2008 FINANCIAL REPORT Carrefour SA with capital of 1,762,256,790 euros RCS Nanterre 652 014 051 www.groupecarrefour.com I T R O P E R L A C N A N F 8 0 0 2 I OTHERS PUBLICATIONS: 2008 Sustainable Development Report 2008 Annual Report ADDITIONAL INFORMATION AND GROUP FINANCIAL REPORTS ARE AVAILABLE AT WWW.GROUPECARREFOUR.COM Design, creation, copywriting and production: Translation: Photocredits: Carrefour Photo Library, Lionel Barbe. Paper: The Carrefour Group is committed to the responsible management of its paper purchasing. The paper used in the 2008 Challenges Booklet is FSC (Forest Stewardship Council) certified. This certification attests to its compliance with a set of internationally recognised forest management principles and criteria. The aim of the FSC is to promote environmentally responsible, socially beneficial and economically viable management of the Earth’s forests. Printing: This document has been produced in association with RR Donnelley. The print facility used is CarbonNeutral® and its Environmental Management System is certified to ISO14001:2004. CONTENTS CONSOLIDATED FINANCIAL STATEMENTS 02 Management Report 09 Consolidated Financial Statements 13 Notes on the Consolidated Financial Statements 45 Companies consolidated by full integration as of 31 December 2008 53 Companies consolidated by the equity method as of 31 December 2008 54 Statutory auditors’ report on the Consolidated Financial Statements REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 56 Report by the Chairman of the Board of Directors 66 Statutory auditors’ report on the Chairman’s Report ADDITIONAL INFORMATION 68 Consolidated store network 72 Commercial statistics CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT REPORT Accounting principles The Carrefour Group’s consolidated financial statements for fiscal year 2008 have been drawn up in accordance with IFRS international accounting standards. The income statement as of 31 December 2007 is presented for the previous period. Activity - results In an environment marked by a sharp slowdown in food-price inflation and a steep decline in discretionary spending during the 4th quarter, (cid:2) Net income from recurring operations was affected by non-current expenses, which mainly include impairment charges and a tax provision of 126 million euros. (cid:2) Sales remained resilient (+6.4% at constant exchange rates, including 1.8% from acquisitions) thanks to sustained promotional efforts. (cid:2) A strengthened balance sheet: free cash flow of 1.9 billion euros was generated via tight management of our merchandise cash flow and capital expenditures. (cid:2) The Activity contribution rose mainly due to our firm grip on operating costs. Main aggregate values from the income statement (in millions of euros) Net sales Activity contribution Net income from recurring operations – Group share Net income from discontinued operations – Group share Net income – Group share Sales 2008 2007 86,967 3,300 1,256 16 1,272 82,148 3,291 1,868 431 2,299 Change 2008/2007 5.9% 0.3% (32.8%) - (44.7%) (in millions of euros) France Europe (excluding France) Latin America Asia 2008 2007 37,968 32,418 10,505 6,076 37,621 30,837 8,211 5,480 Total 86,967 82,148 Change 2008/2007 Change 2008/2007 at constant exchange rates 0.9% 5.1% 27.9% 10.9% 5.9% 0.9% 5.4% 31.0% 13.3% 6.4% Net sales amounted to 86,967 million euros, up 6.4% as compared with 2007 sales at constant exchange rates. After the impact of exchange rates, sales increased by 5.9%. 2 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Breakdown of net sales by business Breakdown of net sales by geographic region As a % Hypermarkets Supermarkets Hard-discount stores Other stores 2008 62.0% 21.6% 11.1% 5.4% 2007 61.9% 21.5% 10.5% 6.0% As a % France Europe (excluding France) Latin America Asia 2008 43.7% 37.3% 12.1% 7.0% 2007 45.8% 37.5% 10.0% 6.7% Total 100.0% 100.0% Total 100.0% 100.0% Activity contribution (in millions of euros) France Europe (excluding France) Latin America Asia Total 2008 2007 Change 2008/2007 Change 2008/2007 at constant exchange rates 1,510 1,153 395 242 3,300 1,556 1,216 301 218 3,291 (3.0%) (5.1%) 31.1% 10.9% 0.3% (3.0%) (4.7%) 33.5% 14.1% 0.9% The Activity contribution amounted to 3,300 million euros and represented 3.8% of our sales, against 4% in 2007. It increased by 0.3% compared with 2007. Increases in Latin America and Asia offset declines in France and in Europe. Breakdown of Activity contribution by geographic region As a % 2008 2007 France Europe (excluding France) Latin America Asia 45.8% 35.0% 12.0% 7.3% 47.3% 36.9% 9.1% 6.6% Total 100.0% 100.0% Depreciation and provisions Depreciation and provisions amounted to 1,861 million euros, representing 2.1% of sales. Non-current income and expenses Non-current expenses amounted to 524 million euros. Non-current income and expenses included: (cid:2) Capital gains or representing income of from sales 276 million euros (mainly from the sale of land in Merter, Istanbul for 157 million euros). losses (cid:2) A tax provision of (126) million euros. (cid:2) Miscellaneous costs of (202) million euros. EBIT EBIT amounted to 2,776 million euros and represented 3.2% of our sales, against 4.1% in 2007. It fell by 16.8% compared to 2007. EBIT by geographic region As a % 2008 2007 France Europe (excluding France) Latin America Asia 41.9% 35.9% 14.2% 8.0% 46.6% 37.6% 9.5% 6.3% (cid:2) Asset impairment charges of (396) million euros. Total 100.0% 100.0% (cid:2) Cost of brand change and consolidation of (76) million euros. 2008 FINANCIAL REPORT 3 Financial income (expense) Sale of Portuguese hypermarkets On 27 July 2007, the Group announced the sale of its Portuguese subsidiary to Sonae Distribuição for an enterprise value of 662 million euros. This transaction was approved by Portuguese competition authorities on 31 December 2007. In 2008, the selling price was adjusted based on certain financial indicators on the transaction’s final closing date. Sale of operations in Switzerland On 21 August 2007, Carrefour Group and Maus Frères announced the sale of their respective interests in Distributis AG to Coop for an enterprise value of approximately 330 million euros. This transaction was approved by Swiss competition authorities on 28 March 2008. Sale of our operations in Slovakia Following the Slovakian competition authorities’ 29 December 2006 refusal to approve the sale of four Carrefour stores to Tesco, the Group looked for a new buyer. On 1 June 2007, the Group concluded an agreement with ICS and ECM Group NV to sell these stores, which will continue to be operated under the Carrefour the Slovakian transaction was approved by banner. competition authorities in February 2008. This Cash flow and investments the year amounted to 2,412 million euros, Cash flow stood at 4,011 million euros and was stable overall compared to 2007. Net for investment against 3,337 million euros in 2007. Tangible and intangible investment amounted to 2,918 million euros. Investment rose in Asia, Latin America and Eastern Europe. Financial investment for 2008 represented 439 million euros. Disposals that 945 million euros. impacted our cash flow in 2008 amounted to Shareholders’ equity This amounted to 10,952 million euros as of 31 December 2008, against 11,770 million euros for the previous year. Net debt The Group’s debt fell from 7,358 million euros at the end of 2007 to 6,652 million euros at the end of 2008. Financial expense amounted to 562 million euros, up by 6.9% as sales, a level compared with 2007. equivalent to 2007. represented 0.6% of It Income tax Effective income-tax expenses were 743 million euros in 2008. This represented 33.6% of income before taxes, against 28.7% in 2007. The effect of low taxation on capital gains from the sale of land in Merter (Istanbul) was more than offset by accounting for the tax provision, which was calculated net of tax, and by the impact of non-deductible impairments. Consolidation by the equity method Income from equity affiliates amounted to 52 million euros, 9 million euros higher than in 2007. This trend is mainly explained by income growth among subsidiaries in which the Group holds a minority interest. Minority interests Minority interests’ share in income amounted to 267 million euros, representing an increase of 87 million euros over the previous year. This increase is mainly related to gains realized on the sale of land in Merter (Istanbul) and to income growth among subsidiaries where the Group works with partners. Net income from recurring operations - Group share This line amounted to 1,256 million euros, down 32.8% compared with net income from recurring operations – Group share 2007, which stood at 1,869 million euros. Net income from discontinued operations - Group share This line, which represented income of 16 million euros in the 2008 income statement, breaks down as follows: (cid:2) adjustment to the sale price of operations in Portugal for (30) million euros; (cid:2) income up to the date of final sale and income from the sale of operations in Switzerland for 12 million euros; (cid:2) income up to the date of final sale and income from the sale of operations in Slovakia for 23 million euros; (cid:2) the final impact of transactions for discontinued operations during prior fiscal years for 11 million euros. 