As
filed with the Securities and Exchange Commission on May 28, 2004 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 20-F (Mark One)|_|
  REGISTRATION STATEMENT PURSUANT TO
  SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR|X|
  ANNUAL REPORT PURSUANT TO SECTION
  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For
  the fiscal year ended December 31, 2003OR|_|
  TRANSITION REPORT PURSUANT TO
  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission
file number 001-16081  HAVAS(Exact name of Registrant as specified in charter) Republic
of France
(Jurisdiction of incorporation or organization) 2
allée de Longchamp
92281 Suresnes Cedex, France
(Address of principal executive offices) Securities
registered or to be registered pursuant to Section 12(b) of the Act:  None  Securities
registered or to be registered pursuant to Section 12(g) of the Act: Title of each class
  
  Name of each exchange on which registeredAmerican Depositary Shares, each representing one
  ordinary share, nominal value 0.40 per share
  
  Nasdaq National Market   Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:   None  The
number of outstanding shares of each of the issuers classes of capital or
common stock as of December 31, 2003: 
306,196,659 ordinary shares, nominal value 0.40 per share. Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes |X|
No |_| Indicate
by check mark which financial statement item the registrant has elected to
follow.  Item 17 |_|
Item 18 |X|     TABLE OF CONTENTS
PageFORWARD-LOOKING STATEMENTS
  1NON-U.S. GAAP FINANCIAL INFORMATION
  1NOTE REGARDING DISCONTINUED OPERATINOS
  2PART IITEM
  1.
  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  3ITEM
  2.
  OFFER STATISTICS AND EXPECTED TIMETABLE
  3ITEM
  3.
  KEY INFORMATION
  33.A Selected financial data
  33.B Capitalization and indebtedness
  43.C Reasons for the offer and use of proceeds
  43.D Risk factors
  5ITEM
  4.
  INFORMATION ON THE COMPANY
  11ITEM
  5.
  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  21ITEM 6.
  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  43ITEM
  7.
  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
  56ITEM
  8.
  FINANCIAL INFORMATION
  578.A Consolidated statements and other financial information
  57ITEM
  9.
  THE OFFER AND LISTING
  609.A Listing details
  609.B Plan of distribution
  619.C Markets
  619.D Selling shareholders
  619.E Dilution
  619.F Expenses of the issue
  61ITEM
  10.
  ADDITIONAL INFORMATION
  61i

10.A
        Share capital
    6110.B
        Memorandum and Articles of Association
    6110.C
        Material contracts
    6810.D
        Exchange controls
    7010.E
        Taxation
    7010.F
        Dividends and paying agents
    7610.G
        Statement by experts
    7610.H
        Documents on display
    7610.I
        Subsidiary information
    76ITEM
        11.
    QUANTITATIVE
        AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    76ITEM
        12.
    DESCRIPTION
        OF SECURITIES OTHER THAN EQUITY SECURITIES
    78PART
        IIITEM
        13.
    DEFAULTS,
        DIVIDEND ARREARAGES AND DELINQUENCIES
    79ITEM 14.
    MATERIAL
        MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    79ITEM
        15.
    CONTROLS
        AND PROCEDURES
    79ITEM
        16.
    [RESERVED]
    79ITEM
        16A.
    AUDIT
        COMMITTEE FINANCIAL EXPERT
    79ITEM
        16B.
    CODE
        OF ETHICS
    79ITEM 16C.
    PRINCIPAL
        ACCOUNTANT FEES AND SERVICES
    79ITEM 16D.
    EXEMPTIONS
        FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    80PART
        IIIITEM
        17.
    FINANCIAL
        STATEMENTS
    80ITEM
        18.
    FINANCIAL
        STATEMENTS
    80ITEM
        19.
    EXHIBITS
    81ii

FORWARD-LOOKING
STATEMENTS

This
annual report on Form 20-F may contain certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which we refer
to as the Exchange Act, relating to our business and the industry and sectors
in which we and our subsidiaries operate. 
In particular, among other statements, the statements in Item 4
Information on the Company with regard to management objectives, industry
trends, market standing and business risks, the statements in Item 5 Operating
and Financial Review and Prospects with regard to trends in results of
operations, margins and overall market trends, the statements in Item 8
Financial Information relating to legal proceedings and the statements in
Item 11 Quantitative and Qualitative Disclosures about Market Risk are
forward-looking in nature. 
Forward-looking statements can be identified by the use of forward-looking
words, such as may, will, project, estimate, anticipate, plan,
believe, expect, intend, continue, potential, opportunity,
objective, goal or the negative of those terms or other variations of those
terms or comparable words or expressions. 
By their nature, forward-looking statements involve risks and
uncertainties because they are based on our current expectations, estimates,
projections and assumptions concerning events and circumstances that will occur
in the future.  There are a number of
factors that could cause our actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements.  These factors include the
following:


  the general economic conditions in our principal
  markets, including any economic disruption or uncertainty resulting from
  geopolitical events or terrorist attacks or similar events that may occur in
  the future;
  the level of worldwide spending on advertising and
  communications services by advertisers;
  our ability to retain existing clients and attract
  new ones;
  the unanticipated loss of an important client or a
  portion of an important clients business, changes in the advertising and
  communications services budgets of clients, and the financial performance and
  condition of clients;
  our ability to retain key personnel while continuing
  to control labor costs;
  the impact of competition in our industry;
  our ability to realize expected benefits from our
  strategic reorganization and to successfully dispose of selected businesses
  and real estate in our ongoing worldwide restructuring;
  our ability to implement our strategy and to
  successfully integrate businesses we have acquired; and
  our ability to adjust to the changing trends in our
  industry.Forward-looking
statements speak only as of the date they are made, and we undertake no
obligation to update publicly any of them in light of new information or future
events or circumstances.
NON-U.S. GAAP FINANCIAL INFORMATION

Our
audited consolidated financial statements included in this annual report on
Form 20-F have been prepared using generally accepted accounting principles in
the United States, which we refer to as U.S. GAAP.  This annual report on Form 20-F may also contain financial
information calculated and presented in accordance with generally accepted
accounting principles in France, which we refer to as French GAAP, as well as
financial information calculated on a pro forma basis, including information
that is restated to exclude the impact of specified historical events.  Because this financial information by its
very nature is not calculated and presented in accordance with U.S. GAAP, it
should not be viewed as a substitute for, and should be read in conjunction with,
our audited consolidated financial statements and the notes to the financial
statements included in this annual report.

1

NOTE REGARDING DISCONTINUED OPERATIONS
In
the fourth quarter of 2003, we completed the strategic reorganization of our
business operations that was announced in September 2003.  As part of our strategic reorganization, our
management targeted for sale or cessation of operations a number of companies
that are not engaged primarily in activities within our core areas of competence,
are not strategic investments, did not meet our financial performance criteria
or otherwise do not fit into our new organization.  Accordingly, we have reported our discontinued operations in
accordance with Statement of Financial Accounting Standards, which we refer to
as SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets.  The results of operations of
the businesses sold or closed during 2003, or to be sold or closed at December
31, 2003, have been reported as discontinued operations for the years ended
December 31, 2003, 2002 and 2001.  (See
Note 8 to the consolidated financial statements included in this annual
report.)  The results presented in our
consolidated financial statements have been adjusted to exclude the impact of
discontinued operations, and the selected financial data set forth in Item 3.A
below have been adjusted to reflect discontinued operations, for the years
ended December 31, 2003, 2002 and 2001.
2


PART I
ITEM
1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS
Not
applicable.
ITEM
2.  OFFER STATISTICS AND EXPECTED
TIMETABLE
Not
applicable.
ITEM
3.  KEY INFORMATION
3.A
Selected financial data
The
following tables summarize our selected financial data and are qualified in
their entirety by reference to, and should be read in conjunction with, our
audited consolidated financial statements and the notes to the financial
statements included in this annual report. 
The historical financial data as of and for the years ended December 31,
2003, 2002, 2001, 2000 and 1999 have been derived from our audited consolidated
financial statements prepared using U.S. GAAP.
The
historical financial data as of and for the year ended December 31, 2003 are
shown translated into U.S. dollars at the noon buying rate of 1.00 = $1.2597
on December 31, 2003. (Source:  Federal
Reserve Bank of New York.)  See Note 2
to our audited consolidated financial statements beginning on page F-7 of this
annual report for further information.

For
        the Years Ended December 31,2003
    
    2003
    
    2002
    
    2001
    
    2000
    
    1999U.S.
      GAAP
      (in thousands, except per share data)adjusted(1)
    
    adjusted(1)($)
    
    ()Consolidated
        Statement of Operations Data:Net
        revenues
    
    $
    1,921,171
    
    
    1,525,102
    
    
    1,811,169
    
    
    1,955,530
    
    
    1,643,640
    
    
    1,124,380Operating
        income (loss)
    
    
    (137,695
    )
    
    (109,308
    )
    
    (217,047
    )
    
    (148,954
    )
    
    114,605
    
    
    73,014Income
        (loss) from continuing operations
    
    
    (409, 330
    )
    
    (324, 943
    )
    
    (312, 365
    )
    
    (175,667
    )
    
    29,408
    
    
    25,225Net
        income (loss)
    
    
    (532,884
    )
    
    (423,025
    )
    
    (1,433,118
    )
    
    (174,909
    )
    
    29,408
    
    
    25,225Net
        income (loss) per share:Basic(2)
    
    
    (1.79
    )
    
    (1.42
    )
    
    (4.86
    )
    
    (0.62
    )
    
    0.16
    
    
    0.18Diluted(2)
    
    
    (1.79
    )
    
    (1.42
    )
    
    (4.86
    )
    
    (0.62
    )
    
    0.15
    
    
    0.16Dividend
        per share(2)(3)
    
    
    0.10
    
    
    0.08
    
    
    0.14
    
    
    0.26
    
    
    0.26
    
    
    0.23(1)
  2002 and 2001 figures have been adjusted to exclude
  the impact of discontinued operations.(2)
  Per share data have been adjusted for the 20-for-1
  stock split that occurred on May 26, 2000.(3)
  These amounts reflect the dividend accrued for the
  year indicated, including the French avoir fiscal (before deduction of any
  French withholding tax).  Actual
  payment of the annual dividend for each fiscal year occurs following our
  annual meeting of shareholders in the subsequent year.  For an explanation of the French avoir
  fiscal, see Item 10. Additional Information TaxationFrench
  taxationTaxation of Dividends on Shares Avoir Fiscal  Tax Credit and Précompte 25%
  Equalization Tax beginning on page 71 and TaxationTaxation of U.S.
  investorsTaxation of dividends beginning on page 73.3

As
        of December 31,2003
    
    2003
    
    2002
    
    2001
    
    2000
    
    1999U.S.
      GAAP
      (in thousands, except per share data)($)
    
    
    
    
    ()Consolidated
        Balance Sheet Data:Current
        assets
    
    $
    2,916,400
    
    
    2,315,155
    
    
    2,728,804
    
    
    2,723,656
    
    
    2,204,323
    
    
    1,270,094Total assets
    
    
    5,547,659
    
    
    4,403,953
    
    
    5,336,981
    
    
    7,091,239
    
    
    5,793,673
    
    
    2,286,846Financial
        debt(1)
    
    
    1,682,823
    
    
    1,335,892
    
    
    1,480,509
    
    
    1,085,941
    
    
    1,121,105
    
    
    459,010Shareholders
        equity
    
    
    979,593
    
    
    777,640
    
    
    1,346,634
    
    
    3,048,655
    
    
    2,666,321
    
    
    537,710Number
        of shares outstanding(2)
    
    
    306,196,659
    
    
    306,196,659
    
    
    305,219,028
    
    
    304,320,312
    
    
    266,496,567
    
    
    151,889,560(1)
  Our financial debt consists of short-term and
  long-term bank debt, convertible and/or exchangeable bonds and capitalized
  lease obligations.(2)
  Number of shares outstanding has been adjusted for
  the 20-for-1 stock split that occurred on May 26, 2000.Exchange rate information
Euro
into U.S. dollars
The
exchange rate for the euro against the U.S. dollar at May 24, 2004 was 1.00 to
$1.1978 at the noon buying rate. 
(Source:  Federal Reserve Bank of
New York.)  The following table sets
forth the high, low and average exchange rates for the euro against the U.S.
dollar in each of the last five years and in each of the last six months.
High
  
  Low
  
  Average
  (1)Euro to U.S. Dollar:
  
  ($)
  
  ($)
  
  ($)April 2004
  
  1.2358
  
  1.1802
  
  1.1989March 2004
  
  1.2431
  
  1.2088
  
  1.2261February 2004
  
  1.2848
  
  1.2426
  
  1.2640January 2004
  
  1.2853
  
  1.2389
  
  1.2638December 2003
  
  1.2597
  
  1.1956
  
  1.2298November 2003
  
  1.1995
  
  1.1417
  
  1.17102003
  
  1.2597
  
  1.0361
  
  1.14112002
  
  1.0485
  
  0.8594
  
  0.94952001
  
  0.9535
  
  0.8370
  
  0.89092000
  
  1.0335
  
  0.8270
  
  0.92071999
  
  1.1812
  
  1.0016
  
  1.0588(1)
  Monthly averages represent the average of the noon
  buying rates for euro for each business day during the relevant month.  Annual averages represent the average of
  the noon buying rates for euro on the last business day of each month during
  the relevant year.  (Source:  Federal Reserve Bank of New York.)3.B Capitalization and indebtedness
Not
applicable.

3.C
Reasons for the offer and use of proceeds
Not
applicable.
4

3.D
Risk factors
You
should carefully consider all of the information set forth in this annual
report and in the following risk factors. 
The risks below are not the only ones we face.  Additional risks not currently known by us or that we currently
deem immaterial may also significantly impair our business operations.  If any of the following risks actually
occurs, our business, prospects, financial condition, results of operations,
ability to service and re-finance debt and ability to pay expected dividends to
shareholders could be materially adversely affected.  In any such case, the market price of our shares and our American
Depositary Shares, or ADSs, could decline and you could lose all or part of
your investment in our company.  This
annual report also contains forward-looking statements that involve risks and
uncertainties.  Our results could
materially differ from those anticipated in these forward-looking statements as
a result of various factors, including the risks we face as described below and
elsewhere.  See Forward-Looking
Statements on page 1.
Our
operating results are highly susceptible to economic conditions, and a
continued downturn in the overall economy or our industry could seriously harm
our performance.
The
amount of money that companies spend for advertising and communications
services to promote their brands, products and services is highly sensitive to
fluctuations in general economic conditions. 
During economic downturns, companies may find that expenditures on
advertising and communications services are easier to reduce than other
expenses related to their operations. 
As a result, we have found that our industry may experience a
disproportionately adverse impact from a downturn in the overall economy.
In
each of 2001 and 2002, the downturn in the overall economy was accompanied by a
severe drop in demand for services in our industry, which had a material
adverse affect on our results of operations for each year.  Weakness in demand for our services
continued in 2003.  Although the second
half of 2003 improved somewhat, we cannot assure you that the conditions in our
industry and the overall economy will improve in 2004, or that a further
decline in our industry or the economy, or economic disruption or uncertainty
resulting from geopolitical events or terrorist attacks or similar events, will
not have a material adverse affect on our prospects, business, financial
condition or results of operations.

We
have substantial scheduled debt payments and may need to refinance some of our
debt at maturity.
As
of December 31, 2003, the total principal amount of our outstanding financial
debt, which consisted of short-term and long-term bank debt, three series of
convertible and/or exchangeable bonds, and capitalized lease obligations, was
approximately 1,335.9 million. 
One of our series of convertible and/or exchangeable bonds matured and
was redeemed on January 1, 2004.  Based
on the bonds outstanding at April 30, 2004 from our two remaining series of
convertible and/or exchangeable bonds outstanding on that date, and assuming no
conversion, exchange or repurchase prior to maturity, we will be required to
pay 671.8 million when the first series matures on January 1, 2006 and an
additional 468 million when the second series matures on January 1, 2009.  Our cash flow from operations may not be
sufficient to meet these required payments of principal and interest.  We may be required, therefore, to refinance
our existing debt, the terms of which might not be as favorable as the terms of
existing debt, if we are able to refinance our existing debt at all.  If principal, premium and interest payments
due at maturity on any of our financial debt cannot be refinanced, extended or
paid with proceeds of other capital transactions, including new equity capital,
our cash flow from operations may not be sufficient in all years to repay all
maturing debt.
A
continuing default under our credit facilities could result in the acceleration
of payment under various of our other debts.

At
December 31, 2003 and 2002, we were not in compliance with financial ratios
under two of our credit facilities, for an aggregate principal amount of 22.6
million and 33.8 million, respectively. 
Although our credit facility banks have waived any default with respect
to the noncompliance, if they do not grant a waiver in the future, these
defaults could trigger the acceleration of payment under one or more of our
credit facilities.  Such an acceleration
could result in the acceleration of payment under our convertible and/or
exchangeable bonds due January 1, 2009, which had an aggregate principal amount
and interest of 473.6 million at December 31, 2003.  In the event of such an acceleration under our credit facilities
and our convertible and/or exchangeable bonds, we may be unable to meet our
obligations under those debts.

5

Our typical contracts provide clients with the right
to cancel for any reason, which has enabled clients to move freely to other
agencies, and which has resulted and may continue to result in lost revenues.
Our
clients typically have the right to cancel contracts with us for any reason
upon prior written notice, usually ranging from 90 days to 180 days.  Clients are also generally free to move from
one agency to another with relative ease. 
As is typical in the advertising and communications services industry,
we have lost or resigned client accounts and assignments in the past for a
variety of reasons, including conflicts with newly acquired clients, and we may
continue to lose or resign client accounts in the future for similar or other
reasons.  In addition, clients generally
are able to reduce advertising and communications services spending or cancel
projects at any time for any reason.  We
may not successfully replace revenues stemming from clients that leave or
significantly reduce their spending on advertising and communications
services.  Any loss of one or more of
our largest clients could harm our results of operations, slow our growth and
cause a decline in our revenues.
We may be unable to collect balances due from any
client that files for bankruptcy or becomes insolvent.

We
generally provide advertising and communications services to our clients in
advance of our receipt of payment.  The
invoices for these services are typically payable within 30 to 60 days.  In addition, we commit to media and
production purchases on behalf of some of our clients.  If one or more of our clients files for
bankruptcy, or becomes insolvent or otherwise is unable to pay for the services
we provide, we may be unable to collect balances due to us on a timely basis or
at all.  In addition, in that event,
media and production companies may look to us to pay for media purchases and
production work to which we committed as an agent on behalf of these clients.

On
July 21, 2002, WorldCom, Inc., one of our significant clients, now known as
MCI, Inc., filed for reorganization under Chapter 11 of the United States
Bankruptcy Code.  We provide both media
and advertising services to MCI, Inc. 
With respect to media purchases on behalf of MCI, we had outstanding
pre-bankruptcy petition media receivables of approximately $26.4 million as of
December 31, 2003 and in parallel, we had outstanding pre-bankruptcy petition
media payables for the media space reserved on behalf of MCI of approximately
$26.9 million as of December 31, 2003. 
With respect to commissions and advertising production work, we had
outstanding pre-bankruptcy petition receivables of approximately $10.4 million
as of December 31, 2003.
MCI
emerged from U.S. Chapter 11 protection on April 20, 2004, at which time an
agreement between MCI and us relating to the pre-bankruptcy amounts due to us
became effective.  See Item 8.  Financial Information  Legal Proceedings  Bankruptcy of WorldCom, Inc.
beginning on page 57.
We
may need to make further impairment charges, which could have an adverse impact
on our financial condition.
During
2002, we recorded significant goodwill impairment charges and, in 2003, we
recorded additional impairment charges. 
As of December 31, 2003, there was approximately 1,881.4 million of
goodwill and other intangible assets on our balance sheet.  We periodically evaluate the realizability
of all of our goodwill and other intangible assets.  Future events, including strategic decisions of our company, could
cause us to conclude that impairment indicators exist and that the asset values
associated with a given operation have become impaired.  Any resulting impairment loss would have an
adverse impact on our reported earnings in the period of such charge.  Any future substantial impairment charge
could adversely affect our financial condition and our operating results.

6

We
are facing increased competition from existing multinational advertising and
communications services companies as well as new competitors in related
industries, which may harm our performance.

The
advertising and communications services industry is highly competitive, and we
expect it to remain so.  Our principal
competitors in the advertising, direct marketing and related businesses are
other large multinational advertising and communications services companies, as
well as numerous smaller agencies that operate only in a small number of local
markets, regions or countries.  In
addition, with respect to media planning and media buying activities, we
compete with divisions of other large multinational advertising and
communications services companies as well as specialized media buying and
planning companies.  We also encounter competition
from some consulting firms that have developed practices in marketing and
communications.  New competitors also
include smaller companies such as systems integrators, database marketing and
modeling companies and telemarketers, which offer technological solutions to
marketing and communications issues faced by clients.  As a result of the increasingly competitive environment, we may
lose clients and potential clients to our competitors, which would negatively
affect our growth and harm our business.
We
have lost client accounts in the past and may continue to lose accounts in the
future as a result of clients periodically conducting competitive reviews of
their accounts, which may cause our revenues to decline and our business to
suffer.

In
the advertising and communications services industry, some clients require
agencies to compete for business periodically. 
We have lost client accounts in the past as a result of such periodic
open competitions.  To the extent that
our existing clients continue to require us to participate in open competitions
to maintain accounts, it increases the risk of losing those accounts, which
losses may harm our business and reduce our revenues.

If
we fail to attract and retain qualified key creative, research, media and
account personnel, our operating results may suffer.
Our
success depends significantly on the skills of our creative, research, media
and account personnel and their relationships with our clients.  These employees may resign from their
positions at any time.  Many of these
employees may be difficult to replace. 
If we lose one or more key personnel, we may not be able to find
suitable replacements and we may lose important clients, which may negatively
affect our ability to sustain and grow our business.  In addition, since demand among advertising and communications
services companies for qualified personnel is very high, to retain our
personnel we may have to increase the salaries, bonuses, fringe benefits and other
compensation we offer to them, which may negatively affect our operating
results.
If
we lose the services of one or more key management personnel, our ability to
manage and coordinate our diverse group of businesses may suffer, which could
harm our performance.
We
depend on the services of our senior management team to manage and coordinate
the global activities of our three principal operating divisions and to
implement our business strategies.  The
services provided by our senior management team are critical to our success,
and the members of our senior management team may be difficult to replace.  The members of our senior management team
may resign from their positions at any time. 
Loss of the services of one or more members of our senior management
team could seriously disrupt our ability to manage and coordinate effectively
the global activities of our three principal operating divisions and to
implement our business strategies, and may adversely affect our ability to
retain key clients.
An
important component of our business strategy has been external growth through
acquisitions, which involves numerous risks and could result in shareholder
dilution.

We
acquired more than 40 companies in 1999, more than 35 companies in 2000 and
more than 20 companies in 2001. 
Although the pace of our acquisitions slowed substantially in 2001
though 2003, we intend to continue to pursue acquisitions in the future to
enhance our capabilities and expand our geographic reach.  Acquisitions involve a number of risks,
including:


  the difficulty of integrating the activities,
  technologies and service offerings of the acquired businesses;
  the diversion of our managements resources to
  difficult integration issues rather than the other aspects of our businesses;
  the management of physically and culturally distant
  and diverse entities;7


  the possible loss of key personnel in the businesses
  acquired;
  the failure of acquired companies to perform as
  expected; and
  the loss or resignation of business due to client
  conflicts.Failure
to overcome these risks or other problems encountered in any of our
acquisitions could negatively impact our growth or lower the quality of our
services, which could reduce customer demand and harm our revenues and
operating results.
In
addition, we may pay the purchase prices of some of our acquisitions by issuing
Havas shares or ADSs, which could result in dilution to our current
shareholders.  We may also incur
additional debt and contingent liabilities and recognize increased amortization
or impairment expenses related to goodwill and other intangible assets in
connection with our acquisitions, which could negatively affect our financial
condition and our operating results.

Fluctuations
in the exchange rates between the euro and the various currencies in which we
conduct business may adversely affect our operating results and the value of
our ADSs.
We
record the revenues and expenses of our local operations in their home
currencies and translate these amounts into euro.  As a result, fluctuations in foreign currency exchange rates in
markets where we derive significant revenues or have significant operations may
adversely affect our revenues, expenses and results of operations as well as
the value of our assets and liabilities as reported in euro.  Fluctuations may also adversely affect the
comparability of period-to-period results. 
For example, the value of the U.S. dollar declined in relation to the
euro during 2003 and 2002 and at December 31, 2003 and 2002 was approximately
16.8% and 15.1% lower than its value to the euro at the beginning of 2003 and
2002, respectively.  Since each U.S.
dollar converted to fewer euro, our revenue expressed in euro has correspondingly
been lower during this period.  In
addition, the currencies of many Latin American countries, including Argentina,
Brazil and Mexico in particular, have experienced substantial devaluation and
volatility in the past.
Moreover,
a decline in the following values may adversely affect the value of our ADSs:

  the U.S. dollar equivalent of the euro trading price
  of our shares in France, which may consequently cause the trading price of
  our ADSs in the United States also to decline;
  the U.S. dollar equivalent of the proceeds that a
  holder of our ADSs would receive upon the sale in France of any of our shares
  withdrawn from the depositary for the ADSs; and
  the U.S. dollar equivalent of cash dividends paid in
  euro on our shares represented by the ADSs.Political
and economic instability in Latin American and Asia-Pacific markets may disrupt
our operations and adversely affect our results.
We
derived approximately 8% of our revenues in 2003 from Latin American and
Asia-Pacific markets, and the portion of our revenues from these markets
may increase in the future.  Both Latin
America and the Asia-Pacific region have experienced periods of
political and economic instability, historically as well as recently, and experience
has shown that negative economic or political developments in one country in a
region can lead to or exacerbate economic or political crises elsewhere in the
region, and at times, the global economy. 
If these conditions were to re-occur, our business could be adversely
affected.

Holders
of our ADSs may have limited ability to influence the governance of our
company.
Holders
of our ADSs may have less ability to influence the governance of our company
than direct holders of our shares. 
Holders of our ADSs may not receive voting materials in time from our
depositary to ensure that they can instruct the depositary to vote their
shares.  In addition, our depositarys
liability to holders of our ADSs for failing to carry out voting instructions
or for the manner of carrying out voting instructions is limited by contract.
8

If
holders of our shares or ADSs fail to comply with the legal notification
requirements under French law or our bylaws, they could be deprived of some or
all of their voting rights and be subject to a fine, which could discourage a
takeover of our company.
French
law requires any person who acquires more than 5%, 10%, 20%, one-third,
one-half or two-thirds of our outstanding shares or voting rights to file a
report with us within five trading days of crossing the threshold
percentage.  Any person acquiring more
than 10% or 20% of our share capital or voting rights must include in the
report a statement of the persons intentions relating to future acquisitions
or participation in the management of our company for the following 12-month
period.  If any shareholder fails
to comply with this notification requirement under French law, the shares or
voting rights in excess of the relevant notification threshold will be deprived
of voting power for up to two years on the demand of any interested party who
has suffered a loss.  In addition, all
or part of the shareholders voting rights may be suspended for up to five
years by the French commercial court, and the shareholder may be subject to a
fine at the request of our chairman, any of our shareholders or the French
Autorité des Marchés Financiers, which we refer to as the AMF.
Under
our bylaws, which we refer to in France as our statuts, any person who becomes a direct or indirect holder
of at least 2%, or any multiple of 2%, of our outstanding shares or voting
rights must provide written notice to our company of the crossing of such
threshold.  French law requires such
notice to be provided within five trading days after such threshold is
crossed.  At the request of any
one or more of our shareholders owning at least 5% of our share capital, any
shareholder
that fails to provide this required notice may be deprived of the voting
rights for all shares in excess of the relevant notification threshold for up
to two years and be subject to a fine.

These
requirements and the consequences of any failure to abide by them could have
the effect of discouraging or preventing a change in control of our company.
Regulatory
restrictions in various countries in which we operate restrict specific types
of services we offer to clients, which may harm our revenue and operating
results.
Our
agencies are located in numerous countries with different levels of
governmental regulation relating to the advertising and communications services
industry, including laws or regulations that:

  prohibit various practices in our industry;
  restrict the media, content, form or duration of
  advertising;
  restrict the collection, use and disclosure of
  personal information;
  assess fees, taxes or tariffs on advertisements;
  allow individuals or classes of individuals to bring
  legal action against companies for allegedly violating laws and regulations;
  or
  otherwise harm our business, financial condition and
  operating results.For
example, in France, media-buying activities are subject to specific regulations
following the adoption in 1993 of Law No. 93-122, known as the Loi Sapin.  The Loi Sapin profoundly redefined
long-standing practices in the media industry in France and in particular the
traditional role of advertising agencies. 
Since the introduction of the Loi Sapin, advertising agencies in
France are no longer able to purchase advertising space from media providers
and then resell the space on different terms to advertisers.  In addition, media providers must bill
advertisers directly for advertising space and agencies cannot receive any
commissions or discounts directly from media providers.  The Loi Sapin has had in the past, and we
expect that it will continue to have, a significant negative financial impact
on our media-buying activities in France.
9


As
another example, in some of the markets in which we operate, including the
United States, there are laws and regulations that impose significant
liabilities upon advertisers and advertising agencies for false or misleading
advertising.  If any advertising that we
create is found to be false or misleading, we could face potential liability.
As
another example, laws and regulations in the European Union, the United States
and a number of U.S. states limit the collection, use and disclosure of
personal information, including personal information regarding Internet users,
students, minors and personal health matters. 
Due to our significant marketing services business, which relies on the
collection and use of personal information, these laws and regulations, and any
future laws and regulations, may substantially harm our operations or
significantly reduce our revenues from marketing services.  A purported class action lawsuit was filed
against one of our subsidiaries, American Student List LLC, in the United
States District Court for the Middle District of Florida on February 18, 2004.
The lawsuit alleges that American Student List obtained, disclosed and used
information from the Florida Department of Highway Safety and Motor Vehicles in
alleged violation of the U.S. Drivers Privacy Protection Act.  The named plaintiff seeks to represent a
class of 876,665 individuals whose personal information from the Florida
Department of Highway Safety and Motor Vehicles records was obtained, disclosed
or used for allegedly impermissible uses by American Student List without the
express consent of the individual.  The
lawsuit seeks certification as a class action, liquidated damages in the amount
of $2,500 per alleged violation of the Act, as well as punitive damages,
attorneys fees and costs, and injunctive and other relief.  Although American Student List intends to
defend itself vigorously against this lawsuit, the ultimate resolution of this
lawsuit cannot presently be determined. 
An unfavorable outcome could have a material adverse effect on our
business, financial condition or results of operations.
Laws
and regulations in France, the United States and other of our significant
markets affecting our services could place us at a competitive disadvantage
relative to other advertising and communications services companies having a
larger portion of their business conducted in countries with less regulation of
our industry.
Civil
liabilities or judgments against our company or our directors or officers based
on U.S. federal or state securities laws may not be enforceable in the U.S. or
in France.

Holders
of our shares or ADSs may not be able to effect service of process within the
United States upon our directors and officers and our outside auditors.  As a result, it may not be possible to
enforce, in U.S. courts, judgments against these persons or against our company
based on any civil liability provisions of the U.S. federal or state securities
laws. In addition, civil liabilities based on U.S. federal or state securities
laws may not be enforceable against our company and our directors and officers
in France.  If an original action is
brought in France, based solely on U.S. federal or state securities laws,
French courts may not have the necessary jurisdiction to grant the remedies
sought.  Actions for enforcement in
France of judgments of U.S. courts rendered against these French persons would
require them to waive their right under the French Civil Code to be sued only
in France.  We believe that none of these
French persons has waived this right with respect to actions based solely on
the U.S. federal or state securities laws.

We are subject to corporate disclosure
standards in the U.S. that are less demanding than those applicable to some
U.S. companies.
As
a French company, we are not required to comply with the notice and disclosure
requirements of the Exchange Act relating to the solicitation of proxies for
shareholders meetings.  Although we are
subject to the periodic reporting requirements of the Exchange Act, the
periodic disclosure required of non-U.S. companies under the Exchange Act is
more limited than the periodic disclosure required of U.S. companies.  Therefore, there may be less publicly available
information about our company than is regularly published by or about other
public companies in the United States.
10

ITEM
4.  INFORMATION ON THE COMPANY
Overview

We
are a global advertising and communications services company.  With our headquarters located in Paris, two
operating divisions headquartered in the United States and the third
headquartered in Spain, we believe that we bring a multicultural approach to
our business that distinguishes us from other major advertising and
communication services companies. 
Through our three operating divisions, we offer a broad range of
communications services, including integrated communications, traditional
advertising, direct marketing, media planning and buying, corporate
communications, internal communications, sales promotion, design, television
sponsorship, human resources, multimedia interactive communications and public
relations.  We have operations in 88
countries through our agencies located in 45 countries throughout Europe, North
America, the Asia-Pacific region and Latin America, as well as contractual
affiliations with agencies in 43 additional countries.

We
conduct our business primarily through the following three principal operating
divisions:
Euro RSCG
Worldwide. From
its divisional headquarters in New York, Euro RSCG Worldwide manages our
principal international brandEuro RSCG Worldwideand operates our global
network of agencies in Europe, North America, Latin America and the
Asia-Pacific region.  Through this
network, Euro RSCG Worldwide offers integrated communications services
encompassing a broad range of advertising and communications services.
Media
Planning Group. With its divisional headquarters in
Barcelona, Media Planning Group provides media planning and buying services to
its clients and operates primarily in Europe, North America, Latin America and
the Asia-Pacific region.
Arnold
Worldwide Partners. 
Arnold Worldwide Partners has its divisional headquarters in Boston and
offers primarily traditional advertising services to clients through agencies
located in the United States, Europe, Canada, Australia and China.  Arnold Worldwide Partners emphasizes
creativity in advertising and marketing techniques and seeks to establish a strong
local identity in the markets it serves.
Although
our company is organized into three principal operating divisions, we conduct
our operations primarily through the following significant subsidiaries:

Name
  
  Country of
  Formation
  
  Our
  Ownership and
  Voting InterestHavas International S.A.
  
  France
  
  100%Snyder Communications, Inc.
  
  U.S.
  
  100%Euro RSCG Worldwide, Inc.
  
  U.S.
  
  100%Havas UK Ltd.
  
  U.K.
  
  100%11


The
following chart depicts the organizational structure of our principal
subsidiaries and agency groups, organized by country of operation:




Our
total revenues were 1,525.1
million, 1,811.2 million and 1,955.5
million for 2003, 2002 and 2001, respectively, adjusted to exclude the
impact of discontinued operations.
The
table below sets forth a breakdown of our revenues by geographic region,
expressed as a percentage of our total revenues for 2003, 2002 and 2001.
Percentage of
Revenue by Geographic Region



Geographic Region(1)(2)
  
  2003
  
  2002
  
  2001North America
  
  42
  %
  
  44
  %
  
  46
  %Europe (excluding France)
  
  33
  %
  
  32
  %
  
  28
  %France
  
  17
  %
  
  16
  %
  
  17
  %Asia Pacific
  
  4
  %
  
  4
  %
  
  4
  %Latin America
  
  4
  %
  
  4
  %
  
  5
  %(1)
  Revenues are allocated to the country or region of
  the subsidiary realizing the revenues.(2)
  Because our revenues from the Middle East and Africa
  represent less than 1% of our total revenues, our geographic breakdown of
  revenues currently includes, and historically has included, revenues in the
  western part of the Middle East and in Africa with those of Europe, and
  revenues in the eastern part of the Middle East with those of the
  Asia-Pacific region.We
operate in a single category of activity, advertising and communications
services.  Although we historically
presented a breakdown of our revenues into two categories of services (media
& marketing and traditional advertising), we believe that this breakdown
does not accurately reflect our current organizational structure or our
managements current view of our business. 
We have developed our organizational structure over the past few years
to offer our clients integrated communications offerings that encompass all of
our advertising and communications services.
12

History and development of our
business
Our company
is a société anonyme,
a form of corporation organized under the French Commercial Code.  Our registered office is located at 2 allée
de Longchamp, 92281 Suresnes Cedex, France, and the telephone number of our
office is +33-1-58-47-90-00. Under our bylaws, our corporate existence
terminates on July 15, 2050 unless extended by the approval of our shareholders
at a meeting of shareholders.
We were
incorporated in 1968 under the name Havas Conseil.  At that time, our sole shareholder was Havas S.A., a French media
group.  Havas S.A.s shareholding
declined over time, from 100% in 1968, to approximately 45% in 1972, to
approximately 31% in 1998 and to 0% in June 2001.  Havas S.A. was acquired by Vivendi Universal in 1998 and is
now known as Vivendi Universal Publishing.
In 1982,
our shares were first listed on Euronext Paris S.A., previously known as the
Paris Bourse, which is the French national stock exchange.  Our shares have traded on the Premier
Marchéof Euronext Paris S.A., which is the principal trading market
for securities in France, since May 1985. 
Our ADSs began trading on the Nasdaq National Market System on September
27, 2000.
At the time
of our original incorporation, our business activity was concentrated in France
and was focused on traditional advertising and media buying services.  Since the mid-1970s, we have expanded our
business significantly, both geographically and in the breadth of services that
we offer.  Our expansion has been
achieved through internal growth and the selective acquisition of complementary
agencies.  Over the last twelve years,
the portion of our total revenues derived outside of France has increased from
approximately 52% in 1992 to 83% in 2003.
Over the
past twelve years, we have made a number of significant changes to our
organization that we believe have substantially expanded our geographic reach,
the scope of our services, and our positioning in an increasingly global
market.  These changes have included the
following:

  In 1992, we acquired the RSCG Group, then a major
  French advertising group, and merged its RSCG network into our own
  Eurocom network to create Euro RSCG Worldwide.  We chose to merge these two networks to create a single
  organization with an expanded global reach and an enhanced offering of
  services.  The combination created
  what we consider to be a world class network capable of accommodating our
  clients in their local, regional and international businesses.
  In 1997, we moved the divisional headquarters of
  Euro RSCG Worldwide from Paris to New York. This has allowed us to move
  closer to U.S. advertisers and to the U.S. advertising market, which Zenith
  Optimedia recently estimated to account for 44.4% of worldwide advertising
  expenditures in 2003.  In addition, we
  believe our introduction of worldwide branding and a global network linking
  all members of Euro RSCG Worldwide has raised the level of cooperation among
  the agencies comprising the Euro RSCG Worldwide network and provided us with
  greater capabilities in servicing global clients.
  Beginning in late 1998, we embarked on a strategic
  acquisition plan to expand and consolidate our businesses and services in
  various markets worldwide. This resulted in a large number of acquisitions in
  North America, Europe, South America and the Asia-Pacific region from late
  1998 through early 2001. See Principal acquisitions and divestitures
  below.
  In 1999, we created a new media planning group by
  combining the media planning and buying activities of Media Planning, S.A., a
  Spanish company, with our then existing media planning business. We initially
  acquired 45% of this new group and subsequently acquired the remaining 55% in
  May 2001.  We believe that operating
  our media planning and buying activities as separate entities rather than
  solely as departments within our agencies is the most effective structure to
  capitalize on growth opportunities in the media business.  By combining our media planning and buying
  activities with those of Media Planning, S.A., we believe that we have
  created a powerful network of media expertise that has the management skills
  and resources necessary to compete in the media market.
  In 2000, we acquired Snyder Communications, Inc., a
  U.S.-based provider of direct marketing, advertising and communications
  services.13
On May 23,
2002, we changed our corporate name from Havas Advertising to Havas by
resolution of our shareholders at our annual meeting of shareholders.  In connection with the change of our
corporate name, we also changed our Nasdaq National Market ticker symbol to
HAVS and our web address to http://www.havas.com.  Neither our web site nor any information
contained on or accessible from our web site shall be deemed to be a part of
this annual report on Form 20-F or incorporated by reference herein.
Principal
acquisitions and divestitures
One of the
elements of our business strategy is the targeted expansion and consolidation
of our businesses and services in various markets worldwide.  The rate of our acquisitions slowed
substantially beginning in 2001 as we reacted to the deterioration in the
global economy and our industry.  Acquisition
activity has been refocused on strengthening our integrated communications and
media expertise, primarily through expansion of the geographic scope and
service offerings of our existing networks.
The total
consideration paid in connection with these acquisitions, including acquisition
costs, was 2,360.2 million in 2000, 635.8 million in 2001, 22.0 million in
2002, 11.5 million in 2003, and 7.6 million in 2004, through April 30, 2004.
Over the
past three years, we have disposed of a number of companies, some of which we
acquired in the Snyder Communications acquisition.  We determined that these companies were engaged primarily in
activities outside of our core areas of competence, were not strategic
investments, did not meet our financial performance criteria or otherwise did
not fit into our organization.  We
disposed of 11 companies in 2001 for a total of 7.0 million, six companies in
2002 for a total of 2.8 million, two companies in 2003 for a total of 8.4
million, and five companies in 2004, through April 30, 2004, for a total of
37.8 million, in each case net of disposal costs.  As part of our strategic reorganization announced in the third
quarter of 2003, we targeted for sale 16 additional companies that we
determined are engaged primarily in activities outside of our core areas of
competence, are not strategic investments or otherwise do not fit into our new
organization.  See Strategic
reorganization below.
Business strategy
Our
long-term business strategy is to continue our development into one of the
leading global advertising and communications groups with levels of revenue
growth and profitability that are comparable to the best among our principal
competitors.  To accomplish this
development, we have identified the following key goals:

  Grow revenues from existing clients by capitalizing
  on opportunities to provide integrated communications;
  Focus on attracting and serving new clients,
  particularly multinational clients, through an emphasis on coordinating the
  worldwide efforts of our constituent advertising, media planning and buying,
  interactive, corporate communications and marketing services agencies;
  Expand and consolidate our positions in various
  markets, including through targeted acquisitions or strategic alliances to
  take advantage of opportunities to increase the geographic scope and service
  offerings of our existing networks;
  Maintain a multicultural approach to our business to
  better respond to client needs and to attract and retain key personnel; and
  Improve our financial performance by controlling
  costs, including through a consolidated purchasing initiative, a
  rationalization of our holding company and divisional headquarters
  structures, and a reinforced emphasis on improving operating margins and free
  cash flow.14
Advertising and communications
services
We offer
the following principal products and services:

  Integrated communications.  Integrated communications services consist
  of coordinating traditional advertising services with marketing, interactive,
  corporate communications and other communications services.
  Traditional advertising.  Traditional advertising services consist
  of defining the nature, content and target audience of an appropriate
  advertising message for the promotion of brands, products or services;
  creating work product; advising clients in the choice of media to disseminate
  creative work product; and monitoring the effectiveness of the advertising
  message and work product through studies and research.
  Direct marketing.  Direct marketing services consist of
  providing communications, such as direct mail, and related database support
  that are designed to develop and maintain a measurable contact between the
  message sender and the receiver.
  Media planning and buying.  Media planning and buying services consist
  of optimizing the efficiency of advertisements by determining the media best
  suited for reaching the largest and most targeted sample of readers,
  listeners or viewers and planning and buying media for advertisers.
  Corporate communications.  Corporate communications services consist
  of providing communications relating to a company, such as annual reports to
  stockholders, that are intended to make the company better known or improve
  its image to stockholders, suppliers or the financial markets.
  Internal communications. Internal communications services consist of
  providing communications for use within an organization, such as
  communications designed to disseminate important information or to motivate
  employees.
  Sales promotion. Sales promotion services consist of
  designing communications that aim to induce consumer purchasing, promote
  consumer loyalty, increase consumer interest in a product or react to
  competitive pressures.
  Design.Design services are intended to
  increase the sales of products or services through the design of products
  themselves, their packaging, the visual identity of companies or the
  architecture of business establishments.
  Television sponsorship.  Television sponsorship services are a
  relatively recent communications specialty and consist of associating a brand
  or a product to a television program.
  Human resources.Human resources services are a specialty provided to
  companies for their hiring, training, promotion and related internal
  communications.
  Multimediainteractive communication.Multimedia interactive
  communication services consist of providing communications using on-line,
  off-line and interactive multimedia.
  Public relations.Public relations services consist of
  providing news releases and other communications, and organizing events, to
  foster a positive understanding of a client and its brands, products or
  services or to highlight newsworthy events regarding the client.Strategic
reorganization
In the
fourth quarter of 2003, we completed a strategic reorganization of our business
operations.  Our management believes
that the strategic reorganization will significantly improve our financial
performance following the prolonged downturn in the global economy, and in the
advertising and communications services industry in particular, and will
reinforce and improve our performance in:

15

  Delivering
  high quality integrated communications services to our clients;
  Developing
  new business globally, regionally and locally; and
  Retaining
  and attracting qualified creative, research, media and account talent.At
the time that the strategic reorganization was announced in the third quarter
of 2003, our business was organized into three operating divisions and a number
of specialized agencies that reported directly to our Paris headquarters.  By the end of 2003, a new organization was
in place based on two global networks, Euro RSCG Worldwide and Media Planning
Group, and a creative force in key strategic countries, Arnold Worldwide
Partners.  As a result of the strategic
reorganization:

  All of our
  specialized agencies have been either integrated into Euro RSCG Worldwide or
  Media Planning Group or, where we determined that they are engaged primarily
  in activities outside of our core areas of competence, are not strategic
  investments, do not meet our financial performance criteria or otherwise do
  not fit into our new organization, they have been sold, closed or targeted
  for sale or cessation of operations.
  A small
  number of companies within Euro RSCG Worldwide and Arnold Worldwide Partners
  that we determined are engaged primarily in activities outside of our core
  areas of competence, are not strategic investments or otherwise do not fit
  into our new organization have been sold, closed or targeted for sale or
  cessation of operations.
  Almost all
  of the marketing services agencies that were previously part of Arnold
  Worldwide Partners have been integrated into Euro RSCG Worldwide.  Arnold Worldwide Partners is now refocused
  on offering highly creative, integrated, idea-driven communication solutions
  on a local basis in the countries in which it operates.The
companies that we targeted for sale or cessation of operations in the strategic
reorganization had aggregate revenues in 2003 of approximately 200.9 million,
and a pre-tax loss from operations in 2003 of approximately  29.1 million.   We cannot assure you that any of the uncompleted dispositions
will be completed as expected or at all.
For
more information on our strategic reorganization, please see Item 5. Operating
and Financial Review and ProspectsOverviewStrategic Reorganization and
Restructuring Plan on page 22.

