PROVISIONS FOR PENSIONS

AND OTHER EMPLOYEE BENEFITS 3,029 2,750

The following tables set out the obligations and provisions for pensions and other post-employment benefits by geographic area:

DECEMBER 31, 2005 France Other European North Rest of Total

(in € millions) countries America the world

Projected benefit obligation – funded plans 349 5,020 1,985 122 7,476

Projected benefit obligation – unfunded plans 180 642 462 5 1,289

Fair value of plan assets 139 3,896 1,636 102 5,773

Deficit 390 1,766 811 25 2,992

Deferred variances (64) (146) (140) 5 (345)

Asset ceiling 38

Insured plans 166

Total pension and other post-employment benefit obligations 2,851

Prepaid pension costs (see Note 8) 29

Total provisions for pensions

and other post-employment benefit obligations 2,880

DECEMBER 31, 2004 France Other European North Rest of Total

(in € millions) countries America the world

Projected benefit obligation – funded plans 289 2,975 1,484 109 4,857

Projected benefit obligation – unfunded plans 176 467 377 3 1,023

Fair value of plan assets 118 2,050 1,255 79 3,502

Deficit 347 1,392 606 33 2,378

Deferred variances (4) (11) 52 (7) 30

Asset ceiling 24

Insured plans 189

Total pension and other post-employment benefit obligations 2,621

Prepaid pension costs (see Note 8) 15

Total provisions for pensions

Description of defined benefit plans

The Group’s main defined benefit plans are as follows: In France, in addition to retirement bonuses, there are three defined benefit schemes based on projected end-of-career salaries. These plans were closed to new employees by the companies concerned between 1969 and 1997.

In Germany, retirement plans provide pensions and death and disability benefits for employees. These plans have been closed to new employees since 1996.

In the Netherlands, ceilings have been introduced in relation to supplementary pension plans, in excess of which they are converted into defined contribution plans.

In the United Kingdom, employee retirement plans provide pensions as well as death and permanent disability benefits. These defined benefit plans – which are based on employees’ average salaries over their final years of employment – have been closed to new employees since 2001.

In the United States and Canada, the Group’s defined benefit schemes are based on projected end-of-career salaries. Since January 1, 2001, new employees have been offered a defined contribution scheme.

Provisions for other long-term benefits amounted to €149 million at December 31, 2005 compared with €114 million in 2004. This item covers all other employee benefits, notably long-service awards in France, “jubilee” benefits in Germany and employee benefits in the United States. The amounts recorded are generally calculated on an actuarial basis.

Measurement of pension and other employee benefit obligations

Pensions and other post-employment benefit obligations are determined by actuarial valuations using a method based on projected end-of career salaries (the projected unit credit method).

The Group’s obligations for other employee benefits including long-term incapacity benefits and other long-term benefits are also calculated on an actuarial basis and recognized in the same way as pension obligations.

The Group’s total pension and other employee benefit obligations amounted to €8,765 million at December 31, 2005, versus €5,880 million one year earlier.

The consolidation of the BPB group led to a €1,460 million increase in these obligations.

Plan assets

For defined benefit plans, plan assets have been progressively built up by contributions, primarily in the United States and the United Kingdom. Contributions paid by the Group totaled €331 million in 2005 and €236 million in 2004 and the actual return on plan assets came to €664 million in 2005.

The fair value of plan assets – which came to €5,773 million at December 31, 2005 (end-2004:€3,502 million) – is deducted from the amount of the Group’s obligation valued according to the projected unit credit method in order to calculate the related provision.

The consolidation of the BPB group led to a €1,141 million increase in the value of plan assets.

Actuarial assumptions used

for valuing pension obligations and plan assets

Assumptions related to mortality, employee turnover and future salary increases take into account the economic conditions specific to each country and company. Interest rates used in 2005 to determine the present value of future obligations were generally between 4% and 6.5%, depending on the country concerned.

The rates used in the countries in which the Group’s obligations are the most significant are as follows:

136

France Other European countries United States

Euro zone United Kingdom

Discount rate 4.25% 4.25% 4.75% 5.75%

Salary increases 2.40% 2.50% to 3.50% 3.20% to 3.45% 3.00%

the employees’ expected average remaining working lives. The related amount recognized in the 2005 income statement came to €1 million.

Prepaid pension costs

A prepaid pension cost is recorded under “Other non-current assets” whenever the assets of a pension plan exceed the related projected benefit obligation, less any unrecognized actuarial gains or losses (see Note 8), provided the asset represents future economic benefits for the Group. In the opposite case, the asset recognized is reduced by the amount of the asset ceiling thus determined.

Insured plans

This item corresponds to amounts payable in the future to insurance companies under the funded retirement schemes for Group employees in Spain. It amounted to €166 million at December 31, 2005 and €189 million at December 31, 2004.

Movements in provisions for pensions and other post-employment benefits

Changes in provisions for pensions and other post-employ- ment benefits (excluding other employee benefits) can be broken down as follows by geographic area:

Notes

to

the c

onsolida

ted financial sta

temen

ts

137

The same assumptions concerning mortality, employee turnover and interest rates are used to determine the Group’s projected benefit obligation for other long-term employee benefits. In the United States, the annual growth rate for medical treatment received by retirees has been set at 9%.

Deferred variances

Deferred variances consist primarily of actuarial gains and losses (€345 million at December 31, 2005), as well as the effects of any plan modifications. Actuarial gains or losses are the result of year-on-year changes in the actuarial assump- tions used to measure the Group’s obligations and plan assets as well as experience adjustments (differences between the actuarial assumptions and what has actually occurred). Total deferred variances amounted to a positive €345 million at December 31, 2005, compared with a negative €30 million the previous year, and are deducted or added to the provision for pensions and other employee benefits. They are amortized using the “corridor” approach, whereby only the portion of net cumulative actuarial gains and losses that exceeds the greater of 10% of either the projected benefit obligation or the fair value of plan assets are charged or credited to income over

France Other Western North Emerging Total

European America markets

(in € millions) countries and Asia

At January 1, 2004