4 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS FRANCE The consolidated store network in France as of 31 December 2008 stood as follows: Hypermarkets Supermarkets Hard-discount stores Other stores Total 203 590 842 9 1,644 In 2008, the network expanded by 9 hypermarkets and 2 hard- discount stores. The number of supermarkets and cash & carry stores operated fell by 14 and 52 respectively. ■ Net Sales (in millions of euros) ■ Activity Contribution (in millions of euros) Sales in France rose by 0.9%. Our French operations’ supermarket and convenience formats saw solid performance. Hypermarkets saw their operations slow down, mainly due to drops in non-food sales and, in particular, discretionary products. At the end of 2008, 160 stores had changed over to the Carrefour Market banner and recorded strong sales gains. Commercial margins to competitive pricing and promotions. Cost savings achieved during the second half of the year enabled the company to control its sales, general and administrative expenses. Overall, Activity contribution in France fell 3%, showing a net profit ratio of 4%, which was nearly stable compared with 2007 and amounted to 1,510 million euros. Operational representing 2.2% of sales. in France totalled 849 million euros, reflecting a commitment investment slightly, fell 37,621 37,968 1,556 1,510 2007 2008 2007 2008 EUROPE (excluding France) Europe’s consolidated store network (excluding France) as of 31 December 2008 stood as follows: Hypermarkets Supermarkets Hard-discount stores Other stores Total 437 974 3,038 236 4,685 The consolidated network expanded this year by 38 hypermarkets, 17 supermarkets and 10 convenience stores, and decreased by 98 hard-discount stores and 3 cash & carry stores. ■ Net Sales (in millions of euros) ■ Activity Contribution (in millions of euros) Sales in Europe increased by 5.4% at constant exchange rates, with sustained growth in Spain (+5.7%), Romania and Portugal. The entire region recorded a slowdown in sales over the year’s last quarter, especially sales of discretionary products. The gross margin from current operations in the region is stable overall as a ratio, with the drop in Spain offset by an increase in other countries. Cost savings did not fully offset the negative effect of the extremely sharp year-end slowdown in sales. In total, the Activity contribution fell 5.1% to 1,153 million euros. Operational representing 3.5% of sales. in Europe totalled 1,134 million euros, investment 30,837 32,418 1,216 1,153 2007 2008 2007 2008 2008 FINANCIAL REPORT 5 LATIN AMERICA The consolidated store network in Latin America as of 31 December 2008 stood as follows: Hypermarkets Supermarkets Hard-discount stores Other stores Total 288 151 606 8 1,053 In 2008, the consolidated network expanded by 33 hypermarkets, 10 supermarkets, 34 hard-discount stores and 3 convenience stores. ■ Net Sales (in millions of euros) ■ Activity Contribution (in millions of euros) Latin American activities recorded a significant rise in sales: +31% at constant exchange rates, of which 27.6% excluding acquisitions. Atacadão (Brazil) continued to show solid growth in sales throughout the year. Gross margins from current operations moved forward more slowly than sales, indicating a slightly reduced ratio that mainly reflects the increasing proportion of sales coming from Atacadão. Cost controls led to a rise in the Activity contribution of 31.1% at 395 million euros, with a net-profit ratio of 3.8% (against 3.7% in 2007). Operational 5.5% of sales. investments totalled 577 million euros, representing 10,505 8,211 395 301 2007 2008 2007 2008 ASIA The consolidated store network in Asia as of 31 December 2008 stood as follows: Hypermarkets Supermarkets Hard-discount stores Other stores Total 285 30 309 - 624 In 2008, the consolidated network expanded by 47 hypermarkets, 30 supermarkets and 34 hard-discount stores. ■ Net Sales (in millions of euros) ■ Activity Contribution (in millions of euros) With sales up by 10.9% at current exchange rates (+13.3% at constant exchange rates), the year showed satisfactory results despite a sudden slowdown in most of the region’s countries at the end of the year. Gross margins from current operations fell slightly, affected by efforts aimed at greater price competitiveness. The cost ratio improved as compared with 2007. In total, the Activity contribution rose by 10.9% to 242 million euros. Operational investment representing 5.9% of sales. in Asia totalled 357 million euros, 6 CARREFOUR GROUP 6,076 5,480 242 218 2007 2008 2007 2008 CONSOLIDATED FINANCIAL STATEMENTS Objectives A boost in sales and free cash-flow generation are Group priorities in 2009, thanks to: (cid:2) operating cost savings of 500 million euros to enhance sales; (cid:2) investment of 600 million euros to boost sales; capped at 2.5 billion euros. (cid:2) increased discipline and selectivity in capital expenditures, Risk management LITIGATION AND OTHER RISKS The Group is subject to various litigation matters and disputes, which it nevertheless believes will not have a significant impact on its financial situation, business and/or results. INSURANCE Carrefour’s insurance strategy is aimed at providing the best possible protection for people and property. To this end, the Group has implemented comprehensive, worldwide schemes (especially with regard to physical damage, civil liability, environmental issues and construction) that provide uniform coverage for all formats (integrated stores), wherever the stores are located (except in Brazil, for example, which does not allow this type of arrangement). Furthermore, the Group ensures that new acquisitions over the course of the year quickly obtain this across-the-board coverage, or, where applicable, benefit from its DIC/DIL (“difference in conditions/difference in limits”) coverage policies. Carrefour’s insurance strategy identifies and assesses existing and emerging risks in close collaboration with operational managers and the various Carrefour Group departments involved, and puts in place preventive measures through a centralized policy that is mainly undertaken with insurers but is also conducted at local level thanks to connections in each country. The Group transfers all the insurable risk it can identify to the insurance market. Monitoring and management methods are regularly controlled including brokers and and inspected by independent parties, through Carrefour’s insurers, as well as via in-house means Corporate Insurance department the Group Legal department). The following information is provided for information purposes only in order to illustrate the scope of action in 2008. This information should not be regarded as static, since the insurance market is changing. Indeed, the Group’s insurance strategy depends on and investments and the coverage adapts available. Furthermore, to optimize insurance costs and better manage risk, Carrefour has a policy for maintaining its frequency lines through its captive reinsurance company and, since 1 January 2005, through its own insurance company in Ireland, Carrefour Insurance Limited (accredited by the Irish authorities), whose results are consolidated in Group financial statements. This direct-insurance company primarily covers property-damage and operating-loss risk for subsidiaries in Europe, in what is known as to market conditions, (part of in order ‘free service provision.’ Subsidiaries outside the Europe zone are reinsured by the Group. A stop-loss provision per claim and per insurance year has been established in order to protect the captive company’s interests and limit its commitments. Beyond a certain predefined limit, risk is transferred to the insurance market. The same subscription strategy applies to civil liability risk, but only with regard to reinsurance. The captive reinsurance company’s exposure is limited per claim and per insurance year. Anything beyond a certain exposure level is transferred to the traditional insurance market. Damage to property and operating-loss coverage The purpose of this insurance is to protect company assets. An “all risks, with exceptions” policy is issued, on the basis of existing insurance-market guarantees, to cover this type of coverage’s traditional risks, which include fire, lightning, theft, natural disaster and operating loss. Deductibles are established appropriately for the various store formats and countries. For certain formats, Carrefour has a self- insured retention policy adapted to well-targeted loss incidents. The programme put in place by the Group offers a guarantee limit of 200 million euros per claim in direct damages and operating loss combined. This programme includes sub-limits, particularly with regard to natural disasters. Over the course of the year, certain sub-limits have been revised upwards. Exclusions in force for this policy comply with market practices. The policy expiration date was changed to 1 July in place of 1 January. Civil-liability coverage This covers the financial consequences of Carrefour’s civil liability in investigated and found liable cases where the company is regarding a loss suffered by a third party; the loss in question may have been caused by the Group either during operations or after delivery. The majority of Carrefour Group sites are classified as places of assembly (in French, ERPs – Établissements Recevant du Public); as a result, risk exposure must be specially taken into account and requires great vigilance. Deductibles vary from country to country. Exclusions in force in this contract comply with market practices and primarily concern certain substances recognized as being toxic, carcinogenic or the like. Carrefour is covered regarding the risk of harming the environment as part of its comprehensive, worldwide civil-liability insurance programme. 