Organization
into three operating divisions
As
a result of our strategic reorganization, our business is now organized into
three operating divisions. Set forth below is a summary of each of these three
operating divisions.
Euro RSCG Worldwide
Our
Euro RSCG Worldwide division was founded in 1992 and is our largest operating
division and our principal international brand. Since its formation, the
division has progressively expanded into an international network of agencies.  This has been accomplished primarily through
acquisitions of independent local agencies around the world.  As of March 31, 2004, Euro RSCG Worldwide
had operations in 77 countries through agencies located in 45 countries
throughout Europe, North America, Latin America and the Asia-Pacific region, as
well as contractual affiliations with agencies in 32 additional countries.
Euro
RSCG Worldwide offers a broad range of advertising and communications services
organized as integrated communications services that combine traditional
advertising and marketing services to support major international clients
through its international network of agencies. 
These services include: integrated communications, traditional
advertising, direct marketing, corporate communications, internal communications,
sales promotion, design, multimedia interactive communications and public
relations.

16
Euro RSCG
Worldwides objective is to provide Creative Business Ideas® to its clients.
This approach focuses on providing creative ideas not just designed to address
clients specific advertising and communications needs, but also to transform
the clients businesses.  By bringing
together marketing, communications and technological expertise, Euro RSCG focuses
on developing and implementing strategies across clients businesses with the
goal of adding value and profitability to clients brands across countries and
cultures.  To deliver Creative Business
Ideas® to clients, Euro RSCG endeavors to structure its client relationships so
that ideas can be channeled through the entire communications process by a
global account team that focuses on delivering integrated marketing and
communications strategies.
In 2002,
Euro RSCG Worldwide began an internal reorganization designed to provide a more
integrated multi-disciplinary offering of services to its clients, which it
calls the Power of One. The Power of One brings together agencies in
different disciplines in the same geographic region into one business unit with
one set of objectives and management incentives linked to those
objectives.  By the end of 2003, Power
of One integrated business units had been implemented in the United States,
France, the United Kingdom, Spain, The Netherlands, as well as in Euro RSCG
Life, Euro RSCG Worldwides healthcare marketing unit.
Euro RSCG
Worldwide believes that this new integrated organization will be a positive
factor in attracting new business and developing business from existing
clients.
Media Planning Group
In recent
years, the media services industry has been affected by the increasing
segmentation of the media and audiences, the increasing importance of high
technology and the increasingly global needs of clients. In response to these
changes, we decided to reorganize our media operations as a separate,
autonomous operating company, with the size, geographic reach, expertise and
dedicated management we believe is required to succeed in the industrys new
environment.  Accordingly, we combined
our then existing media planning business with Media Planning, S.A., a private
Spanish-based media specialist, in October 1999.  We initially acquired a 45% equity interest in Media Planning,
S.A., which then changed its name to Media Planning Group S.A.  In May 2001, we acquired the remaining 55%
of Media Planning Group.
Media
Planning Group offers a broad range of media expertise, including media
strategy, media planning and buying, market research and efficiency
measurement, strategic communications development, and interactive and online
advertising through the following three specialized networks:

  Media Planning,
  an international media agency network specializing in the planning and
  purchase of traditional media, as well as the execution of marketing and media
  strategies.
  Media Contacts,
  an international network specializing in Internet-related media services,
  including the planning and purchase of online media, the formation of online
  partnerships, the creation of e-mail marketing campaigns, the implementation
  of customer relationship management solutions and the design of interactive
  television advertising campaigns.
  Arena, an
  integrated planning network providing communications consulting services
  across a broad range of media platforms.In
addition, Media Planning Group also includes Havas Sports, an agency created in
June 1999 to offer sports marketing services to sports institutions,
federations, clubs, broadcasters and advertisers.
Media
Planning Group, which is headquartered in Barcelona, currently operates in 51
countries through agencies in 20 countries throughout Europe, North America,
Latin America and the Asia-Pacific region, as well as contractual affiliations
with agencies in 31 additional countries.

17
In the
media services industry, we believe larger media services firms can often
leverage their size by obtaining more favorable terms for media purchases for
their clients and are also better able to analyze for their clients the effects
of their planning and purchasing of media due to their greater resources.  As a result of these considerations, Media
Planning Group currently intends to continue its growth by consolidating its
positions in Europe, Latin America and North America, and by expanding into new
markets in the Asia-Pacific region, primarily through strategic alliances with,
or acquisitions of, local media planning and buying companies, with the
objective of being able to match Euro RSCG Worldwides global coverage by the
end of 2005.
Arnold Worldwide Partners
Following
our acquisition of Snyder Communications in 2000, we combined Snyder
Communications Arnold Communications advertising agency with our then existing
Campus network and moved the headquarters of the operating division from
Paris to Boston to create Arnold Worldwide Partners.  Arnold Worldwide Partners consists of a
small number of agencies in the United States, Europe, Canada, Australia and
China. These agencies, located in seven countries, primarily focus on
traditional advertising services, emphasize creativity in advertising and
marketing techniques and seek to establish a strong local identity in the
markets they serve.  We believe that
Arnold Worldwide Partners agencies provide high quality creative work. In 2003,
Arnold Worldwide Partners lead agency in Boston was ranked as the second most
awarded advertising agency in the U.S. by Creative
Magazine, and as the fourth most awarded advertising agency in the
world by the Gunn Report, for the number of prizes and awards its work received
in 2003.
Seasonality
Our
business is subject to seasonal effects and we have generally experienced the
greatest level of business in the fourth quarter of each year and, to a lesser
extent, the second quarter of each year.
Competition
The
advertising and communications services industry is highly competitive, and we
expect it to remain so.  At the holding
company level, our principal competitors are other large multinational
advertising and communications services companies, including WPP Group, The
Interpublic Group of Companies, Omnicom Group, Publicis Groupe, Dentsu, and
Grey Global Group.  The actual
competition for clients, however, generally takes place at the agency
level.  Our principal agency networks in
the advertising industry are Euro RSCG Worldwide and Arnold Worldwide Partners,
which compete with other similar multinational agencies and networks of
agencies, including McCann-Erickson Worldwide, BBDO Worldwide, J. Walter
Thompson Company, Grey Worldwide, DDB Worldwide Communications, Young &
Rubicam, Ogilvy & Mather Worldwide, Leo Burnett Worldwide and Publicis
Worldwide, as well as numerous smaller agencies that operate only in a small
number of local markets, regions or countries. 
In addition, for media planning and buying clients, we compete with
divisions of other large multinational advertising and communications groups,
as well as specialized media buying and planning companies.
We compete
with these other companies and agencies to maintain existing client
relationships and to obtain new clients and assignments.  In addition, some clients require agencies
to compete for business periodically. 
We believe that we compete principally on the basis of the following
factors:

  quality and breadth of services;
  geographic coverage and diversity;
  creative reputation;
  knowledge of media;
  experience and expertise in interactive services;
  relationships with clients; and
  size and financial resources.18
We also
encounter competition from some consulting firms that have developed practices
in advertising and communications services. 
New competitors also include smaller companies such as systems
integrators, database marketing and modeling companies and telemarketers, which
offer technological solutions to advertising and communications issues faced by
clients.  In addition, the trend among
multinational companies towards consolidation of global accounts also has
required us and other companies seeking to compete effectively in the
international advertising and communications services industry to make
significant investments.  These
investments include additional offices and personnel around the world, through
acquisitions or otherwise, and new and improved technology for linking these
offices and people.
Intellectual property
In May of
2002, we purchased all rights held by Vivendi Universal Publishing to the
Havas trademark, except for specified derivative names of Havas, including
Havas Voyages, for 4.6 million. 
Before that time, we licensed the use of the name Havas Advertising
from Vivendi under annual license agreements. 
The name Havas is registered, or is in the process of being
registered, in 95 countries and the European Union.
We also have
trademark protections for each of our three divisional names.  Our Euro RSCG Worldwide name is a
registered trademark owned by us and is registered, or is in the process of
being registered, in 107 countries. Our Arnold Worldwide name is a registered
trademark owned by us and registered in the U.S.  Our Arnold Worldwide Partners name is a registered trademark
owned by us and is registered, or is in the process of being registered, in
four countries and the European Union. 
Our Media Planning Group name is a registered trademark owned by us
and is registered, or is in the process of being registered, in 38 countries
and the European Union.
Government regulation
Our
agencies are located in numerous countries with different levels of
governmental regulation relating to the advertising and communications services
industry, including laws or regulations that:

  prohibit various practices in our industry;
  restrict the media, content, form or duration of
  advertising;
  restrict the collection, use and disclosure of
  personal information;
  assess fees, taxes or tariffs on advertisements;
  allow individuals to bring legal action against
  companies for allegedly violating laws and regulations; or
  otherwise harm our business, financial condition and
  operating results.For
example, in France, media-buying activities are subject to specific regulations
following the adoption in 1993 of Law No. 93-122, known as the Loi Sapin.  The Loi Sapin profoundly redefined
long-standing practices in the media industry in France and in particular the
traditional role of advertising agencies. 
Since the introduction of the Loi Sapin, advertising agencies in
France are no longer able to purchase advertising space from media providers
and then resell the space on different terms to advertisers.  In addition, media providers must bill
advertisers directly for advertising space and agencies cannot receive any
commissions or discounts directly from media providers.  The Loi Sapin has had in the past, and we
expect that it will continue to have, a significant negative financial impact
on our media-buying activities in France.
As another
example, in some of the markets in which we operate, including the United
States, there are laws and regulations that impose significant liabilities upon
advertisers and advertising agencies for false or misleading advertising.  If any advertising that we create is found
to be false or misleading, we could face potential liability.

19
As another
example, laws and regulations in the European Union, the United States and a
number of U.S. states limit the collection, use and disclosure of personal
information, including personal information regarding Internet users, students,
minors and personal health matters.  Due
to our significant marketing services business, which relies on the collection
and use of personal information, these laws and regulations, and any future
laws and regulations, may substantially harm our operations or significantly
reduce our revenues from marketing services. 
A purported class action lawsuit was filed against one of our
subsidiaries, American Student List LLC, in the United States District Court
for the Middle District of Florida on February 18, 2004. The lawsuit alleges
that American Student List obtained, disclosed and used information from the
Florida Department of Highway Safety and Motor Vehicles in alleged violation of
the U.S. Drivers Privacy Protection Act. 
The named plaintiff seeks to represent a class of 876,665 individuals
whose personal information from the Florida Department of Highway Safety and
Motor Vehicles was obtained, disclosed or used for allegedly impermissible uses
by American Student List without the express consent of the individual.  The lawsuit seeks certification as a class
action, liquidated damages in the amount of $2,500 per alleged violation of the
Act, as well as punitive damages, attorneys fees and costs, and injunctive and
other relief.  Although American Student
List intends to defend itself vigorously against this lawsuit, its ultimate
resolution cannot presently be determined. 
An unfavorable outcome could have a material adverse effect on our
business, financial condition or results of operations.
Properties
We lease,
and in a few locations own, office space in various cities in which we do
business throughout the world.
In April
2003, we relocated our headquarters to Suresnes, France, where we leased
approximately 228,000 square feet of space for our principal corporate office
and various of our agencies.  The lease
expires on February 21, 2012.  Our
previous headquarters were located in Levallois-Perret, France, where our
principal corporate office and various of our agencies occupied approximately
246,000 square feet.  Our lease at
Levallois-Perret expired on April 30, 2003.
Our Arnold
Worldwide division headquarters are located in Boston, Massachusetts, where the
division and various of its agencies occupy approximately 178,000 square
feet.  The lease expires on August 31,
2014.
Our Euro
RSCG Worldwide division headquarters are located in New York, New York, where
the division and various of our agencies occupy approximately 137,900 square
feet. The lessee under the lease is one of our wholly owned subsidiaries and
our company has guaranteed this subsidiarys obligations under the lease. The
lease expires on December 31, 2007.
Our Media
Planning Group division headquarters are located in Barcelona, Spain, where the
division and various of our agencies occupy approximately 18,740 square
feet.  Of this space, the division owns
approximately 2,350 square feet and leases approximately 16,389 square feet.  The lease expires on October 23, 2005.  Upon expiration of the lease, the division
has a right to purchase this space for nominal consideration.
In addition
to these leases, we have entered into leases for our principal offices located
in the United States, the United Kingdom and France. In the United States, we
lease office space in over 30 cities. The leases for our U.S. offices expire on
various dates ranging from May 2004 to December 2015. In the United Kingdom, we
lease office space in over 15 cities. 
Our U.K. leases expire on various dates ranging from June 2004 through
December 2018.  In France, we lease
office space in over 15 cities.  Our
French leases expire on various dates ranging from August 2004 to January 2011.
We believe
that all of our facilities are suitable for their use, and that we generally
have sufficient space for our existing needs and expected near-term growth.

20
Marketing
channels
We market
our services, including our integrated communications services, primarily by
evaluating the advertising and communications needs of our clients and
prospective clients and by demonstrating to our clients and prospective clients
how we propose to meet those needs.  Our
development of strong brands and a global reputation are key elements of our
marketing strategy.
ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The
following discussion of our results of operations and financial condition
should be read together with our consolidated financial statements and the
accompanying notes included elsewhere in this annual report.  When comparing performance between years, we
sometimes discuss non-GAAP financial measures such as organic revenue
growth.  The nature of these amounts is
described more fully in Results of Operations below.
OVERVIEW
We are a
holding company.  We conduct our
business primarily through our three operating divisions, Euro RSCG Worldwide,
Media Planning Group and Arnold Worldwide Partners.  Through these operating divisions, we offer a broad range of
advertising and communications services, including integrated communications,
traditional advertising, direct marketing, media planning and buying, corporate
communications, internal communications, sales promotion, design, television
sponsorship, human resources, multimedia interactive communications and public
relations.  We have operations in 88
countries through our agencies located in 45 countries throughout Europe, North
America, the Asia-Pacific region and Latin America, as well as contractual
affiliations with agencies in 43 additional countries.  We provide these services to a wide variety
of clients, and are not significantly dependent on any single client or
industry group.  We operate in one
reportable business segment, advertising and communications services.
During
2003, we continued to experience difficult economic and industry
conditions.  As a result, our revenue
for 2003 declined by 15.8%, 6.4% on a constant currency basis, and 5.7% on an
organic basis, compared with 2002.  In
response to these difficult conditions, we implemented a financial
restructuring and a strategic reorganization plan to significantly reduce our
cost structure.
Our
operating margin before goodwill impairment and restructuring charges was
negatively impacted by poor revenue forecasting at Euro RSCG, which late in the
year turned out to be over-optimistic. 
Our revenues were therefore lower than anticipated, resulting in a cost
structure that was too high.  In
response, we increased our initially planned headcount reduction under our
worldwide restructuring plan to better align our cost structure to our revenues
and we changed our budgeting and internal financial reporting procedures.  Margins were also weakened by the underperformance
of 50 companies that we identified as impeding our revenue and earnings
growth.  These companies, mainly located
in the United Kingdom, the United States and Northern Europe, were determined
to be under-performing due to poor management or inappropriate market
positioning or strategies.  As part of
our strategic reorganization, these companies have either been restructured
with changes in management, closed, sold or have been targeted for sale.
When we
discuss amounts on a constant currency basis, the prior period results are
adjusted to remove the impact of changes in foreign currency exchange rates
during the current period that is being compared to the prior period.  The impact of changes in foreign currency
exchange rates on prior period results is removed by converting the prior
period results into euro at the average exchange rate for the current
period.  Our management believes that
discussing results on a constant currency basis allows for a more meaningful
comparison of current-period results to such prior-period results.
We derive
organic revenue change for a specified period by adjusting reported revenue for
the prior period by:

  excluding the impact of foreign currency effects
  over the course of the period to provide revenues on a constant currency basis,
  as described in the preceding paragraph;21

  excluding the impact of acquisitions, sales and
  closures that were completed after the first day of the prior period by
  adding the pre-acquisition revenues of acquired businesses to, and
  subtracting the pre-sale or pre-closure revenues of sold or closed businesses
  from, the prior period revenues; and
  comparing the resulting adjusted prior period
  revenue to the reported revenue for the specified period.Our
management believes that discussing organic revenue, excluding the effects of
the above factors, provides a better understanding of our revenue performance
and trends than reported revenue because it allows for more meaningful
comparisons of current-period revenue of our ongoing operations to that of
prior periods.  Our management also
believes that organic revenue determined on a generally comparable basis is a
common measure of performance in the businesses in which we operate.
Significant
events for us during 2003 included:
Economic and
industry conditions
2003 was a
very difficult and disappointing year for us and for much of the communications
sector as a whole.  In 2003, the global
economy remained depressed, with the war in Iraq and the SARS epidemic adding
to the climate of uncertainty and tension. 
Market conditions continued to deteriorate in the first half of 2003,
particularly in the United States and Europe, following their dramatic decline
in 2001 and additional decline in 2002. 
Many of our clients continued to scale down their advertising budgets,
while also maintaining strong pressure on fee and commission rates in reaction
to economic weakness and uncertainty. Many of our clients in the United States
and the United Kingdom also called a temporary halt to their spending on
marketing services.  Some of our clients
re-negotiated their contracts with us, which resulted in lower fees and
commissions for our services.  We also
experienced client losses that negatively impacted our revenue and profitability
in the United States.  Although
advertising spending increased in the second half of the year in the United
States, Latin America and Asia, this was not sufficient to offset the slowdown
in the European market, the sharply lower revenue generated from most marketing
services businesses, and the impact of client losses in the United States.  The effects of this difficult environment
had an adverse impact on our revenue and profitability in 2003.
Strategic
Reorganization and Restructuring Plan
In
the fourth quarter of 2003, we completed the strategic reorganization of our
business operations that we announced in September 2003.  We initiated the strategic reorganization to
strengthen our integrated communications capability, to simplify our
organizational structure, and to promote greater synergies among our agencies
by refocusing our activities around our two global networks, Euro RSCG
Worldwide and Media Planning Group, and our creativity-focused division, Arnold
Worldwide Partners.  Our management
believes that the strategic reorganization will improve our financial
performance, and will reinforce and improve our performance in delivering high
quality services to our clients, developing new business globally, regionally
and locally, and retaining and attracting qualified creative, research, media
and account talent.
As
part of our strategic reorganization, we targeted for sale or cessation of
operations a number of companies that are not engaged primarily in activities
within our core areas of competence, are not strategic investments, did
not meet our financial performance criteria or otherwise do not fit into our new organization.  These companies had aggregate revenues in
2003 of approximately 200.9 million, of which 146.2 million is reflected in
discontinued operations, and a pre-tax loss from operations of 29.1 million
for 2003.  As of the end of 2003,
eight companies had been closed and one company had been sold.  In the first four months of 2004, another
five companies have been sold.  We cannot assure you that any of
these companies that we have not sold to date will be sold on expected terms or
at all.

22
During the
third and fourth quarters of 2003, we also implemented a restructuring plan,
primarily in the United States and the United Kingdom, to reduce costs.  For 2003, we recorded approximately 92.4
million in pre-tax restructuring and other charges relating to this worldwide
restructuring, including 37.8 million to restructure our real estate lease
obligations and 39.4 million to reduce our headcount by approximately 1,150.  This headcount reduction reflects an
increase in our initially planned reduction in headcount undertaken at the end
of 2003 to better align our cost structure to our revenues in response to lower
than expected revenues at Euro RSCG Worldwide. 
These personnel positions were eliminated or identified for elimination by December 31, 2003, and the
remaining reserve balance of approximately 25.5 million reflects costs
relating to severance and other termination benefits to be settled in
2004.

This
reorganization will also affect our 2004 consolidated statements of
operations.  As of December 31, 2003,
reserves associated with our 2003 restructuring program were 59.7
million.  Of this amount the remaining
balance in occupancy and facilities-related reserves of 31.8 million at
December 31, 2003 relates to non-cancelable lease commitments in excess of
estimated sublease income for abandoned facilities that will be paid out over
the remaining lease periods.  The
completion of the plan will result in the abandonment and closure of additional
offices in Great Britain and North America and the termination of various
remaining lease obligations and associated termination costs.  As a result of our strategic reorganization
and worldwide restructuring undertaken in 2003, we estimate that we lowered our
cost structure for 2004 by 126 million compared with 2003, consisting of 70
million from ongoing businesses and 56 million from businesses targeted for
sale or cessation of operations.
Re-Purchase
of Redemption Option in Our Convertible and/or Exchangeable Bonds Due on
January 1, 2009On December
1, 2003, the holders of our convertible and/or exchangeable 4% bonds, maturing
on January 1, 2009, accepted our offer of a cash payment of 1.20 per bond,
payable in cash in a single installment on January 1, 2004, in exchange for a
waiver of their option to cause us to redeem the bonds at par value plus
accrued interest on January 1, 2006. 
Our total payment amounted to approximately 51.1 million, which is
reflected in full in our financial statements for 2003.  As a result of this transaction, the
maturity date of this 450 million series of bonds is postponed with certainty
until January 1, 2009.  We believe that
this transaction significantly improved our financial flexibility by reducing
our refinancing needs in 2006.
Discontinued
Operations
Our
discontinued operations had a pre-tax loss from operations of 29.1 million for
2003 in the aggregate and we recorded an aggregate loss on disposal of 75.9 million
in 2003 relating to companies we targeted for sale or cessation of operations
in our strategic reorganization and worldwide restructuring program.
Management
Changes
In
September 2003, Jim Heekin was appointed as President and Chief Operating
Officer of Euro RSCG Worldwide.  Before
joining Euro RSCG Worldwide, Mr. Heekin was Chairman and Chief Executive
Officer of McCann-Erickson WorldGroup, part of The Interpublic Group of
Companies, Inc., since March 2000, after serving as Chairman and Chief
Executive Officer of McCann-Erickson Worldwide from January 2000 to March
2000.  In January 2004, Jim Heekin was
appointed as Chairman and Chief Executive Officer of Euro RSCG Worldwide.  He replaced Bob Schmetterer, who retired as
of December 31, 2003 after 33 years in the industry.
As part of
our reorganization, we have made various other appointments and changes to our
management within our operating divisions. 
Our reorganization was designed to simplify our management, while refocusing
it on certain specific responsibilities, including, among others, finance,
talent management, client development, innovation, creativity and efficiency
and productivity.
OUTLOOK
Our
results of operations are dependent upon:

  maintaining and growing
  our revenue;
  retaining existing clients
  and gaining new clients;23

  overall economic and
  industry conditions;
  continuously aligning our
  costs to our revenue; and
  retaining and attracting
  key personnel.For a discussion of these and other factors
that could affect our results of operations and financial conditions, see
Forward-Looking Statements and Item 3. Key InformationRisk Factors.
As
discussed above, 2003 was a difficult year for us, reflecting continued weak
demand for advertising and communications services in many of our markets.  However, we noted a positive trend in our
revenues toward the end of 2003 and in the first quarter of 2004.
For 2004,
industry forecasters predict that advertising and marketing services spending
will increase by 3.2% in eight of the worlds largest advertising markets: the
U.S., Canada, France, Germany, Italy, Spain, the U.K. and Japan.  (Source: Zenith Optimedia). Although we
cannot assure you that this forecast ultimately will prove to be accurate, our
management believes that conditions for the industry as a whole in 2004 should
improve compared with 2003.  We believe
that a recovery in the industry will be led by the U.S. and the Asia-Pacific
region, with Europe and Latin America lagging behind.  In addition, we expect the Olympic games and a presidential
election campaign in the U.S. to help boost advertising and marketing spending
in 2004.
Our
performance in 2003 has lagged that of the industry and may continue to do so
in the future.  As discussed above, we
have responded to our recent disappointing performance by completing our
strategic reorganization and undertaking our global restructuring.
We
believe that a number of industry trends have had and will continue to have a
fundamental impact on our business and prospects.  These trends include:

  Continued client demand for integrated
  communications services, which consists of coordinating traditional
  advertising services with marketing, interactive, corporate communications
  and other communications services.  In
  response to this trend, we reorganized Euro RSCG beginning in 2002 by
  bringing together agencies in different disciplines, such as advertising,
  marketing services, interactive and corporate communications, in the same
  geographic region, into one Power of One functional business unit having
  one set of objectives and management incentives;
  Globalization of many industries and the resulting
  globalization of the advertising and communications services industry and
  polarization of our industry into a relatively small number of global
  networks and a large number of smaller local and regional agencies.  We have pursued, and continue to pursue, a
  strategy of expanding and consolidating our positions in various markets,
  including through targeted acquisitions or strategic alliances to take
  advantage of opportunities to increase the geographic scope and service
  offerings of our existing networks in response to this trend;
  Continued fragmentation of media audiences and
  proliferation of media channels, increasing the opportunities to reach
  consumers, but also increasing the complexity of doing so. As a result of
  this trend, we continue to invest in market research and efficiency measurement
  tools and techniques, primarily through Media Planning Group;
  Growth of marketing services, as the rapid
  development of new communications technologies has enabled advertisers to
  reach their intended audiences using means that are more targeted than
  traditional mass marketing. In response to this trend, we expanded our
  marketing services capabilities over the past several years primarily through
  acquisitions, including the acquisition of Snyder Communications in 2000;
  Continued evolution of the Internet, interactive
  television and other emerging media as a new market for advertising and
  communications services. In response to this trend, we have expanded our
  multimedia interactive communications services over the past several years,
  including through acquisitions, such as the acquisition in 2001 of the Snyder
  Communications interactive professional services business, Circle.com;24

  Evolution of media planning and buying from an
  ancillary service within traditional advertising agencies into a specialized
  autonomous service. In response to this trend, we created a separate
  division, Media Planning Group, in 1999 to handle our media planning and
  buying activities. We believe that operating these activities as separate
  entities rather than as departments within our agencies is the most effective
  structure to capitalize on growth opportunities in the media business;
  Pressure on fees, particularly as client procurement
  departments, as opposed to marketing departments, are increasingly involved
  in negotiating pricing.  To counteract
  this trend, we have sought to increase revenues by expanding the geographic
  markets in which we represent, and the categories of services we provide to,
  our clients, to continually adapt our costs to the fees negotiated with our
  clients, and to attempt to negotiate fees that include incentives based on
  the effectiveness of our advertising and marketing campaigns; and
  Increasing demands by major international clients
  for exclusivity in their relationships with advertising and communications
  services groups, calling into question the traditional advertising holding
  company structure made up of multiple independent international networks
  representing clients with competing products and services within the same
  group.  As a result of this trend, we
  have decided to make Euro RSCG our unique global advertising agency network,
  with Arnold Worldwide Partners concentrating its efforts on developing a
  strong creative presence in local markets in a smaller number of countries.SEASONALITY
Our
business is subject to seasonal effects. 
We have generally experienced the greatest level of business in the
fourth quarter of each year and, to a lesser extent, in the second quarter of
each year.  As a result, cash, accounts
receivable, accounts payable and accrued expenses are typically higher on our
year-end balance sheet than at the end of any of the preceding three quarters.
CRITICAL ACCOUNTING POLICIES,
ESTIMATES AND JUDGMENTS
Our
financial statements contained in this report have been prepared in accordance
with U.S. generally accepted accounting principles, which we refer to as U.S.
GAAP.  The preparation of these
financial statements requires estimates and judgments that affect the reported
amounts of assets, liabilities, revenue and expenses as well as the disclosure
of contingent assets and liabilities. 
Our significant accounting polices are described in the notes to the
financial statements.  We believe that,
of our significant accounting policies, the following may involve a higher
degree of judgment or complexity:

  revenue recognition;
  allowances for doubtful accounts;
  restructuring charges;
  contingent acquisition obligations;
  impairment of goodwill;
  impairment of long lived assets and accounting for
  discontinued operations; and
  deferred taxes.25
Revenue
recognition 
Substantially all of our revenue is derived from fees and commissions for
advertising and communication services and for the planning and purchase of
media.  Revenue is recognized on the
date that the services are performed, costs are incurred for production,
the media is aired or published and when collection is reasonably assured.  Some of our contractual arrangements with
clients also include performance incentives that allow us to receive additional
payments based upon our performance for the client, measured against specified
qualitative and quantitative objectives. 
We recognize the incentive portion of the revenue under these contractual arrangements
when these qualitative and quantitative goals are achieved in accordance with the arrangements.

Allowance
for doubtful accounts We maintain allowances for
doubtful accounts for estimated losses that result from the inability of our
customers to make required payments.  We
base our allowances on the likelihood of recoverability of accounts receivable
based upon past experience, reviews of aging and analysis of specific
accounts.  If economic or specific
industry trends worsen beyond our estimates, we will increase our allowances
for doubtful accounts by recording additional expense.
Restructuring
charges  During 2003, we recorded significant
charges in connection with our strategic reorganization and worldwide
restructuring plan.  The related reserves
reflect many estimates, including those pertaining to employee severance and
other personnel-related costs and obligations under real estate leases, net of
estimated sublease income.  We reassess
the reserve requirements to complete our restructuring plan at the end of each
reporting period.  Actual experience has
been and may continue to be different from these estimates.  As real estate market conditions change, we
may have further refinements in the future, either upward or downward, to the
original charge recorded.  As of
December 31, 2003, reserves associated with our 2003 and 2001 restructuring
programs were 59.7 million and 15.4 million, respectively, and as of December
31, 2002, reserves associated with our 2001 restructuring plan were 21.2 million.  For more information, see Note 7 to our 2003
consolidated financial statements beginning on page F-16 of this annual report.
Contingent
acquisition obligations  Certain of our acquisition
contracts provide for contingent consideration based on earnings, which we
refer to as an earn-out.  We utilize
earn-out structures in an effort to minimize our risk associated with potential
future negative changes in the performance of the acquired company.  In addition, owners of interests in certain
of our subsidiaries or affiliates have the right, in certain circumstances, to
require us to purchase their interests, which we refer to as a buy-out.
We
currently estimate that the amount of contingent future earn-out and buy-out
payments we will be required to make for past acquisitions, assuming the
acquired companies perform over the relevant earn-out and buy-out periods at
their current profit levels, is 155.8 million as of December 31, 2003.  The ultimate amounts payable are dependent
upon future results of the acquired companies. 
In accordance with U.S. GAAP, we do not record a liability for these
items on our balance sheets until the applicable contingency is resolved and
the additional payment is determinable. 
However, if the contingent consideration is conditioned on the
employment of any selling shareholder, we accrue compensation expense based on
the estimated contingent payment. 
Actual results for these companies may differ from our estimates, in
which case the amounts we are required to pay may be different than the amounts
we estimate.  These contingent
obligations also change from period to period as a result of earn-out or
buy-out payments made during the current period, changes in the previous
estimate of the acquired companies performances, changes in foreign exchange
rates and the addition of new contingent obligations resulting from
acquisitions with earn-out or buy-out structures completed in the current
period.  These differences could be
material.  See Liquidity and capital
resources  Contractual obligations below.
Impairment
of goodwill Beginning
on January 1, 2002, in accordance with the provisions of SFAS No. 142, we
ceased amortizing goodwill or excess basis related to equity-method
investments.  Instead, we began testing
intangible assets, including goodwill, at least annually for impairment by
comparing the fair value of our reporting units over their carrying values, in
accordance with SFAS No. 142.  The fair
value of the reporting units has been computed using the discounted cash flow
method, and is based on estimates of future earnings.  Actual earnings may differ from our estimates.  The excess of the carrying amount over the
fair value is deemed to be impaired and is written off.  In 2002, we completed the transitional and
the first annual impairment tests of goodwill and intangible assets with
indefinite lives.  As a result, we wrote
off a total of 1,483.3 million of goodwill in 2002 of which 1,120.8 million
is reflected as Cumulative effect of accounting change as the last item on
the consolidated statement of operations before arriving at net income.  In 2003, we wrote off 69.5 million of
goodwill.

26
Impairment
of long lived assets and accounting for discontinued operationsThe long lived assets are
reviewed for impairment whenever events or circumstances indicate their
carrying values may not be recoverable. 
Whenever such events or circumstances arise, an estimate of the future
cash flows is compared to the assets carrying value to determine if an
impairment exists pursuant to the requirements of SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived-Assets. 
In 2003, we wrote off 20.7 million of intangible assets.
In
accordance with SFAS 144, we include in assets and liabilities held for sale
and in discontinued operations the assets and liabilities that meet certain
criteria with respect to our plans for their sale or abandonment. Depreciation
and amortization cease when the asset meets the criteria to be classified as
held for sale. A components results of operations are presented as
discontinued operations for all periods if:

  
  a planned or completed disposal involves a component
  of our company whose operations and cash flows can be distinguished
  operationally and for financial reporting purposes;
  
  such operations and cash flows will be (or have
  been) eliminated from our ongoing operations; and
  
  we will not have any significant continuing
  involvement in the component.Operating
losses from discontinued operations are recognized in the period in which they
occur. Long-lived assets (or groups of assets and related liabilities) classified
as held for sale, are measured at the lower of carrying amount or fair value
less cost to sell.
Deferred
taxesWe record deferred tax assets and liabilities
using enacted tax rates for the effect of temporary differences between the book
and tax bases of assets and liabilities. 
If enacted tax rates change, we will adjust our deferred tax assets and
liabilities through the provision for income taxes in the period of the change
to reflect the enacted tax rate expected to be in effect when the deferred tax
items reverse.  A one percentage point
change in the enacted tax rates would increase or decrease net income by
approximately 2.1 million.
In
accordance with SFAS No. 109, Accounting for Income Taxes, we record a
valuation allowance on deferred tax assets when it is more likely than not that
all or a portion of deferred tax assets will not be realized.  Forming  a conclusion that a valuation allowance is not needed is difficult
when there is negative evidence such as cumulative losses in recent years.  Therefore, cumulative losses weigh much more
heavily in the overall assessment.  In
2003, we determined that the positive evidence was not sufficient to overcome
such negative evidence and concluded that it was therefore appropriate to
establish a full valuation allowance for our deferred tax assets related to our
U.S. and French tax groups in an amount of 164.2 million.  Nevertheless, we continue to believe that
business will achieve profitability in future years, and that we will be able
to utilize these tax assets to minimize U.S. and French taxes in the future.
We base our
estimates and judgments on historical experience and other factors that we
believe to be reasonable under the circumstances.  Actual results or outcomes may differ from these estimates.
RESULTS OF OPERATIONS
Our
financial statements contained in this report have been prepared in accordance
with U.S. GAAP.  When comparing
performance between years, however, we also discuss non-GAAP financial measures
such as the impact that foreign currency rate changes, acquisitions/ dispositions
and organic growth have on reported results.
Explanation
of Key Line Items
Net revenues.Our revenues consist of fees and
commissions received from our clients. 
Revenues are presented net of amounts that our clients pay to us to
cover costs that are incurred on their behalf with third parties, such as for
the purchase of television and radio time or print advertising space and
production costs.

27
Compensation
and related costs.Our
compensation costs consist principally of salaries, bonuses and benefits to
employees.  Compensation costs do not
include stock-based compensation. 
Compensation costs also do not include earn-out or buy-out payments made
or accrued to employees who were shareholders of businesses we acquired.  See Compensation to former shareholders of
acquired businesses below. 
Compensation costs include, however, all other compensation paid or
payable to such individuals.

Compensation
to former shareholders of acquired businesses.  This item consists of earn-out and buy-out
payments made or accrued to employees who were shareholders of businesses we
acquired, to the extent that such payments are conditioned on the continued
employment of those employees.

Amortization
of goodwill and other intangible assets.  Prior to January 1, 2002, this item
consisted primarily of the amortization of the excess of acquisition costs over
the fair value of the assets acquired and liabilities assumed (goodwill) and
the amortization of the value of other intangibles acquired in acquisitions
over their estimated useful life.  Prior
to January 1, 2002, goodwill was amortized, using the straight-line method,
over periods from seven to 40 years. 
Beginning on January 1, 2002, this item consists entirely of the
amortization of other intangibles over their estimated useful life.

Goodwill
and other intangible impairment.  Beginning on January 1, 2002, in accordance
with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, we
no longer amortize goodwill or excess basis related to equity-method
investments, but rather we test these assets at least annually for impairment
by comparing the fair value of the reporting units over their carrying
values.  Since 2002, we have been
applying SFAS 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, to the other intangibles which require us to review the intangibles
for impairment whenever events or circumstances indicate their carrying values
may not be recoverable.  Therefore,
since 2002, this item consists of the goodwill impairment charge as determined
at the end of the period as well as the other intangible impairment charge.

Discontinued
Operations.  In
accordance with SFAS 144, the results of operations of the businesses we sold
or disposed of as at December 31, 2003 and businesses classified as Held for
sale have been reported as Discontinued in the current and prior
periods.

Restructuring
and other charges. 
These charges are associated with our strategic reorganization and
worldwide restructuring plan in 2003 and our 2001 restructuring plan, and
consist primarily of employee severance and other personnel-related costs in
connection with employee terminations, occupancy and facilities-related costs
in connection with asset write-downs and other charges related primarily to
lease abandonment, lease terminations and related exit costs.

28


Results
of Operations
The
following table summarizes certain financial information for our company:
( in thousands, except
  per share amounts)2003
  
  2002
  
  2001Net revenues
  
  
  1,525,102
  
  
  1,811,169
  
  
  1,955,530Operating expenses:Compensation and related costs
  
  
  (932,472
  )
  
  (1,060,533
  )
  
  (1,176,740
  )Stock-based compensation
  
  
  (5,420
  )
  
  (12,949
  )
  
  (18,658
  )General and administrative non-payroll costs
  
  
  (474,237
  )
  
  (556,330
  )
  
  (618,162
  )Compensation to former shareholders of acquired
  businesses
  
  
  (2,543
  )
  
  (5,993
  )
  
  (19,814
  )Amortization of goodwill and other intangible assets
  
  
  (31,119
  )
  
  (33,376
  )
  
  (144,704
  )Goodwill and other intangible impairment
  
  
  (90,238
  )
  
  (362,518
  )
  
  Restructuring and other charges
  
  
  (98,381
  )
  
  3,483
  
  
  (126,406
  )Total operating expenses
  
  
  (1,634,410
  )
  
  (2,028,216
  )
  
  (2,104,484
  )Operating loss
  
  
  (109,308
  )
  
  (217,047
  )
  
  (148,954
  )Interest expense
  
  
  (77,552
  )
  
  (76,982
  )
  
  (69,374
  )Interest income
  
  
  28,070
  
  
  27,848
  
  
  28,414Exchange rate loss
  
  
  (9,255
  )
  
  (776
  )
  
  (679
  )Net gain on trading securities
  
  
  8,982
  
  
  9,703
  
  
  5,717Other
  
  
  (53,446
  )
  
  (1,342
  )
  
  (5,130
  )Financial expense-net
  
  
  (103,201
  )
  
  (41,549
  )
  
  (41,052
  )Net loss from operations before income tax
  
  
  (212,509
  )
  
  (258,596
  )
  
  (190,006
  )Provision for income tax
  
  
  (107,649
  )
  
  (38,958
  )
  
  4,383Minority interests
  
  
  (5,495
  )
  
  (14,802
  )
  
  4,272Equity in earnings (losses) of investees
  
  
  710
  
  
  (9
  )
  
  5,684Loss from continuing operations
  
  
  (324,943
  )
  
  (312,365
  )
  
  (175,667
  )Income (loss) from discontinued operations (net of
  tax)
  
  
  (98,082
  )
  
  47
  
  
  758Net loss before effect of change in accounting
  principle
  
  
  (423,025
  )
  
  (312,318
  )
  
  (174,909
  )Cumulative effect of accounting change
  
  
  
  
  
  (1,120,800
  )
  
  Net Income (loss)
  
  
  (423,025
  )
  
  (1,433,118
  )
  
  (174,909
  )Net Income (loss) before effect of change in
  Accounting principle per share:Basic and diluted-continuing operations
  
  
  (1.09
  )
  
  (1.06
  )
  
  (0.62
  )Basic and diluted-discontinued operations
  
  
  (0.33
  )
  
  (0.00
  )
  
  (0.00
  )Cumulative effect of accounting change per shareBasic and diluted
  
  
  
  
  
  (3.80
  )
  
  Net loss per shareBasic and diluted
  
  
  (1.42
  )
  
  (4.86
  )
  
  (0.62
  )The
following are some of the key factors that drove our financial results in 2003:
Operating
Loss


  Lower foreign exchange rates for 2003, primarily
  regarding the U.S. dollar and the U.K. pound, versus the euro that resulted
  in lower euro revenue and expense compared with 2002;
  Organic net revenue declines, primarily as a result
  of the continued softness in demand for our advertising and communications
  services by our clients, continued pressure on fee and commission rates by
  our clients and client losses;
  Restructuring charges of 92.4 million that were
  recorded in 2003 in connection with our 2003 strategic reorganization and
  worldwide restructuring program; and
  A goodwill impairment charge of 69.5 as a result of
  the elimination of one of our reporting units in connection with our
  strategic reorganization.Other
Financial (Expense)

  An expense of 61.8 million was recorded relating to
  the payment we made on January 1, 2004 to holders of our convertible and/or
  exchangeable 4% bonds, maturing on January 1, 2009, in exchange for their
  acceptance of our offer to purchase a waiver of their option to cause us to
  redeem the bonds at par value plus accrued interest on January 1, 2006; and
  During 2003, we repurchased 5,290,000 of our
  convertible bonds issued in December 2000, resulting in a gain of 12.2
  million.29

Discontinued
Operations

  In the fourth quarter of 2003, we completed the
  strategic reorganization of our business operations that was announced in
  September 2003.  In accordance with
  SFAS 144, the results of the businesses sold or to be disposed of at December
  31, 2003 and businesses classified as held for sale have been reported as
  Discontinued in the current and prior periods in this annual report.REVENUE
We
offer advertising and communications services in 88 countries through our
agencies located throughout Europe, North America, the Asia-Pacific region and
Latin America, and through contractual affiliations with other agencies in a
number of countries.  The following
analysis provides further detail on revenue:
2003 vs. 2002

Our
net revenues were 1,525.1 million for 2003, a decrease of 15.8% compared with
1,811.2 million for 2002.  Our revenues
were impacted by reduced demand for advertising and communications services
worldwide, reflecting the continued global economic downturn in most of our
major geographic markets and the U.S. dollars decline against the euro.  Excluding the currency effect, the decline
was 6.4%.  Excluding the effects of
changes in the scope of consolidation, such as acquisitions and dispositions (a
net decrease of 12.3 million) and currency fluctuations (a net decrease of
181.1 million), our net revenues decreased by 92.7 million.

The
following table sets forth a geographic breakdown of our revenues for 2003 and
2002.  In preparing the table, we have
allocated revenues to the country or region of the subsidiary realizing the
revenues.



