or greater than 1 billion) represented the leading class of high-quality liquid assets at the end of 2004, and excluding sovereign issuance and the leading debt market in the euro zone. The predominant market share of German Pfandbriefe is being threatened by the dynamism of French obligations foncières and Spanish cedulas, which are increasing at an annual pace of 20 to 25%. Source: market data, Reuters, banks BOX: ARTICLE 22.4 OF THE EUROPEAN UCITS DIRECTIVE (UNDERTAKING FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES)., Article 22.4 of the UCITS directive provides that: Covered bonds must be issued by credit institutions; These institutions are subject to specific prudential supervision; An overcollateralisation ratio must cover the preferred liabilities; Bondholders are secured in the event of court-ordered liquidation of the issuer. Covered bonds benefit from a dedicated legal framework., Moreover, when the directive relating to transposition of the Basel 2 Accord is adopted in 2005, the CAD III directive will stipulate the elements that should be included as assets for covered bonds: Exposure to and/or guarantees provided by governments (states, central banks, development banks, international organisations); Exposure to and/or guarantees provided by public entities, regions or local authorities in the European Union; Residential mortgage loans with a LTV ratio of less than 80% or based on senior securitisation units (RMBS) of such assets, rated a minimum of Aa3/AA- or equivalent; Professional real estate loans with a LTV ratio of less than 60% or based on senior securitisation units (CMBS) of such assets rated a minimum of Aa3/AA- or equivalent. THE OBLIGATIONS FONCIÈRES ISSUED BY COMPAGNIE DE FINANCEMENT FONCIER BENEFIT FROM AN ATTRACTIVE 10% WEIGHTING UNDER THE EUROPEAN SOLVENCY RATIO (UCITS DIRECTIVE).

9 ANNUAL REPORT 2004 /PAGE 15 Legal, economic and institutional safeguards The French Act of June 25, 1999 on Sociétés de Crédit Foncier offers bearers of obligations foncières one of the highest levels of financial protection on the European covered bond market. Under its specific provisions and the scope of the areas that it covers, the Act of 1999 provides Compagnie de Financement investors with 4 levels of security: > Legal security > Economic security > Institutional security > A stable AAA/Aaa/AAA rating

10 LEGAL, ECONOMIC AND INSTITUTIONAL SAFEGUARDS/PAGE 16 ANNUAL REPORT 2004/PAGE 17 Legal safeguards Sociétés de Crédit Foncier are credit institutions governed by the specific provisions of the French Savings and Financial Security Act, approved by the French Credit Institutions and Investment Companies Committee (CECEI Comité des Établissements de Crédit et des Entreprises d Investissement) under the authority of the Banking Commission and governed by banking regulations. Sociétés de Crédit Foncier are specifically subject to regulation n of CRBF. The law clearly specifies the rights of bearers of obligations foncières (articles L and L to L ), who benefit from the double advantage of priority right of payment and protection of the subsidiary against the risk of bankruptcy of the parent company: > Bondholders of obligations foncières and other privileged debt issued by Compagnie de Financement Foncier benefit from the privilege (article L ): debt obligations relating to assets of Compagnie de Financement Foncier enjoy preferred status and a priority right of payment is granted to obligations foncières (and other resources which benefit from preferred status) used to finance these debts; > In the event of a bankruptcy of the company, bondholders of obligations foncières are paid interest and principal at their normal contractual due date with priority over other creditors, including the State; > The bondholder is protected by the fact that bankruptcy or court-ordered administration of the shareholders or loan manager are not extended to the Société de Crédit Foncier (articles L to ); and in the event of the failure of its parent company, Crédit Foncier de France, the debt collection process would not extend to its subsidiary, Compagnie de Financement Foncier. Economic safeguards The law defines the exclusive purpose of a Société de Crédit Foncier and the strict conditions for eligibility of assets as follows: > The exclusive purpose of a Société de Crédit Foncier is to grant or acquire eligible assets and finance them through the issuance of obligations foncières and other instruments which may or may not benefit from a priority right of payment. A Société de Crédit Foncier may not hold equity interests (article L ); > Eligible assets (articles L to ) are loans with a first-ranking mortgage which respect loan-tovalue ratio limitations (capital still owing to value of financed asset or provided as guarantee) or which have a security offering an equivalent guarantee, loans (or debt obligations) to local authorities (or guaranteed by them), securisation units (or equivalent) backed by either a mortgage or a local government, and secure and liquid securities that may be traded within the European central banking system; FRENCH LAW IMPOSES MANAGEMENT RULES ON SOCIÉTÉS DE CRÉDIT FONCIER > The total weighted assets of a Société de Crédit Foncier must be greater than the total liabilities which benefit from the privilege. This is known as overcollateralisation (article L ); > Balance sheet management must ensure the congruence of rates and maturities for assets and liabilities; > To ensure management of its outstanding debt and servicing of its loans, the law also requires the Société de Crédit Foncier to have access to the resources of a lending institution under service agreements pursuant to articles L et seq. of the Monetary and Financial Code. Institutional safeguards BANKING SUPERVISION Sociétés de Crédit Foncier are credit institutions approved by the Committee of Credit Institutions and Investment Companies ( CECEI Comité des Établissements de Crédit et des Entreprises d Investissement) under the authority of the Banking Commission and governed by banking regulations. Sociétés de Crédit Foncier are specifically subject to regulation n of the French Banking Regulation Committee (CRBF Comité de la Réglementation Bancaire et Financière), which requires them to produce an annual report on the measurement and oversight of risks and the conditions under which internal auditing is performed. These reports are submitted to the General Secretariat of the Banking Commission, the Independent Auditors and the Specific Controller. Sociétés de Crédit Foncier also produce a report that is submitted to the Banking Commission, which specifically describes adherence to overcollateralisation requirements and the hedge ratio for overruns of the loan to value ratio. HISTORICAL REVIEW, The main business of Crédit Foncier de France (a Société de Crédit Foncier when founded in 1852) is to grant mortgagebacked real estate loans, local authority loans and to issue bonds to refinance those loans. From the time it was founded, Crédit Foncier de France became the leading lender to local authorities, and maintained that position until World War II. Since the 1950s, Crédit Foncier de France has been entrusted with several public interest assignments. The most important of these was to invest, finance and manage the state-subsidised loans for which it was the main distributor. Until 1999, only Crédit Foncier de France and Crédit Foncier et Communal d Alsace Lorraine were Sociétés de Crédit Foncier. These entities could issue secured bonds ( obligations foncières ) pursuant to the decree of While the legal environment on bankruptcy laws evolved rapidly, the legislation did not keep up with the requisite priority right of payment for obligations foncières. The rank of holders of these bonds fell significantly. After the priority right of payment was granted under the law of 25 June 1999 and a creditor rating was given (article of the Monetary and Financial Code), the Group s competitive position was strengthened in low-risk European markets (loans to private individual with a first rank mortgage, loans to or guaranteed by public sector or local authority guarantees). The law of 25 June 1999 also required the old Société de Crédit Foncier Crédit Foncier de France and Crédit Foncier et Communal d Alsace Lorraine, to transfer all eligible asset and liability items to a new Société de Crédit Foncier. The creation of Compagnie de Financement Foncier on 23 July 1999, and the transfer of its eligible assets and liabilities to Compagnie de Financement Foncier, brought the Crédit Foncier Group into compliance with the new law on Sociétés de Crédit Foncier. It is also the responsibility of the banking regulator to approve the appointment of a Specific Controller. Designated to make sure that operating mechanisms are working properly and to ensure strict compliance with the law, the Specific Controller is required to notify the Banking Commission immediately of any event or decision that comes to his attention in the course of his work that he thinks might undermine the conditions or continuity of the Company s operations. In the event of bankruptcy, the Specific Controller becomes the legal representative of all the holders of obligations foncières. The audits performed by the Specific Controller are in addition to the standard audits of the financial statements done by independent auditors. In order to ensure independence and avoid any risk of conflict of interest with the other auditors, the Specific Controller is neither a member of the Société de Crédit Foncier s body of statutory auditors nor of the auditors of its controlling shareholders (article L rd paragraph of the Monetary and Financial Code)., Loan-to-value ratio (capital still owing to value of financed asset): 50.6% at December 31, 2004 for Compagnie de Financement Foncier., Overcollateralisation (ratio of weighted assets as compared to privileged debt): 112.2% of the balance sheet at December 31, 2004 for Compagnie de Financement Foncier.

11 LEGAL, ECONOMIC AND INSTITUTIONAL SAFEGUARDS /PAGE 18 ANNUAL REPORT 2004 /PAGE 19 THE SPECIFIC CONTROLLER The responsibilities of the Specific Controller are defined by law. His mission is to verify the eligibility of assets as well as the congruence of rates and maturities. The Specific Controller checks the overcollateralisation ratio (weighted assets/preferred liabilities) and confirms the reliability of the information and computer systems used. Finally, he checks valuation procedures and periodically reviews assets provided as guarantees, and verifies the quality of management procedures as well as risk management methods. EXTENSIVE OVERSIGHT The responsibilities of the Specific Controller are much more extensive in France than in most euro zone countries. As regards assets, the Specific Controller ensures compliance with regulations and the eligibility of assets, including: > Existence of mortgages, > Value of the financing ratio (Loan to Value), > Information in the management and information system, > Revaluation of underlying guarantees for loans to ensure compliance with regulations, > And, he produces his report on the processes and methods used. With respect to liabilities, the Specific Controller checks the overcollateralisation ratio every quarter to ensure that it complies with regulatory requirements and also verifies future issuance programs on a quarterly basis. He completes his quarterly control by certifying each issue that exceeds 500 million. Finally, the legislation provides the Specific Controller with extensive investigative rights which enable him to verify the quality of balance sheet management and consequently, the congruence of assets and liabilities in terms of rates and maturity. Rated AAA/Aaa/AAA due to the legal framework and quality of management at Compagnie de Financement Foncier Long-term ratings are assigned to debt instruments such as bonds and reflect the Rating Agencies opinion regarding the issuer s financial ability to pay the interest and redeem the principal of its borrowings when they become due. They also reflect the level of legal protection provided to the holder of a specific debt instrument, such as the priority for repayment (senior/junior debt), security interests and guarantees. As a general rule, the rating assigned to a subsidiary of a banking institution is either lower than or equivalent to that of its parent company. In the particular case of Sociétés de Crédit Foncier, an analysis may raise the subsidiary Société de Crédit Foncier s rating 1 to 3 levels higher than that of its parent company. This higher rating is attributable to the legal protection offered by and the untouchable status of the subsidiary in the event of the bankruptcy of the parent institution. The law governing Sociétés de Crédit Foncier allows issuers to use other types of analysis, such as the so-called structured rating used by Compagnie de Financement Foncier. The legal framework of the Société de Crédit Foncier and internal management rules at Compagnie de Financement Foncier thus make the company eligible for a structured rating analysis by the Rating Agencies. Compagnie de Financement Foncier s rating of AAA/Aaa/AAA therefore depends on the volume of non-preferred debts (unsecured debt, subordinate debt and shareholders equity) and is consequently largely separate from the rating of both its parent institution, Crédit Foncier de France, and its group, Groupe Caisses d Épargne, which is rated AA/Aa2/AA by the three main Rating Agencies. Compagnie de Financement Foncier has therefore made some additional commitments described on page 30 of this report, in order to offer even more protection to holders of obligations foncières as to well as to ensure that its ratings remain stable. INTERVIEW WITH THE SPECIFIC CONTROLLER What is the role of the Specific Controller? Fundamentally, he is responsible for protecting the interest of bondholders. Most notably, he ensures the appropriateness, as provided by law, of the quality of investments made and the overall compliance of financial balances and regulatory requirements. He also checks the authenticity of guarantees and the accuracy of real estate appraisals used to support guarantees. Unlike other European countries, French legislation on Sociétés de Crédit Foncier provides the Specific Controller with very extensive powers. His responsibilities combine the traditional role of Statutory Auditor with that of an auditor and an on-site representative of the Banking Commission. What are the specific areas that you monitor? We pay particular attention to developments in the real estate market and how these events affect the value of guarantees, and we also verify the company s risk coverage. Lastly, in an environment which requires processing of masses of information, we place great emphasis on the security and reliability of processes. HOLDERS OF OBLIGATIONS FONCIÈRES BENEFIT FROM THE STABILITY OF THE AAA/Aaa/AAA RATING, The AAA/Aaa/AAA rating of Compagnie de Financement Foncier is therefore the reflection of a specific legal provision regarding the level of security offered to investors and the commitments undertaken to the Rating Agencies under guidelines for a structured rating associated with a policy of adapted overcollateralisation, as well as proactive and dynamic risk management. The commitments made under guidelines for a structured rating ensure optimum coverage for credit and interest rate risk. The intervention of the Specific Controller every quarter, and each time an issue of obligations foncières exceeds 500 million, provides an additional level of protection which ensures strict compliance with the overcollateralisation (ratio of weighted assets to preferred liabilities) requirements.

12 ANNUAL REPORT 2004 /PAGE 21 Top-quality assets C ompagnie de Financement Foncier is the Société de Crédit Foncier of Groupe Crédit Foncier de France. Its mission, in the medium term, is to become the preferred instrument for refinancing the eligible assets of other entities within the Groupe Caisse d Épargne. When it purchases assets that it finances through obligations foncières, Compagnie de Financement Foncier must respect the following prerequisites: > Assets must be eligible (eligibility is defined in articles L to L of the French Monetary and Financial Code); > Acquisitions are subject to compliance with contractual rules that the Compagnie de Financement Foncier has undertaken to respect, especially those made to the Rating Agencies; > Purchased assets must present minimal credit risk and ensure the profitability of Compagnie de Financement Foncier.

13 TOP-QUALITY ASSETS /PAGE 22 ANNUAL REPORT 2004 /PAGE 23 The quality of the assets results from the law on Sociétés de Crédit Foncier and reflects the quality of the production of Crédit Foncier de France QUALITY ASSETS, DEFINED BY LAW As a Société de Crédit Foncier, the scope of activities of Compagnie de Financement Foncier is precisely defined by legislation (French Monetary and Financial Code) and by regulation (CRBF). The law precisely determines the eligibility criteria of the assets: > They must originate from the European Economic Area, Switzerland, the United States of America, Canada or Japan; > Residential mortgage loans must be first-ranked mortgages or equivalent real estate securities or must be guaranteed by a credit institution or insurance company that is not part of the seller s group and rated at least Aa3/AA-. The loans must have a financing ratio limit (loan-to-value) of no more than 60% (100% in the case of an FGAS guarantee); > Loans to public entities (and by extension, debt securities issued by public entities) are loans granted to States, to local authorities or groupings thereof, and to public institutions, or loans fully guaranteed by one or more of these States or groupings; > Senior securisation units or equivalent securities are eligible if the underlying asset is at least 90% composed of loans in the categories previously defined, and have top ratings (the weightings used in calculating the overcollateralisation ratio depend on the rating of securisation units: 100% if AA-/Aa3/AA- and 50% if A-/A3/A-, 0% in other cases). Purchased senior securitisation units (almost all rated AAA in the case of Compagnie de Financement Foncier) come from securitisation of assets with the same features as the eligible loans. They carry an additional guarantee of internal overcollateralisation; > Replacement securities, in the case of Compagnie de Financement Foncier, consisting of short-term receivables holding the highest short- or long-term ratings. Low risk assets, almost 46% of which are directly or indirectly guaranteed by the State The assets of a Société de Crédit Foncier can be divided into three main categories: guaranteed loans, loans to public entities and replacement securities. These loans can be acquired directly from the originator, or held indirectly through priority units of securitisation funds when these funds are composed of at least 90% of loans of the same type as those authorised by the 1999 law. Guaranteed loans benefit from a real estate surety which, for Compagnie de Finance Foncier, is made up of a first-rank mortgage or a lender s priority right to funds, and must respect a maximum level of financing ratio (LTV) limits. Loans to public entities are loans granted to, or fully guaranteed by, States, public institutions or local authorities of the European Economic Area, Switzerland, the United States of America, Canada or Japan. Debt securities issued or fully guaranteed by these public entities are included in this category. Some of the guaranteed loans held by Compagnie de Financement Foncier are also publicly guaranteed, either by FGAS (Fonds de Garantie de l Accession Sociale à la propriété), or the French State in the case of the subsidised sector. Finally, replacement securities are mainly short-term interbank loans (less than 6 months), meeting the criteria of minimal credit risk and strong liquidity. Additional loan selection rules In addition to these eligibility rules, Compagnie de Financement Foncier has self-imposed asset selection rules to guarantee its investors the highest level of quality. These assets either have the best ratings, or they are credits produced by Groupe Crédit Foncier or Groupe Caisse d Épargne. QUALITY OF THE ASSETS AND GUARANTEES OF COMPAGNIE DE FINANCEMENT FONCIER A balance sheet with diversified top-quality assets Nearly half the assets in Compagnie de Financement Foncier s total balance sheet of 49.2 billion have the best short-, medium- and long-term ratings. Loans directly or indirectly guaranteed by the State and local authority loans make up roughly 46% of the assets, while first-rank mortgage loans with no additional guarantee (subject to meeting the 60% loan-to-value ratio) make up 15.2%. Finally, the majority of the 12.5 billion worth of long-term rated securities have the best AAA rating. Other eligible assets Replacement securities (A1+/P1/F1+) Mortgage loans (first-ranking guarantee) 15.2% 15.3% 5.5% 20.3% 17.8% 25.9% Senior securitisation units Loans to public entities Loans guaranteed by the State (PAP, FGAS) ASSET COMPOSITION AT DECEMBER 31, 2004 (Total 49.2 billion), Loans to the public sector or benefiting from their guarantee 46.2%. PUBLIC GUARANTEES, Until 1995, Crédit Foncier had a virtual monopoly over the distribution of subsidised loans (PAP loans). These mortgage loans benefit from French State guarantees both for the credit risk and interest rate risk and were transferred to Compagnie de Financement Foncier s balance sheet under the heading subsidised sector (State-guaranteed). At the end of 2004, loans with public guarantees (subsidised sector loans), FGAS guaranteed mortgage loans and loans to public and similar entities represented 46% of the total balance sheet. FONDS DE GARANTIE DE L ACCESSION SOCIALE (FGAS), The FGAS (Fonds de Garantie de l Accession Sociale à la propriété) is a public guarantee mechanism designed to encourage the purchase of property for low-income households under advantageous interest rate conditions. The constitution of the Fund is intended to reduce the cost of risk by creating a guarantee fund through which the State offers an individualised guarantee for each loan granted. The FGAS is funded by the contribution paid by affiliated credit institutions and by the State in anticipation of future disbursements for losses. The FGAS guarantee is a State guarantee, the principal features of which are defined by an agreement entered into, under State control, by the SGFGAS and the lending institutions. If the borrower defaults, the guarantee compensates any loss defined as a reduction in the actuarial rate of yield to maturity anticipated by the credit institution at the time the loan was granted. *Compagnie de Financement Foncier loans guaranteed by the FGAS represented an outstanding amount of over 6 billion at the end of 2004.

14 TOP-QUALITY ASSETS /PAGE 24 ANNUAL REPORT 2004/PAGE 25 A secure and expert loan acquisition process For mortgage loans, the law governing Sociétés de Crédit Foncier provides that a Société de Crédit Foncier is required to not directly originate the loans it acquires; also, by choosing not to produce the loans it acquires itself, Compagnie de Financement Foncier has established an independent loan selection process, developed over and above the legal constraints and complementary to those of the originator. Compagnie de Financement Foncier does not buy loans representing a risk on commercial real estate. These loans are mainly to private individuals. For loans to public authorities and public securities, Compagnie de Financement Foncier relies on the expertise of Groupe Crédit Foncier with respect to selecting loans and monitoring them as well as on that of other loan originators and managers whose loans are on its balance sheet (Entenial and Groupe Caisse d Épargne). Dispersion and low cost of risk Compagnie de Financement Foncier has the equivalent of over 1.5 million loans, some of which are held directly (around 540,000), with the rest (approximately one million loans), partially and indirectly held through senior securitisation units (FCC). The dispersion of the amounts and the scattering of the loan portfolio in terms of amounts and maturity ensures a very high quality for the portfolio of loans held by Compagnie de Financement Foncier (43% of competitive sector loans have a maturity of over 10 years). What is more, the combination of a legal requirement (articles L to L of the Monetary and Financial Code) and the rules of contractual management for the selection of eligible assets results in excellent overall quality for Compagnie de Financement Foncier s assets, illustrated especially by the extremely low levels of cost of risk and by an average doubtful loan rate that is one of the lowest among European establishments. THE THREE STEPS IN THE LOAN ACQUISITION AND SELECTION PROCESS Step 1: Authorisation scoring These loans are granted by the Group as part of an effort to control risks and to earn a return on the equity employed. With this objective, the Group has developed decision-making tools. For consumer housing loans, mortgage loans are subject to an authorisation scoring intended to synthesise the diagnostics on borrower solvency, the real estate security, and take into consideration the statistics established from credit histories. For local authority loans, and loans from the public and local sector, Compagnie de Financement Foncier uses an internal rating derived from a dedicated tool developed by the Group. Step 2: Purchasing filter Compagnie de Financement Foncier selects the loans that it wants to acquire on the basis of the probability of default for mortgage loans and on the basis of their internal rating for local authority sectors. For this purpose, Compagnie de Financement Foncier uses Groupe Caisse d Épargne s internal rating tool Ecolocale. These ratings serve as loan selection and trigger threshold criteria for the acquisition of loans by Compagnie de Financement Foncier. For mortgage loans, the probability of default is calculated from the borrower s characteristics, the loan and the real estate guarantee. This purchasing filter makes Compagnie de Financement Foncier s loan purchasing policy independent of the commercial policy of Crédit Foncier de France and other sellers. Some loans, even if eligible, are refused by Compagnie de Financement Foncier and may possibly be purchased several years later (from 2 to 4 years) if, and only if, no payment incident has been recorded. For its loan acquisition operations from sellers outside the group, Compagnie de Financement Foncier takes into consideration information about the seller (past securities, balance sheet, positioning, experience), elements about the management company, audits of the portfolio and information from Rating Agencies. LOANS TO INDIVIDUALS IN THE COMPETITIVE SECTOR BY AMOUNT AT YEAR END 2004 (CAPITAL OUTSTANDING) (Total 11.7 billion) GEOGRAPHIC DISTRIBUTION OF OUTSTANDING SENIOR SECURITISATION UNITS AND PUBLIC SECURITIES ( 12.5 billion at 12/31/2004) Greece Canada 15,000 to 20,000 20,000 to 46,000 46,000 to 100,000 19% 9% 46%, Nearly 80% of loans have outstanding capital of 100,000 or less. 7% 4% 15% < 15, ,000 to 1,000, ,000 to 150,000 Portugal Spain Italy 23% 5% 1% 40% 14% 13% France Germany, In the context of its purchases of assets issued by local authorities and/or public institutions and senior securitisation units, Compagnie de Financement Foncier closely monitors the optimisation of geographic asset dispersion. 3% 1% US STRATEGIC PLAN: REFINANCING OF LOANS TO LOCAL AUTHORITIES ORIGINATING FROM GROUPE CAISSE D ÉPARGNE, Compagnie de Financement Foncier is positioned not only as the Société de Crédit Foncier for Groupe Crédit Foncier, but also as one of the means of financing for Groupe Caisse d Épargne. Major objectives were set during the creation of the Groupe Caisse d Épargne 2005/2007 strategic plan since the Société de Crédit Foncier would be acquiring a total amount of 10 billion of loans to local authorities over 2005, 2006 and Some transfers, useful for circuit and systems tests, took place at the end of At December 31, 2004: Rate of doubtful loans in the competitive sector: 0.7% (Note: the subsidised sector is guaranteed by the French State) Cost of risk: 1.2 basis points (gain) For the competitive sector excluding real estate in the course of extinction: Rate of doubtful loans: 0.6% Cost of risk: 0.4 basis points (gain)

15 TOP-QUALITY ASSETS /PAGE 26 ANNUAL REPORT 2004 /PAGE 27 In the case of senior securitisation units, the criteria used favour analysis of the quality of the portfolio of underlying loans (at origin and current), a breakdown of loan distribution, analysis of the financial structure (overcollateralisation), historical data (defaults, arrears, recovery, etc.) on loans originated by the seller, as well as on the quality of the manager. Compagnie Financement Foncier also takes account of information concerning the seller and items related to the management company (frequency and quality of financial reporting). Step 3: Purchase and rate hedging After selecting the loans, Compagnie de Financement Foncier purchases them on the basis of market price taking into account their funding cost, cost of risk, management cost, cost of hedging against interest rate risk and expected return on the loans. As a result, Compagnie de Financement Foncier ensures that recurring returns of its activities are independent of the commercial and rate polices of the sellers. This independence and attention to the net margin level on the assets it purchases enable it to ensure the stability of returns. Compagnie de Financement Foncier also hedges against exchange rate risks by converting assets purchased at fixed rate into variable-rate assets whenever necessary. A selection process guided by prudential rules These prudential rules ensure the quality of the assets of Compagnie de Financement Foncier. The entire process of analysing the loans is conducted in an environment of continuous controls and verifications: the loans are analysed regularly by outside agents (Specific Controller and Rating Agencies) and internally (internal control departments of Crédit Foncier de France and the Caisse Nationale des Caisses d Épargne). ELIGIBLE LOANS STEP 1: Authorisation scoring DIAGNOSIS: Solvency Guarantee Statistics Internal rating (97-02) Credit committee 3,5 3 2,5 2 1,5 1 DISTRIBUTION OF ASSETS PURCHASED BY COMPAGNIE DE FINANCEMENT FONCIER ( in billions of euros) ARRANGER AND FINANCER OF ELIGIBLE PACKAGES FOR MORTGAGE COMPANIES, In the context of its activities as a Société de Crédit Foncier since 2000, Compagnie de Financement Foncier has completed 1.2 billion worth of securitisation operations in loans originated by Groupe Crédit Foncier de France, and approximately 9 billion in financing loans not originated directly by Crédit Foncier de France. The most significant operations were as follows: In 2001: Powerhouse Finance: an operation of nearly 700 million consisting of the securitisation of nearly 10,000 housing units leased to EDF employees. In 2002: Cassa di Risparmio di Firenze: an operation representing nearly 500 million, consisting of the refinancing of 9,000 residential mortgage loans in Italy. In 2003: Bancaja: an operation of nearly one billion euros; purchase of 16,000 residential mortgage loans from a Spanish savings bank. In 2004: Antilope I: securitisation of over 12,000 mortgage loans originated by Entenial (a credit institution acquired by Crédit Foncier de France in 2004). The AAA units representing a total of 1.2 billion were acquired by Compagnie de Financement Foncier. STEP 2 : Purchasing filter 0,5 Probability of default STEP 3: Loan selection at market price and hedging against rate risk OVERVIEW OF 2004 ASSET ACQUISITIONS: 10.7 BILLION > Residential mortgage loans originated by Crédit Foncier de France: 2.9 billion > Securities issued by public entities (AAA): 2.1 billion > Loans granted to public entities by the Group: 0.04 million Loans originated by Crédit Foncier de France Public securities Loans originated by the Group Caisse d Épargne Senior securitisation units Loans originated by Entenial > Deposits with public organisations: 1.3 billion > Senior securitisation units (AAA): 2.3 billion > Senior securitisation units (AAA) of mortgage loans originated by Entenial: 1.2 billion > Replacement securities: 0.9 billion MANAGEMENT OF LOANS ON ITS BALANCE SHEET, The loan agreements made between the Compagnie de Financement Foncier and Crédit Foncier enable the Compagnie de Financement Foncier to use Crédit Foncier de France s human and IT resources, both for the management of its assets as well as for its liabilities, balance sheet equilibrium, and loan collection. In addition, the parent company s recognised expertise in the real estate and local authority credit sectors gives Compagnie de Financement Foncier full benefit in terms of: > Appreciation of credit risks by scoring, behavioural modelling of borrowers, and default and loss statistics; > Real estate expertise: Crédit Foncier de France is the subsidiary French real estate market leader, with recognised reputation and service quality, active throughout the country and offering customers quality advice accompanied by a rigorous methodological framework that respects the ethical standards of the business; > Management and collection of outstanding loans: Crédit Foncier de France teams fully intend to extend and consolidate the commercial relationship forged at the moment when the credit was granted by processing various events in the life of a loan. They also monitor the security of the outstanding loans by control over early redemptions and credit risks.

16 ANNUAL REPORT 2004 /PAGE 29 Secure risk management Compagnie de Financement Foncier benefits from the best AAA/ Aaa/ AAA (stable outlook) ratings conferred by the three Rating Agencies: Standard & Poor s, Moody s and FitchRatings. As a general rule, the rating assigned to a subsidiary of a banking institution comes from a bank-type analysis, and tends to link the subsidiary s rating to that of the parent company. In the case of Compagnie de Financement Foncier, the law governing Sociétés de Crédit Foncier creates total separation between the parent and the subsidiary, making it possible to use a different type of analysis structured rating. Structured rating is based on an analysis of resistance to stress scenarios and makes it possible to separate the ratings of the subsidiary and of the parent company. Stress analysis of credit, interest rate and liquidity risks enables the amount of overcollateralisation required to hedge these different risks to be determined, and thus defines the level of non-preferred debt (shareholders equity, subordinated debt and unsecured debt) necessary to obtain a AAA/Aaa/AAA rating.

17 SECURE RISK MANAGEMENT /PAGE 30 ANNUAL REPORT 2004/PAGE 31 In order to offer even more protection to holders of obligations foncières and ensure that ratings remain stable, Compagnie de Financement Foncier has made some additional commitments within the context of its structured rating. In addition to the protection already afforded by the institutional framework of a Société de Crédit Foncier, it made the following commitments to the Rating Agencies: > To create several additional levels of overcollateralisation above and beyond simple compliance with legal overcollateralisation, > To strengthen its risk management by introducing strict management rules in addition to the existing regulatory framework. Compliance with these commitments is monitored by various means and reported to the Rating Agencies on a quarterly basis. Compliance with total overcollateralisation The legislation governing Sociétés de Crédit Foncier requires Compagnie de Financement Foncier to have on its balance sheet total assets after weighting of some of the assets greater than the total liabilities which benefit from the privileged status. This is known as legal overcollateralisation. Compagnie de Financement Foncier made a commitment to the Rating Agencies that it would maintain several levels of additional overcollateralisation intended to hedge the credit risk on assets and the balance sheet s overall interest rate risk. The sum of these different layers of overcollateralisation makes up the total overcollateralisation of Compagnie de Financement Foncier, and makes is possible to have an effective hedge on the risks that it assumes. It is committed to creating this overcollateralisation with unsecured or subordinate resources excluding balancing subsidies and subordinate resources from the subsidised sector. If the overcollateralisation, which is verified quarterly, proves to be lower than the minimum level required to cover these risks, all new asset acquisitions are immediately suspended and non-preferred resources are used to achieve the minimum level of overcollateralisation required. In addition, it has committed to other management rules that strengthen this overcollateralisation: > The carry forward of the compensation of participating loans (in the amount of 1.35 billion maturing in 2040) granted by Crédit Foncier de France if non-preferred resources, excluding balancing subsidies and mechanisms related to the subsidised sector, are less than 8% of the total amount outstanding for loans which are not part of the subsidised sector; > The suspension of distribution of all subscribed capital regardless of whether it is from a balance brought forward, dividend payment, or reduction of capital, as soon as the net income of Compagnie de Financement Foncier falls below 10 million. Management of credit risk ON ELIGIBLE LOANS THAT HAVE NOT BEEN RATED In order to determine the total overcollateralisation needed for this class of assets, the outstanding loans that have not been rated are distributed among nine sectors of activity depending on the type of borrower, the nature of the asset financed and guarantees provided. An overcollateralisation rate reflecting the credit risk, Overcollateralisation of the Sociétés de Crédit Foncier, at 5.7 billion on December 31, 2004, is largely due to its capital and subordinate resources composed principally of: 1 - capital and reserves of 0.38 billion 2 - participating loan of 1.35 billion maturing in redeemable subordinated securities of 0.9 billion, maturing presented is applied to each sector of activity and also differs depending on whether it applies to the inventory of existing loans or new production. Two levels of total overcollateralisation are then calculated: > The first is based on the inventory of existing loans to which the overcollateralisation rate for the existing portfolio applies; > The second is based on outstanding amounts in two years and, in addition to existing inventory net of amortisation includes new production estimated over the two future years, and to which the overcollateralisation rate for new production applies. The higher of the two amounts obtained comprises the dynamic overcollateralisation required. However, it will be reduced by 5% to account for the diversification of the loan portfolio. The overcollateralisation rates currently in effect are as follows: OVERCOLLATERALISATION OF THE EXISTING PORTFOLIO OVERCOLLATERALISATION OF NEW PRODUCTION Subsidised sector 3% No new production PAS + PTZ 2.5% 3% Private accessions 3% 3.5% Private rental housing 25% 30% Professional real estate 50% No new production Local communities 3% 3% Social housing 4.5% 4.5% Financial institutions 4% 4% These overcollateralisation percentages have remained unchanged since 1999 since credit risk has not deteriorated in the last few years. Credit risk management has in fact been strengthened by the implementation of a loan purchase score as of 2002 in addition to the given score established. This purchase score, which is based on the probability of loan defaults, helps highlight certain loans considered riskier that are put on hold and only purchased after sufficient time has passed with no payment incident. In case of significant deterioration in credit risk, most notably by a downgrading of doubtful rates or losses, Compagnie de Financement Foncier undertakes to immediately revalue upwards the overcollateralisation rates in effect. For loans in the subsidised sector, it should be recalled that Compagnie de Financement Foncier does not incur additional expenses related to late payments by borrowers in default because of the guarantees from the State and the assumption of the entire outstanding debt for the sector by Crédit Foncier. ON ELIGIBLE RATED ASSETS For eligible rated assets, the overcollateralisation rate applicable to the portfolio in question depends on a Monte Carlo-type simulation. This simulation takes into account the probability of default for each asset, based on its rating and maturity, possible recovery rate, the degree of exposure to each asset and the correlation between different assets in the portfolio. Any loan or security with at least one public or one private rating resulting from an appraisal requested by Compagnie de Financement Foncier from one or more Rating Agencies is considered rated. However, Compagnie de Financement Foncier is committed to limiting the portion of assets with just one rating to between 10 and 20% of the total of eligible rated assets. Moreover, the minimal admissible rating is AA-/Aa3/AA-.

18 SECURE RISK MANAGEMENT /PAGE 32 ANNUAL REPORT 2004 /PAGE 33 Besides these strict asset acquisition rules, the model is also based on relatively conservative working hypotheses. As a result, the rating retained in the simulation may in some cases be under-estimated by one or two levels, particularly in the absence of 3 ratings. To date, the securities acquired by Compagnie de Financement Foncier have always had highest quality ratings, thus minimising the portfolio s credit risk and thereby, the overcollateralisation rate required. ON REPLACEMENT SECURITIES The assets which Compagnie de Financement Foncier holds as replacement securities benefit from the best short-or long-term ratings granted by the Rating Agencies. The minimum rating admissible for each asset depends on the term of the investment and corresponds to the upper end investment grade in the agencies ratings scale. STANDARD & POOR S MOODY S FITCHRATINGS 0-1 month ST A1 LT A2 or ST P1 ST F1 1-3 months ST A1+ LT A1 and ST P1 ST F months ST A1+ LT Aa3 and ST P1 ST F1+ Over 6 months LT AAA LT Aaa LT AAA ST: Short-Term ; LT: Long-Term OFF-BALANCE SHEET OPERATIONS All counterparties carrying out forward market operations with Compagnie de Financement Foncier are required to sign a master agreement and a specific appendix defining the asymmetrical collateralisation agreements between the two parties. Accordingly, the counterparty undertakes, in the event that its rating is or falls below the lowest A1+ or AA- ratings at Standard and Poor s, or P1 or Aa3 at Moody s, or F1+ or AA- at FitchRatings, to pay Compagnie de Financement Foncier a security deposit equal to its net debt position with no reciprocity required by the latter. The security deposit is calculated and paid to Compagnie de Financement Foncier on a weekly basis and has a deductible of 10 million if the rating of the counterparty remains at least equal to A-1 or A- at Standard and Poor s, P2 or A3 at Moody s, or F1 or A- at FitchRatings. In the opposite case, calculation and payment become daily with no deductible possible. Management of interest rate risk The overcollateralisation necessary to cover the global interest rate risk for Compagnie de Financement Foncier depends on the estimate of its future results compared to the size of its balance sheet: it is equal to 0.5% of Compagnie de Financement Foncier s total balance sheet less the estimated net present value for 10 future earnings periods. In order to ensure a high level of security, several Net Present Values are calculated based on the following criteria: > Calculations based on extinctive situations without new acquisition; > Three hypotheses involving early repayment: no early repayment, probable early repayment rate based on actual rates observed, and stress testing of the early repayment rate to increase it to three times the probable rate; > Three hypotheses involving market rates: base rate curve, stress testing of cash resources assuming unfavourable borrowing and lending conditions for EONIA+1% and EONIA-0.5% respectively, and moving the rate curve by 200 basis points. The most conservative Net Present Values is retained for the calculation of overcollateralisation. For greater control of its interest rate risk, Compagnie de Financement Foncier also undertakes to: > Limit the difference between the average life of its assets and the maturity of its liabilities to around two years. The calculations of average life are made with a view towards extinction based on probable scenarios in terms of market rates and early repayment. At December 31, 2004, this difference was 0.09 of a year. >Maintain rate gaps within the limits set during each observation period. These gaps measure the difference between requirements and fixed-rate resources, based on a probable scenario, without the acquisition of new assets or issuance. If limits are exceeded, the required corrective action is implemented before the end of the quarter following this observation. The limits currently in effect for interest rate gaps are: TERM PERCENTAGE OF THE BALANCE SHEET RECORDED AT THE BEGINNING OF THE PERIOD Less than 2 years 2% 2-5 years 3% 5-10 years 5% Over 10 years 10% Management of currency risk Compagnie de Financement Foncier is not permitted to hold any open position, and asset acquisition or refinancing operations not denominated in euros are covered by currency hedging as soon as they are executed. In any event, Compagnie de Financement Foncier undertakes to limit residual positions to a maximum of 0.1% of the balance sheet. Management of liquidity risk Compagnie de Financement Foncier has strict management rules that guarantee it sufficient liquidity to cover is privileged debt commitments even in times of difficulty accessing the market. Accordingly it is committed to maintaining a level of cash on its assets so that: > For the next twelve months, assuming a zero rate of early repayments on the assets for that period, contractual reimbursements of its privileged debt, net of expected payments on its assets, be covered for at least half by replacement securities and securities issued by public entities, both deemed liquid, and for the balance, by other assets that can be readily realised through the ECB; > After one year, assuming a probable early repayment rate on loans, contractual reimbursements of its privileged debt, net of expected payments on its assets, be covered by the sum of the assets previously cited to which the other listed assets are added; > Over the next ten years, assuming a probable early repayment rate on the loans, any possible financing deficit authorised solely beyond the second year, after discounting the assets previously cited, be limited to 10% of the current balance sheet. These calculations are performed with an extinctive view of the balance sheet., Compagnie de Financement Foncier hedges against interest rate risks, as it does for the rest of its balance sheet, by converting assets bought at fixed rates into assets at variable rates, and liabilities issued at fixed rates into liabilities at variable rates in euros., Compagnie de Financement Foncier s liquid reserves are composed of replacement values, largely constituted by short-term loans that benefit from the best short-term ratings, with the balance in liquid securities with the best long-term ratings.