2008 FINANCIAL REPORT 7 Such risk requires a specially-designed approach due to conditions imposed by reinsurers, which offer more limited guarantees for gradual pollution risk. Nevertheless, Carrefour has established specific coverage dedicated to this type of risk. Special risks This essentially translates into coverage for corporate officers. Coverage for such risk is adapted as closely as possible to Group exposure. Given the sensitive nature of such information, coverage amounts for the various policies remain confidential. Construction coverage This covers operators involved in construction as well as any consequences that may arise from their activities. The coverage amounts established are in line with market practices and the limits available on the insurance market for this type of risk. Employee-benefit coverage In compliance with current legislation, collective bargaining agreements and other company agreements, programmes covering occupational-injury risk, medical expenses, and welfare and retirement costs have been established in each country. INDUSTRIAL AND ENVIRONMENTAL RISK The Carrefour Group is environmental responsibility. strongly committed to a policy of Since our business does not involve direct major environmental risk, we have identified the main environmental issues on which the Group has taken action: (cid:2) prevention of risk related to the operation of service stations (ground pollution, hydrocarbons); (cid:2) control over refrigerant and energy consumption; (cid:2) automobile pollution (car parks, distribution of less-polluting fuels); (cid:2) logistics involving atmospheric-emission reduction and research into less-polluting transport systems; (cid:2) control of nuisances (caused by noise and property maintenance) that affect local residents; (cid:2) natural resource management (fish stocks, wood etc.); (cid:2) reduction of packaging’s environmental impact via eco-friendly packaging design and reduced packaging use; (cid:2) waste conversion and recycling; (cid:2) water management. impact of our Costs incurred while reducing the environmental activities are partially included in the Sustainable Development department’s operating costs and those of its counterparts in countries where we operate. The largest proportion, however, involves an operational share corresponding to amounts allocated to specific projects. Indeed, environmental policies and risk management are inherent to and managed by each sector than involving the rather Sustainable Development department alone. 8 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Income statement Symbols: - expenses, + income (in millions of euros) Net sales Other income Total income Cost of sales Gross margin from current operations Sales, general and administrative expenses Depreciation, amortization and provisions Activity contribution Non-recurring income and expenses EBIT Financial income Income before taxes Income tax Net income from recurring operations of consolidated companies Net income from companies consolidated by the equity method Net income from recurring operations Net income from discontinued operations Total net income of which net income - Group share of which net income from recurring operations - Group share of which net income from discontinued operations - Group share of which net income - minority share Notes 31/12/2008 Change 31/12/2007 4 5 6 7 8 9 10 11 12 86,966.8 1,258.3 88,225.2 (68,709.4) 19,515.8 (14,354.7) (1,860.8) 3,300.3 (524.3) 2,775.9 (562.3) 2,213.6 (743.1) 1,470.5 52.1 1,522.6 16.2 1,538.8 1,271.8 1,255.6 16.2 266.9 5.9% 9.7% 5.9% 6.3% 4.4% 5.0% 8.0% 0.3% - (16.8%) 6.9% (21.3%) (7.9%) (26.7%) 20.9% (25.7%) (96.2%) (37.9%) (44.7%) (32.8%) (96.2%) 48.5% 82,148.5 1,147.2 83,295.7 (64,609.4) 18,686.3 (13,672.7) (1,722.5) 3,291.2 47.0 3,338.2 (526.1) 2,812.1 (806.9) 2,005.2 43.1 2,048.3 430.9 2,479.2 2,299.4 1,868.5 430.9 179.8 Earnings per share from recurring operations (in euros, before dilution) - Group share Earnings per share from recurring operations (in euros, after dilution) - Group share 13 13 1.83 1.83 (31.5%) (31.5%) 2.67 2.67 Notes 31/12/2008 Change 31/12/2007 2008 FINANCIAL REPORT 9 Assets (in millions of euros) Assets Goodwill Other intangible fixed assets Tangible fixed assets Other non-current financial assets Investments in companies accounted for by the equity method Deferred tax on assets Investment properties Consumer credit from financial companies – long-term Non-current assets Inventories Commercial receivables Consumer credit from financial companies – short-term Other current financial assets Tax receivables Other assets Cash and cash equivalents Current assets Non-current assets held for sale(1) Total assets Liabilities (in millions of euros) Liabilities Equity capital Consolidated reserves (including income) Shareholders’ equity - Group share Shareholders’ equity - minority interests Shareholders’ equity Borrowing - long-term Provisions Deferred tax liabilities Consumer credit refinancing - long-term Non-current liabilities Borrowing - short-term Trade payables Consumer credit refinancing - short-term Tax payables Other liabilities Current liabilities Non-current liabilities held for sale(1) Total liabilities Notes 31/12/2008 31/12/2007 14 14 15 16/24 16 17 18 24 19 20 24 21/24 22/23 23 11,363 1,055 14,809 1,312 429 672 346 2,097 11,674 1,173 14,751 1,119 436 944 500 1,959 32,082 32,555 6,891 2,919 2,708 245 673 1,096 5,317 19,850 150 52,082 6,867 3,424 2,713 - 582 956 4,164 18,707 669 51,932 Notes 31/12/2008 31/12/2007 25 27 26 17 27 27 27 27 27 1,762 8,399 10,161 791 10,952 9,506 2,320 424 451 12,700 2,709 17,276 4,044 1,467 2,910 28,405 25 52,082 1,762 8,900 10,663 1,107 11,770 8,276 2,147 462 430 11,315 3,247 17,077 3,989 1,193 3,114 28,620 227 51,932 (1) Non-current assets and liabilities held for sale correspond: a.In 2007, to assets and liabilities of operations in Switzerland and Slovakia, as well as certain assets in Belgium, Turkey and Poland, plus assets involving Dia Spain. b.In 2008, to certain assets in Bulgaria, Turkey, Poland, plus assets involving Dia Spain. 10 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Consolidated cash-flow statement (in millions of euros) Income before tax(1) Operating activities Tax Provisions for amortization Capital gains and losses on sale of assets Changes in provisions and impairment Dividends on companies accounted for by the equity method Impact of discontinued activities Cash flow from operations Change in working capital Impact of discontinued activities Change in cash flow from operating activities (excluding financial companies) Change in consumer credit commitments Net cash from operating activities Investment activities Acquisition of tangible and intangible fixed assets Acquisition of financial assets Acquisition of subsidiaries Disposal of subsidiaries Disposal of fixed assets Disposal of investments Investments net of disposals subtotal Other uses Impact of discontinued activities Net cash from investment activities Financing activities Proceeds on share issues Dividends paid by Carrefour (parent company) Dividends paid by consolidated companies to minority interests Change in treasury stock and other instruments Change in current financial assets Change in borrowing Impact of discontinued activities Net cash from financing activities Net change in cash and cash equivalents before currency impact Impact of currency fluctuations Net change in cash and cash equivalents after currency impact Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (1) Including financial interest on 500 million euros as of 31 December 2008 and 474 million euros as of 31 December 2007. 31/12/2008 31/12/2007 2,214 2,812 (624) 1,946 (219) 642 50 3 4,011 964 22 4,997 (111) 4,887 (2,918) (143) (296) 191 742 12 (2,412) (166) (19) (2,596) 3 (740) (202) (404) (232) 578 (31) (1,028) 1,262 (110) 1,153 4,164 5,317 (660) 1,790 (139) 98 7 10 3,918 (88) 40 3,869 43 3,912 (3,069) (101) (1,388) 684 505 33 (3,337) (48) (105) (3,491) 14 (722) (106) (507) - 1,298 68 46 467 0 467 3,697 4,164 2008 FINANCIAL REPORT 11 Change in consolidated shareholders’ equity before allocation of income 66 (17) (437) (388) 2,479 Capital Reserves relating to changes in treasury stock Currency translation adjustment - Group share Reserves for fair-value changes in financial instruments** Other reserves and income Shareholders’ equity - Group share Minority interests Total shareholders’ equity 1,762 (36) 370 64 7 7,382 9,486 1,017 10,503 (15) (437) 64 (15) (437) 3 (2) 64 (15) (437) 2,299 (388) 2,299 0 180 0 0 64 (15) 1,862 1,911 180 2,091 1,762 (36) 434 (781) (722) (722) 0 (99) 14 (821) 14 (12) (12) (6) (18) (8) 8,510 10,663 1,107 11,770 (25) (220) (781) (25) (220) (47) (14) (828) (39) (220) 0 0 (781) (25) (220) (1,025) (61) (1,087) 1,272 1,272 267 1,539 (781) (25) 1,052 246 206 (740) (740) 0 (187) 3 452 (927) 3 (8) (8) (338) (346) 1,762 (36) (347) (33) 8,814 10,161 791 10,952 (in millions of euros) Shareholders’ equity as of 31/12/06 before allocation Foreign currency translation adjustment Change in fair value of financial instruments Treasury stock* Income and expenses recorded directly as shareholders’ equity as of 31/12/07 Income 2007 Total income and expenses recorded for 2007 Dividends 2006 Change in capital and premiums Impact of changes in consolidation scope and other movements Shareholders’ equity as of 31/12/07 before allocation Foreign currency translation adjustment Change in fair value of financial instruments Treasury stock* Income and expenses recorded directly as shareholders’ equity as of 31/12/08 Income 2008 Total income and expenses recorded for 2008 Dividends 2007 Change in capital and premiums Impact of changes in consolidation scope and other movements Shareholders’ equity as of 31/12/08 before allocation * This line groups together the impact of treasury share movements and the application of IRFS 2 (see Note 1, “Treasury Shares” and “Employee benefits – share-based payments”). ** This item groups together the hedging reserve, which includes the effective portion of the change in fair value of cash-flow hedges, and the fair-value reserve, which includes the change in fair value of financial assets available for sale. 12 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS NOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS The summary statements concern the financial statements drawn up in accordance with IFRS standards as of 31 December 2008 and 31 December 2007. The 2006 financial statements included in the Reference Document filed with the AMF on 24 April 2007 are incorporated by way of reference. Note 1: Accounting principles the company’s functional currency, The Carrefour Group’s consolidated financial statements were drawn up in