Region(1)
  
  2003
  % of
  Total
  
  2002 
  % of
  TotalNorth America
  
  
  42
  %
  
  44
  %Europe (excluding France)
  
  
  33
  %
  
  32
  %France
  
  
  17
  %
  
  16
  %Asia Pacific region
  
  
  4
  %
  
  4
  %Latin America
  
  
  4
  %
  
  4
  %TOTAL
  
  
  100
  %
  
  100
  %(1) Because our revenues from the Middle East and
  Africa represent less than 1% of our total revenues, our geographic breakdown
  of revenues currently includes, and historically has included, revenues in
  the western part of the Middle East and in Africa with those of Europe, and
  revenues in the eastern part of the Middle East with those of the
  Asia-Pacific region.As
in 2002, North America, Europe (excluding France) and France remained our most
important regions in terms of revenues in 2003.  However, organic revenue declined sharply in the United Kingdom
and was also lower in Europe excluding France. 
Responding to this situation, at the end of the first half of fiscal
2003, we identified for sale or closure 50 companies, mainly in the United
Kingdom, the United States and Northern Europe, which were underperforming due
to unsatisfactory management or inappropriate market positioning or strategies.
Our
operating margin before goodwill impairment and restructuring charges was
negatively impacted by poor revenue forecasting at Euro RSCG, which late in the
year turned out to be over-optimistic. 
Our revenues were therefore lower than anticipated, resulting in a cost
structure that was too high.  In
response, we increased our initially planned headcount reduction under our
worldwide restructuring plan to better align our cost structure to our revenues
and we changed our budgeting and internal financial reporting procedures.  Margins were also weakened by the
underperformance of 50 companies that we identified as impeding our revenue and
earnings growth.  These companies,
mainly located in the United Kingdom, the United States and Northern Europe,
were determined to be under-performing due to poor management or inappropriate
market positioning or strategies.  As
part of our strategic reorganization, these companies have either been
restructured with changes in management, closed, sold or have been targeted for
sale.

30

2002 vs. 2001
Our
net revenues were 1,811.2 million for 2002, a decrease of 7.4% compared with
1,955.5 million for 2001.  Our revenues
were impacted by reduced demand for advertising and communications services
worldwide, reflecting the generally negative economic conditions prevailing in
most of our major geographic markets. 
In particular, demand by our clients in the technology, media and
telecommunications sectors declined dramatically.  Excluding the effects of changes in the scope of consolidation,
such as acquisitions and dispositions (a net increase of 58.6 million) and
currency fluctuations (a net decrease of 82.7 million), our net revenues
decreased by 120.2 million.
The
following table sets forth a geographic breakdown of our revenues for 2002 and
2001.  In preparing the table, we have
allocated revenues to the country or region of the subsidiary realizing the
revenues.



Region(1)
  
  2002
  % of
  Total
  
  2001 
  % of
  TotalNorth America
  
  
  44
  %
  
  46
  %Europe (excluding France)
  
  
  32
  %
  
  28
  %France
  
  
  16
  %
  
  17
  %Asia Pacific region
  
  
  4
  %
  
  4
  %Latin America
  
  
  4
  %
  
  5
  %TOTAL
  
  
  100
  %
  
  100
  %(1) Because our revenues from the Middle East and
  Africa represent less than 1% of our total revenues, our geographic breakdown
  of revenues currently includes, and historically has included, revenues in
  the western part of the Middle East and in Africa with those of Europe, and
  revenues in the eastern part of the Middle East with those of the
  Asia-Pacific region.As
in 2001, North America, Europe (excluding France) and France remained our most
important regions in terms of revenues in 2002.  Our revenues in North America were impacted by the persistent
weakness of the U.S. economy, particularly in the first half of 2002, as well
as the decrease in spending by MCI.  In
Germany, revenues were particularly hard hit by the weak economy, while France,
The Netherlands and Spain also experienced flat or negative growth.  Revenue growth continued in Italy and
Central Europe.  Latin America showed
signs of improvement as the year progressed.
OPERATING
EXPENSES

Our
2003 operating expenses decreased 393.8 million, or 19.4%, to 1,634.4 million
in 2003 from 2,028.2 million in 2002. 
Our operating expenses were impacted primarily by a goodwill impairment
charge lower than in 2002 and the decline in the U.S. dollar against the euro.

Compensation
and Related Costs and Stock-Based Compensation
In
2003, our compensation and related costs and stock-based compensation amounted
to approximately 61.5% of revenue, compared with 59.3% of revenue in 2002.  Compensation and related costs and
stock-based compensation increased as a percentage of revenue because of poor
forecasting at Euro RSCG, which meant that there were not sufficient reductions
in headcount to meet the lower revenue than forecast.  Employee incentive programs are based primarily on operating
results.  Compensation and related costs
in all periods also were impacted by salary progression.
2003
vs. 2002
In
2003, our expenses relating to compensation and related costs and stock-based
compensation was 937.9 million, a decrease of 12.6% compared with 1,073.5
million for 2002.  This decrease was
primarily attributable to the effects of currency translation for 105.4
million and to staff reductions in 2003 in connection with the implementation
of our strategic reorganization and restructuring plan to reduce our cost
structure.  As a percentage of revenue,
compensation and related costs and stock-based compensation was 61.5% for 2003
compared with 59.3% for 2002.
31

2002
vs. 2001
In
2002, our expenses relating to compensation cost and stock-based compensation
was 1,073.5 million, a decrease of 10.5% compared with 1,195.4 million for
2001.  This decrease was primarily
attributable to staff reductions which, although not part of a formal
restructuring plan, continued to occur in 2002 as we continued to take actions
to reduce our cost structure as a result of the declining market.
General
and Administrative Non-Payroll Costs

2003
vs. 2002

General
and administrative non-payroll costs were 474.2million for 2003, a decrease of 14.8% compared with 556.3
million for 2002.  This decrease was
primarily attributable to the effects of currency translation for 60.5 million
and to a reduction in occupancy and facilities-related costs and other general
and administrative costs as a result of our restructuring plan.  Expressed as a percentage of total revenues,
general and administrative non-payroll costs were 31.1% for 2003 compared with
30.7% for 2002.

2002
vs. 2001
General
and administrative non-payroll costs were 556.3 million for 2002, a decrease
of 10% compared with 618.2 million for 2001. This decrease was primarily
attributable to a reduction in occupancy and facilities-related costs and other
general and administrative costs as a result of our 2001 restructuring
plan.  As a result of uncertainty
surrounding the collectibility of receivables from MCI for pre-bankruptcy
petition commissions and production work, we recorded 11.1 million in charges
in 2002.  Additionally, we recorded a
bad debt expense associated with our 1.6 million receivable from another
client, Mosaic UK Ltd., which filed for bankruptcy during 2002.  We also took additional actions to reduce
our cost structure in 2002, including by beginning to leverage our resources
across our company through centralized contracts for the purchase of items such
as telecommunications, office supplies, computer equipment and travel.  Expressed as a percentage of total revenues,
general and administrative non-payroll costs were 30.7% for 2002 compared with
31.6% for 2001. This decrease was primarily due to the impact of our cost
reduction efforts.
Compensation
to Former Shareholders of Acquired Businesses
Compensation
to former shareholders of acquired businesses was 2.5 million for 2003, 6 million for 2002,
and 19.8 million for 2001.  This
decrease was primarily attributable to a reduction in the amounts of our
earn-out and buy-out payments recognized as compensation expense under U.S.
GAAP as a result of a decrease in the number of our earn-out and buy-out
commitments conditioned on the continued employment of the seller, and a
reduction in the estimated future earn-out payments that applied to 2002 only
associated with one of these remaining commitments recognized as compensation
expense in connection with reduced earnings at the acquired subsidiary.

Amortization
of Goodwill and Other Intangible Assets
Amortization
of goodwill and other intangible assets was 31.1 million in 2003, 33.4
million in 2002 and 144.7 million in 2001. 
The decrease from 2001 is primarily a result of the adoption of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, on January 1, 2002.
Goodwill
and Other Intangible Impairment
Goodwill
and other intangible impairment was 90.2 million for 2003, 362.5 million for
2002 and 1,120.8 million in connection with our adoption of SFAS 142 on
January 1, 2002.
32

Restructuring
and Other Charges
2003
vs. 2002
In
the fourth quarter of 2003, we completed the strategic reorganization of our
business operations that was announced in September 2003.  We initiated the strategic reorganization to
strengthen our integrated communications capability, to simplify our
organizational structure, and to promote greater synergies among the agencies
by refocusing our activities around our two global networks, Euro RSCG
Worldwide and Media Planning Group, and our creativity-focused division, Arnold
Worldwide Partners.
We
also implemented a restructuring plan, primarily in the United States and the
United Kingdom, to reduce costs.  This
plan resulted in pre-tax restructuring costs and other charges in the amount of
92.4 million.  This charge includes
pre-tax severance and other personnel-related costs of 39.4 million, pre-tax
occupancy and facilities-related costs of 37.8 million as well as other
charges of 15.3 million including 8.8 million in asset write downs.

The
severance and other personnel related charges of 39.4 million reflected the
elimination of 1,158 positions worldwide, most of them in Europe and North
America. The employee groups affected included all levels and functions across
our company.  All positions had been
eliminated or identified for elimination at December 31, 2003, and the remaining reserve balance of 25.5
million at December 31, 2003 reflects costs relating to severance and other
termination benefits to be settled in 2004.
This
reorganization will also affect our 2004 consolidated statements of
operations.  The completion of the plan
will result in the abandonment and closure of 40 offices representing about
70,000 square meters principally located in Great Britain and in North America.  Lease terminations include remaining lease
obligations net of estimated sublease income at December 31, 2003.   Such termination costs were based upon an
estimate of the amounts that we expected to pay over the terms of these leases,
based on our assumptions regarding offsetting sublease income.  The remaining balance in occupancy and
facilities-related reserves of 31.8 million at December 31, 2003 relates to
non-cancelable lease commitments in excess of estimated sublease income for
abandoned facilities that will be paid out over the remaining lease periods,
ranging from one to ten years. Related to the 2001 plan, as local real estate
markets evolved, we adjusted our estimated sublease income over the related
lease terms, resulting in an additional restructuring reserve of 6 million
at December 31, 2003.
2002
vs. 2001
During
2001, we recorded approximately 128.4 million in pre-tax restructuring and
other charges associated with our worldwide restructuring to reduce costs.  These charges included pre-tax occupancy and
facilities-related charges of 51.4 million associated with lease terminations
and other exit costs primarily from the abandonment and closure of office space
predominantly located in North America. 
These costs included 19.6 million of remaining lease obligations net of
estimated sublease income at December 31, 2002.  The amounts recorded were based upon an estimate of the amounts
that we expected to pay over the terms of these leases, based on our
assumptions regarding offsetting sublease income.  During 2002, as local real estate markets evolved, we adjusted
our estimated sublease income over the related lease terms, resulting in an
additional restructuring reserve of 2.6 million and in a reversal of
previously recorded reserves of 5.1 million. 
The remaining balance in occupancy and facilities-related reserves at
December 31, 2002 relates to non-cancelable lease commitments in excess of
estimated sublease income for abandoned facilities that will be paid out over
the remaining lease periods, ranging from one to 12 years.

33

FINANCIAL
EXPENSE, NET
Other
At
a general meeting of holders of the convertible and/or exchangeable 4% bonds
due January 1, 2009, the holders approved the payment by us of 1.20 per bond,
payable in cash in a single installment on January 1, 2004, in exchange for a
waiver of the option they had to cause us to redeem the bonds at its nominal
value plus accrued interest on January 1, 2006, which we refer to as the put.  Our total expense amounted to 51.1 million,
including 0.9 million in consulting fees which are reflected as other
financial expense in the consolidated statements of operations. Based on the
Emerging Issues Task Force, which we refer to as EITF, consensus on issue no.
96-19, Debtors Accounting for a Modification or Exchange of Debt
Instruments, this operation has been accounted for in accordance with
paragraph 16 of statement 125, resulting in a 10.7 million loss which is also
reflected as Other financial expense in the accompanying consolidated
statements of operations.  No conversion
of any bond has been exercised since the issuance.  The aggregate amount of the outstanding bonds at December 31,
2003 amounted to 473.6 million, comprised of 455.7 million in aggregate
principal and 17.9 million in interest.
During
the first quarter of 2003, we repurchased 5,290,000 of our convertible and/or
exchangeable bonds due January 1, 2006 resulting in a 12.2 million gain which
is reflected as Other financial income in the consolidated statements of
operations.

OTHER
ITEMS
Provision
for Income Tax
Provision
for income tax was 107.6 million for 2003, compared with 39 million for
2002.  The increase was primarily
attributable to the impact of the deferred tax valuation allowance of 164.2
million, partially offset by a lower level of earnings before taxes and before
goodwill impairment charges.
Provision
for income tax was 39 million for 2002, compared with 4.4 million for
2001.  The increase was associated with
a higher level of earnings before taxes and before goodwill impairment charge,
which is non-deductible.
Minority
interests
Minority
interests were 5.5 million for 2003, compared with 14.8 million for
2002.  This decrease is primarily
attributable to the decrease in earnings.
Minority
interests were 14.8 million for 2002, compared with (4.3) million for
2001.  This increase was primarily due
to the effect of the 2001 losses of Circle.com attributable to the holders of
Circle.com common stock prior to our acquisition of the Circle.com common stock
in June 2001 for which there was no comparable attribution of losses to
minority interest holders in 2002.
LIQUIDITY
AND CAPITAL RESOURCES
At
December 31, 2003, cash and cash equivalents amounted to 660.2 million, a
decrease of 85 million from December 31, 2002 of 745.2 million.  Our total debt at December 31, 2003 was
1,335.9 million, a decrease of 125.9 million from December 31, 2002.  We collect funds from clients to pay for
media, production and other third-party expenses incurred on behalf of our
clients.  As a result, our cash receipts
and disbursements substantially exceed our net revenue.  The working capital amounts shown on our balance
sheet and the cash flows from operating activities reflect these pass-through
of expenses.
Our
primary sources of funds in 2003 were cash from operations, various revolving
lines of credit and the proceeds remaining from the convertible and/or
exchangeable bonds issued in May 2002.

Our
primary uses of cash were to finance our general corporate needs, including
bond repurchases operating and capital expenditure requirements, dividend
payments and to finance acquisitions, including earn-out and buy-out payments
related to prior acquisitions.
34

Operating
activities
Our
net cash provided by operating activities was 191.6 million, 255 million and
(0.9) million for the years ended December 31, 2003, 2002 and 2001, respectively.  The decrease in 2003 was a primarily
attributable to the lower earnings level in 2003 resulting from continued
weakness in client demand for all advertising and communications services and
severance costs and other costs related to our strategic reorganization and
worldwide restructuring program.  We
expect to generate cash from operations in 2004.  We expect to use a significant portion of that cash for operating
expenses.
The
increase in cash provided by operating activities in 2002 was primarily a
result of concerted efforts that we undertook throughout our company to improve
our cash position by reducing costs and improving our working capital
management.  The substantial decrease in
2001 was primarily attributable to lower operating profit levels and severance
payments in connection with our worldwide restructuring in 2001.
Investing
activities
We
have pursued acquisitions in the past, and intend to pursue acquisitions in the
future, some of which could be significant, to enhance our capabilities and
expand our geographic reach.  We
generally fund these acquisitions using our shares, cash or a combination of
both.
Net
cash used in investing activities was (28.4) million, (104.7) million
and  (95.4) million for 2003, 2002 and
2001, respectively.  Cash used in
investing activities decreased in 2003 due primarily to a decrease in earn-out
and buy-out payments, a decrease in our acquisition activity and other capital
expenditures. Cash used in investing activities increased in 2002 due primarily
to an increase in earn-out and buy-out payments related to prior acquisitions,
which was partially offset by a reduction in our capital expenditures in 2002
as well as the proceeds from divestitures and other asset sales.  The decrease in 2001 was primarily
attributable to the offsetting effect of cash acquired in connection with the
purchase of the remaining 55% interest in Media Planning Group and in other
acquisitions in 2001, as well as a reduction in our investing activities in
2001 as we reacted to deteriorating conditions in the global economy and our
industry by moderating our acquisition activity and refocusing our acquisition
plan on reinforcing our integrated communications services and media expertise.

Financing
activities
Net
cash provided by financing activities was (181.7) million, 285.2 million and
(163.7) million for 2003, 2002 and 2001, respectively.  The substantial decrease in 2003 was
primarily attributable to the fact that in 2002 we had a 450 million convertible
and/or exchangeable bond issuance for which there was no comparable issuance in
2003.  The increase in 2002 was
primarily due to the significant amount of cash generated by our issuance of
convertible and/or exchangeable bonds in May 2002 for which there was no
comparable financing activity in 2001. 
The substantial decrease in 2001 was primarily due to the significant
amount of cash generated by our issuance of convertible and/or exchangeable
bonds in December 2000 for which there was no comparable financing activity in
2001.
At
December 31, 2003, total financial debt, which consists of bank debt,
obligations under our three series of convertible and/or exchangeable bonds
outstanding on that date and capitalized lease obligations, was 1,335.9 million,
a decrease of 144.6 million from December 31, 2002.  This total financial debt was comprised of:

  1,192.4 million aggregate principal amount and
  accrued premium under our convertible and/or exchangeable bonds;
  40.4 million in long-term borrowings;
  99.2 million in short-term borrowings; and
  3.9 million in capitalized lease obligations.Approximately 94.3% of our financial debt outstanding at
December 31, 2003 was denominated in euro, 3.9% was denominated in U.S. dollars
and 0.2% was denominated in British pounds.
35

Convertible
and/or exchangeable bonds
At
December 31, 2003, we had a total of 1,192.4 million aggregate principal
amount and accrued premium and interest under our unsecured convertible and/or
exchangeable bonds outstanding, comprised of 89.4 million aggregate principal
amount and accrued premium and interest under our convertible and/or
exchangeable bonds issued in February 1999, 629.4 million aggregate principal
amount and accrued premium and interest under our convertible and/or
exchangeable bonds issued in December 2000 and 473.6 million aggregate
principal amount and interest under our convertible and/or exchangeable bonds
issued in May 2002.
In
February 1999, we issued 1,223,405 unsecured convertible and/or exchangeable
bonds due January 1, 2004, each with a nominal value of 188, for an aggregate
principal amount at issuance of 230.0 million.  We received net proceeds of 225.3 million from this issuance.  The coupon rate of the bonds was 1.0% per
annum, payable annually in arrears on January 1 of each year, and the gross
yield to maturity was 1.75% per annum, assuming no conversion or redemption
occurs prior to maturity.  The implicit
interest rate, including issue costs, was 2.18% per annum.  The bonds had a maturity date of January 1,
2004.  As of December 31, 2003, 769,448
million bonds had been converted into 15,389,004 Havas shares.  As of that date, our  89.4 million in aggregate principal amount and
accrued premium and interest under these bonds was comprised of 85.3 million
in aggregate principal amount, 3.2 million in accrued premium and 0.9 million
in interest through that date.  We paid
89.4 million to redeem the outstanding bonds at their maturity on January 1,
2004.

In
December 2000, we issued 32,817,012 unsecured convertible and/or exchangeable
bonds, each with a nominal value of 21.60, for an aggregate principal amount
at issuance of 708.8 million.  We
received net proceeds of 694.9 million from this issuance.  The coupon rate of the bonds is 1.0% per
annum, payable annually in arrears on January 1 of each year, beginning January
1, 2002, and the gross yield to maturity is 4.25% per annum, assuming no
conversion or redemption occurs prior to maturity.  The implicit interest rate, including issue costs, is 4.67% per
annum.  The bonds have a maturity date
of January 1, 2006.  Each bond currently
is exercisable at any time at the option of the holder for 1.035 Havas shares,
subject to specified anti-dilution adjustments, which exercise may, at our
option, be a conversion for newly issued shares, an exchange for treasury
shares or a combination thereof.  In
accordance with French law, the conversion/exchange ratio has been adjusted
from 1 to 1.02 and then to 1.035 due to the distribution of a portion of
paid-in capital in connection with our payment of our annual dividend to
shareholders on June 11, 2002 and June 18, 2003, respectively.  For a discussion of the future distribution
of paid-in-capital in connection with our payment of dividends to shareholders,
see Item 8. Financial Information Dividend Policy on page 59.  The bonds have a redemption value at
maturity of 25.44 per bond, or approximately 117.78% of their nominal
value.  We have the option to redeem
all, but not less than all, of the outstanding bonds between January 1, 2004
and December 31, 2005, at an early redemption price that guarantees the holder
of the bond a yield to maturity equivalent to the rate the holder would have
obtained upon redemption at maturity, if the product of (1) the
conversion/exchange ratio and (2) the arithmetic mean of the closing prices of
Havas shares on Euronext Paris during 20 consecutive trading days chosen by us
from among the 40-trading day period preceding publication of a notice of early
redemption, exceeds 115% of the early redemption price.  We also have the option to redeem, all, but
not less than all, of the bonds at their nominal value plus accrued interest at
any time when less than 10% of the bonds issued remain outstanding.  In connection with this issuance, we agreed
not to issue bonds with any preference over these bonds, or reduce our share
capital or alter the way we allocate profits. 
As of December 31, 2003, no bonds had been converted into Havas
shares.  As of December 31, 2003, our
629.4 million aggregate principal amount and accrued premium and interest
under these bonds was comprised of 565.6 million in aggregate principal
amount, 58.1 million in accrued premium and 5.7 million in accrued interest
through that date.  Assuming no
conversions, redemptions or repurchases, an additional 42.4 million of premium
would accrue on these bonds through maturity. 
During 2003, we repurchased 5,290,000 of these bonds on the secondary
market.
36


On
May 22, 2002, we issued 41,860,465 unsecured convertible and/or exchangeable
bonds, each with a nominal value of 10.75, for an aggregate principal amount
of 450 million.  We received net
proceeds of approximately 443.5 million from this issuance.  The coupon rate of the bonds is 4.0% per
annum, payable annually in arrears on January 1 of each year, beginning January
1, 2003, and the gross yield to maturity also is 4.0% per annum, assuming no
conversion, redemption or repurchase occurs prior to maturity.  The implicit interest rate, including issue
costs, is 4.26% per annum.  The bonds
have a maturity date of January 1, 2009. 
Each bond currently is exercisable at any time at the option of the
holder for 1.035 Havas shares, subject to specified anti-dilution adjustments,
which exercise may, at our option, be a conversion for newly issued shares, an
exchange for treasury shares or a combination thereof.  In accordance with French law, the
conversion/exchange ratio has been adjusted from 1 to 1.02 and then to 1.035
due to the distribution of a portion of paid-in capital in connection with our
payment of our annual dividend to shareholders on June 11, 2002 and June 18,
2003, respectively.  For a discussion of
the future distribution of paid-in-capital in connection with our
payment of dividends to shareholders, see Item 8. Financial Information
Dividend Policy on page 59.  The bonds
have a redemption value at maturity equal to their nominal value.  We have the option to redeem all, but not
less than all, of the outstanding bonds between January 1, 2005 and December
31, 2008 at their nominal value plus accrued interest if the product of (1) the
conversion/exchange ratio and (2) the arithmetic mean of the closing prices of
Havas shares on Euronext Paris during 20 consecutive trading days chosen by us
from among the 40-trading day period preceding publication of a notice of early
redemption, exceeds 125% of the nominal value of the bonds.  We also have the option to redeem, all, but
not less than all, of the bonds at their nominal value plus accrued interest at
any time when less than 10% of the bonds issued remain outstanding.  In connection with this issuance, we agreed
not to give any other bonds any preference over the bonds, or reduce our share
capital or alter the way we allocate profits. 
As of December 31, 2003, no bonds had been converted into our shares. As
of December 31, 2003, our 473.6 million aggregate principal amount and accrued
interest on these bonds was comprised of 455.7 million in aggregate principal
amount and 17.9 million in accrued interest through that date.
At
a general meeting of holders of the convertible and/or exchangeable bonds due
January 1, 2009, the holders approved the payment by us of 1.20 per bond,
payable in cash in a single installment on January 1, 2004, in exchange for a
waiver of the option they had to cause us to redeem the bonds at its nominal
value plus accrued interest on January 1, 2006, which we refer to as the
put.  Our total expense amounted to
51.1 million, including 0.9 million in consulting fees, which are reflected
as Other financial expense in the consolidated statements of operations.  Based on the EITF consensus on issue No.
96-19, Debtors Accounting for a Modification or Exchange of Debt
Instruments, this operation has been accounted for in accordance with
paragraph 16 of statement 125, resulting in a 10.7 million loss which is
reflected as Other financial expense in the accompanying consolidated
statements of operations.

For
a discussion of our convertible and/or exchangeable bonds as of December 31,
2003, see Note 10 to our 2003 consolidated financial statements beginning on
page F-18 of this annual report.
Long-term
borrowings
As
of December 31, 2003 and 2002, we had outstanding long-term borrowings of 40.4
million and 64.9 million, respectively. 
The weighted average interest rate on these long-term borrowings was
3.3% at December 31, 2003 and 2002.  Of
the total outstanding long-term borrowings at December 31, 2003, 31.4 million
was due within one year, 4.4 million was due in 2005, 4.1 million was due in
2006, 0.1 million was due in 2007 and 0.4 million was due after January 1,
2008.  11.4 million of the outstanding
long-term borrowings as of December 31, 2003 bore interest at fixed rates, and
29 million bore interest at variable rates.
In
June 1999, one of our indirect, wholly owned subsidiaries, Havas North America,
Inc., formerly EWDB North America, Inc., borrowed $30 million from Banque
Nationale de Paris, New York Branch. In connection with this loan, we agreed to
deposit with Banque Nationale de Paris, New York Branch, $30 million to allow
Havas North America to borrow the funds. 
The loan bears interest at a rate equal to the London Inter-bank Offered
Rate, or LIBOR, plus a margin.  The
deposit earns interest at a rate of LIBOR less a margin.  The deposit and loan mature simultaneously
in six equal annual installments from June 4, 2001 through June 5, 2006 and the
borrowing and collateral deposit have therefore been reduced to $15 million at
December 31, 2003.  In order to hedge
the currency risk with respect to our U.S. dollar deposit, we also entered into
a currency and interest rate swap arrangement, which we refer to as CIRCUS,
with Banque Nationale de Paris.  The
CIRCUS has the effect of transforming our U.S. dollar deposit of $15 million
into a euro deposit of 11.9 million that earns interest at the European
Inter-bank Offered Rate, or EURIBOR, less a margin.  The maturities of the CIRCUS are identical to those of the
deposit in terms of dates, currency and amounts.  As of December 31, 2003, we recorded an exchange rate gain on the
CIRCUS in the amount of 0.01 million and an exchange rate loss on the deposit
in the amount of 2.4 million.  As of
December 31, 2002, we recorded an exchange rate gain on the CIRCUS in the
amount of 0.051 million and an exchange rate loss on the deposit in the amount
of 0.015 million.
37


On
January 19, 2000, one of our indirect, wholly owned subsidiaries, Havas UK plc,
formerly Evelink plc, issued a £40.0 million unsecured convertible bond due
July 19, 2007 to Banque Nationale de Paris S.A.  This convertible bond bears interest at a rate of 7.6% per annum
and is convertible, at the option of the holder, at any time from January 19,
2000 through January 19, 2007 into 117,131 ordinary shares of Havas UK, subject
to specified anti-dilution adjustments. 
In conjunction with the bond issuance, we guaranteed the obligations of
Havas UK under the bond.
Also
on January 19, 2000, Havas UK issued a warrant to Banque Nationale de Paris
S.A. authorizing the holder of the warrant, upon payment of £40.0 million, to
purchase 117,131 Havas UK shares on January 19, 2007.  The right to purchase Havas UK shares under the warrant will
lapse if the conversion rights of the £40.0 million convertible bond issued on
January 19, 2000 are exercised.  In
addition, our wholly owned subsidiary, Havas International S.A., formerly Havas
Advertising International S.A., and Banque Nationale de Paris S.A. (as the
initial holder of the bond) entered into a forward sale agreement under which
Havas International paid £25.2 million to Banque Nationale de Paris S.A. for
the future purchase of the Havas UK shares issuable on conversion of the £40.0
million convertible bond, and Banque Nationale de Paris S.A. agreed to convert,
or arrange for a third party to convert, the £40.0 million convertible bond
into Havas UK shares on January 19, 2007 (or prior to January 19, 2007 under
specified circumstances) and to sell, or arrange for a third party to sell,
those shares to Havas International. 
The number of shares subject to the forward sale agreement will be
determined by dividing £40.0 million by the Havas UK share price on the date
Banque Nationale de Paris S.A. sells, or arranges for a third party to sell,
the Havas UK shares to Havas International.
For
a discussion of our long-term borrowings as of December 31, 2003, see Note 10
to our 2003 consolidated financial statements beginning on page F-20 of this
annual report.
Short-term
borrowings

As
of December 31, 2003 and 2002, we had outstanding 52.9 million and 53.7
million, respectively, in short-term borrowing arrangements.  The weighted average interest rate on these
short-term borrowings was 2.6% and 2.9% at December 31, 2003 and 2002, respectively.

In
addition, through some of our subsidiaries, we had outstanding 46.2 million
and 67.1 million, respectively, in borrowings under various lines of credit as
of December 31, 2003 and 2002, respectively. 
These lines of credit bear interest at the prevailing market rates in the
countries of the subsidiaries.  Where
required, we guaranteed the repayment of borrowings by our subsidiaries.  We had unused lines of credit available
under short-term and overdraft borrowing arrangements of 159.3 million and
193.1 million at December 31, 2003 and 2002, respectively.
For
a discussion of our short-term borrowings as of December 31, 2003, see Note 10 to our 2003 consolidated financial
statements beginning on page F-21 of this annual report.
Financial
covenants
We
and our subsidiaries are subject to various financial covenants under our
borrowing arrangements.  In addition, we
frequently guarantee significant loans of our subsidiaries.  The financial covenants applicable to our
borrowing subsidiaries include:

  A ratio of total debt to earnings before interest,
  taxes, depreciation and amortization of less than 3.8 to one;
  A ratio of earnings before interest and taxes and
  amortization to interest expense of greater than three to one;38

  A ratio of total debt to equity of less than 2.5 to
  one;
  A ratio of earnings before interest, taxes,
  depreciation and amortization to interest expenses of greater than three to
  one;
  A ratio of total debt to earnings before interest,
  taxes, depreciation and amortization of less than 3.0 to one; and
  A ratio of total debt to equity of less than 2.5 to
  one.Under two
loans of our subsidiaries, we are subject to the following financial covenants
applied to our company on a consolidated basis:

  A ratio of net financial debt to equity of less than
  0.8 to one;
  A ratio of earnings before interest and taxes and
  amortization to net financial result of greater than five to one;
  A ratio of net financial debt to earnings before
  interest, taxes, depreciation and amortization of less than 2.75 to one; and
  Shareholders equity of greater than 380 million.At
December 31, 2003 and 2002, we were not in compliance with financial covenants
under two credit facilities, for an aggregate principal amount of 22.6 million
and 33.8 million, respectively.  See
Item 3 Key InformationRisk FactorsA continuing default under our credit
facilities could result in the acceleration of payment under various of our
other debts.  However, the credit
facility banks waived any default with respect to the noncompliance.
As
of December 31, 2003, we and our subsidiaries were in compliance with all other
financial covenants related to all of the borrowings described above.

Capital lease obligations
We
lease premises and equipment under both capital and operating leases.  As of December 31, 2003 and 2002, assets
held under capital leases were 11 million and 35.5 million,
respectively.  Net rental expense for
all operating leases was 106.7 million, 135.1 million and 116.6 in 2003,
2002 and 2001, respectively.
For
a discussion of our capital lease obligations as of December 31, 2003, see Note
17 to our 2003 consolidated financial statements on page F-32 of this annual
report.
Share and bond repurchases
We
repurchased 104,400, 363,148 and 4,150,240 of our shares in the open market in
2003, 2002 and 2001, respectively.  The
aggregate purchase price of these shares was 0.4 million, 1.6 million, 62
million in 2003, 2002 and 2001, respectively. 
In 2003, we sold 89,400 of our shares in the open market for an
aggregate sale price of 0.4 million.
In
2003, we repurchased in the secondary market and cancelled approximately 114.3
million aggregate principal amount of our convertible and/or exchangeable bonds
issued in December 2000.  Specifically,
we repurchased 5,290,000 of these bonds for an aggregate purchase price of
109.7 million.  These bonds were
convertible into a total of 5,475,150 shares at the conversion exchange ratio
of 1 to 1.035 in effect on December 31, 2003.
39


In
2002, we repurchased in the secondary market and cancelled approximately 29
million aggregate principal amount of our convertible and/or exchangeable bonds
issued in December 2000.  Specifically,
we repurchased 1,342,046 of these bonds for an aggregate purchase price of
24.2 million, which resulted in a gain of 4.8 million.  These bonds were convertible into a total of
1,368,887 shares at the conversion exchange ratio of 1 to 1.02 in effect on
December 31, 2002.
Our
future repurchases of bonds or shares, if any, will depend on the prevailing
market conditions, our liquidity requirements, applicable contractual
restrictions and other factors.  The
amounts involved may be material.
Other
We
may declare dividends upon the recommendation of our board of directors and the
approval of our shareholders at their annual general meeting.  Under the French Commercial Code, a
companys right to pay dividends is limited in some circumstances.
At
our annual meeting of shareholders approved held on May 26, 2004,
our shareholders approved a resolution, among others, to authorize a
dividend payment of 0.075 per share, of which 0.05 represents the net
dividend and 0.025 represents the French avoir fiscal tax credit. 
We will pay the dividend to shareholders on or about June 17, 2004.  Under the terms of the anti-dilution
provisions of our three series of convertible and/or exchangeable bonds, the
applicable conversion/exchange ratio will be adjusted as of that date to reflect
the component of the dividend payment that represents a distribution of a
portion of paid-in capital.  In
addition, under the terms of the anti-dilution provisions of our option plans,
the number of options and exercise prices for outstanding options under our
plans will be adjusted on that date to reflect the component of the dividend
payment that represents a distribution of a portion of paid-in capital. In the
future, we also may submit for the approval of our shareholders resolutions to
authorize dividend payments that represent distributions of a portion of
paid-in capital.
In
2003, we paid a dividend on our common shares of 0.135 per share, of which
0.09 represented the net dividend and 0.045 represented the French avoir
fiscal tax credit.  In 2002, we paid a
dividend on our common shares of 0.255 per share, of which 0.17 represented
the net dividend and 0.085 represented the French avoir fiscal tax
credit.  In 2001, we paid a dividend on
our common shares of 0.255 per share, of which 0.17 represented the net
dividend and 0.085 represented the French avoir fiscal tax credit.  The reduction in our dividends over the last
three years corresponds with our Boards policy of adjusting our companys
dividend in relation to the results of our operations and that the yield (the
amount of dividend compared to the share price on the last day of the previous
fiscal year) should be aligned with the average for the advertising sector,
which has also decreased.
Treasury policies

Our
policy is for our subsidiaries worldwide to hold cash and cash equivalents in
the currency of their principal operating expenses.

Our
policy is to implement cash pooling arrangements among our subsidiaries in the
countries in which the size of our operations justifies these
arrangements.  These pooling
arrangements are intended to reduce bank financing and optimize interest income
in these countries.
For
a discussion of our use of derivative securities in connection with foreign currency
and interest rate risk as of December 31, 2003, see Item 11. Quantitative and
Qualitative Disclosure About Market Risk beginning on page 76 of this annual report and Note 19 to our 2003 consolidated financial
statements on page F-33 of this
annual report.
40

Contractual obligations
The
following table summarizes our contractual obligations and commercial
commitments at December 31, 2003.
ContractualObligations
  
  Payments Due by Period
  (in  thousands)Total
  
  Less than 1
  year
  
  1-3 years
  
  3-5 years
  
  More than
  5 yearsLong-term debt obligations
  
  
  40,419
  
  
  31,388
  
  
  8,475
  
  
  208
  
  
  348Capital (finance) lease obligations
  
  
  4,135
  
  
  2,156
  
  
  1,027
  
  
  952
  
  
  Operating lease obligations
  
  
  653,005
  
  
  91,471
  
  
  170,305
  
  
  148,588
  
  
  242,641Stock option plan obligations
  
  
  3,138
  
  
  115
  
  
  3,023
  
  
  
  
  
  Pension plan obligations
  
  
  19,567
  
  
  3,579
  
  
  7,645
  
  
  8,343
  
  
  Estimated obligations under earn-outs/buy-outs
  
  
  155,813
  
  
  85,071
  
  
  46,087
  
  
  24,655
  
  
  Convertible and/or exchangeable bonds
  
  
  1,192,401
  
  
  112,976
  
  
  623,710
  
  
  
  
  
  455,715Other commercial commitments
  
  
  24,162
  
  
  9,558
  
  
  11,682
  
  
  2,922
  
  
  Total
  
  
  2,092,640
  
  
  336,314
  
  
  871,954
  
  
  185,668
  
  
  698,704Estimated
obligations under earn-outs/buy-outs.  As noted above, in connection with business
combinations, we typically enter into agreements with some or all of the
selling shareholders or the selling entity that provide for future earn-out
payments and, in the case of partial acquisitions, put and call buy-out
payments.  The earn-out and buy-out
payments are generally based upon a formula using a multiple of future
earnings, with the multiple in some cases increasing when organic growth or
profitability exceed specified thresholds. 
In determining the estimated obligations under both earn-outs and
buy-outs, the applicable earn-out or buy-out formula has been applied to the
latest available earnings data or estimates. 
The payment date for our buy-out obligations has been assumed to be the
date the applicable buy-out put provision can first be exercised.  In some cases, this date could not be
determined because the buy-out put provision first becomes exercisable when the
minority shareholder leaves our employ. 
In these cases, the applicable estimated buy-out amount, an aggregate of
51.5 million, was allocated ratably over five years.  We cannot assure you, however, that these estimated obligations
will not be exceeded in any specified period.
Stock
option plan obligations. 
Some of our subsidiaries have granted stock options to some of their
employees with respect to the stock of the applicable subsidiary.  The exercise price is usually based on a
multiple of current earnings of the subsidiary at the award date, which we
refer to as the multiple.  Such
options are generally exercisable five to seven years after the award date and
require continuing employment.  The
parent companies of such subsidiaries have the option to buy back the shares if
and when acquired by the employees and the employees have the option to put
these shares to such parent companies. 
The buyback price is generally based upon the multiple applied to the
earnings level of the subsidiary when the option is exercised.  The employees are required to put the shares
to the applicable parent company when they leave the employ of the
subsidiary.  In determining the
estimated obligations under these stock option plans, the applicable multiple
has been applied to the latest available earnings data or estimates.

41


Pension
plan obligations.In
accordance with the laws and practices of each country, we participate in
employee benefits pension plans offering death and disability, retirement and
special termination benefits.  Those
plans provide benefits of various types from flat currency amounts per year of
service to final pay plans integrated with social security and multi-employer
plans.  For defined benefit pension
plans, accruals and prepaid expenses are determined using the projected unit
credit method.
Convertible
and/or exchangeable bonds.Convertible
and/or exchangeable bonds reflects the aggregate principal amount outstanding
as of December 31, 2003 under our three series of convertible and/or
exchangeable bonds outstanding on that date, together with accrued premium and
interest on these bonds through their respective maturity dates, assuming no
conversion, exchange or repurchase from January 1, 2004 through maturity.
Other
commercial commitments. 
Other commercial commitments reflects commitments related to one of our
subsidiaries that acquires exclusive marketing rights from soccer clubs for
periods generally ranging from one to seven years, and then re-sells those
rights to sponsors.  These marketing
rights agreements typically provide for payments to be made on a monthly basis
during the exclusive marketing rights period. 
At December 31, 2003, the aggregate amount payable under these
agreements was 24.2 million, and our subsidiary had received commitments from
sponsors for 1.3 million.
Future
cash needs

We
expect that our cash on hand, cash flows from operations and existing revolving
lines of credit will be sufficient to meet our near-term cash requirements, but
will not enable us to meet our longer-term obligations.  In making this determination, we have taken
into account expected uses of cash, including working capital, capital
expenditures, including acquisitions, debt service, cash payments for
restructuring expenses, contractual obligations and dividend payments.  Based on the bonds outstanding at April 30,
2004 from our two series of convertible and/or exchangeable bonds outstanding
on that date, and assuming no conversion, exchange or repurchase prior to
maturity, we will be required to pay 671.8 million when the first series
matures on January 1, 2006 and an additional 468 million when the second
series matures on January 1, 2009.

Our
ability to meet our near-term cash requirements and our longer-term obligations
will depend on our ability to generate cash in the future, which is subject to
general economic, industry, competitive, legislative, regulatory and other
factors that may be beyond our control. 
At our annual meeting of shareholders held on May 26, 2004,
our shareholders approved a resolution to authorize us
to issue convertible debt by entering into the convertible bond market.
Continuing
interest in WCRS Limited
On
April 1, 2004, we sold an indirect 75.1% interest in WCRS Limited to the
management of WCRS Limited and other investors.  We retained a 24.9% interest in WCRS, which interest we account
for using the equity method.  At any
time after June 30, 2008, and in specified circumstances earlier, we have the
right to require WCRS to repurchase our 24.9% interest for cash at a
price based on a multiple of past financial performance.  In specified circumstances, WCRS has
the right to require us to sell our 24.9% interest at the same price, but
subject to a minimum of £3 million.
New
accounting pronouncements
In January
2003, FASB issued FASB Interpretation No, 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No.
51.  This interpretation provides guidance
on how to apply the controlling financial interest criteria in ARB 51 to
variable interest entities. Given the Interpretations complexity, the FASB
issued several FASB Staff Positions (FSPs) throughout 2003 to clarify the
Boards intent on certain of the Interpretations provisions, and in December
2003, the Board revised the Interpretation (FIN 46-R) to address certain
technical corrections and to clarify many of the implementation issues that had
arisen. Variable interest entities (VIEs) include many entities that have
previously been referred to as special-purpose entities (SPEs), but also may
include many other entities not previously thought of as SPEs.  A variable interest entity is an entity that
either does not have equity investors with voting rights or has equity
investors that do not provide sufficient financial resources for the entity to
support its activities. Interpretation 46 requires a company to consolidate a
variable interest entity if the company is subject to a majority of the risk of
loss from the variable interest entitys activities or is entitled to receive a
majority of the entitys residual returns or both. This application of this
interpretation is required at various dates in 2004 and 2005. The adoption of
this Statement will not have a material effect on our results of operations,
financial position or cash flows.

42

In December
2003, FASB issued a revision of SFAS No. 132, Employers disclosures about
pensions and other post-retirement benefits, to improve financial statement
disclosures for defined benefit plans. This statement requires that companies
provide more details about their plan assets, benefits obligations, cash flows,
benefit costs and other relevant information. 
Disclosures of certain information (such as estimated future benefit
payments or information about foreign plans) are effective for fiscal years
ending after June 15, 2004.

In November
2002, the EITF reached a consensus on EITF 00-21, Revenue Arrangements with Multiple Deliverables,
which we refer to as EITF 00-21. EITF 00-21 provides guidance on how to account for arrangements that involve the delivery
or performance of multiple products, services and/or rights to use assets. The provisions of EITF 00-21 will apply
to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We do not expect
that the adoption of EITF 00-21 will have a significant impact on our results of operations, financial position or cash flows.



ITEM 6. 
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Our board of
directors
In
accordance with French law, our affairs are managed by our board of directors
and by our chairman and chief executive officer, who has full authority to
manage our affairs and has broad powers to act on our behalf within our
corporate purpose and to represent us in dealings with third parties, subject
only to the powers expressly reserved to our board of directors or our
shareholders by law, by our bylaws or
by decision of our board of directors or our shareholders.
Under our bylaws, our board of directors must
consist of between three and 18 directors. 
Our board of directors currently consists of 13 directors.  Our bylaws
provide that each director is elected for a term of three years, and is
eligible for reelection when the term expires. 
The board of directors has the power to appoint and remove the chairman
and chief executive officer at any time. 
There are no family relationships among our executive officers or
directors, other than with respect to Leopoldo Rodés Castañe, who is the father of Fernando Rodés Vilà.
43

Set forth
in the table below is information regarding the members of our board of
directors as of May 27, 2004.

Name
    
    Position
    
    Age
    
    Principal
        Occupation
    
    Director
        Since
    
    Term
        ExpiresAlain
        de Pouzilhac (1)
    
    Chairman
    
    58
    
    Chairman of the Board
        of Directors and Chief Executive Officer, Havas
    
    April
        1989
    
    2006Michel
        Boutinard Rouelle (1)(2)
    
    Director
    
    58
    
    Vice President (Newspapers
        and Periodicals Department), La Poste
    
    March
        1997
    
    2005Leopoldo
        Rodés Castañe (1)
    
    Director
    
    69
    
    Vice Chairman, Banco
        Urquijo; Chairman and President, Media Planning Group
    
    May 2001
    
    2007Alain
        Cayzac
    
    Director
    
    62
    
    Executive Vice President
        and Chief Communications Officer, Havas
    
    June 1992
    
    2006Richard
        Colker (2)
    
    Director
    
    58
    
    Managing Partner, Colker,
        Gelardin & Co.
    