19 ANNUAL REPORT 2004 /PAGE 35 A recognised issuance policy With over 20 billion in obligations foncières issued for the period, Compagnie de Financement Foncier is the leading private issuer in France. In 2004 alone, with 11.2 billion issued, Compagnie de Financement Foncier strengthened its position among the top 10 European issuers of covered bonds. In terms of volumes issued, the flexibility of its funding policy, the nature of its investors, and the levels of refinancing achieved, Compagnie de Financement Foncier has become a member of a small group of the most stable and productive European issuers.

20 A RECOGNIZED ISSUANCE POLICY /PAGE 36 ANNUAL REPORT 2004 /PAGE overview of the issuance policy In 2004, Compagnie de Financement Foncier issued 11.2 billion worth of obligations foncières (90 operations) rated AAA/Aaa/AAA, making it the leading private issuer in France. With a 17% increase over 2003, the total value of obligations foncières issued since the creation of the company in 1999 now stands at 43.7 billion, or nearly 50% of total outstanding French covered bonds issued ( 96 billion). In terms of market share within the European covered bond market, Compagnie de Financement Foncier accounts for almost 5% of the jumbo covered bonds market (issues over 500 million) and around 3% of the total market (public and private issue) at the end of 2004, the total amount of which is estimated at 1,500 billion (source: European Mortgage Federation). A flexible issuance policy adapted to investor demand In 2004, Compagnie de Financement Foncier continued a refinancing policy marked by the desire to adapt to investor demand, optimise the funding cost, and ensure a reference yield curve offering a satisfying level of liquidity. Within its annual program, with an average maturity of 8.7 years, 53% of its issues ( 5.9 billion) were public in format, with an average maturity of 7.9 years. This issuer profile consolidates its position as one of the AAA European issuers with access to the longest maturities. In terms of currencies, 82% of the transactions were made in euros. Issued as jumbos (issue of an amount greater than 500 million), these issues were completed within the framework of a market-making charter signed with over twenty banks for the organisation of the secondary market for covered bonds. This charter allows these issues to benefit from a high level of liquidity, which is appreciated by investors OBLIGATIONS FONCIÈRES ISSUED SINCE 1999 (in billion) Compagnie de Financement Foncier CIF EM Dexma Compagnie de Financement Foncier completed its benchmark issue curve in euros by issuing three benchmark maturities of 3, 7 and 10 years. It also completed its benchmarks in US dollars with an issue in the amount of one billion US dollars and a maturity of 5 years. At the same time, through increases, Compagnie de Financement Foncier supplemented the liquidity of existing lines (notably the 2008, 2009 and 2018 lines). With nearly 5.3 billion issued in the form of private placements, Compagnie de Financement Foncier has demonstrated its ability to anticipate and adapt to the precise demands of investors. These transactions represented 75 operations, with an average size of 70.2 million and an average maturity of 9.5 years was marked by stronger competition among issuers in the private placements market. The recognition of the quality of its signature made it possible to position itself in issue structures traditionally reserved for State-type signatures. Compagnie de Financement Foncier was thus among the elite group of issuers that reactivated the constant maturity rate to 10 years ( Tec 10 ) on a benchmark scale. The success of this structured operation is a testament to the trust in the signature by investors looking for lower and more stable risk profiles from issuers over the long term. It reflects Compagnie de Financement Foncier s ability to adopt to the specific demands of investors. DISTRIBUTION OF 2004 ISSUES BY CURRENCY JPY, Compagnie de Financement Foncier has strengthened its position as a leader in obligations foncières issues in France since At the end of December 2004, its issues represented nearly 50% of all obligations foncières issued. SECURITY TRANSPARENCY LIQUIDITY, Obligations foncières rated AAA/Aaa/AAA (stable outlook) by the three main Rating Agencies., At least two benchmarks per annum and increases of existing lines if necessary. GBP CHF AUD 0.1% 1% 4% 4% 9% USD 0.1% HKD, 2004 was extremely favourable for transactions in euros (82% of issues). Nevertheless, Compagnie de Financement Foncier was able to take advantage of arbitrage opportunities in foreign currencies, as it also had a presence in sterling, Swiss francs (leading issuer of obligations foncières ), the US dollar and the yen., Annual and quarterly issue programme certified by the Specific Controller., Market-making charter with market institutions. EUR 82%

21 A RECOGNIZED ISSUANCE POLICY /PAGE 38 ANNUAL REPORT 2004/PAGE 39 Financial communication & Investor relations Compagnie de Financement Foncier continued its policy of optimising and diversifying the investment of its issues through a financial reporting policy that is reactive and present in different media. In 2004, Compagnie de Financement Foncier thus strengthened its presence in entities dedicated to the covered bonds market (Euromoney (Amsterdam, September), Eurocatalyst (Berlin, October), European Mortgage Federation (Brussels, November). For the second consecutive year, Compagnie de Financement Foncier co-sponsored the Euromoney Covered Bonds Congress. Compagnie de Financement Foncier recalled the importance of the regulatory and legislative framework of its obligations foncières which allows its investors to fully benefit from the priority right of repayment attached to these securities. At the same time, Compagnie de Financement Foncier intensified its presence at seminars dedicated to central banks (Tokyo, Beijing, Frankfurt) and continued its marketing effort through traditional non deal related road shows of frequent issuers (Switzerland, Asia, Japan & Hong-Kong, and Australia). In Australia (Sydney, Melbourne and Brisbane), at the end of an investor presentation campaign completed at the end of 2004, Compagnie de Financement Foncier launched its Australian dollar issuance program in early 2005 (January 25, 2005). Established at 5 billion Australian dollars, this new program has helped to broaden Compagnie de Financement Foncier s investor base. Access to the Australian market confirms the continuing confidence of international investors in the signature of Compagnie de Financement Foncier. These two areas of targeted marketing of the signature translated into a significant strengthening of the presence of non-european investors and Central Banks in Compagnie de Financement Foncier s issues and by a marked improvement in its refinancing cost throughout Compagnie de Financement Foncier also strengthened its market lobbying in favour of obligations foncières by becoming co-founder of the European Covered Bond Council (ECBC) officially launched on November 24, 2004 at the annual conference of the Fédération Hypothécaire Européenne (FHE). The creation of the European Covered Bond Council (ECBC) responds to the need of market players to create a platform for the exchange of information and discussion intended to bring them together and create a single and credible spokesperson in the European banking and finance environment. The missions of the ECBC will include improving the visibility of covered bonds as a particular class of assets, studying the impact on issuers of regulatory measures adopted at the European level, defending the interests of issuers before European institutions (Parliament, the Commission, Chairmanship of the Union, regulators). Lastly, in 2004, Compagnie de Financement Foncier, which is a member of AMTE (Euro Debt Market Association), conducted updating work on the market-making charter. This modernised charter, common to French issuers of obligations foncières, will become effective in the first half of In 2005, the focus of this charter will be on financial information provided by covered bond issuers and the desire to ensure greater liquidity their listed securities. DISTRIBUTION BY INVESTOR TYPE JUMBO ISSUES IN 2004 GEOGRAPHIC DISTRIBUTION OF JUMBO ISSUES IN 2004 TREND IN SPREADS FOR COMPAGNIE DE FINANCEMENT FONCIER VERSUS OAT (January 2004-February 2005) Basis point (bp) Banks Other Insurers 2% 32% 16% 27% 23% Asset management/ pension funds Central banks/ Supras Other Europe Switzerland Germany Japan 6% 10% 10% 17% 15% 26% 13% 3% France Scandinavia Benelux Asia /02/04 02/02/04 03/02/04 04/02/04 05/02/04 06/02/04 07/02/04 08/02/04 09/02/04 10/02/04 11/02/04 12/02/04 01/02/05 02/02/05 CFF 01/24/2008 CFF 03/02/2013 Source: banks, at issue, The recognition of the quality of the signature of Compagnie de Financement Foncier was confirmed by a significant reinforcement of demand from Central Banks. This reinforcement is the result of targeted marketing to this category of investor centred on the quality of the credit risk and the stability of the issuer s signature. Source: banks, at issue, The international diversification of the investor base particularly in Asia is a testament to the confidence granted to this class of assets. Within this segment, Compagnie de Financement Foncier s investor base has one of the largest international distributions. Source: Reuters, The spreads of Compagnie de Financement have tightened, settling at 10 basis points above the OAT benchmark curve compared to 15 to 17 basis points at the beginning of the year.

22 FINANCIAL REPORT/PAGE 41 Financial Report contents 142 I. Management report 177 II. Corporate financial statements 128 III. Chairman s report pursuant the Financial Security Law 140 IV. Legal information 168 Reference document cross-reference index

23 FINANCIAL REPORT 2004/PAGE 42 FINANCIAL REPORT 2004 /PAGE 43 i.management report Assets Liabilities Hedge Ratios Analysis of net income Analysis of credit risks Analysis of rate and currency risks Analysis of liquidity risks Sensitivity of the balance sheet Other risks Valuation of collateral Organisational structure of Compagnie de Financement Foncier and Crédit Foncier internal control in Changes in accounting principles in Conversion to IFRS Outlook for the future 64 Notes to the Management Report management report for fiscal year 2004 In fiscal year 2004, Compagnie de Financement Foncier continued its development and recorded 16% growth of its balance sheet, which reached a total of 49.2 billion on December 31, The Company s asset acquisition programme remained very steady across the different asset classes authorised for purchase by its legal status. For example, Compagnie de Financement Foncier completed a number of loan acquisitions totalling 4.1 billion from the Crédit Foncier Group and 5.7 billion of loans from outside the Group as well as debt securities purchases on the secondary market. Following the changes in its balance sheet, Compagnie de Financement Foncier increased its replacement securities by 0.9 billion. Total investment for the year therefore amounted to 10.7 billion. To finance this investment programme, Compagnie de Financement Foncier issued 11.2 billion of obligations foncières (French covered bonds) which were placed with various international investors. As with all Compagnie de Financement Foncier privileged debt, these securities were given AAA/Aaa/AAA ratings by the leading Rating Agencies, after consideration of the legislative and regulatory framework required of all Sociétés de Crédit Foncier and additional commitments taken by Compagnie de Financement Foncier concerning its risk management under a structured rating. For the fiscal year 2004, Compagnie de Financement Foncier reported net income of 73 million which demonstrates, both the quality of its assets and its management in addition to the profitability of its business which is mainly driven by the particularly competitive funding cost. 1. ASSETS The assets of a Société de Crédit Foncier can be broken down into three large categories defined in the four Articles, from L to L , of the French Monetary and Finance Code: secured loans, loans to public entities and replacement securities. According to French law, these loans may be acquired directly from the institutions selling them or held indirectly through priority units of securitisation funds so long as they are composed of at least 90% of the same kind of underlying loans as those authorised by law for direct acquisition. Secured loans benefit from a real estate security, mainly comprised for Compagnie de Financement Foncier by a first-rank mortgage or a privilège du prêteur de denier (preferential mortgage rights for the lender), and must respect a maximum level of loan-to-value (LTV) ratio. Loans to public entities are loans granted to, or totally guaranteed by States, Local Authorities or public institutions of the European Economic Area, Japan, the United States, Switzerland or Canada. By extension, debt securities issued or fully guaranteed by these public entities are included in this category. The secured loans held by Compagnie de Financement Foncier include loans which also benefit from the public guarantee granted, either by the FGAS - Fonds de Garantie de l Accession Sociale à la propriété (a public guarantee mechanism designed to encourage the purchase of property for low-income families under advantageous conditions), or directly by the French government in the case of the subsidised sector. The latter includes special subsidised loans guaranteed by the State until 1995, when they were cancelled. In 1999, Crédit Foncier de France which had a quasi monopoly for their distribution, transferred all its subsidised loan stock to Compagnie de Financement Foncier. Replacement securities are secure and liquid securities which meet criteria that ensure risk minimisation and very high marketability.

24 MANAGEMENT REPORT/PAGE 44 FINANCIAL REPORT 2004 /PAGE 45 12/31/04 12/31/03 12/31/02 IN M AS % IN M AS % IN M AS % Secured loans Articles L and 16 26, % 23, % 22, % State subsidised mortgage loans 3, % 5, % 6, % Mortgage loans guaranteed by the FGAS 6, % 5, % 4, % Other mortgage loans 7, % 6, % 6, % Senior mortgage backed securities 8, % 6, % 4, % Other loans with real estate guarantee % % % Loans to public entities Articles L and 16 12, % 9, % 7, % State subsidised public loans % % % Other public loans 8, % 7, % 5, % Public entity securities 3, % 1, % 1, % Senior securisation units of public debt % % % Other assets not recognised in the 2 previous categories 2, % 2, % 2, % Replacement securities Article L , % 6, % 4, % TOTAL ASSETS 49, % 42, % 37, % The most significant changes in fiscal 2004 included: > The large volume of assets covered by direct or indirect public guarantees which represented nearly 50% of the balance sheet equal to 22.7 billion in outstanding loans. This category as a percentage of total assets, has remained stable over time. > The decline in the subsidised sector (a sector which is being extinguished) where the outstanding loans of 4.5 billion have fallen to under 10% of the balance sheet from its level of 20% two years earlier. > The increase in outstanding property mortgage in the competitive sector. The volume of purchases was higher than the repayments recorded in this loan category. At year end 2004, they amounted to 13.6 billion, i.e. 28% of the balance sheet versus 12.6 billion at December 31, > The significant portion of operations resulting from securitisation. The considerable increase in the portfolio of residential mortgage-backed and equivalent securities or FCC ( Fonds Commun de Créances ) in the last two years to reach 8.8 billion at December 31, 2004, i.e. 18% of the balance sheet. It was half this amount at year end > The increase in securities issued by public entities. Outstanding securities increased two fold during 2004, rising from 1.9 billion to 3.7 billion, representing nearly 8% of the balance sheet at December 31, > The stability of replacement securities which grew at the same pace as the balance sheet and provided a steady level of liquidity to the Company. In 2004, the activity of Compagnie de Financement Foncier expanded in the same proportion within its two main divisions of loan acquisition and purchase of securities. a. Loan acquisition New loans, which complied with the legal eligibility criteria and were acquired during 2004, were basically originated by the Crédit Foncier Group. Accordingly, Compagnie de Financement Foncier purchased 2.9 billion worth of loans granted by Crédit Foncier, in 12 transactions, following an automated process allowing it to select, from among the new production, the loans responding to the necessary purchase criteria. The criteria focus on credit quality and conservative valuation. Compagnie de Financement Foncier also purchased 1.2 billion of senior units rated AAA/Aaa/AAA from a residential mortgage backed securisation of loans originated by Entenial. Technical incompatibilities following the recent acquisition of Entenial by the Crédit Foncier Group prevented the direct purchase of these loans. At the end of the year, Compagnie de Financement Foncier also completed purchases from two Caisses d Épargne banks by way of testing the Caisse d Épargne Group s new loan acquisition system, for a symbolic amount of 0.04 billion. Lastly, Compagnie de Financement Foncier granted 1.3 billion of additional short-term loans to other banking institutions guaranteed by the German State. After taking into account the foregoing, the total loans held by Compagnie de Financement Foncier at December 31, 2004 amounted to 26.5 billion, composed of 4.5 billion for the subsidised sector and 22.0 billion for the competitive sector. The competitive sector loans can be further broken down according to the nature of the borrower: individuals, public entities, social or commercial property sector to fine-tune the analysis of other factors such as credit risk, which will be discussed further on in this report. b. Purchase of securities Concerning securities, in fiscal 2004, Compagnie de Financement Foncier s business resulted in a volume of purchases of 4.3 billion. This corresponded to the purchase of equal portions of securities considered by French law as loans to public entities and FCC. > The public entity securities purchased in 2004 were issued by major European public issuers, and benefited from premium ratings, some after upgrading by monoline insurers, where necessary. 95% have a triple A rating from at least one of the three top Rating Agencies, with 95% benefiting from the best rating from the three Rating Agencies. The ratings for the remaining 5% are equal to or higher than double A. Compagnie de Financement Foncier carried out 24 transactions on securities with maturity dates ranging from 3 months to 31 years for a total amount of 2.1 billion. At December 31, 2004, the portfolio of public entity securities amounted to 3.7 billion, up by 1.8 billion in one year. Securities issued by approximately two-thirds of issuers are guaranteed by the State; the nature of the remaining one-third of issuers can be broken down between public institutions, States and local governments. A majority of issuers are European, mostly from Germany (36%), France (28%) and Italy (21%). In terms of rating, 95% of the overall portfolio obtained the best rating granted by at least two agencies. > Acquisitions of senior securitisation units in 2004 pertained to securisation units rated triple A by at least two Rating Agencies, mostly comprised of residential mortgage loans, and also included a transaction that is guaranteed by the American government. Compagnie de Financement Foncier bought units from ten new securitisation funds for a total amount of 2.2 billion.

25 MANAGEMENT REPORT/PAGE 46 FINANCIAL REPORT 2004 /PAGE 47 At December 31, 2004, the portfolio of securitisation units amounted to 8.8 billion, up by 2.6 billion compared to December 31, Considering the securitisation transaction carried out by the Group on loans originated by Entenial and therefore the purchase of priority units from this fund by Compagnie de Financement Foncier for 1.2 billion, the geographical breakdown changed in favour of France. At year end 2004, the geographical dispersion of the underlying loans of the overall portfolio was 42% in Italy, 28% in Spain, 23% in France, 6% in Portugal and 1% in the United States. At the time of their acquisition, all the units acquired by Compagnie de Financement Foncier from 43 funds had obtained premium ratings from at least two Rating Agencies, with the exception of a public loan securisation fund rated Aa2/AA-, whose outstanding principal amounted to 0.06 billion at December 31, One of the ratings for this investment has gone up since the time of its purchase; however, the units of another FCC fund have been downgraded to AA-/Aa1/AA-, still a very satisfactory rating. For this security, Compagnie de Financement Foncier signed a repurchase agreement with Crédit Foncier, at the time of purchase, to protect it if the rating were to fall below the current level The other securities suffered no change of assessment from the Rating Agencies during the fiscal year. A close look at the prepayment rates of underlying loans indicates an increase in relation to the rates envisaged at the creation of the securisation funds, especially in Spain, where it reached 14% although it was estimated at 10% at the time of acquisition and, to a lesser extent in Italy where it is at a level close to 6% versus the originally expected 4%. This difference can be explained by declining interest rates in Europe and the predominance of fixed-rate loans in the acquired portfolios. However, the resulting interest-rate risk is not borne by Compagnie de Financement Foncier which has invested in units which offer a floating interest rate thanks to the structuring of the funds. For Compagnie de Financement Foncier, the higher-than-expected increase in prepayments only results in a shorter investment period, without any change in margin. For each of the securisation funds, held partially or fully by Compagnie de Financement Foncier, we have observed continued improvement of overcollateralisation since their acquisition, reinforcing the intrinsic strength which motivated the initial purchase of units. In addition, Compagnie de Financement Foncier has set up a procedure for assessing the quality of reports produced by the management companies of these funds. The assessment helps to improve information transmitted on funds held, and therefore their analysis. As a result of these developments, the reports can be used as a more efficient decision-support tool for new investments. 2. LIABILITIES The liabilities of Compagnie de Financement Foncier fall into two categories: > Privileged debts which provide bondholders with the privilège granted by law, or, in other words, the guarantee of priority repayment and compliance with payment schedules, even in the unlikely case of a defaulting issuer or its parent Company. It is in consideration of this highly secure legal context and the commitments taken by Compagnie de Financement Foncier concerning, notably, the quality of its assets and its balance sheet management, that the three leading Rating Agencies have consistently given their highest ratings to these privileged resources since the Company s creation. > The other non privileged debts which help to reinforce the security of privileged debt holders and demonstrate the highly prudent risk monitoring and management policies of Compagnie de Financement Foncier. 12/31/04 12/31/03 12/31/02 IN M AS % IN M AS % IN M AS % Privileged resources 43, % 37, % 33, % Obligations foncières 41, % 34, % 28, % Other privileged resources 2, % 3, % 4, % Unsecured resources 5, % 4, % 4, % Unsecured debts 1, % 1, % 1, % Subordinated debts and other debts 3, % 3, % 2, % Shareholders equity, provisions and FRBG % % % TOTAL LIABILITIES 49, % 42, % 37, % This table shows: > The sharp increase in outstanding obligations foncières which amounted to 41.1 billion at December 31, 2004, representing a 20% year on year increase; > The persistently strong protection provided to privileged bondholders through the presence of non privileged debts on the balance sheet. These debts represent 11.6% of the total balance sheet or an outstanding amount of 5.7 billion at December 31, billion of this overcollateralisation corresponds to subordinated debts and shareholders equity and provisions. In fiscal year 2004, Compagnie de Financement Foncier confirmed its position as the leading private issuer in France by issuing a total volume of 11.2 billion of obligations foncières. With issuance of 9.6 billion in 2003, Compagnie de Financement Foncier was already the largest issuer after the French government in terms of volume. The Company executed highly diversified transactions on the financial markets. This diversity resulted from the variety of currencies and structures issued. Compagnie de Financement Foncier operated on several international financial markets and increased the geographical diversification of the placement of its bonds as well as the proportion placed with central banks. Its public issues reached 5.9 billion in 2004: three transactions, of 1 billion each, are covered by the marketmaking charter signed with some twenty international banks. This market-making charter helps ensure liquidity in the secondary market. This diversity resulted from the variety of currencies and structures issued. Compagnie de Financement Foncier also carried out a large number of transactions involving private placements. These borrowings are structured to meet the specific needs of a select number of investors and offer a more advantageous financing cost for the issuer even if they require more complex management to avoid any structuring risk. For example, the private issues in 2004 often proposed remuneration indexed on the inflation level of a European country. Compagnie de Financement Foncier also issued 1 billion of securities referenced on the TEC 10 index representative of the French government s ten-year debts. The choice of index remains neutral for Compagnie de Financement Foncier which negotiates, if necessary at the time of each issue, the necessary swap operation to ensure a variable interest rate for its debt based on Euribor.

26 MANAGEMENT REPORT/PAGE 48 FINANCIAL REPORT 2004 /PAGE 49 In accordance with the text of the law, any issue above 500 million must be submitted to a Specific Controller for special certification. The Controller specific checks the level of overcollateralisation of Compagnie de Financement Foncier after taking the operation into account. This certification completes the one delivered at the beginning of each quarter, on the basis of the issuance programme envisaged for that period. Accordingly, four transactions were validated in 2004: > CFF 4.25% January 2014 for 1 billion (code ISIN FR ) > CFF 4.00% July 2011 for 1 billion (code ISIN FR ) > CFF TEC 10 July 2020 of 1 billion (code ISIN FR ) > CFF 2.75% November 2007 for 1 billion (code ISIN FR ) Concerning foreign currency, the euro had a predominant place as the currency of choice for 82% of issues in Compagnie de Financement Foncier took advantage of the strong demand for this currency during the period while also maintaining its presence in sterling, the Swiss franc, the US dollar and the yen. The average life of issues rose slightly in 2004 to reach nearly 9 years. Compagnie de Financement Foncier intervened across the entire yield curve, with maturities from 18 months to 39 years. Most bonds had maturities greater than 5 years. Since its creation, Compagnie de Financement Foncier has issued nearly 44 billion in obligations foncières. After taking into account the debt transferred in 1999, the total of privileged debt was 41 billion at December 31, 2004, 90% of which will be amortised over the next 14 years with the longest maturity date being ,000 5,000 4,000 3,000 2,000 1, SCHEDULE OF OBLIGATIONS FONCIÈRES (in millions of euros) Maturity For all the privileged bonds, thirteen lines in euros enjoy special liquidity due to their size in excess of 500 million at origin and the market making charter entered into with more than twenty banks for the organisation of their secondary market trading. At December 31, 2004, there were outstanding bonds worth 21.3 billion, representing the Compagnie de Financement Foncier s benchmark privileged debt curve of the secured debt benchmark rate of Compagnie de Financement Foncier. BONDS SICOVAM OR ISIN CODE REPAYMENT DATE OUTSTANDING ISSUED IN MILLION CFF 5% June 2005 FR /24/05 1,750 CFF 2.75% February 2006 FR /02/06 1,250 CFF 2.75% November 2007 FR /02/07 1,000 CFF 3.625% January 2008 FR /28/08 2,450 CFF 5.125% October 2008 FR /25/08 1,250 CFF 4.25% October 2009 FR /25/09 1,400 CFF 5.625% June 2010 FR /25/10 4,300 CFF 4% July 2011 FR /21/11 1,000 CFF 5.375% March 2013 FR /02/13 1,400 CFF 4.25% January 2014 FR /29/14 1,400 CFF 6.125% February 2015 FR /23/15 1,500 CFF 4.50% May 2018 FR /16/18 1,500 CFF 5.75% October 2021 FR /04/21 1, HEDGE RATIOS French law obliges any Société de Crédit Foncier to permanently maintain a volume of weighted assets superior to the privileged debt. Weighting is aimed at reducing, for the calculation of this ratio, the amount of certain assets. This is mainly the case for guaranteed loans and securitisation units for which the weighting depends on the rating, the guarantee or the security. Considering these management rules, all the assets of this category held by the Compagnie de Financement Foncier have a 100% weighting. The only CFF balance sheet items which present a reduction of their outstanding principal for calculating this ratio are the 5,710 million of replacement securities, which, pursuant to the regulations, are selected after a 5% discount enabling the prudential guarantee of their perfect liquidity, and the fixed assets deducted from shareholders equity of 31 million weighted at 0%, in accordance with this regulation. At December 31, 2004, the overcollateralisation ratio of Compagnie de Financement Foncier totalled 112.2%, up slightly from the 2003 level of 111.6%. The component items of this percentage rose sharply in 2004, in line with the Company s development. Weighted assets amounted to 48.8 billion at December 31, 2004 compared to 42.2 billion one year earlier and can be compared to the privileged debts for an amount respectively of 43.5 billion at year end 2004 and 37.8 billion at year end Similarly, Compagnie de Financement Foncier has to ensure that the amount of loans, of which those with a loan-to-value ratio which exceeds the eligibility threshold for refinancing by obligations foncières, remains lower than its non privileged resources. The application decree of the law fixed this percentage between the outstanding capital due and the re-estimated value of the underlying financed asset at 60% for loans with a first rank mortgage or an equivalent real estate surety. This ratio can be raised to 80% so long as the surplus is financed by non privileged debts.

27 MANAGEMENT REPORT/PAGE 50 FINANCIAL REPORT 2004 /PAGE 51 For the loans covered by the FGAS guarantee, a 100% ratio is authorised. To evaluate compliance with this rule, Société de Crédit Foncier calculates the amount of the overrun on all the loans that it holds and for each of the loans that was the object of an overrun at the time of acquisition, they compare their total to the amount of the non privileged liability. For Compagnie de Financement Foncier, the hedge ratio for LTVr overruns in 2004 shows very high protection equivalent to that observed in previous years. Non privileged resources, which may not result in payment of interest if the Company were to encounter difficulties, are much higher than the outstanding amounts exceeding this regulatory threshold. Non privileged liabilities totalled 5,710 million at December 31, 2004, representing 11.6% of the balance sheet, to cover an overrun estimated at 175 million, corresponding to 0.4% of the total balance sheet. In terms of the percentage of outstanding loans compared to the value of the underlying collateral, the average LTVr for all mortgage loans stood at 50.6% at December 31, These LTVr values were calculated after reviewing the value of the underlying assets. At December 31, 2004, the amount of the underlying assets was valued at 58.1 billion for an amount of mortgage loans not benefiting from a public guarantee equal to 16.7 billion. The average LTVr of the portfolio, weighted by outstanding loans remained stable throughout fiscal 2004 under the effect of two opposing trends. In terms of flow, the LTVr of loan acquisitions is higher, close to the thresholds authorised by the law, while in term of stock, the LTVr of loans held recorded a steady decline. This improvement of hedge ratios recorded on previous loan acquisitions, particularly those acquired during the transfer in 1999, takes into account the contractual amortisation of loans and the overall appreciation, observed for several years now, of the value of property assets used as security. Out of the outstanding loans submitted to the limit of 80% of the LTVr at purchase, i.e., nearly 11 billion, only 145 million exceeded this LTVr threshold at December 31, In addition, at year end 2004, Compagnie de Financement Foncier continued to have a liquidity coefficient and compliance ratios well above the minimum levels set by banking regulations. The other prudential ratios applicable to credit institutions are monitored by the Crédit Foncier Group at the consolidated level 4.ANALYSIS OF NET INCOME a.net banking income Net banking income for 2004 levelled off at million, up by 23 million on the previous year. However, this positive change was driven by non-recurring events which had burdened the results of fiscal In 2003, a 44.6 million expense was recognised for the closing of off-balance sheet positions which allowed better results in the subsequent years. In 2004, the main extraordinary item was an expense of 7.8 million on micro hedging cap operations carried out to reduce the exercise threshold and thereby improve the effectiveness of the management of capped loans. Excluding exceptional movements, current net banking income fell slightly, mainly due to the sharp decline of loans in the subsidised sector which enjoyed a high margin recorded in net banking income. However, a high percentage of this margin was paid back to Crédit Foncier in management commissions and is recognised under general operating expenses. After reintegration of these expenses, restated current net banking income increased by 5.1 million in 2004, driven by the sharp rise in other outstanding loans. The interest charge in 2004 included 85.8 million of interest paid on subordinated debts with Crédit Foncier de France, compared to 66.0 million in This increase results from the inclusion over the whole of 2004 of the remuneration of redeemable subordinated securities for 900 million at year end The outstanding participating loan of 1,350 million reached its maximum rate this year again, equal to the money market rate plus 2.5% for the period. For these two securities, the interest portion corresponding to the surplus remuneration, paid above the money-market rates, totalled 37.4 million in fiscal Under commissions received, we must note the continued rise of prepayment or renegotiation indemnities on loans to customers; before retrocession of part of the amount to Crédit Foncier, these gains amounted to 20.7 million during fiscal Net banking income also takes into account the cost of hedging a number of assets with Crédit Foncier. They correspond, first, to an asset repurchase guarantee in the event of downgraded ratings for a total cost of 0.7 million in fiscal 2004; second, to coverage for a credit risk hedge on 2.6 billion of mortgage loans. The risk on these loans was indirectly transferred to a triple A rated public institution; the last operation was carried out at year end 2004 and had no material impact on the financial statements for fiscal Accounts relating to banking operations also recorded movements linked with the loans guaranteed by FGAS. They primarily concerned payment of commissions on outstanding loans and a bonus on payments made at the time the loans were granted, on production prior to the transfer, for 9 million. Such movements had also been recorded in 2003 for similar amounts. b. Gross operating income Gross operating income for fiscal 2004 amounted to million compared to 79.7 million for fiscal 2003, indicating the increase in net banking income and a slight fall in general operating charges and allocations to amortisation. A large part of these expenses reflect repayment of the commissions paid by Compagnie de Financement Foncier and items on its balance sheet and are proportional to the managed outstanding loans. However, since the commissioning rates differed according to the nature of the markets under consideration, the declining expenses relating to the subsidised sector, by amortisation of outstanding loans, remained higher than the cost borne for the management of loans from the competitive sector, which had risen sharply. Allocation to amortisations exclusively corresponds to the amortisation of goodwill between the market value and the net book value of the items transferred to Compagnie de Financement Foncier in October The method for eradication of this goodwill over time was determined when the transfer was made. A decreasing amortisation amount is recognised every year until extension in June c. Cost of risk In fiscal 2004, cost of risk contributed 2.0 million to the income of Compagnie de Financement Foncier, after a positive contribution of 4.0 million in In 2004, Compagnie de Financement Foncier s provisioning policy led to the recognition of a net allocation of 1.9 million, after the net write-back of 1.8 million in As in the previous year, the settlement of litigation resulted in a net gain of 3.9 million in 2004 compared to 2.2 million in For fiscal 2004, this result includes gains on amortised debts for 6.2 million and losses of 2.3 million. These items reflect the cost of capital risk. To measure the total cost of risk, the interest on doubtful loans recognised in net banking income has to be added. For 2004, this corresponded to a gain of 4.6 million. It was also positive in an amount of 3.8 million in fiscal This total charge is discussed in more detail in the next chapter.

28 MANAGEMENT REPORT/PAGE 52 FINANCIAL REPORT 2004 /PAGE 53 d. Income from operations before tax Pre-tax income from operations stood at million for fiscal 2004 compared to 83.8 million for the previous year. After reintegration of the money market rate increase granted to subordinated debts of 37.4 million and the cost of guarantees subscribed on some assets quoted above of 0.7 million, the restated gross income for the year totalled million. By adding the full remuneration paid to Crédit Foncier for the subordinated debts, the income levels off at million, an amount very close to the doubtful debts from the competitive sector, after provisions, equal to million. Accordingly, recognised risks are hedged by this income alone without resorting to other guarantees which constitute shareholders equity and funds for general banking risks (FRBG) of million, subordinated debts and similar loans of 3,397.2 million or the other non privileged resources of 1,929.5 million. e. Other items The tax charge for 2004 totalled 40.7 million, being an apparent rate of 35.8% compared to the accounting income, the taxable income being slightly higher. In 2004, Compagnie de Financement Foncier did not change allocations for FRBG which had been the object of an initial allocation of 20.0 million in f. Net Income After taking these different items into account, Compagnie de Financement Foncier s net income for 2004 was at 72.9 million compared to 31.7 million for the previous year. When extraordinary items and allocation of the FRBG recorded in 2003 are deducted, the net incomes of fiscal 2003 and 2004 are quite comparable and reflect an increase in the income correlated to that of outstanding loans and therefore stability of the margin on outstanding loans. 5. ANALYSIS OF CREDIT RISKS Concerning credit risk, the assets held by Compagnie de Financement Foncier are analysed according to the four main categories below: > Loans from the subsidised sector which are guaranteed by the State, > Loans from the competitive sector which are guaranteed by a real secured by a first rank mortgage or a public entity and those granted to public entities. This category includes securities issued or guaranteed by public entities, in accordance with the regulatory classification of eligible assets for Sociétés de Crédit Foncier, > Eligible securitisation units, in other words funds with at least 90% of their underlying assets comprised of loans covered by the same guarantees as those required for the direct acquisition of loans. Concerning just the priority units, the credit risks on these securities are covered by different mechanisms set up at the time of the fund structuring which are permanently monitored by Rating Agencies. Furthermore, the analysis of the performance of underlying credits and the management of funds, developed by Compagnie de Financement Foncier on its securitisation transactions, confirm the quality of these assets, > The replacement securities inherently comprised of safe and liquid securities enjoy the best credit quality. No provisions are allocated for this asset category, which does not include any doubtful loans. At December 31, 2004, all the eligible loans and similar securities of Compagnie de Financement Foncier totalled 39 billion and break down as follows: > 4,477 million for the subsidised sector > 25,802 million for the competitive sector, of which - 12,402 million of mortgage loans granted to individuals - 1,349 million of loans and securities granted to or guaranteed by public entities - 1,876 million of loans granted to social housing professionals (these loans are covered by a mortgage and/or public guarantee) million of loans granted to commercial property professionals > 8,770 million of securitisation units whose underlying assets are primarily comprised of mortgage loans to individuals. Out of these outstanding loans, 98%, or 8,602 million are secured loans as defined by the law. Furthermore and in addition to the unconsolidated accounting items which will be analysed below, the unrealised gains from the accounting methods used for loans transferred in 1999 from Crédit Foncier to Compagnie de Financement Foncier must be taken into account. These unrealised premiums correspond to write-backs on provisions made by Crédit Foncier before the transfer and which were recognised at the consolidated Group level only. Today, these potential profits for Compagnie de Financement Foncier will be recorded in the individual Company financial statements as extraordinary profit only at the time of the total amortisation of the loan, and only insofar as this improvement of the situation since the transfer is effectively confirmed. The unrealised gains amounted to 2.7 million for the subsidised sector and 2.1 million for the competitive sector at December 31, a. Loans from the subsidised sector This sector comprises loans from the subsidised sector produced by Crédit Foncier and transferred to Compagnie de Financement Foncier in October 1999 with their related guarantees. This guarantee is exercised by means of various regulatory mechanisms that have the effect of stabilising the income and expenses of the assets and liabilities of this sector; it provides Compagnie de Financement Foncier with coverage against of the risk of default of debtors, of late payments and prepayments of loans. Thanks to these mechanisms, only a residual credit risk is retained by Compagnie de Financement Foncier. In addition, the French government has historically given its direct guarantee for a portion of the debt refinancing for the subsidised sector. Two bonds covered by the explicit guarantee of the French government were accordingly transferred. The total outstanding principal of these bonds totalled 150 million pounds sterling at December 31, 2004, with their maturity dates in 2007 and SUBSIDISED SECTOR (in millions of euros) CHANGE 2004/ Outstanding loans 4, , % 7,349.3 Doubtful loans % Rate of doubtful loans 8.4% 7.6% 9.6% 7.0% Compromised doubtful debts % n.a.r. Rate of compromised doubtful loans 6.6% 5.3% 24.2% n.a.r. Overall provisions % 3.8 Net losses % -1.4 Cost of risk n.s Cost of risk (in basis points) -1.2 bp 0.0 bp n.s bp NB: By convention, the losses and cost of risk represent costs when the number is positive. n.s.: not significant n.a.r.: non applicable regulation.