euros, in accordance with the International Financial Reporting Standards (IFRS) approved by the European Union. The consolidated financial statements as of 31 December 2008 were adopted by the Board of Directors on 10 March 2009. These statements were drawn up on the basis of historic cost, with the exception of certain assets and liabilities stated in accordance with IAS standards 32 and 39, pertaining to financial instruments. The asset and liability categories concerned are described, where applicable, in the corresponding notes below. Non-current assets and groups of assets held for sale are valued at their book value or fair market value minus sale costs, whichever is lower. Preparation of the consolidated financial statements involves the consideration of estimates and assumptions made by Group management. This may affect the book value of certain asset and liability items, information provided in the notes statements. Group management reviews its estimates and assumptions regularly in order to ensure their relevance to past experience and the current economic situation. The consolidated financial statements for the fiscal year were thus drawn up to take into account the current economic and financial crisis, and were based on the financial market criteria available on the balance-sheet date. The immediate effects of the crisis were taken into account in the changes to assets and liabilities. Depending on changes in these assumptions, items appearing in future financial statements may be different from current estimates. The main estimates made by management when preparing the financial statements concern the valuations and useful lives of intangible (Note 14) and tangible (Note 15) operating assets and goodwill (Note 14), the amount of provisions for risk and other provisions relating to the business (Note 26), and assumptions made for the calculation of pension commitments (Note 26) and deferred taxes (Note 17). income, and expenses, as well as to the financial NEW STANDARDS AND INTERPRETATIONS APPLICABLE IN 2008 IFRIC Interpretation 11 (IFRS 2 Group and Treasury Share Transactions) provides further information on the reporting rules for shares held in treasury as equity instruments or as cash instruments, as well as intragroup share-based payment arrangements. Application of this standard since 1 January 2008 has not had a significant impact on the Group’s financial statements. IFRIC Interpretation 14 (IAS 19 - Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction) sets forth valuation and reporting rules for assets in the event that a defined benefit asset regime is overfinanced. Application of this standard since 1 January 2008 has not had a significant impact on the Group’s financial statements. The amendments to IAS 39 (Financial Instruments: Recognition and Measurement) and IFRS 7 (Financial Instruments: Disclosures) allows the reclassification of certain financial instruments. The Group has not reclassified any financial assets. NEW STANDARDS AND INTERPRETATIONS FOR SUBSEQUENT APPLICATION The standards, amendments and interpretations existing as of 31 December 2008 and applicable by the Group as of 1 January 2009 were not applied in advance by the Group. The Group is currently conducting studies in order to measure the possible effect of their application on the financial statements. IAS 1R (Presentation of Financial Statements) The revision of modifies the structure of financial statements mainly by limiting the statement of changes in shareholders’ equity only to transactions with shareholders, whereas all other current components will be included in a statement of comprehensive income, either in one single statement or in two statements. This standard is applicable as of 1 January 2009. IFRS 8 (Operating Segments) requires the presentation of segment information, which serves as the basis for management decisions about the direction of the company. Application of IFRS 8 is mandatory as of 1 January 2009. The Group is currently conducting studies on the impact of its application. The amendment to IAS 23R (Amendment Related to Borrowing Costs) specifies the conditions for capitalization of borrowing costs. IAS 23R was not mandatory as of 31 December 2008 and was not applied in advance. The Group does not expect this amendment to have any significant effect. IFRIC Interpretation 13 (Customer Loyalty Programmes) specifies the valuation and reporting methods for benefits granted to customers in the scope of a customer loyalty programme. Application of IFRIC 13 is mandatory as of 1 January 2009. The Group is currently conducting studies on the impact of its application. IFRIC Interpretation 15 (Agreements on the Construction of Real Estate) applies to the accounting for revenue under construction agreements (mainly real-estate development). Application of IFRIC 15 is mandatory as of 1 January 2009. The Group is currently conducting studies on the impact of its application. The revision of 2008 FINANCIAL REPORT 13 IFRS 3, amendments to IAS 27, IAS 32, IAS 1, IFRS 2 and IAS 39, and IFRIC Interpretations 12, 16, 17 and 18 were not applied in advance. The accounting methods presented below were applied continuously for all periods presented in the consolidated financial statements, and uniformly so by Group entities. SCOPE/METHOD OF CONSOLIDATION to direct The companies over which Carrefour exercises exclusive control, either directly or indirectly, are fully consolidated. Control exists when the Group has the power the financial and operational policies of the entity, directly or indirectly, in order to obtain advantages from its operations. To assess the degree of control, potential voting rights that can currently be exercised or converted are taken into account. Furthermore, the companies in which the Group exercises significant influence or joint control are consolidated by the equity method. The consolidated financial statements include the Group share of total profit and loss amounts recorded by companies consolidated by the equity method, after making adjustments into conformity with those of the Group, as of the date on which significant influence was exercised up through the date on which the said significant influence or joint control ceased. When Carrefour has no significant influence or joint control over the operational or financial decisions of the companies in which it owns securities, these are held as other non-current financial assets. These securities may, where appropriate, be subject to a provision for amortization. The method of amortization is presented in the section on “Financial assets”. The Group does not have any ad-hoc entities. to bring their accounting methods For companies disposed of during the course of the fiscal year, only income for the period prior to the disposal date is shown in the consolidated income statement. CONVERSION OF FOREIGN COMPANIES’ FINANCIAL STATEMENTS For companies operating in countries with high inflation rates: (cid:2) fixed assets, equity investments, shareholders’ equity and other non-monetary items are revalued based on the reduction in the general purchasing power of the local currency during the fiscal year; these items are restated by means of a relevant price index as of the balance-sheet date; (cid:2) all balance-sheet items, with the exception of the Group share of shareholders’ equity, are then converted into euros on the basis of exchange rates in effect at the end of the fiscal year; (cid:2) with respect to the Group share of shareholders’ equity, the opening balance is carried forward at its value in euros at the end of the previous fiscal year; other movements are converted at current foreign-currency exchange rates. The difference in euros thus created between assets and liabilities in the balance sheet is recorded in a foreign-currency translation adjustment account included under “Shareholders’ equity – Group share”; (cid:2) the income statement in local currency is adjusted for the effects of inflation between the date of transactions and end of the fiscal year. All items are then converted based on the exchange rates in effect at year-end. SEGMENT-BASED INFORMATION There were no countries with high inflation rates in 2007 and 2008. The Carrefour Group is organized by geographic region (France, Europe excluding France, Asia and Latin America) in the first level of segment-based information, and is then organized according to the following store formats: hypermarkets, supermarkets, hard- discount stores and other formats (convenience, cash & carry, financial companies etc.), which constitute the second level of segment-based information. Accounting principles used for segment-based information are identical to those applied to draw up the consolidated financial statements. BUSINESS COMBINATIONS For other companies: (cid:2) balance-sheet items are converted on the basis of the closing rate; (cid:2) income-statement items are converted at the average rate for the year when this is not materially different from the rate in effect on the date of the transactions. CONVERSION RATE ADJUSTMENT FOR FOREIGN COMPANIES The Group has chosen the option offered by IFRS 1 that does not require restatement of business combinations prior to 1 January 2004 in accordance with IFRS 3. As of 1 January 2004, all business combinations are entered in the accounts by applying the purchase method. The difference between the purchase cost, which includes expenses directly attributable to the acquisition, and the fair value of assets acquired, net of liability and any liability assumed within the context of the grouping, is shown as goodwill. Negative goodwill recognized in the income statement. Subsequent acquisitions after control is assumed are subject to an additional calculation of goodwill without reassessment of subsidiaries’ assets and liabilities. For companies acquired during the course of the fiscal year and the equity-interest acquisition date is shown in the consolidated income statement. resulting from the acquisition is immediately increases, only income for the period after 14 CARREFOUR GROUP In accordance with the option offered under IFRS 1, the Group has chosen to restate the translation adjustments accumulated at 1 January 2004 under “Consolidated reserves”. This option has no it involves a impact on the Group’s total shareholders’ equity; reclassification the reserves” entry “Translation adjustments” entry to the “Other totalling 3,236 million euros. shareholders’ equity within from FIXED ASSETS 1) Goodwill In accordance with IFRS 3, goodwill has not been amortized since 1 January 2004. Instead, goodwill is subject to an impairment test during the second half of the year. Methods of depreciation are described in the paragraph, “Impairment tests”. 