    June 1995
    
    2006Ed
        Eskandarian
    
    Director
    
    67
    
    Executive Vice President,
        Havas; Chairman and Chief Executive Officer, Arnold Worldwide Partners
    
    September
        2000
    
    2007Pierre
        Lescure (1)(3)
    
    Director
    
    58
    
    Chairman and Chief
        Executive Officer, AnnaRose Production
    
    June 1994
    
    2007Jacques
        Mayoux (1)
    
    Director
    
    79
    
    Vice-Chairman, Goldman
        Sachs Europe
    
    August
        1988
    
    2006Thierry
        Meyer (3)
    
    Director
    
    65
    
    Chairman, Compensation
        and Selection Committee, Havas
    
    June 1995
    
    2005Fernando
        Rodés Vilà
    
    Director
    
    43
    
    Executive Vice President,
        Havas; Chief Executive Officer, Media Planning Group
    
    January
        2001
    
    2006Jacques
        Séguéla
    
    Director
    
    70
    
    Executive Vice President
        and Chief Creative Officer, Havas
    
    June 1992
    
    2005Patrick
        Soulard
    
    Director
    
    52
    
    Deputy Chief Executive
        Officer of the Investment Banking Division, Société Générale
    
    December
        1999
    
    2007Société
        Centrale Immobilière et Foncière (SOCIF), represented
         by Clément Vaturi (2)(3)Director
    
    63
    
    Chairman of the Board,
        Immobilière Hôtelière S.A.
    
    August
        1988
    
    2007(1)
  Member of
  the strategic planning committee.(2)
  Member of
  the audit committee.(3)
  Member of
  the compensation and selection committee.The
following are summary biographies of each of the members of our board of
directors and our principal executive officers:
Alain de
Pouzilhac.Alain
de Pouzilhac is currently our Chairman and Chief Executive Officer.  Mr. de Pouzilhac began his career at
Publicis Conseil, a French advertising company, in 1969 as an Assistant Account
Executive.  In 1970, he joined the
French advertising company DDB as account executive.  In 1982, he was appointed Chairman and Chief Executive Officer of
Havas Conseil, one of our subsidiaries. 
Between 1984 and 1989, he served as Chairman of HCM, an advertising
joint venture comprised of Havas Conseil and Marsteller, Inc. (an agency
affiliated with the U.S. advertising company Young & Rubicam, Inc.), and
HCMs successor, HDM, an advertising joint venture comprised of Havas Conseil,
Dentsu and Marsteller. Mr. de Pouzilhac was appointed our Chairman and Chief
Executive Officer in 1989.
44

Michel
Boutinard Rouelle.Michel
Boutinard Rouelle is currently Vice President (Newspapers and Periodicals
Department) of La Poste, the French national postal service, a position he has
held since June 2003. Mr. Boutinard Rouelle, a graduate of the Institut
dEtudes Politiques de Paris and the Ecole Nationale dAdministration (ENA),
began his career in government and public affairs, holding a variety of
national, regional and local offices in France from 1971 to 1988, including
Chief of Staff of the Mayor of Paris from 1977 to 1979 and Counsellor to the
Prime Minister from 1986 to 1988. From 1989 to 1999, Mr. Boutinard Rouelle held
a variety of positions with Vivendi Universal Publishing, a French media group,
and its affiliates. These positions included Vice President of Vivendi
Universal Publishing from 1997 to 1998 and Chairman and Chief Executive Officer
of Vivendi Universal Publishings affiliate Havas Media Communication from 1995
to 1999. From 1999 to 2002, Mr. Boutinard Rouelle acted as a free-lance
management consultant.
Leopoldo
Rodés Castañe.Leopoldo
Rodés Castañe is currently Vice Chairman of Banco Urquijo, a Spanish financial
institution, and Chairman of Media Planning Group. Mr. Rodés Castañe founded
Tiempo, an advertising agency, in 1958, and was its Chairman and Chief
Executive Officer until 1984. In 1985, Mr. Rodés Castañe also founded and
became President of Barcelona 92, an organization created to promote the bid
of Barcelona as the host city of the 1992 Summer Olympic Games.  From 1986 through 1992, he served as a
member of the executive committee of Summer Olympic Games of Barcelona, known
as COOB 92. From 1994 to 1996, he was a member of the International Advisory
Board of Repsol, S.A., a Spanish oil and gas exploration and development
company.  Mr. Rodés Castañe was
President of Media Planning, S.A. from 1978 through 1999.  He was President of Media Planning, S.A.
from 1978 through 1999.  He has been
President and Chairman of the Media Planning Group since 1999. He also
currently serves on the Board of Directors of Alcatel Espana, S.A., a Spanish
telecommunications company, and Sogecable, S.A., a Spanish pay television
company.

Alain
Cayzac.Alain Cayzac
is currently one of our Executive Vice Presidents and our Chief Communications
Officer.  Mr. Cayzac, a graduate of
Hautes Etudes Commerciales (HEC) and of Berlin University, began his career in
advertising in 1972 as an Associate Director of RSCG.  He was appointed Chairman of RSCG in 1984. From 1996 to 1997, he
served as Chairman and Chief Executive Officer of Euro RSCG Worldwide.  He was appointed as one of our Executive
Vice Presidents in 1997. Mr. Cayzac is also Chairman of the Association Sportive,
or Sports Association, of the Paris Saint-Germain (PSG) professional soccer
team and member of the executive committee of the Mouvement des Enterprises de
France (MEDEF), a confederation of French businesses.  He currently serves on the Board of Directors of Groupe Amaury, a
press group.

Richard
Colker.Richard
Colker is currently Managing Partner of Colker, Gelardin & Co., a private
investment banking partnership in the United Kingdom. Mr. Colker has held these
positions since 1990. A graduate of Michigan State University, Mr. Colker began
his career in 1969 at Wells Fargo Bank N.A., a financial institution.  From 1973 to 1976, he was a manager in the
Corporate Finance Department of Wells Fargo Ltd., a merchant banking affiliate
of Wells Fargo Bank. From 1976 to 1983, Mr. Colker served as Vice President of
Banque de la Société Financière Européenne, a French financial institution.
From 1983 to 1990, Mr. Colker served as Managing Director, Investment Banking,
and a Member of the London Management Committee of the investment bank Kidder,
Peabody International Limited and its affiliate, Kidder, Peabody & Co., and
a Member of the Board of Directors of another affiliate, Kidder, Peabody Italia
S.p.A. Mr. Colker has been one of our directors since June 1995.

Ed
Eskandarian.Ed
Eskandarian is currently one of our Executive Vice Presidents and the Chairman
and Chief Executive Officer of Arnold Worldwide Partners.  Mr. Eskandarian, a graduate of Villanova
University and Harvard Business School, began his career as a scientist working
for NASA. In 1971, Mr. Eskandarian became senior vice president of Humphrey
Browning MacDougall, an advertising agency, and in 1981 he became President and
Chief Executive Officer of that agency. When London-based WCRS acquired
Humphrey Browning MacDougall in the mid-1980s, Mr. Eskandarian continued as
Chairman and Chief Executive Officer of the newly formed WCRS Diversified
Communications. In 1990, Mr. Eskandarian purchased Arnold Advertising, and has
served as its Chairman and Chief Executive Officer since that time.

45


Jim Heekin.  Jim Heekin is currently the Chairman and
Chief Executive Officer of Euro RSCG Worldwide.  Jim Heekin was appointed Chairman and Chief Executive Officer of
Euro RSCG Worldwide in January 2004. 
Mr. Heekin, a graduate of Williams College, began his advertising career
in 1975 in the Research Department of J. Walter Thompson.  He joined the Brand Management Department of
General Foods in 1978 and remained there until 1980, when he joined Bozell
Worldwide as an Executive Vice President. 
He returned to J. Walter Thompson in 1985, and in 1988 was appointed
General Manager of J. Walter Thompson New York and elected to the agencys
Worldwide Board of Directors.  Mr.
Heekin joined McCann-Erickson in 1993 as Regional Director of McCann North
America.  In April 1998, he was named
Worldwide Executive Vice President, Regional Director of the Europe/Middle
East/Africa region of McCann-Erickson Worldwide, part of The Interpublic Group
of Companies, Inc.  He became the
Chairman and CEO of McCann-Erickson Worldwide in January 2000, and the Chairman
and CEO of McCann-Erickson WorldGroup in March 2000.
Pierre
Lescure.Pierre
Lescure is currently Chairman and Chief Executive Officer of AnnaRose
Production, a cinema production company. 
From 2001 to April 2002, he was Co-Chief Operating Officer of Vivendi
Universal, where he was in charge of its television and film business unit.  Mr. Lescure, a graduate of the Centre de
Formation de Journalistes in Paris, began his career in journalism, holding a
variety of positions in French radio and television from 1965 to 1984. From
1984 to April 2002, he held a variety of positions with Canal+ Group and its
affiliated companies, including Chairman and Chief Executive Officer of Canal+
Group. Mr. Lescure currently serves on the board of directors of several
companies, including the Supervisory Board of Lagardère, a French media group,
the French newspaper Le Monde and Thomson Multimedia. Mr. Lescure is also
Chairman of the Supervisory Board of the PSG professional soccer team.
Jacques
Mayoux.Jacques
Mayoux is currently Vice-Chairman of Goldman Sachs Europe. Mr. Mayoux, a
graduate of Hautes Etudes Commerciales (HEC) and the Ecole Nationale
dAdministration (ENA), began his career in government, holding a variety of
offices within the French Ministry of Finance beginning in 1952. He served as
Chief Executive Officer of Crédit Agricole, a major French financial
institution, from 1963 to 1975, Chief Executive Officer of Sacilor, a French
steel company, from 1978 to 1982, and Chairman and Chief Executive Officer of
Société Générale, a French financial institution, from 1982 to 1986. Since
1986, Mr. Mayoux has served on the board of directors of several
companies.  He currently serves on the
Board of Directors of Altra Banque and Euris, a financial holding company.

Thierry
Meyer.Thierry
Meyer is currently chairman of our compensation and selection committee.  From 1996 to 2003, he was an advisor to
Senior Management of Alcatel, a French telecommunications company. Mr. Meyer, a
graduate of Universite Libre de Bruxelles and Harvard University, began his
career at Philips Electronics N.V., a Dutch electronics company, in its
marketing department in 1964. From 1969 through 1995, he served in many
capacities for Philips Electronics, including Chairman and Managing Director of
several of its international divisions.

Fernando
Rodés Vilà.Fernando
Rodés Vilà is currently one of our Executive Vice Presidents and the Chief
Executive Officer of Media Planning Group. 
Mr. Rodés Vilà, a graduate of UCB University and of Gresham College in
London in Economics and Finance Management, began his career in banking. In
1985, he joined Manufacturers Hanover Trust, a financial institution, as the
Director of Capital Markets in Barcelona. In 1989, he became Director of
company banking services at Banco Español de Credito, a Spanish financial
institution. Mr. Rodés Vilà was appointed Chief Executive Officer of Media
Planning, S.A. in 1994. In 1999, concurrently with the combination of our media
services with those of Media Planning, S.A., Mr. Rodés Vilà was appointed as
the Chief Executive Officer of Media Planning Group.

Jacques
Séguéla.Jacques
Séguéla is currently one of our Executive Vice Presidents and our Chief
Creative Officer.  Mr. Séguéla, who has
a Ph.D. in Pharmacy, began his career as a reporter for Paris-Match and then
for France-Soir. In 1969, he created RSCG, which merged with Eurocom in 1991 to
create Euro RSCG Worldwide. Mr. Séguéla is the author of eighteen books on
advertising and related matters and has been involved in numerous political
campaigns in France and abroad.

46


Patrick
Soulard.Patrick
Soulard is currently Deputy Chief Executive Officer of the Investment Banking
Division of Société Générale, a position he has held since 1999. Mr. Soulard, a
graduate of the Institut dEtudes Politiques de Paris and the Ecole Nationale
dAdministration (ENA), began his career in government, holding a variety of
offices within the French Ministry of Finance from 1977 to 1986. From 1986 to
1995, he held a variety of positions with Banque Nationale de Paris, a French
financial institution, including Director of Financial Affairs and Industrial
Holdings, and Manager of Banexi, a subsidiary bank.  Mr. Soulard joined Société Générale as a Senior Banker in 1996.
He is currently a director of Foncières Financières de Participation, an investment
company, and Chairman of the Supervisory Board of Société Générale Private
Equity.
Clément
Vaturi.  Clément
Vaturi has served as Chairman of the Board of Immobilière Hôtelière, a French
hotel real estate development company, since 1983. Mr. Vaturi is also majority
shareholder of Immobilière Hôtelière. Mr. Vaturi received his Bachelor of
Science, Civil Engineering, from the Massachusetts Institute of Technology and
his Master of Science, Industrial Management, from the Sloan School of
Management at the Massachusetts Institute of Technology.  Mr. Vaturi has been one of our directors
since August 1988.
Jacques
Hérail.Jacques
Hérail is currently one of our Executive Vice Presidents and our Chief
Financial Officer, positions he has held since 1996.  He also currently serves as Senior Vice President of Snyder
Communications. Mr. Hérail, a graduate of Sciences Economiques, the Institut
dEtudes Politiques and the Ecole Supérieure des Sciences Economiques et
Commerciales (ESSEC), began his career at the accounting firm Arthur Andersen
in 1976. In 1984, he was appointed Chief Financial Officer of HCM and later
served as Chief Financial Officer of HDM. Between 1989 and 1996, he served as
Executive Vice President and Chief Financial Officer of Euro RSCG Worldwide.
Executive committees

At
a meeting of our board of directors on December 12, 2002, our Chairman, Alain
de Pouzilhac, proposed the creation of four new executive committees to replace
our then existing executive committee. 
These committees, a strategic committee, creative committee, financial
committee, and business development committee, were created in January
2003.  In a very difficult environment,
these committees steered the planning and implementation of a major strategic
reorganization plan completed during 2003. 
Having successfully fulfilled their role, these committees have now been
reorganized to reflect our new structure and our return to a primary focus on
management of our businesses.  Starting
in 2004, the previous four committees have been combined to form two new
committees:

Finance and strategy executive committee.  This committee is made up of Alain de Pouzilhac, Jacques Hérail, the
chief executive officers and chief financial officers of each of our divisions, and other senior
management personnel.
Creative executive
committee.  This committee is made up of Alain de Pouzilhac, Jacques Séguéla,
the chief executive officers of each of our divisions, and the leaders of the
creative teams in all the categories of our communications activities.
Our audit committee
Our
board of directors has a standing audit committee. The purpose of the audit
committee is to:

  make
  recommendations concerning the engagement of independent public accountants;
  review with
  our management and independent public accountants the plans for, and scope
  of, the audit procedures to be utilized and results of audits;
  approve the
  professional services provided by the independent public accountants; and
  review the
  adequacy and effectiveness of our internal accounting controls.The
current members of our audit committee are Messrs. Boutinard Rouelle, Colker
and Vaturi.

47

Our compensation and
selection committee

Our
board of directors has a standing compensation and selection committee.  The purpose of the compensation and
selection committee is to:


  examine and present recommendations concerning the compensation of
  each of our executive officers;
  examine the methodology of attributing stock options to executive
  committee members, taking into account the performance of each executive as
  well as the performance of our shares;
  present a range of board and committee fees to be paid to the members
  of our board of directors; and
  issue recommendations regarding candidates for our board of directors
  and top executives.The current
members of our compensation and selection committee are Messrs. Lescure, Meyer
and Vaturi.
Our strategic planning committee

The purpose
of our strategic planning committee is to assist and make recommendations to
our board regarding the medium- and long-term strategic goals for our
company.  Our strategic planning
committee:


  examines
  annual budgets, semi-annual reviews, as well as medium- and long-term
  strategic plans;
  reviews and
  evaluates the terms of proposed acquisitions and divestitures, and makes
  recommendations regarding these transactions to our board;
  reviews the
  financial planning and financial structure of our company; and
  evaluates
  strategic alternatives for our company and its operating divisions.The
current members of our strategic planning committee are Messrs. Rodés Castañe,
Lescure, Mayoux, de Pouzilhac and Boutinard Rouelle.
Compensation of our
directors and officers

Compensation of our executive officers

Our
compensation and selection committee reviews the compensation packages of our
principal executive officers annually. 
The compensation policy that has been established by our compensation
and selection committee is designed to motivate our principal executive
officers and to closely align their interests with those of our shareholders.
The policy is based on the following principles:


  The various components and
  the total amount of the compensation packages are determined based on
  benchmarking analyses, to ensure that they remain competitive;
  A significant proportion of
  compensation for the executive officers (including stock options) is variable
  and depends on the fulfillment of performance targets; and
  The performance targets are
  expressed in terms of growth in underlying profitability and also of our
  companys performance in relation to its peer group.Components
of compensation packages.  The compensation
packages of our principal executive officers comprise a fixed salary, an annual
bonus, a long-term incentive payment (for a minority of executives) and stock
options.
Fixed
salary.  Fixed salaries are determined by reference to
market rates of pay for comparable positions. No salary increases have been
awarded to our principal executive officers for 2004.

48


Annual
bonus.  Annual
bonuses are determined based on a combination of quantitative and qualitative
criteria, including:

  Operating
  margin (earnings before interest, taxes and goodwill amortization expressed
  as a percentage of revenue);
  Organic
  growth; and
  Free cash
  flow.Operating
margin and organic growth targets are set at either group or division level,
depending on the executives
position in the organization. As a general rule, 30% to 50% of the target bonus
is linked to operating margin, 30% to 50% to organic growth and 25% to 40% to
free cash flow.
Qualitative
targets are clearly defined and the compensation and selection committee pays
particular attention to ensuring that they are both objective and measurable.
In principle, no more than 25% to 30% of the target bonus is linked to
qualitative criteria. Depending on the executives position and the division,
the total annual bonus, assuming that all the targets are met, represents
between 50% and 100% of the individuals salary. If the targets are exceeded,
the bonus may represent up to a maximum of 200% of salary.
2003
Bonus. In view
of our disappointing results, Alain de Pouzilhac and our other 2003 principal
executive officers waived their qualitative bonus (except for the portion
corresponding to directors fees) for 2003. The qualitative bonus targets
included the development of new business, improved creative performance, debt
refinancing and cost savings. Quantitative bonuses paid in respect of 2003
rewarded the performance of executive officers in the Media Planning Group
division. In addition, partial qualitative bonuses of 123,000 and 71,000 were
paid to Messrs. de Pouzilhac and Hérail, respectively, with respect to
2003 before the decision to renounce these bonuses.  The renunciations of these bonuses are being effected through a
reduction in base salary in 2004.  In 2003, executive officers total
compensation was approximately 25% lower than in 2002, due mainly to the
reduction in bonus payments.

2004
Bonus.  The 2004 bonuses for our principal executive officers are based on the
same general principles as described above. The free cash flow criterion
adopted in 2003 has also been applied in 2004, to act as an incentive to
executives to maintain their efforts to strengthen our financial position.
However, for 2004, the target has been refined and is based on an improvement
in the working capital at the division level, which our compensation and
selection committee viewed as more relevant. Our compensation and
selection committee has also recommended
including this target in bonus plans for all of our employees who are in a
position to influence working capital. Exceptionally, no qualitative targets
have been set for our principal executive officers for 2004. The entire annual
bonus for these executives will be based on the above quantitative targets, to
help ensure that executives focus all of their energies on improving our
financial results.

Long-term
incentive Plan (LTIP).  The compensation and selection committee
decided to introduce a long-term incentive plan beginning in 2003 for a minority
of our principal executive officers who are the most directly able to influence
our financial results. The purpose of this plan is to reward longer term
performance. The plan is intended to act as an incentive for the executives
concerned while also creating value for shareholders. Incentive payments are
based on our performance compared with that of our six main competitors
(Omnicom Group, The Interpublic Group of Companies, WPP Group, Publicis Groupe,
Aegis Group and Grey Global Group) and they also take into account the level of
our net debt. This benchmarking mechanism ensures that only underlying
performance is rewarded, and not the possible benefits of an improvement in
economic conditions. In view of last years results and the worldwide restructuring
plan implemented during the year, the compensation and selection committee
introduced two changes to the LTIP so that it continues to act as an incentive
to the executives concerned and so that performance is measured on a relevant
basis:


  The performance measurement
  period has been shifted to 2004-2006 from 2003-2005; and49


  The initial cash earnings
  per share growth criterion has been replaced with a criterion based on a
  comparison of the cumulative growth in earnings before interest, taxes and
  goodwill amortization between 2004 and 2006 compared to our six main
  competitors.If
the trigger criterion linked to control of our net debt is met, our cumulative
growth in earnings before interest, taxes and goodwill amortization between 2004
and 2006 must be in third place or better compared with our main competitors
for an LTIP payment to be due, with the amount of the LTIP payment decreasing
significantly from first to third place.
Stock
options.  Under
our stock option policy for executive officers, stock option grants are
generally tied to attainment of our cash earning per share targets and our
stock price performance in relation to that of our six principal
competitors.  For options to be granted,
our stock price performance must rank among the top three in this peer
group.  The number of options granted
decreases significantly from first place to third place. This stock option
policy was implemented beginning in 2002.
In
application of our policy, none of our 2003 executive officers received stock
options related to our 2003 fiscal year due to our 2003 stock price and
earnings performance.
Directors fees

Beginning
in 2003, we changed our policy on directors fees.  The fixed annual retainer amount was reduced by 25% to 30,000
and we added a variable retainer amount. 
The variable retainer amount is based on two criteria:


  the
  directors attendance at board and committee meetings, with a payment amount
  equal to 2,000 for each meeting attended, or 3,000 per meeting for
  committee chairmen; and
  growth in
  our annual operating margin.The
variable retainer payment amount ranges from 0% to 40% of the fixed retainer
amount plus the attendance-based variable amount.  8,000 of the fixed annual retainer amount is paid in Havas
shares which may not be sold for as long as the director remains on our board
of directors.  In addition, as
applicable in prior years, directors fees paid to our principal executive
officers are part of, and not in addition to, their annual compensation
packages.
The tables
below set forth the following information with respect to each of our directors and executive officers for
2003:

  gross compensation for 2003, which includes all regular compensation,
  benefits in kind and contingent or deferred compensation accrued in 2003,
  even if payable at a later date; and
  stock option grants in or related to 2003 and stock option exercises
  in 2003.50

Compensation Table
for 2003(1)

In 
  
  Base Salary
  
  Bonus
  
  Other
  Compensation(2)
  
  Board and
  Committee
  Fees
  
  TotalEmployee Directors and
  Executive OfficersAlain de
  Pouzilhac(3)
  
  1,000,000
  
  0
  (4)
  6,470
  
  
  48,000
  
  1,054,470Bob
  Schmetterer(5)
  
  840,056
  
  0
  
  326,249
  (6)
  
  
  
  1,166,305Alain
  Cayzac(3)
  
  450,000
  
  0
  
  13,697
  
  
  42,000
  
  505,697Ed Eskandarian(3)
  
  663,202
  
  0
  
  17,254
  
  
  42,000
  
  722,456Jacques Hérail(3)
  
  700,000
  
  0
  (4)
  7,371
  
  
  
  
  707,371Leopoldo
  Rodés Castañe(7)
  
  600,000
  
  334,950
  
  369,369
  
  
  48,000
  
  1,352,319Fernando
  Rodés  Vilà(3)
  
  600,000
  
  698,000
  
  178,759
  (8)
  
  42,000
  
  1,518,759Jacques
  Séguéla(3)
  
  450,000
  
  0
  
  21,268
  
  
  44,000
  
  515,268Sub-Total
  
  5,303,258
  
  1,032,950
  
  940,437
  
  
  266,000
  
  7,544,645Non-employee DirectorsMichel
  Boutinard Rouelle
  
  N/A
  
  0
  
  N/A
  
  
  60,000
  
  60,000Richard
  Colker
  
  N/A
  
  0
  
  56,153
  (9)
  
  65,000
  
  121,153Pierre
  Lescure
  
  N/A
  
  0
  
  N/A
  
  
  44,000
  
  44,000Juan
  March(10)
  
  N/A
  
  0
  
  N/A
  
  
  62,000
  
  62,000Jacques
  Mayoux
  
  N/A
  
  0
  
  N/A
  
  
  42,000
  
  42,000Thierry
  Meyer
  
  N/A
  
  0
  
  N/A
  
  
  71,000
  
  71,000Patrick
  Soulard
  
  N/A
  
  0
  
  N/A
  
  
  42,000
  
  42,000SOCIF
  
  N/A
  
  0
  
  N/A
  
  
  44,000
  
  44,000Clément
  Vaturi,
  representative of SOCIF
  
  N/A
  
  0
  
  N/A
  
  
  28,000
  
  28,000Sub-total
  
  N/A
  
  0
  
  56,153
  
  
  458,000
  
  514,153TOTAL
  
  5,303,258
  
  1,032,950
  
  996,590
  
  
  724,000
  
  8,058,798(1)
  
  Amounts paid
  in currencies other than euro have been converted into euro at the average
  2003 exchange rate between the applicable currency and the euro.
  (Source:  Banque de France.)(2)
  
  Includes
  benefits in kind, as well as retirement benefits.(3)
  
  As a result
  of our disappointing financial performance in 2003, in early 2004 our
  executive officers renounced their rights to any qualitative bonus to which
  they were entitled with respect to 2003.(4)
  
  Partial
  qualitative bonuses of 123,000 and 71,000 were paid to Messrs. de Pouzilhac
  and Hérail, respectively, with respect to 2003 before the decision to
  renounce these bonuses.  The
  renunciations of these bonuses are being effected through a reduction in base
  salary in 2004.(5)
  
  Mr.
  Schmetterer resigned as President and Chief Operating Officer of Havas and as
  a member of our board of directors and as Chairman and Chief Executive
  Officer of Euro RSCG Worldwide effective December 31, 2003.(6)
  
  Includes
  265,281 ($300,000) paid as a partial severance payment.(7)
  
  Mr. Rodés
  Castañe is Chairman of Media Planning Group. 
  His compensation is not reviewed by our compensation and selection
  committee and results from a January 2001 agreement entered into in
  connection with the 2001 acquisition of the 55% of the shares of Media
  Planning Group that we did not already own.(8)
  
  Includes
  75,000 related to expatriation expenses.(9)
  
  Reflects
  $60,000 paid to Colker, Gelardin & Co. for investment banking advisory
  services.  Mr. Colker is Managing
  Partner of Colker, Gelardin & Co. 
  See Item 7. Major Shareholders and Related Party
  TransactionsTransactions involving directors, executive officers and
  shareholders of HavasTransactions involving Richard Colker.(10)
  
  Mr. March,
  for personal reasons, has decided not to stand for re-election to our board
  of directors in 2004.  Consequently,
  he ceased to be a member of our board of directors and our compensation and
  selection committee as of May 26, 2004.51

Options of Executive
Officers of HavasGranted in or related to 2003 or Exercised in 2003 (1)

Number
        of
        Options
        Granted
        Under
        2002
        Option
        Program
        (2)
    
    Exercise
        Price
        per
        Share
        ()
    
    Grant
        Date
    
    Expiration
        Date
    
    Number of
        Options
        Granted
        Under
        2003
        Option
        Program
        (3)
    
    Number of
        Options
        Exercised
        in 2003
    
    Exercise
        Price
        per
        Share
        ()
    
    Grant
        DateAlain
        de Pouzilhac
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0(4)
    
    0
    
    N/A
    
    N/ABob
        Schmetterer (5)
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0
    
    217,214
    
    4.09
    
    12/5/96Alain
        Cayzac
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0
    
    0
    
    N/A
    
    N/AEd
        Eskandarian
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0
    
    0
    
    N/A
    
    N/AJacques
        Hérail
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0
    
    139,968
    
    4.09
    
    12/5/96Fernando
        Rodés Vilà
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0
    
    0
    
    N/A
    
    N/ALeopoldo
        Rodés Castañe
    
    0
    
    N/A
    
    N/A
    
    N/A
    
    0
    
    0
    
    N/A
    
    N/AJacques
        Séguéla
    
    202,248
    (6)
    2.67
    
    3/24/03
    
    3/24/10
    
    0
    
    0
    
    N/A
    
    N/A(1)
  
  As a result of our
  distribution of a portion of paid-in capital in connection with our payment
  of our annual dividend to shareholders on June 18, 2003, the number of
  options and the exercise prices for outstanding options under our plans on
  that date were adjusted.  Information
  in this table reflects this adjustment. 
  For a discussion of the possible future distribution of
  paid-in-capital in connection with our payment of dividends to shareholders,
  see Item 8. Financial Information  Dividend Policy on page 59.(2)
  
  Reflects option grants in
  2003 related to 2002.  See Compensation
  of our directors and officers
  Compensation of our executive officers  Components of compensation packages Stock options on page 50 above.(3)
  
  Reflects option grants
  related to 2003.  See Compensation
  of our directors and officers
  Compensation of our executive officers  Components of compensation packages Stock options on page 50 above.(4)
  
  Alain de Pouzilhac
  receives an annual grant of 300,000 options from 2002 through 2005 as
  compensation for renouncing a substantial part of the benefits to which he
  was entitled under a retirement plan established in 1978.  On July 4, 2003, Mr. de Pouzilhac received
  300,000 options under this annual grant for 2003.  These options have an exercise price of 4.03 per share and expire on July 4,
  2013.(5)
  
  Mr. Schmetterer resigned
  as President and Chief Operating Officer of Havas and as a member of our
  Board of Directors and as Chairman and Chief Executive Officer of Euro RSCG
  Worldwide effective December 31, 2003.(6)
  
  For Jacques
  Séguéla, the criteria for the grant of options related to 2002 were based on
  the creative agency rankings obtained by Havas and not on attainment of cash
  earnings per share targets or relative stock price performance.In
addition to the compensation set forth in the table above, some of our
directors who are executive officers are entitled to severance benefits under
their employment agreement with us.
Share ownership

As of March
31, 2004, all our directors and executive officers as a group (17 persons,
including Mr. Heekin who was appointed Chairman and Chief Executive Officer of
Euro RSCG Worldwide and became one of our executive officers effective January
1, 2004, and SOCIF and Clément Vaturi) beneficially owned 18,169,700 or 6.1% of
our outstanding shares, not including 7,828,320 shares, which represented
approximately 2.6% of our outstanding shares on that date, owned by companies
controlled by the families of Leopoldo Rodés Castañe and Fernando Rodés
Vila.  Juan March beneficially
owned 11,400,305 shares, which represented approximately 3.8% of our
outstanding shares on that date.  As of
that date, none of our other directors or executive officers beneficially owned
more than 1% of our outstanding shares.

52


Employees and labor
relations
Our
business is highly dependent upon the skills of our creative, research, media
and account personnel and their relationships with our clients.  Many of our employees have employment
contracts, some of which contain covenants not to compete.  Our senior management employees also are
generally bound by covenants not to compete. 
Those employees who are not subject to covenants are typically able to
move within the industry with relative ease. 
Competition with our competitors for qualified personnel is intense, and
we, like our principal competitors, are vulnerable to any failure to attract or
retain qualified personnel.  We believe
the compensation arrangements for our key employees are highly competitive with
those of other advertising and communications services companies.
The tables
below set forth our total number of employees by geographic location.  The figures in these tables are based on the
average number of employees employed during the year by each of our agencies as
of December 31, 2001, 2002 and 2003, including in each case the average number
of employees employed by Media Planning Group:
Employees by
Geographic Location

Year Ended December 31,
  
  Total
  Number
  of Employees
  
  Europe
  
  U.S.
  
  Asia
  Pacific
  
  Latin
  America2001
  
  20,373
  
  10,959
  
  6,336
  
  1,940
  
  1,1382002
  
  18,864
  
  10,430
  
  5,588
  
  1,739
  
  1,1072003
  
  16,343
  
  8,055
  
  5,409
  
  1,583
  
  1,296Some
of our U.S. employees in one of our subsidiaries that is to be sold as part of
our strategic reorganization are covered by collective bargaining agreements
with two separate labor unions.  In
Europe, membership of our employees in labor unions varies from country to
country, and a number of countries prohibit us from keeping records of union
membership. We are subject to various collective bargaining agreements in
Europe.  In most continental European
countries, collective bargaining agreements are imposed by law on the entire
industry.  We believe that our
relationship with the labor unions is good.
As of
December 31, 2003, our principal collective bargaining agreements are as
follows:


Country
  
  Number of
  Covered Employees
  
  Expiration
  DateArgentina
  
  130
  
  
  No
  expirationAustria
  
  52
  
  
  No
  expirationBelgium
  
  107
  
  
  No
  expirationBrazil
  
  217
  
  
  December
  31, 2004Brazil
  
  43
  
  
  No
  expirationFrance
  
  2,646
  
  
  No
  expirationItaly
  
  141
  
  
  December
  31, 2004Portugal
  
  95
  
  
  No
  expirationPortugal
  
  143
  
  
  December
  31, 2004Spain
  
  809
  
  
  December
  31, 2004United
  Kingdom
  
  15
  
  
  No
  expirationUnited
  States
  
  56
  
  
  April
  30, 2005United
  States
  
  37
  
  
  June
  12, 200653

Option plans

As of
December 31, 2003, our shareholders had authorized our board of directors to
grant options to purchase an aggregate of up to 12,092,658 Havas shares on or
before July 23, 2005 with respect to 4,461,525 of this total and July 21, 2006
with respect to 7,631,133 of this total under authorizations by our
shareholders on May 23, 2002 and May 21, 2003. 
As of December 31, 2003, options to purchase an aggregate of 30,734,948
Havas shares were outstanding, including options to purchase an aggregate of
8,750,406 Havas shares granted to our directors and executive officers.  All of the options we granted are subject to
specified anti-dilution adjustments.

Our board
of directors will fix the number of Havas shares and the exercise price for
option grants, which we refer to as plans, under our shareholder authorizations
in accordance with the laws in effect at the time the board of directors
decides to grant the options.  At that
time, our board of directors also will establish the conditions for exercising
the options and the periods during which the options may be exercised.
Our
shareholder authorizations typically permit our board of directors to grant
options to purchase up to an aggregate percentage of our issued shares from
time to time.  Each shareholder
authorization is effective for a specified period from the date of authorization
or until all of the options authorized have been granted.  On May 21, 2003, our shareholders gave our
board of directors authority for a period of 38 months to grant options to
purchase up to an annual average over the term of the authorization of 2.5% of
the then issued Havas shares, including treasury shares, from time to time,
provided that the aggregate number of shares purchasable under options
outstanding from time to time may not exceed 12% of the then issued Havas
shares, including treasury shares.  As
of December 31, 2003, the only new options that may be granted by the
board are options to purchase shares under our May 2002 and May 2003
shareholder authorizations.
Upon the
completion of the acquisition of Snyder Communications in September 2000, all
outstanding options to purchase shares of SNC common stock of Snyder
Communications were converted into options to purchase an aggregate of
9,494,613 Havas ADSs, of which options to purchase an aggregate of 3,191,594
Havas ADSs were outstanding as of December 31, 2003.  These options are not considered to be part of any of our option
plans, are not subject to anti-dilution adjustments and do not affect the
calculation of the limits on option grants described above.

In
addition, upon the completion of the acquisition of Circle.com in June 2001,
all outstanding options to purchase shares of Circle.com common stock of Snyder
Communications were converted into options to purchase an aggregate of 273,220
Havas ADSs, of which options to purchase an aggregate of 106,341 Havas ADSs
were outstanding as of December 31, 2003. 
These options are not considered to be part of any of our option plans,
are not subject to anti-dilution adjustments and do not affect the calculation
of the limits on option grants described above.
The table
below shows information relating to our various options plans and the converted
SNC options and Circle.com options as of December 31, 2003:

54

6/19/1997
        Plan
        (2)
    
    3/05/1998
        Plan
    
    2/25/1999
        Plan
    
    6/17/1999
        Plan
    
    9/30/1999
        Plan
    
    12/02/1999
        Plan
    
    3/02/2000
        Plan
    
    5/23/2000
        Plan
    
    10/23/2000
        Plan
    
    3/01/2001
        Plan
    
    5/22/2001
        Plan
    
    2/14/2002
        Plan
        (3)
    
    12/12/2002
        Plan
    
    3/24/2003
        Plan
    
    7/4/2003
        Plan
    
    12/10/2003
        Plan
    
    Converted
        SNC
        Options
    
    Converted
        Circle.com
        OptionsDate
        of shareholders meeting authorizing plans
    
    
    6/19/1997
    
    
    6/19/1997
    
    
    6/19/1997
    
    
    6/19/1997
    
    
    6/19/1997
    
    
    6/19/1997
    
    
    6/17/1999
    
    
    6/17/1999
    
    
    6/17/1999
    
    
    5/23/2000
    
    
    5/23/2000
    
    
    5/22/2001
    
    
    5/22/2001
    
    
    5/22/2001
    
    
    5/23/2002
    
    
    5/23/2002
    
    
    8/25/2000
    
    
    5/22/2001Date
        of board meeting granting options
    
    
    6/19/1997
    
    
    3/05/1998
    
    
    2/25/1999
    
    
    6/17/1999
    
    
    9/30/1999
    
    
    12/02/1999
    
    
    3/02/2000
    
    
    5/23/2000
    
    
    10/23/2000
    
    
    3/01/2001
    
    
    5/22/2001
    
    
    2/14/2002
    
    
    12/12/2002
    
    
    3/24/2003
    
    
    7/4/2003
    
    
    12/10/2003
    
    
    8/25/2000
    
    
    5/22/2001Number
        of shares over which options granted (1)
    
    
    6,217,896
    
    
    1,633,143
    
    
    734,602
    
    
    309,877
    
    
    206,866
    
    
    893,698
    
    
    919,078
    
    
    413,737
    
    
    4,075,311
    
    
    4,586,435
    
    
    3,479,804
    
    
    6,306,841
    
    
    31,680
    
    
    2,740,982
    
    
    315,000
    
    
    1,500,000
    
    
    9,494,613
    
    
    273,220Number
        of shares over which options granted to our executive officers
    
    
    3,181,477
    
    
    383,252
    
    
    335,440
    
    
    
    
    
    
    
    
    517,471
    
    
    298,150
    
    
    413,737
    
    
    
    
    
    1,545,135
    
    
    97,277
    
    
    1,476,219
    
    
    
    
    
    202,248
    
    
    300,000
    
    
    
    
    
    
    
    
    Number
        of executive officers receiving options
    
    
    5
    
    
    2
    
    
    2
    
    
    
    
    
    
    
    
    2
    
    
    2
    
    
    1
    
    
    
    
    
    7
    
    
    1
    
    
    7
    
    
    
    
    
    1
    
    
    1
    
    
    
    
    
    
    
    
    Exercisable
        date
    
    
    6/19/2002
    
    
    3/05/1998
    
    
    2/25/1999
    
    
    1/01/2000
    
    
    1/01/2000
    
    
    1/01/2000
    
    
    1/01/2001
    
    
    5/23/2000
    
    
    10/23/2000
    
    
    3/01/2001
    
    
    1/01/2002
    
    
    1/01/2003
    
    
    1/01/2003
    
    
    3/24/2004
    
    
    7/4/2004
    
    
    12/10/2004
    
    
    9/29/2000
    
    
    7/02/2001Expiration
        date
    
    
    6/19/2006
    
    
    12/31/2004
    
    
    2/24/2006
    
    
    6/16/2006
    
    
    9/29/2006
    
    
    12/01/2006
    
    
    3/01/2007
    
    
    5/22/2007
    
    
    10/22/2007
    
    
    2/29/2008
    
    
    5/21/2008
    
    
    2/13/2009
    
    
    12/11/2009
    
    
    3/24/2010
    (9)
    
    7/4/2013
    
    
    12/10/2010
    (12)
    
    9/13/2010
    
    
    8/03/2010Exercise
        price per share (1)
    
    
    4.45
    
    
    6.13
    
    
    7.37
    
    
    8.79
    
    
    10.49
    
    
    15.17
    
    
    26.72
    
    
    24.17
    
    
    17.16
    
    
    14.98
    
    
    14.35
    
    
    8.31
    
    
    4.79
    
    
    2.67
    
    
    4.03
    
    
    4.38
    
    
    9.19(13
    )
    
    144.42(14
    )Discount
        from average market price
    
    
    5
    %
    
    5
    %
    
    5
    %
    
    5
    %
    
    5
    %
    
    5
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    0
    %
    
    N/A
    
    
    N/AExercise
        conditions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    (5
    )
    
    (6
    )
    
    (7
    )
    
    (8
    )
    
    (10
    )
    
    (11
    )
    
    
    
    
    Number
        of shares issued on exercise as of 12/31/2003
    
    
    
    
    
    386,645
    
    
    
    
    
    20,000
    
    
    
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,760,948
    
    
    Number
        of shares over which options terminated as of 12/31/2003
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    
    948,771
    
    
    804,457
    
    
    503,733
    
    
    864,735
    
    
    7,377
    
    
    44,244
    
    
    
    
    
    
    
    
    4,542,071
    
    
    166,879Number
        of options outstanding as of 12/31/2003
    
    
    6,217,896
    
    
    1,246,498
    
    
    728,602
    
    
    289,877
    
    
    206,866
    
    
    849,698
    
    
    919,078
    
    
    413,737
    
    
    3,126,540
    
    
    3,781,978
    
    
    2,976,031
    
    
    5,442,106
    
    
    24,303
    
    
    2,696,738
    
    
    315,000
    
    
    1,500,000
    
    
    3,191,594
    
    
    106,341(1)
As
a result of our distribution of a portion of paid-in capital in connection with our
payment of our annual dividend to shareholders on June 18, 2003, the number of options
and the exercise prices were adjusted for all plans except the converted SNC and
Circle.com options. For a discussion of the possible future distribution of
paid-in-capital in connection with our payment of dividends to shareholders, see Item
8. Financial Information Dividend policy on page 59.(2)
Upon
exercise of the options under this plan, option holders receive treasury shares rather
than newly issued shares.  On March 3, 2004, our board of directors decided to
postpone the expiration date of these options from June 19, 2004 to June 19, 2006.(3)
This
plan includes grants under two separate programs: the second half of the 2001 option
program and the first half of the 2002 option program. See Compensation of
our directors and officers Compensation of our executive officers  Components
of compensation packages Stock options on page 50 above.(4)
197,306
options became exercisable since March 1, 2001, 1,463,043 in 2002, 1,463,043 in 2003, and
all the options in 2004.(5)
1,159,935
options became exercisable 2002, 1,159,935 exercisable in 2003, and all the options in
2004.(6)
2,102,280
options became exercisable in 2003, 2,102,280 exercisable in 2004, and all the options in
2005.(7)
10,560
options became exercisable in 2003, 10,560 in 2004 and all the options in 2005.(8)
913,661
options became exercisable at December 10, 2004, 500,000 at December 10, 2005 and all the
options at December 10, 2006.(9)
For
French residents the expiration date is March 24, 2013.(10)
105,000
options became exercisable at July 4, 2004, 105,000 at July 4, 2005 and all the options
at July 4, 2006.(11)
500,000
options became exercisable at December 10, 2004, 500,000 at December 10, 2005 and all the
options at July 4, 2006.(12)
For
French residents the expiration date is December 10, 2013.(13)
Represents
the weighted average exercise price of $11.58 converted into euro at the noon buying rate
of 1.00 = $1.2597 on December 31, 2003.(14)
Represents
the weighted average exercise price of $181.92 converted into euro at the noon buying
rate of 1.00 = $1.2597 on December 31, 2003.55

Some of our
subsidiaries have granted stock options to some of their employees with respect
to the stock of the applicable subsidiary. 
The exercise price is usually based on a multiple of current earnings of
the subsidiary at the award date, which we refer to as the multiple.  Such options are generally exercisable five
to seven years after the award date and require continuing employment.  The parent companies of such subsidiaries
have the option to buy back the shares if and when acquired by the employees
and the employees have the option to put these shares to such parent
companies.  The buyback price is
generally based upon the multiple applied to the earnings level of the
subsidiary when the option is exercised. 
The employees are required to put the shares to the applicable parent
company when they leave the employ of the subsidiary.  In determining the estimated obligations under these stock option
plans, the applicable multiple has been applied to the latest available
earnings data or estimates.
ITEM 7. 
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
As of
February 27, 2004, based on information provided to us by FMR Corp., Fidelity
International Limited, and the Johnson family, which could be deemed to control
Fidelity International Limited, in a notification of holdings pursuant to
Article 356-1 of the Law of July 24, 1966, as amended, FMR Corp., Fidelity
International Limited and their respective direct and indirect subsidiaries
owned 30,433,867 of our shares, which represented approximately 9.9% of our
issued shares and 10.2% of our voting rights. 
As of March 31, 2004, to the best of our knowledge, there are no other
shareholders whose beneficial ownership represents 5% or more of our share
capital or voting rights.  All of our
shareholders have the same voting rights with respect to the Havas shares that
they hold. (However, see Item 3.  Key
Information  Risk Factors  Holders of our ADSs may have limited ability to
influence the governance of our company on page 8.)  As of March 31, 2004, we held 7,434,117
shares as treasury stock.  These Havas
shares do not have voting rights. As a result, the percentage of the issued
Havas shares owned by each of our shareholders translates into a slightly
greater percentage of total voting rights.
As of
February 25, 2003, based on information provided to us by Putnam Investment
Management, LLC and The Putnam Advisory Company, LLC in its Notification of
Holdings under the EC Directive 88/627 on the Disclosure of Interest of Shares,
these two entities owned 30,082,256 of our shares, which represented
approximately 9.9% of our outstanding shares and 10.1% of our voting
rights.  As of April 15, 2003, based on
information provided to us by Putnam Investment Management, LLC and The Putnam
Advisory Company, LLC in its Notification of Holdings under the EC Directive
88/627 on the Disclosure of Interest of Shares, these two entities owned
14,126,405 of our shares, which represented approximately 4.6% of our
outstanding shares and 4.8% of our voting rights.