29 MANAGEMENT REPORT/PAGE 54 FINANCIAL REPORT 2004 /PAGE 55 Structurally, this sector, which is being extinguished, records a sharp drop in its outstanding loans each year. In 2004, through amortisation it lost nearly a quarter of its amount and stood at 4.5 billion at year end At the same time, the rate for doubtful loans also shrank, since the fall of past due loans was lower than that of healthy loans. It stood at 8.4% at December 31, 2004, representing an outstanding amount of 375 million, 294 million of which are described as compromised doubtful loans. Since fiscal 2003, pursuant to regulation of the French Accounting Regulation Committee, compromised outstanding doubtful loans are recognised separately; they include loans classified as compromised for which reclassification as healthy loans is not foreseeable, particularly loans with lapsed payment dates and loans considered as bad for more than one year. These items, usually representative of the potential risk, remain, in the case of the subsidised sector, immaterial of the actual risks incurred, considering the existence of the State guarantees protecting this sector. The amount of provisions remained stable and the overall risk charge resulted in a slight gain in terms of income for Compagnie de Financement Foncier. b. Competitive sector excluding securitisation units This sector expanded considerably in 2004, growing by 20% to reach 25.8 billion at year end 2004 and representing, as in the previous year, 50% of the total assets of Compagnie de Financement Foncier. INDIVIDUALS (in millions of euros) CHANGE 2004/ Outstanding loans 12, , % 10,238.3 Doubtful loans % Rate of doubtful loans 1.7% 1.7% 1.1% 1.4% Compromised bad loans % n.a.r. Rate of compromised doubtful loans 0.3% 0.2% 31.2% n.a.r. Overall provisions % 11.9 Net losses % 1.9 Overall risk expense % 1.5 Cost of risk (in basis points) 0.7 bp -1.4 bp % 1.5 bp PUBLIC ENTITIES (in millions of euros) CHANGE 2004/ Outstanding loans 11, , % 6,357.6 Doubtful loans % 3.8 Rate of doubtful loans 0.0% 0.0% -37.0% 0.1% Compromised bad loans n.s. n.a.r. Rate of compromised doubtful loans 0.0% 0.0% n.s. n.a.r. Overall provisions % 0.1 Net losses n.s. 0.0 Risk expense % -0.7 Cost of risk (in basis points) 0.0 bp 0.1 bp % -1.1 bp SOCIAL HOUSING (in millions of euros) CHANGE 2004/ Outstanding loans 1, , % 1,774.6 Doubtful loans % 22.8 Rate of doubtful loans 0.3% 0.7% -63.1% 1.3% Compromised bad loans % n.a.r. Rate of compromised doubtful loans 0.2% 0.1% 32.2% n.a.r. Overall provisions % 3.7 Net losses % 0.1 Risk expense % 0.6 Cost of risk (in basis points) 3.1 bp 1.7 bp 87.9% 3.4 bp COMMERCIAL PROPERTY (in millions of euros) CHANGE 2004/ Outstanding loans % Doubtful loans % 77.0 Rate of doubtful loans 15.7% 23.4% -32,8% 28.5% Compromised doubtful loans % n.a.r. Rate of compromised doubtful loans 6.7% 13.0% -47.9% n.a.r. Overall provisions % 16.5 Net losses % -2.2 Risk expense % -2.2 Cost of risk (in basis points) n.s bp n.s bp TOTAL COMPETITIVE SECTOR (in millions of euros) CHANGE 2004/ Outstanding loans 25, , % 18,641.1 Doubtful loans % Rate of doubtful loans 0.9% 1.2% -20.9% 1.3% Compromised doubtful loans % n.a.r. Rate of compromised doubtful loans 0.2% 0.3% -23.6% n.a.r. Overall provisions % 32.2 Net losses % -0.3 Risk expense % -0.7 Cost of risk (in basis points) -1.6 bp -1.7 bp -9.7% -0.4 bp NB: By convention, the losses and cost of risk represent costs when the number is positive. n.s.: not significant n.a.r.: non applicable regulation. NB: By convention, the losses and cost of risk represent costs when the number is positive. n.s.: not significant n.a.r.: non applicable regulation.

30 MANAGEMENT REPORT/PAGE 56 FINANCIAL REPORT 2004 /PAGE 57 This increase is primarily due to public sector loans and securities (up by 3.1 billion raising the outstanding principal to 11.3 billion at year end 2004) and to a lesser extent, loans to individuals (up by 1.2 billion raising the outstanding amount to 12.4 billion at year end 2004) especially on loans covered by the FGAS guarantee. Social housing loans remained relatively stable in volume, slightly increasing from 1.8 billion to 1.9 billion in one year. As for loans to commercial property professionals, the outstanding principal continued to fall and levelled off at less than 0.2 billion at December 31, 2004, less than 0.4% of the balance sheet. Since there has been no acquisition since 2001 and due to its very structure, the sector is disappearing through loan amortisation. These loan trends in each sector had already been observed the previous year with similar variances. The amount of doubtful loans also recorded a positive trend. Outstanding loans stabilised at around 250 million while the overall portfolio of loans sharply increased; the rate of doubtful loans rose from 0.9% to 1.2% during fiscal 2004 but remains very differentiated according to the business sectors: > Mechanically, it is high in the commercial property sector because it is being extinguished, but corresponds in fact to 27 million of doubtful loans, which is immaterial considering the size of the Company s balance sheet. > The percentage of doubtful loans is very small, virtually nil, for loans granted to social housing professionals or to public entities. Some loans to the social sector receive additional public guarantees especially from local governments. > Lastly, loans to individuals have a more significant doubtful loan rate, although not high, of 1.7% on a large total volume. In the field of compromised doubtful loans, their outstanding principal breaks down into 40 million for individuals, 12 million for commercial property and 3 million for social housing; accordingly, 55 million were classified as compromised out of total outstanding bad loans of 244 million at December 31, 2004, for this global portfolio of loans in the competitive sector. The portion of compromised loans within doubtful loans is similar to the figure recorded in 2003, around 23%. The amount of provisions increased slightly and follows, to a lesser extent, the change in the loan portfolio. It remains low, equal to 0.13% of the outstanding amount at a total of 32 million, while Compagnie de Financement Foncier s policy of provisioning remains very prudent as shown by the results concerning the cost of risk in recent years. The cost of risk includes the net allocation to provisions and the amount of net losses. In fiscal 2004, net losses for the competitive sector represented a significant gain of 6.9 million for Compagnie de Financement Foncier. This provision had already contributed positively to results the financial in the previous two years: 1.3 million in 2003 and 0.3 million in This contribution to the financial results can be explained by receipts from amortised loans ( 10.3 million) superior to the amounts of losses covered or not by prior provisions, recorded on loans under litigation ( 3.4 million). Loans granted to commercial property professionals also recorded profit of 8.5 million on amortised loans versus only 0.7 million of losses. These results prove the high level of stock provisioning, particularly stemming from the transfer, as well as the efficiency of loan recovery by Crédit Foncier. c. Competitive sector of which securitisation units To analyse all the loans of the competitive sector in terms of risk, securitisation operations which allow the indirect holding of loans must be included. The securitisation portfolio of Compagnie de Financement Foncier has the best ratings, and the integration of securitisation units in the competitive sector improves the overall income. TOTAL LOANS IN MILLION RATE OF DOUBTFUL LOANS RISK IN BP TOTAL LOANS IN MILLION RATE OF DOUBTFUL LOANS RISK IN BP TOTAL LOANS IN MILLION RATE OF DOUBTFUL LOANS Individuals 21, % , % , % 1.1 > Of which securitisation units 8,602 6,157 4,128 Public entities 11, % 0.0 8, % 0.1 6, % -1.0 > Of which securitisation units Social housing 1, % 3.1 1, % 1.7 1, % 3.4 Commercial property % -313, % % TOTAL 34, % ,699 0,9% % -0.3 Total excluding securitisation units 25, % , % , % -0.4 Total excluding commercial property 34, % , % , % 0.6 NB: By convention, the losses and cost of risk represent costs when the number is positive. This table confirms the results already observed solely on the portfolio of loans and equivalents in the competitive sector: > Strong growth in loans in 2004, > Declining percentage of doubtful loans in the four sectors, > An overall cost of risk which continues to contribute positively to the income of Compagnie de Financement Foncier; excluding commercial property loans, the cost of risk remains very low, equal to 1.5 million for total assets of 34.4 billion, i.e., 0.4 basis points. At December 31, 2004, Compagnie de Financement Foncier did not have any credit derivatives. However, it had protection mechanisms against credit risks, mainly: > Guarantees provided by the State in the case of the subsidised sector > FGAS guarantees > Insurance provided by specialised institutions > Guarantee commitments received from Crédit Foncier de France pertaining to an outstanding principal of 2.6 billion of mortgage loans, in the context of a credit risk transfer transaction from Crédit Foncier Group to a public institution with a triple A rating. 6. ANALYSIS OF RATE AND CURRENCY RISKS As a result of the implementation of a series of protective mechanisms, Compagnie de Financement Foncier is only very marginally exposed to an interest-rate risk. All the items on its balance sheet are transformed, as applicable, into variable rate assets and liabilities from origination additionally its rate position is checked quarterly and corrected immediately in case of distortion. Furthermore, Compagnie de Financement Foncier has no open currency positions. The operations initiated in foreign currencies, primarily those negotiated during issues of obligations foncières are converted into euros at the time of their execution. RISK IN BP

31 MANAGEMENT REPORT/PAGE 58 FINANCIAL REPORT 2004 /PAGE 59 a. Hedging transactions At the time of the transfer on October 21, 1999, micro-hedging swaps were established to transform the balance sheet into variable interest rates. In addition, during the life of the loans, all the risks of the subsidised sector, of which interest-rate risks, the risk of prepayment and renegotiations, are covered under the guarantee granted by the French State. With respect to loans acquired since the transfer, suitable mechanisms have been implemented upon acquisition to neutralise interest-rate risks on these assets. The fixed-rate loans transferred by Crédit Foncier de France are covered by variable-rate micro-hedging swaps, and rate guarantee operations are executed for the variable-rate loans that have a rate cap. With Caisses d Épargne, a series of mechanisms has also been agreed to allow hedging of the interest-rate risks and to guarantee the anticipated profitability for Compagnie de Financement Foncier. Securities acquired on financial markets are the subject of interest-rate and currency swaps, as applicable, if they are not variable rate or euro-denominated securities. The funds raised by Compagnie de Financement Foncier are covered by interest rate and currency swap transactions, in order to ensure a variable interest rate in euros for the primary market issues, through microhedging swaps at the time of issuance. Finally, Compagnie de Financement Foncier reviews its interest rate positions every quarter, and periodically executes new macro-hedging swaps to correct positions in order to maintain compliance with its commitment limits for the balance sheet life. In order to offset any counterparty risks tied to these derivatives, Compagnie de Financement Foncier has signed an asymmetrical collateralisation agreement with all counterparties. This way, it receives deposits corresponding to its net position after deductions depending on the rating of the counterparty. As of December 31, 2004, these unsecured deposits amounted to million. The financial instruments traded in these hedging operations represent very significant amounts recorded off the balance sheet. The total of the reciprocal commitments at December 31, 2004 was 79.5 billion; it increased by 41% over one year because of the development of the activity of Compagnie de Financement Foncier and the continuation of very active risk management. These financial instruments can be analysed, based on the desired hedging objective as: > Macro-hedging rate swaps for 12.8 billion, 1.8 billion of which represents the stock at December 31, 2004 of the swaps transferred from Crédit Foncier in 1999 to cover its former activity as a Société de Crédit Foncier, and swaps which closed the open positions that appeared at the time of the legal split for the transfer. The financial instruments used to protect against the risks of the subsidised sector represent 2.4 billion. The balance of 8.7 billion corresponds to operations realised after the transfer in order to correct balance sheet distortions that appear in the life of the loans, such as prepayments. > Micro-hedging swaps of asset items acquired for 12.6 billion. These primarily correspond to rate swaps executed by Compagnie de Financement Foncier to transform the loans acquired from Crédit Foncier, which had previously granted them at a fixed rate to its customers and other investment securities issued or guaranteed by public entities into variable-rate assets. Currency swaps were also put in place for the portion of these securities not denominated in euros; their outstanding amount was 0.5 billion of currencies to be delivered ( 0.6 billion euros to be received). > Micro-hedging swaps of issued debts. Interest rate operations totalled 38.1 billion and those of currency exchange 7.5 billion to be delivered ( 6.5 billion to be received). The rate swaps recorded a sharp rise in fiscal 2004, rising from 22.6 billion to 38.1 billion, thus translating the very active management of benchmark indices of the variable rate component of swaps. > Micro-hedging conditional operations for 1.9 billion, used to protect the variable-rate loan portfolios with a remuneration capped to the benefit of their borrowers. b. Residual rate position Considering the different hedging mechanisms entered into by Compagnie de Financement Foncier from the closing of operations, exposure to interest-rate risk is limited to the possible distortion of the hedging transaction due to unknown events at origination and occurring in the life of these operations. Since the securitisation units are at variable rate from origination and the other investment securities have a certain maturity date, the residual rate position is constituted by fixed-rate loans whose prepayment is not covered by indemnities equivalent to the risk incurred. In the subsidised sector, interest-rate risk is borne by the State in the context of its guarantee and all the loans granted to corporate entities benefit from actuarial indemnities. Therefore, there is only a residual risk on the fixed-rate outstanding loans in the competitive sector granted to individuals, because of the cap on the indemnity stipulated in the contract in the event of prepayment, which is 6 months interest with a maximum of 3% of the outstanding principal amount. For Compagnie de Financement Foncier, these loans amounted to 5.3 billion at December 31, 2004, as the recent production of Crédit Foncier remains mostly at variable rate. Moreover, the low nominal rate of these loans constitutes an additional protection against the risk of prepayment and renegotiation. Interest free loans amounted to 1.4 billion and loans with non-zero but less than 6% interest rates totalled 3.0 billion. The interest-rate risk, resulting from the prepayment or imperfectly indemnified renegotiation, may be estimated, potentially present, on a portfolio of less than 1 billion, i.e. 1.8% of the balance sheet. Furthermore, for the entire portfolio of loans held by Compagnie de Financement Foncier, the observation of prepayment flows shows a steady and moderate increase in the percentage of loans recording such an event. This rate remains nevertheless low and close to the incompressible levels not linked to changes in interest rates. Prepayments remain more significant on loans in the subsidised sector for which Compagnie de Financement Foncier benefits from a rate guarantee from the French State. This change in the last three years is summarised in the table below: PREPAYMENTS RATES (in %) Subsidised sector 9.2% 7.4% 5.7% Competitive sector 4.4% 3.8% 3.2% TOTAL 5.6% 4.9% 4.2% 7. ANALYSIS OF LIQUIDITY RISKS As for rate risks, the balance sheet management rules of Compagnie de Financement Foncier provide a very low exposure to liquidity risk.

32 MANAGEMENT REPORT/PAGE 60 FINANCIAL REPORT 2004 /PAGE 61 Accordingly, Compagnie de Financement Foncier is committed to maintaining sufficient short term liquidity to cover its privileged debt commitments for a period of one year. Moreover, a significant portion of its assets are inherently easily negotiable, such as replacement securities comprised of safe and liquid investments, as required by the law on Sociétés de Crédit Foncier. Accordingly, at December 31, 2004, Compagnie de Financement Foncier had 7.5 billion in replacement securities, i.e. 15% of the balance sheet, the bulk of which had a life span under 6 months, and a set of securities eligible for refinancing at the European Central Bank, for an amount of 9.2 billion. At December 31, 2003, Compagnie de Financement Foncier also had the equivalent of 15% of its balance sheet in replacement securities and the amount of its short-term claims on the ECB was less significant, at 6.8 billion. Furthermore, according to the same rules as those applied to the monitoring of interest-rate risk, the liquidity position of Compagnie de Financement Foncier is reviewed every quarter and compliance with its commitments, regarding its immediately available cash and realisable assets is permanently checked. 8. SENSITIVITY OF THE BALANCE SHEET The exposure of Compagnie de Financement Foncier to interest rate and liquidity risks can be measured using different sensitivity indicators of its results or asset/liability matching. Thus, in a cash-flow methodology, excluding new acquisitions and issues, the present value of the net results as they may be estimated over the next 10 years would decline by 52 million, i.e. 0.11% related to the balance sheet in the event of an increase of 2 points in market rates, all other elements being equal. In 2003, this sensitivity of results to market trends was also much reduced to 0.16% of the balance sheet. The maturities of the balance sheet items, both fixed rate and variable rate, at December 31, 2004 remained very close: the maturity of assets was 5.90 years versus the maturity of liabilities which was 5.99 years. They were respectively 5.41 years and 5.49 years one year earlier. The very strong quality of the matching was therefore confirmed for fiscal OTHER RISKS LEGAL RISKS a. Outstanding events and disputes At December 31, 2004, there were no exceptional events or disputes likely to have a material impact on the results or the financial position of Compagnie de Financement Foncier. b. Insurance policy Compagnie de Financement Foncier has insurance policies taken out by Crédit Foncier de France, of which the following: > A comprehensive policy covering all risks except real estate, subscribed by Crédit Foncier for all operating buildings (head office and network), which covers Compagnie de Financement Foncier as well, so long as its business is conducted in buildings belonging to Crédit Foncier de France. This policy also covers the mainframe computer units of Crédit Foncier, which are also used by Compagnie de Financement Foncier. > An insurance policy for protection against risks of fraud, malice or embezzlement. The policy cites Compagnie de Financement Foncier among the Companies insured. > A civil liability policy for senior executives and corporate officers (Chairman, Chief Executive, Administrators) for any judgments against them for negligence in the performance of their duties. This policy was taken out by Crédit Foncier de France for its own account and for subsidiaries (of which Compagnie de Financement Foncier). In addition, Compagnie de Financement Foncier has also signed the Group Insurance Agreements covering borrowers of mortgage loans for risks of death, total and irreversible loss of autonomy, inability to work and disability. Under the Agreement, Compagnie de Financement Foncier is named as the beneficiary of any payments made by the Insurance Company. The same is true of the Group insurance agreements subscribed to protect mortgage borrowers from the risk of job loss. Lastly, Compagnie de Financement Foncier has also signed a collateral loss agreement under which it can be compensated if the building financed and mortgaged is damaged by fire or explosion, while the owner, borrower would not qualify for compensation by his own insurer owing to lack of coverage or to insufficient coverage. SOCIAL AND ENVIRONMENTAL RISKS In terms of social and environmental consequences, Compagnie de Financement Foncier relies upon the material and human resources provided by Crédit Foncier de France under the agreements entered into pursuant to Articles L and L of the Monetary and Finance Code. Its own business as a Société de Crédit Foncier is not likely to have any impact on the environment. 10. VALUATION OF COLLATERAL The Specific Controller reports on the methods used for the valuation and periodic review of the property securing the loans. Further information about these methods is available in the section on the individual corporate financial statements in the financial report. 11. ORGANISATIONAL STRUCTURE OF COMPAGNIE DE FINANCEMENT FONCIER AND CRÉDIT FONCIER INTERNAL CONTROL IN 2004 Since Compagnie de Financement Foncier does not have its own employees, it has signed several agreements with Crédit Foncier specifying the services that Crédit Foncier must provide for the management of Compagnie de Financement Foncier. As a Crédit Foncier department, the Compagnie de Financement Foncier follow-up and control department oversees the application of these agreements. Moreover, the units in charge of implementing these agreements depend on the internal control organisation of Crédit Foncier. The Crédit Foncier internal control structure, adapted to the provisions of Regulation as amended of the French Banking and Finance Regulatory Committee is structured as follows: > Permanent control is exercised: - first, by line units, in charge of the application of conventions binding Crédit Foncier de France to Compagnie de Financement Foncier, and implementing adequate systems and the resources necessary for the following:. management and oversight of the risks generated by their activity, using the appropriate management and tracking tools,. preserving the assets of Compagnie de Financement Foncier, through the efficient use of the resources allocated to them and abiding by the laws and regulations and the directives of Crédit Foncier and the Executive Board of Compagnie de Financement Foncier; - second, permanent control units separate from the line structures, which are responsible for the proper performance of procedures. > The relevance and effectiveness of the internal control systems, especially as regards risk management, are assessed periodically by the General Inspection Office, which is attached to the office of the Chairman of the Executive Board of Crédit Foncier on missions authorised by it or by the Management of Compagnie de Financement Foncier:

33 MANAGEMENT REPORT/PAGE 62 FINANCIAL REPORT 2004 /PAGE 63 - A system of internal decision-making committees implements the guidelines established by the Executive Board: this system was updated in It mainly includes the Commitment Committees (National committee or business-specific committees) for the authorisation of large credits, the Sensitive Affairs Committees (National committee or litigation committees) for the management of commitments presenting major risks, the Balance Sheet Management Committee for oversight of financial risks, the Financial Committee for defining the conditions for Compagnie de Financement Foncier bond issues, and acquisitions of FCC units or securities, and the Risks Committee for defining limits by counterparty and the rules of risk taking. - The Agreements Monitoring Committee ensures the balance of relations between Compagnie de Financement Foncier and Crédit Foncier and translates their development into binding agreements for the two companies. It delegated the monitoring of these agreements and their application to the Management Committee of Compagnie de Financement Foncier. Lastly, the Management Committee of the Subsidised Sector linking Crédit Foncier and the State monitors the State / Compagnie de Financement Foncier / Crédit Foncier agreement which regulates their relationship with the Subsidised Sector. - The Crédit Foncier Audit Committee regularly monitors internal auditing work and oversees the implementation of the recommendations issued by the General Inspection Office. The Crédit Foncier General Inspection Office has the authority to conduct any internal audit without restriction within Crédit Foncier concerning Compagnie de Financement Foncier. Crédit Foncier s internal control system is part of an overall mechanism supervised by the audit body of the institution to which Compagnie de Financement Foncier is affiliated. The General Inspections of Crédit Foncier and Caisse Nationale des Caisses d Épargne are individually responsible for monitoring and implementing their recommendations for their audits. The annual audit plan, which is approved by the Audit Committee as part of a multi-year plan, covers all the activities of Crédit Foncier and Compagnie de Financement Foncier. It is supplemented by periodic audits carried out at the request of Crédit Foncier or the Management of Compagnie de Financement Foncier. > For fiscal 2004, audits conducted specifically for Compagnie de Financement Foncier covered the following: - Loans transferable to Compagnie de Financement Foncier, with the analysis being done at the time of the audits on the six regional sales divisions; - Processing of past dues and losses of loans held by Compagnie de Financement Foncier; - Processing renegotiations and prepayments of loans held by Compagnie de Financement Foncier. In 2004, internal audits were reinforced in the area of credits to professionals (periodic review of risks, analysis of loan requests by an independent unit of the operational entity) and the constitution of a risk segment, responsible for the oversight of all risks counterparty risks, financial risks, operational risks and ensuring control, monitoring and hedging. The General Inspection Office monitored the implementation status of regulatory projects (Basle II, IFRS). In accordance with the French law on financial security, an internal audit report was presented to the Chairman of the Board of Directors at the Annual Shareholders Meeting for the first time in Lastly in 2004, Crédit Foncier drafted an audit charter based on the audit charter of the Caisse d Épargne Group. During the year, Compagnie de Financement Foncier established its own Audit Committee. Previously, the Crédit Foncier Audit Committee had been in charge of monitoring its business via internal audit and reporting on accounting and financial information. Outlook for 2005 In 2005, new developments in the internal control mechanism will mainly focus on: > The creation of a Compliance Division, pursuant to the guidelines of the Caisse d Épargne Group; > Update of the business continuity plan, to match the new regulatory provisions. 12. CHANGES IN ACCOUNTING PRINCIPLES IN 2004 There were no changes in accounting principles in CONVERSION TO IFRS The Caisse d Épargne Group decided to anticipate the transition to IFRS in 2006 with comparative financial statements in In fact, as the Group is not listed, it is not legally required to abide by this deadline. Compagnie de Financement Foncier has decided not to apply these standards to its corporate accounts in OUTLOOK FOR THE FUTURE In 2005, Compagnie de Financement Foncier intends to continue expanding through loan acquisitions within the Group and diversified eligible assets purchases, while preserving the quality of its portfolio. Compagnie de Financement Foncier has set the following major objectives: > Assist in the growth of the Crédit Foncier Group, which now includes Entenial, and the Caisses d Épargne Group. Acquisitions will primarily concern loans to individuals and local governments as well as those granted to social operators. Different acquisition methods will then be implemented: direct loan acquisition from Crédit Foncier and Caisses d Épargne; in 2004 an automated loan sale process was finalised with the two Groups. Another option will involve buying FCC units sold by EnteniaL These investments could represent an expenditure of 5 to 7 billion. > Increase its investment portfolio in securitisation units and securities issued by public entities for an overall volume of 4 billion. Compagnie de Financement Foncier would especially like to continue its dealings on the securitisation market, mainly in loans for residential homes, which already represented 1 2% of the market in These acquisitions will be refinanced by a of issue program of around 12 billion depending on the achievement of these objectives. This programme is expected to reinforce the role of Compagnie de Financement Foncier, as the leading issuer in France, after the French State, of securities that have the best ratings, and as a top European issuer of covered bonds.

34 MANAGEMENT REPORT/PAGE 64 FINANCIAL REPORT 2004 /PAGE 65 LAST NAME, FIRST NAME DROUIN François DUFOUR Thierry GUÉRIN Sandrine AIMELAFILLE Jacques FUZIER Pierre-Éric PRÉVOT Alain COTRET Guy NOTES TO THE MANAGEMENT REPORT NOTE 1: INFORMATION ON CORPORATE OFFICERS For the year ended December 31, 2004, pursuant to France s New Economic Regulations Act ( NRE ) of May 15, 2001, as amended by the Financial Security Act of August 1, 2003, the list below shows the total compensation as well as the benefits of all kinds paid by the Company during the year ended to each of the corporate officers (Article L of the French Commercial Code) and by controlled companies as defined by Article L or the controlling Company, as defined by the same article. Statement of the total compensation of Compagnie de Financement Foncier corporate officers in All figures are in euros. POSITION Chairman of the Executive Board of Crédit Foncier de France Chairman of the Board of Directors of Compagnie de Financement Foncier Executive Director Financial Operations of Crédit Foncier de France Chief Executive Officer of Compagnie de Financement Foncier Chief of Financing Department Deputy Chief Executive Officer of Compagnie de Financement Foncier Executive Director, Financial Planning of Crédit Foncier de France (until May 24, 2004) General Counsel of Crédit Foncier de France Member of the Executive Board of Crédit Foncier de France, Finances, Risks and Controls (since February 17, 2004) Chief Executive of Crédit Foncier de France, resigned February 17, 2004 SALARIES AND COMMISSIONS BENEFITS IN KIND PAYMENTS AND STANDARD ALLOWANCES FOR PROFESSIONAL EXPENSES AMOUNT OF REIMBURSE- MENTS FOR PERSONAL EXPENSES TOTAL 413,950 36, , , , , , , , , , ,225 2, , , ,038 TOTAL 1,587,357 39,240 1,626,597 OTHER INFORMATION ON COMPENSATION AND STOCK OPTION AND STOCK PURCHASE PLANS At December 31, 2004, Compagnie de Financement Foncier did not have its own staff, with the exception of its corporate officers. Therefore, there was no incentive scheme or profit-sharing plan in the Company, and there were no stock option and stock purchase plans. LIST OF OFFICES OF CORPORATE OFFICERS Offices or Positions held by Mr. François Drouin MANAGEMENT POSITIONS COMPANY CRÉDIT FONCIER DE FRANCE SACS ENTENIAL SA POSITIONS Chairman of the Executive Board Chairman & Chief Executive Officer OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER A.C.F.F. SA Chairman of the Board of Directors (since March 22, 2004) COMPAGNIE DE FINANCEMENT FONCIER SA Chairman of the Board of Directors CRÉDIT FONCIER BANQUE SA Director FONCIER EXPERTISE (formerly SEIEF) SA Chairman of the Board of Directors FONCIER PARTICIPATIONS SA Permanent Representative of Crédit Foncier, Director (since June 30, 2004) SIPAREX ASSOCIÉS SA Director CFD SAS Legal Representative of Cofimab, Chairman DOM 9 SAS Legal Representative of Crédit Foncier Chairman of the SAS ENTENIAL CONSEIL SAS Legal Representative of Entenial Chairman of the SAS FONCIER VIGNOBLES SAS Legal Representative of Crédit Foncier Chairman of the SAS COFIMAB SNC Legal Representative of Crédit Foncier Managing partner SOCLIM SNC Legal Representative of CFD, Manager SOFIPAR LOGEMENT SNC Legal Representative of Crédit Foncier Managing partner SOFONEG SNC Legal Representative of Crédit Foncier Managing partner CHÂTEAU BEAUREGARD SC Legal Representative of Foncier Vignobles, Manager CHAUVEAU LAGARDE SCI Legal Representative of CFD, Manager IMMOBILIÈRE MADELEINE DUPHOT SCI Legal Representative of CFD, Manager RENTE IMMOBILIÈRE 2 SCI Legal Representative of CFD, Manager GIRCE INGENIERIE GIE Permanent Representative of Crédit Foncier, Supervisory Board member GIRCE STRATÉGIE GIE Permanent Representative of Crédit Foncier, Director ECUREUIL EXPANSION OPCVM Chairman of the Board of Directors (until September 29, 2004) ECUREUIL INVESTISSEMENTS OPCVM Permanent Representative of Caisse d Épargne Midi-Pyrénées, Director (until October 5, 2004)

35 MANAGEMENT REPORT/PAGE 66 FINANCIAL REPORT 2004 /PAGE 67 Offices or Positions held by Mr. Thierry Dufour MANAGEMENT POSITIONS COMPANY POSITIONS COMPAGNIE DE FINANCEMENT FONCIER SA Chief Executive Officer OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER ACFF SA Director CRÉDIT FONCIER BANQUE SA Permanent Representative of ACFF, Director ENTENIAL SA Permanent Representative of Crédit Foncier, Director (since February 4, 2004) FINANCIÈRE DESVIEUX SA Director SEIEF SA Director SOCRELOG SA Director EUROPEAN COVERED BOND COUNCIL (ECBC) Vice-Chairman OTHER OFFICES AND POSITIONS CRÉDIT FONCIER DE FRANCE - SACS Executive Director of Financial Operations, Executive Board member ENTENIAL - SA Financial Director Offices or Positions held by Mrs. Sandrine Guérin MANAGEMENT POSITIONS COMPANY POSITIONS COMPAGNIE DE FINANCEMENT FONCIER SA Deputy Chief Executive Officer, Director FINANCIÈRE DESVIEUX SA Chief Executive Officer VAUBAN MOBILISATION GARANTIE SACS Chairman of the Executive Board OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER FONCIER COURT TERME SICAV Director FONCIER ASSURANCE Director OTHER OFFICES AND POSITIONS CRÉDIT FONCIER DE FRANCE - SACS Chief of Financing Division Division of Financial Operations Offices or Positions held by Mr. François Chauveau OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER COMPANY POSITIONS MARTIGNAC FINANCE SA Director since December 2004 COMPAGNIE DE FINANCEMENT FONCIER - SA Director since December 16, 2004 ECUFONCIER - SCA Director since December 28, 2004 ECONOMIC INTEREST GROUP CDS ECUREUIL GIE Chairman since December 2004 ISSORIA - SA Permanent Representative of CNCE Since November 24, 2004 SURASSUR - SA Permanent Representative of CNCE since December 7, 2004 BAIL ECUREUIL - SA Permanent Representative of CNCE since December 16, 2004 CAISSE GÉNÉRALE RETRAITE (CGR) - IRS Employer Representative since November 2004 CAISSE GÉNÉRALE PRÉVOYANCE (CGP) IP Employer Representative since November 2004 Offices or Positions held by Mr. Pierre-Éric Fuzier OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER COMPANY POSITIONS COMPAGNIE DE FINANCEMENT FONCIER SA Director DOM 3 SAS Director CARPI SA HLM Director OTHER OFFICES AND POSITIONS: CRÉDIT FONCIER DE FRANCE SACS General Counsel Offices held by Crédit Foncier de France COMPANY IDENTIFICATION PUBLIC LIMITED COMPANY (SOCIÉTÉ ANONYME) DIRECTORSHIPS AUXILIAIRE DU CRÉDIT FONCIER DE FRANCE ACFF SA CFCAL BANQUE SA (since April 17, 2004) CFCAL SCF SA (since March 17, 2004) COMPAGNIE DE FINANCEMENT FONCIER SA COMPAGNIE FONCIÈRE DE CONSTRUCTION SA CRÉDIT DE L ARCHE SA CRÉDIT FONCIER ASSURANCE COURTAGE SA CRÉDIT FONCIER BANQUE SA CRÉDIT LOGEMENT SA CREPAH SA EMGP SA ENTENIAL SA (since February 4, 2004) FONCIER ASSURANCE SA FONCIER CONSULTANTS SA FGI SOCIÉTÉ FINANCIÈRE DE GESTION ET D INVESTISSEMENT SA FNBV - PAYS-BAS FONCIER EXPERTISE (formerly SEIEF) SA FONCIER PARTICIPATIONS SA FONCIÈRE D ÉVREUX SA H & T CONSEIL (formerly TEC HABITAT) SA MOBILIÈRE VOLNEY SA ODACIA SA PEREXIA SA (until June 3, 2004) SAF ENVIRONNEMENT SA SOFI CONSEIL SA SOCIÉTÉ DE RÉALISATION DE DÉFAISANCE SRD SA

36 MANAGEMENT REPORT/PAGE 68 FINANCIAL REPORT 2004 /PAGE 69 SICP SOCIÉTÉ INVESTISSEMENT CONSTRUCTION PATRIMOINE SA transformed into PEREXIA (formerly SICP) SACS since December 19, 2004) SNTE SOCIÉTÉ NATIONALE DE LA TOUR EIFFEL SA SGFGAS - SOCIÉTÉ DE GESTION DU FGAS SA SOCRELOG SA TEC HABITAT SA SIA SOCIÉTÉ IMMOBILIÈRE DE L ARTOIS SAHLM FONCIER VALEURS SICAV OFFICES AS SUPERVISORY BOARD MEMBER SCAFR TERRES D EUROPE SOCIÉTÉ CENTRALE D AMÉNAGEMENT FONCIER ET RURAL UNION EUROPÉENNE D ASSURANCE (since November 21, 2004) COMPAGNIE DE FINANCEMENT FONCIER SA Permanent Representative of Crédit Foncier, Director (since April 6, 2004) COMPAGNIE FONCIÈRE DE CRÉDIT SA Permanent Representative of Auxiliaire du Crédit Foncier de France, Director (since May 26, 2004) CRÉDIT DE L ARCHE SA Chairman of the Board of Directors (since May 26, 2004) CRÉDIT FONCIER BANQUE SA Permanent Representative of Foncier Participations, Director (since November 3, 2004) FONCIER BAIL SA Permanent Representative of Auxiliaire du Crédit Foncier de France, Director (since April 28, 2004) MLDC SACS Member of the Supervisory Board (since May 14, 2004) VAUBAN MOBILISATION GARANTIE SACS Permanent Representative of Entenial, Supervisory Board member (since July 2004) NOTE 2: FCC (RESIDENTIAL MORTGAGE-BACKED SECURITIES) TABLE AS OF DECEMBER 31, 2004 VÉGA FINANCES VÉGA MULTIMANAGER OFFICES AS CHAIRMAN/DIRECTOR A3C SAS DOM 9 SAS FONCIER PATRIMONIAL SAS (since October 22, 2004) FONCIER VIGNOBLES SAS PARTNERSHIPS (SNC, SCI) MANAGING PARTNER COFIMAB SOFIPAR LOGEMENT SOFONEG ECONOMIC INTEREST GROUPS GIRCE INGENIERIE GIRCE STRATÉGIE SAEM SONACOTRA Offices or Positions held by Mr. Alain Prévot MANAGEMENT OFFICES COMPANY POSITIONS COMPTOIR FINANCIER DE GARANTIE SA Chairman and CEO (since June 2004) CRÉDIT FONCIER DE FRANCE SACS Member of the Executive Board (since February 17, 2004) ENTENIAL SA Deputy Chief Executive (since March 18, 2004) OFFICES AS DIRECTOR AND SUPERVISORY BOARD MEMBER AUXILIAIRE DU CRÉDIT FONCIER DE FRANCE SA Director (since May 5, 2004) COUNTRY SPAIN FRANCE ITALY PORTFOLIO SENIOR SECURITISATION UNITS (RMBS) BANCAJA FCC 4 FTH PARTS A SENIOR BANCAJA FCC 5 FTA PARTS A SENIOR BANCAJA FCC 6 FTA PART A2 SENIOR BANCAJA FCC 7 FTA PART A2 SENIOR BANKINTER 4 PARTS A FCC BANKINTER 5 PART A FCC GC SABADELL 1 HIPOTEBANSA VIII PART A HIPOTEBANSA XI IM PASTOR 2 TDA PASTOR 1 - A2 UCI 5 CLASSE 5 POWERHOUSE FINANCE PARTS A FCC GROUPE CRÉDIT FONCIER*: TEDDY 1 PARTS A2* TEDDY 1 PARTS A3* ANTILOPE 1* APULIA FINANCE PART A1 APULIA FINANCE FCC PART A2 APULIA 3 ARGO MORTGAGES 2 ASTREA FCC PARTS A SENIORS** BERICA 3 PART A2 PORTUGAL UNITED STATES BERICA PART A2 BIPIELLE RESIDENTIAL BPM SECURISATION PART A CR FIRENZE MUTUI CREDICO FINANCE PART A GIOTTO FINANCE 2 GIOTTO FINANCE SPA HELICONUS SRL INTESA BCI SEC 2 INTRA MORTGAGE SPA MANTEGNA FINANCE SRL MARCHE MUTUI MECENATE SRL PALLAZZO FINANCE A2 SESTANTE FINANCE SESTANTE FINANCE 2 SIENA MORTGAGES 02-3 VELA HOME VELITES LUSITANO 3 SALLIE MAE** *FCC comprised of loans originated by Crédit Foncier de France and consolidated by it. **Securitisation of loans granted to or guaranteed by public entities.