2) Intangible fixed assets Other intangible fixed assets basically correspond to software programs that are depreciated over a period ranging from one to five years. 3) Tangible fixed assets In accordance with IAS 16 “Tangible Fixed Assets”, land, buildings, equipment, fixtures and fittings are valued at their cost price at acquisition, or at production cost less depreciation and loss in value. The cost of borrowing is not included in the acquisition price of fixed assets. Tangible fixed assets in progress are posted at cost identified loss in value. Depreciation of these assets begins when the assets are ready for use. Tangible fixed assets are depreciated on a straight-line basis according to the following average useful lives: less any (cid:2) Construction: (cid:129) Buildings (cid:129) Grounds (cid:129) Car parks (cid:2) Equipment, fixtures, fittings and installations 40 years 10 years 6-and-two-thirds years 6-and-two-thirds years to 8 years (cid:2) Other fixed assets 4 to 10 years life values and residual values are Depreciation methods, useful revised at the close of each fiscal year. Fixed-asset acquisitions made through a financial lease agreement – i.e. a contract whose impact is to transfer, to a substantial extent, in the ownership of an asset to the lessee – are recorded as follows: the risks and advantages inherent (cid:2) assets are capitalized at the fair value of the leased asset or, if it the minimum leasing the discounted value of is lower, at instalments. the same These assets are depreciated over duration as tangible fixed assets owned by the Group, or over the duration of the contract if this is shorter than the useful life of the asset; (cid:2) the corresponding debt is recorded in the balance sheet as a liability; (cid:2) lease instalments paid are allocated between financial expense and amortization of the balance of the debt. the net book value is their useful value, whichever 4) Impairment tests In accordance with IAS 36 (Impairment of Assets), when events or changes in the market environment indicate the risk of a loss in value regarding individual assets and cash-generating units (CGUs), these are the subject of a detailed review in order to determine whether than their recoverable value, defined as their fair value (minus disposal cost) or is higher. The useful value is determined by discounting future cash flow expected from use of the asset. If the recoverable amount is lower than the net book value, the loss in value is recorded as the difference between these two amounts. Losses in the value of tangible and intangible assets with a definite useful life may be reversed at a later date if the recoverable value becomes higher than the net book value (within the limits of initially-recorded depreciation) and of the amortization that would have been recorded if no loss of value had been observed. lower CONSOLIDATED FINANCIAL STATEMENTS These impairment tests are performed for all fixed assets on an annual basis. IMPAIRMENT OF GOODWILL IAS 36 (Impairment of Assets) stipulates that an impairment test must be performed annually for each CGU to which goodwill has been allocated. The level of analysis at which Carrefour appraises the present value of goodwill corresponds to countries or to operations per country. As stipulated in IAS 36, goodwill must be allocated to each CGU or to each group of CGUs that may benefit from the synergies of the combined companies. Each unit or group of units to which is allocated must represent the lowest level within the goodwill entity at which goodwill is monitored for internal management purposes, and must not be larger than a segment based on either the entity’s primary or secondary reporting format, determined in accordance with IAS 14 (Activity or Geographic Region). The useful value is estimated by discounting future cash flow over a period of five years with determination of a final value calculated by discounting the fifth-year figures at the perpetual rate of growth to infinity and the use of a discount rate specific to each country. The specific discount rate for each country is obtained by adding the inflation differential and a risk premium to the average cost of to the difference unleveraged capital between the cost of the five-year credit default swap (CDS) applicable to countries where the Group operates and those that apply in France. for France. This refers These discount rates, which are subject to validation by Group management, ranged between 7.7% and 20.8% for the 2008 fiscal year. They break down as follows, depending on the country: (cid:2) France: 7.7% (cid:2) Europe: between 8.2% and 16.7% (cid:2) Latin America: between 11.0% and 20.8% (cid:2) Asia: between 8.1% and 16.0% IMPAIRMENT OF OTHER INTANGIBLE AND TANGIBLE FIXED ASSETS that tangible fixed assets In accordance with IAS 36, show identifiable signs of a loss in value (for example, a negative Activity contribution) are subjected to a detailed review to determine whether their net book value is lower than their recoverable value, this being their market value or useful value, whichever is higher. Useful value is estimated by discounting future cash flow over a period of five years plus a residual value. Market value is assessed with regard to recent transactions and professional practices. Discount rates used are the same as for impairment testing of goodwill. FINANCIAL ASSETS In accordance with IAS 39, financial assets are classified in one of the four following categories: (cid:2) financial assets measured at fair value through the income statement, including derivatives; (cid:2) loans and receivables; 2008 FINANCIAL REPORT 15 (cid:2) assets held to maturity; (cid:2) assets available for sale. These instruments’ classification determines their accounting treatment. Classification is determined by the Group on the date on which the instrument is initially recorded, on the basis of the purpose for which the asset was acquired. Sales and acquisitions of financial assets are recorded on the transaction date, i.e. the date on which the Group bought or sold the asset. 1) Financial assets reported at fair value in the income statement These are financial assets held by the Group in order to make a short-term profit on the sale, or financial assets voluntarily classified in this category. These assets are valued at their fair value with variations in value recognized in the income statement. Classified as current assets in the cash-flow equivalents, these financial instruments include, in particular, UCITS cash shares. 2) Loans and receivables Loans and receivables are financial assets, whose payment is fixed or can be determined, which are not listed on an active market and are neither held for trading purposes nor available for sale. These assets are initially valued at amortized cost on the basis of the effective-rate-of-interest method. For short-term receivables without a declared rate of interest, the fair value will be the same as the amount on the original invoice, unless the effective interest rate has a significant impact. These assets are subject testing when there is evidence that they have diminished in value. An impairment loss is recognized if than the estimated recoverable value. Debts pertaining to equity interests, other debts and receivables and commercial receivables are included in this category. They appear as financial assets and commercial receivables. the book value is higher to impairment 3) Assets held to maturity Assets held to maturity are financial assets, other than loans and receivables, whose payments are determined or can be determined and which the Group has the intention and capacity of holding until this maturity date. These assets are initially booked at fair value and then at their amortized cost on the basis of the effective-rate-of-interest method. They are subject to impairment testing when there is evidence that they have diminished in value. An impairment loss is recognized if the book value is higher than the estimated recoverable value. Assets held to maturity are recognized as financial assets. is 4) Assets available for sale Assets available for sale are financial assets that do not belong to the aforementioned categories. They are valued at fair value. Unrealized capital gains or losses are recorded as shareholders’ equity until they are sold. When, however, there is an objective indication of the impairment of an asset available for sale, the accumulated loss recognized in the income statement. Impairment losses recorded on variable-income securities cannot be reversed at a later balance-sheet date. For listed securities, fair value corresponds to the market price. For non-listed securities, is determined by reference to recent transactions or by valuation techniques that are based on reliable, observable market data. When, however, impossible to reasonably estimate the fair value of a security, it is valued at its historic cost. These assets are then subject to impairment testing in order to evaluate the extent to which they are recoverable. is it it 16 CARREFOUR GROUP This category contains primarily non-consolidated equity securities and