To our
knowledge, as of December 31, 2003, approximately 29.8 million, or 10%, of
our outstanding shares (including shares represented by ADSs) were held by
shareholders in the United States. In addition, to our knowledge,
there were approximately 354 registered ADR holders in the United States as
of May 24, 2004.
Transactions
involving directors, executive officers and shareholders of Havas
Transactions involving theRodés
Family.  Media Planning Group
and its subsidiaries have entered into the following transactions with members
of the families of Fernando
Rodés Vilà, one of our directors and executive officers and the chief executive
officer of Media Planning Group, and Leopoldo Rodés Castañe, one of our
directors and the father of Fernando Rodés Vilà, and or entities controlled by
them.
In October
1991, the predecessor to Media Planning Group entered into an agreement with
Gestora de Viviendas S.A. under which Gestora de Viviendas provides client
development services to Media Planning Group and its subsidiaries in exchange
for commissions on new clients developed by it.  Under this agreement, Media Planning Group paid Gestora de Viviendas
commissions of 360,000, excluding taxes, for these services provided in 2003,
and expects to pay approximately the same amount in 2004.  Fernando Rodés Vilà and Leopoldo Rodés Castañe, together with
other members of their families, are controlling shareholders of Gestora de Viviendas.
Gestora
de Viviendas is a major shareholder of Vigilancia y Sistemas de Seguridad,
S.A., a company that provides security services.  Vigilancia y Sistemas de Seguridad provides security systems to
Media Planning Group, for which Media Planning Group paid it 440,185,
excluding taxes, in 2003.  Media
Planning Group expects to pay Vigilancia approximately the same amount in 2004
for these services.

56

Media
Planning Group receives legal services from the Spanish law firm of Rodés &
Sala Abogados, S.L.  Under an agreement
entered into in September 2001, Media Planning Group pays an annual fee of 120,000 to Rodés & Sala for
general legal services.  In addition,
Rodés & Sala was paid a total of 210,800, excluding taxes, for
legal services provided to Media Planning Group in 2003 and has billed Media
Planning Group a total of 63,575, excluding taxes, in legal fees for 2004
through April 30, 2004.  Gonzalo Rodés Vilà, the brother of Fernando
Rodés Vilà and the son of Leopoldo Rodés Castañe, is a partner in Rodés &
Sala.  In addition, Gonzalo Rodés Vilà serves as secretary of
the board of directors of Media Planning Group.  Gonzalo Rodés
Vilà was paid 48,000 for his services as secretary of the board in 2003
and has been paid 16,000 for such services in 2004 though April 30.

Transactions
involving Richard Colker.  In 2003, we paid $60,000 to Colker, Gelardin & Co. for
investment banking advisory services performed during 2003 related to our
specialized agencies.  Richard Colker,
one of our directors, is the Managing Partner of Colker, Gelardin & Co.

ITEM
8.   FINANCIAL INFORMATION

8.A
Consolidated statements and other financial information

8.A.1
See Item 18 Financial Statements.

8.A.2
See Item 18 Financial Statements.

8.A.3
See Report of Independent Public Accountants, page F-2.

8.A.4 We
have complied with this requirement.

8.A.5
Not applicable.

8.A.6
Not applicable.

8.A.7
Legal proceedings

Bankruptcy
of WorldCom, Inc.

On
July 21, 2002, WorldCom, one of our significant clients, now known as MCI,
Inc., filed for reorganization under Chapter 11 of the United States Bankruptcy
Code. We provide both advertising and marketing services and media
services to MCI.

With
respect to the media, we act as an agent for MCI and as
an intermediary in the transfer of the clients payments to the applicable
media suppliers, which is consistent with the concept of sequential liability
adopted by the American Association of Advertising Agencies in 1991 as its
standard for the industry. We had outstanding pre-bankruptcy petition media
receivables of approximately $26.4 million as of December 31, 2003 and in
parallel, we had outstanding pre-bankruptcy petition media payables for the
media space reserved on behalf of MCI of approximately $26.9 million as of
December 31, 2003.
Currently,
no media vendor is pursuing, nor have any waived, any claim against us for any
MCI payables, and it is not currently possible to determine what actions, if
any, will be taken in connection with the MCI bankruptcy proceeding, or the
possible outcome of any such actions, or the amount of any loss to us that
might result. Consequently, although a loss is possible, we cannot at this time
reasonably determine the probability of any loss or the magnitude thereof.  Therefore, no reserve has been recorded in
our financial statements.
57

With
respect to commissions and production work, we had outstanding pre-bankruptcy
petition receivables of approximately $10.4 million in our financial statements
as of December 31, 2003 and 2002, which were fully reserved as of December 31, 2002.  One production vendor has filed a complaint
against the Company seeking to recover approximately $64,000.  We intend to defend the matter vigorously.
On
August 4, 2003, we entered into an agreement to compromise the pre-bankruptcy
amounts due to us.  Under its terms, the
agreement became effective upon MCI emerging from U.S. Chapter 11
protection.  The agreement provides that
MCI will pay us approximately $14.3 million in cash.  Of this amount, a substantial portion will be used to pay the MCI
vendors that we engaged as agent for MCI. 
MCI emerged from U.S. Chapter 11 protection on April 20, 2004.  As a consequence, in 2003 we reversed $6.6 million
of the $10.4 million reserve that was recorded in our financial statements at
December 31, 2002.
American
Student List class action lawsuit
On
February 18, 2004, a purported class action lawsuit was filed in the United
States District Court for the Middle District of Florida against American
Student List LLC, one of our subsidiaries. 
The lawsuit alleges that American Student List obtained, disclosed and
used information from the Florida Department of Highway Safety and Motor Vehicles
in alleged violation of the U.S. Drivers Privacy Protection Act.  The named plaintiff seeks to represent a
class of 876,665 individuals whose personal information from Florida Department
of Highway Safety and Motor Vehicles records was obtained, disclosed or used
for allegedly impermissible uses by American Student List without the express
consent of the individual.  The lawsuit
seeks certification as a class action, liquidated damages in the amount of
$2,500 per alleged violation of the Act, as well as punitive damages,
attorneys fees and costs, and injunctive and other relief.  Although American Student List intends to
defend itself vigorously against this lawsuit, its ultimate resolution cannot
presently be determined.  An unfavorable
outcome could have a material adverse effect on our business, financial
condition or results of operations.
Snyder
Communications LP class action lawsuit
Former
employees of Snyder Communications LP have filed a purported class action
lawsuit in the Texas State Court. The motion to certify the purported class of
former employees in Texas was granted by the Texas trial court in January 2002,
affirmed on appeal by the Texas intermediate appellate court in November 2002
and is currently subject to a petition for review to the Texas Supreme Court.
Snyder Communications motion for summary judgment in this action is still
pending. The lawsuit alleges, in substance, that Snyder improperly denied
commission payments to former employees in connection with alleged sales
activities.  Snyder Communications
denies all liability with respect to the claims alleged in this case and
believes the claims to be without merit. Snyder Communications intends to
defend itself vigorously against these actions.
Circle.com
litigation
On
June 4, 2001, two holders of Circle.com common stock filed a purported class
action lawsuit in Delaware Chancery Court against Snyder Communications, our
company and each director of our company and Snyder Communications.  The lawsuit sought a preliminary and
permanent injunction or, alternatively, monetary damages.  The lawsuit alleged that our company and the
board of directors of Snyder Communications breached their fiduciary duties
owed to the Circle.com stockholders when considering and negotiating the
proposed merger of Snyder Communications with one of our subsidiaries by
failing to create an independent negotiating structure, failing to seek truly
independent advice, concealing material information from the Circle.com
stockholders, and unfairly timing the proposed merger to the disadvantage of
the Circle.com stockholders.  Subsequent
to the filing of the lawsuit, each of our directors was dismissed from the
lawsuit.   In August 2001, Snyder Communications, its directors and our company filed an
answer in the lawsuit and responded to requests for the production of
documents.  On February 6, 2004, the
Delaware Chancery Court dismissed the lawsuit without prejudice.
58

Verizon
settlement
A
case involving claims by Snyder Communications for declaratory relief as to
alleged indemnification obligations set forth in their agreements with Verizon
Select Services and counterclaims by Verizon for indemnification, declaratory
relief and damages was filed in April 2001, as a result of two investigations by
Florida agencies into the parties business and marketing practices.  Verizon demanded that Snyder Communications
indemnify it for all liabilities, costs and expenses incurred as a result of
the two Florida Investigations.  In
their December 2001 Settlement Agreement, our company and Snyder Communications
agreed to pay an aggregate amount of $1,052,500 to Verizon in a series of
installments.  The final payment was
made on February 15, 2003.
American
Student List consent order
In
September 2002, American Student List LLC, one of our subsidiaries, signed a
consent order issued by the U.S. Federal Trade Commission relating to the use
of information collected from a survey conducted by the National Research
Center for College and University Admissions, which we refer to as NRCCUA.  For a number of years, American Student List
provided funding for a portion of the out-of-pocket expenses incurred by NRCCUA
in connection with its post-secondary education planning survey.  The FTC argued that the disclosures made by
NRCCUA to the high schools that distributed the surveys to students, and the
disclosures in the survey completed by the students, were inadequate to advise
the schools and students that the results of the survey would be used for marketing
and non-educational uses.  American
Student List signed the consent order without admitting that it engaged in any
deceptive practices that violate the law. 
The consent order became effective on January 31, 2003.
In
addition to the foregoing, we are party to various other legal and arbitration
proceedings arising in the ordinary course of business, including matters
relating to current and former vendors, clients and employees. None of these
other proceedings has had or is expected to have a significant effect on our
financial position or profitability.
8.A.8
Dividend policy
We
may declare dividends upon the recommendation of our board of directors and the
approval of our shareholders at their annual general meeting. Under the French
Commercial Code, a companys right to pay dividends is limited in some
circumstances.
At
our annual meeting of shareholders held on May 26, 2004,
our shareholders approved a resolution, among others, to authorize a
dividend payment of 0.075 per share, of which 0.05 represents the net
dividend and 0.025 represents the French avoir
fiscal tax credit. We
will pay the dividend to shareholders on or about June 17, 2004. Under the
terms of the anti-dilution provisions of our two series of convertible and/or
exchangeable bonds, the applicable conversion/exchange ratio will be adjusted
as of that date to reflect the component of the dividend payment that
represents a distribution of a portion of paid-in capital. In addition, under
the terms of the anti-dilution provisions of our option plans, the number of
options and exercise prices for outstanding options under our plans will be
adjusted on that date to reflect the component of the dividend payment that
represents a distribution of a portion of paid-in capital.  In the future, we also may submit for the
approval of our shareholders resolutions to authorize dividend payments that
represent distributions of a portion of paid-in capital.
59

ITEM
9.  THE OFFER AND LISTING
9.A
Listing details
The
principal trading market for Havas shares is the Premier Marché of Euronext Paris S.A. (which resulted from the
merger of the Paris, Brussels and Amsterdam stock exchanges on October 27,
2000), a self regulatory organization responsible for supervision of trading in
listed securities in France.  Havas
shares have been traded on the Premier
Marché since October 23, 1982. 
The Havas shares are quoted under the symbol HAV.  Prior to this date, Havas shares were not
publicly traded. Havas shares are currently included in the SBF 80, SBF 120
and SBF 250 indices.
Havas
shares are also quoted on the Nasdaq National Market System under the symbol
HAVS.  In addition, we sponsor ADSs in
the United States with J.P. Morgan Chase & Co. (formerly known as Morgan
Guaranty Trust Company), as depositary. 
Each Havas ADS represents one Havas share.
The
table below indicates the range of the high and low prices in U.S. dollars for
the ADSs on Nasdaq from September 27, 2000, the date Havas ADSs began trading
on Nasdaq, to April 30, 2004.  The table
below also provides the high and low prices in euro for the Havas shares on
Euronext Paris from 1997 to April 30, 2004. 
The high and low market prices have been adjusted to reflect our 20 for
1 stock split on May 26, 2000.



Nasdaq
  price per ADS
  
  Euronext
  Paris
  price per SharePeriod
  
  High
  
  Low
  
  High
  
  LowAnnual information for the past five years:1999
  
  
  
  
  
  
  
  
  22.20
  
  
  6.952000
  
  $
  16.50
  
  $
  13.00
  
  
  36.50
  
  
  14.702001
  
  $
  17.20
  
  $
  4.85
  
  
  18.50
  
  
  5.302002
  
  $
  9.49
  
  $
  2.75
  
  
  11.00
  
  
  2.802003
  
  $
  5.86
  
  $
  2.26
  
  
  4.98
  
  
  2.07Quarterly information for the past two years:2002First quarter
  
  $
  9.49
  
  $
  6.70
  
  
  11.00
  
  
  7.82Second quarter
  
  $
  9.39
  
  $
  6.70
  
  
  10.94
  
  
  5.30Third quarter
  
  $
  6.21
  
  $
  5.40
  
  
  6.49
  
  
  2.80Fourth quarter
  
  $
  5.80
  
  $
  2.75
  
  
  5.92
  
  
  3.642003First quarter
  
  $
  4.01
  
  $
  2.26
  
  
  4.38
  
  
  2.07Second quarter
  
  $
  5.04
  
  $
  2.58
  
  
  4.32
  
  
  2.37Third quarter
  
  $
  5.69
  
  $
  3.91
  
  
  4.98
  
  
  3.50Fourth quarter
  
  $
  5.86
  
  $
  4.34
  
  
  4.75
  
  
  3.842004First quarter
  
  $
  6.62
  
  $
  5.02
  
  
  5.39
  
  
  3.66Monthly information for most recent six months:November 2003
  
  $
  5.27
  
  $
  4.34
  
  
  4.44
  
  
  3.93December 2003
  
  $
  5.86
  
  $
  5.36
  
  
  4.75
  
  
  4.40January 2004
  
  $
  6.62
  
  $
  5.76
  
  
  5.39
  
  
  4.57February 2004
  
  $
  6.31
  
  $
  5.44
  
  
  5.13
  
  
  4.35March 2004
  
  $
  6.00
  
  $
  5.02
  
  
  4.96
  
  
  3.66April 2004
  
  $
  5.89
  
  $
  5.25
  
  
  4.96
  
  
  4.2660

9.B Plan
of distribution

Not
applicable.

9.C
Markets
See
Item 9.A Listing details.
9.D
Selling shareholders
Not
applicable.
9.E
Dilution
Not
applicable.
9.F
Expenses of the issue
Not
applicable.
ITEM
10.  ADDITIONAL INFORMATION
10.A
Share capital
Not
applicable.
10.B
Memorandum and Articles of Association
Under
Article 2 of our bylaws, our corporate purposes are to:


  provide advertising and communication services in
  all forms;
  provide all forms of services, including technical,
  financial, commercial or administrative studies;
  engage in any activities of production, sale or
  distribution, particularly in sectors that are developing rapidly or have
  great communication power;
  manage, acquire, construct, develop or improve real
  property or related assets or rights and conduct studies relating to such
  real estate transactions; and
  carry out industrial, commercial or financial, real
  estate or securities transactions directly or indirectly related to our
  corporate purposes.We
may also acquire interests in other businesses, regardless of such businesses
purposes.
Directors

Our
bylaws provide that our board must be composed of at least three members but
not more than 18, except for exceptions provided by law.  Each member of our
board is required to own at least one of our shares for so long as he, she or
it serves as a director.  Members of our
board serve three-year terms and are eligible for reappointment upon the
expiration of their term of office. 
There is no requirement under the French
Commercial Code or our bylaws that requires directors to serve concurrent
terms. Accordingly, fewer than all of the members of our board will ordinarily
stand for reelection at any particular shareholders meeting.
One-third of our directors must stand for re-election every year, and no
more than one-third of our directors may be over the age of 70.  Our board elects a chairman from among our
directors.  The chairman will have
responsibility for management of our company unless our board elects to appoint
a managing director with full authority to manage our company, as well as one
or more assistant managing directors (directeurs généraux délégués) not to
exceed five, to assist the managing director. 
Our board has appointed Alain de Pouzilhac as managing director
(directeur général) and has appointed Jacques Hérail as assistant managing
directors (directeurs généraux délégués).

61

Our
board is authorized to meet at its discretion, upon notice from its chairman or
vice chairman.  If our board has not met
for more than two months, directors representing one-third of our board may
require that our chairman convene a meeting.
Under
the French Commercial Code, the prior approval of our board is required before
one of our directors, executive officers or shareholders holding more than 10%
of our voting rights (or any company that controls such shareholder), whom we
refer to collectively as interested parties, may enter into a transaction with
us that cannot be reasonably considered in the ordinary course of business and
the product of an arms-length negotiation. 
Similar limitations apply to any transaction between our company and
another company which has one or more officers or directors in common with our
company.  The transaction must also be
approved by our shareholders at the following annual shareholders meeting.  Any interested party must inform our
chairman as soon as it has knowledge of the transaction and may not vote at the
board or shareholder meeting called to authorize the transaction, nor may the
shares of an interested party be taken into account in determining the outcome
of the vote or whether a quorum is present. In the event the transaction
authorized by the board is not approved by our shareholders at a shareholders
meeting, it will remain enforceable by third parties against our company, but our
company may in turn hold the interested party and, in some circumstances, the
other directors liable for any damages it may suffer as a result. In addition,
the transaction may be canceled if it is fraudulent.
For
transactions that can be considered within our ordinary course of business and
the product of arms-length conditions, an interested party must provide a copy
of the governing agreement to the chairman of our board, who will then provide
a summary of these transactions to the members of our board and the statutory
auditors.

Certain
transactions between our company and one of its directors are prohibited under
the French Commercial Code.
Rights,
preferences and restrictions applicable to our shares
Dividends
Dividends
on our shares are distributed to shareholders on a pro rata basis. Outstanding
dividends are generally payable to shareholders on the date of the
shareholders meeting at which the distribution of dividends is approved,
subject to any conditions imposed by the shareholders at the meeting. In the
case of interim dividends, we make distributions to our shareholders on the
date of the board meeting in which the distribution of interim dividends is
approved. The dividend payment date is decided by the shareholders at an
ordinary general meeting or by our board in the absence of such a decision by
the shareholders. Under the French Commercial Code, we must pay any dividends
within nine months of the end of our fiscal year unless otherwise authorized by
court order. Dividends on shares that are not claimed within five years of the
date of declared payment revert to the French government.
We
may only distribute dividends out of our distributable profits, plus any
amounts held in reserve which our shareholders decide to make available for
distribution, other than those reserves that are specifically required by law
or our bylaws.  Our distributable
profits consist of our unconsolidated net profit in each fiscal year, as
increased or reduced by any profit or loss carried forward from prior years,
less any amounts which French law or our bylaws require to be placed in a
reserve account.
In
addition, the French Commercial Code requires us to allocate 5% of our
unconsolidated statutory net profit for each year to a legal reserve fund
before we may pay dividends with respect to that year.  Funds must be allocated until the amount in
the legal reserve is equal to 10% of the aggregate nominal value of our issued
and outstanding share capital.  This
restriction on the payment of dividends also applies to our French subsidiaries
on an unconsolidated basis.  Our legal
reserve may only be distributed to our shareholders upon our liquidation, and
the legal reserve of each of our French subsidiaries may only be distributed to
their respective shareholders upon their liquidation.

62

The
French Commercial Code also prohibits us from distributing dividends when our
net equity is or would become as a result of any such distribution less than
the amount of our stated capital increased by reserve funds required by law or
our bylaws.
Voting
rights
In
general, each of our shares carries the right to cast one vote on all matters
submitted to a vote of shareholders.
Liquidation
rights
If
our company is liquidated, any assets remaining after payment of our debts,
liquidation expenses and all of our remaining obligations will be distributed
first to repay in full the nominal value of our shares. Any surplus will be
distributed pro rata among our shareholders in proportion to the nominal value
of their shareholdings.
Preferential
subscription rights

According
to the French Commercial Code, if we issue additional shares, or other specific
kinds of additional securities, current shareholders will have preferential
subscription rights to those securities on a pro rata basis. These preferential
rights will require us to give priority treatment to those shareholders over
other persons wishing to subscribe for the securities. The rights entitle the
holder to subscribe to an issue of any securities that may increase our share
capital by means of a cash payment or a set-off of cash debts. Preferential
subscription rights are transferable during the subscription period relating to
a particular offering. These rights may also be traded during the subscription
period usually by transfer from one account to another. A two-thirds majority
of our shares entitled to vote at an extraordinary general meeting may vote to
cancel preferential subscription rights with respect to any particular
offering. French law requires our board and the statutory auditors to present
reports that specifically address any proposal to cancel preferential
subscription rights. In the event of a cancellation, the relevant securities
issuance must be completed within the period prescribed by law.

Our
shareholders may also decide at an extraordinary general meeting to give
existing shareholders a non-transferable priority right to subscribe for the
new securities during a limited period of time. Our shareholders may also waive
their own preferential subscription rights with respect to any particular
offering.
Amendments
to rights of holders
The
rights of our shareholders can be amended only by action at an extraordinary
general meeting of shareholders. Two-thirds of the shares voting must approve
any proposal to amend shareholder rights, except that a unanimous vote is
required to increase liabilities of shareholders. The voting and quorum
requirements for this type of special meeting are the same as those applicable
to an extraordinary general meeting, except that the quorum requirements for a
special meeting are 50% of the voting shares, or 25% upon resumption of an
adjourned meeting.
Ordinary
and extraordinary meetings

In
accordance with the French Commercial Code, there are two types of
shareholders general meetings: ordinary and extraordinary.

Ordinary
general meetings of shareholders are required for matters that are not
specifically reserved by law to extraordinary general meetings, such as:

  electing, replacing and removing members of the
  board of directors;
  appointing statutory auditors;
  declaring dividends or authorizing dividends to be
  paid in shares;63


  approving our annual financial statements; and
  issuing specific types of debt securities.Extraordinary
general meetings of shareholders are required for approval of matters such as
amendments to our bylaws, including any amendment required for an extraordinary
corporate action. Extraordinary corporate actions include:

  changing our companys name or corporate purpose;
  increasing or decreasing our share capital;
  creating a new class of equity securities;
  authorizing the issuance of investment certificates
  or convertible or exchangeable securities;
  establishing any other rights to equity securities;
  selling or transferring substantially all of our
  assets; and
  voluntarily liquidating our company.Calling
shareholders meetings
The
French Commercial Code requires our board to convene an annual ordinary general
meeting of shareholders for approval of our annual financial statements. This
meeting must be held within six months of the end of each fiscal year. This
period may be extended by an order of the Presiding Judge of the Commercial
Court. Our board may also convene an ordinary or extraordinary meeting of
shareholders upon proper notice at any time during the year. If our board fails
to convene an annual shareholders meeting, our independent statutory auditors
or a court-appointed agent may call the meeting. Any of the following persons
may request the court to appoint an agent:


  one or several shareholders holding at least 5% of
  our share capital;
  in cases of urgency, any interested party, including
  any member of a special management committee consisting of one manager
  appointed by us and a series of representatives elected by our employees,
  which we refer to as the Works Council, designated by the Works Council; or
  duly qualified associations of our shareholders who
  have held their shares in registered form for at least two years and who
  together hold at least 1% of the voting rights of our company.An ordinary or extraordinary meeting of shareholders
may also be convened by:

  in a bankruptcy, our liquidator or court-appointed
  agent may also call a shareholders meeting in some instances; or
  any shareholder that holds a majority of our
  outstanding shares or voting rights following a public tender or exchange
  offer for our shares or the sale of a majority of our shares.Notice
of shareholders meetings
We
must announce general meetings at least 30 days in advance by means of a
preliminary notice published in the Bulletin des Annonces Legales Obligatoires,
or the BALO.  The preliminary notice
must first be sent to the Autorité des Marchés Financiers, or the AMF.  The AMF also recommends that a summary of such preliminary notice
be published in a newspaper of national circulation in France.  The preliminary notice must disclose, among
other things, the time, date and place of the meeting, whether the meeting will
be ordinary or extraordinary, the agenda, a draft of the resolutions to be
submitted to the shareholders, a description of the procedures which holders of
bearer shares must follow to attend the meeting, the procedure for voting by
mail, the address of the web site permitting the vote by electronic means and a
statement informing our shareholders that they may propose additional
resolutions to our board within 10 days of the publication of the notice.
64

We
must send a final notice containing the agenda and other information about the
meeting at least 15 days prior to the meeting or at least six days prior to the
resumption of any meeting adjourned for lack of a quorum. The final notice must
be sent by mail or, to shareholders who have agreed thereto in writing, by
electronic means, to all registered shareholders who have held shares for more
than one month before the date of the preliminary notice.  The final notice must also be published in
the BALO and in a newspaper authorized to publish legal announcements in the
local administrative department in which our company is registered, with prior
notice having been given to the AMF.
In
general, our shareholders can take action at shareholders meetings only on
matters listed in the agenda for the meeting. 
As an exception to this rule, our shareholders may take action with
respect to the dismissal of members of our board regardless of whether this
action is on the agenda. Additional resolutions to be submitted for approval by
our shareholders at the meeting may be proposed to our board, within ten days
of the publication of the preliminary notice in the BALO by:


  a member of the Works Council designated by the
  Works Council;
  one or several shareholders holding a specified
  percentage of shares; or
  a duly qualified association of shareholders who
  have held their shares in registered form for at least two years and who
  together hold at least 1% of the voting rights in our company.Our
board must submit these resolutions to a vote of our shareholders.
During
the two weeks preceding a meeting of shareholders, any shareholder may submit
written questions to our board relating to the agenda for the meeting.  Our board must respond to these questions
during the meeting.
Attendance
and voting at shareholders meetings

Each
of our shares confers on the shareholder the right to cast one vote on all
matters submitted to a vote of shareholders, except that we are not entitled to
vote our treasury shares.  Our
shareholders may attend ordinary meetings and extraordinary shareholders
meetings and exercise their voting rights subject to the conditions specified
in the French Commercial Code and our bylaws.  There is no requirement that our
shareholders have a minimum number of shares in order to attend, or to be
represented at, an ordinary or extraordinary general meeting.

In
addition, two members of the Works Council are entitled to attend any
shareholders meeting.  They are also
permitted to address our shareholders before the vote of any resolution
requiring the unanimous consent of the shareholders.

To
participate in any general shareholders meeting, a holder of our registered
shares must have its shares registered in its name in a shareholder account
maintained by us, or on our behalf by an agent appointed by us, at least five
days before the date set for the meeting. 
A holder of our bearer shares must obtain a certificate from the
accredited intermediary with whom the holder has deposited its shares.  This certificate must indicate the number of
bearer shares the holder owns.  The holder must deposit this certificate at the place specified
in the notice of the meeting at least five days before the meeting.  However, our board of directors has the
right to accept deposits after this deadline or to shorten the deadline.
Once
a shareholder has registered its shares or duly presented a certificate from
its accredited financial intermediary, any transfer of the shares prior to
the relevant shareholders meeting must be notified
to our agent or the accredited financial intermediary.  The notice
must be delivered no later than 3 p.m. Paris time on the day before such
meeting.
65


Proxies
and voting by mail or electronic means
In
general, all of our shareholders that have properly registered their shares or
duly presented a certificate from their accredited financial intermediary may
participate and vote in general shareholders meetings in person, by proxy, by
videoconference or by any electronic telecommunication device enabling their identification.
Proxies
will be sent via mail or electronic means to any shareholder on request.  To be counted, the proxies must be received
at our registered office, or at any other address indicated on the notice
convening the meeting, before the date of the meeting.  Voting instructions must be received by us
in the form provided by law no later than 3:00 p.m. Paris time on the day
before the shareholders meeting.  A
shareholder may grant proxies to his or her spouse or to another shareholder. A
shareholder that is a corporation may grant proxies to a legal representative.
Alternatively, the shareholder may send to us a blank proxy without nominating
any representative. In that case, the chair of the meeting will vote blank
proxies in favor of all resolutions proposed by our board and against all other
resolutions.
With
respect to votes by mail or other electronic means, we are required to send
shareholders a voting form. The completed form must be returned to us, if by
mail, at least three days before the date of the shareholders meeting.  However, forms may be sent electronically to
us until 3:00 p.m. Paris time on the day before the shareholders meeting.
Quorum
The
French Commercial Code requires that shareholders having at least 25% of the
shares entitled to voting rights must be present in person or be voting by
mail, by electronic means or by proxy to fulfill the quorum requirement for:

  an ordinary general meeting; or
  an extraordinary general meeting where an increase
  in our share capital is proposed through incorporation of reserves, profits
  or share premium.The
quorum requirement is one-third of the shares entitled to voting rights,
determined on the same basis, for any other extraordinary general meeting.
If
a quorum is not present at a meeting, the meeting is adjourned. When an
adjourned meeting is resumed, there is no quorum requirement for an ordinary
meeting or for an extraordinary general meeting where an increase in our share
capital is proposed through incorporation of reserves, profits or share
premium. However, only questions that were on the agenda of the adjourned
meeting may be discussed and voted upon. In the case of any other reconvened
extraordinary general meeting, shareholders having at least 25% of the shares
entitled to voting rights must be present in person or be voting by mail, by
electronic means or by proxy for a quorum. 
If a quorum is not present, the reconvened meeting may be adjourned for
a maximum of two months.  Any
deliberation by the shareholders taking place without a quorum is void.
Majority
Holders
of a simple majority of our voting power present in person, voting by mail, by
electronic means or by proxy may pass any resolution on matters required to be
considered at an ordinary general meeting, or concerning a capital increase by
incorporation of reserves, profits or share premium at an extraordinary general
meeting. At any other extraordinary general meeting, a two-thirds vote of our
voting power present in person, voting by mail, by electronic means or by proxy
is required.
A
unanimous shareholder vote is required to increase liabilities of shareholders.

Abstention
from voting by shareholders present in person, voting by mail, by electronic
means or by proxy is counted as a vote against the resolution submitted to the
shareholder vote.
66

In
general, our shareholders are entitled to one vote per share on matters
submitted to a vote of at any general meeting. Under the French Commercial
Code, shares of a company held by entities controlled directly or indirectly by
that company are not entitled to voting rights and are not considered for
quorum purposes.
Limitations
on right to own our securities
The
French Commercial Code currently does not limit the right of non-residents of
France or non-French persons to own and vote our shares or ADSs.  However, non-residents of France must file
an administrative notice with French authorities for any acquisition of a
controlling interest in our company. 
Under existing administrative rulings, ownership of 33.33% or more of
our share capital or voting rights would be regarded as a controlling interest,
but a lower percentage might be held to be a controlling interest in specified
circumstances depending upon factors such as:

  the acquiring partys intentions;
  the acquiring partys ability to elect directors; or
  our financial reliance on the acquiring party.Anti-takeover
effects of applicable law and regulations
The
French Commercial Code provides that any person, acting alone or in concert
with others, that becomes the owner, directly or indirectly, of more than 5%,
10%, 20%, one-third, 50% or two-thirds of the outstanding shares or voting
rights of a listed company in France, such as our company, or that increases or
decreases its shareholding or voting rights above or below any of those
percentages, must notify our company within five trading days of the date it
crosses any of these thresholds of the number of shares it holds and the voting
rights of the shares. The individual or entity must also notify the AMF, within
five trading days of the date it crosses any of these thresholds.

In
addition, article 11 of our bylaws provides that any person who becomes the
direct or indirect owner of at least 2%, or any multiple of 2%, of our
outstanding shares or voting rights, or who decreases its shareholdings below
2% or any multiple of 2% of our outstanding shares or voting rights, must
provide written notice to us of the crossing of such threshold.  French law requires such notice to be
provided within five trading days after such threshold is crossed.  At a general meeting of our shareholders on May 26, 2004, our
shareholders did not adopt a resolution to amend Article 11 of our bylaws. Accordingly, this Article does not reflect the notice requirement under French law.
French
law and AMF regulations impose additional reporting requirements on any person
who becomes the owner of more than 10% or 20% of our outstanding shares or
voting rights.  Any such person must
file a report with us, the AMF within five trading days of the date it crosses
either of these thresholds. In the report, the acquiror must specify its
intentions for the following 12-month period, including whether or not it
intends to continue its purchases, to acquire control of our company or to
nominate candidates for our board. The AMF makes the notice public. The
acquiror must also publish a press release stating its intentions in a
financial newspaper of national circulation in France. The acquiror may amend
its stated intentions, so long as it does so on the basis of significant changes
in its own situation or that of its shareholders. Upon any change of intention,
it must file a new report.
To
permit holders to give the required notice, we are required to publish in the
BALO no later than 15 days after the annual ordinary general shareholders
meeting information with respect to the total number of voting rights
outstanding as of the date of the meeting. In addition, if the number of
outstanding voting rights changes by 5% or more between two annual ordinary
general meetings, we are required to publish in the BALO, within 15 days of
such change, the number of voting rights outstanding and provide the AMF with
written notice of this information. The AMF publishes the total number of
voting rights so notified by all listed companies in a weekly notice, noting
the date each number was last updated.
If
any person fails to comply with the legal notification requirement with respect
to the acquisition of 5%, 10%, 20%, one-third, 50% or two-thirds of our shares
or voting rights, the shares or voting rights in excess of the relevant
threshold will be deprived of voting rights for all shareholders meetings
until the end of a two-year period following the date on which their owner
complies with the notification requirements. Upon the request of any of our
shareholders holding at least 5% of our share capital, any shareholder who
fails to comply with these requirements may have all or part of his, her or its
voting rights suspended for up to five years by the French Commercial Court at
the request of our chairman, any shareholder or the AMF, and may be subject to
a fine.

67

Pursuant
to the French Commercial Code, we are authorized to require persons holding
voting shares in bearer form to disclose the beneficial owner(s) of those
shares, the number of shares held by each of the shareholders and any
restrictions to which these shares may be subject. We may suspend the voting
and dividend rights associated with these shares until the required disclosures
are made.
Pursuant
to the French Commercial Code, we are authorized to require any entity holding
more than 2.5% of our shares or voting rights to disclose the identity of the
persons who directly or indirectly holds more than one-third of the outstanding
shares or voting rights of that entity.
Under
AMF regulations, and subject to limited exemptions granted by the AMF, any
person or persons acting in concert that own in excess of one-third of the
share capital or voting rights of a French listed company must initiate a
public tender offer for the balance of the share capital of that company.
In
addition, a number of provisions of the French Commercial Code allow us to
adopt bylaws that have certain anti-takeover effects,
including provisions that allow us to:

  limit the voting power of our shareholders; and
  execute shareholders agreements that provide for
  preemptive rights in case of a sale of shares by a shareholder.The
French Commercial Code also permits us to take other corporate actions that may
discourage or prevent a change of control of our company, including:

  authorizing our board to reserve for issuance to a
  limited number of holders securities that contain rights to receive an
  additional number of our shares, contingent upon the agreement of our
  existing shareholders to waive any preemptive rights with respect to such
  issuance; and
  authorizing our board, upon receipt of the approval
  of our shareholders, to acquire our shares in open market purchases for
  purposes of canceling such shares.On
May 26, 2004, our shareholders authorized our board of directors to purchase up
to 10% of our capital stock for purposes that may include the cancellation of
these shares.  The shareholders meeting
also delegated to the board the powers necessary to proceed, any number
of times and in the proportions and time frames that it so determines, in
France and in any other country, to issue
Havas shares as well as any securities that entitle their holder(s),
immediately and/or in the future, to Havas shares, including securities that
may be issued pursuant to Article L 228-93 of the French Commercial
Code.  The amount of the capital increase
which may be realized immediately and/or in the future under this delegation
may not exceed a par value of 60 million, with a sub-limit of
a par value of 24 million for capital increases without preemptive
subscription rights, to which will be added, if
applicable, any additional shares to preserve the rights of the holder(s) of
securities entitling such holder(s) to Havas shares.
10.C
Material contracts

The
following summarizes each of our material contracts, other than contracts that
we entered into in the ordinary course of our business, for the two years
before the date of filing of this annual report.  Since the following is only a summary, you should carefully read
each of the material contracts, filed as exhibits to this annual report.


  On October 11, 1991, Media Planning, S.A., the
  predecessor to Media Planning Group, entered into an agreement with Gestora
  de Viviendas under which Gestora de Viviendas provides client development
  services to Media Planning Group and its subsidiaries in exchange for new
  clients developed by it.  Fernando Rodés Vilá and Leopold Rodés Castañe,
  together with other members of their families, are controlling shareholders,
  and Leopold Rodés Castañe was a
  director, of Gestora de Viviendas.68


  On January 1, 2000, Havas North America, Inc.,
  formerly EWDB North America Inc., one of our U.S. subsidiaries, entered into
  a Fourth Amendment of Lease with The Rector, Church-Wardens and Vestrymen of
  Trinity Church in the City of New York. 
  Under this lease, Havas North America occupies approximately 138,000
  square feet for its headquarters for a fixed annual rent which escalated to
  $4,127,443 starting on January 1, 2003. The amended lease terminates on
  December 31, 2007.
  On January 20, 2001, we entered into an Agreement to
  Contribute with Advertising Antwerpen B.V., Banco Santander Central Hispano,
  S.A., Compañía de Cartera e Inversiones S.A., Deya S.A., Mr. Jose
  Martínez-Rovira Vidal, Mrs. Maris Luisa Munoz Alvarez, Mrs. Cristina
  Martínez-Rovira Munoz and Mrs. Sandra Martínez-Rovira Munoz, who are former
  shareholders of Media Planning Group, and Havas, S.A., under which the former
  shareholders of Media Planning Group agreed to sell the shares they held in
  Media Planning Group to us for a total of 28,800,000 Havas shares and 51.2
  million in cash.
  On April 2, 2001, we entered into a Protocol
  Agreement and Commercial Lease with Suresnes Immobilier for the lease of our
  new corporate headquarters in Suresnes, France.  The lease is for approximately 228,000 square feet of leasable
  area, for a period of nine years, commencing on the date we took possession
  of the leased building.  The minimum
  net annual rent is approximately 8.1 million, which may be adjusted annually
  based on the national construction cost index.
  On May 14, 2001, in connection with our acquisition
  of the remaining 55% interest in Media Planning Group, we entered into a
  registration rights agreement with Acacia ISP, S.L., Banco Santander Central
  Hispano, S.A., Compañía de Cartera e Inversiones S.A., Deya S.A., Jose
  Martínez-Rovira Vidal, Maria Luisa Munoz Alvarez, Cristina Martínez-Rovira
  Munoz and Sandra Martínez-Rovira Munoz, under which we granted to the sellers
  certain registration rights with respect to Havas shares they received as
  consideration for the acquisition.
  On December 5, 2001, we entered into a trademark
  sales agreement with Vivendi Universal Publishing.  Under this agreement, we purchased for 4.5 million all
  rights held by Vivendi Universal Publishing to the Havas trademark, except
  for rights to the name Havas Voyages and other specified names.
  On April 16,
  2002, Intermedia Management Services, A.G., an indirect, wholly owned
  subsidiary of our company, entered into a consulting agreement with Fernando
  Rodés Vilá to provide consulting services to Intermedia Management Services
  and, through Intermedia Management Services, to various subsidiaries of Media
  Planning Group.  This arrangement was
  terminated on December 31, 2002.
  Gestora de Viviendas is a major shareholder of
  Vigilancia y Sistemas de Seguridad, S.A., a company that provides security
  services.  Vigilancia y Sistemas de
  Seguridad provides security systems to Media Planning Group, for which Media
  Planning Group paid it 440,185, excluding taxes, in 2003.  Media Planning Group expects to pay
  Vigilancia approximately the same amount in 2004 for these services.
  Media Planning
  Group receives legal services from the Spanish law firm of Rodés & Sala
  Abogados, S.L.  Under an agreement
  entered into in September 2001, Media Planning Group pays an annual fee of
  120,000 to Rodés & Sala for general legal services.  In addition, Rodés & Sala was paid a
  total of 210,800, excluding taxes, for legal services provided to Media
  Planning Group in 2003 and has billed Media Planning Group a total of
  63,575, excluding taxes, in legal fees for 2004 through April 30.  Gonzalo Rodés Vilà, the brother of
  Fernando Rodés Vilà and the son of Leopoldo Rodés Castañe, is a partner in
  Rodés & Sala.  In addition,
  Gonzalo Rodés Vilà serves as secretary of the board of directors of Media
  Planning Group.  Gonzalo Rodés Vilà
  was paid 48,000 for his services as secretary of the board in 2003 and has
  been paid 16,000 for such service in 2004 through April 30.
  In 2003, we paid $60,000 to Colker, Gelardin &
  Co. for investment banking advisory services performed during 2003 related to
  our specialized agencies.  Richard
  Colker, one of our directors, is the Managing Partner of Colker, Gelardin
  & Co.
  Thierry Meyer, one of our directors, also served as
  a director of one of our subsidiaries in the U.K. until 2003.  We paid Mr. Meyer £60,000 for his services
  as a director of the subsidiary in 2002.69


  As of October 1, 2003, Arnold Worldwide LLC, one of our U.S.
  subsidiaries, entered into a lease with BP Prucenter Acquitions LLC. Under this lease, Arnold
  occupies approximately 178,000 square feet for its headquarters for a fixed
  annual rent of $4,853,066. The lease terminates on August 31, 2014.10.D
Exchange controls
French
exchange control regulations currently do not limit the amount of payments that
we may remit to non-residents of France, with the exception of certain persons
connected with terrorist activities. Laws and regulations concerning foreign
exchange controls do require, however, that all payments or transfers of funds
made by a French resident to a non-resident be handled by an accredited
intermediary. In France, all registered banks and most credit establishments are
accredited intermediaries.
10.E
Taxation
French taxation
The
following is a description of the French tax consequences of owning and
disposing of Havas shares. This description may only be relevant to holders of
Havas shares who are not residents of France and do not hold their shares in
connection with a permanent establishment or a fixed base in France through
which the holders carry on a business or perform personal services.
This
description may not address all aspects of French tax laws that may be relevant
in light of the particular circumstances of individual holders of Havas shares.
It is based on the laws, conventions and treaties in force as of the date of
this Annual Report, all of which are subject to change, possibly with
retroactive effect, or different interpretations.
Holders
of Havas shares should consult their own tax advisors about the potential tax
effects of owning or disposing of shares in any particular situation.