37 MANAGEMENT REPORT/PAGE 70 FINANCIAL REPORT 2004 /PAGE 71 NOTE 3: INFORMATION ON ASSET QUALITY I) Secured loans as of December 31, ) BREAKDOWN ACCORDING TO THE LOANS TO VALUE (LTV) OF OUTSTANDING LOANS* (in millions of euros) BETWEEN 0 AND 20% BETWEEN 20 AND 40% BETWEEN 40 AND 60% BETWEEN 60 AND 80% BETWEEN 80 AND 100% BETWEEN 100 AND 120% BETWEEN 120 AND 140% Residential mortgage guarantees (guarantee A) 1,150 1,293 1,882 2, ,556 Mortgage guarantees on business property (guarantee B) Combined guarantees (D) (Subsidised mortgage guarantees + subsidised sector & competitive local government guarantees <100%) 1,431 1, ,945 FGAS guarantees (guarantee E) ,472 2,167 1, ,074 Loan with financial caution (guarantee C) TOTAL 2,918 3,893 4,111 4,511 1, ,903 Guarantees: A: Senior mortgage on individual residence. B: Senior mortgage on business property. C: Guarantee issued by a credit institution. D: Combined subsidised sector guarantee: senior mortgage and State guarantee, and partial guarantees for local authorities. E: Combined regulated sector guarantee: senior mortgage and FGAS. *Gross loans of which doubtful loans, accrued interest, arrears and adjustment accounts. NB: Adjustment accounts amounted to 22.0 million at December 31, Note: Loans benefiting from public guarantees (local governments, the French State of which the subsidised sector and FGAS), all Compagnie de Financement Foncier mortgage loans can be refinanced by obligations foncières only up to an LTV of 60%. For the loans benefiting from public guarantees, the eligible ratio is 100%. The fraction exceeding the LTV must be financed by resources other than obligations foncières or other privileged resources. OVER 140% TOTAL I) Secured loans as of December 31, / A) BREAKDOWN OF OUTSTANDING SECURED LOANS BY TYPE OF GUARANTEE* (in millions of euros) CATEGORY LOANS/ COUNTERPARTY TYPE TYPE OF GUARANTEE NON-FINANCIAL COMPANIES AND INDEPENDENT ENTREPRENEURS (1) A B C D E TOTAL (1) PRIVATE INDIVIDUALS (2) A B C D E TOTAL (2) OTHER (CREDIT INSTITUTIONS) (3) A B C D E TOTAL ( 3) ALL CATEGORIES Commercial loans Export credits Short-term loans Equipment loans Residential property loans 1, , , , , , , Loans to real estate developers Other loans Credit institutions TOTAL 1, , , , , , , Guarantees: A: Senior mortgage on individual residence. B: Senior mortgage on business property. C: Guarantee issued by a credit institution. D: Combined subsidised sector guarantee: senior mortgage and State guarantee, and partial guarantees for local authorities. E: Combined regulated sector guarantee: senior mortgage and FGAS. *Gross loans of which doubtful loans, accrued interest, arrears and adjustment accounts. Note: Loans benefiting from public guarantees (local governments, the French State of which the subsidised sector and FGAS), Compagnie de Financement Foncier mortgage loans can only be refinanced by obligations foncières up to 60%. For the government-backed loans, the eligible ratio is 100%. The fraction exceeding the eligible ratio must be financed by resources other than obligations foncières or other privileged resources. GRAND TOTAL

38 MANAGEMENT REPORT/PAGE 72 FINANCIAL REPORT 2004 /PAGE 73 I) Secured loans as of December 31, 2004 I) Secured loans as of December 31, / B) BREAKDOWN OF PROVISIONS ASSIGNED TO SECURED LOANS BY TYPE OF GUARANTEE* (in millions of euros) CATEGORY LOANS/ COUNTERPARTY TYPE TYPE OF GUARANTEE NON-FINANCIAL COMPANIES AND INDEPENDENT ENTREPRENEURS (1) A B C D E TOTAL (1) PRIVATE INDIVIDUALS (2) A B C D E TOTAL (2) OTHER (CREDIT INSTITUTIONS) (3) A B C D E TOTAL ( 3) ALL CATE- GORIES Commercial loans Export credits Short-term loans Equipment loans Residential property loans Loans to real estate developers Other loans Credit institutions TOTAL Guarantees: A: Senior mortgage on individual residence. B: Senior mortgage on business property. C: Guarantee issued by a credit institution. D: Combined subsidised sector guarantee: senior mortgage and State guarantee and partial guarantees for local authorities. E: Combined regulated sector guarantee: senior mortgage and FGAS. *The provisions include adjustment accounts which amounted to 22.0 million at December 31, NB: Adjustment accounts amounted to 22.0 million on December 31, Note: Loans benefiting from public guarantees (local governments, the French State of which the subsidised sector and FGAS), Compagnie de Financement Foncier mortgage loans can only be refinanced by obligations foncières up to 60%. For the government-backed loans, the eligible ratio is 100%. The fraction exceeding the eligible ratio must be financed by resources other than obligations foncières or other privileged resources. GRAND TOTAL 2/ C) BREAKDOWN OF ARREARS ATTACHED TO SECURED LOANS BY TYPE OF GUARANTEE (in millions of euros) CATEGORY LOANS/ COUNTERPARTY TYPE TYPE OF GUARANTEE NON-FINANCIAL COMPANIES AND INDEPENDENT ENTREPRENEURS (1) A B C D E TOTAL (1) PRIVATE INDIVIDUALS (2) A B C D E TOTAL (2) OTHER (CREDIT INSTITUTIONS) (3) A B C D E TOTAL ( 3) ALL CATEGORIES Commercial loans Export credits Short-term loans Equipment loans Residential property loans Loans to real estate developers Other loans Credit institutions TOTAL Guarantees: A: Senior mortgage on individual residence. B: Senior mortgage on business property. C: Guarantee issued by a credit institution. D: Combined subsidised sector guarantee: senior mortgage and State guarantee and partial guarantees for local authorities. E: Combined regulated sector guarantee: senior mortgage and FGAS. Note: Loans benefiting from public guarantees (local governments, the French State of which the subsidised sector and FGAS), Compagnie de Financement Foncier mortgage loans can only be refinanced by obligations foncières up to 60%. For the government-backed loans, the eligible ratio is 100%. The fraction exceeding the eligible ratio must be financed by resources other than obligations foncières or other privileged resources. GRAND TOTAL

39 MANAGEMENT REPORT/PAGE 74 FINANCIAL REPORT 2004 /PAGE 75 I) Secured loans as of December 31, 2004 I) Secured loans as of December 31, / D) BREAKDOWN OF DOUBTFUL SECURED LOANS BY TYPE OF GUARANTEE** (in millions of euros) CATEGORY LOANS/ COUNTERPARTY TYPE TYPE OF GUARANTEE NON-FINANCIAL COMPANIES AND INDEPENDENT ENTREPRENEURS (1) A B C D E TOTAL (1) PRIVATE INDIVIDUALS (2) A B C D E TOTAL (2) OTHER (CREDIT INSTITUTIONS) (3) A B C D E ALL CATEGORIES Commercial loans Export credits Short-term loans Equipment loans Residential property loans Loans to real estate developers Other loans Credit institutions TOTAL Guarantees: A: Senior mortgage on individual residence. B: Senior mortgage on business property. C: Guarantee issued by a credit institution. D: Combined subsidised sector guarantee: senior mortgage and State guarantee and partial guarantees for local authorities. E: Combined regulated sector guarantee: senior mortgage and FGAS. *Doubtful loans of which accrued interest and adjustment accounts. NB: Adjustment accounts amounted to 22.0 million on December 31, Note: Loans benefiting from public guarantees (local governments, the French State of which the subsidised sector and FGAS), Compagnie de Financement Foncier mortgage loans can only be refinanced by obligations foncières only up to 60%. For the government-backed loans, the eligible ratio is 100%. The fraction exceeding the eligible ratio must be financed by resources other than obligations foncières or other privileged resources. TOTAL ( 3) GRAND TOTAL 3) BREAKDOWN OF LOAN CONTRACTS BY YEAR OF ORIGINATION* (in millions of euros) YEAR MORTGAGE GUARANTEES ON INDEPENDENT RESIDENCE MORTGAGE GUARANTEES ON BUSINESS PROPERTY COMBINED GUARANTEES FGAS GUARANTEE CREDIT INSTITUTION SECURITY FGAS (GUARANTEE A) (GUARANTEE B) (GUARANTEE D) (GUARANTEE E) (GUARANTEE C) AMOUNT OUTSTAN- DING NO. OF LOANS AMOUNT OUTSTAN- DING NO. OF LOANS AMOUNT OUTSTAN- DING NO. OF LOANS AMOUNT OUTSTAN- DING NO. OF LOANS AMOUNT OUTSTAN- DING NO. OF LOANS AMOUNT OUTSTAN- DING ALL CATEGORIES , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,182 38, , , ,026 1,119 30, , , ,579 1,543 35, , , ,488 2,088 41, ,103 18, ,217 20, ,344 40, , ,160 17, ,156 34,503 TOTAL 6, , , ,244 6, , ,617 16, ,826 NO. OF LOANS *Gross amounts outstanding with accrued interest, arrears, adjustment accounts. NB: Adjustment accounts amounted to 22.0 million on December 31, Note: Gross loans of which doubtful loans, accrued interest, arrears and adjustment accounts. NB: Adjustment accounts amounted to 22.0 million at December 31, 2004.Loans benefiting from public guarantees (local governments, the French State of which the subsidised sector and FGAS), Compagnie de Financement Foncier mortgage loans can only be refinanced by obligations foncières up to 60%. For the governmentbacked loans, the eligible ratio is 100%. The fraction exceeding the eligible ratio must be financed by resources other than obligations foncières or other privileged resources.

40 MANAGEMENT REPORT/PAGE 76 FINANCIAL REPORT 2004 /PAGE 77 ii. corporate financial statements 2004 II) Loans granted to or guaranteed by public law legal entities as of (in millions of euros) LOANS TO PUBLIC ENTITIES LOANS GUARANTEED BY PUBLIC ENTITIES PUBLIC ADMINISTRATIONS OTHER PUBLIC ADMINISTRATIONS TOTAL LOANS 8,193 2,024 1,166 1,342 12,725 DOUBTFUL LOANS ARREARS PROVISIONS This statement only includes loans granted to or 100% guaranteed by public entities, it does not include combined loans covered by a double guarantee (mortgage + public entity) such as PAP and FGAS loans, classified in the category of guaranteed loans (Cf. I). OTHER TOTAL 78 Balance sheet 81 Income statement 82 Detail of calculation of the overcollateralisation ratio - Mod Notes to the financial statements of Compagnie de Financement Foncier 120 Statutory Auditors Report on the financial statements 122 Specific Controller s report on the valuation methods and the methods for the periodic review of the value of real estate at December 31, Procedure for the valuation and periodic review of the assets underlying loans at December 31, 2004 The number of these loans amounts to approximately 58,000, of which 49,000 are PCF loans (supplementary loans to civil servants) covered by a full, unconditional State guarantee, for which the residual principal was 45 million at December 31, 2004.

41 CORPORATE FINANCIAL STATEMENTS /PAGE 78 FINANCIAL REPORT 2004 /PAGE 79 balance sheet balance sheet AS PER NOTES assets (in thousands of euros) 12/31/ /31/ /31/2002 AS PER NOTES liabilities and equity (in thousands of euros) 12/31/ /31/ /31/2002 Cash due from central banks and post office accounts 6, ,251 37,952 1 Treasury notes and similar securities 161, ,422 2 Due from banks 8,857,377 7,437,379 5,110,038 > On demand 594, ,852 1,266,960 > At maturity 8,262,831 6,807,527 3,843,078 3 Customer loans 20,533,958 20,484,770 20,856,013 Other customer loans 20,533,958 20,484,770 20,856,013 4 Bonds and other fixed income securities 17,119,338 11,994,182 8,667,323 5 Intangible fixed assets 31,144 43,492 56,908 6 Other assets 212, , ,647 7 Prepayments, deferred charges and accrued income 2,434,008 2,058,202 2,438,851 TOTAL ASSETS 49,194,805 42,526,243 37,508,154 8 Due to banks 1,468,162 2,119,344 2,890,397 > On demand 18,284 26,095 16,952 > At maturity 1,449,878 2,093,249 2,873,445 9 Customer deposits 307, ,064 77,806 On demand 307, ,064 77, Debt securities 41,358,710 34,536,839 29,681,433 > Interbank securities and tradable debt securities 270, , ,123 > Bonds 41,087,822 34,239,573 28,809, Other liabilities 467, , , Accruals and deferred income 2,959,086 2,589,371 2,636, Provisions for liabilities and charges 6,588 9,930 13, Subordinated debt 2,250,465 2,250,439 1,350, Fund for general banking risks 20,000 20, Equity other than fund for general banking risks: 356, , ,091 > Subscribed capital stock 100, , ,000 > Share premiums 118, , ,536 > Reserves 65,517 46,303 26,158 > Regulated provisions and investment subsidies 1 > Retained earnings (+/-) > Net income for the year (+/-) 72,867 31,714 26,396 TOTAL LIABILITIES AND EQUITY 49,194,805 42,526,243 37,508,154

42 CORPORATE FINANCIAL STATEMENTS /PAGE 80 FINANCIAL REPORT 2004 /PAGE 81 off balance sheet income statement AS PER NOTES (in thousands of euros) 12/31/ /31/ /31/2002 AS PER NOTES (in thousands of euros) COMMITMENTS GIVEN 16 Financing commitments > Commitments in favour of banks > Commitments in favour of customers 293, , ,698 Guarantee commitments > Commitments for customers 17 COMMITMENTS RECEIVED Financing commitments > Commitments received from banks 1,306,445 2,134,642 2,138,723 Guarantee commitments > Commitments received from banks 3,449, , ,156 > Commitments received from customers 16,894,787 16,842,639 1,173,617 RECIPROCAL COMMITMENTS 18 Sale and purchase of foreign currencies 15,281,596 11,788,963 11,658, Non-unwound financial instruments 64,175,547 44,442,826 36,488, Interest and similar income 2,332,226 2,234,283 2,051, Interest and similar expenses -2,105,932-2,031,635-1,858, Commission and fee income 32,389 28,366 22, Commission and fee expenses -16,654-15,793-13, Gains or losses on trading securities transactions Gains or losses on investment securities transactions and similar instruments 1,155 4,165 2, Other income from banking operations 23,887 37,367 32, Other expenses on banking operations -35,760-48,417-49,999 NET BANKING INCOME 231, , , General operating expenses -107, , ,869 Depreciation, amortisation and provisions on tangible and intangible fixed assets -12,348-13,416-20,886 GROSS OPERATING INCOME 111,685 79,737 43, Cost of risk 1,983 4,000-2,972 OPERATING INCOME 113,668 83,737 40,324 Gains or losses on fixed assets ORDINARY INCOME BEFORE TAX 113,534 83,764 40,328 Exceptional items Income tax -40,667-32,051-13, Increases and decreases in fund for general banking risks and provisions -19,999-1 NET INCOME 72,867 31,714 26,396 Earnings per share (1) Diluted earnings per share (1) Earnings per share is calculated by dividing the net income by the number of shares in issue at the balance sheet date. The notes set out in the following pages form an integral part of the Company s financial statements.

43 CORPORATE FINANCIAL STATEMENTS /PAGE 82 FINANCIAL REPORT 2004 /PAGE 83 detail of calculation of the overcollateralisation ratio - mod NAME: COMPAGNIE DE FINANCEMENT FONCIER statement date: 12/31/2004 LC: P statement date: 12/31/2004 LC: P ASSETS COVERING FUNDING WITH A PRIORITY RIGHT OF PAYMENT (PRIVILÈGE) (in thousands of euros) ACCOUNT REFERENCE AMOUNTS 1 WEIGHT-ING (AS A%) WEIGHTED AMOUNTS 2 FUNDING BENEFITING FROM A PRIORITY RIGHT OF PAYMENT (PRIVILÈGE) AS DEFINED IN ARTICLE 98 OF LAW OF JUNE 25, 1999: LIABILITIES [L OF THE MONETARY AND FINANCIAL CODE] (in thousands of euros) ACCOUNT REFERENCE AMOUNTS Guaranteed loans which do not conform with the conditions of section 1) of the appendix to Regulation % 0 Mortgage Backed Securties (FCCs) which do not conform with the conditions of section 2) of the appendix to Regulation % 0 Guaranteed loans which do not conform with the conditions of section 1.b) of the appendix to Regulation % 0 Mortgage Backed Securties (FCCs) which do not conform with the conditions of section 2.b) of the appendix to Regulation % 0 Fixed assets resulting from the acquisition of real estate under implementation of guarantees % 0 RISK FREE SAFE AND LIQUID SECURITIES Deposits for a term less than one year with banks 210 6,973,055 95% 6,624,402 Securities ,939 95% 471,142 Receivables related to these assets ,882 95% 22,688 OTHER 1st CATEGORY ASSETS 215 8, % 8,350 OTHER 2nd CATEGORY ASSETS Mortgage loans ,564, % 16,564,142 of which: > Mortgage loans also guaranteed by the FGAS guarantee fund 221 6,074,168 > Mortgage loans also guaranteed by a bank or an insurance Company 222 5,194 I - Privileged funding received from banks ,849 II - Privileged funding received from customers > Financial customers > Non-financial customers Sub-total A III - Securities benefiting from the Privilège > Mortgage bonds ( obligations foncières ) ,907,738 > Negotiable debt securities ,808 > Other securities benefiting from the Privilège > Payables related to these securities 118 1,196,164 Sub-total B ,358,710 IV - Amounts due in respect of the contract specified under Article 99 of law of June 25, 1999 [L of the Monetary and Financial Code] ,041 V - Amounts due under forward financial instruments benefiting from the Privilège as defined in Article 98 of law of June 25, 1999 [L of the Monetary and Financial Code] 130 1,485,947 VI - Payables resulting from ancillary expenses referred to in the last paragraph of Article 98 of law of June 25, 1999 [L of the Monetary and Financial Code] PRIVILEGED FUNDING (140 = ) T ,484,547 > Mortgage loans also guaranteed by a public body 223 3,935,634 Guaranteed loans which conform with the conditions of section 1.a) of the appendix to regulation , % 301,879 Loans to public bodies ,719, % 12,719,460 Other 2nd Category Assets , % 198,960 OTHER 3rd CATEGORY ASSETS Mortgage Backed Securities (FCCs) which conform with the conditions of section 2.a) of the appendix to Regulation ,770, % 8,770,474 Other 3nd Category Assets 241 3,107, % 3,107,520 OTHER 4th CATEGORY ASSETS % 0 TOTAL WEIGHTED ASSETS (250 = ) R ,789,017 COVERAGE RATIO (R/T*100) ,20%

44 CORPORATE FINANCIAL STATEMENTS/PAGE 84 FINANCIAL REPORT 2004 /PAGE 85 notes to the financial statements of compagnie de financement foncier 1. MAJOR EVENTS OF THE FISCAL YEAR 1.1 In 2004, Compagnie de Financement Foncier acquired loans from Crédit Foncier totalling 2,290.7 M (of which 2,204.4 M in outstanding principal), in addition to M of loans not yet released, which are recorded as Financial commitments given. The Company also bought additional loans from Caisses d Épargne for 40.6 M; the outstanding principal on these loans amounted to 36.9 M. Compagnie de Financement Foncier also acquired other eligible assets for an amount of 6,859.0 M, in the form of securitisation investments (of which 1,167.7 M derived from the sale of debts by Entenial, a Company that is fully consolidated by Crédit Foncier), securities issued by public entities and loans granted to public entities. The total value of these acquisitions for fiscal 2004 amounted to 9,778.2 M. Compagnie de Financement Foncier increased its replacement assets by M. 1.2 Compagnie de Financement Foncier issued obligations foncières bonds for an amount of 11,151.6 M during fiscal In addition, on December 31, 2004, the Company sold investment securities with a net book value of 62.1 M out of a portfolio of investment securities of 12,673.5 M. This transaction generated a book loss of 0.1 M, recorded in the income statement under the heading GAINS OR LOSSES ON FIXED ASSETS. 2. PRESENTATION OF FINANCIAL STATEMENTS AND ACCOUNTING POLICIES Compagnie de Financement Foncier was authorised to operate as a mortgage bank by the savings and financial security act passed in France on June 25, It is therefore regulated by Articles L to L of France s Monetary and Finance Code. Sociétés de Crédit Foncier are credit institutions accredited as financial companies by the French Credit Institutions and Investment Companies Committee ( CECEI ). For this reason, they are subject to the following accounting regulations: > Regulation and of the French National Accounting Committee ( CRC ), concerning the preparation and disclosure of annual corporate accounts of credit institutions, > Regulation of the French Banking Regulation Committee ( CRBF ), which relates only to Sociétés de Crédit Foncier and refers to: - the valuation of buildings financed by eligible loans recorded as assets of Sociétés de Crédit Foncier, - the valuation of the assets and liabilities of such companies, - their specific management policies. Since Crédit Foncier joined the Caisses d Épargne Group in 1999, Compagnie de Financement Foncier has applied the accounting standards of this Group. 2.1 RECORDING OF LOANS Loans granted appear on the assets side of the balance sheet for the portion actually paid, once the implementation procedures have been applied. Amounts not yet paid are recognised as off-balance sheet items under FINANCING COMMITMENTS GIVEN. Compagnie de Financement Foncier acquires loans at market value. The goodwill is then calculated by comparing this value to the net book value of the loans, known as a premium or discount depending on whether it is positive or negative and is booked in a sub-account of the customer loan account. Premiums and discounts on acquisitions made up to December 31, 2004 are then transferred to income for the fiscal year on an actuarial basis over the term remaining to maturity of the loans acquired. The amount of outstanding loan instalments appears under assets in each loan receivable heading, unless they are deemed to be doubtful, in which case they are included in doubtful loans. Interest accrued on loans is entered in the relevant customer loan account with a corresponding entry in the income statement. Early repayment fees are recognised in full in the income statement for the fiscal year in which the transaction was booked. Doubtful loans consist of all loans due from debtors of which at least one commitment presents a known credit risk. A risk is considered as known as soon as it is probable that the institution will not receive all or part of the amounts due from the counterparty, notwithstanding the existence of guarantees or securities. Loans are classified as doubtful especially when one or several amounts are more than three months overdue (nine months for loans granted to local communities). Some doubtful loans are further classified as compromised doubtful loans when there is no foreseeable hope of reclassifying them as performing loans in the future. They include, in particular: > Loans with overdue payment dates, > Loans considered doubtful for over a year, unless an examination of guarantees suggests that the loan will be fully repaid. Unrecoverable loans are written off and the corresponding bad debt provisions are reversed. Doubtful loans are reclassified as performing loans when the repayments are resumed on a regular basis, in the amounts corresponding to the original contractual instalments. Loans that are restructured under non-market terms are identified in a specific sub-category until their final maturity. They are subject to a discount that represents the present value of the future interest difference. This discount is recorded in the income statement under cost of risk and in the balance sheet as a deduction from the corresponding performing loan. It is transferred to the income statement in the interest margin based on an actuarial method over the term of the loan (see note 3 c regarding loans, note 20 on interest and similar income and note 28 on cost of risk). For the presentation of note 3 c, the loans are analysed according to the same method used within the Crédit Foncier Group for its internal management requirements especially in the commercial, financial and risk areas. Since 2003, in accordance with the standards of the Caisses d Épargne Group, Compagnie de Financement Foncier has recognised guarantees that are explicitly or implicitly attached to certain types of customer loans recorded on the balance sheet, considering their material nature, such as mortgage values or counter-guarantees received from the SGFGAS (see note 17 on Commitments received). They are periodically revalued. The book value of all the guarantees taken on a same loan is limited to the outstanding portion of that loan. 2.2 PROVISIONS FOR LOAN RISKS Provisions for known risks Provisions for known risks cover all potential risks calculated as the difference between the principal outstanding and the recoverable amounts. The risk is calculated for each individual loan taking into account the present value of the guarantees received. For loans to the subsidised sector and those guaranteed by FGAS, the portion of the risk carried by the French government or by FGAS is also taken into account.

45 CORPORATE FINANCIAL STATEMENTS/PAGE 86 FINANCIAL REPORT 2004 /PAGE 87 Since loans transferred or sold to Compagnie de Financement Foncier are recorded in the balance sheet at acquisition cost, the provision is calculated with respect to that cost. Interest on doubtful loans, of which on compromised doubtful loans, is booked as income from banking operations and provisions are set-aside for the full amount (excluding loans to the subsidised sector or guaranteed by FGAS). Increases and decreases to loan provisions as well as charges covered by this provision appear in the income statement under items related to cost of risk for the principal portion of the loans. Interest paid on these loans is reported under Interest and similar income Provisions for counterparty risks For a more economic calculation of counterparty risks, a provision is recorded on performing balance sheet and off-balance sheet commitments. This provision is calculated by applying different factors per rating category and per remaining maturity of the loans, and weighted by recovery assumptions in case of default. The provision covers potential risks on performing loans to professional real estate, credit institutions and public sector authorities. Total provisions for counterparty risks on credit institutions and customers stood at 4.1 M at year-end The level of provisions remained unchanged for fiscal These provisions are recorded as Liabilities and any increases or reversals of the provisions appear under the COST OF RISK heading. 2.3 FOREIGN EXCHANGE TRANSACTIONS Balance sheet and off-balance sheet transactions are translated into euros at the end of each month at the prevailing exchange rate of the currency in which the transactions are denominated. Corresponding income or expenses are immediately converted into euros at the exchange rate effective on the day they are recorded in the income statement. Realised and unrealised foreign exchange gains and losses on proprietary transactions of Compagnie de Financement Foncier are booked as foreign exchange income under GAINS OR LOSSES ON TRADING SECURITIES TRANSACTIONS. To date, Compagnie de Financement Foncier has not conducted any transaction in non liquid currencies. 2.4 SECURITIES TRANSACTIONS Compagnie de Financement Foncier does not hold any trading securities and does not conduct any securities repurchase transactions. Moreover, as a Société de Crédit Foncier, Compagnie de Financement Foncier cannot hold equity investments, even as a minority interest, and consequently does not own any variable income security Securities Portfolio (Short-term and Long-term investment securities) a. Short-term investment securities Short-term investment securities are securities acquired with the intention of holding them for six months or more, without the bank being obliged to hold them until maturity, especially if they are fixed-income securities. Short-term investment securities are entered in the balance sheet at their acquisition cost net of expenses. If these are interest-bearing securities, the interest accrued at acquisition is included in the acquisition cost. Premiums and discounts on short-term investment securities correspond to the difference, if any, between the acquisition cost and the redemption value of fixed-income securities. They are amortised over their remaining term to maturity based on a straight line method for fixed-income securities and on the actuarial method for Treasury bills, other negotiable debt securities and interbank market instruments. Interest accrued on fixed-income securities are recorded in related receivables as a double entry of the income statement item of INTEREST AND SIMILAR INCOME. Short-term investment securities are valued at the lower of acquisition cost and probable market value. Unrealised losses are recognised by means of provisions, while unrealised gains are not recognised. Where applicable, the provision takes into account income or losses on hedging instruments. Income from sales and increases and reversals of provisions appear under the heading GAINS OR LOSSES ON SHORT-TERM INVESTMENT SECURITIES AND SIMILAR INSTRUMENTS. However, in case of a known credit risk on fixed income securities, a provision for doubtful loans is booked, which appears on the income statement under COST OF RISK. b. Long-term investment securities Long-term investment securities are fixed-income securities with a fixed redemption price, acquired with the intention of holding them long-term, in principle until maturity. The securities that meet these criteria can be classified as long-term investment securities, when, according to the CRBF provisions, they are subject to a specific hedge with respect to their term or their rate. Securities which meet the required criteria, but which are initially included in short-term securities, are also included in the long-term investment portfolio if the specific hedge conditions with respect to their term or their rate had not yet been met at the time of their acquisition. Long-term investment securities are booked on the date of their acquisition based on the same rules as shortterm investment securities. A contingency provision may be booked against them if there is a strong probability that the bank will not keep the securities until maturity due to new developments or in case of risk of default by the issuer. In accordance with regulation as amended of the CRBF, securities transferred from the short-term investment portfolio to the long-term investment portfolio are booked at their acquisition price; the provisions set aside at the beginning of the fiscal year are carried forward for the remaining term to maturity of the securities in question. Premiums and discounts are amortised over the remaining term to maturity of the securities, according to the same methods as the ones used for short-term investment securities. Interest accrued on long-term investment securities are recorded according to the same rules as those applicable to fixed income short-term investment securities. Any income or loss on disposals and increases and reversals of provisions appear under the heading GAINS OR LOSSES ON FIXED ASSETS. During the year, there was no transfer between short-term investment securities and long-term investment securities.

46 CORPORATE FINANCIAL STATEMENTS/PAGE 88 FINANCIAL REPORT 2004 /PAGE INTANGIBLE FIXED ASSETS Compagnie de Financement Foncier recorded as an intangible asset the difference between the market value and the net book value of the items transferred in 1999 by Crédit Foncier pursuant to the law of June 25, 1999, which stood at a gross amount of M. This intangible asset is amortised in the accounts according to a predetermined schedule, with the annual amortisation rates being calculated in 1999 on the basis of the expected decrease in the volume of the assets contributed, until they are fully eliminated in The amortisation booked in 2004 amounted to 12.3 M. 2.6 INTERBANK LOANS AND BONDS The outstanding principal from bonds and loans is booked under liabilities on the balance sheet for the gross amount. Bonds and loans in foreign currencies are translated into euros at the exchange rate prevailing at year-end. Issuing expenses, less any premiums, are first booked for their full amount under COMMISSIONS AND FEES in the years in which they are incurred. They are then amortised as follows: > Recorded on the assets side of the balance sheet in accruals under DEFERRED EXPENSES as a double entry to the expense transfer account, which appears under COMMISSIONS AND FEES INCOME ; > Amortisation of the asset account over the term to maturity of the relevant loans, recorded as OTHER EXPENSES FROM BANKING OPERATIONS. Issue and redemption premiums are amortised over the term of the loans to which they relate. They are booked as deferred charges in assets under DEFERRED CHARGES. They are amortised with the double entry being booked as INTEREST AND SIMILAR EXPENSES ON BONDS AND OTHER FIXED-INCOME SECURITIES. 2.7 FORWARD FINANCIAL INSTRUMENTS Compagnie de Financement Foncier does not hold any option contract or firm forward contract on regulated markets Interest Rate and Foreign Exchange Swaps and Forward Rate Agreements (FRA) Interest rate swaps and foreign exchange swaps include isolated open positions, micro-hedging and macrohedging contracts. All the foregoing are considered as over-the-counter transactions. They are recorded based on the following principles: > The commitments related to these transactions are posted in the off-balance sheet statements for the nominal value of unsettled contracts; > Expenses and income relating to micro-hedging operations are posted in the income statement symmetrically to the hedged item; > Expenses and income relating to macro-hedging operations are posted in the income statement on a proportional basis; estimated unrealised gains and losses compared to market value are not recognised. At December , Compagnie de Financement Foncier did not have any unmatched open position Caps and floors market rate contracts Caps and floors rate contracts are handled over-the-counter and classified as isolated open positions and microhedging. These transactions are similar to a series of options and their accounting treatment is the same. Micro-hedging transactions: > Premiums are booked in accruals and amortised over the remaining term of the hedged item; > Interest rate differentials, paid or received at each payment date, constitute realised gains or losses; they are recognised under the same conditions as the gains and losses generated when an option is unwound, symmetrically to the hedged item. At December 31, 2004, Compagnie de Financement Foncier did not have any rate cap or floor contract as an isolated open position. 2.8 PROVISIONS FOR LIABILITIES AND EXPENSES This position covers provisions for liabilities and expenses not directly related to banking transactions as defined by Article L of the French Monetary and Financial Code and related transactions defined under Article L of the same code. Their purpose is clearly identified whenever their amount or maturity is uncertain. It also covers provisions for liabilities and expenses related to banking transactions as defined by Article L of the French Monetary and Financial Code and related transactions defined under Article L of the same code, which are likely to occur in view of events that have occurred or are occurring. Their purpose is clearly identified whenever their amount or maturity is uncertain. They mainly comprise provisions for counterparty risks (see paragraph 2.2.2). They are presented in detail in note INCOME TAXES Compagnie de Financement Foncier is a member of the tax consolidation Group headed by Crédit Foncier. In this respect, in accordance with the tax consolidation agreement, Compagnie de Financement Foncier will pay to Crédit Foncier as a contribution towards the income taxes due for the tax Group, a sum equal to the tax that it would have incurred on its profits if it had been assessed independently. In 2004, Compagnie de Financement Foncier reported a taxable income which resulted in the booking in the income statement of an income tax charge at the full rate of 40.7 M.

47 CORPORATE FINANCIAL STATEMENTS /PAGE 90 FINANCIAL REPORT 2004 /PAGE 91 note 1 treasury notes and similar securities (1)(2) note 2 due from banks 12/31/04 12/31/03 12/31/02 (in thousands of euros) GROSS AMOUNT PROVISIONS NET AMOUNT Trading securities Short-term investment securities Long-term investment securities 159, ,263 Related receivables 2,623 2,159 TOTAL 161, ,422 (1) This account only includes treasury notes. Other securities issued by the State or guaranteed by the State are recorded under bonds and other fixed income securities. (2) The portfolio in existence at December 31, 2003 matured in July Since then, Compagnie de Financement Foncier no longer holds any treasury notes. (in thousands of euros) PERFORMING LOANS DOUBTFUL LOANS PROVISIONS NET AMOUNTS NON-GROUP LOANS On demand Customer accounts 1,442 3,113 2,687 1,442 3,113 2,687 Loans and accounts 250, ,000 1,091, , ,000 1,091,000 Related receivables Non-allocated securities , ,403 note 1 a (in thousands of euros) Short-term investment securities Long-term investment securities premiums/discounts GROSS AMOUNT REDEMPTION VALUE DIFFERENCE +/- GROSS AMOUNT REDEMPTION VALUE DIFFERENCE +/- GROSS AMOUNT REDEMPTION VALUE DIFFERENCE +/- 159, , , ,000 1,737 Sub-total 251, ,321 1,115, , ,321 1,115,190 At maturity Loans and accounts 5,217,831 3,760,777 2,198, ,218,737 3,760,942 2,198,003 Related receivables 35,411 37,823 36,529 35,411 37,823 36,529 Sub-total 5,253,242 3,798,600 2,234, ,254,148 3,798,765 2,234,532 TOTAL NON-GROUP LOANS 5,504,715 4,254,921 3,349, ,505,621 4,255,086 3,349,722 GROUP LOANS On demand 343, , , , , ,770 At maturity 3,008,683 3,008,762 1,608,546 3,008,683 3,008,762 1,608,546 Sub-total 3,351,756 3,182,293 1,760,316 3,351,756 3,182,293 1,760,316 TOTAL GROUP LOANS 3,351,756 3,182,293 1,760,316 3,351,756 3,182,293 1,760,316 GRAND TOTAL (1) 8,856,471 7,437,214 5,110, ,857,377 7,437,379 5,110,038 (1) Of which subsidised sector 10,659 15,060 20,

48 CORPORATE FINANCIAL STATEMENTS /PAGE 92 FINANCIAL REPORT 2004 /PAGE 93 note 2 a breakdown of term loans to banks note 3 customer loans 12/31/04 12/31/03 12/31/02 (in thousands of euros) GROSS AMOUNT PROVISIONS NET AMOUNT TERM LOANS Refinancing of subsidised residential property 10,659 10,659 15,060 20,966 Refinancing of unsubsidised residential property 34,126 34,126 84, ,186 Public authorities 5,208,480 5,208,480 3,698,079 2,110,379 Structured financing Other loans to banks 3,008,660 3,008,660 3,009,867 1,608,547 Doubtful term loans TOTAL 8,262, ,262,831 6,807,527 3,843,078 (in thousands of euros) PERFORMING LOANS DOUBTFUL LOANS PROVISIONS NET AMOUNTS CUSTOMER LOANS Commercial loans Export credits Short-term loans Equipment loans 1,601,949 1,649,512 1,532,255 11,327 11,897 11,868 2,727 3,027 2,446 1,610,549 1,658,382 1,541,677 Residential property loans 18,196,120 17,998,697 18,398, , , ,384 30,076 27,220 28,612 18,766,675 18,649,255 19,109,701 Other customer loans 18,030 25,388 33,434 1,585 1,942 2, ,009 1,067 18,685 26,321 34,782 Loans to financial customers Non-allocated securities , ,243 Subordinated loans Related receivables 133, , ,139 4,078 5,244 6, , , ,610 Non-allocated securities Sub-total 19,950,070 19,819,165 20,128, , , ,138 33,733 31,256 32,125 20,533,958 20,484,770 20,856,013 CUSTOMER ACCOUNTS Customer accounts Related receivables Sub-total Total loans 19,950,070 19,819,165 20,128, , , ,138 33,733 31,256 32,125 20,533,958 20,484,770 20,856,013 GRAND TOTAL (1) 19,950,070 19,819,165 20,128, , , ,138 33,733 31,256 32,125 20,533,958 20,484,770 20,856,013 (1) Of which subsidised sector 4,092,119 5,318,567 6,811, , , ,406 4,359 4,531 3,831 4,462,174 5,754,399 7,335,736 Of which unsubsidised sector 15,857,951 14,500,598 13,316, , , ,732 29,374 26,725 28,294 16,071,784 14,730,371 13,520,277 Note: Compagnie de Financement Foncier does not include any intra-group loan in customer loans.