marketable securities that do not comply with other definitions of financial assets. They are shown as other financial assets. INVESTMENT PROPERTIES With regard to IAS 40 as amended, investment properties are tangible-asset items (buildings or land) owned for leasing or capital valuation. As for the criteria that apply to this standard, those assets not used for operational purposes are generally shopping malls within the Group (i.e. all businesses and services established behind the stores’ cash registers), in full or co-ownership. Investment properties are posted at their historic value and depreciated over the same period as tangible fixed assets of the same nature. Assessment of the fair value of investment properties is performed on an annual basis by applying a multiple that is a function of the calculated profitability of each shopping mall and a capitalization rate based on the country to the annualized gross rents generated by each investment property. The fair value is presented in Note 18. INVENTORIES Inventories are valued at the most recent purchase price plus any additional costs, a method that is well suited to rapid inventory turnaround, and does not generate a significant difference from the FIFO method. The cost price includes all costs that constitute the purchase cost of the goods sold (with the exception of foreign currency losses and gains), also taking into consideration all conditions obtained at the time of purchase and from supplier services. In accordance with IAS 2 (Inventories), inventories are valued at their cost price or net present value, whichever is lower. The net present value is the estimated selling price minus additional costs necessary for the sale. OPERATING RECEIVABLES Operating receivables generally include trade receivables, franchisee receivables and rents receivable from shopping malls. Where appropriate, they are subject to depreciation, which takes into account the debtor’s capacity to honour its debt and the collection period of the receivable. OUTSTANDING CUSTOMER RECEIVABLES/ REFINANCING WITH FINANCIAL SERVICE COMPANIES Customer receivables due to financial service companies refer primarily to consumer credit granted to customers of companies within the Group’s scope of consolidation. These loans, together with the amounts outstanding from refinancing them, are classified on the basis of their maturity date as current or non-current assets and liabilities. CASH AND CASH EQUIVALENTS Cash equivalents are short-term investments that are highly liquid, can easily be converted into a known cash amount, and are subject to only a negligible risk of change in value. Cash refers to cash in hand and demand deposits. PROVISIONS In accordance with IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), provisions are posted when, at year-end, the Group has a present, legal or implicit obligation arising from a past event, the amount of which can be reliably estimated and the settlement of which is expected to result in an outflow of resources representative of economic advantages. This obligation may be of a legal, regulatory or contractual nature. These provisions are in view of the most likely estimated on the basis of their type, assumptions. Amounts are discounted when the impact of the passage of time is significant. EMPLOYEE BENEFITS The Group’s employees enjoy short-term benefits (such as paid leave, sick leave and profit-sharing), long-term benefits (like long- service medals and seniority bonuses) and post-employment (including benefits with defined contributions and benefits retirement bonuses and benefits). 1) Defined-contribution schemes Defined-contribution schemes are systems whereby the company makes periodic fixed contributions to external benefit agencies that provide administrative and financial management. These schemes free the employer from any further obligation, with the agency taking responsibility for paying employees the amounts owed schemes, complementary pension schemes and pension funds with fixed contributions). These contributions are recognized as expenses when they fall due. them (basic pension Security Social 2) Defined-benefit schemes and long-term benefits The Carrefour Group makes provisions for various defined-benefit schemes that depend upon an individual’s accumulated years of service within the Group. The commitment is calculated annually on the basis of a projected-units-of-credit method, on an actuarial basis, taking into consideration such factors as salary increases, retirement age, mortality, personnel rotation and discount rates. The discount rate is equal to the interest rate, at the balance-sheet date, of top-rated bonds with a due date close to that of the Group’s commitments. Calculations are made by a qualified actuary. The Group has decided to apply the “corridor” method, whereby the effect of variations in actuarial terms is not recognized on the income statement, as long as the former remain within a range of 10%. Actuarial differences exceeding 10% of the value of the commitment, or the value of hedging assets if that is greater than the value of the commitment on the income statement, are thus spread over the expected residual active working life of employees benefiting from the scheme. In accordance with the option offered under IFRS 1, the Group has chosen to directly recognize actuarial gains and losses on its pension commitments that have not yet been recognized in the French financial statements as of 31 December 2003 by offsetting shareholders’ equity at 1 January 2004. CONSOLIDATED FINANCIAL STATEMENTS The plans granted between 2003 and 2008 fall within the scope of IRFS 2. These are subscription or purchase options reserved for employees, with no special acquisition conditions aside from effective presence at the end of the vesting period. The granted benefits that are remunerated via these schemes are posted as expenses, offsetting a capital increase over the vesting period. The expense recognized for each period corresponds to the fair value of the assets and services received on the basis of the Black-Scholes formula, on the date on which these were granted and spread over the vesting period. The free-share allocation plans granted by the Group also give rise to the recognition of an expense spread over the vesting period. The granted plans are conditional both upon the effective presence of the beneficiaries at the end of the vesting period and upon the achievement of objectives. Details of share-allocation plans are also provided in the Reference Document. INCOME TAX Deferred taxes are calculated at the tax rate in effect at the beginning of the following fiscal year, on the basis of the carry- forward method. Deferred taxes are reviewed annually when the accounts are closed. Tax expenses for the fiscal year include tax payable and deferred tax. Deferred tax is calculated according to the balance-sheet method of tax-effect accounting on the basis of temporary differences between the book value entered in the consolidated balance sheet and the tax basis of assets and liabilities. Deferred taxes are accounted for based on the way in which the Group expects to realize or settle the book value of assets and liabilities, using tax rates that have been enacted by the balance-sheet date. Deferred assets and liabilities are not discounted and are classified in the balance sheet as non-current assets and liabilities. Deferred tax assets are recognized for deductible temporary differences, unused tax losses and unused tax credits, to the extent it is likely that taxable profit will be available against which the deductible temporary differences can be used. FINANCIAL DEBT AND FINANCIAL INSTRUMENTS Financial debt includes: (cid:2) bonds; (cid:2) outstanding accrued interest; (cid:2) outstanding amounts relating to financial lease agreements; (cid:2) bank loans and facilities; (cid:2) financial debt pertaining to securitized debt for which the Group incurs credit risk; (cid:2) minority share-purchase commitments. 3) Share-based payments In accordance with the option offered under IFRS 1, the Group has elected to limit the application of IRFS 2 (Share-based Payment) to stock option plans paid in shares, allocated after 7 November 2002, the rights to which had not yet been acquired as of 1 January 2004. This application had no effect on total shareholders’ equity at 1 January 2004. 1) Accounting principle Financial debts are recorded on the basis of the amortized-cost principle. Initially, they were recorded at nominal value, net of transaction costs and premiums directly attributable to their issue. Derivative instruments intended to cover exposure to interest-rate risk are entered at market value and used as fair value or cash-flow hedges. 2008 FINANCIAL REPORT 17 Cash-flow hedge: derivatives intended to hedge the floating rate of borrowing are considered cash-flow hedges. The portion of gain or loss related to variations in fair value deemed to be effective is stated as equity until the hedged transaction is itself recognized in Group financial statements. The portion considered ineffective is directly recorded as financial income/expense. Fair-value hedge: issue swaps backed by fixed-rate bonds are considered fair-value hedge instruments. liabilities hedged via these swaps are revalued for the hedged portion. Fair- value changes are recorded in the income statement and offset by corresponding fair-value variations of the effective portion. Other derivatives: value variations are recorded in profit or loss. these are recorded at market value, and fair- rate swaps Financial for 2) Fair value The market values of exchange-rate and interest-rate instruments are determined on the basis of valuation models that are recognized on the market or by the use of rates established by external financial institutions. The values estimated by valuation models are based on the discounting of expected future cash flows. These models use criteria based on market data (interest-rate and exchange-rate curves) obtained from Reuters. The fair value of long-term debt is estimated according to the market value of bonds or of all future flows discounted on the basis of market conditions for a similar instrument (in terms of currency, maturity, interest type and other factors). 