Taxation on sale or disposal of Havas shares
Generally,
a holder of Havas shares will not be subject to any French income tax or
capital gains tax when the holder sells or disposes of Havas shares if both of
the following apply:

  the holder is not a French resident for French tax
  purposes; and
  the holder has held not more than 25% of Havass
  dividend rights, known as droits aux bénéfices sociaux, at any
  time during the preceding five years, either directly or indirectly.If
a double tax treaty between France and the country of residence of a holder of
Havas shares contains more favorable provisions, a holder may not be subject to
any French income tax or capital gains tax when the holder sells or disposes of
any Havas shares, even if one or both of the above statements does not apply to
the holder.
Subject
to various conditions, foreign states, international organizations and a number
of foreign public bodies are not considered French residents for these
purposes.
If
a holder of Havas shares transfers shares using a written agreement, that
agreement must generally be registered. The holder will be required to pay a
registration duty of 1% of either the purchase price or the market value of the
shares transferred, whichever is higher. The maximum duty is 3,049 per
transfer. However, if the agreement is executed outside France, the holder of
Havas shares will not be required to pay this duty.
70


Taxation of Dividends on Shares
In
France, dividends are paid out of after-tax income. Dividends paid to
non-residents normally are subject to a 25% French withholding tax. However,
non-resident holders that are entitled to and comply with the procedures for
claiming benefits under an applicable tax treaty may be subject to a reduced rate
(generally 15%) of French withholding tax. If a non-resident holder establishes
its entitlement to treaty benefits prior to the payment of a dividend, then
French tax generally will be withheld at the reduced rate provided under the
treaty.
The
French Finance Law of 2004 includes a reform of the French tax treatment of
distributions implementing a new mechanism to avoid double taxation of
dividends and the elimination of the former avoir
fiscal and précompte
mechanisms as explained below.
Avoir
Fiscal  Tax Credit
Prior
to enactment of the reform, French resident shareholders were entitled to a tax
credit, known as the avoir fiscal,
on dividends received from French companies. The avoir fiscal was equal to 50% of the dividend received for
individuals and, generally, equal to 10% of the dividend received for other
investors, although the 10% rate was generally increased by 80% of any précompte actually paid in cash by the
distributing corporation.
As
a result of the reform:

  French resident individuals will still benefit from
  the avoir fiscal with respect
  to dividend distributions made during 2004 but will not be entitled to the avoir fiscal with respect to dividend
  distributions made from 2005 on. Instead, from 2005 on, French resident
  individuals will only be taxed on half of dividends received and, in addition
  to the annual allowance which is already applicable, will be entitled to a
  tax credit equal to 50% of the dividend, which we refer to as the Tax Credit.
  The Tax Credit will have a cap of 230 for married couples and members of a
  union agreement subject to joint taxation and 115 for single persons, widows
  or widowers, divorcees or married persons subject to separate taxation.
  French resident shareholders other than individuals
  will lose the benefit of the avoir fiscal
  for tax credits that they would otherwise have been able to use from 2005 on;
  thus French corporate shareholders with a fiscal year corresponding to the
  calendar year will not be entitled to the avoir
  fiscal with respect to dividends received in 2004.Dividends
paid to non-residents are not normally eligible for the benefit of the avoir fiscal and, from 2005 on, will not
be eligible for the Tax Credit described above. However, France has entered
into tax treaties with certain countries under which qualifying residents
complying with the procedures for claiming benefits under an applicable tax
treaty may be entitled to benefit from a refund of the avoir fiscal (net of applicable
withholding tax), in addition to a reduced rate of withholding tax. Certain of
these treaties impose additional conditions for the entitlement of corporate
entities to the avoir fiscal and
under certain treaties only individual residents are entitled to the avoir fiscal.
As
a result of the French Finance Law of 2004 reform:


  qualifying non-resident individuals who hold shares
  directly will be entitled to a refund of the avoir
  fiscal with respect to dividends received in 2004 but will not be
  entitled to avoir fiscal
  refunds with respect to distributions made from 2005. Instead, qualifying
  non-resident individuals who were previously entitled to a refund of the avoir fiscal may benefit, under the same
  conditions as for the avoir fiscal,
  from a refund of the Tax Credit (net of applicable withholding tax); the
  French tax authorities have not yet issued any guidance with regard to the
  refund of the Tax Credit to non-resident individuals, but claiming such
  refund may likely entail compliance with cumbersome formalities.
  non-resident shareholders other than individuals are
  no longer entitled to a refund of the avoir
  fiscal with respect to dividend distributions made from 2004.Précompte
 25% Equalization Tax
Dividends
paid out of profits that have not been taxed at the ordinary corporate rate, or
were earned and taxed more than five years before the distribution, are subject
to an equalization tax called the précompte,
which is payable by the distributing corporation to the French tax authorities.
The précompte generally is equal
to one-half of the amount of the dividend paid to shareholders prior to
deduction of withholding tax. When a tax treaty does not provide for a refund
of the avoir fiscal, or when a
non-resident shareholder is not entitled to such a refund but is otherwise
entitled to the benefits of the tax treaty, then a qualifying shareholder may
generally obtain from the French tax authorities a payment equal to 100% of the
précompte actually paid in cash
by the distributing corporation, net of applicable withholding tax. These rules
will be applicable to distributions made through December 31, 2004.
71


Distributions
made by French companies from 2005 on will no longer be subject to précompte. However, an equalization tax
will apply to distributions made in 2005 out of profits that have not been
taxed at the ordinary corporate tax rate, or which were earned and taxed more
than five years before the distribution. This equalization tax will be equal to
25% of the amount of the dividends paid to the shareholder. Unlike précompte, this equalization tax will not
be refundable to non-resident shareholders, as it will be refunded to the
distributing corporation in three installments of one third each with respect
to the three fiscal years closed after the distribution, either as a credit
against its corporate tax liability or in cash, if the corporate tax liability
is insufficient to offset the entire tax credit.
Distributions
made as from 2006 will not give rise to précompte
or equalization tax liability.
Estate and gift tax
France
imposes estate and gift tax where an individual or entity acquires real and
personal property from a non-resident of France by way of inheritance or gift.
France has entered into estate and gift tax treaties with a number of
countries. Under these treaties, residents of those countries may be exempted
from this tax or obtain a tax credit, assuming specified conditions are met.
Holders of Havas shares should consult their own tax advisors about whether
French estate and gift tax will apply and whether they may claim an exemption
or tax credit.
Wealth tax
French
individual residents are taxable on their worldwide assets. Non-resident
individuals are taxable only on their assets which are located in France.
However, financial investments made by non-resident individuals, other than in
real property companies, are exempt from wealth tax under certain conditions.
If
a double tax treaty between France and a holders country of residence contains
more favorable provisions, the holder may not be subject to French wealth tax.

Taxation of U.S. investors
On
August 31, 1994, the United States and France signed a tax treaty, which
entered into force on December 30, 1995. The following is a general summary of
the principal tax effects on holders of Havas shares or Havas ADSs for purposes
of U.S. federal income tax and French tax, if all of the following five points
apply:



  the holder owns, directly or indirectly, less than
  10% of Havass share capital;
  the holder is any one of (a), (b) or (c) below:(a)
  a citizen or resident of the United States for U.S.
  federal income tax purposes, or(b)
  a U.S. domestic corporation, or(c)
  otherwise subject to U.S. federal income taxation on
  a net income basis in respect of its Havas shares or Havas ADSs;
  the holder is entitled to the benefits of the
  U.S.-France tax treaty under the limitations on benefits article of that
  treaty;
  the holder holds Havas shares or Havas ADSs as
  capital assets; and
  the holders functional currency is the U.S. dollar.72

For
purposes of the U.S.-France tax treaty and U.S. federal income tax, holders of
Havas ADSs will be treated as holders of the shares which their Havas ADSs
represent.

Special
rules may apply to United States expatriates, insurance companies, pass-through
entities and investors in such entities, tax-exempt organizations, financial
institutions, persons subject to the alternative minimum tax, securities
broker-dealers and persons holding their Havas shares or Havas ADSs as part of
a conversion transaction, among others. Those special rules are not discussed
in this registration statement.
Holders
of Havas shares or Havas ADSs should consult their own tax advisers as to the
particular tax consequences to them of owning Havas shares or Havas ADSs,
including their eligibility for the benefits of the U.S.-France tax treaty, the
applicability and effect of state, local, foreign and other tax laws and
possible changes in tax law.
Taxation
of dividends
As
discussed in more detail above, the French Finance Law of 2004 includes a
reform of the French tax treatment of distributions and dividends paid by
French companies to non-residents of France. Generally, non-residents of France
are subject to French withholding tax at a 25% rate and are not eligible for
the benefit of the avoir fiscal.
In addition, as of 2005, non-residents generally will not be eligible for the
benefit of the Tax Credit available to French resident individuals, as
described above.
However,
under the Treaty, you can claim the benefit of a reduced dividend withholding
tax rate of 15%.
If
you are an individual U.S. holder, you will also be entitled to a payment from
the French tax authorities equal to the avoir
fiscal with respect to dividends distributed in 2004 at a 50% rate,
less a 15% withholding tax. Because of the 2004 French tax reform you will no
longer be entitled to the avoir fiscal
refund with respect to dividend distributions made from 2005 on. Instead, under
the same conditions as for the avoir fiscal,
you may be entitled to a refund of the Tax Credit less a 15% withholding tax.
You generally will be entitled to receive a refund of the avoir fiscal or the Tax Credit only if you
are subject to U.S. federal income tax on the avoir
fiscal payment (or the Tax Credit) and the dividend to which it
relates. The refund of the avoir fiscal
(or the Tax Credit) will not be made available before January 15 following
the end of the calendar year in which the dividend is paid. The French tax
authorities have not yet issued any guidance with regard to the refund of the
Tax Credit to non-resident individuals, which may entail compliance with
cumbersome formalities.
As
a result of the 2004 French tax reform, U.S. holders that are legal entities,
pension funds or other tax-exempt holders are no longer entitled to tax credit
payments from the French Treasury in respect of dividends paid from 2004.

French
withholding tax will be withheld at the 15% Treaty rate if you have established
before the date of payment that you are a resident of the United States under
the Treaty and, if you are not an individual, that you are the owner of all the
rights relating to the full ownership of the shares or ADSs (including, but not
limited to, dividend rights).
With
respect to distributions of dividends made during 2004, U.S. holders that are
not entitled to a refund of the avoir fiscal
(e.g., corporations, pension
funds and other tax-exempt U.S. holders) may generally obtain from the French
tax authorities a refund of the entire précompte
equalization tax (discussed under  French Taxation, above) we actually pay
in cash in respect of a dividend, less a 15% French withholding tax.
Thus, for example, if we
pay a dividend of 100 to an individual U.S. holder in 2004, the holder
initially will receive 85, but will be entitled to an additional payment of
42.50, consisting of the avoir fiscal
of 50 less a 15% withholding tax. If we pay a dividend of 100 to a corporate
U.S. holder, such U.S. holder will receive 85, and will not be entitled to any avoir fiscal; in the event that the
dividend distribution triggers payment by us of the précompte, such U.S. holder generally may also obtain from
the French tax authorities a refund of the précompte
that we pay in cash, less a 15% withholding tax.
73

The
gross amount of dividend, avoir fiscal
(or Tax Credit) and précompte
payments that you receive (prior to deduction of French withholding tax)
generally will be subject to U.S. federal income taxation as foreign source
dividend income. Subject to certain exceptions for positions that are hedged or
held for less than 60 days during a 121-day period, an individual U.S.
holder generally will be subject to U.S. taxation at a maximum rate of 15% in
respect of dividends received after 2002 and before 2009. Such dividends will
not be eligible for the dividends received deduction generally allowed to U.S.
corporations. French withholding tax at the 15% Treaty rate will be treated as
a foreign income tax that, subject to applicable limitations under U.S. law, is
eligible for credit against your U.S. federal income tax liability or, at your
election, may be deducted in computing taxable income. Foreign tax credits will
not be allowed for withholding taxes imposed in respect of certain short-term
or hedged positions in securities. You should consult your own tax advisers
concerning the implications of these rules in the light of your particular
circumstances.
Dividends
paid in euro will be included in your income in a U.S. dollar amount calculated
by reference to the exchange rate in effect on the date you receive the
dividend (or the date the depositary receives the dividend, in the case of the
ADSs), regardless of whether the payment is in fact converted into U.S.
dollars. If such a dividend is converted into U.S. dollars on the date of
receipt, you generally should not be required to recognize foreign currency
gain or loss in respect of the dividend income.

Procedures
for Claiming Treaty Benefits
In
order to claim Treaty benefits with respect to distributions made in 2004, if
you are an individual U.S. holder, you must complete and deliver to the French
tax authorities either:

  the simplified certificate described below; or
  an application for refund on French Treasury Form RF
  1A EU-No. 5052.A
simplified certificate must state that:

  you are a U.S. resident within the meaning of the
  Treaty;
  you do not maintain a permanent establishment or
  fixed base in France with which the holding giving rise to the dividend is effectively
  connected;
  you own all the rights attached to the full
  ownership of the shares (including dividend rights); and
  you meet all the requirements of the Treaty for
  obtaining the benefit of the reduced rate of withholding tax and the refund
  of the avoir fiscal.Copies
of the simplified certificate and the application for refund are available from
the U.S. Internal Revenue Service and from the Centre
des Impôts des Non-Résidents (9, rue dUzès, 75094 Paris Cedex 2).
If
the certificate or application is not filed prior to a dividend payment, then
holders may claim withholding tax and avoir
fiscal refunds by filing an application for refund at the latest by
December 31 of the second year following the year in which the withholding
tax is paid.

The
avoir fiscal and any French
withholding tax refund will not be paid before January 15 following the
end of the calendar year in which the dividend is paid.
As
noted above, the French tax authorities have not yet issued any guidance with
regard to the refund of the Tax Credit to non-resident individuals, which may
entail compliance with cumbersome formalities.
If
you are a U.S. holder not entitled to a refund of the avoir fiscal, in order to claim Treaty
benefits (reduced withholding tax rate and, as the case may be, refund of the précompte) with respect to distributions
made in 2004, you must file with the French tax authorities either the
simplified certificate described above or French Treasury Form RF 1B
EU-No. 5053 before the end of the second year following the year in which
the dividend was paid. Copies of the simplified certificate and of the form,
together with instructions, are available from the U.S. Internal Revenue Service
or at the Centre des Impôts des
Non-Résidents (9, rue dUzès, 75094 Paris Cedex 2). If the
simplified certificate or the form are filed prior to the dividend payment,
then the French withholding tax generally will be withheld at the reduced rate.
74

The
French tax authorities are expected to issue new guidelines setting out
formalities to be complied with by U.S. holders in order to obtain the reduced
withholding tax rate on distributions made from 2005. You should nevertheless
be entitled to benefit from the application of the reduced rate of withholding
tax of 15% provided that you complete and file with the French tax authorities
Form RF 1B EU-No. 5053 before the payment of the dividend. If the form is
not filed prior to the dividend payment, withholding tax should be levied at
the 25% rate and you would have to claim for a refund of the excess by filing
an application in this respect.
Taxation
of capital gains

If
a holder is a resident of the United States for purposes of the U.S.-France tax
treaty, the holder will not be subject to French tax on any capital gain if the
holder sells or exchanges its Havas shares or Havas ADSs, unless the holder has
a permanent establishment or fixed base in France and the Havas shares or Havas
ADSs the holder sold or exchanged were part of the business property of that
permanent establishment or fixed base. Special rules apply to individuals who
are residents of more than one country.

In
general, for U.S. federal income tax purposes, a holder will recognize capital
gain or loss if the holder sells or exchanges its shares or Havas ADSs in the
same manner as the holder would if it were to sell or exchange any other shares
held as capital assets. Any gain or loss will generally be U.S. source gain or
loss. If a holder is an individual, any capital gain will generally be subject
to U.S. federal income tax at preferential rates if the holder meets the
minimum holding periods.   The
deductibility of capital losses is subject to significant limitations.
We
believe that we will not be treated as a passive foreign investment company, or
PFIC, for U.S. federal income tax purposes for the current taxable year or for
future taxable years. However, an actual determination of PFIC status is
fundamentally factual in nature and cannot be made until the close of the
applicable taxable year. We will be a PFIC for any taxable year in which
either:

  75% or more of our gross income is passive income;
  or
  our assets which produce passive income or which are
  held for the production of passive income amount to at least 50% of the value
  of our total assets on average.If
we were to become a PFIC, the tax applicable to distributions on Havas shares
or Havas ADSs and any gains a holder realizes when the holder disposes of Havas
shares or Havas ADSs may be less favorable to the holder. Each holder should
consult its own tax advisors regarding the PFIC rules and their effect on the
holder if they purchase Havas shares or Havas ADSs.
French estate and gift taxes

Under
The Convention Between the United States of America and the French Republic
for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Estates, Inheritance and Gifts of November 24, 1978, if a
holder transfers their Havas shares or Havas ADSs by gift, or if they are
transferred by reason of the holders death, that transfer will only be subject
to French gift or inheritance tax if one of the following applies:


  the holder is domiciled in France at the time of
  making the gift, or at the time of the holders death; or
  the holder used the Havas shares or Havas ADSs in
  conducting a business through a permanent establishment or fixed base in
  France, or the holder held the Havas shares or Havas ADSs for that use.75

French wealth tax
The
French wealth tax does not generally apply to Havas shares or Havas ADSs if the
holder is a resident of the United States for purposes of the U.S.-France tax
treaty.
United States information reporting and backup withholding
A
holder may be required to report dividend payments and proceeds from the sale
or disposal of such holders Havas shares or Havas ADSs to the Internal Revenue
Service. U.S. federal backup withholding generally is a withholding tax imposed
at the current rate of 28% on some payments to persons that fail to furnish
required information.  Backup
withholding will not apply to a holder who furnishes a correct taxpayer
identification number or certificate of foreign statutes and makes any other
required certification, or who is otherwise exempt from backup withholding. Any
U.S. persons required to establish their exempt statutes generally must file
Internal Revenue Service Form W-9, entitled Request for Taxpayer Identification
Number and Certification.
Amounts
withheld as backup withholding may be credited against a holders U.S. federal
income tax liability. A holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service and furnishing any required
information.

10.F
Dividends and paying agents
Not
applicable.
10.G
Statement by experts
Not
applicable.
10.H
Documents on display
We
are subject to the reporting requirements of the Exchange Act and accordingly
are required to file reports and other information with the SEC relating to our
business, financial condition and other matters.  It is possible to read and copy documents referred to in this
annual report on Form 20-F that have been filed with the SEC at the SECs
public reference room located at 450 Fifth Street, NW, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms and their copy charges. You may also view our annual reports
and other documents filed with the SEC on the internet at http://www.sec.gov.   In addition, you may obtain a copy of any foreign language document for
which we have filed an English translation as an exhibit to this annual report
on Form 20-F by sending a written request to our corporate headquarters at 2
allée de Longchamp, 92281 Suresnes Cedex, France,
attention: Corporate Communications.
10.I
Subsidiary information
Not
applicable.
ITEM
11.   QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
Impact of changes in foreign currency exchange rates and
interest rates

Foreign
currency exchange rates.As
of March 31, 2004, we had operations in 88 countries through agencies in 45
countries throughout Europe, North America, Latin America and the Asia-Pacific
region, as well as contractual affiliations with agencies in 43 additional
countries. The geographic diversity of our operations is reflected in the
diversity of the currencies that make up our results of operations. In 2003,
68.2% of our revenues were realized in currencies other than the euro,
including 40.1% realized in U.S. dollars and 15.5% realized in British pounds.
In 2002, 72.5% of our revenues were realized in currencies other than the euro,
including 43.3% realized in U.S. dollars and 18.6% realized in British pounds.

76


The
majority of our subsidiaries carry out businesses that are essentially local,
with almost all of their revenues received in local currency and almost all of
their expenses incurred in local currency. For those subsidiaries that are
involved in more international businesses, non-local currency expenses are
generally billed to the clients for whom those expenses are incurred on a basis
which protects the subsidiary from currency exchange rate fluctuations between
the time that it incurs the expenses and the time that it receives payment from
the client. In addition, most of our acquisitions for cash in the United States
and the United Kingdom have been funded through local borrowings, resulting in
financial expenses and repayment obligations in the same local currency. For
these reasons, our exposure to currency exchange risks arising from mismatches
between the currencies in which we receive revenues and the currencies in which
we incur expenses tends to be limited. There can be no assurance, however, that
currency exchange risks from such mismatches will not increase in the future,
which could  materially affect our
results of operations.
Because
our foreign currency mismatches tend to be limited, we generally do not hedge
our exposure to foreign currencies.  As
at December 31, 2003 and December 31, 2002, we had not entered into any foreign
currency hedges, with the exception of the following:

  We are a party to a currency and interest rate swap
  arrangement, which we refer to as CIRCUS, that we entered into in June 1999
  in connection with a collateral deposit in the initial amount of $30.0
  million we made to secure a borrowing made by one of our U.S. subsidiaries in
  the same amount from Banque Nationale de Paris, New York Branch.  This arrangement is repayable in six equal
  annual installments from June 4, 2001 to June 5, 2006 and the borrowing and
  collateral deposit have therefore been reduced to $15.0 million at December
  31, 2003.  The CIRCUS has the effect
  of transforming our U.S. dollar deposit of $15.0 million, which earns
  interest at a rate of LIBOR less a margin, into a euro deposit of 11.9
  million, which earns interest at EURIBOR less a margin.  As at December 31, 2003, the fair value of
  the CIRCUS amounted to 0.01 million, compared with 0.05 million as at
  December 31, 2002.
  We are a party to a forward sale contract of
  Canadian $10.7 million against British pounds that we entered into in 2000 in
  connection with a Canadian $10.7 million intercompany loan made by one of our
  U.K. subsidiaries to a newly acquired Canadian subsidiary.  This forward sale contract matured in 2003
  and was extended to 2004 for an amount of Canadian $19 million.  As at December 31, 2003 and 2002, the fair
  value of this forward sale contract was (0.2) million.
  We were a party to a forward sale contract of $17
  million against euro that we entered into in 2003.  As at December 31, 2003, the fair value of this forward sale
  contract was  (0.2) million.
  We were a party to a forward sale contract of £35.5
  million against euro that we entered into in 2003.  As at December 31, 2003, the fair value of this forward sale
  contract was  (0.2) million.For
a discussion of the terms of our financial instruments as at December 31, 2003,
see Notes 2.19, 10 and 19 to our 2003 consolidated financial statements
included elsewhere in this annual report.
Because
of the geographic diversity of our operations, our subsidiaries record their
revenues, expenses, assets and liabilities in a number of different currencies.
When we prepare our consolidated financial statements, the value of these
different revenues, expenses, assets and liabilities is translated into euro.
Fluctuations in the value of the euro will have an impact on the value of the
amounts at which these revenues, expenses, assets and liabilities are recorded
in our financial statements. For this reason, changes in foreign currency
exchange rates can have a significant impact on our results of operations and
financial position as reported in euro. This is particularly true with respect
to changes in U.S. dollar/euro exchange rate and the British pound/euro
exchange rate.

Interest
rates.In the
course of our operations, we are exposed to interest rate changes, primarily as
a result of our credit facilities used to finance our investment activity and
to maintain financial liquidity. We borrow at both fixed and variable rates.
77

As
at December 31, 2003, we had 40.4 million of outstanding long-term borrowings,
including current maturities, comprised principally of:

  27.8 million in U.S. dollar denominated bank loans,
  at variable rates ranging from 1.4% to 1.5%, due 2004 to 2006;
  10.8 million in a British pound denominated
  convertible bond at a fixed rate of 7.6%, due 2007; and
  1.8 million in other borrowings, including 0.6
  million at fixed rates and 1.2 million at variable rates.We
generally do not hedge our interest rate exposure, with the exception of the
following:

  the currency and interest rate swap arrangement,
  which we refer to as CIRCUS, described above;
  an interest rate swap of  30 million entered into by Media Planning Group in
  connection with a 42 million credit facility, under which we had 0
  outstanding as at December 31, 2003; the swap matures in 2004 and is assessed
  at (1.2) million as at December 31, 2003, compared with 0.7 million as
  at December 31, 2002; and
  interest rate caps entered into by Media Planning
  Group in a total amount of 6.758 million in connection with a lease
  agreement; 0.493 million of these caps mature in 2005 and the remaining
  6.265 million matures in 2008; as at December 31, 2003, the fair value of
  these caps amounted to 0.005 million, compared with 0.008 million as at
  December 31, 2002.Based
on approximately 29 million of outstanding long-term borrowings at variable
rates as at December 31, 2003, the impact on pre-tax earnings resulting from a
one-percentage point increase or decrease in interest rates would be
approximately 0.3 million, holding other variables constant.
ITEM
12.   DESCRIPTION OF SECURITIES OTHER
THAN EQUITY SECURITIES
Not
applicable.

78

PART II
ITEM
13.   DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
None.

ITEM 14.
  MATERIAL MODIFICATIONS TO THE
  RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSNone.
ITEM
15.   CONTROLS AND PROCEDURES
Our
Chief Executive Officer and our Chief Financial Officer have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this annual report on Form 20-F.  Based on that evaluation, our Chief
Executive Officer and our Chief Financial Officer have concluded that, as of
the evaluation date, our disclosure controls and procedures were effective to
ensure that material information relating to us and our consolidated
subsidiaries would be made known to them by others within these entities,
particularly during the period in which this annual report was being prepared,
in order to allow timely decisions regarding required disclosure.
There
have been no significant changes in our internal controls or, to our knowledge,
other factors that could significantly affect our internal controls subsequent
to the evaluation date.  Therefore, no
corrective actions were taken.
ITEM
16.   [RESERVED]
ITEM
16A.  AUDIT COMMITTEE FINANCIAL EXPERT
Our
Audit Committee members are Messrs. Boutinard Rouelle, Colker and Vaturi.  See Item 6. Directors, Senior Management
and Employees.  The Board has
determined that none of these individuals meet all of the criteria required to
be named a Financial Expert, as defined in applicable rules of the Securities
and Exchange Commission.  The Board is
making every effort to identify an individual who will be able to meet those
criteria.
ITEM
16B.  CODE OF ETHICS

In
March 2004, our board adopted a Code of Ethics, a code that applies to, among
others, our chief executive officer and chief financial officer.  This code is publicly available on our
website at www.havas.com.

ITEM
16C.  PRINCIPAL ACCOUNTANT FEES AND
SERVICES
Ernst & Young served as our independent auditors for
the 2003 fiscal year. A description of the fees billed to us by Ernst &
Young for professional services in each of the last two fiscal years is set
forth below:



Year Ended
  December 31,2003
  
  2002(in 
  thousands)Audit Fees
  
  
  5,398
  
  
  
  5,167Audit-Related Fees
  
  
  441
  
  
  
  Tax Fees
  
  
  1,296
  
  
  
  3,365All Other Fees
  
  
  141
  
  
  
  179Total
  
  
  7,276
  
  
  
  8,71179

Audit
Fees are the aggregate fees billed by Ernst & Young for the audit of our
consolidated and annual financial statements, reviews of interim financial
statements and attestation services that are provided in connection with
statutory and regulatory filings or engagements.  Audit-Related Fees are fees charged by Ernst & Young for
assurance and related services that are reasonably related to the performance
of the audit or review of our financial statements and are not reported under
Audit Fees.  This category comprises
fees billed for the audit of employee benefit plans and pension schemes,
agreed-upon procedure engagements and other attestation services subject to
regulatory requirements, certifications of accounting-related internal
controls, as well as advisory services associated with our financial reporting.  Tax Fees are fees for professional
services rendered by Ernst & Young for tax compliance, tax planning and tax
advice on actual or contemplated transactions. 
Fees disclosed under the category All Other Fees are mainly related to
legal advice.  This category also
includes training and other immaterial support services.

In May 2003, our
audit committee established policies and procedures under which all audit
and non-audit services performed by our principal accountants must be approved
by the audit committee.
All
audit services have been approved by the audit committee.  All non-audit services since May 2003 have
been approved under the pre-approval policies of the audit committee.

ITEM
16D.  EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES
Not
applicable.

PART III

ITEM
17.   FINANCIAL STATEMENTS

Not
applicable.

ITEM
18.   FINANCIAL STATEMENTS
The
following financial statements are filed as part of this annual report on Form
20-F:

Havas and Subsidiaries

Report of Independent Public Accountants
F-2Consolidated Statements of Operations
F-3Consolidated Balance Sheets
F-4Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
F-5Consolidated Statements of Cash Flows
F-6Notes to Consolidated Financial Statements
F-780

ITEM
19.   EXHIBITS

Exhibit
  No.
  
  Description1.1
    *
  
  Statuts (bylaws) of Havas (English translation).2.1
  
  
  Form of Deposit Agreement among Havas, Morgan
  Guaranty Trust Company of New York and all holders from time to time of Havas
  ADSs (incorporated by reference to Exhibit 4.1 to Havass registration
  statement on Form F-4 (Reg. No. 333-43362)).2.2
  
  
  Note dOperation (Prospectus) dated February 3, 1999
  for the issuance of convertible bonds by Havas (English translation)
  (incorporated by reference to Exhibit 4.2 to Havass registration statement
  on Form F-4 (Reg. No. 333-43362)).2.3
  
  
  Note dOperation (Prospectus) dated December 12,
  2000 for the issuance of convertible bonds by Havas (English translation)
  (incorporated by reference to Exhibit 4.3 to Havass registration statement
  on Form F-4 (Reg. No. 333-59880)).2.4
  
  
  Final Prospectus dated May 15, 2002 for the issuance
  of convertible and/or exchangeable bonds by Havas (English translation)
  (incorporated by reference to Exhibit 4.19 to Havass annual report on Form
  20-F for the year ended December 31, 2001 (SEC File No. 001-16081)).4.1
  
  
  Fourth Amendment to Lease dated January 1, 2000
  between Havas North America, Inc., formerly EWDB North America Inc. and The
  Rector, Church-Wardens and Vestrymen of Trinity Church in the City of New
  York (incorporated by reference to Exhibit 4.1 to Havass annual report on
  Form 20-F for the year ended December 31, 2000 (SEC File No. 001-16081)).4.2
  
  
  Protocol Agreement and Commercial Lease dated as of
  April 2, 2001 between Havas Advertising and Suresnes Immobilier (English
  summary) (incorporated by reference to Exhibit 4.2 to Havass annual report
  on Form 20-F for the year ended December 31, 2000 (SEC File No. 001-16081)).4.3
  
  
  Supplemental Agreement No. 1 to the Memorandum of
  Understanding of April 2, 2001 dated May 3, 2002 between Suresnes Immobilier
  and Havas (English translation) (incorporated by reference to Exhibit 4.18 to
  Havass annual report on Form 20-F for the year ended December 31, 2001 (SEC
  File No. 001-16081)).4.4
  
  
  Agreement to Contribute dated as of January 20, 2001
  between Havas and Advertising Antwerpen B.V., Banco Santander Central
  Hispano, S.A., Compañía de Cartera e Inversiones S.A., Deya S.A., Mr. Jose
  Martínez-Rovira Vidal, Mrs. Maria Luisa Munoz Alvarez, Mrs. Cristina
  Martínez-Rovira Munoz, Mrs. Sandra Martínez-Rovira Munoz and Havas S.A.
  (incorporated by reference to Exhibit 2.7 to Havass registration statement
  on Form F-4 (Reg. No. 333-59880)).4.5
  
  
  Trademark Sales Agreement dated December 5,
  2001 between Havas and Vivendi Universal Publishing (English translation)
  (incorporated by reference to Exhibit 4.15 to Havass annual report on Form
  20-F for the year ended December 31, 2001 (SEC File No. 001-16081)).4.6
  
  
  Registration Rights Agreement dated as of May 14,
  2001 among Acacia ISP, S.L., Banco Santander Central Hispano, S.A., Compañía
  de Cartera e Inversiones S.A., Deya S.A., Jose Martínez-Rovira Vidal, Maria
  Luisa Munoz Alvarez, Cristina Martínez-Rovira Munoz and Sandra
  Martínez-Rovira Munoz (incorporated by reference to Exhibit 4.14 to Havass
  annual report on Form 20-F for the year ended December 31, 2000 (SEC File No.
  001-16081)).81

Exhibit
  No.
  
  Description4.7
  
  
  Services Agreement dated April 16, 2002 between
  Intermedia Management Services, A.G. 
  and Fernando Rodés Vilà 
  (incorporated by reference to Exhibit 4.17 to Havass annual report on
  Form 20-F for the year ended December 31, 2001 (SEC File No. 001-16081)).4.8
  
  
  Amended and Restated Employment Agreement dated
  January 1, 2002 between Euro RSCG Worldwide, Inc. and Alain de Pouzilhac
  (incorporated by reference to Exhibit 4.9 to Havass annual report on Form 20-F
  for the year ended December 31, 2002 (SEC File No. 001-16081)).4.9
  
  
  Agreement dated February 1, 2003 between Arnold
  Worldwide Partners and Edward Eskandarian (incorporated by reference to
  Exhibit 4.10 to Havass annual report on Form 20-F for the year ended
  December 31, 2002 (SEC File No. 001-16081)).4.10
  *
  
  Agreement, effective as of October 1, 2003, between
  Jim Heekin and EURO RSCG Worldwide.8.1
  *
  
  List of subsidiaries.12.1
  *
  
  Certification of Chief Executive Officer pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.12.2
  *
  
  Certification of Chief Financial Officer pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.13.1
  *
  
  Certification of Chief Executive Officer pursuant to
  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002.13.2
  *
  
  Certification of Chief Financial Officer pursuant to
  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002.14
  *
  
  Nasdaq Corporate Governance Exemptions.*     Filed herewith.82

SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.

HAVASBy:
  /s/ Jacques HérailName: Jacques Hérail Title: Executive Vice President and
  Chief          Financial OfficerDated: May 28, 200483
INDEX TO FINANCIAL STATEMENTS
Havas and Subsidiaries

Report of Independent Public Accountants
F-2Consolidated Statements of Operations
F-3Consolidated Balance Sheets
F-4Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
F-5Consolidated Statements of Cash Flows
F-6Notes to Consolidated Financial Statements
F-7F-1REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors ofHavas
We have audited the accompanying consolidated balance sheets of Havas (a French corporation) and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in shareholders equity and comprehensive income and cash flows for each of the three years in the period ended December 31, 2003, expressed in euro. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Havas and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with U. S. generally accepted accounting principles.
As described in Notes 2 and 5 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill and other intangible assets in accordance with guidance provided in Statement of Financial Accounting Standards No. 142 Goodwill and Intangible Assets.

ERNST & YOUNG AUDITBy:
/s/ CHRISTIAN CHIARASININame: Christian Chiarasini
Paris-La-Défense, FranceApril 23, 2004
F-2HAVAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Year
        ended December 31,(In 000s except per share amounts)Note
    
    2003
    
    2003
    
    2002
    
    2001USDollars(1)
    
    Euro
    
    Euro
    
    Euroadjusted
        (2)
    
    adjusted
        (2)Net
        revenues
    
    
    1,921,171
    
    1,525,102
    
    1,811,169
    
    1,955,530Operating
        expensesCompensation
        and related costs
    
    
    (1,174,635
    )
    (932,472
    )
    (1,060,533
    )
    (1,176,740
    )Stock-based
        compensation
    12
    
    (6,828
    )
    (5,420
    )
    (12,949
    )
    (18,658
    )General
        and administrative non-payroll costs
    
    
    (597,396
    )
    (474,237
    )
    (556,330
    )
    (618,162
    )Compensation
        to former shareholders of acquired businesses
    11
    
    (3,203
    )
    (2,543
    )
    (5,993
    )
    (19,814
    )Amortization
        of goodwill and other intangible assets
    6
    
    (39,201
    )
    (31,119
    )
    (33,376
    )
    (144,704
    )Goodwill
        and other intangible impairment
    5,
        6
    
    (113,673
    )
    (90,238
    )
    (362,518
    )
    Restructuring
        and other charges
    7
    
    (123,930
    )
    (98,381
    )
    3,483
    
    (126,406
    )Total
        operating expenses
    
    
    (2,058,866
    )
    (1,634,410
    )
    (2,028,216
    )
    (2,104,484
    )Operating
        loss
    
    
    (137,695
    )
    (109,308
    )
    (217,047
    )
    (148,954
    )Interest
        expense
    
    
    (97,692
    )
    (77,552
    )
    (76,982
    )
    (69,374
    )Interest
        income
    
    
    35,360
    
    28,070
    
    27,848
    
    28,414Exchange
        rate loss
    
    
    (11,659
    )
    (9,255
    )
    (776
    )
    (679
    )Net
        gain on trading securities
    
    
    11,315
    
    8,982
    
    9,703
    
    5,717Other
    10
    
    (67,326
    )
    (53,446
    )
    (1,342
    )
    (5,130
    )Financial
        expense - net
    
    
    (130,002
    )
    (103,201
    )
    (41,549
    )
    (41,052
    )Net
        loss from operations before income tax
    
    
    (267,697
    )
    (212,509
    )
    (258,596
    )
    (190,006
    )Provision
        for income tax
    14
    
    (135,605
    )
    (107,649
    )
    (38,958
    )
    4,383Minority
        interests
    
    
    (6,922
    )
    (5,495
    )
    (14,802
    )
    4,272Equity
        in earnings (losses) of investees
    9
    
    894
    
    710
    
    (9
    )
    5,684Loss
        from continuing operations
    
    
    (409,330
    )
    (324,943
    )
    (312,365
    )
    (175,667
    )Income
        (loss) from discontinued operations (net of tax)
    
    
    (123,554
    )
    (98,082
    )
    47
    
    758Net
        loss before effect of change in accounting principle
    
    
    (532,884
    )
    (423,025
    )
    (312,318
    )
    (174,909
    )Cumulative
        effect of accounting change
    5
    
    
    
    
    
    (1,120,800
    )
    Net
        loss
    
    
    (532,884
    )
    (423,025
    )
    (1,433,118
    )
    (174,909
    )Net
        loss before effect of change in accounting principle per shareBasic
        and diluted - continuing operations
    
    
    (1.38
    )
    (1.09
    )
    (1.06
    )
    (0.62
    )Basic
        and diluted - discontinued operations
    
    
    (0.41
    )
    (0.33
    )
    0.00
    
    0.00Cumulative
        effect of accounting change per shareBasic
        and diluted
    
    
    
    
    
    
    (3.80
    )
    Net
        loss per share
    16Basic
        and diluted
    
    
    (1.79
    )
    (1.42
    )
    (4.86
    )
    (0.62
    )(1)Translation of amounts from Euro () into US Dollars ($) has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.2597 on December 31, 2003.(2)2002 and 2001 figures have been adjusted due to the 2003 discontinued operations.The accompanying notes are an integral part of these consolidated financial statements.
F-3HAVAS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

As
        of December 31,(In
        000s except per share amounts)Note
    
    2003
    
    2003
    
    2002US
        Dollars(1)
    
    Euro
    
    EuroASSETSCurrent
        assets:Cash
        and cash equivalents
    
    
    831,609
    
    660,164
    
    745,191Accounts
        receivable, net of reserve for doubtful accounts of 36,654 and 58,169
        as of December 31, 2003 and 2002, respectively
    23
    
    1,393,353
    
    1,106,099
    
    1,370,196Costs
        billable to clients
    
    
    67,702
    
    53,745
    
    81,180Prepaid
        expenses and advances to suppliers
    
    
    49,137
    
    39,007
    
    56,139Other
        receivables
    
    
    89,479
    
    71,032
    
    100,768Deferred
        tax assets
    14
    
    84,580
    
    67,143
    
    75,852Assets
        held for sale
    8
    
    79,953
    
    63,470
    
    Other
        current assets
    
    
    320,587
    
    254,495
    
    299,478Total
        current assets
    
    
    2,916,400
    
    2,315,155
    
    2,728,804Noncurrent
        assets:Property
        and equipment, net
    4
    
    187,616
    
    148,937
    
    214,638Goodwill,
        net
    5
    
    2,072,594
    
    1,645,308
    
    1,891,659Other
        intangible assets, net
    6
    
    297,369
    
    236,063
    
    317,254Equity
        investments
    9
    
    3,443
    
    2,733
    
    1,189Noncurrent
        deferred tax assets
    14
    
    20,253
    
    16,078
    
    119,440Other
        assets
    
    
    49,984
    
    39,679
    
    63,997Total
        noncurrent assets
    
    
    2,631,259
    
    2,088,798
    
    2,608,177Total
        assets
    
    
    5,547,659
    
    4,403,953
    
    5,336,981LIABILITIES
        AND SHAREHOLDERS EQUITYCurrent
        liabilitiesShort-term
        borrowings
    10
    
    124,908
    
    99,157
    
    120,800Current
        maturities of convertible bonds
    10
    
    142,316
    
    112,976
    
    18,700Current
        maturities of long-term borrowings
    10
    
    39,539
    
    31,388
    
    18,100Short-term
        obligations under capital leases
    17
    
    2,567
    
    2,038
    
    8,655Accounts
        payable
    
    
    1,324,806
    
    1,051,683
    
    1,182,884Liabilities
        held for sale
    8
    
    35,478
    
    28,164
    
    Other
        payables
    
    
    937,893
    
    744,537
    
    832,236Advances
        from clients
    
    
    154,233
    
    122,436
    
    150,582Accrued
        compensation
    11,
        12
    
    6,395
    
    5,077
    
    10,804Deferred
        tax liabilities
    14
    
    24,422
    
    19,387
    
    14,763Deferred
        income
    
    
    39,090
    
    31,031
    
    45,028Total
        current liabilities
    
    
    2,831,647
    
    2,247,874
    
    2,402,552Noncurrent
        liabilitiesLong-term
        borrowings
    10
    
    11,376
    
    9,031
    
    46,830Convertible
        bonds
    10
    
    1,359,752
    
    1,079,425
    
    1,263,404Long-term
        obligations under capital leases
    17
    
    2,364
    
    1,877
    
    4,020Accrued
        compensation
    11,
        12
    
    5,121
    
    4,065
    
    10,689Deferred
        tax liabilities
    14
    
    94,068
    
    74,675
    
    100,633Accrued
        pensions and other benefits costs
    13
    
    55,424
    
    43,998
    
    35,006Other
        liabilities
    
    
    181,703
    
    144,243
    
    100,313Total
        noncurrent liabilities
    
    
    1,709,808
    
    1,357,314
    
    1,560,895Minority
        interests
    
    
    26,611
    
    21,125
    
    26,900Shareholders
        equityCommon
        stock: 0.40 par value, 306,196,659 and 305,219,028 shares issued
        at December 31, 2003 and 2002, respectively
    
    
    154,287
    
    122,479
    
    122,087Additional
        paid-in capital
    
    
    4,065,927
    
    3,227,695
    
    3,224,078Retained
        earnings
    
    
    (2,813,503
    )
    (2,233,471
    )
    (1,766,548
    )Accumulated
        other comprehensive income
    
    
    (386,040
    )
    (306,454
    )
    (169,187
    )Less:
        Treasury stock, at cost, 7,614,663 and 9,629,547 shares at December 31,
        2003 and 2002, respectively
    
    
    (41,078
    )
    (32,609
    )
    (63,796
    )Total
        Shareholders equity
    
    
    979,593
    
    777,640
    
    1,346,634Total
        liabilities and Shareholders equity
    
    
    5,547,659
    
    4,403,953
    
    5,336,981(1)Translation of amounts from Euro () into US Dollars ($) has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.2597 on December 31, 2003.The accompanying notes are an integral part of these consolidated financial statements.
F-4HAVAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITYAND COMPREHENSIVE INCOME
(In thousands of euro except number of shares)

Number of shares(000s)

Commonstock

Additionnalpaid-in capital

Retainedearnings

Treasury stock

Deferredcompensation

Othercomprehensiveincome

TotalshareholdersequityBalance at December 31, 2000

260,346

106,599

2,702,591

(17,741
)
(16,507
)
(26,602
)
(82,019
)
2,666,321Comprehensive income:Net loss







(174,909
)






(174,909
)Currency translation adjustment













132,098

132,098Total comprehensive income (loss)







(174,909
)




132,098

(42,811
)Dividends (per share amount: 0.17) and equalization tax







(62,712
)






(62,712
)Treasury stock transactions

(4,150
)






(61,982
)




(61,982
)Stock option plans





(375
)








(375
)Exercise of stock options and warrants

6,692

2,677

58,687









61,364Stock option tax benefit





2,201









2,201Share issuanceconvertible bonds

200

80

1,684









1,764Unearned compensation on unvested options











16,050



16,050Share issuanceMPG acquisition

28,800

11,520

429,253









440,773Share issuanceCircle acquisition

2,131

852

26,149









27,001Other issuance





1,061









1,061Balance at December 31, 2001

294,019

121,728

3,221,251

(255,362
)
(78,489
)
(10,552
)
50,079

3,048,655Comprehensive income:Net loss







(1,433,118
)






(1,433,118
)Currency translation adjustment











437

(213,031
)
(212,594
)Minimum pension liability adjustment, gross













(8,948
)
(8,948
)Minimum pension liability adjustment, tax benefit













2,713

2,713Total comprehensive income (loss)







(1,433,118
)


437

(219,266
)
(1,651,947
)Dividends (per share amount: 0.17) and equalization tax







(69,912
)






(69,912
)Treasury stock transactions

672





(8,156
)
14,693





6,537Exercise of stock options and warrants

899

359

2,827









3,186Unearned compensation on unvested options











10,115



10,115Balance at December 31, 2002

295,590

122,087

3,224,078

(1,766,548
)
(63,796
)


(169,187
)
1,346,634Comprehensive income:Net loss







(423,025
)






(423,025
)Currency translation adjustment













(134,239
)
(134,239
)Minimum pension liability adjustment, gross













(4,429
)
(4,429
)Minimum pension liability adjustment, tax benefit













1,401

1,401Total comprehensive income (loss)







(423,025
)




(137,267
)
(560,292
)Dividends (per share amount: 0.09) and equalization tax







(29,896
)






(29,896
)Treasury stock transactions

2,015





(14,002
)
31,187





17,185Exercise of stock options

975

391

3,591









3,982Share issuanceconvertible bonds

2

1

26









27Balance at December 31, 2003

298,582

122,479

3,227,695

(2,233,471
)
(32,609
)