49 CORPORATE FINANCIAL STATEMENTS /PAGE 94 FINANCIAL REPORT 2004 /PAGE 95 note 3 a /1 provisions for counterparty risks note 3 b breakdown of customer loans (2) (in thousands of euros) 12/31/02 INCREASES REVERSALS 12/31/03 INCREASES REVERSALS 12/31/04 PROVISIONS RECORDED AS A DEDUCTION FROM ASSETS Customer loans and due from banks 32,125 16,250-17,119 31,256 26,926-24,449 33,733 PROVISIONS RECORDED IN LIABILITIES Customer loans and due from banks and from securities 5, ,056 4, ,101 TOTAL 37,164 16,398-18,175 35,387 27,590-25,143 37,834 12/31/04 12/31/03 12/31/02 (in thousands of euros) GROSS AMOUNT PROVISIONS NET AMOUNT LOANS TO HOUSEHOLDS 15,009,817 15,009,817 14,865,193 15,155,927 Individuals 14,307,087 14,307,087 14,134,237 14,375,572 Subsidised residential property 3,111,411 3,111,411 4,161,400 5,405,542 Unsubsidised residential property 11,193,092 11,193,092 9,969,216 8,964,521 Other 2,584 2,584 3,621 5,509 Individual entrepreneurs 702, , , ,355 note 3 a /2 discounts on acquired loans (in thousands of euros) 12/31/02 NEW POSTINGS LOANS DUE FROM BANKS AMORTISA- TION 12/31/03 NEW POSTINGS AMORTISA- TION 12/31/04 Premiums 219,332-15, ,617-16, ,203 Discounts Net 219,332-15, ,617-16, ,203 LOANS DUE FROM CUSTOMERS Premiums 133,572 66,064-17, ,134 85,915-26, ,625 Discounts -56,069-5,878 8,613-53,334-5,586 8,950-49,970 Net 77,503 60,186-8, ,800 80,329-17, ,655 TOTAL 296,835 60,186-24, ,417 80,329-33, ,858 Subsidised residential property 165, , , ,526 Unsubsidised residential property 535, , , ,833 Other 1,254 1,254 2,007 2,996 LOANS TO COMPANIES Regional public sector (local communities) 2,112,286 2,112,286 2,171,179 2,039,929 Social organisations 2,588,762 2,588,762 2,498,582 2,594,840 Subsidised residential property 543, , , ,061 Unsubsidised residential property 2,028,852 2,028,852 1,855,944 1,797,279 Other 16,743 16,743 32,557 42,500 Real estate professionals Unsubsidised residential property Other Real estate investors 189, , , ,089 Subsidised residential property 42,168 42,168 52,742 71,093 Unsubsidised residential property 133, , , ,082 Other 13,686 13,686 17,377 21,914 Structured financing 15,162 15,162 17,511 24,885 Transportation 13,495 13,495 15,696 17,995 Large projects 1,667 1,667 1,815 6,890 Other 34,309 34,309 36,250 48,330 SUB-TOTAL CUSTOMER LOANS 19,950,070 19,950,070 19,819,165 20,128,000 Doubtful loans 617,621 33, , , ,013 TOTAL CUSTOMER LOANS (1) 20,567,691 33,733 20,533,958 20,484,770 20,856,013 (1) Of which subsidised sector 4,466,533 4,359 4,462,174 5,754,399 7,335,736 Of which unsubsidised residential sector 16,101,158 29,374 16,071,784 14,730,371 13,520,277 (2) The amount of restructured performing loans outside market conditions at Dec. 31, 2004 is 7,345 K after deducting a discount of 94 K.

50 CORPORATE FINANCIAL STATEMENTS /PAGE 96 FINANCIAL REPORT 2004 /PAGE 97 note 3 d breakdown of doubtful loans TOTAL DOUBTFUL LOANS OF WHICH COMPROMISED DOUBTFUL LOANS TOTAL DOUBTFUL LOANS OF WHICH COMPROMISED DOUBTFUL LOANS DECEMBER 31, 2004 (in thousands of euros) GROSS AMOUNT PROVISIONS NET AMOUNT GROSS AMOUNT PROVISIONS NET AMOUNT LOANS TO HOUSEHOLDS 366,388 10, , ,692 7, ,362 Individuals 312,299 6, , ,024 3, ,161 Subsidised residential property 131, ,168 72, ,606 Unsubsidised residential property 180,645 5, ,754 31,128 3,677 27,451 Other Individual entrepreneurs 54,089 3,993 50,096 27,668 3,467 24,201 Subsidised residential property 26,501 26,501 18,839 18,839 Unsubsidised residential property 27,062 3,635 23,427 8,416 3,116 5,300 Other LOANS TO COMPANIES Regional public sector (local communities) 4, , Social organisations 37,131 2,266 34,865 27,723 2,253 25,470 Subsidised residential property 34,347 34,347 25,289 25,289 Unsubsidised residential property Other 2,426 2, ,377 2, Real estate professionals Unsubsidised residential property Other Real estate investors 207,767 21, , ,689 10, ,378 Subsidised residential property 180,272 4, , ,874 4, ,660 Unsubsidised residential property 25,487 15,987 9,500 10,310 5,227 5,083 Other 2, ,042 1, Structured financing Transportation Large projects Other 1, , TOTAL (1) 617,621 33, , ,932 19, ,038 (1) Of which subsidised sector 374,414 4, , ,582 4, ,223 Of which unsubsidised residential sector 243,207 29, ,833 54,350 15,535 38,815 DECEMBER 31, 2003 (in thousands of euros) GROSS AMOUNT PROVISIONS NET AMOUNT GROSS AMOUNT PROVISIONS NET AMOUNT LOANS TO HOUSEHOLDS 404,631 10, , ,815 6, ,153 Individuals 347,553 6, ,407 92,579 3,263 89,316 Subsidised residential property 188, ,065 74, ,117 Unsubsidised residential property 158,583 5, ,717 18,051 3,033 15,018 Other Individual entrepreneurs 57,078 4,183 52,895 28,236 3,399 24,837 Subsidised residential property 30,015 30,015 18,932 18,932 Unsubsidised residential property 26,075 3,663 22,412 8,836 2,994 5,842 Other LOANS TO COMPANIES Regional public sector (local communities) 4, , Social organisations 38,488 2,541 35,947 25,428 2,289 23,139 Subsidised residential property 26, ,323 23, ,025 Unsubsidised residential property 9, , Other 2,655 1, ,888 1,888 Real estate professionals Unsubsidised residential property Other Real estate investors 248,756 18, , ,947 17, ,885 Subsidised residential property 194,551 4, , ,880 4, ,681 Unsubsidised residential property 52,291 13,169 39,122 28,646 12,078 16,568 Other 1, ,048 1, Structured financing Transportation Large projects Other TOTAL (1) 696,861 31, , ,926 26, ,913 (1) Of which subsidised sector 440,363 4, , ,889 4, ,490 Of which unsubsidised residential sector 256,498 26, ,773 60,037 21,614 38,423

51 CORPORATE FINANCIAL STATEMENTS /PAGE 98 FINANCIAL REPORT 2004 /PAGE 99 note 4 bonds and other fixed income securities note 4 b financial fixed assets (in thousands of euros) GROSS AMOUNT PROVISIONS NET AMOUNT 12/31/04 12/31/03 12/31/02 (in thousands of euros) GROSS AMOUNT 12/31/2002 ACQUISI- TIONS DISPOSALS/ REPAYMENTS CHANGE IN PREMIUMS/ DISCOUNTS CURRENCY DIFFERENCES GROSS AMOUNT 12/31/2003 ACQUISI- TIONS DISPOSALS/ REPAYMENTS CHANGE IN PREMIUMS/ DISCOUNTS CURRENCY DIFFERENCES GROSS AMOUNT 12/31/2004 BONDS AND OTHER FIXED INCOME SECURITIES (1) Short-term investment securities Listed securities 520, , , ,130 Unlisted securities 3,830,304 3,830,304 3,270,761 2,575,289 Long-term investment securities (2) Listed securities 9,905,407 9,905,407 7,202,648 4,347,427 Long-term investment securities 5,427,891 3,483, , ,763 8,114,551 5,571, ,938 4,659-40,859 12,673,543 Total 5,427,891 3,483, , ,763 8,114,551 5,571, ,938 4,659-40,859 12,673,543 Related receivables 49,058 60,252 78,293 GRAND TOTAL 5,476,949 3,483, , ,763 8,174,803 5,571, ,938 4,659-40,859 12,751,836 Unlisted securities 2,768,136 2,768, ,903 1,080,464 Related receivables 94,777 94,777 81,877 89,013 TOTAL (3) 17,119, ,119,338 11,994,182 8,667,323 (1) Units of mutual receivables funds under this item represent 8,742,988 K (excluding related receivables). (2) At December 31, 2004, underlying capital losses on long-term investment securities totalled 1,301,000 on an overall portfolio of 12.7 billion (data made available pursuant to CRC regulation of November 23, 2004 on information to be provided following the transposition of European directives Fair value and Modernisation directives). (3) There are no compromised doubtful loans within Bonds and other fixed income securities. note 5 (in thousands of euros) tangible and intangible fixed assets GROSS AMOUNT AT 12/31/03 ACQUISITIONS IN 2004 DISPOSALS IN 2004 GROSS AMOUNT AT 12/31/2004 AMORTISATION AND PROVISIONS NET AMOUNT AT 12/31/04 NET AMOUNT AT 12/31/03 NET AMOUNT AT 12/31/02 note 4 a premiums/discounts Intangible fixed assets Intangible fixed assets on the contribution of Crédit Foncier de France 119, ,408 88,268 31,140 43,488 56,904 AS OF DECEMBER 31, 2004 (in thousands of euros) Short-term investment securities (1) GROSS VALUE REDEMPTION VALUE DIFFERENCE +\- Other intangible fixed assets TOTAL 119, ,412 88,268 31,144 43,492 56,908 Bonds 473, ,450 3,778 Other fixed income securities 3,877,353 3,877, Long-term investment securities Bonds 2,757,863 2,754,115-3,748 Other fixed income securities 9,915,680 9,915, note 5 a amortisation and provisions on tangible and intangible fixed assets (1) Of which unrealised capital gains by reference to the market value of 41,776 K. (in thousands of euros) AMOUNT AT 12/31/02 INCREASES IN 2003 REVERSALS IN 2003 AMOUNT AT 12/31/03 INCREASES IN 2004 REVERSALS IN 2004 AMOUNT AT 12/31/04 Intangible fixed assets 62,504 13,416 75,920 12,348 88,268 TOTAL 62,504 13,416 75,920 12,348 88,268

52 CORPORATE FINANCIAL STATEMENTS /PAGE 100 FINANCIAL REPORT 2004 /PAGE 101 note 6 other assets note 7 a deferred charges (in thousands of euros) 12/31/04 12/31/03 12/31/02 Conditional instruments purchased 42,659 59,307 73,184 Miscellaneous receivables 30,884 42,486 50,481 Special bonus account 138, ,314 56,982 TOTAL 212, , ,647 (in thousands of euros) 12/31/04 12/31/03 12/31/02 ISSUE AND REDEMPTION PREMIUMS Debt securities Mortgage loans (obligations foncières) > Subsidised sector 8,671 13,320 18,476 note 7 prepayments, deferred charges and accrued income > Other sectors 119,045 88,669 86,342 Negotiable debt securities (B.M.T.N.) 874 1,157 1,637 Total issue and redemption premiums 128, , ,455 OTHER DEFERRED CHARGES Loan and bond issuance costs 42,206 42,709 43,466 (in thousands of euros) 12/31/04 12/31/03 12/31/02 DEFERRED CHARGES (1) Issue and redemption premiums 128, , ,455 (See note 7 a) Other deferred charges 57,200 61,850 67,368 FOREIGN EXCHANGE DIFFERENCES (2) 16,399 27,752 OTHER PREPAYMENTS, DEFERRED CHARGES AND ACCRUED INCOME - ASSETS Prepayments 111,609 74,184 57,451 Accrued income (3) 1,220,189 1,027, ,450 Other (4) 916, ,084 1,317,375 TOTAL 2,434,008 2,058,202 2,438,851 (1) Deferred charges consist of issue premiums on long-term loans and debt securities. See following table entitled Deferred charges. Other deferred charges correspond to the remaining balance of bond and loan issuance costs to be amortised over the remaining term to maturity of the bonds and loans and flat-rate commissions paid to the FGAS guarantee fund in respect of PAS loans which are being amortised over the remaining term to maturity of the loans. (2) Foreign exchange differences are those arising on funding allocated to the subsidised sector which benefit from a State guarantee. They are included in the 2004 liabilities and equity for 1599 K (see note 12 item Other in Liability adjustment accounts ). (3) Of which accrued income on swaps contracts for 1,183,980 K as of Dec. 31, (4) Of which borrower accounts of 285,378 K as of Dec. 31, 2004 compared to 123,727 K as of Dec. 31, 2003 (see note 12). Flat-rate commissions on PAS loans 14,994 19,141 23,902 Total other deferred charges 57,200 61,850 67,368 TOTAL DEFERRED CHARGES 185, , ,823 note 8 due to banks (in thousands of euros) 12/31/04 12/31/03 12/31/02 DUE TO NON-GROUP BANKS On demand Current accounts ,082 Other amounts due 615 8,690 14,719 Related payables Sub-total 1,421 9,144 16,813 At maturity At maturity (1) 638,576 1,570,835 2,589,392 Related payables 12,889 36,685 57,886 Sub-total 651,465 1,607,520 2,647,278 TOTAL DUE TO NON-GROUP BANKS 652,886 1,616,664 2,664,091 DUE TO GROUP BANKS On demand 16,863 16, At maturity 798, , ,167 TOTAL DUE TO GROUP BANKS 815, , ,306 GRAND TOTAL 1,468,162 2,119,344 2,890,397 (1) Of which subsidised sector 388,574 1,304,562 2,323,384

53 CORPORATE FINANCIAL STATEMENTS /PAGE 102 FINANCIAL REPORT 2004 /PAGE 103 note 9 customer deposits note 12 liability adjustment accounts (in thousands of euros) 12/31/04 12/31/03 12/31/02 OTHER LIABILITIES Non-Group On demand > Other amounts due to customers 307, ,064 77,806 TOTAL 307, ,064 77,806 (in thousands of euros) 12/31/04 12/31/03 12/31/02 OTHER LIABILITY ADJUSTMENT ACCOUNTS Prepaid FGAS subsidies 615, , ,951 Other pre-payments 268, , ,245 Accruals (1) 603, , ,594 Adjustment accounts (2) 909, , ,377 Other (3) 561, , ,311 TOTAL 2,959,086 2,589,371 2,636,478 note 10 debt securities (in thousands of euros) 12/31/04 12/31/03 12/31/02 (1) Of which accruals on swap contracts of 588,893 K at (2) This account is the double entry to assets and liabilities after recognition in the income statement of gains and losses arising on the valuation of off balance sheet transactions (see note 18). (3) Of which borrowers accounts of 197,869 K at compared to 90,182 K at (see note 7). Negotiable debt securities (1) 254, , ,252 Mortgage bonds ( obligations foncières ) (2) 39,907,738 33,226,971 27,954,409 Related payables 1,196,164 1,030, ,772 GRAND TOTAL 41,358,710 34,536,839 29,681,433 (1) Of which subsidised sector 134, , ,484 (2) Of which subsidised sector* 4,977,113 6,976,247 7,684,170 All of these debt securities benefit from a priority right of payment. * Borrowings from the subsidised sector include a total of 150 million pounds sterling explicitly guaranteed by the French State. note 13 provisions for liabilities and charges (in thousands of euros) BALANCE INCREASE REVERSALS USED PROVISIONS FOR LIABILITIES AND CHARGES ON BANKING OPERATIONS 12/31/02 12/31/03 12/31/04 REVERSALS NOT USED BALANCE INCREASE REVERSALS USED REVERSALS NOT USED BALANCE Provisions for litigation note 11 other liabilities Provisions for amortisation of loans > Subsidised sector 3,954 1,794 2,160 1, > Competitive sector 3,720 1,042 2,678 1,037 1,641 (in thousands of euros) 12/31/04 12/31/03 12/31/02 Other payables 63,312 95,135 47,662 Related payables Conditional instruments sold Allocated public funds (1) 403, , ,563 TOTAL 467, , ,405 (1) Of which subsidised sector 340, , ,466 Provisions for losses on commitments Provisions for liabilities and charges on financial instruments PROVISIONS FOR LIABILITIES AND CHARGES - COST OF RISK Provisions for potential risks on non-doubtful loans (1) 5, ,057 4, ,101 TOTAL 13, ,836 1,097 9, ,769 1,237 6,588 (1) See paragraph of the draft appendix.

54 CORPORATE FINANCIAL STATEMENTS /PAGE 104 FINANCIAL REPORT 2004 /PAGE 105 note 14 subordinated debt note 15 change in shareholders equity 1) AMOUNTS IN FINANCIAL STATEMENTS (in thousands of euros) DESCRIPTION AMOUNT AT 12/31/04 AMOUNT AT 12/31/03 AMOUNT AT 12/31/02 Reimbursable subordinated instruments TSR 900, ,000 - Subordinated participating loan 1,350,000 1,350,000 1,350,000 Related payables TOTAL SUBORDINATED DEBT 2,250,465 2,250,439 1,350,379 2) DETAILED INFORMATION CONCERNING SUBORDINATED DEBT a) Financial characteristics DESCRIPTION DATE OF ISSUE MATURITY DATE RATE REPAYMENT TERMS Reimbursable subordinated instruments TSR 12/30/ /30/2043 Subordinated participating loan from Crédit Foncier de France rescheduled on June 28, 2002 b) Possibility and conditions for early repayment > On the subordinated participating loan 10/22/ /21/2040 AMOUNT AT 12/31/04 Euribor 3 months + 0,5% At maturity 900,000 TAM + 2.5% Compagnie de Financement Foncier has the right to reimburse all or part of the loan before maturity without penalty. > On the reimbursable subordinated instruments TSR At maturity 1,350,000 The TSRs were placed privately with Crédit Foncier and therefore, for reasons of prudence, are not deemed to represent shareholders equity of the Crédit Foncier Group. Compagnie de Financement Foncier has undertaken not to repay TSRs early for the entire duration of the loan. However, it reserves the right to redeem these instruments prior to maturity, as these transactions have no impact on the normal repayment schedule of outstanding securities. Redeemed TSRs are cancelled. Nevertheless, if Crédit Foncier were to sell these securities to entities outside the Group, they would become representative of shareholders equity and their purchase would require the prior agreement of the French Banking Authority [Commission Bancaire]. c) Conditions relating to interest rate payable > On the subordinated participating loan In order to ensure the Company s profitability, interest is only due if the net income for the year in respect of which the interest is due, after payment of that interest, is at least 10 million euros. As a consequence, if net income before payment of the interest were to be lower than 10 million euros, no interest would be due and it would not be carried over to subsequent years. If net income, before payment of the interest, were greater than 10 million euros but would become less than this amount after payment of the interest, this interest is reduced by a corresponding amount, and the amount of interest greater than the interest thus reduced would not be carried forward to subsequent years. > On the reimbursable subordinated instruments TSR Any interest not paid is carried over as unsecured debt. (in thousands of euros) OPENING BALANCE 01/01/03 ALLOCATIONS CHANGES IN CAPITAL AND RESERVES DIVIDENDS PAID IN SHARES OTHER CHANGES BALANCE AT 12/31/03 ALLOCATIONS CHANGES IN CAPITAL AND RESERVES DIVIDENDS PAID IN SHARES OTHER CHANGES BALANCE AT 12/31/04 Capital stock (1) 100, , ,000 Share premiums (1) 118, , ,536 Reserves Legal reserve 10,000 10,000 10,000 General reserve 16,158 20, ,303 19,214 55,517 Regulated reserves Of which: > Regulated revaluation reserves > Special long-term capital gains reserves Retained earnings Net shareholders equity before income for the year 244, , ,053 Income for the year before distribution 26,396 31,714 72,867 Net shareholders equity after income for the year 271, , ,920 Dividends distributed 6,250 12,500 Regulated revaluation reserves OPENING BALANCE 01/01/03 Other regulated reserves 1-1 Regulated reserves 1-1 ALLOCATIONS CHANGES IN PROVISIONS BALANCE AT ALLOCATIONS CHANGES IN PROVISIONS BALANCE AT 12/31/03 12/31/04 INCREASES REVERSALS INCREASES REVERSALS Amount of shareholders equity before dividends 271, , ,920 OPENING BALANCE 01/01/03 ALLOCATIONS CHANGES IN FRBG BALANCE AT ALLOCATIONS CHANGES IN FRBG BALANCE AT 12/31/03 12/31/04 INCREASES REVERSALS INCREASES REVERSALS Fund for general banking risks 20,000 20,000 20,000 TOTAL 271, , ,920 (1) The capital stock consists of 6,250,000 ordinary shares with a par value of 16 euros, which all benefit from the same rights. No revaluation has been carried out to date.

55 CORPORATE FINANCIAL STATEMENTS /PAGE 106 FINANCIAL REPORT 2004 /PAGE 107 note 15 a proposed allocation of income note 17 commitments received SOURCES Retained earnings (in thousands of euros) (in thousands of euros) FINANCING COMMITMENTS Income for the year 72,867 Drawing from reserves ALLOCATIONS Allocation to reserves > Legal reserve 1,000 > Special reserve for long-term capital gains > Other reserves Dividends 35,687 Other distributions Retained earnings 36,180 TOTAL 72,867 NON-GROUP COMMITMENTS Banks Sub-total GROUP COMMITMENTS (1) 1,306,445 2,134,642 2,138,723 TOTAL 1,306,445 2,134,642 2,138,723 GUARANTEE COMMITMENTS NON-GROUP COMMITMENTS Banks (2) 806, , ,156 Customers (3) 16,894,787 16,842,639 1,173,617 Sub-total 17,700,821 17,162,605 1,502,773 GROUP COMMITMENTS (4) 2,643,684 1 TOTAL 20,344,505 17,162,605 1,502,774 note 16 FINANCING COMMITMENTS (in thousands of euros) SUBSIDISED SECTOR NON-GROUP COMMITMENTS Banks commitments given NET AUTHORISATIONS AMOUNTS NOT DRAWN DOWN NET AUTHORISATIONS AMOUNTS NOT DRAWN DOWN NET AUTHORISATIONS AMOUNTS NOT DRAWN DOWN Customers Sub-total subsidised sector TOTAL COMMITMENTS RECEIVED (5) 21,650,950 19,297,247 3,641,497 (1) Lines of credit granted by Crédit Foncier rated AA-/Aa3 and by a public bank rated AAA. This last line for one billion euros was not renewed at the end of Only commitments from the parent Company remained at Dec. 31, (2) Of which 298,672 K rated AA/Aa2 at Dec. 31, 04. (3) In fiscal year 2003, Compagnie de Financement Foncier began posting guarantees to the balance sheet that are explicitly or implicitly related to certain types of customer loans on the balance sheet, in view of their materiality. For 2004, these guarantees are broken down as follows: > Government guarantees on subsidised sector loans 4,092,234 K > SFGAS guarantees on FGAS-eligible loans 5,254,687 K > Mortgage guarantees for mortgage loans benefiting from only one such guarantee 6,461,321 K > Guarantees granted by local municipalities and other entities 1,086,544 K (4) Guarantee commitment received during the establishment of a credit risk transfer transaction, indirectly on a German public entity rated AAA. (5) Compagnie de Financement Foncier has also received a deposit commitment from a public bank rated AAA. The maximum amount of this commitment is set at 3 billion euros. It will bear interest at market rates. This commitment affords assurance that any excess cash can be replaced under highly secure conditions and in accordance with the special legal constraints applying to mortgage loan companies. COMPETITIVE SECTOR NON-GROUP COMMITMENTS Banks Customers 293, , ,809 Sub-total competitive sector 293, , ,809 TOTAL (1) 293, , ,698 Amounts not drawn down represent the fractions that remain to be drawn on loans already partially put in place. Net authorisations represent the amount of loans authorised but which have not yet been put in place. (1) At Dec. 31, 2004, doubtful commitments came to 1,568 K.

56 CORPORATE FINANCIAL STATEMENTS /PAGE 108 FINANCIAL REPORT 2004 /PAGE 109 note 18 foreign currency transactions note 19 forward financial instruments (in thousands of euros) CURRENCY RECEIVABLE CURRENCY PAYABLE CURRENCY RECEIVABLE CURRENCY PAYABLE CURRENCY RECEIVABLE CURRENCY PAYABLE (in thousands of euros) EUROS (1) OTHER CURRENCIES (2) EUROS (1) OTHER CURRENCIES (2) EUROS (1) OTHER CURRENCIES (2) FORWARD TRANSACTIONS TRANSACTIONS DIRECTLY WITH COUNTERPARTIES (3) Transactions directly with counterparties (1) CONDITIONAL TRANSACTIONS Hedging transactions Micro-hedging transactions Financial swaps Micro-hedging transactions > Subsidised sector 212, , , , , ,739 > Competitive sector 6,929,765 7,788,880 5,260,896 5,961,643 5,109,067 5,539,925 Macro-hedging transactions > Subsidised sector > Competitive sector 43,305 57,115 46,703 57,115 92,735 91,720 Total hedging transactions 7,185,821 8,095,775 5,520,425 6,268,538 5,600,007 6,058,384 FORWARD TRANSACTIONS (nominal amounts) 7,185,821 8,095,775 5,520,425 6,268,538 5,600,007 6,058,384 FORWARD TRANSACTIONS (fair value) (2) -949, CURRENT CASH TRANSACTIONS Total foreign currency cash transactions 7,185,821 8,095,775 5,520,425 6,268,538 5,600,007 6,058,384 TOTAL 15,281,596 11,788,963 11,658,391 (1) Compagnie de Financement Foncier does not transact any forward foreign currency contracts on regulated markets. (2) Data communicated pursuant to regulation CRC of Nov. 23, 2004 regarding information to be provided further to the transposition of the European directives, Fair value and Modernisation. Purchases 1,858,606 2,053,039 2,160,583 Sales 25,154 28,203 31,252 Macro-hedging transactions Purchases Sales Other conditional transactions Purchases Sales CONDITIONAL TRANSACTIONS (nominal amouts) 1,883,760 2,081,242 2,191,835 CONDITIONAL TRANSACTIONS (fair value) (4) 14,679 FIRM TRANSACTIONS Micro-hedging transactions 49,503,773 31,295,696 23,377,549 Interest rate instruments 49,503,773 31,295,696 23,377,549 Exchange rate instruments Other instruments Macro-hedging transactions 12,788,014 11,065,888 10,918,365 Interest rate instruments 12,788,014 11,065,888 10,918,365 Exchange rate instruments Other instruments Other transactions 300 Interest rate instruments 300 Exchange rate instruments Other instruments FIRM TRANSACTIONS (nominal amounts) 62,291,787 42,361,584 34,295,914 FIRM TRANSACTIONS (fair value) (4) 1,457,246 FIRM AND CONDITIONAL TRANSACTIONS 64,175,547 44,442,826 36,488,049 TOTAL (5) (nominal amounts) 64,175,547 44,442,826 36,488,049 TOTAL (5) (fair value) 1,471,925 (1) Euro equivalent for currencies that became the euro. (2) Euro equivalent for non-euro currencies. (3) Compagnie de Financement Foncier does not transact any forward financial instruments on regulated markets. (4) Data communicated pursuant to regulation CRC of Nov. 23, 2004 regarding information to be provided further to the transposition of the European directives, Fair value and Modernisation. (5) At Dec. 31, 2004, there were no doubtful loans relating to transactions on financial instruments.

57 CORPORATE FINANCIAL STATEMENTS /PAGE 110 FINANCIAL REPORT 2004 /PAGE 111 note 20 interest and similar income (1)(2) note 23 gains and losses on trading portfolio transactions (in thousands of euros) On transactions with banks 241, , ,514 On transactions with customers 1,189,530 1,335,873 1,402,994 On bonds and other fixed income securities 900, , ,512 Other interest and similar income 1,596 2,505 TOTAL 2,332,226 2,234,283 2,051,525 (1) Of which income from the subsidised sector 623, ,614 1,050,112 (2) Of which 57 K as reversals of discounts on restructured loans under non-market conditions. note 21 interest and similar expenses (1) (in thousands of euros) Foreign exchange and arbitrage transactions Gains on foreign exchange and arbitrage transactions ,227 Losses on foreign exchange and arbitrage transactions ,230 Forward financial instrument transactions Income from forward financial instruments 817 Expenses on forward financial instruments Reversals in provisions for unrealised losses on forward financial instruments 12 Increases in provisions for unrealised losses on forward financial instruments -4-8 NET BALANCE (in thousands of euros) On transactions with banks -74, , ,584 On transactions with customers -1,536-18,987-14,683 On bonds and other fixed income securities -1,865,749-1,681,583-1,500,095 note 24 gains and losses on investment securities transactions Related to subordinated debt -85,783-65,997-73,287 Other interest and similar expenses (1) -78, ,346-88,479 TOTAL -2,105,932-2,031,635-1,858,128 (1) Of which expenses from the subsidised sector -548, , ,707 (in thousands of euros) Gains on disposal 1,310 4,172 2,722 Losses on disposal Reversals in provisions for loss of value ,201 note 22 net commissions and fees Increases in provisions for loss of value ,115 NET BALANCE 1,155 4,165 2,800 (in thousands of euros) Income 32,389 28,366 22,632 On customers transactions 20,718 17,735 12,282 note 25 other income from banking operations Transfer of loan issuance costs/expenses 11,602 10,544 10,325 On securities transactions 50 Other commissions and fees Expenses -16,654-15,793-13,198 On transactions with banks On customer transactions -1,266-1, On securities transactions (1) -12,471-11,556-10,999 On payment method transactions -2,692-2,500-1,444 Other commissions and fees NET BALANCE 15,735 12,573 9,434 (1) Of which loan issue costs 11,602 10,544 10,325 (in thousands of euros) Reversals of provisions relating to banking transactions Surplus of reversals over increases in provisions for amortisation of loans (1) 2,769 2,837 2,916 Provision for claims and litigation on banking transactions 544 Other income from banking operations Transfer of operating expenses * Flat-rate commissions on PAS loans 3,963 6,720 6,576 Other sundry income from banking operations (2) 16,611 27,810 23,268 TOTAL 23,887 37,367 32,760 (1) Of which subsidised sector 1,732 1,794 1,837 (2) Of which repayments of PAS commissions by FGAS 5,075 11,554 9,653

58 CORPORATE FINANCIAL STATEMENTS /PAGE 112 FINANCIAL REPORT 2004 /PAGE 113 note 26 other expenses on banking operations note 28 a increases in provisions for doubtful loans (in thousands of euros) Increases in provisions relating to banking operations Provisions for claims and litigation on banking operations -546 Other expenses on banking operations Commissions on PAS and PTZ loans paid to FGAS -8,543-11,760-13,942 Amortisation of loan issuance expenses -12,093-11,256-9,414 Amortisation of flat-rate commissions on PAS loans -8,110-16,743-17,605 (in thousands of euros) Provisions for doubtful loans Provisions for loans to customers 10,841 6,724 18,482 Provisions for liabilities and charges - Cost of risk Provision for losses and charges on commitments 14 Provision for counterparty risks TOTAL 11,505 6,872 18,823 Amortisation of the correcting account on PC and PAS loans -6,772-7,731-8,582 Other sundry expenses from banking operations TOTAL -35,760-48,417-49,999 note 28 b reversals in provisions for doubtful loans note 27 general operating expenses (in thousands of euros) Provisions for doubtful loans (in thousands of euros) Personnel expenses Taxes and duties -6,777-4,342-3,915 External services -3,319-3,053-2,614 Expenses invoiced by Crédit Foncier de France -96, , ,212 Provisions for loans to banks 590 Provisions for loans to customers 8,909 7,608 13,806 Provisions for liabilities and charges - Cost of risk Provisions for counterparty risks 693 1,056 TOTAL 9,602 8,664 14,396 TOTAL -107, , ,869 Note: The total amount of compensation received by members of management bodies in financial year 2004 was 199 K.. note 28 cost of risk note 29 frbg increases/reversals and regulated provisions (in thousands of euros) Provisions and losses on doubtful loans -4,234-1,429-8,276 Increases in provisions (see note 28 a) -11,505-6,872-18,823 Reversals of provisions 8,753 7,249 12,055 Losses not covered by provisions -1,482-1,806-1,508 > Of which discounts on restructured loans 358 (in thousands of euros) Increases to the FRBG -20,000 Reversal from the FRBG Reversals of regulated provisions 1 1 Increases to regulated provisions -1-1 TOTAL -19,999-1 Bad debt losses Losses covered by provisions ,415-2,341 Reversals of provisions used 849 1,415 2,341 Recoveries on loans written off (1) 6,217 5,429 5,304 NET BALANCE 1,983 4,000-2,972 (1) Of which recoveries under the corrective account 4,659 3,659 4,368

59 CORPORATE FINANCIAL STATEMENTS /PAGE 114 FINANCIAL REPORT 2004 /PAGE 115 note 30 transactions with related enterprises and other investments note 32 schedule of positions: liquidity risk (in thousands of euros) RELATED ENTERPRISES OTHER INVESTMENTS GROUP (1) NON-GROUP TOTAL C.O.B. Recommendation HEADINGS REMAINING TERM TO MATURITY (in thousands of euros) TRANSACTIONS WITH BANKS < 3 MONTHS 3M<T<6M 6M<T<1Y 1Y<T<5Y >5 YEARS TOTAL (2) Loans receivable BALANCE SHEET On demand 343, ,073 At maturity 3,008,683 3,008,683 Loans payable On demand 16,863 16,863 At maturity 798, ,413 Commitments given Financing Guarantee Commitments received Financing 1,306,445 1,306,445 Guarantee 2,643,684 2,643,684 Securities transactions Bonds and other fixed income securities 5,440,602 5,440,602 Debt securities Subordinated debt 2,250,465 2,250,465 (1) The definition of Group applied refers to the consolidated Group to which Compagnie de Financement Foncier belongs. The Company is fully consolidated within the consolidated financial statements of Crédit Foncier de France, itself a part of the Caisses d Épargne Group. Consequently, the Group thus defined represents all the entities fully and proportionally consolidated in the Caisses d Épargne Group. note 31 C.O.B. Recommendation HEADINGS BALANCE SHEET schedule of foreign exchange positions AUSTRALIAN $ CANADIAN $ US $ HONG-KONG $ STERLING SWISS FRANC YEN (in thousands of euros) Financial assets 118 1, ,788 1,400 28,765 12,293 21, ,887 Financial liabilities 11,571 62,874 2,648,512 95,596 1,517,997 1,502, ,385 6,360,761 TOTAL Financial assets (1) 5,779,622 6,736,109 1,383,059 10,896,988 20,231,354 45,027,132 Due from banks 4,151,921 3,001,604 3, , ,430 8,218,807 Customer loans 638, , ,960 5,866,442 12,064,296 19,783,764 Bonds and other fixed-income securities 988,948 3,324, ,952 4,738,841 7,396,628 17,024,561 Subordinated term loans Financial liabilities 1,899,500 2,865, ,112 15,316,905 23,120,871 43,847,507 Due to banks 542,982 18, , , ,514 1,434,960 Customer deposits Debt securities 1,356,518 2,846, ,864 15,039,293 20,411,357 40,162,547 > Liquid notes > Inter-bank market securities > Negotiable debt securities 38, ,355 18,294 49,546 36, ,809 > Bonds 1,318,430 2,734, ,570 14,989,747 20,374,831 39,907,738 > Other debt securities Subordinated term debt 2,250,000 2,250,000 Balance sheet differential (I) 3,880,122 3,870, ,947-4,419,917-2,889,517 1,179,625 OFF BALANCE SHEET Commitments given 293, ,803 Commitments received 500, ,444 1,306,444 Off balance sheet differential (II) 293, , ,444-1,012,641 TOTAL DIFFERENTIAL (I) + (II) 3,880,122 3,870,990 1,031,750-4,919,917-3,695, ,984 Conditional positions 923, ,056 1,883,760 (1) Among the financial assets of the SCF, we have identified 9.2 billion euros of securities that conform to the refinancing criteria of the European Central Bank. (2) The difference with the amounts shown on the balance sheet is principally explained by unpaid loans, doubtful loans and related receivables. Balance sheet differential (I) -11,453-60,915-2,094,724-94,196-1,489,232-1,490, ,821-5,740,874 OFF BALANCE SHEET Commitments received 11,455 60,916 2,845,117 94,196 1,505,617 1,490, ,777 6,525,777 Commitments given 750,140 16,361 17, ,457 Off balance sheet differential (II) 11,455 60,916 2,094,977 94,196 1,489,256 1,490, ,821 5,741,320 OVERALL DIFFERENTIAL (I)+(II) Financial assets are comprised of amounts due from banks and customers. Financial liabilities are comprised of amounts due to banks, customer deposits and debt securities. Foreign exchange position: the table above only shows the amount of transactions carried out by Compagnie de Financement Foncier on its own behalf and thus excludes transactions carried out on behalf of the French State.