3) Derecognition of financial assets In December 2002, the Group contracted into a programme for securitizing receivables. This programme partially transfers the risks and advantages of the variation in value discounted by future cash flows from receivables. Consequently, part of these securitized receivables has been recognized as financial debt. 4) Commitments for the purchase of minority interests The Group has agreed to purchase the shares of minority shareholders in some of its fully-consolidated subsidiaries. For the Group, these purchase commitments correspond to option commitments (sales of put options). The exercise price of these transactions may be fixed or determined by a predefined calculation formula; these transactions can be exercised at any time or at a predetermined date. Under current accounting treatment: standards, we have chosen the following furthermore, (cid:2) in accordance with the provisions of IAS 32, the Group has recorded the put options granted to minority shareholders in the subsidiaries concerned as financial liabilities; (cid:2) initially, the liability is recorded at the current exercise price, and then, in later closing, on the basis of the fair value of potentially purchased shares, if the exercise price is based on the fair value; (cid:2) the counterpart to this liability is recorded minus minority interests, with the balance recorded as goodwill in reference to IFRS 3. For the sake of consistency, the obligation to record a liability when the put option has not been exercised suggests that we should continue to treat these transactions in the same way as we do to increase the percentage of shares in controlled companies; (cid:2) any further change in commitment value is recorded by (excluding the discounting adjusting the goodwill amount effect); 18 CARREFOUR GROUP (cid:2) the Group share figure is calculated on the basis of the percentage holding in the subsidiary, without taking into consideration the percentage of interest attached to put-option sales. The accounting principles described above may be revised based on changes in the standards. FOREIGN-EXCHANGE RATE HEDGING INSTRUMENTS The Group uses foreign-exchange rate hedging instruments (mainly forward currency contracts) to manage and reduce its exposure to fluctuations instruments are valued at their fair value. Variations in fair value of these instruments are treated as follows: in currency rates. These financial (cid:2) when the instrument is classified as a hedging instrument for future cash flows, variations in fair value corresponding to the effective portion are directly recorded as shareholders’ equity, while variations corresponding to the ineffective portion are recorded on the income statement; (cid:2) when the instrument is classified as a fair-value hedging instrument, variations in fair value are recorded in the income statement, where they offset variations in fair value of the underlying instrument for the effective portion. RISK MANAGEMENT The Group is exposed to the following risks relating to the use of financial instruments: (cid:2) credit risk; (cid:2) liquidity risk; (cid:2) market risk. It is the Board of Directors’ responsibility to define and supervise risk management for the Group. A Risk Committee, responsible for defining and controlling the Group’s risk management policy, has been put in place, comprising the Group’s Chief Financial Officer, the director of the Group’s Cash-flow and Financing Operations department (DTFG), DTFG Front Office and Risk Control managers, the director of the Group’s internal auditing department, and an outside consulting firm. The purpose of the Group’s risk-management policy is to identify and analyze risks faced by the Group, to define risk limits and controls to be implemented, to manage risks, and to ensure compliance with defined risk limits. Risk-management policy and systems are reviewed on a regular basis to take into account changes in market conditions and Group operations. Through its training and management rules and procedures, the Group aims to develop a rigorous, constructive control environment where all personnel have a full understanding of their roles and obligations. The Group’s Audit Committee is responsible for ensuring the application of Group risk-management policies and procedures and for examining whether framework adequately addresses risks faced by the Group. The Group’s Audit Committee is assisted in its supervisory role by the Internal Audit department, which conducts regular, risk- management controls and procedures and reports its results to the Audit Committee. the risk-management targeted reviews of Credit risk Credit risk is the risk of financial loss for the Group in the event that a instrument fails to meet its client or counterparty to a financial contractual obligations. This risk mainly arises from commercial receivables and marketable securities. Commercial receivables Operating receivables generally include trade receivables, franchisee receivables and rents receivable from shopping malls. Where appropriate, they are subject to depreciation, which takes into account the debtor’s capacity to honour its debt and the collection period of the receivable. Customer receivables due to financial service companies refer primarily to consumer credit granted to customers of companies within the Group’s scope of consolidation. These loans, together with the amounts outstanding from refinancing them, are classified on the basis of their maturity date as current or non-current assets and liabilities. In order to assess the credit risk, the Group discounts (on the original terms of the credit) recoverable cash flow in the context of calculating depreciation on bad debts. Furthermore, a discount is calculated on the restructured credit using a base rate. Lastly, for questionable restructured debt and non-restructured bad debt, provisions and reversal of impairment losses for risk of the debt’s non-recovery are recorded as risk cost; the increase in book value relating to reversal of impairment loss and depreciation of the discount arising from the passage of time is recorded as interest margin. Investments CONSOLIDATED FINANCIAL STATEMENTS The Group buys and sells derivatives in order to manage market risk. All of these transactions are executed in compliance with directives set forth by the Risk Committee. In general and to the extent possible, the Group seeks to apply hedge accounting to manage the volatility of its results. Foreign-exchange risk throughout the world are performed by Group operations subsidiaries that primarily operate in their own countries (with purchasing and sales in local currencies). As a result, the Group’s exposure to exchange-rate risk in commercial operations is naturally limited, and mainly involves imports. Risk related to fixed import transactions is hedged via forward currency purchases. Investments planned in foreign countries are sometimes hedged by options. Local financing operations are generally conducted in the local currency. The maturity of months. foreign-exchange transactions is less than 18 Interest-rate risk Interest-rate risk is managed centrally by the Group’s Cash-flow and Financing Operations department (DTFG). The latter has a reporting obligation for its operations, and measures monthly performance in order to identify: (cid:2) the outcome of actions undertaken; (cid:2) whether or not the actions undertaken comply with the Group’s risk policy. The Group limits its exposure to credit risk by diversifying its investments in liquid securities and limiting them to counterparties with a minimum credit rating of A with Standard and Poor’s and A1 with Moody’s. Given requirements, management does not expect any counterparty to default on its obligations. credit-rating these Liquidity risk the risk that Liquidity risk involves the Group will experience difficulties in honouring its debts when they are due. To manage liquidity risk, the Group’s approach is to ensure, to the extent possible, that it has sufficient liquid assets at all times to honour its liabilities when they become due, under normal or “strained” conditions, without incurring unacceptable losses or damaging the Group’s reputation. Following renegotiation of syndicated loans in 2004, the Group is no longer subject to any financial covenants. The breakdown of debt according to expiration date and currency is presented in Note 27, and the commitments received from and given to financial institutions is presented in Note 33. Market risk Market risk corresponds to the risk of variations in market price, such as exchange rates, rates and the price of equity instruments, that affect Group results. The purpose of market-risk management is to manage and control exposure to market risk within acceptable limits while optimizing the profitability/risk trade- off. interest The Risk Committee is responsible for controlling compliance with internal risk limits and monitoring Carrefour policy through the DTFG. Chaired by the Group’s Chief Financial Officer, the Risk Committee meets at least once every two months. The DTFG’s management procedures are subject to approval by the Audit Committee. To achieve its aims, the DTFG has various reporting schedules (weekly, monthly and annually). The Group’s net exposure to interest-rate fluctuation risk is reduced via the use of financial instruments comprising interest-rate swaps and options. The types of hedge used as of 31 December 2008 and the amount of capital hedged are presented in Note 27 of the financial statements. We have calculated our accordance with IFRS 7. The results of