(306,454
)
777,640The accompanying notes are an integral part of these consolidated financial statements.
F-5HAVAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year
        ended December 31,2003
    
    2003
    
    2002
    
    2001(In
        US
    
    (In
        Euro 000s)Dollar
        000s)(1)Cash
        flows from operating activitiesNet
        loss from continuing operations and after changes in accounting principles
    
    (409,330
    )
    (324,943
    )
    (1,433,165
    )
    (175,667
    )Adjustments
        to reconcile net income (loss) to net cash provided by operating activities
        :Minority
        interests
    
    6,922
    
    5,495
    
    13,658
    
    (4,272
    )Amortization,
        depreciation and impairment
    
    219,762
    
    174,456
    
    1,590,295
    
    231,961Restructuring
    
    90,313
    
    71,694
    
    (25,880
    )
    67,832Stock-based
        compensation-Parent company plan
    
    
    
    
    
    12,949
    
    16,317(Gain)
        loss on disposal of fixed assets
    
    72
    
    57
    
    (8,556
    )
    5,887Earnings
        of investees carried under equity method in excess of dividends received
    
    156
    
    124
    
    244
    
    2,113Deferred
        tax
    
    117,573
    
    93,334
    
    (2,505
    )
    (44,275
    )Change
        in assets and liabilities:Accounts
        receivable
    
    63,985
    
    50,794
    
    143,834
    
    33,758Accounts
        payable
    
    121,234
    
    96,240
    
    (71,070
    )
    33,783Advances
        from clients
    
    (10,060
    )
    (7,986
    )
    (44,279
    )
    (49,127
    )Related
        parties payable
    
    
    
    
    
    
    
    (90,904
    )Other
    
    40,714
    
    32,320
    
    79,472
    
    (28,301
    )Net
        cash provided by operating activities
    
    241,341
    
    191,585
    
    254,997
    
    (895)Cash
        flows from investing activitiesPurchase
        of tangible and intangible assets
    
    (64,306
    )
    (51,049
    )
    (63,087
    )
    (87,530
    )Purchase
        of subsidiaries net of cash acquired
    
    (19,839
    )
    (15,749
    )
    (67,761
    )
    (23,455
    )Proceeds
        from sale of tangible and intangible assets
    
    38,103
    
    30,248
    
    22,011
    
    8,069Proceeds
        from sale of subsidiaries
    
    10,203
    
    8,100
    
    4,143
    
    7,010Purchase
        of marketable securities
    
    
    
    
    
    
    
    (973
    )Proceeds
        of marketable securities
    
    
    
    
    
    
    
    1,430Net
        cash used in investing activities
    
    (35,839
    )
    (28,450
    )
    (104,694
    )
    (95,449
    )Cash
        flows from financing activitiesDividends
        paid in cash
    
    (48,850
    )
    (38,779
    )
    (84,392
    )
    (75,007
    )Acquisition
        of treasury stock
    
    (540
    )
    (429
    )
    (1,605
    )
    (61,982
    )Proceeds
        from issuance of stock and disposal of treasury stock
    
    7,717
    
    6,126
    
    2,757
    
    60,309Net
        payments under line-of-credit agreements
    
    (10,865
    )
    (8,625
    )
    (17,800
    )
    (39,077
    )Principal
        payments under capital lease obligations
    
    (11,423
    )
    (9,068
    )
    (3,953
    )
    (4,935
    )Proceeds
        from convertible bonds
    
    
    
    
    
    443,453
    
    Purchase
        of convertible bonds
    
    (143,937
    )
    (114,263
    )
    (28,990
    )
    Proceeds
        from long-term borrowings
    
    421
    
    334
    
    6,613
    
    20,848Repayment
        of long-term borrowings
    
    (21,366
    )
    (16,961
    )
    (30,926
    )
    (63,830
    )Net
        cash used in/provided by financing activities
    
    (228,843
    )
    (181,665
    )
    285,157
    
    (163,674
    )Effect
        of exchange rate changes on cash and cash equivalents
    
    (26,790
    )
    (21,267
    )
    (34,509
    )
    2,984Net
        cash (used in) provided by discontinued operations
    
    (56,976
    )
    (45,230
    )
    (7,081
    )
    14,140Net
        increase (decrease) in cash and cash equivalents
    
    (107,109
    )
    (85,027
    )
    393,870
    
    (242,894
    )Cash
        and cash equivalents at beginning of the year
    
    938,718
    
    745,191
    
    351,321
    
    594,215Cash
        and cash equivalents at end of the year
    
    831,609
    
    660,164
    
    745,191
    
    351,321(1)Translation of amounts from Euro () into US Dollars ($) has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.2597 on December 31, 2003.F-6HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
1.NATURE OF OPERATIONS
Havas, a French corporation listed on thePremier Marchéof Euronext Paris S.A. and on the Nasdaq National Market system, and its subsidiaries (the Company or Havas) operate as a global advertising and communications group with worldwide networks that offer a broad range of advertising and communications services, including integrated communications, traditional advertising, direct marketing, media planning and buying, corporate communications, internal communications, sales promotion, design, television sponsorship, human resources, multimedia interactive communications and public relations.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.
All figures are presented in thousands of euro, unless otherwise indicated. Translation of amounts from euro () into US dollars ($) has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.2597 on December 31, 2003.
A summary of the Companys significant accounting policies is provided below.
2.1.Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries.All significant intercompany balances and transactions have been eliminated upon consolidation.
2.2.Foreign Currency Translation
The balance sheets of foreign subsidiaries are converted into euro at year-end exchange rates and their income and cash-flows statements are converted at average rates for the year. Differences arising on translation are recorded as a separate component of shareholders equity.
2.3.Estimates and judgments
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The following may involve a higher degree of judgment or complexity: revenue recognition, allowances for doubtful accounts, restructuring charges, contingent acquisition obligations, impairment of intangible assets and goodwill and income taxes.
F-7
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
2.4.Revenue Recognition
Substantially all revenue is derived from fees and commissions for advertising and communication services and for the planning and purchase of media. Revenue is recognized on the date that the service is performed, in accordance with the terms of the contractual arrangement, and upon completion of the earnings process.  The earnings process is complete when services are rendered, on the date the media is aired or published, when costs are incurred for production and when collection is reasonably assured. Some contractual arrangements with clients include performance incentives which allow the Company to earn additional revenues as a result of its performance relative to both qualitative and quantitative objectives. The Company
recognizes the incentive portion of revenue under these contractual arrangements when these qualitative and quantitative goals are achieved in accordance with the arrangements.
2.5.Accounts Receivable
Accounts receivable include both the revenue recognized as well as actual media and production costs which are paid for the Company and rebilled to clients.
2.6.Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses that result from the inability of its customers to make required payments. The Company bases its allowances on the likelihood of recoverability of accounts receivable based upon past experience and reviews of aging and analysis of specific accounts. If economic or specific industry trends worsen beyond its estimates, the Company will increase its allowances for doubtful accounts by recording additional expense.
2.7.Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less.
2.8.Costs Billable to Clients
Revenue resulting from expenditures billable to clients is recognized when the services are performed and billed.
2.9.Property and Equipment, net
Property and equipment are carried at historical cost. Depreciation is calculated either on a straight-line basis or using the declining-balance method over the estimated useful life of the related asset. Assets acquired under capital lease agreements are capitalized.
The Company estimates the useful lives of its property and equipment in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period.
F-8
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
2.10.Goodwill and Other Intangible Assets
Goodwill corresponds to the excess of the acquisition cost of subsidiaries over the fair value of the related assets acquired and liabilities assumed. Prior to January 1, 2002, goodwill was amortized, using the straight-line method, over periods from 7 to 40 years. Beginning on January 1, 2002, in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, the Company no longer amortizes goodwill, but rather tests these assets at least annually for impairment by comparing the fair value of the reporting units over their carrying values. The Company assesses the fair value and recoverability of goodwill in accordance with SFAS 142. The fair value of the reporting units has been computed using the discounted cash flow method. Such projections require the use of estimates and assumptions as to matters such as
future revenue growth, product margins, capital expenditures, working capital requirements, tax rates and discount rates. Actual earnings may differ from the Companys estimates. If the fair value of the reporting unit is determined to be less than its carrying value, a second step is performed to compute the amount of goodwill impairment, if any. In 2002, the Company completed the transitional impairment tests of goodwill, net of tax, and intangible assets with indefinite lives. The Company determined that upon adoption, 1,120,800 of goodwill was required to be written off at January 1, 2002.  This charge was reflected as the Cumulative effect of accounting change in the accompanying consolidated statements of operations. In 2003 and 2002, as a result of the annual impairment testing, the Company determined that there was an additional goodwill impairment charge of 69,488 and 362,518 respectively (See Note 5).
Other intangibles consist mainly of trademarks and customer lists and customer relationships, which are amortized over their estimated useful lives using the straight-line method.
2.11.Impairment of Long Lived Assets and Accounting for Discontinued Operations

The long lived assets are reviewed for impairment whenever events or circumstances indicate their carrying values may not be recoverable. Whenever such events or circumstances arise, an estimate of the future undiscounted cash flows is compared to the assets carrying value to determine if an impairment exists pursuant the requirements of SFAS 144, Accounting for the Impairment or Disposal of Long-Lived-Assets.

In accordance with SFAS 144, the Company includes in assets and liabilities held for sale and in discontinued operations the assets and liabilities that meet certain criteria with respect to the Companys plans for their sale or abandonment. Depreciation and amortization cease when the asset meets the criteria to be classified as held for sale. If (1) a planned or completed disposal involves a component of the Company whose operations and cash flows can be distinguished operationally and for financial reporting purposes; (2) such operations and cash flows will be (or have been) eliminated from the Companys ongoing operations; and (3) the Company will not have any significant continuing involvement in the component, then the components results of operations are presented as discontinued operations for all periods. Operating losses from discontinued operations are recognized in the period in which they occur.
Long-lived assets (or groups of assets and related liabilities) classified as held for sale, are measured at the lower of carrying amount or fair value less cost to sell.
2.12.Pension, Retirement and Post Employment Obligations
In accordance with the laws and practices of each country, the Company participates in various employee benefit plans offering pensions, retirement, termination and death and disability benefits.
Pension plans include flat benefits, final pay plans and multi-employer plans. For defined contribution plans and multi-employer plans, pension expenses correspond to the contributions payable. For defined benefit pension plans, pension costs are determined using the projected unit credit method.
F-9
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Individual employment contracts, collective bargaining agreements and statutes in certain countries where the Company operates generally provide for severance indemnities in the event of involuntary employee terminations. Indemnities may range generally from several months to, for certain key employees, several years of the related employees annual salary. Those severance indemnities that are provided for by collective bargaining agreement or statutes generally accumulate and when they are probable and can be reasonably estimated, they are accrued ratably over the service period. Those severance indemnities that are allowed through individual contracts generally do not vest or accumulate and are therefore accrued when the decision to sever the individual is made. Key employees are also generally subject to non-competition agreements.
2.13.Income Taxes
In accordance with the SFAS No. 109, Accounting for Income Taxes, the Company records deferred tax assets and liabilities using enacted tax rates that account for the effect of temporary differences between the book and tax bases of assets and liabilities. If enacted tax rates change, the Company would adjust its deferred tax assets and liabilities through the provision for income taxes in the period of the change to reflect the enacted tax rate expected to be in effect when the deferred tax items are reversed. The Company records a valuation allowance on deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. Cumulative losses weigh heavily in the overall assessment.
2.14.Foreign Currency Transactions
Foreign currency transactions are converted at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are converted at the respective exchange rates prevailing at the balance sheet date.
2.15.Earnings per share
Basic net income (loss) per share is computed on the basis of the weighted-average number of Havas shares issued after deducting the weighted average number of treasury shares. Diluted net income (loss) per share takes into account share equivalents having a dilutive effect. Potential shares include: convertible bonds (Note 10), stock options granted to employees (Note 12), converted stock options granted by Snyder Communications for SNC and Circle.com shares (Note 12) and warrants to subscribe for Havas shares.
2.16.Treasury Stock
Treasury share purchases are accounted for at cost. The sale of treasury shares is accounted for at first in first out cost method. Gains or losses on the sale of treasury shares are accounted for as retained earnings and do not affect reported results of operations.
F-10
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
2.17.Stock Options
At December 31, 2003, the Company had stock-based employee compensation plans, which are more fully described in Note 12. The Company accounts for those plans under the recognition and measurement principles of Accounting Practices Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No 123, Accounting for Stock-Based Compensation, to stock-based compensation.

2003

2002

2001Net loss, as reported

(423,025
)
(1,433,118
)
(174,909
)Deduct: compensation expense, net of related tax effects

(6,672
)
(32,624
)
(43,872
)Add: Stock-based compensation expense, net of related tax effects



11,227

15,794Net loss, pro forma

(429,697
)
(1,454,515
)
(202,987
)Net loss per share basic, as reported

(1.42
)
(4.86
)
(0.62
)Net loss per share basic, pro forma

(1.45
)
(4.93
)
(0.72
)Net loss per share diluted, as reported

(1.42
)
(4.86
)
(0.62
)Net loss per share diluted, pro forma

(1.45
)
(4.93
)
(0.72
)Based on recent trading prices of the Companys shares, most of the outstanding options to purchase the Companys shares have become out of the money. As of December 31, 2003, of the 30,734,948 options outstanding, 20,005,314 options had an exercise price above the 20-day average trading price of the Companys shares on Euronext Paris as of that date.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

2003

2002

2001Expected life (in years)

4

4

7Risk-free interest rates

2.81 to 3.35
%
3.35 to 4.46
%
4.65 to 4.97
%Expected dividend yield

2.00 to 3.35
%
2.00 to 3.65
%
1.13 to 1.06
%Expected volatility

30%

30%

30%2.18.Concentration of Credit Risk
The Company provides advertising and communications services to a wide range of clients that operate in many different industry sectors around the world. The Company grants credit to all qualified clients and does not believe it is exposed to any undue concentration of credit risk related to either a specific country or customer. Consequently, concentrations of credit risk with accounts receivable are limited. The Company used derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, which are negotiated with leading banks, thus limiting the counterpart risks. The Company invests its excess cash in short-term securities with financial institutions and limits the amount of credit exposure to any one counterpart.
F-11
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
2.19.Derivative Financial Instruments
The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, on January 1, 2001. SFAS 133 establishes accounting and reporting standards requiring that every derivative financial instrument (including certain derivative financial instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value.
Derivatives that are not hedges must be adjusted to fair value through the consolidated statement of income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of the change in fair value of a derivative used as a hedge is required to be recognized immediately in the statement of income.
For derivative financial instruments to qualify for hedge accounting, the following criteria must be met: (1) the hedging instrument must be designated as a hedge; (2) the hedged exposure must be specifically identifiable and expose the Company to risk; and (3) it must be highly probable that a change in fair value of the derivative financial instrument and an opposite change in the fair value of the hedged exposure will have a high degree of correlation.
Currently, the Company does not have any derivative financial instruments outstanding that are designated as hedges. Therefore, the Companys derivative financial instruments are recorded on the balance sheet as either assets or liabilities and are revalued to the current market rate, with any resulting gains or losses recorded in the statement of income in the current period.
2.20.Restructuring Charges
Restructuring charges were recorded in 2001 and in 2003, associated with the Companys formal restructuring plan. The related reserves reflect many estimates, including those pertaining to separation costs and obligations under real estate leases, net of estimated sublease income. The Company reassesses the reserve requirements to complete its restructuring plan at the end of each reporting period. The 2001 restructuring plan has been recorded in accordance with Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring.) The 2003 restructuring plan has been recorded in accordance with SFAS No.146 Accounting for Costs Associated with Exit or Disposal Activities. As real estate market conditions change, the Company may have
further refinements in the future, either upward or downward, to the original charge recorded.
2.21.Contingent Acquisition Obligations
Certain of the Companys acquisition contracts provide for contingent consideration based on earnings (an earn-out). The Company utilizes earn-out structures in an effort to minimize the risk to the Company associated with potential future negative changes in the performance of the acquired entity. The ultimate amounts payable are dependent upon future results of the acquired entity. The Company does not record the contingent consideration as additional purchase price for these items on its balance sheet until the applicable contingency is resolved and additional consideration is determinable. However, if the contingent consideration is conditioned on the employment of any selling shareholder, the Company applies EITF consensus on issue No. 95-8, Accounting for Contingent Consideration Paid to Shareholders of an Acquired Enterprise in a Purchase Business Combination, which
requires that compensation expense be accrued as more fully described in Note 11.
Actual results can differ from these estimates and, as a result, the actual amount that the Company pays may be different from these estimates. These obligations change from period to period as a result of earn-out payments made during the current period, changes in the previous estimates of the acquired entities performances, changes in foreign exchange rates and the addition of new contingent obligations resulting from acquisitions with earn-out structures that were completed in the current period. These differences could be material (See Note 21).
F-12
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
In addition, owners of interests in certain subsidiaries or affiliates of the Company have the right in certain circumstances to require the Company to purchase their interests (a buy-out). The purchase price for a buy-out is generally based upon a multiple of future earnings and in some cases is conditioned on the continued employment of the related shareholders. The Company accounts for these arrangements as restricted stock plans. The ultimate amount payable in the future relating to these transactions will vary because it is generally dependent on the future results of operations of the subject businesses and the timing the buy-out is exercised. The actual amounts that the Company pays may be different from these estimates. These differences could be material (See Note 21).
2.22.Advertising Costs
Advertising costs are expensed as incurred. Advertising expense amounted to 13,528, 14,162 and 11,484 for the years ended December 31, 2003, 2002 and 2001, respectively.
2.23.Recently Issued Accounting Pronouncements
In January 2003, Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No. 51. This interpretation provides guidance on how to apply the controlling financial interest criteria in ARB 51 to variable interest entities. Given the Interpretations complexity, the FASB issued several FASB Staff Positions (FSPs) throughout 2003 to clarify the Boards intent on certain of the Interpretations provisions, and in December 2003, the Board revised the Interpretation (FIN 46-R) to address certain technical corrections and to clarify many of the implementation issues that had arisen. Variable interest entities (VIEs) include many entities that have previously been referred to as special-purpose entities (SPEs), but also may include many other entities not
previously thought of as SPEs. A variable interest entity is an entity that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. Interpretation 46 requires a company to consolidate a variable interest entity if the company is subject to a majority of the risk of loss from the variable interest entitys activities or is entitled to receive a majority of the entitys residual returns or both. The application of this interpretation is required at December 31, 2003 for entities created after February 1, 2003 and at December 31, 2004 for other entities. The adoption of this Statement will not have a material effect on the Companys results of operations, financial position or cash flows.
In December 2003, FASB issued a revision of SFAS No. 132, Employers disclosures about pensions and other postretirement benefits to improve financial statement disclosures for defined benefit plans. This statement requires that companies provide more details about their plan assets, benefits obligations, cash flows, benefit costs and other relevant information. Disclosures of certain information (such as estimated future benefit payments or information about foreign plans) are effective for fiscal years ending after June 15, 2004.

In November
2002, the EITF reached a consensus on EITF 00-21, Revenue Arrangements with Multiple Deliverables
(EITF 00-21). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery
or performance of multiple products, services and/or rights to use assets. The provisions of EITF 00-21 will apply
to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company does not expect
that the adoption of EITF 00-21 will have a significant impact on its results of operations, financial position or cash flows.

2.24.Reclassifications

Certain amounts applicable to prior periods have been reclassified to conform to the classifications followed in 2003.
F-13
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
3.ACQUISITIONS
The Company did not acquire any significant subsidiaries in 2003. The Company acquired 9 small entities in 2003 for an aggregate amount of 11,486, including acquisition costs, resulting in a preliminary goodwill of 9,623. Revenues from such acquisitions reflected in the 2003 Consolidated Statements of Operations amount to 5,892. The Company is in the process of finalizing the purchase price allocation to the net assets acquired and liabilities assumed.
The Company did not acquire any significant subsidiaries in 2002. The Company acquired 3 small entities in 2002 for an aggregate amount of 22,007, including acquisition costs, resulting in a goodwill of 20,731. These acquisitions added 7,776to the Companys 2002 net revenues.
4.PROPERTY AND EQUIPMENT, NET
Property and equipment, net are comprised of the following:

Useful lives

As of December 31,2003

2002Land



559

4,453Buildings

25-33 years

58,265

78,740Furniture, fixtures and equipment

3-10 years

335,804

451,527394,628

534,720Less: Accumulated depreciation



(245,691
)
(320,082
)148,937

214,638Included in property and equipment are assets recorded under capital leases with costs of approximately 11,044 and 35,482 as of December 31, 2003 and 2002, respectively. The accumulated depreciation of these assets amounted to 3,261 and 11,999 as of December 31, 2003 and 2002, respectively.
Depreciation expense amounted to 53,099, 72,369 and 84,886 for the years ended December 31, 2003, 2002 and 2001, respectively.
5.GOODWILL, NET
As required, the Company adopted SFAS 142 as of January 1, 2002. Upon adoption, the Company recognized an impairment charge of 1,120,800, net of tax, in one reporting unit, which charge is the result of adopting a fair value approach under SFAS 142. The fair value approach calculates impairment using the discounted future cash flows method at the reporting unit level. Prior to adoption of SFAS 142, the Company assessed the recoverability of goodwill by comparing for each entity the undiscounted projected future earnings before interest and after taxes over its economic life to its carrying amount.
During 2003 and 2002, the Company performed its annual impairment review for goodwill and recorded a charge of 69,488 and 362,518 respectively, which is recorded as a component of operating income in the accompanying consolidated statements of operations. The 2003 impairment is the result of the elimination of one of the Companys reporting units in connection with its strategic reorganization whereas the 2002 impairment is the result of a decline of market conditions in the advertising and communications industry in the course of 2002.
F-14
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
The changes in the carrying amount of goodwill for each of the two-year period ended December 31 are as follows:

Balance as of January 1, 2002

3,450,235Currency translation adjustment

(158,395
)Workforce reclassified as goodwill

15,885Goodwill acquired during the year

20,731Goodwill arising from earn-out, buy-out payments

54,531Goodwill written off related to sale of business

(8,010
)Impairment loss due to SFAS 142 adoption

(1,120,800
)Impairment loss during the year

(362,518
)Balance as of December 31, 2002

1,891,659Currency translation adjustment

(123,145
)Goodwill acquired during the year

9,623Goodwill arising from earn-out, buy-out payments

15,050Goodwill written off related to business sold or abandoned

(64,910
)Goodwill reclassified as Assets Held for Sale

(13,481
)Impairment loss during the year

(69,488
)Balance as of December 31, 2003

1,645,308A reconciliation of reported income (loss) before change in accounting principle and net income (loss) before change in accounting principle per share for prior periods to exclude amortization of goodwill is as follows:

2003

2002

2001Net loss before effect of change in accounting principle, as reported

(423,025
)
(312,318
)
(174,909
)Add back: Goodwill amortization





105,895Net loss before effect of change in accounting principle, adjusted

(423,025
)
(312,318
)
(69,014
)Net loss per share, basic, as reported

(1.42
)
(4.86
)
(0.62
)Net loss per share, basic, adjusted

(1.42
)
(4.86
)
(0.25
)Net loss per share, diluted, as reported

(1.42
)
(4.86
)
(0.62
)Net loss per share, diluted, adjusted

(1.42
)
(4.86
)
(0.25
)6.OTHER INTANGIBLE ASSETS, NET
Other intangible assets subject to amortization consist of the following:

As
        of December 31,2003
    
    2002Customer
        base
    
    209,243
    
    218,846Database
    
    29,006
    
    34,932Trademarks
    
    80,909
    
    118,887Patents,
        licenses and other intangibles
    
    31,285
    
    41,949Less:
        Accumulated amortization
    
    (114,380
    )
    (97,360
    )236,063
    
    317,254The aggregate amortization expense for the year ended December 31, 2003 is 31,119. The estimated aggregate amortization expense for each of the five succeeding years is as follows: 27,000 for 2004; 27,000 for 2005; 25,000 for 2006; 17,000 for 2007; and 17,000 for 2008.
F-15
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Due to the Companys 2003 reorganization, an impairment test has been conducted on certain intangible assets resulting in a 20,750 charge on trademarks which is reflected as Goodwill and other intangible impairment in the Consolidated Statements of Operations.
7.RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 2003, the Company completed the strategic reorganization of its business operations that was announced in September 2003. The Company initiated the strategic reorganization to strengthen its integrated communications capability, to simplify its organizational structure, and to promote greater synergies among the agencies by refocusing its activities around its two global networks, Euro RSCG Worldwide and Media Planning Group, and its creativity-focused network, Arnold Worldwide Partners.
The Company also implemented a restructuring plan, primarily in the United States and the United Kingdom, to reduce costs. This plan resulted in pre-tax restructuring costs and other charges in the amount of 92,424. This charge includes pre-tax severance and other personnel-related costs of 39,353, pre-tax occupancy and facilities-related costs of 37,783 as well as other charges of 15,288 including 8,836 asset write downs.
The severance and other personnel related charges of 39,353 reflected the elimination of 1,158 positions worldwide, most
of them in Europe and North America. The employee groups affected included all levels and functions across the Company. All positions had been eliminated or identified for elimination at December 31, 2003, and the remaining reserve balance of 25,529 at December 31, 2003 reflects costs relating to severance and other termination benefits to be settled in 2004.
This reorganization will also affect the 2004 Consolidated Statements of Operations. The completion of the plan will result in the abandonment and closure of 40 offices representing about 70,000 m2 principally located in Great Britain and in North America. Lease terminations include remaining lease obligations net of estimated sublease income at December 31, 2003. Such termination costs were based upon an estimate of the amounts that the Company expected to pay over the terms of these leases, based on its assumptions regarding offsetting sublease income. The remaining balance in occupancy and facilities-related reserves of 31,761 at December 31, 2003 relates to non-cancelable lease commitments in excess of estimated sublease income for abandoned facilities that will be paid out over the remaining lease periods, ranging from one to ten years.
The following table displays the activity and balances of the restructuring reserve account:

Severanceandotherpersonnel-related

Occupancyandfacilities-related

Other

Total2003 Charge

39,353

37,783

15,288

92,424Foreign exchange translation

(1,501
)
(2,393
)
(877
)
(4,771
)Non cash items





(8,836
)
(8,836
)Amount used

(12,323
)
(3,629
)
(3,199
)
(19,151
)Balance at December 31, 2003

25,529

31,761

2,376

59,666During 2001, the Company recorded approximately 128,370 in pre-tax restructuring and other charges associated with the Companys worldwide initiative to reduce costs. This charge included pre-tax severance and other personnel-related costs of 61,294, pre-tax occupancy and facilities-related costs of 51,447 as well as pre-tax asset write-downs and other charges of 15,629 (including 14,106 asset depreciation / write-downs which are not included in Reserve established as they are non-cash items).
The severance and other personnel-related charges reflected the elimination of 2,826 positions worldwide, approximately 80% of which occurred in Europe and North America. The employee groups affected included executive and regional management and administrative personnel. All positions had been eliminated at December 31, 2002. During 2002, a personnel related reserve was reversed in the amount of 907 which primarily related to one entity, Circle.com, where the amounts actually paid were less than estimated, although the headcount reduction was unchanged.
F-16
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)

The pre-tax occupancy and facilities-related costs of 51,447 in 2001 associated with lease terminations and other exit costs resulted primarily from the abandonment and closure of office space predominantly located in North America. Lease terminations include remaining lease obligations net of estimated sublease income. Such termination costs were based upon an estimate of the amounts that the Company expected to pay over the terms of these leases, based on the Companys assumptions regarding offsetting sublease income. During 2003 and 2002, as local real estate markets changed, the Company adjusted its estimated sublease income over the related lease terms, which resulted in an additional restructuring reserve of 5,957 and 2,554 respectively and in a reversal of previously recorded reserves of 236 and 5,130, respectively. The remaining balance in occupancy and facilities-related reserves at December
31, 2003 relates to non-cancelable lease commitments in excess of estimated sublease income for abandoned facilities that will be paid out over the remaining lease periods, ranging from one to 12 years.
The following table displays the activity and balances of the restructuring reserve account:

Severanceandotherpersonnel-related

Occupancyandfacilities-related

Other

TotalReserve established

61,294

51,447

1,523

114,264Amount used

(52,506
)
(7,691
)
(341
)
(60,538
)Balance at December 31, 2001

8,788

43,756

1,182

53,726Foreign exchange translation adjustment

(381
)
(6,148
)
(122
)
(6,651
)Deductions:- Amounts used

(6,819
)
(15,446
)
(132
)
(22,397
)- Reversals

(907
)
(5,130
)


(6,037
)Change in original estimate



2,554



2,554Balance at December 31, 2002

681

19,586

928

21,195Foreign exchange translation adjustment

(60
)
(3,774
)
(158
)
(3,992
)Deductions:- Amounts used

(605
)
(6,161
)
(770
)
(7,536
)- Reversals

(16
)
(236
)


(252
)Change in original estimate



5,957



5,957Balance at December 31, 2003



15,372



15,3728.DISCONTINUED OPERATIONS  HELD FOR SALE
In the fourth quarter of 2003, the Company completed the strategic reorganization of its business operations that was announced in September 2003. As part of its strategic reorganization, the Companys management targeted for sale or cessation of operations a number of companies that are not engaged primarily in activities within its core areas of competence, are not strategic investments or otherwise do not fit into our new organization. As of April 30, 2004, all operations targeted for cessation have been closed and around 80% (in terms of revenue) of companies to be disposed of have been sold or are about to be sold.
F-17
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
In accordance with SFAS 144, the results of operations of the businesses sold or to be disposed of at December 31, 2003 have been reported as Discontinued in the current and prior periods. The table below reports the breakdown of the discontinued operations:

DISCONTINUED OPERATIONS

2003

2002

2001Loss on disposal

(75,925
)


Income (loss) from discontinued operations (excluding loss on disposal)

(29,129
)
3,301

4,915Benefit (provision) for income taxes

6,972

(3,254
)
(4,157
)Income (loss) from discontinued operations (net of tax)

(98,082
)
47

758The major classes of assets and liabilities classified as Held for sale in the accompanying Consolidated Balance Sheets are disclosed below:

ASSETS HELD FOR SALE

2003

LIABILITIES HELD FOR SALE

2003Goodwill, net

16,200



Accounts receivable

31,856

Short-term borrowings

6,109Cost billable to clients

6,049

Accounts payable

14,005Prepaid expenses and advances to suppliers

7,163

Other payables

4,770Other assets

2,202

Other liabilities

3,280Assets held for sale at December 31, 2003

63,470

Liabilities held for sale at December 31, 2003

28,1649.EQUITY INVESTMENTS

2003

2002Investmentamount

EquityinnetIncome(loss)

InvestmentAmount

Equityinnetincome (loss)Others

2,733

710

1,189

(9
)Equity investments

2,733

710

1,189

(9
)10.CONVERTIBLE BONDS AND LONG-TERM AND SHORT-TERM BORROWINGS
Convertible Bonds
On May 22, 2002, the Company issued 41,860,465 unsecured convertible and/or exchangeable bonds, each with a nominal value of 10.75, for an aggregate principal amount of 450,000. The Company received net proceeds of approximately 443,500 from this issuance. The coupon rate of the bonds is 4.0% per annum, payable annually in arrears on January 1 of each year, beginning January 1, 2003, and the gross yield to maturity also is 4.0% per annum, assuming no conversion or redemption occurs prior to maturity. The implicit interest rate, including issue costs, is 4.26% per annum. The bonds have a maturity date of January 1, 2009. Each bond currently is exercisable at any time at the option of the holder for 1.035 Havas shares, subject to specified anti-dilution adjustments, which exercise may, at the Companys option, be a conversion for newly issued shares, an exchange for treasury shares or a combination thereof.
In accordance with French law, the conversion/exchange ratio has been adjusted from 1 to 1.035 due to the distribution of a portion of paid-in capital in connection with the Companys payment of its annual dividend to shareholders on June 11, 2002 and on June 18, 2003. The bonds have a redemption value at maturity equal to their nominal value. The Company has the option to redeem all, but not less than all, of the outstanding bonds between January 1, 2005 and December 31, 2008 at their nominal value plus accrued interest if the product of (1) the conversion/exchange ratio and (2) the arithmetic mean of the closing prices of Havas shares on Euronext Paris during 20 consecutive trading days chosen by the Company from among the 40-trading day period preceding publication of a notice of early redemption, exceeds 125% of the nominal value of the bonds. The Company also has the option to redeem, all, but not less than all, of
the bonds at their nominal value plus
F-18
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
accrued interest at any time when less than 10% of the bonds issued remain outstanding. In connection with this issuance, the Company agreed not to give any other bonds any preference over the bonds, or reduce its share capital or alter the way it allocates profits.
The General Meeting of holders of these Havas bonds met on December 1, 2003 and approved the payment by the Company of 1.20 per bond, payable in cash in a single installment on January 1, 2004, in exchange for a waiver of the option they had to cause the Company to redeem the bonds at its nominal value plus accrued interests on January 1, 2006 (Put). This amount is reflected in Other payables in the accompanying consolidated Balance Sheets as of December 31, 2003. As a result of this transaction, the maturity date of the 450,000 series of bonds is postponed with certainty until January 1, 2009. The total expense for the Company amounted to 51,108 including 875 consulting fees reflected as Other financial expense in the Consolidated Statements of Operations. Based on the Emerging Issues Task Force (EITF) consensus on issue No. 96-19 Debtors accounting for a modification or
exchange of debt instruments, this operation has been accounted for in accordance with paragraph 16 of Statement 125, resulting in a 10,666 loss which is reflected as Other financial expense in the accompanying Consolidated Statements of Operations. No conversion of any bond has been exercised since its issuance. The aggregate amount of the outstanding bonds at December 31, 2003 amounted to 473,602 comprised of 455,715 in aggregate principal and 17,887 in interests.
On December 22, 2000, the Company issued 32,817,012 unsecured convertible and/or exchangeable bonds, each with a nominal value of 21.60, for an aggregate principal amount at issuance of 708,848.  The Company received net proceeds of 694,859 from this issuance.  The coupon rate of the bonds is 1.0% per annum, payable annually in arrears on January 1 of each year, beginning January 1, 2002, and the gross yield to maturity is 4.25% per annum, assuming no conversion or redemption occurs prior to maturity.  The implicit interest rate, including issue costs, is 4.67% per annum.  The bonds have a maturity date of January 1, 2006. Each bond currently is exercisable at any time at the option of the holder for 1.035 Havas shares, subject to specified anti-dilution adjustments, which exercise may, at the Companys option, be a conversion for newly issued shares, an exchange for treasury shares or a
combination thereof. In accordance with French law, the conversion/exchange ratio has been adjusted from 1 to 1.035 due to the distribution of a portion of paid-in capital in connection with the Companys payment of its annual dividend to shareholders on June 11, 2002 and on June 18, 2003.  The bonds have a redemption value at maturity of 25.44 per bond, or approximately 117.78% of their nominal value. The Company has the option to redeem all, but not less than all, of the outstanding bonds between January 1, 2004 and December 31, 2005, at an early redemption price that guarantees the holder of the bond a yield to maturity equivalent to the rate the holder would have obtained upon redemption at maturity, if the product of (1) the conversion/exchange ratio and (2) the arithmetic mean of the closing prices of Havas shares on Euronext Paris during 20 consecutive trading days chosen by the Company from among the 40-trading day period preceding publication of a notice of early
redemption, exceeds 115% of the early redemption price. The Company also has the option to redeem all, but not less than all, of the bonds at their nominal value plus accrued interest at any time when less than 10% of the bonds issued remain outstanding. In connection with this issuance, the Company agreed not to issue bonds with any preference over these bonds, or reduce its share capital or alter the way it allocates profits. The aggregate amount of the outstanding bonds at December 31, 2003 amounted to 629,365 comprised of 565,580 in aggregate principal, 58,130 in accrued premium through that date and 5,655 in interests.  Assuming no conversion, redemption or repurchase, an additional 42,418 of premium would accrue on those bonds through maturity. During the last quarter of 2002, the Company repurchased 1,342,046 of its convertible and/or exchangeable bonds issued in December 2000 resulting in a gain of 4,771 which is reflected as other financial income in the
accompanying Consolidated Statements of Operations. During the first quarter of 2003, the Company repurchased 5,290,000 of its convertible bonds issued in December 2000 resulting in a gain of 12,231 which is reflected as Other financial income.
On February 12, 1999, the Company issued 1,223,405 unsecured convertible and/or exchangeable bonds due January 1, 2004, each with a nominal value of 188, for an aggregate principal amount at issuance of 230,000. The Company received net proceeds of 225,336 from this issuance. The coupon rate of the bonds is 1.0% per annum, payable annually in arrears on January 1 of each year, and the gross yield to maturity is 1.75% per annum, assuming no conversion or redemption occurs prior to maturity. The implicit interest rate, including issue costs, is 2.18% per annum. The bonds have a maturity date of January 1, 2004. At December 31, 2003, the aggregate amount of the outstanding bonds amounted to 89,434, comprised of 85,344 in aggregate principal, 3,237 in accrued premium through that date and 853 in interest. The redemption of bonds was made on January 1, 2004.
F-19
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Long-Term Borrowings
Long-term borrowings consist of the following:

As
        of December 31,2003
    
    2002U.S.
        dollar denominated bank loans, at variable rates ranging from 1.36% to1.49%,
        due 2004 to 2006 (1.6% to 2.1%, due 2004 to 2006 as of 2002)
    
    27,779
    
    47,727Convertible
        bond of a subsidiary (Havas UK plc) with a fixed rate of 7.6%
    
    56,754
    
    61,491Less:
        Forward sale agreement on Havas UK shares
    
    (45,992
    )
    (46,743
    )Otherweighted
        average interest of 6.6% (6.1% as of 2002)
    
    1,878
    
    2,455Total
    
    40,419
    
    64,930Less:
        Current maturities of long-term borrowings
    
    (31,388
    )
    (18,100
    )Long-term
        borrowings
    
    9,031
    
    46,830Future minimum payments as of December 31, 2003, on long-term borrowings, excluding capital leases, are as follows:

Year

20032004

31,3882005

4,3912006

4,0842007

1162008

92Thereafter

34840,419Less: Current maturities

(31,388
)9,031Convertible bond of Havas UK plc
On January 19, 2000, Havas UK plc, formerly Evelink plc, an indirect, wholly owned subsidiary of the Company, issued a 56,754 convertible bond due July 19, 2007 to Banque Nationale de Paris S.A. (BNP). This convertible bond bears interest at the rate of 7.6% per annum and is convertible, at the option of the holder, at any time from January 19, 2000 through January 19, 2007 into 117,131 ordinary shares of Havas UK plc, subject to specified anti-dilution adjustments. In addition, Havas UK plc issued a warrant to BNP authorizing the holder of the warrant, upon payment of £40 million (56,754) to purchase from Havas UK plc 117,131 ordinary shares of Havas UK plc on January 19, 2007, subject to specified anti-dilution adjustments. The right to purchase such ordinary shares under the warrant will lapse in the event that the conversion right of this convertible bond is exercised.
F-20
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
On the same date, Havas International S.A., a wholly owned subsidiary of the Company, and BNP, as the initial holder of the bond, entered into a forward sale agreement under which Havas International S.A. paid 45,992 to BNP for the future purchase of the same number of Havas UK plc ordinary shares as issuable on conversion of this convertible bond.
In the absence of a right of setoff, this convertible bond and the investment of 45,992 resulting from the forward sale agreement are presented separately in the table above. The interest expense related to this convertible bond is determined using the net proceeds (10,762) as a basis for applying the effective rate of 7.605%.  Such net proceeds are presented under proceeds from borrowing in the Consolidated Statements of Cash Flow.
CIRCUS agreement
In 1999, a U.S. subsidiary of the Company borrowed $30 million (23,753) from an international bank (the Bank). In connection with this loan, the Company agreed with the Bank to make a deposit in the same amount to allow the subsidiary to borrow the funds. The terms of the agreement provide that the deposit and debt mature simultaneously in six equal annual installments from June 4, 2001 to June 5, 2006, and the debt and deposit have therefore been reduced to $15 million (11,876) at December 31, 2003. The deposit has been classified as restricted deposits under Other assets (11,876 as converted at the spot rate at the closing date for the loan) in the balance sheet as of December 31, 2003 (19,071 as of December 31, 2002). The debt bears interest at LIBOR plus a margin, and interest on the deposit is at LIBOR less a margin. The Company entered into a combined
interest and currency swap arrangement, referred to as CIRCUS, with the Bank with the effect of transforming this $15 million deposit into a euro deposit of 14,315 at EURIBOR less a margin. The maturities of the CIRCUS are identical to those of the deposit both in terms of dates, currency and amounts. As of December 31, 2003, an exchange gain on the CIRCUS was recorded in the Consolidated Statements of Operations under exchange rate gain for 10 (a gain of 51 for 2002). As of December 31, 2003, an exchange loss on the deposit was recorded in the consolidated statements of operations under exchange rate loss for 2,439 (a loss of 15 in 2002).
Short-Term Borrowings
Included in short-term borrowings in the amounts of 52,943 and 53,742 at December 31, 2003 and 2002, respectively, are primarily borrowings by subsidiaries under the terms of various short-term borrowing arrangements. The weighted-average interest rates on these short-term borrowings outstanding at December 31, 2003 and 2002 were 2.6% and 2.9%, respectively. Also included in short-term borrowings in the amounts of 46,214 and 67,058 at December 31, 2003 and 2002, respectively, are overdraft amounts resulting from various lines of credit of subsidiaries. These overdraft amounts bear interest at the prevailing market rates in the countries of the subsidiaries. In the aggregate, the Company had unused lines of credit available under short term and overdraft borrowing arrangements of 159,338 and 193,091 at December 31, 2003 and 2002, respectively, carrying interest at prevailing market rates.
Covenants
The Company and some of its subsidiaries are subject to restrictive covenants under borrowings at the subsidiary level. Covenants on Company debt include total borrowing levels in some countries and minimum shareholders consolidated equity, among others. In addition, the Company guarantees significant loans of its subsidiaries.
As of December 31, 2003, the Company was not in compliance with financial covenants under two credit facilities, for an aggregate principal amount of 22,638. However, the credit facility banks waived any default with respect to the noncompliance.  As of December 31, 2003, the Company and its subsidiaries were in compliance with all other financial covenants related to the borrowings described above.
As of December 31, 2002, the Company was not in compliance with financial covenants under two credit facilities, for an aggregate principal amount of 33,820. However, the credit facility banks waived any default with respect to the noncompliance.  As of December 31, 2002, the Company and its subsidiaries were in compliance with all other financial covenants related to the borrowings described above.
F-21
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
11.COMPENSATION TO FORMER SHAREHOLDERS OF ACQUIRED BUSINESSES
In connection with the acquisition of private companies, the Company typically enters into agreements with some or all of the selling shareholders that provide for the payment of contingent consideration based upon a multiple of future earnings of the acquired company. In certain cases, their right to such contingent consideration is conditioned on the continued employment of such selling shareholders (an Earn-Out) and are partially or totally forfeited if they leave the acquired company before certain future dates. EITF consensus on issue No. 95-8 requires that in those circumstances the amount paid in excess of what the selling shareholders are entitled to if they left the acquired company at the date of the relevant agreement be recorded as compensation expense. The amounts recorded in each of the periods presented have been determined on the basis of the earnings formula upon
which the contingent consideration is based and allocated on a straight-line basis over the period the employees are required to stay with the acquired company to obtain the maximum amount of the Earn-Out. Estimates used in connection with such computations are based upon the latest available earnings data and the related formulas and are revised every year.
In the case of partial acquisitions, the purchase contracts generally include put and call provisions to buy the remainder of the equity of the acquired company at some future date (the Buy-Out). The purchase price for the Buy-Out is generally based upon a multiple of future earnings (the Formula) and in certain cases is conditioned on the continued employment of the related shareholders (the Minority Shareholders). The Company accounts for these arrangements as restricted stock plans. The Formula is applied at the end of every period on the basis of latest available earnings data and any amount in excess of what the Minority Shareholders would get if they left the acquired company at the date of the purchase contract is treated as compensation expense, which is allocated to every period presented under a method similar to the one used
for Earn-Out provisions. The share in the earnings of the related subsidiaries attributable to the Minority Shareholders, included in such amounts, is presented as Minority interests.
Compensation expense related to the arrangements described above was:

2003

2002

2001Earn-out

1,839

6,008

16,907Buy-out

704

(15
)
2,907Recorded as compensation to shareholders of acquired businesses

2,543

5,993

19,814Recorded as minority interests

1,101

2,344

2,103As of December 31, 2003, the contingent payments expected to be made based upon the assumptions used for the determination of compensation expense amounted to approximately 7,076 (18,277 as of 2002), of which 6,004 (16,530 as of 2002) were accrued as of the same date.
For tax purposes, the above expenses are generally included as part of the purchase price of the acquired company. The tax effect of this excess of the tax basis over the financial reporting basis is not recognized until the disposition of such acquired company.
F-22
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
12.EMPLOYEE STOCK OPTION PLANS
Havas share options
The following table sets forth information with respect to the status of outstanding options granted under Havass stock option plans for the years ended December 31, 2003, 2002 and 2001 (except options issued in connection with the acquisitions of the SNC common stock and the Circle.com common stock of Snyder Communications which are disclosed separately below).