60 CORPORATE FINANCIAL STATEMENTS /PAGE 116 FINANCIAL REPORT 2004 /PAGE 117 note 33 financial results of the Company over the last five financial years note 34 summary Company balance sheets for the last five years DESCRIPTION (amounts in euros) I) FINANCIAL SITUATION AT THE END OF THE FINANCIAL YEAR a) Capital stock 100,000, ,000, ,000, ,000, ,000,000 b) Number of shares in issue 6,250,000 6,250,000 6,250,000 6,250,000 6,250,000 c) Number of bonds convertible into shares None None None None None II) OVERALL RESULTS FROM OPERATIONS a) Revenue excluding taxes 2,128,093,000 2,077,184,000 2,110,376,000 2,303,969,000 2,389,429,000 b) Profit for the financial year before tax, employee profit sharing and net increase/reversal in amortisation and provisions 36,177,065 32,177,753 34,314,680 93,082, ,017,146 c) Income taxes 10,357,540 5,840,388 13,931,136 32,050,715 40,666,904 d) Employee profit sharing for the financial year None None None None None e) Profit for the financial year after tax, employee profit sharing and net increase/reversal in amortisation and provisions 10,999,647 7,622,451 26,395,577 31,714,173 72,867,183 f) Amount of profits distributed None None 6,250,000 III) RESULTS FROM OPERATIONS PER SHARE a) Profit for the financial year after tax and employee profit sharing but before net increase/reversal in amortisation and provisions 4,13 4,21 3,26 9,77 13,50 b) Profit for the financial year after tax and employee profit sharing and net increase/reversal in amortisation and provisions 1,76 1,22 4,22 5,07 11,66 c) Dividend paid per share None None 1,00 IV) PERSONNEL a) Number of employees Not significant Not significant Not significant Not significant Not significant > Management category Not significant Not significant Not significant Not significant Not significant > Employee and Technician category None None None None None b) Total employee salaries Not significant Not significant Not significant Not significant Not significant c) Amount paid for social contributions and benefits (social security, other staff benefits, etc.) Not significant Not significant Not significant Not significant Not significant (in thousands of euros) 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 ASSETS Cash, due from central banks and post office accounts 6, ,251 37,952 1,704 1,716 Treasury notes and similar securities 161, , , ,729 Due from banks 8,857,377 7,437,379 5,110,038 5,326,990 4,638,702 Customer loans 20,533,958 20,484,770 20,856,013 20,515,965 20,522,852 Bonds and other fixed-income securities 17,119,338 11,994,182 8,667,323 6,014,173 4,669,807 Fixed assets 31,144 43,492 56,908 77,793 93,034 Other assets 212, , , , ,170 Prepayments, deferred charges and accrued income 2,434,008 2,058,202 2,438,851 2,395,270 2,130,601 TOTAL ASSETS 49,194,805 42,526,243 37,508,154 34,600,336 32,426,611 LIABILITIES Due to central banks and post office accounts Due to banks 1,468,162 2,119,344 2,890,397 5,312,609 5,449,951 Customer deposits 307, ,064 77,806 41,641 49,301 Obligations foncières 41,358,710 34,536,839 29,681,433 25,660,986 23,363,930 Other liabilities 467, , , , ,503 Accruals and deferred income 2,959,086 2,589,371 2,636,478 1,750,391 1,648,314 Provisions for liabilities and charges 6,588 9,930 13,165 15,731 13,843 Subordinated debt 2,250,465 2,250,439 1,350, , ,698 Fund for general banking risks 20,000 20,000 Regulated reserves and subsidies Capital, reserves and retained earnings 284, , , , ,071 Net income for the year 72,867 31,714 26,396 7,623 11,000 TOTAL LIABILITIES 49,194,805 42,526,243 37,508,154 34,600,336 32,426,611 OFF BALANCE SHEET Commitments given Financing 293, , ,698 1,406,389 2,274,150 Guarantee 7 TOTAL COMMITMENTS GIVEN 293, , ,698 1,406,389 2,274,157 Commitments received 21,650,950 19,297,247 3,641,496 3,103,119 2,382,999 Reciprocal commitments Purchase and sale of foreign currencies 15,281,596 11,788,963 11,658,391 7,378,780 4,701,050 Loans to be made or received in foreign currencies Non-unwound forward financial instruments 64,175,547 44,442,826 36,488,049 32,600,893 25,564,323 TOTAL RECIPROCAL COMMITMENTS 79,457,143 56,231,789 48,146,440 39,979,673 30,265,373

61 CORPORATE FINANCIAL STATEMENTS /PAGE 118 FINANCIAL REPORT 2004 /PAGE 119 note 35 privileged/non-privileged liabilities note 36 totals for the subsidised sector (in thousands of euros) PRIVILEGED DEBT 43,484,546 37,763,805 33,445,400 Due to banks 629,848 1,609,576 2,669,665 Obligations foncières 41,358,710 34,536,839 29,681,433 Amounts due under forward financial instruments 1,485,947 1,524,359 1,094,302 Amounts due under the agreement covered by Article L of the French Monetary and Financial Code 10,041 19,565 - Debt resulting from related expenses mentioned in the last paragraph of Article L of the French Monetary and Financial Code - 73,466 - NON-PRIVILEGED DEBT 5,710,259 4,762,438 4,062,754 Unsecured debt 1,929,510 1,075,985 1,174,498 BALANCE SHEET (in thousands of euros) ASSETS LIABILITIES Loans 4,472,941 5,769,620 7,356,489 Interbank loans 395,934 1,334,596 2,373,271 Customer deposits 10,495 12,140 15,218 Debt securities 5,297,200 7,361,596 8,395,831 Other assets 138, ,314 56,982 Other liabilities 5,168 3, Special subsidy account 138, ,314 56,982 Prepayments, deferred charges and accrued income CSB - Foreign exchange and rate differences 103, , ,147 Accruals and deferred income 83, , , ,399 27,752 CSB - State guaranteed foreign exchange and rate differences 1, Subordinated and similar debt 3,397,241 3,359,970 2,604,000 Shareholders equity and provisions 383, , ,256 TOTAL LIABILITIES 49,194,805 42,526,243 37,508,154 Other prepayments, deferred charges and accrued income 103, , ,395 Other accruals and deferred income 81, , ,437 Public funds allocated 340, , ,466 Subsidies 236, , ,411 Guarantee fund 103,510 81,763 64,055 Cash and cash equivalents 1,416,982 3,158,572 3,663,749 TOTAL 6,132,402 9,347,106 11,537,367 TOTAL 6,132,402 9,347,106 11,537,367 OFF BALANCE SHEET (in thousands of euros) Commitments received State guarantees 4,092,234 5,269,136 not available Commitments given Loan amounts not drawn down RECIPROCAL COMMITMENTS (in thousands of euros) Commitments on forward financial instruments Rate hedging instruments > Micro hedging 38,112 1,164,287 1,666,301 > Macro hedging 2,357,347 3,617,347 3,117,347 Exchange hedging instruments > Micro hedging > Foreign exchange receivable 212, , ,205 > Foreign exchange payable -249, , ,739

62 CORPORATE FINANCIAL STATEMENTS/PAGE 120 FINANCIAL REPORT 2004 /PAGE 121 This is a free translation into English of the Statutory Auditors report issued in the French language and is provided solely for the convenience of English speaking readers. The Statutory Auditors report includes information specifically required by French law in all audit reports, whether qualified or not, and this is presented below the opinion on the financial statements. This information includes an explanatory paragraph discussing the auditors assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the financial statements. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. statutory auditors report on the financial statements Year ended December 31, 2004 Mazars & Guérard 39, rue de Wattignies Paris PricewaterhouseCoopers Audit 32, rue Guersant Paris TO THE SHAREHOLDERS Compagnie de Financement Foncier 4, quai de Bercy Charenton Cedex In compliance with the assignment entrusted to us by your Shareholders Meeting, we hereby report to you for the year ended 31 December 2004 on: > The audit of the accompanying financial statements of Compagnie de Financement Foncier, > The justification of our assessments, > The specific verifications and information required by law. These financial statements have been approved by the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. In our opinion, the financial statements give a true and fair view of the Company s financial position and its assets and liabilities, as of 31 December 2004, and of the results of its operations for the year then ended in accordance with the accounting rules and principles applicable in France. II. JUSTIFICATION OF OUR ASSESSMENTS In accordance with the requirements of Article L of the French Commercial Code (Code de Commerce) relating to the justification of our assessments, we bring to your attention the matters set out below: ACCOUNTING ESTIMATES Your Company records provisions to cover the credit risks inherent in its business (paragraph 2.2 of the notes to the financial statements). As part of our assessment of significant estimates used in the preparation of the financial statements, we examined the control procedures applicable for monitoring credit risks, assessing the risks of non-recovery and determining provisions for specific risks and for counterparty risk on sound loans. ACCOUNTING RULES AND PRINCIPLES Your Company holds positions relating to securities and financial instruments. Paragraphs 2.4 and 2.7 of the notes to the financial statements describe the accounting rules and principles applicable to securities and financial instruments. We examined the control procedures applicable to the related accounting classification and the determination of the criteria used for valuing these positions. As part of our assessment of the accounting rules and principles applied by your Company, we verified that the above-mentioned accounting methods and the related information provided in the notes to the financial statements were appropriate, and ensured they have been properly applied. Our assessments were made in the context of our audit of the financial statements, taken as a whole, and therefore contributed to the formation of the unqualified opinion expressed in the first part of this report. III. SPECIFIC VERIFICATION AND INFORMATION We have also performed the specific verifications required by law in accordance with professional standards applicable in France. We have no matters to report regarding the fair presentation and the conformity with the financial statements of the information given in the management report of the Board of Directors, and in the documents addressed to the shareholders with respect to the financial position and the financial statements. La Défense and Paris, April 6, 2005 I. OPINION ON THE FINANCIAL STATEMENTS We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. The Statutory Auditors Mazars & Guérard Michel Barbet-Massin PricewaterhouseCoopers Audit Anik Chaumartin

63 CORPORATE FINANCIAL STATEMENTS/PAGE 122 FINANCIAL REPORT 2004 /PAGE 123 specific controller s report on the valuation methods and the methods for the periodic review of the value of real estate at December 31, 2004 To the Directors of Compagnie de Financement Foncier, In our capacity as the Specific Controller of your Company, and pursuant to the provisions of Article L of the French Monetary and Financial Code, as well as those set out in Article 5 of Regulation of the CRBF (French Banking and Financial Regulations Committee), we hereby present you with our report relating to the assessment of the procedure describing the methods used to value the real estate underlying loans and the methods for periodically reviewing their value, published at the same time as the annual financial statements on December 31, 2004 and appended herewith. The procedure relating to the valuation methods for real estate and the methods for periodically reviewing their value was defined and implemented under the responsibility of the management of your Company. It is our responsibility to assess the validity of this procedure in light of its compliance with the regulations in force. We have examined the valuation methods and the methods for periodically reviewing the value of real estate underlying loans in accordance with the professional standards applicable to this assignment. These standards require that we take the steps necessary to ascertain that the valuation methods and periodic review methods comply, in their design and their application, with the regulations in force, and that we check the presentation of the procedure which is published simultaneously in the annual financial statements. We have no special observation to make as to the compliance of the valuation methods and the periodic review of the underlying assets described in this procedure with the provisions set out in Regulations and of the CRBF. It should however be noted that, based on the tests we carried out, the operational implementation of this procedure could be improved in terms of: > Automation of uploads into the management databases of securities from the periodic review statistical processes and from the individual review process based on real estate expert appraisals; > Consistency of the methods used to calculate the provisional revaluation indices with those used for the final indices. The Specific Controller Cailliau Dedouit et Associés Laurent Brun Paris, April 8, 2005 procedure for the valuation and periodic review of the assets underlying loans at December 31, 2004 I. METHOD FOR THE VALUATION OF ASSETS UNDERLYING LOANS a. General asset valuation principles The procedure described below was determined, in accordance with Articles 1 and 2 of Regulation of the CRBF, as amended by Regulation Real estate financed by eligible loans or recorded as assets for these loans is subject to prudent valuation rules. The valuation is based on the real estate s long term characteristics, normal and local market conditions, the current use of the property and other possible uses. Exceptionally, the valuation may be based on the total cost of the operation where this cost is lower than 350,000 (CRBF Regulation ). b. Special rule used by Compagnie de Financement Foncier As from January 1, 2003, in accordance with the provisions of CRBF Regulation and a decision from the Chairman of the Crédit Foncier de France Executive Board dated July 28, 2003, the cost of the operation of which VAT and without discount is taken as the estimated value of the asset, for all operations concerning residential property which is valued at less than 350,000. Exceptionally, the VAT-inclusive collateral less a 10% discount on new property and 5% on old (for old constructions requiring renovation, the collateral is previously discounted by 60% of the renovation cost), is taken as the asset value in the following cases: > Presence of a bridging loan in the operation (Foncier Intégral product) > The cost of the operation is less than the authorised amount > One of the loans of the operation was authorised or implemented before January 1, 2003 > One of the loans of the operation was transferred to the Société de Crédit Foncier before September 1, SUMMARY The foregoing rules are summarised in the tables below: TYPE OF ASSET AMOUNTS BELOW 350,000 AMOUNTS ABOVE 350,000 RESIDENTIAL PROPERTY Cost of the operation Expert appraisal BUSINESS PROPERTY Expert appraisal Expert appraisal COMBINED PROPERTY Cost of the operation Expert appraisal At December 31, 2004, this valuation method was only used on collateral underlying loans authorised in 2004; collateral underlying loans authorised before 2004 is necessarily subject to periodic reviews of its value at December 31, 2004, as presented hereafter (Cf. II).

64 CORPORATE FINANCIAL STATEMENTS/PAGE 124 FINANCIAL REPORT 2004 /PAGE 125 II. METHODS FOR PERIODIC REVIEW OF RESIDENTIAL PROPERTY The rules detailed below apply to collateral underlying loans authorised before Collateral underlying loans authorised in 2004 is valued according to the method explained in Chapter I. Two periodic review methods are applied according to the following distinction: > The S1 method for all residential assets below 350,000 and for the residential property of private clients above 350,000. > The S2 method for the residential property of business customers valued at more than 350,000. a. S1 periodic review method This revaluation method entails applying to the real property: > The revaluation ratios of one year to the next, according to price changes on the property market from January 1, 2004 December 31, 2004; > An annual natural obsolescence ratio equal to 0.65%. The S1 revaluation method includes two sub-periods: > From year-end 2002 to year-end 2003: replacement of the provisional revaluation indices by final indices. > From year-end 2003 to year-end 2004: definition of the provisional revaluation indices, of which the obsolescence effect. 1. FROM YEAR-END 2002 TO YEAR-END 2003 The provisional indices of price changes in 2003, applied in the previous year, have been replaced by final price-change indices obtained from the 2003 Real Estate Market expert appraisal These final indices are therefore based on the opinion of real estate experts conducted each year by Foncier Expertise. The results of this survey are restated in an econometric model which includes the average indices of the annual price change by cities, for apartments and houses. The following adjustments were carried out on these indices: 1. Even if the locations of the assets on which Crédit Foncier loans are secured are precisely known, some variables (area, neighbourhood, and building quality in particular) are not included in the survey carried out by Foncier Expertise. Consequently, we limited the use of the econometric model to just the average variation in prices for each city. 2. Assets which were subject to sharp price changes (decrease greater than 10% or increase greater than 30%) were excluded as it was considered that the variations probably revealed the expert s difficulty in determining the price of genuinely comparable properties. 3. The final model uses the annual price change in the French départements, based on the values observed in each city. The method used to calculate these indices is as follows: > The average index of cities in the départements was extrapolated to the whole département. > When a départements has no surveyed city, the change used is the average change for the cities in the region. The final ratios are appended herewith. 2. FROM YEAR-END 2003 TO YEAR-END 2004 Considering the early date of the statistical revaluation processing, the exact change in the price of assets during the last year was provisionally estimated by Foncier Expertise. The indices selected for 2004 take into account a rise in real estate property prices for apartments and houses, and are determined as follows: > For the first half of the year, the information is extracted from the CD-Biens database, which contains indices of prices statistically determined by notaries, for Ile-de-France (Greater Paris area), Paris and other French cities; > The July indices for Paris and Ile-de-France are taken from the same database and determine the trend used for the entire third quarter; > Since no statistical information was available for the fourth quarter, zero change was recorded for this period, in a real estate bull market. As a result, an extrapolation of the indices from the first half of 2004 can be used to establish the provisional change indices for These indices are presented in the table below: CHANGES 2004 PARIS ILE-DE-FRANCE REST OF FRANCE Apartments 11.5% 11% 13.5% Houses 11.5% 10% 9% These provisional changes will be replaced next year by the final changes obtained from the next survey conducted by Foncier Expertise. Accordingly, at each annual revaluation, we systematically correct the provisional changes of the real estate market estimated the previous year (2003) by using a model based on the actual changes observed. Furthermore, the process includes new provisions for b. S2 periodic review method For 2004, the S2 revaluation method entailed applying the annual change in the rent index for residential property to 2003 values, i.e % (source INSEE). This change was then adjusted to reflect annual obsolescence, at a rate of 0.65%. III. METHODS FOR PERIODIC REVIEW OF BUSINESS PROPERTY a. Revaluation of business property valued at more than 350,000 This segment is revalued each year by an expert, on an asset-by-asset basis. The expert determines a prudential mortgage value, based on an in-depth analysis of the nature of the asset and its specific characteristics, and on a forward and prudent vision of the market. 254 such expert appraisals were conducted in For loans in this category where the ratio of outstanding principal to authorised amount has fallen to under 30%, pursuant to CRBF Regulation , the S1 revaluation method is applied based on the last known expert appraisal b. Revaluation of business property valued at less than 350,000 Pursuant to the provisions of CRBF , this collateral is revalued individually, every three years, through an expert appraisal, then statistically in the interval, according to the S1 method.

65 CORPORATE FINANCIAL STATEMENTS/PAGE 126 FINANCIAL REPORT 2004 /PAGE 127 IV. SUMMARY TABLE TYPE OF ASSET Residential property Business property APPENDIX HEALTHY CASES RATIO OF OUTSTANDING PRINCIPAL TO INITIAL AMOUNT > 30% AMOUNTS LOWER THAN 350,000 S1 With 2 sub-periods: S S Individual quarterly review S1 in the intervening period AMOUNTS GREATER THAN 350,000 If private client: S1 method If business client: S2 method Annual individual review RATIO OF OUTSTANDING PRINCIPAL TO INITIAL AMOUNT 30% ALL AMOUNTS S1 (< 350,000) or S2 (> 350,000) CHANGES IN HOUSING PRICES IN FRENCH DÉPARTEMENTS BETWEEN 2002 AND 2003 Final ratios for sales in France regions (excluding Paris and Ile-de-France) DÉPARTEMENT HOUSE RATIO APARTMENT RATIO Ain Aisne Allier Alpes-de-Haute-Provence Alpes-Maritimes Ardèche Ardennes Ariège Aube Aude Aveyron Bas-Rhin Bouches-du-Rhône Calvados Cantal Charente Charente-Maritime Cher S1 CASES IN DISPUTE ALL AMOUNTS Specific individual review Corrèze Côte d Or Côtes-d Armor Creuse Deux-Sèvres Dordogne Doubs Drôme Eure Eure-et-Loir Finistère Gard Gers Gironde Haute-Garonne Haute-Loire Haute-Marne Hautes-Alpes Haute-Saône Haute-Savoie Hautes-Pyrénées Haute-Vienne Haut-Rhin Hérault Jura Ille-et-Vilaine Indre Indre-et-Loire Isère Landes Loire Loire-Atlantique Loiret Loir-et-Cher Lot Lot-et-Garonne Lozère Maine-et-Loire Manche Marne Mayenne Meurthe-et-Moselle Meuse Morbihan Moselle Nièvre Nord Oise Orne Pas-de-Calais Puy-de-Dôme Pyrénées-Atlantiques Pyrénées-Orientales Rhône Saône-et-Loire Sarthe Savoie Seine-Maritime Somme Tarn Tarn-et-Garonne Territoire-de-Belfort Var Vaucluse Vendée Vienne Vosges Yonne Final ratios for sales in Paris and Ile-de-France DÉPARTEMENT HOUSE RATIO APARTMENT RATIO Essonne Hauts-de-Seine Seine-et-Marne Seine-Saint-denis Val-de-Marne Val-d Oise Yvelines MOYENNE Paris

66 CHAIRMAN S REPORT /PAGE 128 FINANCIAL REPORT 2004 /PAGE 129 iii. chairman s report on the conditions under which the board prepares and organises the internal control procedures established by the Company (pursuant to the provisions of Articles 117 and 120 of the Financial Security Law of August 1, 2003) Conditions for preparation and organisation of the work of the Board of Directors Internal control procedures 1. CONDITIONS FOR THE PREPARATION AND ORGANISATION OF THE WORK OF THE BOARD OF DIRECTORS A) MEMBERS OF THE BOARD The Board of Directors of Compagnie de Financement Foncier consists of six members, of which the Chairman of the Board, the Chief Executive Officer, and the Deputy Chief Executive Officer. During fiscal 2004, the Board worked with three advisors: a Member of the Executive Board of the CNCE, a Member of the Executive Board of Crédit Foncier de France and a Director of Crédit Foncier de France, who attended the meetings in an advisory capacity. Details of the current composition of the Board are provided in the chart on page 138. Two statutory auditors and the Company s Specific Controller also attend Board meetings, depending on the items on the agenda. B) MEETINGS OF THE BOARD The legal secretary to the Board of Directors is provided by the Legal Department of Crédit Foncier de France which establishes, in consultation with the chairman and the executive management, the agenda for the meetings as well as the information files distributed to the members documenting the various issues to be discussed. This department also drafts the minutes and keeps the legal registers. No internal regulations defining operational procedures for the Board have been adopted. In 2004, the Board of Directors of Compagnie de Financement Foncier met 7 times, primarily in order to: > Set the budget for the year; > Approve the audit plan; > Approve the accounts for the previous year; > Review management forecasts; > Define, at the end of each quarter, for the following quarter, the program for issuing obligations foncières and other privileged ressources which require certification by the Specific Controller; > Delegate to Management the powers necessary to contract these debts; > Review the 2004 half-year accounts; > Generally, authorise any major operation by the Company or to receive information on any significant event affecting the Company (appointment of members of the Audit Committee, approval of the internal regulations of this committee, replacement of the Specific Controller, quarterly report on bond issues, etc.). The Board of Directors has not defined any limit to the power of the Chief Executive Officer or the Deputy Chief Executive Officer. Finally, the members of the Board received no directors fees. On average, the attendance rate of Board members was 86%. C) COMMITTEES In its meeting of May 25, 2004, the Board of Directors proceeded with the appointment of members of a dedicated Audit Committee for Compagnie de Financement Foncier. The principle of creating an Audit Committee had been approved on February 6, However, given the changes in corporate officers made within the Group during the year, the creation of this Audit Committee was postponed. The Audit Committee operates under the terms of an internal regulation approved by the Board of Directors during its meeting of June 29, As at December , The Audit Committee consisted of the following 3 members: the Director of the Caisse Nationale des Caisses d Épargne responsible for finance (the Chair), the member of the Executive Board of Crédit Foncier de France responsible for finance and risk and the Director of Crédit Foncier de France responsible for management accounting and the ALM.

67 CHAIRMAN S REPORT/PAGE 130 FINANCIAL REPORT 2004 /PAGE INTERNAL CONTROL PROCEDURES A) CONTROL CONTEXT AND PRINCIPLES OF CAISSE D ÉPARGNE GROUP Compagnie de Financement Foncier is the Société de Crédit Foncier of the Crédit Foncier de France Group, governed by the provisions of law of June 25, 1999 on Savings and Financial Security ( Épargne et Sécurité Financière ), restated in Articles L to of the Monetary and Financial Code. Under the provisions of this law, the exclusive purpose of Compagnie de Financement Foncier is the production or acquisition of secured loans, loans to public entities and securities, for which the eligibility criteria are defined by law. Its activity is financed through the issuance of obligations foncières (Articles L to L ), and other privileged debt in accordance with the law and or through the issuance of non privileged debt. Pursuant to Article 110 of this same law, Compagnie de Financement Foncier was created by Crédit Foncier de France for the specific purpose of transferring assets and liabilities to this entity of which the loans, borrowings and funds of the subsidised sector. As the Company does not have its own personnel, it uses the technical resources of its parent Company for its administrative, accounting and financial management, as well as for management and servicing of the loans that it holds, with the exception of certain loans which continue to be managed by the seller (Caisse d Épargne and Entenial); it also relies on the technical resources of its parent Company in order to monitor all its activities on the financial markets. Agreements signed between Compagnie de Financement Foncier and Crédit Foncier de France, which are subject to the provisions of Articles L and L of the Commercial Code, set out the terms which regulate relations between the two aforementioned companies notably audit and control engagements. As a result, internal control procedures applied in the Company are those which apply to the entire Crédit Foncier Group. However, because of the specific features of Compagnie de Financement Foncier, in addition to these procedures, there are also strict management rules for the subsidised sector and a Specific Controller. A specific department is responsible for internal controls relating to the proper application of various agreements between Crédit Foncier and Compagnie de Financement Foncier. > Management of the subsidised sector is subject to a convention signed with the French State. This convention defines the rules for loan servicing, accounting management and the special mechanisms related to this sector. A Management and Oversight Committee for the subsidised sector, composed of members appointed by the State and by Crédit Foncier de France, ensures the correct application of the convention, the recovery of loans in default and defines applicable financial management. In order to carry out these functions, this Committee can rely on the work performed by an independent auditor appointed by the State. The financial statements of the Subsidised Sector for 2001, 2002 and 2003 have been audited by independent audit firms; these audits confirm the Company s compliance with the convention governing the Subsidised Sector, with the exception of a few non-material differences in both directions in the calculation of financial expenses charged to the Treasury. > A Specific Controller is appointed following an opinion from the Banking Commission. The mission of the Specific Controller is to verify compliance with legal provisions regarding asset eligibility, overcollateralisation of assets in relation to preferred liabilities, the congruence and the valuation of assets or underlying securities. The controller prepares several reports, some submitted to the corporate governing bodies and to the Banking Commission, and others that are published, such as the annual report on the valuation methods and the periodic review of the value of the assets underlying the mortgage loans, the quarterly certifications of issues of obligations foncières, or special certifications for any issue exceeding 500 M. As a lending institution, Compagnie de Financement Foncier is also subject to a very comprehensive legislative and regulatory framework which governs the exercise and control of its activities. This framework is primarily made up of the Monetary and Financial Code and the regulations set forth by the Banking and Finance Regulatory Committee (CRBF), and in particular, with regard to internal audit, by Regulation No of the CRBF, recently amended by Regulations and of said committee. In compliance with regulatory requirements, the Executive Board of Crédit Foncier is responsible for defining and implementing the internal control system. This system encompasses all procedures, systems and controls required to firstly achieve Company objectives, comply with laws, regulations and general or Group rules, and secondly to ensure the management of all types of risk to which the Company is exposed. The structure of these systems is primarily defined by regulations. This system relies on various levels of permanent controls which are exercised by departments or individuals that are independent of the operations they are auditing. The Group s auditing system is defined by standards set out by the Caisse Nationale des Caisses d Épargne (CNCE). In fact, as the central organ of Groupe Caisse d Épargne, its primary mission is to execute all administrative, financial and technical measures relating to the organisation and management of Caisses d Épargne, its subsidiaries and joint operations. Applicable to all affiliated institutions, the organisational or audit rules issued by the CNCE cover all commercial and financial activities as well as the assessment, control and oversight of risks relating to credit, markets, accounting, computer technology or operations. As a result, combating money laundering and the financing of terrorism is the subject of a particular focus, involving the definition of specific standards. The emergence of the compliance function will prompt the Company to set up a special department in Finally, evaluation of the quality and operations of the auditing system is conducted by the General Inspection Department, which is subject to requirements governing lending institutions. The periodic audit function is governed by an audit charter, which evolved from the audit charter of Caisse d Épargne Group and handled by a special office staffed by members of the CNCE General Inspection Department. The purpose of this organisation is to promote cooperation among inspection departments and to ensure the Group s audit process is performed as efficiently cost effectively as possible. B) CONTROL SYSTEM ORGANISATIONAL STRUCTURE CORPORATE GOVERNANCE The Board of Directors of Compagnie de Financement Foncier elects from among its members a Chairman, who organises and directs the work of the Board. The Board of Directors ensures that the governing bodies of Compagnie de Financement Foncier operate properly, and that the Directors are able to perform their duties. The dedicated Audit Committee of Compagnie de Financement Foncier, created in 2004, has relieved the Audit Committee of Crédit Foncier of its responsibilities relating to Compagnie de Financement Foncier. Its primary mission is to ensure the relevance and consistency of accounting policies adopted to establish Company accounts and ensure that internal procedures relating to the collection and control of information guarantee the successful execution of these functions. Management of Compagnie de Financement Foncier is performed by a Chief Executive Officer and a Deputy Chief Executive Officer designated to assist him. The Chief Executive Officer is vested with the broadest powers to act in all circumstances on behalf of Compagnie de Financement Foncier within the limits of the corporate purpose, and subject to the powers expressly attributed by law to shareholders meetings and the special powers of the Board of Directors. He represents the Company in its relationships with third parties. The Deputy Chief Executive Officer has the same powers as the Chief Executive Officer with respect to third parties.

68 CHAIRMAN S REPORT/PAGE 132 FINANCIAL REPORT 2004 /PAGE 133 INTERNAL AUDITING SYSTEM The internal auditing system is organised around varying levels of ongoing and periodic control, and is reflected in various organisational measures (e.g. involving line and staff managers, the delegation system, reporting, and separation of functions) which are detailed below. The different levels of internal control There are different levels of internal control at Crédit Foncier as follows: > Ongoing operational control is the job of the operating units, their staff and managers. The procedures are included in procedural and operating manuals. Unit heads are responsible for producing and updating these manuals. In this respect, it should be noted that the units are rapidly changing, and substantial IT changes, either completed or underway, are profoundly changing the ways transactions are processed, and, as a result, many instructions have to be reformulated. The larger management teams have permanent control units which are responsible for creating and implementing permanent controls and producing reports. Two entities merit further elaboration: - Accounting: The Accounting Standards and Control Department in the Accounting Division is responsible for auditing the accounts and ensuring there is sufficient documentation for the accounting system to operate properly. - Finance: the Suivi de la Société de Crédit Foncier ( Société de Crédit Foncier Monitoring) Department, created in the Financial Operations Office, was placed in charge of internal control for all processes affecting Compagnie de Financement Foncier (most notably, auditing the quality of procedures). > Centralised permanent control is the responsibility of non-operating units: - Risk Department: this entity is responsible for the control of loan commitments (individual and business loans) and the monitoring of operational risk. In 2005, it will also be responsible for financial risk. - Compliance: the compliance function is carried out through a Compliance Department created in The department head is responsible for organising its operations during the first half of Issues relating to ethics and money laundering will continue to be handled by the Ethics Officer. - Head of information systems security: in 2004, Crédit Foncier de France Group created and filled the position of Head of Information Systems Security, a function which directly reports to management. The responsibilities of the Head of Information Systems Security are threefold:. To define a policy for the security of information systems,. To supervise a network of contacts within the various entities of the Company,. To provide assistance and advice to the Technology Department with respect to security issues. > Periodic control is the responsibility of the Crédit Foncier de France General Inspection Office. The auditing units of Crédit Foncier (CNCE) shareholders also take part in this periodic control. On June 1, 2005, the merger of Crédit Foncier, Entenial, Crédit Foncier Banque and A3C will result in a complete overhaul of Crédit Foncier de France Group s permanent control system, through the creation of a formal Risk Control System. A Pilot committee, which will assess overall risk control, will be responsible for the oversight and development of this system. Role of line and staff managers in controlling the activities of employees As a major component of permanent control, control by line and staff managers is usually conducted: > Through reports of anomalies, oversight and reporting, which enable risk monitoring and ensure that unit activities are being controlled by those in charge; > Through the delegation of power, which is generally integrated into information procedures (authorisation by type of transaction or by threshold, transactions subject to approval) or by manual approvals. Delegation system Under the agreements binding the two institutions, the delegation system implemented by Crédit Foncier de France applies to Compagnie de Financement Foncier. It is based on two series of measures: > First, a system ensuring that decisions, based on the magnitude of the risks they present, are made at an appropriate level within the Company (involvement of the competent decision-making committees, or the internal delegation system); > Second, a system ensuring that representatives of Crédit Foncier de France provide third parties with the necessary documents, demonstrating their power to engage the Company in a transaction. Decisions that are not made by the Executive Management of Compagnie de Financement Foncier and that exceed the delegations granted to operating managers are the responsibility of specialised Committees. Under an internal control system, two kinds of decision-making committees are responsible for the operation and monitoring of the activity of Compagnie de Financement Foncier: > All the Crédit Foncier de France committees responsible for the business of its subsidiary, > Two specific committees of Compagnie de Financement Foncier. Among the committees of Crédit Foncier de France, the most important are: > The National Loan Committee: authorises loans exceeding the powers delegated to the operating units and key committees, > The Risk Committee: monitors overall changes in counterparty risks and the resulting decisions (scoring rules, delegations, limits), > The National Committee of Sensitive Operations: management strategy and decisions regarding substantial debts which are either in difficulty or exposed to risk, > The Balance Sheet Management Committee: analyses ALM indicators and resulting decisions, > The Finance Committee: executes financial commitments, sets objectives for refinancing, authorises special operations and determines operations to hedge the balance sheet. The two committees specific to the Company are: > The Committee monitoring the Master Agreement and the special agreements signed by Crédit Foncier de France and Compagnie de Financement Foncier. It is responsible for the interpretation, application and fairness of the agreements. Committee meetings are held sporadically at the request of the Executive Management of either party, or, if necessary, of the Compagnie de Financement Foncier Management Committee. > The Management Committee: examines problems confronting the operating units of Crédit Foncier with respect to the operations of Compagnie de Financement Foncier, approves proposed solutions and monitors implementation. It also ensures the application of recommendations made by the General Inspection Department of Crédit Foncier following inspections. Risk oversight measurement Information on risks is reported regularly to the Audit Committee and the Board of Directors of Compagnie de Financement Foncier. As a Société de Crédit Foncier, Compagnie Financement Foncier is specifically required to monitor all risks related to credit, interest rates, liquidity levels, the valuation of assets provided as guarantees and any other element that falls under the scope of the Specific Controller s activities.