Year
        ended December 31,2003
    
    2002
    
    2001Shares
    
    WeightedAverage Price
    
    Shares
    
    Weighted
        SharesAverage Price
    
    Shares
    
    WeightedAverage Price(in
        )
    
    
    
    (in
        )
    
    
    
    (in
        )Outstanding
        at the beginning of the year
    
    28,965,694
    
    11.09
    
    24,340,121
    
    11.87
    
    17,118,080
    
    10.15Options
        granted
    
    4,525,250
    
    3.35
    
    6,131,285
    
    8.58
    
    7,814,662
    
    15.22Options
        exercised
    
    (970,940
    )
    4.09
    
    (880,949
    )
    3.57
    
    (480,805
    )
    4.15Options
        forfeited
    
    (2,169,925
    )
    12.12
    
    (1,282,346
    )
    13.40
    
    (111,816
    )
    15.61Equity
        restructuring adjustment (1)
    
    384,869
    
    
    
    657,583
    
    
    
    
    
    Outstanding
        at the end of the year
    
    30,734,948
    
    9.96
    
    28,965,694
    
    11.09
    
    24,340,121
    
    11.87Exercisable
        at the end of the year
    
    20,393,481
    
    11.22
    
    16,824,612
    
    10.44
    
    7,547,776
    
    11.30Weighted-average
        fair value of options Granted during the year
    
    
    
    0.75
    
    
    
    2.02
    
    
    
    5.60(1)In accordance with French law, the number of options and the exercise price have been adjusted due to the distribution of a portion of paid-in capital in connection with the Companys payment of its annual dividend to shareholders on June 18, 2003 and June 11, 2002.The following table summarizes information with respect to fixed stock options outstanding under the Companys stock option plans at December 31, 2003:

ExercisePrices
    
    Number
        Outstandingat December 31, 2003
    
    Weighted-AverageRemaining Contractual Life
    
    Number
        Exercisableat December 31, 2003(in
        )
    
    
    
    (in
        years)4.45
    
    6,217,896
    
    0.5
    
    6,217,8966.13
    
    1,246,498
    
    1
    
    1,246,4987.37
    
    728,602
    
    2.1
    
    728,6028.79
    
    289,877
    
    2.5
    
    289,87710.49
    
    206,866
    
    2.7
    
    206,86615.17
    
    849,698
    
    2.9
    
    849,69826.72
    
    919,078
    
    3.2
    
    919,07824.17
    
    413,737
    
    3.4
    
    413,73717.16
    
    3,126,540
    
    3.8
    
    3,126,54014.98
    
    3,781,978
    
    4.2
    
    2,588,41314.35
    
    2,976,031
    
    4.4
    
    1,983,8118.31
    
    5,442,106
    
    5.1
    
    1,814,3624.79
    
    24,303
    
    5.9
    
    8,1032.67
    
    2,696,738
    
    7.1
    
    4.03
    
    315,000
    
    9.5
    
    4.38
    
    1,500,000
    
    7.8
    
    30,734,948
    
    
    
    20,393,481F-23
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
As a result of the Companys acquisition of all of the outstanding shares of SNC common stock of Snyder Communications on September 26, 2000, all SNC options outstanding on that date were converted into options to purchase Havas shares. Each SNC option was converted into an option to acquire 1.371 Havas shares, which was the same ratio used to exchange SNC common stock for the Companys ADSs.
As a result of the Companys acquisition of all of the outstanding shares of Circle.com common stock of Snyder Communications on June 26, 2001, all Circle.com options outstanding on that date were converted into options to purchase Havas shares. Each Circle.com option was converted into an option to acquire 0.0937 Havas shares, which was the same ratio used to exchange Circle.com common stock for the Companys ADSs.
A summary of the Companys option activity with respect to the converted SNC options for 2003 and 2002 is set forth below:
Converted SNC stock options

OptionsOutstanding2003

WeightedAverageExercisePrice2003

WeightedAverageExercisePrice 2003

OptionsOutstanding2002

WeightedAverageExercisePrice2002

WeightedAverageExercisePrice2002(In 000s)

(In USD)

(InEuro)(1)

(In 000s)

(In USD)

(InEuro)(1)Outstanding at beginning of year

5,629

11.79

9.36

6,040

11.77

11.23Exercised

(5
)
3.01

2.39

(18
)
2.40

2.29Forfeited or expired

(2,432
)
12.09

9.60

(393
)
11.78

11.24Outstanding at end of year

3,192

11.58

9.19

5,629

11.79

11.24Exercisable at end of year

3,187

11.58

9.19

5,131

11.95

11.40(1)Translation of amounts from USD into Euro has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.2597 on December 31, 2003.(2)Translation of amounts from USD into Euro as been made solely for the convenience of the reader at the noon buying rate of 1 = $1.0485 on December 31, 2002.The converted SNC options outstanding at December 31, 2003 have exercise prices that range from $0.96 to $13.94 (at December 31, 2002, the range was from $0.96 to $17.59).
A summary of the Companys option activity with respect to the converted Circle.com options for 2003 and 2002 is set forth below:
Converted Circle.com stock options

OptionsOutstanding2003
    
    WeightedAverageExercisePrice2003
    
    WeightedAverageExercisePrice2003
    
    OptionsOutstanding2002
    
    WeightedAverageExercisePrice2002
    
    WeightedAverageExercisePrice2002(In
        000s)
    
    (In
        USD)
    
    (InEuro)(1)
    
    (In
        000s)
    
    (InUSD)
    
    (InEuro)(1)Outstanding
        at beginning of year
    
    172
    
    195.59
    
    155.27
    
    250
    
    182.39
    
    173.95Exercised
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
        or expired
    
    (66
    )
    217.76
    
    172.87
    
    (78
    )
    153.24
    
    146.15Outstanding
        at end of year
    
    106
    
    181.92
    
    144.42
    
    172
    
    195.59
    
    186.54Exercisable
        at end of year
    
    105
    
    184.35
    
    146.34
    
    149
    
    204.90
    
    195.42(1)Translation of amounts from USD into Euro has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.2597 on December 31, 2003.(2)Translation of amounts from USD into Euro has been made solely for the convenience of the reader at the noon buying rate of 1 = $1.0485 on December 31, 2002.F-24
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
The converted Circle.com options outstanding at December 31, 2003 had exercise prices that ranged from $0.08 to $272.43 (at December 31, 2002, the range was from $0.08 to $337.88).
The compensation expense related to the Companys stock-based compensation is presented under Stock-based compensation and amounted to 0, 11,227 and 16,316 in 2003, 2002 and 2001, respectively.
In addition, certain subsidiaries have granted stock options to some of their employees with respect to their own stock. The strike price is usually based on a multiple of current earnings of the subsidiary at the award date (the Multiple). Such options are generally exercisable five to seven years after the award date and require continuing employment. The parent companies of such subsidiaries have the option to buy back the shares if and when acquired by the employees and the employees have the option to put these shares to such parent companies. The buyback price is generally based upon the Multiple applied to the earnings level of the subsidiary when the option is exercised. The employees are required to put the shares to such parent companies when they leave the subsidiary. Under U.S. GAAP, such plans are performance plans and variable plan accounting is required. Accordingly,
the Company makes an interim measurement of compensation on the basis of the formula price at the end of each period based upon the most recent available earnings data and allocates such costs to expenses over the period from award date to exercise date. As of December 31, 2003, 2002 and 2001, accrued compensation related to such plans amounted to 3,138, 4,963 and 6,146, respectively. The related compensation recorded for the years ended December 31, 2003, 2002 and 2001 amounted to 5,420, 1,722 and 2,342, respectively, and is presented under Stock-based compensation.
13.PENSIONS AND OTHER BENEFITS
In accordance with the laws and practices of each country, the Company participates in employee benefits pension plans offering death and disability, retirement and special termination benefits. Those plans provide benefits of various types from flat currency amounts per year of service to final pay plans integrated with social security and multi-employer plans.
For defined contribution plans, expenses correspond to the contributions paid. The amount of contributions paid in 2003 is 17,076. For defined benefit pension plans, accruals and prepaid expenses are determined using the projected unit credit method.
F-25
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Defined benefit pension plans in France are unfunded. In 2003, the measurement date is as of December 31, 2003.

Pension Benefits

Other Benefits2003

2002

2003

2002Change in benefit obligationBenefit obligation at beginning of the year

(94,503
)
(81,114
)
(11,984
)
(9,497
)Service cost

(4,323
)
(5,052
)
(1,037
)
(688
)Interest cost

(4,896
)
(4,871
)
(607
)
(522
)Plan participants contributions

(423
)
(1,371
)


Amendments



(346
)
(9
)
(235
)Acquisitions/disposals

221

(1,512
)
10

131Curtailments / settlements

312





Actuarial gain (loss)

511

(9,135
)
519

(1,356
)Benefits paid

4,171

3,357

192

183Others (foreign currency translation)

6,238

5,541



Benefit obligation at end of the year

(92,692
)
(94,503
)
(12,916
)
(11,984
)Accumulated Benefit obligation ( French companies only)

(13 523
)
(13 039
)


Change in plan assetsFair value of plan assets at beginning of the year

52,128

57,937



Actual return on plan assets

3,236

3,998



Company contributions

1,579

2,730



Plan participants contributions

423

1,371



Acquisitions/disposals



2,708



Curtailments /settlements

(14
)




Benefits paid

(2,180
)
(1,614
)


Actuarial gain (loss)

3,442

(10,681
)


Others (foreign currency translation)

(4,375
)
(4,321
)


Fair value of plan assets at end of the year

54,239

52,128



Funded status of the plan

(38,453
)
(42,375
)
(12,916
)
(11,984
)Unrecognized actuarial loss

20,033

26,874

398

917Unrecognized actuarial prior service cost

199

276

228

235Unrecognized actuarial transition obligation







Accrued benefit cost

(18,221
)
(15,225
)
(12,290
)
(10,832
)F-26
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Actuarial assumptions were as follows:

Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Discount rate

5.7%

5.7%

5.5%

5.1%

5.1%

5.5%Rate of compensation increase

3.0%

3.0%

3.0%

na

na

naExpected return on plan assets

6.6%

6.6%

6.0%

na

na

naThe expected return of plan assets rate is based on the expected return of assets of similar duration in the domestic market of the plan.

Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Annual costService cost

4,323

5,052

3,851

1,037

688

372Expected interest cost

4,896

4,871

4,223

607

522

254Expected return on plan assets

(3,236
)
(3,998
)
(3,711
)




Amortization of unrecognized prior service cost

33

40



16



Amortization of actuarial net loss (gain)

1,244

797

(11
)




(354
)Amortization of net transition obligation











Curtailments/settlements

(114
)








Net periodic benefit cost

7,146

6,762

4,352

1,660

1,210

272Health care costs are assumed to increase (inflation excluded) by 3.8% in 2004, 3.3% in 2005 and 2.8% in 2006, decreasing gradually to 2.3% (ultimate).
Amounts recognized in the consolidated balance sheet were as follows:

Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Accrued benefit liability

(34,062
)
(26,492
)
(16,080
)
(12,289
)
(10,832
)
(9,936
)Prepaid benefit cost

2,354

2,318

2,684





Net amount accrued for

(31,708
)
(24,174
)
(13,396
)
(12,289
)
(10,832
)
(9,936
)Accumulated other comprehensive income

13,487

8,949







Net amount recognized

(18,221
)
(15,225
)
(13,396
)
(12,289
)
(10,832
)
(9,936
)The net accruals accounted for as of December 31, 2003, 2002 and 2001 in the accompanying Consolidated Balance Sheets can be compared with balances determined under U.S. GAAP as follows:

Pension Benefits

Other Benefits2003

2002

2001

2003

2002

2001Net amount accrued under U.S. GAAP

(31,708
)
(24,174
)
(13,396
)
(12,289
)
(10,832
)
(9,936
)Minimum liability adjustment

13,487

8,949

Net amount accrued for in consolidated financial statements

(18,221
)
(15,225
)
(13,396
)Accrued

(20,575
)
(17,543
)
(16,080
)Prepaid

2,354

2,318

2,684F-27

HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Regarding the other benefits plans, a one-percentage-point change in assumed health care cost trend rates would have the following effects:

One-Percentage-Point 
        Increase
    
    One-Percentage-PointDecrease2003
    
    2002
    
    2003
    
    2002Effect
        on total of service and interest cost components
    
    (611
    )
    (608
    )
    451
    
    447Effect
        on the post-retirement benefit obligation
    
    (3,926
    )
    (3,740
    )
    2,985
    
    2,83014.INCOME TAX
As of December 31, 2003 and 2002, the deferred tax assets and liabilities in the balance sheet were as follows:

As of December 31,2003

2002Deferred tax assetCurrent

67,143

75,852Deferred tax assetNoncurrent

16,078

119,440Deferred tax liabilityCurrent

(19,387
)
(14,763
)Deferred tax liabilityNoncurrent

(74,675
)
(100,633
)Net deferred tax asset (liability)

(10,841
)
79,896The Companys provision for income tax includes the following components:

As
        of December 31,2003
    
    2002
    
    2001CurrentFrance
    
    3,085
    
    11,419
    
    16,213State
    
    
    
    1,765
    
    335Foreign
    
    11,230
    
    31,011
    
    22,971Total
    
    14,315
    
    44,195
    
    39,519DeferredFrance
    
    34,626
    
    (6,101
    )
    (5,699
    )State
    
    (2,192
    )
    2,417
    
    317Foreign
    
    60,900
    
    (1,553
    )
    (38,520
    )Total
    
    93,334
    
    (5,237
    )
    (43,902
    )Provision
        for income tax
    
    107,649
    
    38,958
    
    (4,383
    )F-28
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
The provision for income tax differs from the amount computed by applying the French income tax rate as a result of the following:

Year ended December 31,2003

2002

2001Net loss from continuing operations

(324,943
)
(1,433,165
)
(175,667
)Minority interests

5,495

14,802

(4,272
)Provision for income tax

107,649

38,958

(4,383
)Equity in (earnings) losses of investees

(710
)
9

(5,684
)Income from operations before income tax (1)

(212,509
)
(1,379,396
)
(190,006
)Provision for income tax using rates of 35.43%, 35.43% and 36% in 2003, 2002 and 2001, respectively

(75,292
)
(488,720
)
(68,130
)Stock-based compensation

1,742

4,588

6,717Compensation to former shareholders of acquired businesses

901

2,123

7,133Non deductible goodwill amortization and impairment

19,622

524,607

34,736Loss on intercompany sale of consolidated company



(445,256
)
Other permanent differences

3,488

36,658

3,667Difference between French and foreign rates

(6,979
)
(5,958
)
7,157Change in valuation allowance

164,167

410,916

4,337Provision for (benefit from) income tax

107,649

38,958

(4,383
)(1)Of which (77,809), 15,189 and (2,438) originated from French companies for 2003, 2002 and 2001, respectively.Temporary differences that give rise to deferred tax assets and liabilities consist of the following:

Year endedDecember 31,2003

2002Tax effect on tax loss carry forwardLong-term capital losses

19,412

17,485Ordinary tax loss carry forward

562,633

540,162Total effect on tax loss carry forward

582,045

557,647Temporary differencesAccrued vacation paid

734

402Long-term incentive plan

2,403

5,726Accrued pension costs

17,382

12,595Amortization

27,922

37,651Accrued expenses and others

73,884

51,082Total temporary differences

122,325

107,456Deferred tax assets, gross

704,370

665,103Tax effect of temporary differences related to:Deductible goodwill amortization

7,381

6,142Intangibles

77,358

106,742Other

9,323

2,512Deferred tax liabilities

94,062

115,396Less: valuation allowances

(621,149
)
(469,811
)Net deferred tax asset (liability)

(10,841
)
79,896F-29
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
SFAS 109 Accounting for Income Taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. All available positive and negative evidence needs to be considered, including Companys performance, the market environment in which the Company operates, the utilization of past tax loss carry forwards, length of carry back and carry forward periods, existing contracts that will result in future profits. It further states that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. Therefore, cumulative losses weigh much more heavily in the overall assessment. The Company determined that positive evidences were not sufficient to overcome such negative evidence and concluded that it was therefore appropriate to
establish a full valuation allowance for its deferred tax assets related to the Companys US and French tax groups. Nevertheless, management continues to believe that business will achieve profitability in future years, and that the Company will be able to utilize these tax assets to minimize the US and French taxes for the next years.
The Companys share of undistributed earnings of foreign subsidiaries that could be subject to additional income tax if remitted was approximately 203,842 and 286,836 as of December 31, 2003 and 2002, respectively. No provision has been recorded for the French and foreign taxes that could result from the remittance of such undistributed earnings since the earnings are permanently reinvested outside of France and it is not practicable to estimate the amount of such taxes.
As of December 31, 2003, the expiration dates of tax loss carry forwards are as follows:

As ofDecember 31,2003December 31, 2004

24,295December 31, 2005

8,372December 31, 2006

5,205December 31, 2007

11,318December 31, 2008

14,336Thereafter

1,657,2141,720,74015.RELATED PARTY TRANSACTIONS
Transactions involving directors, officers and shareholders of Havas
Purchase of Havas Trademark from Vivendi Universal Publishing.On March 31, 2002, the Company purchased all rights held by Vivendi Universal Publishing to the Havas trademark, except derivative names of Havas, for 4,574. Before that time, the Company licensed the use of the name Havas Advertising from Vivendi Universal Publishing under annual license agreements.
Transactions Involving the Rodés Family. Media Planning Group and its subsidiaries have entered into the following transactions with members of the families of Fernando Rodés Vilà, one of the Companys directors and executive officers and the chief executive officer of Media Planning Group, and Leopoldo Rodés Castañe, one of the Companys directors and the father of Fernando Rodés Vilà, and or entities controlled by them.
In October 1991, the predecessor to Media Planning Group entered into an agreement with Gestora de Viviendas S.A. under which Gestora de Viviendas provides client development services to Media Planning Group and its subsidiaries in exchange for commissions on new clients developed by it. Under this agreement, Media Planning Group paid Gestora de Viviendas commissions of 360, excluding taxes, for these services provided in 2003 (347 in 2002). Fernando Rodés Vilà and Leopoldo Rodés Castañe, together with other members of their families, are controlling shareholders of Gestora de Viviendas.
F-30
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Gestora de Viviendas is a major shareholder of Vigilancia y Sistemas de Seguridad, S.A., a company that provides security services. Vigilancia y Sistemas de Seguridad provides security systems to Media Planning Group, for which Media Planning Group paid 440, excluding taxes, in 2003.
Media Planning Group receives legal services from the Spanish law firm of Rodés & Sala Abogados, S.L. pursuant to an agreement entered into in September 2001; Media Planning Group pays an annual fee of 120 to Rodés & Sala for general legal services. In addition, Rodés & Sala was paid a total of 211, excluding taxes, for legal services provided to Media Planning Group in 2003 (194 in 2002). Gonzalo Rodés Vilà, the brother of Fernando Rodés Vilà and the son of Leopoldo Rodés Castañe, is a partner in Rodés & Sala. In addition, Gonzalo Rodés Vilà serves as secretary of the board of directors of Media Planning Group. Gonzalo Rodés Vilà was paid 48 for his services as secretary of the board in 2003 (28 in 2002).
Intermedia Management Services, A.G., an indirect, wholly owned subsidiary of Media Planning Group, renders services to various subsidiaries of Media Planning Group by hiring as consultants various officers of Media Planning Group on behalf of such subsidiaries. This arrangement facilitates internal accounting and control of the services rendered and helps to minimize transfer pricing issues where services are rendered to subsidiaries outside of Spain. The consulting fees paid to officers of Media Planning Group under this arrangement are part of, and not in addition to, their annual compensation packages. Intermedia Management Services has entered into a consulting services agreement with Fernando Rodés Vilà. Under this agreement, Fernando Rodés Vilà provides consulting services to Intermedia Management Services and, through Intermedia Management Services, to various subsidiaries of
Media Planning Group. Fernando Rodés Vilà is paid an hourly fee of 600 in cash for his consulting services, and may also be entitled to an additional fee if Fernando Rodés Vilà and Intermedia Management Services so agree. Fernando Rodés Vilà was paid 536 for his consulting services provided in 2002. This arrangement was terminated on December 31, 2002.
Transactions Involving Richard Colker. In 2003, the Company paid $60,000 (53) to Colker, Gelardin & Co. for investment banking advisory services performed during 2003 related to the Companys specialized agencies ($60,000 in 2002). Richard Colker, one of the Companys directors, is the Managing Partner of Colker, Gelardin & Co.
Transactions Involving Thierry Meyer. Thierry Meyer, one of the Companys directors, also served as a director of one of our subsidiaries in the U.K. until 2003. The Company paid Mr. Meyer £40,000 (64) for his services as a director of the subsidiary provided in 2002.
16.NET LOSS PER SHARE AS IN CONSOLIDATED STATEMENTS OF OPERATIONS
Basic net loss per share is computed on the basis of the weighted-average number of Havas shares issued after deducting the weighted average number of treasury shares.
Diluted net loss per share takes into account share equivalents having a dilutive effect. Potential shares include: convertible bonds (Note 10), stock options granted to employees (Note 12), converted stock options granted by Snyder Communications for SNC and Circle.com shares (Note 12) and warrants to subscribe for Havas shares. On May 13, 1998, the Company issued to its shareholders, for no consideration, an aggregate of 6,695,621 warrants that matured on May 13, 2001. A holder of 20 warrants had the right to subscribe for 20 Havas shares for 182.94. No warrants were outstanding as of December 31, 2001. Net income is adjusted for after tax interest expense related to the convertible bonds. The dilutive effect of stock options and warrants is calculated using the treasury stock method.
F-31

HAVAS
  AND SUBSIDIARIES
NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise
  indicated)
The following tables present a reconciliation of the basic net loss, basic, per
  share and the net loss, diluted, per share for each of the years ended December
  31:

Net
        income
    
    Number
        of shares
    
    Per
        shareamount2003Net
        loss per share
    
    (423,025
    )
    297,009,275
    
    (1.42
    )Stock
        options Havas (1)
    
    
    
    
    
    Stock
        options SNC (1)
    
    
    
    
    
    Convertible
        bonds (1)
    
    
    
    
    
    Diluted
        net loss per share
    
    (423,025
    )
    297,009,275
    
    (1.42
    )2002Net
        loss per share
    
    (1,433,118
    )
    294,757,744
    
    (4.86
    )Stock
        options Havas (1)
    
    
    
    
    
    Stock
        options SNC (1)
    
    
    
    
    
    Convertible
        bonds (1)
    
    
    
    
    
    Diluted
        net loss per share
    
    (1,433,118
    )
    294,757,744
    
    (4.86
    )2001Basic
        net loss per share
    
    (174,909
    )
    281,640,364
    
    (0.62
    )Stock
        options Havas (1)
    
    
    
    
    
    Stock
        options SNC (1)
    
    
    
    
    
    Warrants
        (1)
    
    
    
    
    
    Convertible
        bonds (1)
    
    
    
    
    
    Diluted
        net loss per share
    
    (174,909
    )
    281,640,364
    
    (0.62
    )(1) As these items are anti-dilutive, they are not included in the calculation.
17.LEASES
The Company leases certain premises and equipment under both capital and operating leases. The following is a schedule of future minimum lease payments for capital and operating leases in effect at December 31, 2003:

Year Ending
        December 31,
    
    CapitalLeases
    
    OperatingLeases2004
    
    2,156
    
    91,4712005
    
    647
    
    87,1082006
    
    380
    
    83,1972007
    
    274
    
    76,1202008
    
    678
    
    72,468Thereafter
    
    
    
    242,641Total
        minimum lease payments
    
    4,135
    
    653,005Less:
        amount representing interest
    
    (220
    )Total
        obligation under capital leases
    
    3,915Less:
        current portion
    
    (2,038
    )Long-term
        portion
    
    1,877Net rental expenses for all operating leases were 106,654, 135,094 and 116,594 in 2003, 2002 and 2001, respectively.
F-32
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
18.SEGMENT DATA
The Companys revenues and operating results are derived from three operating divisions utilizing independent brands plus a number of specialized agencies until 2003 strategic reorganization described in Note 8. This organization was mainly designed in order that the Company could provide advertising and communications services to clients with competing products and services and to permit the expansion of certain specialty advertising and communications services. These three operating divisions have substantial similarities in the nature of services provided, the delivery process for rendering their services, the customers they serve and their economics. The Company aggregates its operating segments into one reportable segment.
Geographical information required by SFAS 131, Disclosure about Segment of an Enterprise and Related Information, for each of the years ended December 31, is as follows:

France
    
    UnitedStates
    
    UnitedKingdom
    
    Rest
        ofEurope
    
    Other
    
    Total2003Net
        revenues
    
    260,225
    
    612,193
    
    243,122
    
    254,127
    
    155,435
    
    1,525,102Property
        and equipment, net
    
    30,637
    
    58,659
    
    23,741
    
    25,998
    
    9,902
    
    148,937Goodwill,
        net
    
    217,069
    
    405,789
    
    367,038
    
    575,728
    
    79,684
    
    1,645,308Other
        intangible assets, net
    
    15,574
    
    73,048
    
    5,119
    
    141,701
    
    621
    
    236,063Equity
        investments
    
    (3
    )
    
    
    1,932
    
    75
    
    729
    
    2,7332002Net
        revenues
    
    287,107
    
    756,088
    
    330,029
    
    261,868
    
    176,077
    
    1,811,169Property
        and equipment, net
    
    42,226
    
    89,811
    
    41,433
    
    29,945
    
    11,223
    
    214,638Goodwill,
        net
    
    221,916
    
    510,128
    
    502,447
    
    596,787
    
    60,381
    
    1,891,659Other
        intangible assets, net
    
    17,436
    
    106,480
    
    35,783
    
    155,718
    
    1,837
    
    317,254Equity
        investment
    
    (3
    )
    
    
    1,100
    
    120
    
    (28
    )
    1,1892001Net
        revenues
    
    331,361
    
    869,869
    
    377,296
    
    172,716
    
    204,288
    
    1,955,530Net revenues and long-lived assets are attributed to countries based on the location of the applicable operating unit.
19.FINANCIAL INSTRUMENTS AND DERIVATIVE INSTRUMENTS
Fair value of financial instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Cash and cash equivalents and short-term borrowings
The carrying value of cash and cash equivalents and short-term borrowings approximate fair value because of the relatively short maturity of these instruments.
Restricted deposit
Restricted deposit carries a variable interest rate and its fair value approximates its carrying amount.
F-33
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Long-term borrowings
The fair value of long-term borrowings is substantially the same as its carrying amount in the financial statements because the majority of the Companys long-term borrowings is at variable rates and approximates fair value.
Convertible and/or exchangeable bonds
The fair value of convertible and/or exchangeable bonds was determined by reference to quotations available in markets where the bonds were traded estimated using quoted market prices and amounts.
Combined interest and currency swap (CIRCUS)
The estimation of the CIRCUS fair value involves splitting the swap into its borrowing and lending elements and discounting the future expected currency cash flows relating to each element. The fair value of the CIRCUS was calculated by third party banks. Please refer to Note 10.
Interest rate swaps and caps
The fair value of interest rate swaps and caps has been estimated by third-party banks.
Forward contracts
Due to the short maturities of forward exchange contracts, the fair value of the contracts were determined to be the difference between the contract rate and the market forward rate multiplied by the foreign currency amount.
The following table presents the carrying amounts and estimated fair values of the Companys financial instruments as of December 31, 2003 and 2002. Amounts in parentheses represent liabilities.

2003
    
2002CarryingAmount
    
FairValue
    
Carryingamount
    
FairValue(In Euro 000s)Cash and cash equivalents
    
660,164
    
660,164
    
745,191
    
745,191Restricted deposit
    
11,876
    
11,876
    
19,071
    
19,071Long-term borrowings including current maturities
    
(40,419
    )
(40,419
    )
(64,930
    )
(64,930
    )Convertible bonds
    
(1,192,401
    )
(1,193,101
    )
(1,263,404
    )
(1,148,401
    )CIRCUS
    
10
    
10
    
46
    
46Interest rate swap (Media Planning Group)
    
(1,208
    )
(1,208
    )
723
    
723Interest rate cap (Media Planning Group)
    
5
    
5
    
8
    
8US dollar denominated forward contracts
    
230
    
230
    
401
    
401UK pounds denominated forward contracts
    
194
    
194
    

    
Canadian dollar denominated forward contracts
    
224
    
224
    
192
    
192Purposes for which derivative financial instruments are held or issued
The Company uses derivative instruments primarily to mitigate interest rate and foreign currency exposures. Currently, the Company hedges intra-group loans denominated in foreign currency with forward contracts. The intra-group loans are recorded at spot rates before being eliminated and the forward contracts are marked-to-market in earnings (natural hedge). As of December 31, 2003, changes in fair value of forward contracts amounted to 55. The intra-group loans resulted in a loss of (332).
F-34
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
The Company hedges a foreign-currency variable rate deposit with a combined interest and currency swap (CIRCUS). This strategy is described in Note 10. The foreign-currency deposit is accounted for at a spot rate and the swap is marked-to-market in earnings. As of December 31, 2003, the CIRCUS impacted earnings by 36 (before tax).
The Company hedges amounts outstanding under itscredit facility with a compound interest rate swap that contains a written option component. Under SFAS 133, such compound swap does not qualify for hedge accounting and is therefore remeasured at market value with a direct impact in earnings. As of December 31, 2003, the Company had no amounts outstanding under this credit facility.
The Company also hedges a variable leasing debt with an interest rate cap for which the Company elected not to apply hedge accounting. Such cap was therefore remeasured at market value with a direct impact in earnings. As of December 31, 2003, the impact of the interest rate swap and cap amounted to 1,934 (before tax).
20.SUPPLEMENTAL CASH FLOWS INFORMATION

Years
        ended December 31,2003
    
    2002
    
    2001(In
        Euro 000s)Cash
        paid for interest
    
    28,023
    
    27,786
    
    22,302Cash
        paid for income taxes
    
    30,305
    
    42,397
    
    45,432Non
        cash items:Equipment
        purchased under capital lease
    
    285
    
    289
    
    971Increase
        in shareholders equity related to conversion of bonds:Convertible
        debt carrying amount net of deferred issue expenses
    
    
    
    
    
    1,878Interest
        expenses
    
    
    
    
    
    1Increase
        in shareholders equity related to:Acquisition
        of minority interests
    
    9,450
    
    8,140
    
    Media
        Planning Group acquisition
    
    
    
    
    
    442,000Circle.com
        acquisition
    
    
    
    
    
    27,869Extinguishment
        of convertible debt (Note 10)
    
    (450,000
    )
    
    
    Issuance
        of convertible debt (Note 10)
    
    455,715
    
    
    
    21.CONTRACTUAL OBLIGATIONS
Commercial commitments
One of the Companys subsidiaries purchases marketing rights from its clients, which are primarily soccer and rugby clubs, for periods from one to seven years, and then re-sells those rights to sponsors. At December 31, 2003, these purchases amounted to 24,162 (30,431 as of December 31, 2002), of which 9,558, 6,143, 5,539 and 2,922 are due in 2004, 2005, 2006 and thereafter, respectively. This subsidiary has received commitments from sponsors of 1,331 as of December 31, 2003 (10,426 as of December 31, 2002).
Estimated obligations under earn-outs / buy-outs
As more fully described in Notes 2.14 and 11, the Company has entered into contingent consideration arrangements in connection with certain business combinations. At December 31, 2003 and 2002, the related total commitment is estimated at 155,813 and 212,464, respectively, of which 6,004 and 16,530 were accrued at December 31, 2003 and 2002, respectively. Minority interest related to subsidiaries subject to buy-out agreements amounted to 21,125 as of December 31, 2003 (14,137 as of December 31, 2002). As these agreements do not include maximum amounts to be paid and are based on future earnings, it is not possible to determine a maximum potential amount of future payments. Therefore, the amounts indicated above represent the Companys best estimate and actual amounts may differ.
F-35
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
The payment dates for these arrangements are estimated as follows as of December 31, 2003:

Payment date

Commitment2004

74,7712005

17,2482006

8,2392007

3492008

3,707Undetermined

51,499TOTAL

155,813The payment date for the Companys buy-out obligations has been assumed to be the date the applicable buy-out option can first be exercised by the minority shareholder. The payment date for some buy-out agreements may not be determinable because the buy-out option is first exercisable at the time the minority shareholder leaves the employ of the Company.
The other commitments are described in Notes 11, 12 and 19.
22.CONTINGENCIES
Bankruptcy of WorldCom, Inc.
On July 21, 2002, WorldCom, Inc., a significant client of the Company, now known as MCI, Inc., filed for reorganization under Chapter 11 of the United States Bankruptcy Code. The Company provides both advertising and marketing services and media services to MCI.
With
  respect to the media, the Company acts as an agent for MCI and as an intermediary
  in the transfer of the clients payments to the applicable media suppliers,
  which is consistent with the concept of sequential liability adopted
  by the American Association of Advertising Agencies in 1991 as its standard
  for the industry. As a result, the Company had outstanding pre-bankruptcy petition media
  receivables of approximately $26.4 million as at December 31, 2003 ($36.1 million
  as at December 31, 2002) and in parallel, the Company had outstanding pre-bankruptcy
  petition media payables for the media space reserved on behalf of MCI of approximately
  $26.9 million as at December 31, 2003 ($36.9 million as at December 31, 2002).
  The decrease in receivables and payables between December 31, 2003 and 2002
  is in large part the result of a court approved settlement between MCI and media
  vendor AOL, following which the Company received confirmation to offset their
  respective receivables and payables.
Currently, no media vendor is pursuing, nor have any waived, any claim against the Company for any MCI payables, and it is not currently possible to determine what actions, if any, will be taken in connection with the MCI bankruptcy proceeding, or the possible outcome of any such actions, or the amount of any loss to the Company that might result. Consequently, although a loss is possible, the Company cannot at this time reasonably determine the probability of any loss nor the magnitude thereof. Therefore, no reserve has been recorded.
With respect to commissions and production work, the Company had outstanding pre-bankruptcy petition receivables of approximately $10.4 million as at December 31, 2003 and 2002, which were fully reserved as at December 31, 2002.
On August 4, 2003, the Company entered into an agreement to compromise the pre-bankruptcy amounts due to the Company. Under its terms, the agreement became effective upon MCI emerging from U.S. Chapter 11 protection. The agreement provides that MCI will pay the Company approximately $14.3 million in cash. Of this amount, a substantial portion will be used to pay the MCI vendors that the Company engaged on MCIs behalf.
MCI emerged from U.S. Chapter 11 protection on April 20, 2004. As a consequence, in 2003 the Company reversed $6.6 million of the $10.4 million reserve that was recorded at December 31, 2002.
F-36
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)


The Company continues to do business with MCI.
American Student List Class Action
On February 18, 2004, a class action lawsuit was filed in the United States District Court for the Middle District of Florida against American Student List, LLC (ASL) one of the Companys subsidiaries. The lawsuit alleges that ASL obtained, disclosed and used information from the Florida Department of Highway Safety and Motor Vehicles in alleged violation of the U.S. Drivers Privacy Protection Act (DPPA). The named plaintiff seeks to represent a class of 876,665 individuals whose personal information from Florida Department of Highway Safety and Motor Vehicles records was obtained, disclosed and used for allegedly impermissible uses by ASL without the express consent of the individuals. The lawsuit seeks certification as a class action, liquidated damages in the amount of $2,500 under the Drivers Privacy Protection Act for each instance in which American Student
List violated the Act, punitive damages, attorneys fees and costs, and injunctive and other relief. American Student List intends to defend itself vigorously against this action. While the ultimate resolution of this lawsuit cannot presently be determined, an unfavorable outcome could have a material adverse effect on the Companys business, financial condition or results of operations.
Snyder Communications LP class action lawsuit
Former employees of Snyder Communications LP have filed a purported class action lawsuit in the Texas State Court. The motion to certify the purported class of former employees in Texas was granted by the Texas trial court in January 2002, affirmed on appeal by the Texas intermediate appellate court in November 2002 and is currently subject to a petition for review to the Texas Supreme Court. Snyder Communications motion for summary judgment in this action is still pending. The lawsuit alleges, in substance, that Snyder improperly denied commission payments to former employees in connection with alleged sales activities. Snyder Communications denies all liability with respect to the claims alleged in this case and believes the claims to be without merit. Snyder Communications intends to defend itself vigorously against these actions.
Circle.com litigation
On June 4, 2001, two holders of Circle.com common stock filed a purported class action lawsuit in Delaware Chancery Court against Snyder Communications, the Company and each director of the Company and Snyder Communications. The lawsuit sought a preliminary and permanent injunction or, alternatively, monetary damages. The lawsuit alleged that the Company and the board of directors of Snyder Communications breached their fiduciary duties owed to the Circle.com stockholders when considering and negotiating the proposed merger of Snyder Communications with one of the subsidiaries of the Company by failing to create an independent negotiating structure, failing to seek truly independent advice, concealing material information from the Circle.com stockholders, and unfairly timing the proposed merger to the disadvantage of the Circle.com stockholders. Subsequent to the filing of the lawsuit, each director of the Company was
dismissed from the lawsuit. In August 2001, Snyder Communications, its directors and the Company filed an answer in the lawsuit and responded to requests for the production of documents. On February 6, 2004, the Delaware Chancery Court dismissed the lawsuit without prejudice.
F-37
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
Verizon settlement
A case involving claims by Snyder Communications for declaratory relief as to alleged indemnification obligations set forth in their agreements with Verizon Select Services and counterclaims by Verizon for indemnification, declaratory relief and damages was filed in April 2001, as a result of two investigations by Florida agencies into the parties business and marketing practices. Verizon demanded that Snyder Communications indemnify it for all liabilities, costs and expenses incurred as a result of the two Florida Investigations. In their December 2001 Settlement Agreement, the Company and Snyder Communications agreed to pay an aggregate amount of $1,052,500 to Verizon in a series of installments. The final payment was made on February 15, 2003.
American Student List consent order
In September 2002, American Student List LLC, one of the Companys subsidiaries, signed a consent order issued by the U.S. Federal Trade Commission relating to the use of information collected from a survey conducted by the National Research Center for College and University Admissions (NRCCUA). For a number of years, American Student List provided funding for a portion of the out-of-pocket expenses incurred by NRCCUA in connection with its post-secondary education planning survey. The FTC argued that the disclosures made by NRCCUA to the high schools that distributed the surveys to students, and the disclosures in the survey completed by the students, were inadequate to advise the schools and students that the results of the survey would be used for marketing and non-educational uses. American Student List signed the consent order without admitting that it engaged in any deceptive
practices that violate the law. The consent order became effective on January 31, 2003.

In addition to the foregoing, the Company is party to various other legal and arbitration proceedings arising in the ordinary course of business, including matters relating to current and former vendors, clients and employees. None of these other proceedings has had or is expected to have a significant effect on the Companys financial position or profitability. Any litigation, however, involves risks and potentially significant litigation costs, and therefore the Company cannot give any assurance that any litigation which may arise in the future will not have a materiel adverse effect on its business, financial conditions or future results of operations.

23.ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in the Companys allowance for doubtful accounts for the years ended December 31, 2003, 2002 and 2001 were as follows:

OpeningBalance

Charge toCosts andExpense

Reversal

Deductions

OtherMovements

ClosingBalanceYear 2003

58,169

10,897

(6,581
)
(14,126
)
(11,705
)
36,654Year 2002

54,156

21,558

(2,998
)
(8,812
)
(5,735
)
58,169Year 2001

36,602

13,272

(1,528
)
(8,528
)
14,338

54,156F-38
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)
EXHIBIT INDEX


Exhibit No.

Description1.1*
Statuts(bylaws) of Havas (English translation).2.1
Form of Deposit Agreement among Havas, Morgan Guaranty Trust Company of New York and all holders from time to time of Havas ADSs (incorporated by reference to Exhibit 4.1 to Havass registration statement on Form F-4 (Reg. No. 333-43362)).2.2
Note dOperation (Prospectus) dated February 3, 1999 for the issuance of convertible bonds by Havas (English translation) (incorporated by reference to Exhibit 4.2 to Havass registration statement on Form F-4 (Reg. No. 333-43362)).2.3
Note dOperation (Prospectus) dated December 12, 2000 for the issuance of convertible bonds by Havas (English translation) (incorporated by reference to Exhibit 4.3 to Havass registration statement on Form F-4 (Reg. No. 333-59880)).2.4
Final Prospectus dated May 15, 2002 for the issuance of convertible and/or exchangeable bonds by Havas (English translation) (incorporated by reference to Exhibit 4.19 to Havass annual report on Form 20-F for the year ended December 31, 2001 (SEC File No. 001-16081)).4.1
Fourth Amendment to Lease dated January 1, 2000 between Havas North America, Inc., formerly EWDB North America Inc. and The Rector, Church-Wardens and Vestrymen of Trinity Church in the City of New York (incorporated by reference to Exhibit 4.1 to Havass annual report on Form 20-F for the year ended December 31, 2000 (SEC File No. 001-16081)).4.2
Protocol Agreement and Commercial Lease dated as of April 2, 2001 between Havas Advertising and Suresnes Immobilier (English summary) (incorporated by reference to Exhibit 4.2 to Havass annual report on Form 20-F for the year ended December 31, 2000 (SEC File No. 001-16081)).4.3
Supplemental Agreement No. 1 to the Memorandum of Understanding of April 2, 2001 dated May 3, 2002 between Suresnes Immobilier and Havas (English translation) (incorporated by reference to Exhibit 4.18 to Havass annual report on Form 20-F for the year ended December 31, 2001 (SEC File No. 001-16081)).4.4
Agreement to Contribute dated as of January 20, 2001 between Havas and Advertising Antwerpen B.V., Banco Santander Central Hispano, S.A., Compañía de Cartera e Inversiones S.A., Deya S.A., Mr. Jose Martínez-Rovira Vidal, Mrs. Maria Luisa Munoz Alvarez, Mrs. Cristina Martínez-Rovira Munoz, Mrs. Sandra Martínez-Rovira Munoz and Havas S.A. (incorporated by reference to Exhibit 2.7 to Havass registration statement on Form F-4 (Reg. No. 333-59880)).4.5
Trademark Sales Agreement dated December 5, 2001 between Havas and Vivendi Universal Publishing (English translation) (incorporated by reference to Exhibit 4.15 to Havass annual report on Form 20-F for the year ended December 31, 2001 (SEC File No. 001-16081)).F-39
HAVAS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of euro except per share amounts and as otherwise indicated)

Exhibit
        No.
    
    Description4.6
    Registration
        Rights Agreement dated as of May 14, 2001 among Acacia ISP, S.L., Banco
        Santander Central Hispano, S.A., Compañía de Cartera e Inversiones
        S.A., Deya S.A., Jose Martínez-Rovira Vidal, Maria Luisa Munoz Alvarez,
        Cristina Martínez-Rovira Munoz and Sandra Martínez-Rovira Munoz
        (incorporated by reference to Exhibit 4.14 to Havass annual report
        on Form 20-F for the year ended December 31, 2000 (SEC File No. 001-16081)).4.7
    Services Agreement
        dated April 16, 2002 between Intermedia Management Services, A.G. and
        Fernando Rodés Vilà (incorporated by reference to Exhibit 4.17
        to Havass annual report on Form 20-F for the year ended December
        31, 2001 (SEC File No. 001-16081)).4.8
    Amended and
        Restated Employment Agreement dated January 1, 2002 between Euro RSCG
        Worldwide, Inc. and Alain de Pouzilhac (incorporated by reference to Exhibit
        4.9 to Havass annual report on Form 20-F for the year ended December
        31, 2002 (SEC File No. 001-16081)).4.9
    Agreement dated
        February 1, 2003 between Arnold Worldwide Partners and Edward Eskandarian
        (incorporated by reference to Exhibit 4.10 to Havass annual report
        on Form 20-F for the year ended December 31, 2002 (SEC File No. 001-16081)).4.10*
    Agreement,
        effective as of October 1, 2003, between Jim Heekin and EURO RSCG Worldwide.8.1*
    List of subsidiaries.12.1*
    Certification
        of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.12.2*
    Certification
        of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.13.1*
    Certification
        of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2*
    Certification
        of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.14*
    Nasdaq Corporate
        Governance Exemptions._______________
*Filed herewith.F-40