69 CHAIRMAN S REPORT/PAGE 134 FINANCIAL REPORT 2004 /PAGE 135 Reporting Information from the Company s Board of Directors is provided through activity reports prepared by management of the various business sectors of the Crédit Foncier de France Group. Principle of separation of functions These principles in force at Crédit Foncier de France also apply to Compagnie de Financement Foncier. > Overall independence among the units in charge of operating commitments and the units in charge of accounting approval, oversight and control of the related risks. > The independence of the control units vis-à-vis the operating units is provided by: - oversight of commitments by the Department of Risk and Commitments, - oversight of financial risks by the Department of ALM and Management Control, - accounting control by the Department of General Accounting, - ethics and control of investment services by the Ethics Officer, - audit by the General Inspection Department. Accounting system and procedures The Crédit Foncier de France accounting system and, therefore, the accounting system of Compagnie de Financement Foncier, is based largely on management chains that supply accounting data. The methods used for internal accounting audits are described in the section covering procedures for auditing accounting and financial data. THE WORK OF GENERAL INSPECTION Organisation and resources of general inspection Evaluating internal control systems is the responsibility of the General Inspection Department of Crédit Foncier de France. Management of the General Inspection Division reports to the Executive Management, Board of Directors and Audit Committee of Compagnie de Financement Foncier for all assignments that concern it directly or indirectly. In late 2004, the General Inspection Department had 21 staff members, of which 5 audit seniors and 10 auditors, all with advanced degrees and a combination of varied skills (accounting, financial, legal, computer and sales). Staff hires during 2004 (appointment of an Inspector General for Crédit Foncier de France Group, and the recruitment of 2 auditors), helped achieve the target number of employees required for effective coverage of the scope of the Group s audit activities. The annual audit plan of Compagnie de Financement Foncier is submitted for approval to the Company s Audit Committee and Board of Directors. It is part of the annual audit plan of Crédit Foncier de France which is in turn included in a multi-year audit plan for Caisse d Épargne Group. The annual audit plan is designed for the Crédit Foncier de France Group by the Management of the General Inspection Department in cooperation with the CNCE General Inspection Department. It is approved by the Chairman of the Executive Board of Crédit Foncier and then submitted to its Audit Committee for approval. It falls under the responsibility of the General Inspection Department, which is covered under a multi-annual plan that takes into account the audit cycle of each business activity, and the context. In addition to the contribution of Crédit Foncier de France Group s General Inspection Department, the auditing units of Caisse Nationale des Caisses d Épargne also helped to design the annual plan. During the year, special investigations or assignments may be conducted at the request of the Board of Directors or the Management of Compagnie de Financement Foncier. The assignments performed and the follow-up on the recommendations result in reports to the Executive Management and Audit Committee of Compagnie de Financement Foncier. Consolidation with the General Inspection department of Entenial is already underway. The physical merger of teams, scheduled for March 2005, will start with a unit of 30 people, whose structure will include oversight and reporting functions. Inspection assignments conducted in 2004 A total of 24 audit assignments were conducted in Two of these assignments had a direct bearing on the scope of activities of the Compagnie de Financement Foncier, while 22 assignments, relating to the overall scope of Crédit Foncier de France, had an indirect bearing on Compagnie de Financement Foncier s activities. Moreover, of the 24 assignments conducted during 2004, 20 were conducted by the General Inspection Department of Crédit Foncier de France and 4 by the General Inspection Department of CNCE. These assignments had generally been included in the annual audit plan approved by the Audit Committee of Crédit Foncier on December 9, 2003, and either related to the scope of activities of Compagnie de Financement Foncier, or various sectors within Crédit Foncier de France Group which were of interest to Compagnie de Financement Foncier (loans to individuals, business loans, accounting, information technology, etc.). An audit of the various segments of business loan activity was conducted by the General Inspection Department at the same time as follow up of the action plan implemented after the inspection of the Banking Commission. Follow-up of recommendations following previous assignments During 2004, the General Inspection Department followed up on the implementation of recommendations by the audited units. The procedure for following up on recommendations is now in compliance with the methodology used by the General Inspection of CNCE, namely a systematic semi-annual follow up with management identifying the audited unit, the percentage of completion and if applicable, the action plan indicating the new deadline. The responses of the audited units were subjected to consistency checks rated by the General Inspection Department. A summary was then forwarded to the Executive Management and Audit Committee of Compagnie de Financement Foncier. This summary includes comments relating to cases where worrying delays in implementation were observed. C) PROCEDURES FOR AUDITING FINANCIAL AND ACCOUNTING INFORMATION ROLE OF THE CNCE The CNCE Group Regulations and Consolidation Direction conducts missions involving standardisation, supervision, appraisals, oversight, forecasting, and regulatory watch and oversight and for the Group in prudential, accounting and fiscal matters. In this capacity, it defines and updates the Group s accounting indicators through a Caisse d Épargne Chart of Accounts (PCCE) and accounting rules and methods applicable to all Group institutions. These rules and methods include accounting and generic operating forms and are summarised in a manual used by all the Group s institutions, which is updated regularly based on changes in accounting regulations. Furthermore, the rules for preparing half-year and annual financial statements are announced separately so as to harmonise accounting procedures and statements among the different companies in the Group.

70 CHAIRMAN S REPORT/PAGE 136 FINANCIAL REPORT 2004 /PAGE 137 AUDIT COMMITTEE OF THE COMPANY The accounting and financial information (annual and half-year consolidated accounts and notes to the financial statements) which were presented to the Audit Committee of Crédit Foncier until June 2004, are now presented to the Audit Committee of the Compagnie de Financement Foncier. This Committee analyses this information, receives the conclusions of the Auditors or the Specific Controller and submits a report on its activities to the Board of Directors. CRÉDIT FONCIER - ORGANISATION OF THE ACCOUNTING FUNCTION The accounting function in the Crédit Foncier de France Group is performed by accounting Departments responsible for preparing balance sheets, income statements, notes to the financial statements, and statutory reports by the different companies in the Group, of which Compagnie de Financement Foncier, and by decentralised accounting units housed in the administrative offices of the parent Company. The process is coordinated by the Crédit Foncier de France Group Direction of General Accounting and Banking Regulations (DCGRB), which in turn is divided into three main units, the responsibilities of which are described in the table below. The Chief Accountant (Directeur Comptable) reports to the member of the Executive Board of Crédit Foncier de France responsible for finance and risk. Units Loan Clearing Department Document Production Department Accounting Standards and Control Department Principal responsibilities in accounting system operations > oversight and control of interface operations among loan management chains and reporting databases > maintenance of accounting parameters of loan chains > clearing for subsidised Sector operations Parent Company accounts: > accounting for Compagnie de Financement Foncier > tax returns > management of accounting software packages Research and ratios: > calculation of regulatory ratios (liquidity, etc.) and specific Compagnie de Financement Foncier ratios (overcollateralisation and LTV) > monitoring the Group s position in terms of regulatory requirements > definition and follow-up of Crédit Foncier accounting standards in accordance with the Group CNCE accounting standards > permanent accounting controls > maintenance of the chart of accounts, parameters for daily income accounting forms and audit trails Principal responsibilities in compiling and summarising data > reporting on loans outstanding and loan flows > reporting on risk exposure > reporting to the state treasury on subsidised loans > balance sheets, income statements and notes to the financial statements > reporting to the banking commission (through the cnce, the central body) > monthly profit statements > prudential reports to the banking commission > accounting audit reports > procedural manuals In keeping with changes in technology and accounting practices, the Accounting Standards and Control Department adapts the internal chart of accounts to ensure it is in complete compliance with the Group CNCE chart of accounts. The Service Suivi de la Société de Crédit Foncier ( Société de Crédit Foncier Monitoring) Department, which reports to the Finance Division, which in turn is part of the Division of Financial Operations, sends to the Banking Commission the report on the quality of the assets of Compagnie de Financement Foncier, prepared pursuant to Regulation of the Banking and Finance Regulatory Committee. ACCOUNTING CONTROLS The accounting system of Crédit Foncier de France and, therefore, of Compagnie de Financement Foncier, is based largely on accounting data supplied by management chains. The organisational principles of accounting control, in a context of broad decentralisation of work, are formalised in the Accounting Charter distributed in July Operating accounting controls are the responsibility of the decentralised accountants (bookkeepers and 1st-level managers). Financial statements are supported and certified quarterly according to standardised formats in a single centralised computer tool (the account justification database), managed by the Department of Accounting Standards and Control. Activity reports track the progress made in supporting the accounts (in terms of quantity and quality). These reports are used to verify the quality of the supporting documentation and to guide on-site audits. These auditing assignments are part of an annual program approved by the Head of the General Accounting and Banking Regulation Division. The resulting auditing reports are presented to the General Inspection Office and to the outside auditors, in addition to the relevant departments. The recommendations of the statutory auditors and the General Inspection Office are presented to the management of the companies concerned. These recommendations are summarised and submitted to the Audit Committees of Crédit Foncier and Compagnie de Financement Foncier. Periodic verifications are performed to ensure the recommendations are implemented. Consolidated units formed by subsidiaries and certified by their respective auditors will be subject to a detailed review and consistency controls conducted by the Consolidation Unit. The consolidated accounting income statement is included with the income statement established by the Management Control Division. All these prudential and regulatory reports are cleared by the CNCE, which runs automated consistency controls before sending them to the Banking Commission. These tools are gradually being provided to the companies for broader use. AUDIT OF FINANCIAL DATA The financial data published outside Compagnie de Financement Foncier (annual reports for shareholders, regulatory restitutions intended specifically for the Banking Commission, reference documents submitted to the Autorité des Marchés Financiers, reports to Ratings Agencies and to the Specific Controller) are carefully audited by the competent operating departments: the Service suivi de la Société de Crédit Foncier ( Société de Crédit Foncier Monitoring) Department, which has a complete overview of the Company, as well as management control, balance sheet management and general accounting. CHANGES MADE IN 2004 In 2004, the Company carried out a number of key activities which included the following: > Implementation of the new IFRS accounting standards, which resulted in an accurate analysis of the relevant texts and compilation of needs for computer-related projects to be carried out, > Preparation of the sentinel tool intended to improve monitoring of audit activities in 2005, > Expansion of accounts monitored by the BJC system, > Implementation of a new consolidation system intended for the CNCE, which will provide more accurate reporting, > Creation of the Audit Committee of Compagnie de Financement Foncier in June 2004.

71 CHAIRMAN S REPORT/PAGE 138 FINANCIAL REPORT 2004 /PAGE 139 compagnie de financement foncier Financial year from January 1, 2004 to December 31, 2004 Range of possible number of members: 3 to 18 Actual number of members: 6 Number of meetings held by the Board: 7 Average attendance rate: 86% Director s fee: None SURNAME/FIRST NAME COMPANY NAME + PERMANENT REPRESENTATIVE CRÉDIT FONCIER DE FRANCE Represented by. Mr. Alain PRÉVOT Mr. François DROUIN Mr. Thierry DUFOUR Mrs. Sandrine GUÉRIN FUNCTION WITHIN THE BOARD OF THE COMPANY DATE OF APPOINTMENT DATE OF EXPIRATION OF TERM OF OFFICE OBSERVATIONS Director June 25, 1999 AGM 2005 Mr. Prévot has been a permanent representative of CFF since April 6, 2004 ; when he replaced Guy Cotret Chairman of the Board of Directors Director Chief Executive Officer Director Deputy Chief Executive Officer June 25, 2003 AGM 2005 He replaced Jean Sebeyran Director since December 18, 1998 CEO since May 17, 2002 Director since March 25, 2002 Deputy CEO since May 17, 2002 AGM 2006 AGM 2006 Following the separation of the functions of Chairman and CEO Following the separation of the functions of Chairman and CEO Mr. François CHAUVEAU Director December 16, 2004 AGM 2005 He replaced Pierre Servant, who resigned on December 13, 2004, following his appointment on May 25, 2004 to replace Jacques Aimelafille who resigned on May 24, 2004 Mr. Pierre-Éric FUZIER Director December 18, 1998 AGM 2007 Mr. François BLANCARD Adviser May 17, 2002 AGM 2005 Resigned on May 25, 2004 statutory auditors report Prepared in accordance with the final paragraph of Article L Of the French Commercial Code (Code de Commerce), on the report prepared by the Chairman of the Board of Directors of Compagnie de Financement Foncier the internal control procedures relating to the preparation and processing of financial and accounting information. Year ended December 31, 2004 To the shareholders, In our capacity as Statutory Auditors of Compagnie de Financement Foncier and in accordance with the final paragraph of Article L of the French Commercial Code (Code de Commerce), we hereby report to you on the report of the Chairman of your Company in accordance with Article L of the French Commercial Code (Code de Commerce) for the year ended 31 December In his report, the Chairman is notably required to give an account of the conditions in which the duties of the Board of Directors are prepared and organised and of the internal control procedures in place within the Company. It is our responsibility to report to you our observations on the information set out in the Chairman s report on the internal control procedures relating to the preparation and processing of financial and accounting information. We performed our procedures in accordance with professional guidelines applicable in France. These require us to perform procedures to assess the fairness of the information set out in the Chairman s report on the internal control procedures relating to the preparation and processing of financial and accounting information. These procedures notably consisted of: > Obtaining an understanding of the objectives and general organization of internal control, as well as the internal control procedures relating to the preparation and processing of financial and accounting information, as set out in the Chairman s report; > Obtaining an understanding of the work performed to support the information given in the report. On the basis of these procedures, we have no matters to report in connection with the information concerning the internal control procedures relating to the preparation and processing of financial and accounting information, as set out in the Chairman s report, prepared in accordance with the final paragraph of Article L of the French Commercial Code (Code de Commerce). La Défense and Paris, April 6, 2005 Mr. Philippe BOMPARD Adviser May 17, 2002 AGM 2005 Resigned on January 6, 2005 Mr. Nicolas MERINDOL Adviser May 13, 2003 AGM 2006 Resigned on December 6, 2004 The Statutory Auditors Mazars & Guérard Michel Barbet-Massin PricewaterhouseCoopers Audit Anik Chaumartin

72 LEGAL INFORMATION/PAGE 140 FINANCIAL REPORT 2004 /PAGE 141 iv. legal information Corporate Governance General Information concerning the Company General Information concerning the Capital Stock Resolutions Submitted to the Shareholders Meeting of Compagnie de Financement Foncier Special Report of the Auditors on the Related-Party Agreements of Compagnie de Financement Foncier Bylaws General Information concerning the Reference Document 166 Appendix 1: Fees for the Statutory Auditors 167 Appendix 2: Simplified organisation of Caisse d Épargne Group I. CORPORATE GOVERNANCE Members of the Board of Directors at December 31, 2004 MR. FRANÇOIS DROUIN Director and Chairman of the Board of Directors since June 25, MR. THIERRY DUFOUR Director since December 18, 1998 Chairman from December 18, 1998 to June 25, 1999 Chief Executive Officer from June 25, 1999 to May 16, 2001 Chief Operating Officer from May 16, 2001 (following the promulgation of the New Economic Regulations Act) to May 17, 2002 Chief Executive Officer since May 17, 2002 (following the separation of the positions of Chairman of the Board and Managing Director). MRS. SANDRINE GUÉRIN Deputy Chief Executive Officer (non Director member) since October 15, 2001 Director since March 25, 2002 Deputy Chief Executive Officer since May 17, 2002 (following the separation of the positions of Chairman of the Board and Managing Director). MR. FRANÇOIS CHAUVEAU Director since December 16, 2004, replacing Pierre Servant, who is retiring. MR. PIERRE-ÉRIC FUZIER Director since December 18, CRÉDIT FONCIER DE FRANCE Director since June 25, 1999 Represented by Mr. Alain PRÉVOT, Director, permanent representative of Crédit Foncier de France replacing Guy Cotret, who retired on April 6, Advisors MR. PHILIPPE BOMPARD Director from June 25, 1999 to March 25, 2002 Advisor since May 17, The Board of Directors of Compagnie de Financement Foncier elected from among its members a Chairman, who organises and directs the work of the Board, The Board of Directors, ensures that the governing bodies of Compagnie de Financement Foncier operate properly, and that the Directors are able to perform their duties. The Compagnie de Financement Foncier s dedicated Audit Committee, which was established in 2004, has taken over from the Crédit Foncier de France Audit Committee in its missions with Compagnie de Financement Foncier. Its mission is to check the relevance and consistency of the accounting policies used to prepare the Company s financial statements and to verify the quality of internal control and collection procedures relating to financial data.

73 LEGAL INFORMATION/PAGE 142 FINANCIAL REPORT 2004 /PAGE 143 The management of Compagnie de Financement Foncier consists of a Chief Executive Officer and a Deputy Chief Executive Officer to assist him. The Chief Executive Officer is vested with the broadest powers to act in all circumstances on behalf of Compagnie de Financement Foncier within the limits of the corporate purpose, and subject to the powers expressly attributed by law to shareholders meetings and the special powers of the Board of Directors. He represents the Company in its relationships with third parties. The Deputy Chief Executive Officer has the same powers with respect to third parties as the Chief Executive Officer. II. GENERAL INFORMATION CONCERNING THE COMPANY a. Corporate name and registered offices The legal registered offices of Compagnie de Financement Foncier are located at 19, rue des Capucines, Paris. b. Activity Compagnie de Financement Foncier is the Société de Crédit Foncier of Crédit Foncier de France Group, specifically governed by the provisions of Section IV of the second part of French law of June 25, 1999 governing savings and financial security, which has been incorporated into Articles L to L of the French Monetary and Financial Code. Pursuant to Article 110 of this law, Crédit Foncier de France transferred to Compagnie de Financement Foncier, on October 21, 1999, assets and liabilities covered by the specific legislative and regulatory requirements that applied to it before this transfer. The purpose of Compagnie de Financement Foncier is the production or the purchase of secured loans and loans to public entities financed by the issue of obligations foncières, or by other resources which may or may not benefit from the privilege as defined by Article L of the Monetary and Financial Code. c. Structure of the relationship between Compagnie de Financement Foncier and Crédit Foncier de France The new production of Crédit Foncier de France, as long as it meets the eligibility criteria defined by law, may be financed by Compagnie de Financement Foncier, subject to the provisions of Articles L to L of the French Monetary and Financial Code. As stipulated by law, Compagnie de Financement Foncier uses the technical and human resources of its parent Company under agreements binding the two companies. These agreements, which are regulated as defined by Articles L and L of the French Commercial Code (previously Articles 101 and 143 of law No of July 24, 1966), cover all lending activities carried out in the enterprise. The general principles applied in preparing these agreements are described below. The texts as drafted take into account the special nature of the relationship between Crédit Foncier de France and its subsidiary Compagnie de Financement Foncier. Seven agreements have been entered into by Crédit Foncier de France and Compagnie de Financement Foncier, namely: > A master agreement setting forth the general principles; > An agreement for the sale of loans; > An agreement for the servicing and recovery of loans; > An agreement governing financial services; > An administrative and accounting management agreement; > An agreement concerning audit and control services and; > An agreement concerning the remuneration of the services. As a result, with the exception of Directors and Officers, Compagnie de Financement Foncier does not have any employees. In 2004, Compagnie de Financement Foncier: > Acquired 2.9 billion in mortgage loans from Crédit Foncier de France; > Acquired 3.4 billion in assets, of which the acquisition of asset backed securities (Fonds Commun de Créances- FCC) funds of mortgage loans originally granted by Entenial for 1.2 billion; > Acquired loans granted to public persons ( 1.3 billion) and securities issued by public entities ( 2.1 billion); > Increased its portfolio of replacement securities to nearly 0.9 billion. d. Legal form and applicable legislation Compagnie de Financement Foncier is a lending institution authorised as a financial Company and a Société de Crédit Foncier by a decision of the French Credit Institutions Committee (CECEI - Comité des Établissements de Crédit et des Entreprises d Investissement) on July 23, Thus, it is subject to all regulations and legislation applicable to credit institutions and, as a Société de Crédit Foncier ; it is also subject to Articles to of the French Monetary and Financial Code. It was formed as a French société anonyme and, for this reason, is also subject, apart from certain exemptions, to the requirements applicable to commercial companies under the French Commercial Code. Société de Crédit Foncier benefit from a certain number of exemptions from ordinary laws, of which: > Article L of the Monetary and Financial Code, which establishes a privilege for bondholders of obligations foncières ; > Article L of the Monetary and Financial Code, which stipulates that the legal receivership or liquidation of a Company holding shares of a Société de Crédit Foncier cannot be extended to the Société de Crédit Foncier ; > Furthermore, Article L of the Monetary and Financial Code stipulates that, notwithstanding any legal or regulatory requirements to the contrary, notably those of Section II of Volume VI of the Commercial Code, contracts for the management and recovery of loans of a Société de Crédit Foncier can be immediately terminated in the event that a Company responsible for the servicing of such loans is placed in legal receivership or liquidation. e. Term of the Company The Company was incorporated on December 22, 1998 for a period of 99 years. f. Legal purpose (Article 2 of the bylaws) ARTICLE 2 - PURPOSE The purpose of the Company, in the context of the laws and regulations applicable to Société de Crédit Foncier, in particular Articles L and following of the Monetary and Financial Code, and without restriction as to the countries in which it can operate other than those set out in these provisions, is: 1 In respect of loans and similar transactions: > To grant or acquire secured loans, whether these are loans benefiting from a first rank mortgage, a property lien, or any other form of property-based security that is at least equivalent, or loans that carry a guarantee issued by a lending institution or an insurance Company; > To grant or acquire loans from public entities, and loans fully guaranteed by public entities, and to subscribe for or acquire bonds and other debt securities issued or guaranteed by public entities;

74 LEGAL INFORMATION/PAGE 144 FINANCIAL REPORT 2004 /PAGE 145 > To acquire, by subscription at the time of issue, either on the markets on which they are traded, or over the counter or, more generally, in any other manner which in compliance with current legislation, units of Fonds Communs de Créances (FCC/RMBS) and units or securities issued by similar entities subject to the law of a foreign state, as long as these units or securities are authorised for inclusion in the assets of Société de Crédit Foncier ; > To acquire and hold risk free, liquid investments and securities as replacement securities authorised for inclusion in the assets of Société de Crédit Foncier ; 2 For financing these categories of loans, investments and securities: > To issue obligations foncières benefiting from a privilege granted by the legislation governing Société de Crédit Foncier and, in particular, Article L of the Monetary and Financial Code; > To procure any other type of financing, stipulating that such financing will benefit from the privilege granted by the law; > To procure any other financing, of which through issuance of loans, which does not benefit from the privilege granted by the law; 3 To carry out all financial and banking transactions necessary in the context of its purpose and, in particular: > Securitise, in any manner compliant with current legislation, all or part of the loans that it holds, whatever the nature of such loans; > Use forward financial instruments, in order to hedge loan management operations, obligations foncières, other senior instruments, and non privileged resources; 4 To contract with any credit institution all agreements necessary: > To manage and recover loans; > To manage bonds and other financing; > More generally, to provide all services necessary to manage the assets, liabilities and the financial balances of the Company; > As well as all agreements concerning the distribution and refinancing of loans; 5 To acquire and own all property and equipment necessary to achieve its purpose or arising from the recovery of its loans; to contract with any third party any agreement in respect of the acquisition, ownership, management, maintenance and sale of such assets; 6 To contract with any insurance Company any agreement which serves the Company purpose, notably to cover risks related to borrowers, risks in respect of both assets securing the loans and assets owned by the Company, and the liability risks of the Company or its directors and officers; 7 To replace CRÉDIT FONCIER DE FRANCE in all loan and credit transactions, whether involving bonds or not, which this Company had contracted in its capacity as a Société de Crédit Foncier prior to this replacement; this replacement: > Is the result of the provisions of the law of June 25, 1999 concerning savings and financial security and, in particular, Article 110 of said law, as well as any agreement signed with CRÉDIT FONCIER DE FRANCE for the implementation of these provisions; and > Also results in the transfer to the Company of the forward financial instruments described by these legislative provisions, as well as all securities, guarantees and similar commitments; 8 In the context of its proprietary activity, or on behalf of other companies, to make available to customers and manage payment terms, in particular: > For the payment or the receipt of all sums arising from the loan activities; > For the holding of all financial accounts with other banks or public entities; > For the management of technical accounts in respect of expenses and receipts; 9 To participate in any system for interbank settlement, settlement-delivery of securities, as well as in any transactions within the scope of the monetary policy of the European Central Bank, which contribute to the development of the Company s activities; 10 More generally, to carry out all operations related to its activity or contributing to the achievement of its corporate purpose as long as such transactions comply with the purpose of Sociétés de Crédit Foncier as defined in the legislation and regulations that regulate their activity. g. Trade Register Number Compagnie de Financement Foncier is registered in the Paris Trade Register under number B h. Location where legal documents relating to the Company may be consulted Legal documents concerning Compagnie de Financement Foncier may be consulted at 4, quai de Bercy, Charenton Cedex. i. Financial year The financial year begins on January 1 and closes on December 31. j. Provisions of the bylaws governing appropriation of earnings If the financial statements for a given financial year, approved by the Shareholders Meeting, show distributable earnings as defined by law, the meeting shall decide either to attribute it to one or more reserve accounts the allocation and use of which it determines, to retain the earnings, or to distribute them. After noting the existence of the reserves at its disposal, the Meeting may decide to distribute amounts from such reserves. In such a case, the decision of the Meeting indicates expressly reserves from which the amounts to be distributed are to be drawn. However, any dividends are drawn in priority from the distributable earnings for the year. The Meeting also has the right to grant to each shareholder, for all or part of the dividend or interim dividend to be distributed, an option to receive payment either in the form of cash or in shares. k. Shareholders Meetings Shareholders Meetings are called and conduct their proceedings in accordance with the conditions set out in the applicable legislation. An Ordinary Meeting must be held each financial year within five months of the end of the preceding financial year. Meetings are held at the registered offices or at another location specified in the notice of a Meeting. All shareholders can either participate in person, or through an agent, in Meetings, with proof of their identity and ownership of their shares in the form a registration in the name of the shareholder in the Company s books five days before the Meeting. Shareholders may also vote by mail in accordance with the conditions defined by law. Meetings are chaired by the Chairman of the Board of Directors or, in his absence, by a Director specially designated to do so by the Board. If no person is so designated, the Meeting designates its own Chairman. A record of attendance at Shareholders Meetings is kept in accordance with the conditions set by law. Minutes of Meetings are prepared, and copies of such minutes are certified and issued as required by law.

75 LEGAL INFORMATION/PAGE 146 FINANCIAL REPORT 2004 /PAGE GENERAL INFORMATION CONCERNING THE CAPITAL STOCK a. Capital stock At December 31, 2004, the Company s subscribed capital amounted to 100,000,000 euros. It is divided into 6,250,000 fully paid up shares with a par value of 16 euros each. b. Share capital authorised but not subscribed No authorisation to increase the Company s capital has remained unused. c. Ownership of capital and voting rights Principal shareholders at December 31, 2004 SHAREHOLDERS NUMBER OF SHARES HELD AS A PERCENTAGE Crédit Foncier de France 6,249, Directors and other individuals 6 - TOTAL 6,250, d. Changes in shareholders over the last five years At December 31, 1998, Compagnie de Financement Foncier s share capital amounted to 250,000 French francs. The Combined Ordinary and Extraordinary Meeting of June 25, 1999 decided to increase the capital by 14,750,000 francs, with the entire increase reserved for Crédit Foncier de France. Following this increase, the capital was raised to FRF 15 million, consisting of 150,000 shares with a par value of FRF One Hundred (100) each, fully paid up and owned as follows: SHAREHOLDERS NUMBER OF SHARES HELD AS A PERCENTAGE Crédit Foncier de France 147, Directors Foncier Participations 2, TOTAL 150, On October 13, 1999, Crédit Foncier de France purchased from Foncier Participations 2,496 shares of Compagnie de Financement Foncier, and thus, on that date, held 149,994 shares of the Company, representing 99.99% of its capital stock. The Extraordinary Meeting of Compagnie de Financement Foncier, held on October 21, 1999, decided, at the time of the transfer to Compagnie de Financement Foncier by Crédit Foncier de France of the assets and liabilities mentioned in Article 110 of law of June 25, 1999 (see paragraph below), to increase the capital by FRF 600,000,000. The contribution premium was FRF 783,000,000. The capital of Compagnie de Financement Foncier was thus increased to FRF 615 million. The Board of Directors, meeting on September 25, 2000, decided to use the authorisations granted to it by the Combined Ordinary and Extraordinary Meeting of May 31, 2000 to: > Convert the share capital into euros and to increase the par value of each share to 16 euros, by capitalising the sum of 30,461,688 euros taken from the profits of the financial year ended December 31, 1999 which had been retained on the last balance sheet. As a result of these operations, the Company s capital reached 98,400,000 euros, > Increase the capital stock by 1,600,000 euros, taken from the profits of the financial year ended December 31, 1999 which had been previously retained on the last approved balance sheet, to bring it to 100 million euros. The 100,000 new shares issued in the context of this capital increase were allotted as bonus shares to shareholders in the proportion of two new shares for every 123 existing shares. e. Individuals or companies that exercise control over the Company Crédit Foncier de France 19, rue des Capucines Paris Trade Register f. Information on the Crédit Foncier de France Group, to which Compagnie de Financement Foncier belongs The principal business of Crédit Foncier de France is to grant mortgage loans, grant loans to local authorities, grant financing for aircraft and ships and to issue bonds to finance these loans. From the time it was founded, Crédit Foncier de France established itself as the leading lender to local authorities, a position that it retained until the Second World War. In the 1950s, Crédit Foncier de France was entrusted with a number of public interest assignments, the most important of which was the investment, financing and management of loans subsidised by the French state (PAP), of which it was the principal distributor. The real estate crisis at the beginning of the 1990s, together with the elimination of PAP loans by the government, contributed to a deterioration in the financial position of Crédit Foncier de France Group. During this period, a restructuring plan was implemented, and an attempt was made to find a buyer for the Group. As this process did not succeed, the Caisse des Dépôts et Consignations, acting at the request and on behalf of the French state, initiated on October 4, 1996 a public tender offer for the shares of Crédit Foncier de France and thus acquired 90.6% of the capital of Crédit Foncier de France. On July 9, 1999, the Caisse Centrale des Caisses d Épargne et de Prévoyance was designated as the purchaser of the 90.6% of the capital and voting rights of Crédit Foncier de France that were held by Caisse des Dépôts et Consignations. The Government of the French Republic authorised, through Decree of August 2, 1999, the transfer of Crédit Foncier de France to the private sector. The French Credit Institutions Committee (CECEI) authorised the purchase of Crédit Foncier de France by the Caisse Centrale des Caisses d Épargne et de Prévoyance at its meeting of July 7, The entry of Crédit Foncier de France into the Caisse d Épargne Group, which had 56.9 billion francs (8.5 billion euros) in shareholders equity, and the authorisation to operate as a Société de Crédit Foncier granted by the French Credit Institutions Committee to Compagnie de Financement Foncier (the entity to which the obligations foncières and similar debt issued by Crédit Foncier de France on the French and international markets was transferred by legislation) were events which were favorable to the future development of Compagnie de Financement Foncier. On September 29, 1999, in application of the first section of law of June 25, 1999 governing savings and financial security, the Centre National des Caisses d Épargne et de Prévoyance and the Caisse Centrale des Caisses d Épargne et de Prévoyance merged to create Caisse Nationale des Caisses d Épargne in which Caisse des Dépôts et Consignations holds 35% of the capital

76 LEGAL INFORMATION/PAGE 148 FINANCIAL REPORT 2004 /PAGE 149 On October 21, 1999, Crédit Foncier de France contributed to Compagnie de Financement Foncier all of its obligations foncières and the assets on which they were secured (Article 110 of law of June 25, 1999). As of this date, Crédit Foncier de France lost its status as a Société de Crédit Foncier. In December 2001, the Caisse Nationale des Caisses d Épargne et de Prévoyance sold 40% of the capital and voting rights of Crédit Foncier de France to the financial Company EULIA, which is itself held by Centre National des Caisses d Épargne et de Prévoyance (49.9%) and Caisse des Dépôts et Consignations (50.1%). In the context of selling a percentage of the CNCE s stake to the financial Company Eulia, the CNCE presented a simplified tender offer at the price of 15 euros per share between November 20 and December 31, > 2003 and early 2004 were marked by the Entenial acquisition process. In early 2004, Crédit Foncier de France acquired 72.05% of the capital and voting rights from AGF Bank for a total of million euros. A price guarantee was offered for the balance of the Entenial shares. This price guarantee on the balance of Entenial s shares (27.95%) was provided at a unit price of euros. At its conclusion on March 12, 2004, Crédit Foncier held 98.66% of Entenial s capital and voting rights. In addition to the merger with Entenial, Crédit Foncier de France also acquired 9.50% of the share capital of Crédit Foncier Communal d Alsace Lorraine (CFCAL) at the beginning of Crédit Foncier Communal d Alsace Lorraine (with corporate offices in Strasbourg) is a French société anonyme certified as a bank with shares traded on the Euronext Paris Premier Marché. Furthermore, Crédit Foncier de France was able to add effective management structures in the areas of real estate leasing and savings as a result of its acquisition of A3C from Eulia at the end of In 2004, the sale of AGF s 72% holding in Entenial was finalised and the assets were transferred to Crédit Foncier from February 24 to March 8, 2004, as well as from June 7 to June 21, 2004: Crédit Foncier initiated a public offer to acquire Entenial shares followed by a mandatory purchase offer for these shares at a price of 51 euros. After this public offer to acquire shares, Crédit Foncier held 99.40% of Entenial s capital and voting rights. Subsequently, on June 22, 2004, Entenial s shares were delisted from the Premier Marché by Euronext. Shares not included in the public offer to acquire shares of minority shareholders were transferred to Crédit Foncier. In January, Crédit Foncier Group also purchased close to 4.33% of the capital and 4.63% of the voting rights of CFCAL, a bank located in Strasbourg which specialises in all purpose mortgage loans (excluding acquisitions) from Wurttembergische Hypothekenbank, and then purchased 5.17% of CFCAL s capital (treasury shares) in February. On August 19, 2004, Crédit Foncier Group purchased two blocks of shares from CIAL and SADE, after all suspensive conditions for this transaction were lifted, amounting to 24.25% of CFCAL s capital. To date, the Group holds 33.76% of the capital and 34.09% of the voting shares of CFCAL Finally from October 5 to November 8, the Group made a mandatory public offer to purchase CFCAL shares at a price of 390 euros, which would enable CFF to obtain close to 66% of this bank s capital at a price of 390 euros per share. In June, Crédit Foncier Group purchased 60% of Cicobail, a real estate leasing financial corporation, as part of efforts to build the professional real estate arm of Crédit Foncier. After obtaining the prescribed agreements and approvals from the respective Shareholders Meetings of Crédit Foncier and Entenial, Crédit Foncier will absorb Entenial with retroactive application to January 1, With respect to the Group s share ownership, on June 30, 2004, the financial Company Eulia was absorbed by CNCE, which held 52.14% of the capital and voting rights of Crédit Foncier. As a result, CNCE held 95.42% of the Company s shares. In July 2004, CNCE opted to receive its 2003 dividend payment from Crédit Foncier de France in the form of shares, thereby increasing its holdings to 95.44% of the capital and voting rights of Crédit Foncier de France. Subsequently, from October 25 to November 5, 2004, CNCE initiated a public offer to acquire shares of Crédit Foncier de France followed by a mandatory purchase offer for these shares at a unit price of 40 euros. On completion of this public offer to acquire shares, CNCE had obtained 100% of the capital and voting rights of Crédit Foncier de France. On November 8, this public offer was followed by the delisting of Crédit Foncier shares from the premier marché by Euronext. Shares not included in the public offer to acquire shares of minority shareholders were transferred to CNCE. 4. RESOLUTIONS SUBMITTED TO THE SHAREHOLDERS MEETING OF COMPAGNIE DE FINANCEMENT FONCIER Ordinary Shareholders Meeting of May 25, 2005 PROPOSED RESOLUTIONS FIRST RESOLUTION The Shareholders Meeting, having heard the reports of both the Board of Directors and the Statutory Auditors on the year ended December 31, 2004, hereby approves the financial statements as presented to the meeting. SECOND RESOLUTION The Shareholders Meeting, having noted the existence of distributable profits of 72,867,183 euros corresponding to the net income for the year, hereby approves the following appropriation of all such distributable profits: Provision for legal reserve: 1,000,000 euros Dividend: 35,687,500 euros Balance brought forward: 36,179,683 euros As a result, the dividend for each of the 6,250,000 shares composing the capital is set at 5.71 euros. Pursuant to Article 243 of the French tax code, it is noted that the entire amount of the proposed dividend is eligible for the 50% abatement provided to individuals who are residents of France for tax purposes, under the provisions of Article of the French tax code. The dividend payment date has been scheduled for June 28, Pursuant to Article 24 of the bylaws, the shareholders meeting hereby approves to give each shareholder the option of receiving payment in the form of shares. The new shares will have the same characteristics and rights as the shares which entitled shareholders to the dividend payment. The dividend-bearing date was determined to be January 1, The issue price of the new shares will be equal to the amount of shareholders equity before dividends, as presented in the financial statements as at December 31, 2004, and approved by the Shareholders Meeting in the above first resolution, divided by the number of existing shares. It is established by default to be 57.10/share. The number of shares that can be awarded to shareholders who opt to receive their dividend payment in the form of shares is therefore calculated as follows: 1 new share for 10 existing shares, on the understanding that shareholders cannot receive the dividends to which they are entitled in a combination of shares and cash.

77 LEGAL INFORMATION/PAGE 150 FINANCIAL REPORT 2004 /PAGE 151 If the above dividend calculation does not result in the allocation of a whole number of shares, shareholders who opt to receive their dividend payment in shares may either subscribe for the whole number of shares immediately below the amount calculated, and will then receive the balance due in cash, or for the nearest whole number above the amount calculated and pay the difference in cash. The option period runs from June 1, 2005 to June 15, Option declarations will be received by the institutions competent to make dividend payments. Shareholders who have not exercised their option by June 15, 2005 at the latest will receive dividends in cash as of the payment date of June 28, The Shareholders Meeting gives all powers to the Board of Directors to account for the number of shares issued and the resulting increase in capital and consequently modify the text of Article 6 of the bylaws accordingly. Pursuant to Article 47 of the law of July 12, 1965 and Article 243 of the French tax code, it is noted that the dividend and total return per share for the last three financial years have been as follows: FINANCIAL YEAR NUMBER OF SHARES RETURN PER SHARE DIVIDEND DISTRIBUTED TAX ALREADY PAID TO THE TREASURY (TAX CREDIT) ,250,000 _ ,250, ,250, THIRD RESOLUTION The Shareholders Meeting, after a reading of the special reports of the Auditors concerning the operations described in Article L of the Commercial Code duly notes the terms of said report. FOURTH RESOLUTION The Shareholders Meeting, after noting that the term of the Director of CRÉDIT FONCIER DE FRANCE has expired, hereby approves the renewal of said term for a 6-year period which ends during the Shareholders Meeting that will be called to approve the financial statements for the financial year FIFTH RESOLUTION The Shareholders Meeting, after noting that the term of Mr. François DROUIN, Director, has expired, hereby approves the renewal of said term for a 6-year period which ends during the Shareholders Meeting that will be called to approve the financial statements for the financial year SIXTH RESOLUTION The Shareholders Meeting hereby ratifies the appointment of Mr. François CHAUVEAU as a Director, made on a provisional basis by the Board of Directors in its meeting of December 16, 2004, to replace Mr. Pierre SERVANT who resigned, for the remainder of Mr. SERVANT s term, which is until the Shareholders Meeting that will be called to approve the financial statements for the financial year SEVENTH RESOLUTION Further to the preceding resolution, the Shareholders Meeting hereby renews the term of Mr. François CHAUVEAU, Director, for a 6-year period which ends during the Shareholders Meeting that will be called to approve the financial statements for the financial year EIGHTH RESOLUTION The Shareholders Meeting notes that the term of Mazars & Guérard, the designated Statutory Auditor has expired. NINTH RESOLUTION Further to the preceding resolution, the Shareholders Meeting notes that the term of Mr. Jean-Louis LEBRUN, Alternate Auditor, has expired. TENTH RESOLUTION The Shareholders Meeting appoints KPMG Audit, a division of KPMG SA, as Statutory Auditors for a 6-year term, which ends during the Shareholders Meeting that will be called to approve the financial statements for the financial year ELEVENTH RESOLUTION The Shareholders Meeting appoints Ms. Marie-Christine FERRON-JOLYS as Alternate Auditor for a 6-year term, which ends during the Shareholders Meeting that will be called to approve the financial statements for the financial year TWELFTH RESOLUTION The Shareholders Meeting notes the resignation of Mr. Philippe BOMPARD as an Advisor and has decided not to replace him. THIRTEENTH RESOLUTION The Shareholders Meeting notes the resignation of Mr. Nicolas MERINDOL as an Advisor. FOURTEENTH RESOLUTION Further to the preceding resolution, the Shareholders Meeting appoints Mr. Guy LAFITE as an Advisor, to replace Mr. Nicolas MERINDOL who is resigning, for the remainder of Mr. MERINDOL s term, which is until the Shareholders Meeting that will be called to approve the financial statements for the 2005 financial year. FIFTEENTH RESOLUTION The Shareholders Meeting gives all powers to a bearer of a copy or an excerpt of the minutes of this meeting to accomplish all legal formalities in respect of registration and publication.

78 LEGAL INFORMATION/PAGE 152 FINANCIAL REPORT 2004 /PAGE SPECIAL REPORT OF THE AUDITORS ON THE RELATED-PARTY AGREEMENTS OF COMPAGNIE DE FINANCEMENT FONCIER Year ended December 31, 2004 TO THE SHAREHOLDERS OF Compagnie de Financement Foncier 4, quai de Bercy Charenton Cedex Ladies and Gentlemen, In our capacity as the auditors of the Company, we are submitting to you our report on the regulated agreements. Pursuant to Article L (or L ) of the Commercial Code, we were advised of all agreements which received the prior approval of the Board of Directors. It is not our responsibility to search for the possible existence of other such agreements, but rather to inform you, on the basis of the information provided to us, of the essential terms and conditions of the agreements, without commenting on the usefulness or merits of those agreements. Pursuant to Article 92 of the Decree of March 23, 1967, it is your responsibility to assess the Company s interest in concluding these agreements, for the purpose of approving them. We have performed our work in accordance with generally accepted accounting practices in France. Those standards require that we verify the consistency of the information provided to us with the documents on which said information is based. 1. Agreement authorised during the year During its meeting of 09/28/2004, the Board of Directors of Compagnie de Financement Foncier authorised the signing of an amendment to the agreement for the transfer by Crédit Foncier de France of eligible loans to Compagnie de Financement Foncier, dated 10/21/1999. Since this amendment was not regulated, a complete examination of the above agreement has been initiated. Directors concerned: F. Drouin, A. Prévot. 2. Agreements approved in prior years which continued during the year In addition, pursuant to the Decree of March 23, 1967, we have been informed that the execution of the following agreements, approved in prior years, continued during the past year. 2.1 Equity and unsecured loans made by Crédit Foncier de France In agreements dated October 21, 1999, October 23, 1999 and February 1, 2002, Crédit Foncier de France granted the Company two loans in the form of one subordinated equity loan and one unsecured credit line, intended to strengthen the shareholders equity of Compagnie de Financement Foncier. These loans consist of: > A credit line maturing on October 21, 2004, for a maximum authorised amount of 503 million euros. This credit line was not used during the financial year ended December 31, > A subordinated equity loan agreement in the amount of 1,350 million euros, maturing on October 21, Interest on this equity loan remains fixed at the annual average percentage of +2.50% payable annually, provided that the income of the Company for the financial year in which the interest is calculated reaches at least 10 million euros after payment of this interest. This agreement resulted in the recognition by the Company of an interest expense of 62.1 million euros for the year January 1 to December 31, Guarantee agreement with Crédit Foncier de France Within the scope of the agreement to transfer the assets and liabilities of Crédit Foncier de France to the Company, which was signed on September 15, 1999, Crédit Foncier: > Agreed, in an agreement dated October 21, 1999, to guarantee the Company from any impact on its earnings of changes in market rates on fixed-rate financing deadlocks, if any, in the competitive sector; > Guaranteed to the Company, in an agreement dated October 21, 1999, a minimum return on the loans transferred and agrees, in particular, to cover any insufficiency of income that would be related to an unfavorable change in the assumptions for prepayments and renegotiation of these loans; > Agreed to indemnify the Company in the event of a change in the conditions for recognising all the costs of the loans assigned to financing the subsidised sector. This set of guarantees was an element included in the valuation of the contributions made to the Company. They generated no financial flows during the financial year ended December 31, Management agreements with Crédit Foncier de France Pursuant to the law of June 25, 1999 governing savings and financial security, since then codified as Articles L and following of the Monetary and Financial Code, the Company has entrusted to Crédit Foncier de France the management and collection of loans and other assets, obligations foncières and other resources, both secured and unsecured, which it holds and, more generally, all the services necessary for its operational, financial, administrative and accounting management, as well as required audit and control services. For this purpose, a series of agreements dated October 21, 1999 were signed by the Company and Crédit Foncier de France, and amended by amendments 1, 2, A and B: > A master agreement, defining the general principles, > An agreement for the transfer by Crédit Foncier de France of eligible loans to Compagnie de Financement Foncier, > An agreement to manage and collect the loans, > A financial services agreement, > An administrative and accounting management agreement, > An agreement to provide audit and control services, > An agreement governing the remuneration of services. As remuneration for services provided under these agreements, Crédit Foncier de France invoiced the Company a total of 96.7 million euros for the financial year ended December 31, Pursuant to the agreement to manage and collect loans, Crédit Foncier de France paid the Company cash advances totaling 127 million euros at the end of 2004, corresponding to the unpaid amounts, as of the date of the transfer to the Company, on the loans transferred by Crédit Foncier de France. As interest on these cash advances, Crédit Foncier de France retains the late interest invoiced to clients, totaling 11.3 million euros during 2004.

79 LEGAL INFORMATION/PAGE 154 FINANCIAL REPORT 2004 /PAGE 155 Moreover, the guarantee mechanism set up between the Company and Crédit Foncier de France allows for losses from these loans to be applied first to cash advances. As a result, losses assumed by Crédit Foncier amounted to 0.5 million euros in Payer-Agent agreements with Crédit Foncier de France The Company signed payer-agent agreements with Crédit Foncier de France, under the terms of which Crédit Foncier de France agreed to provide the financial clearing for the borrowings corresponding to the first and second issues of obligations foncières. The corresponding agreements were signed on October 13, November 12, and November 15, The remuneration due to Crédit Foncier for this financial service is included in the remuneration for financial services defined in Article 6 of the agreement governing remuneration for services entered into by the Company and Crédit Foncier de France on October 21, Tax consolidation agreement On December 29, 1998, the Company signed a tax consolidation agreement with Crédit Foncier de France, which was completed by an amendment dated December 28, In its meeting on May 17, 2002, the Board of Directors authorised the renewal of the provisions of this agreement and its amendment, which expired on December 31, 2001, for a further period of five years. This authorisation resulted in the signature of a new tax consolidation agreement dated June 25, This agreement is similar to the usual agreements in this matter in its general form, but stipulates the principle of no indemnification by Crédit Foncier de France, except for specific reasons to be assessed by mutual agreement, for subsidiaries that leave the tax group. The specific provision summarised above did not need to be applied during the 2004 financial year. The Statutory Auditors Mazars & Guérard Michel Barbet-Massin La Défense and Paris, April 6, 2005 PricewaterhouseCoopers Audit Anik Chaumartin 6. BYLAWS TITLE I FORM PURPOSE CORPORATE NAME REGISTERED OFFICES TERM OF THE COMPANY Article 1 - FORM The Company is a French société anonyme (limited liability Company). It is governed by the terms of current legislation and regulations in respect of Société Anonyme, credit institutions, in particular Société de Crédit Foncier, and by these bylaws. Article 2 - PURPOSE The purpose of the Company, in the context of the laws and regulations applicable to Société de Crédit Foncier, in particular sections L and following of the Monetary and Financial Code and without any restriction as to the countries in which it can operate other than those set out in such laws and regulations is: 1 In respect of loan and similar transactions: > To grant or acquire secured loans, whether these are loans benefiting from a senior mortgage, a property lien, or any other form of property-based security that is at least equivalent, or loans that carry a guarantee issued by a lending institution or an insurance Company; > To grant or acquire loans from public entities, and loans fully guaranteed by public entities, and to subscribe for or acquire bonds and other debt securities issued or guaranteed by public entities; > To acquire, by subscription at the time of issue, either on the markets on which they are traded, or over the counter or, more generally, in any other manner which in compliance with current legislation, units of FCCs and units or securities issued by similar entities subject to the law of a foreign state, as long as these units or securities are authorised for inclusion in the assets of Société de Crédit Foncier ; > To acquire and hold certain and liquid investments and securities as replacement securities authorised for inclusion in the assets of Société de Crédit Foncier ; 2 For financing these categories of loans, investments and securities: > To issue obligations foncières benefiting from a preferred right of repayment granted by the legislation governing Société de Crédit Foncier and, in particular, Article L of the French Monetary and Financial Code; > To procure any other type of financing, stipulating that such financing will benefit from the preferred right of payment granted by the law to obligations foncières ; > To procure any other financing, of which through the issuance of loans, which does not benefit from the preferred right of payment granted by the law to obligations foncières ; 3 To carry out all financial and banking transactions necessary in the context of its purpose and, in particular: > Securitise, in any manner compliant with current legislation, all or part of the loans that it holds, whatever the nature of such loans; > Use forward financial instruments, in order to hedge operations to manage loans, obligations foncières, other senior instruments, and other financing without the preferred right of payment granted by law to obligations foncières ; 4 To contract with any credit institution all agreements necessary: > To manage and recover loans; > To manage bonds and other financing; > More generally, to provide all services necessary to manage the assets, liabilities and the financial balances of the Company; > As well as all agreements concerning the distribution and refinancing of loans.

80 LEGAL INFORMATION/PAGE 156 FINANCIAL REPORT 2004 /PAGE To acquire and own all property and equipment necessary to achieve its purpose or arising from the recovery of its loans; to contract with any third party any agreement in respect of the acquisition, ownership, management, maintenance and sale of such assets; 6 To contract with any insurance Company any agreement, which serves the Company purpose, notably to cover risks related to borrowers, risks in respect of both assets securing the loans and assets owned by the Company, and the liability risks of the Company or its Directors and Officers; 7 To replace CRÉDIT FONCIER DE FRANCE in all loan and credit transactions, whether involving bonds or not, which this Company had contracted in its capacity as a Société de Crédit Foncier prior to this replacement; this replacement: > Is the result of the provisions of the law of June 25, 1999 concerning savings and financial security and, in particular, Article 110 of said law, as well as any agreement signed with CRÉDIT FONCIER DE FRANCE for the implementation of these provisions; and > Also results in the transfer to the Company of the forward financial instruments described by these legislative provisions, as well as all securities, guarantees and similar commitments; 8 In the context of its proprietary activity, or on behalf of other companies, to make available to customers and manage payment terms, in particular: > For the payment of funds or the receipt of all sums arising from the loan activities; > For the holding of all accounts of financial relations with other banks or public entities; > For the management of technical accounts in respect of expenses and receipts; 9 To participate in any system for interbank settlement, settlement-delivery of securities, as well as in any transactions within the framework of the monetary policy of the European Central Bank, which contribute to the development of the Company s activities; 10 More generally, to carry out all operations related to its activity or contributing to the achievement of its corporate purpose as long as such transactions comply with the purpose of Société de Crédit Foncier as defined in the legislation and regulations that regulate their activity. Article 3 - CORPORATE NAME The Company s name is: COMPAGNIE DE FINANCEMENT FONCIER Article 4 - REGISTERED OFFICES The registered offices are located at 19, rue des Capucines, in PARIS (75001). If the location of the head-office is moved by the Board of Directors in accordance with the conditions set out in the applicable legislation, the new location shall be automatically substituted for the previous one in this Article, provided the move is ratified by an Ordinary Shareholders Meeting. Article 5 TERM The duration of the Company is ninety-nine years from its registration in the Trade Register, unless such a period is extended, or the early liquidation of the Company is decided, in accordance with the legislation in force or these bylaws. TITLE II CAPITAL STOCK - SHARES Article 6 - CAPITAL STOCK The capital stock is set at 100,000,000 euros (One Hundred Million euros). It is divided into 6,250,000 (Six Million Two Hundred and Fifty Thousand) shares with a par value of 16 (Sixteen) euros each, all of which belong to the same category and are fully paid up in cash. Article 7 - FORM OF THE SHARES The shares are in registered form. They are registered in accordance with the terms and conditions set by law. Article 8 - RIGHT AND OBLIGATIONS ATTACHED TO SHARES Each share confers a right to ownership of the Company s assets and a share in its profits proportional to the fraction of the Company s capital that it represents. All shares which comprise or will comprise the Company s capital, as long as they are of the same type and the same par value, are strictly equivalent to each other as of the time they have the same dividend-bearing date; both during the Company s existence and on liquidation, they provide payment of the same net amount on all allocations or redemptions, so that, if applicable, all shares are aggregated without distinction with respect to all tax savings or charges resulting from such allocations or redemptions. The rights and duties follow ownership of the share. Ownership of a share legally implies acceptance of the bylaws and the decisions of Shareholders Meetings. The beneficiaries, creditors, successors or other representatives of a shareholder cannot cause legal seals to be placed on the assets and securities of the Company or request the distribution or division of such assets and securities or interfere in any manner in the Company s administration. They must, for the exercise of their rights, refer to the financial statements and to the decisions of Shareholders Meetings. Each time it is necessary to own several shares in order to exercise a given right, in cases of exchange, Grouping or allotment of shares, or as a result of an increase or decrease in capital stocks, splits or reverse splits of shares, or any other operation on the Company s capital, the owners of single shares, or of a number of shares lower than required, may exercise their rights only if they undertake to combine and, possibly sell or purchase, the necessary number of shares. Article 9 TRANSFER OF SHARES Shares are freely negotiable. Shares can be transferred, with respect to third parties and the Company by an order to transfer them from one account to another. Article 10 - INDIVISIBILITY OF SHARES Shares are indivisible vis-à-vis the Company, which only recognises one owner for each share. Joint owners of a share are required to be represented with the Company by one of the joint owners or by a single agent. The beneficial owner shall represent the bare owner in Ordinary Meetings; however, the bare owner is the only one entitled to vote in Extraordinary Meetings.

81 LEGAL INFORMATION/PAGE 158 FINANCIAL REPORT 2004 /PAGE 159 TITLE III ADMINISTRATION OF THE COMPANY Article 11 - BOARD OF DIRECTORS The Company is administered by a Board of Directors comprised of at least three and at most eighteen members, selected from among the shareholders and appointed by the Ordinary Meeting. Each Director must own at least one share during his or her term of office. Article 12 - TERM OF OFFICE OF DIRECTORS The term of office of Directors is six years. Each Director reaching the end of his term of office may be re-elected; however, the number of Directors over 70 years of age may not be greater than three. When more than three of the Directors are past the age limit, the terms of office of the eldest Directors expire at the end of the Annual Meeting following the date on which this occurs, whatever the initial term of office of these Directors. Article 13 - MEETINGS AND PROCEEDINGS OF THE BOARD MINUTES The Board of Directors is called by its Chairman, as often as the interest of the Company requires, either at the registered offices, or at any other location indicated on the notice. Meetings may be called by all means, even verbally. If no meeting has been held for more than two months, at least one third of the members of the Board can request that the Chairman call a Board meeting with a specific agenda. The Chairman must comply with requests that have been made to him in accordance with the two previous paragraphs. Resolutions are adopted with the quorum and majority required by law. In the event of a tie vote, the Chairman shall cast the deciding vote. The internal regulations may stipulate that, for the purposes of calculating quorum and majority, Directors participating in the meeting through videoconferencing are considered present. This rule is not applicable for the adoption of resolutions that require, in accordance with current legislation, the effective presence of Directors. Sufficient proof of the number of Directors in office and of their presence at a meeting of the Board is provided by the production of a copy or an excerpt of the minutes of the Board meeting. The minutes of the meeting are prepared, and the copies or excerpts are delivered and certified as required by law. Article 14 - POWERS OF THE BOARD The Board of Directors determines the strategic direction of the Company s activities and supervises the implementation of such strategies. Subject to the powers expressly attributed to Shareholders Meetings, and within the limits of the Company s purpose, the Board deals with any issue affecting the Company s operations and settles, through its decisions, all matters concerning the Company. The Board carries out such controls and verifications that it considers appropriate. Each Director receives all the information necessary to perform his duties and can request all documents that he considers useful to him. In its relations with third parties, the Company is obligated even by acts of the Board of Directors which are not in accordance with the Company s purpose, unless it can prove that the third party knew that the act in question was not in accordance with the Company s purpose or that the third party could not have been unaware of this fact given the circumstances. The sole fact that the Company s bylaws are published is not sufficient to constitute such proof. Article 15 - REMUNERATION OF THE BOARD OF DIRECTORS An Ordinary Meeting can allocate to the Board of Directors a fixed annual remuneration in the form of Directors fees, the amount of which it shall determine. This remuneration remains applicable until a General Meeting decides otherwise. The Board of Directors shall allocate this remuneration in the proportions that it considers appropriate. Article 16 - CHAIRMAN OF THE BOARD OF DIRECTORS The Board of Directors elects, from among its non-corporate members, a Chairman and determines his remuneration. It determines his term of office as Chairman, may be no longer than his term as Director. The individual can be re-elected. The term of the Chairman must end no later than the end of the Ordinary Meeting that follows the date on which the Chairman reaches the age of sixty-five. The Chairman represents the Board of Directors. He organises and directs the work of the Board, and reports to the meeting of shareholders on such work. He supervises the correct operation of the decision-making bodies of the Company and ensures, in particular, that the Directors are in a position to be able to carry out their responsibilities. The Board may confer on one or more of its members or on third parties, whether or not they are shareholders, special mandates for one or more specific purposes. It may also appoint one or more committees, the structure and roles of which it shall determine. These committees, which can include both Directors and third parties chosen for their expertise, study the questions that the Board or the Chairman submits for their review. In these various cases, the Board may allocate special compensation to the Directors appointed. Article 17 MANAGEMENT Management of the Company is assumed, under his responsibility, either by the Chairman of the Board, or by another individual appointed by the Board of Directors with the title of Chief Executive Officer. The selection of the individual for this position, which may be changed at any time, is made by the Board of Directors voting with a majority of three quarters of the members present or represented. The Board of Directors reports, in its annual report, on the choice that it has made and explains the reasons for this choice. The Board of Directors determines the period for which the Chief Executive Officer is appointed. The Chief Executive Officer has the broadest powers to act in all circumstances in the name of the Company, within the limits of its purpose, and subject to the specific powers expressly attributed to meetings of shareholders by law and to the specific powers of the Board of Directors. The Chief Executive Officer represents the Company in its relationships with third parties. The Company is obligated even by acts of the Chief Executive Officer which are not in accordance with the Company s purpose, unless it can prove that the third party knew that the act in question was not in accordance with the Company s purpose, or that the third party could not have been unaware of this fact in light of the circumstances. The sole fact that the Company s bylaws are published is not sufficient to constitute such proof.

82 LEGAL INFORMATION/PAGE 160 FINANCIAL REPORT 2004 /PAGE 161 On the recommendation of the Chief Executive Officer, the Board of Directors can appoint one or more individuals, whether directors or not, to assist the Chief Executive Officer, with the title of Chief Operating Officer. The number of Chief Operating Officers may not be greater than five. The scope and duration of the powers of the Chief Operating Officers shall be determined by the Board of Directors with the agreement of the Chief Executive Officer. With respect to third parties, Chief Operating Officers have the same powers as the Chief Executive Officer. The Board of Directors determines the compensation of the Chief Executive Officer and the Chief Operating Officers. The Chief Executive Officer and, if they have been appointed, Chief Operating Officers, even if not members of the Board, are invited to the meetings of the Board of Directors. The duties of the Chief Executive Officer and Chief Operating Officer must cease no later than the end of the Ordinary Meeting, which follows the date at which the person reaches the age of sixty-five. The Chief Executive Officer may be removed at any time by the Board of Directors. The same applies, on the recommendation of the Chief Executive Officer, to the Chief Operating Officers. If the removal is decided without a serious reason, it may result in legal damages, unless the individual is also Chairman of the Board of Directors. If the Chief Executive Officer ceases, or cannot carry out his duties, the Chief Operating Officers retain, unless the Board decides otherwise, their positions and the responsibilities assigned to them until such time as a new Chief Executive Officer is appointed. Article 18 ADVISORS An Ordinary Meeting may, on the recommendation, of the Board of Directors, appoint one or more Advisors. The term of office of Advisors is three years. They may be re-appointed. The Advisors attend meetings of the Board of Directors and have an advisory role. The Board of Directors determines their compensation in the context of the allocation of the Directors fees allocated by the Shareholders Meeting. TITLE IV AUDIT OF THE COMPANY Article 19 - STATUTORY AUDITORS The Shareholders Meeting shall designate one or more Statutory Auditors and one or more alternate Auditors, under the conditions stipulated by law. Article 20 - SPECIFIC CONTROLLER Under the conditions stipulated by law and by the regulations applicable to Société de Crédit Foncier, and after obtaining the opinion of the Board of Directors, the Chief Executive Officer shall appoint one Specific Controller and an alternate. The Specific Controller and, if applicable, the alternate shall perform the duties assigned to them by the laws governing Sociétés de Crédit Foncier. TITLE V SHAREHOLDERS MEETINGS Article 21 - SHAREHOLDERS MEETING Shareholders Meeting shall be called and shall deliberate under the conditions stipulated by law. Each year, an Ordinary Shareholders Meeting must be convened within five months following the financial year-end date. Meetings shall be held at the corporate offices or at another location stated in the notice of meeting. Any shareholder may participate personally, or by proxy, in Shareholders Meetings with proof of identity and ownership of shares in the form of a record in his name on the Company s books five days before the date of the Shareholders Meeting. He may also vote by mail under the conditions stipulated by law. Shareholders who participate in the Shareholders Meeting by videoconference or telecommunications that enable them to be identified shall be considered present for calculating the quorum and the majority. Shareholders Meetings shall be chaired by the Chairman of the Board of Directors or, in his absence, by a Director specially authorised for that purpose by the Board. Otherwise, the Shareholders Meeting shall appoint a Chairman. An attendance sheet shall be kept under the conditions stipulated by law. Minutes of General Shareholders Meetings shall be drawn up and copies shall be certified and issued pursuant to law. Article 22 - DELIBERATIONS OF SHAREHOLDERS MEETINGS Ordinary and Extraordinary Shareholders Meetings ruling with the quorum and majority set by law shall exercise the powers that are vested in them by law. TITLE VI ANNUAL FINANCIAL STATEMENTS APPROPRIATION OF EARNINGS Article 23 - FINANCIAL YEAR The financial year shall begin on January 1 and shall end on December 31. The Board of Directors shall be authorised to change the closing date of the financial year if it determines such a change to be in the Company s interest. As an exception, the first financial year ran from the date of registration to December 31, Article 24 - APPROPRIATION OF EARNINGS If the financial statements for the financial year, as approved by the Shareholders Meeting, show a distributable profit as defined by law, the Shareholders Meeting shall decide to allocate it to one or more reserves the allocation or utilisation of which is governed by the Meeting, retain it, or distribute it. After ascertaining the existence of the reserves at its disposal, the Shareholders Meeting may decide to distribute amounts drawn from those reserves. In that event, the resolution shall expressly state the reserves from which the withdrawals are made.

83 LEGAL INFORMATION/PAGE 162 FINANCIAL REPORT 2004 /PAGE 163 However, dividends shall be withdrawn first from the distributable earnings for the financial year. The above provisions shall are understood to be subject to the creation of non-voting preferred shares. For all or part of the dividend distributed or interim dividends, the Shareholders Meeting shall also have the authority to give each shareholder a choice between payment of the dividend or interim dividends in cash or in shares. TITTLE VII DISSOLUTION - LIQUIDATION DISPUTES Article 25 - DISSOLUTION AND LIQUIDATION At the expiration of the Company or in the event of early dissolution, the Shareholders Meeting shall determine the method of liquidation and shall appoint one or more liquidators, whose powers it shall determine and who shall perform their duties pursuant to law. Article 26 DISPUTES All disputes that might arise during the term of the Company or at the time of liquidation, either between the shareholders, the Directors and the Company, or among the shareholders themselves, concerning the Company s business shall be adjudicated as required by law and shall be subject to the jurisdiction of the competent courts. 7. GENERAL INFORMATION CONCERNING THE REFERENCE DOCUMENT 1. PERSON RESPONSIBLE FOR THE REFERENCE DOCUMENT Person who assumes responsibility for the Reference Document. Mr. Thierry DUFOUR, Chief Executive Officer To our knowledge, the information provided in this reference document is true and includes all the information necessary for investors to make a judgment concerning the assets and liabilities, activity, financial condition, results and outlook of Compagnie de Financement Foncier. No information has been omitted that would change the interpretation of the information provided. Signed in Charenton-le-Pont, April 8, PERSON RESPONSIBLE FOR FINANCIAL INFORMATION Mr. Thierry DUFOUR Chief Executive Officer Compagnie de Financement Foncier Address: 4, quai de Bercy Charenton-le-Pont cedex Tel: 33 (0) Fax: 33 (0) PERSONS RESPONSIBLE FOR THE AUDIT OF THE FINANCIAL STATEMENTS Statutory Auditors Mazars & Guérard Represented by Mr. Michel Barbet-Massin Address: 39, rue de Wattignies, Paris Paris Trade Register Start of term: June 25, Current term: six financial years. Expiration of this term: at the end of the Ordinary Meeting called to approve the financial statements for the financial year ending December 31, PricewatherhouseCoopers Audit Represented by Anik Chaumartin Address: 32, rue Guersant, Paris Paris Trade Register Start of term: May 17, 2002 Current terms: six financial years Expiration of term: at the end of the Ordinary Meeting called to approve the financial statements for the financial year ending December 31, Alternate Auditors Mr. Jean-Louis Lebrun Address: 39, rue de Wattignies, Paris Start of term: June 25, Current term: six financial years. Expiration of term: at the end of the Ordinary Meeting called to approve the financial statements for the financial year ending December 31, Mr. Pierre Coll Address: 32, rue Guersant, Paris Start of term: May 17, 2002 Current term: six financial years Expiration of term: at the end of the Ordinary Meeting called to approve the financial statements for the financial year ending December 31, Chief Executive Officer, Compagnie de Financement Foncier Thierry Dufour

84 LEGAL INFORMATION/PAGE 164 FINANCIAL REPORT 2004 /PAGE CERTIFICATION OF THE REFERENCE DOCUMENT OF THE STATUTORY AUDITORS As statutory auditors of Compagnie de Financement Foncier and pursuant to Article of the AMF General Regulation, we have, in accordance with generally accepted accounting standards in France, verified the information on the financial position and the historical financial statements provided in this reference document. This reference document has been prepared under the responsibility of Mr. François Drouin, Chairman of the Board of Directors of Compagnie de Financement Foncier. It is our responsibility to issue an opinion as to the fair presentation of the information on the financial position and the financial statements that it contains. In accordance with generally accepted accounting standards in France, our work consisted of evaluating the fair presentation of the information concerning the financial position and the financial statements of Compagnie de Financement Foncier and verifying the consistency of such information with the financial statements which have been reported. It also included reading the other information contained in the reference document in order to identify any material inconsistencies with the information on the financial position and the financial statements, and to point out any clearly erroneous information we noted on the basis of our general knowledge of the Company acquired in the context of our assignment. The current reference document does not contain any isolated provisional data resulting from a structured calculation process. We have audited the financial statements for the year ended December 31, 2004, approved by the Board of Directors, in accordance with auditing standards applicable in France. We have certified these financial statements without reservation, or comment. Mazars & Guérard, PricewaterhouseCoopers Audit and Cailliau Dedouit & Associés have audited the financial statements for the year ended December 31, 2003, approved by the Board of Directors, in accordance with auditing standards applicable in France. These financial statements have been certified without reservation, with a comment on the change in accounting method, as described in paragraph II-10 of the notes, which states the methods of application, as of January 1, 2003, of regulation No of the Accounting Regulation Committee concerning the accounting treatment of credit risk in companies under the authority of the Financial and Banking Regulation Committee. Mazars & Guérard, PricewaterhouseCoopers Audit and Cailliau Dedouit & Associés have audited the financial statements for the year ended December 31, 2003, approved by the Board of Directors, in accordance with auditing standards applicable in France. These financial statements have been certified without reservation, or comment. On the basis of this work, with the exception of those already indicated above, we have no other comment to make on the fair presentation of the information on the financial position and financial statements presented in this reference document. The Statutory Auditors Mazars & Guérard Michel Barbet-Massin Signed in Paris, April 6, 2005 PricewaterhouseCoopers Audit Anik Chaumartin In accordance with prevailing legal provisions, this reference document includes: > On page 120, the Statutory Auditors Report on the Financial Statements for the year ended December 31, 2004 of which the justification of our assessments in accordance with the requirements of Article L paragraphs 1 and 2 of the Commercial Code, > On page 139, the special report of the auditors provided for in the last paragraph of Article L of the Commercial Code on the report of the Chairman of the Supervisory Board on the internal control procedures in accordance with the requirements of Article L of the Commercial Code. Specific Controller SPECIFIC CONTROLLERS UNTIL JUNE 29, 2004 STATUTORY SPECIFIC CONTROLLER Barbier Frinault et Compagnie ERNST & YOUNG represented by Mr. Franck Sastre Address: 41, rue Ybry Neuilly-sur-Seine Cedex Date of approval from the Banking Commission: August 30, 1999 Start of term: August 30, 1999 Current term: four years (renewed once) Expiration of term: June 29, 2004 SPECIFIC CONTROLLERS FROM JUNE 29, 2004 STATUTORY SPECIFIC CONTROLLER Cailliau Dedouit & Associés represented by Mr. Laurent Brun Address: 19, rue Clément Marot Paris Date of approval from the Banking Commission: June 23, 2004 Start of term: June 29, 2004 Current term: period remaining in predecessor s term Expiration of term: after submission of the report and certified statements for the financial year ended December 31, 2006 ALTERNATE SPECIFIC CONTROLLER Michel Gauthier Address: 41, rue Ybry Neuilly-sur-Seine Cedex Date of approval from the Banking Commission: August 30, 1999 Start of term: August 30, 1999 Current term: four years (renewed once) Expiration of term: June 29, 2004 ALTERNATE SPECIFIC CONTROLLER Didier Cardon Address: 19, rue Clément Marot Paris Date of approval from the Banking Commission: June 23, 2004 Start of term: June 29, 2004 Current term: period remaining in predecessor s term Expiration of term: after submission of the report and certified statements for the financial year ended December 31, 2006

85 LEGAL INFORMATION/PAGE 166 FINANCIAL REPORT 2004 /PAGE 167 appendix 1 fees for the statutory auditors and members of their networks FISCAL YEARS COVERED 2004 AND 2003 (1) STATUTORY AUDITOR CAILLIAU DEDOUIT & ASSOCIÉS STATUTORY AUDITOR MAZARS & GUÉRARD STATUTORY AUDITOR PRICEWATERHOUSECOOPERS (in thousands of euros) Amounts for % Amounts for % Amounts for % AUDIT Statutory Auditor, Certification, review of the individual and consolidated financial statements (2) % 88.44% % 84.42% % 81.76% Additional missions (3) % 11.56% % 15.58% % 18.24% Mission of the Specific Controller pursuant to Article L of the Monetary and Financial Code Sub-total A % % % % % % OTHER SERVICES, IF ANY Legal, tax, corporate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Information technology 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Internal audit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other (specify if > 10% of audit fees) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Sub-total B % 0.00% % 0.00% % 0.00% TOTAL A + B % % % % % % (1) For the period in question, these are services rendered for a financial year and recorded in the income statement. (2) Of which services of independent experts or of experts in the network, at the request of the Statutory Auditor, as part of the certification of the financial statements. (3) The technical memorandum from the COB (French Securities Regulator) specifies that additional missions include services performed as an extension of the Statutory Auditors mission (e.g. specific reviews performed for the parent Company in the consolidated subsidiaries, specific declarations, due diligence). Appendix 2 simplified organisation of caisse d épargne group Compagnie de Financement Foncier AAA/Aaa/AAA As of January 1, Credit unions (3.1 million members) Fédération Nationale des Caisses d Épargne 100% 80% (Partnership share) Crédit Foncier de France Banque Sanpaolo France 20% (CCI) 1 CAISSES D ÉPARGNE 65% Caisse Nationale des Caisses d Épargne 100% 97.5% 60% 73.9% 35% IXIS Corporate & Investment Bank IXIS Asset Management Group Caisse des Dépôts et Consignations FISCAL YEARS COVERED 2004 AND 2003 (1) BARBIER FRINAULT - MEMBER ERNST & YOUNG FROM JANUARY 1 TO JUNE 28, 2004 SPECIFICS CONTROLLERS CAILLIAU DEDOUIT & ASSOCIES FROM JUNE 29 TO DECEMBER 31, 2004 Financière OCÉOR % 100% IXIS Investor Services (in thousands of euros) Amounts for % Amounts for % AUDIT Statutory Auditor, Certification, review of the individual and consolidated financial statements (2) 0.00% 0.00% 0.00% 0.00% Additional missions (3) 0.00% 0.00% 0.00% 0.00% Mission of the Specific Controller pursuant to Article L of the Monetary and Financial Code % % % 0.00% Sub-total A % % % 0.00% OTHER SERVICES, IF ANY Legal, tax, corporate 0.00% 0.00% 0.00% 0.00% Information technology 0.00% 0.00% 0.00% 0.00% Internal audit 0.00% 0.00% 0.00% 0.00% Other (specify if > 10% of audit fees) 0.00% 0.00% 0.00% 0.00% Sub-total B % 0.00% % 0.00% TOTAL A + B % % % 0.00% Specialised in local banks > CEFI > CNP 3 > Ecureuil Vie > Ecureuil Assurances IARD > Eulia Caution > Gestitres 100% IXIS Financial Guaranty CIFG (1) Cooperative investment certificates (CCI) representing 20% of the capital of credit unions. They entitle the holder to a dividend but not to voting rights. (2) Financière OCÉOR holds the Group s shareholdings in overseas banks. (3) 18% held through Sopassure 49.98% held by CNCE.

86 FINANCIAL REPORT/PAGE 168 REFERENCE DOCUMENT CROSS-REFERENCE INDEX This annual report, along with the headings listed below, takes the place of the reference document registered with the Autorité des marchés financiers INFORMATION CERTIFICATIONS OF PERSONS RESPONSIBLE Certification of persons responsible for the reference document 162 Certification of statutory auditors of the financial statements 164 Information policy 163 GENERAL INFORMATION Capital 146 Features (limited to exercise of voting rights, etc.) 146 Capital authorised but not issued 146 Potential capital 146 Table of changes over five years CAPITAL AND VOTING RIGHTS Current breakdown of capital and voting rights 146 Changes in shareholders structure 146 Shareholders agreements 146 GROUP ACTIVITY Organisation of the Group 167 Financial highlights of the Group 6-7 Sector information in figures Markets and competitive positioning of the issuer Investment policy Performance indicators 43 ANALYSIS OF GROUP RISKS Risk factors Market risks (liquidity, rates, exchange rate, securities portfolio) Specific activity-related risk Legal risks (specific regulations, concessions, patents, licenses, material litigation, exceptional facts, etc.) Industrial and environmental risks 61 Insurance and coverage of risks NET WORTH, FINANCIAL SIGNIFICANCE AND RESULTS Financial statements and notes Off-balance sheet commitments Fees for the Statutory Auditors and members of their networks 166 Regulatory prudential ratios CORPORATE GOVERNANCE Membership and operation of the administrative, management and supervisory bodies Composition and operation of committees 141 Executive and corporate officers Regulated agreements RECENT CHANGES AND FUTURE OUTLOOK Recent changes Future outlook 63 Chairman s report on the conditions under which the work of the Board of Directors is prepared and organised, and the internal control procedures implemented in the Company (pursuant to law No of August 1, 2003, Articles 117 and 120 of the LSF law) Auditors report pursuant to the last paragraph of Article L of the Commercial Code on the report of the Supervisory Board on the internal control procedures for drawing up and processing accounting and financial information. 139 PAGE contacts Compagnie de Financement Foncier 4, quai de Bercy Charenton cedex - France Tel: 33 (0) Detailed information on the new Compagnie de Financement Foncier website at Actualité. Desing and Production: Burson-Marsteller Credit photo: Pierre-Laurent Hahn Illustrations: Cécile Olive - except page 40: Valentine Marçot