the calculation (on short-term debt) are as follows: susceptibility to rate changes in Effect of an interest-rate simulation on financial expenses (in millions of euros)* Rate reduction of 1% Rate increase of 1% Variation in financial expenses before derivatives Variation of financial expenses of derivatives Variation of financial expenses after derivatives * (gain), loss. (44) (3) (47) 44 1 45 2008 FINANCIAL REPORT 19 Share risk OTHER INCOME The Group’s policy is to maintain a sound capital base to preserve investor, creditor and market confidence and to support the future development of operations. The Group occasionally purchases its own shares on the market. The rate of these purchases depends on stock prices. These shares are mainly used in the context of programmes under which Group stock options are granted. As of 31 December 2008, the Group held 19,325,573 treasury shares. investments Furthermore, marketable securities and financial primarily comprise monetary investments, where Group exposure is low. TREASURY STOCK Treasury stock is deducted from consolidated shareholders’ equity. Any income from the sale of treasury stock (together with the corresponding tax effects) is directly charged to shareholders’ equity and does not contribute to net income for the fiscal year. ASSETS AND ASSET GROUPS HELD FOR SALE AND DISCONTINUED OPERATIONS rental services, income (financial and travel Other income, franchise fees etc.) are recorded on a separate “Other income” line and under the “Net sales” line on the income statement. Certain expenses, the cost of payments made by customers in several instalments and of loyalty schemes not funded by suppliers, are recorded net of other revenue. This entry includes fees received by finance companies from debit cards, traditional credit applications and revolving credit applications. Fees are spread across the duration of the contract. such as GROSS MARGIN FROM CURRENT OPERATIONS Gross margin from current operations corresponds to the sum of net sales and other income minus the cost of sales as defined in Note 6. ACTIVITY CONTRIBUTION Activities correspond to the gross margin from current operations minus and general depreciation, amortization and provisions. administrative expenses sales, and A discontinued operation is a component of an entity that the latter has sold or that is being held with a view to sale, and which: NON-CURRENT INCOME AND EXPENSES (cid:2) represents an activity line or primary, distinct geographic region, and (cid:2) is part of a unique, coordinated plan to dispose of an activity line or distinct geographic region, or (cid:2) is a subsidiary acquired exclusively for the purpose of resale. It is classified as a discontinued operation at the time of its disposal or at a prior date when the operation satisfies the criteria for classification as an asset held for sale. When an activity is classified as a discontinued operation, the comparative income statement is restated as if the activity had satisfied the criteria for classification as a discontinued operation as of the comparative period’s opening. NET SALES Net sales include only store and warehouse sales. Note 2: The year’s highlights Acquisitions during the period (cid:2) Acquisition of Artima: On 26 October 2007, Carrefour signed a memorandum of agreement with PEF V Investment Holdings SARL and Mr. Clemens Petschnikar to acquire 100% of shares in Artima SA for a price of 55 million euros. This acquisition is subject to approval by the relevant authorities. On 27 January 2008, the Romanian competition authorities approved the acquisition. Artima operates 21 stores. This company was fully consolidated as of 1 February 2008. 20 CARREFOUR GROUP Items of an unusual nature and frequency are accounted for under non-current such as depreciation of assets and restructuring costs. income and non-current expenses, INCOME PER SHARE The Group presents basic and diluted income per share for its ordinary shares. Basic income per share is calculated by dividing income attributable to the bearers of the company’s ordinary shares by the weighted average number of ordinary shares in circulation during the period. Diluted income per share is determined by adjusting income attributable to bearers of ordinary shares and the average to weighted accommodate the effects of all potential ordinary dilutive shares, which mainly include convertible bonds and share-subscription options allocated to members of the workforce. circulation ordinary number shares of in (cid:2) Acquisition of Alfa: On 21 January 2008, Carrefour Indonesia signed a memorandum of agreement with PT Sigmantara Alfindo and Prime Horizon Pte to acquire 75% of shares in PT Alfa Retailindo Tbk for a price of 49 million euros. On 4 April 2008, Carrefour Indonesia acquired 4.9% of additional shares. Listed on the Jakarta Stock Exchange, Alfa Retailindo operates 29 stores. Since the agreement is not subject to approval by the local fully consolidated as of 21 January 2008. competition authorities, company was the CONSOLIDATED FINANCIAL STATEMENTS agreement concerning the sale of their respective interests in Distributis AG to Coop. Distributis AG is a joint venture in which Carrefour and its partner, Maus Frères, each own a 50% interest. It operated 12 hypermarkets at the end of 2008. As of 31 December 2007, this agreement remained subject to the approval of the Swiss competition authorities, which did approve the sale on 28 March 2008. In accordance with IFRS 5, income from the sale and results up to the date of sale were recorded as “Results from operations sold or in the process of being sold”. (cid:2) Sale of land in Turkey: on 29 January 2008, Carrefour SA, a joint venture between Carrefour and Sabanci, announced the sale of land in Merter (Istanbul) to a joint venture controlled by Apollo Real Estate and Multi Turkmall for the purpose of building a shopping centre. A Carrefour hypermarket will be built on this site. The transaction price amounted to 267 million euros. Disposals and discontinued operations during the period (cid:2) Withdrawal from Slovakia: on 1 June 2007, Carrefour signed an agreement with ICS and ECM Group BV concerning the sale of its hypermarkets in Slovakia. This agreement was entered into after the Slovakian competition authorities’ 29 December 2006 refusal to approve the sale of these four stores to Tesco. These hypermarkets will be operated as Carrefour franchises as of the effective date of sale. On 31 December 2007, this transaction remained subject to the approval of the competition authorities, but approval was granted in February of 2008. In accordance with IFRS 5, results from the first half of 2008 were recorded as “Results from operations sold or in the process of being sold”. (cid:2) Withdrawal from Switzerland: on 21 August 2007, the Carrefour signed a joint memorandum of Group and Maus Frères Note 3: Sectoral information a) Sectoral information by region Other income Investment by region (in millions of euros) 31/12/2008 31/12/2007 (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 849 1,134 577 357 1,105 1,162 537 265 Total 2,918 3,069 In 2008, 53% of capital expenditure concerned the extension of sales area, with the balance primarily involving maintenance and renovation of the existing network. In 2007, extensions of sales area represented 50% of capital expenditure. Sales France Europe (excluding France) Latin America Asia 365 360 363 171 299 299 357 192 Total 1,258 1,147 Activity contribution before depreciation, amortization and provisions (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 2,228 1,866 627 440 2,244 1,884 488 397 (in millions of euros) 31/12/2008 31/12/2007 Total 5,161 5,014 France Europe (excluding France) Latin America Asia 37,968 32,418 10,505 6,076 37,621 30,837 8,211 5,480 Total 86,967 82,148 Depreciation, amortization and provisions (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 718 713 232 198 688 668 187 179 Total 1,861 1,722 2008 FINANCIAL REPORT 21 Activity contribution Investment properties (in millions of euros) 31/12/2008 31/12/2007 (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 1,510 1,153 395 242 1,556 1,216 301 218 France Europe (excluding France) Latin America Asia Total 3,300 3,291 Total 32 217 16 81 346 41 369 17 74 500 Non-current income and expenses Foreign currency translation - Group share (in millions of euros) 31/12/2008 31/12/2007 (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia Total (347) (157) (1) (20) (524) (1) 41 15 (7) 47 France Europe (excluding France) Latin America Asia Total - (73) (221) (53) (347) - 154 337 (57) 434 Income from companies consolidated by the equity method Provisions for risks and expenses (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia Total Net intangible fixed assets 31 22 (1) - 52 30 19 (6) - 43 (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 4,573 6,658 1,086 100 4,448 7,025 1,280 93 Total 12,417 12,847 Net tangible fixed assets (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 4,751 6,209 2,445 1,405 4,786 6,333 2,420 1,211 Total 14,809 14,751 (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 980 989 322 30 723 1,033 366 25 Total 2,320 2,147 Trade payables (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 6,200 8,196 1,631 1,249 6,346 8,080 1,676 975 Total 17,276 17,077 Other liabilities (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 1,461 796 412 241 1,540 1,004 387 182 Total 2,910 3,114 22 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Total balance sheet Net tangible and intangible fixed assets (in millions of euros) 31/12/2008 31/12/2007 (in millions of euros) 31/12/2008 31/12/2007 France Europe (excluding France) Latin America Asia 31,924 18,060 123 1,974 32,567 16,947 913 1,504 Hypermarkets Supermarkets Hard-discount stores Other activities 13,084 6,008 2,506 5,628 13,343 6,184 2,343 5,728 Total 52,082 51,932 Total 27,227 27,597 b) Segment information by format Investments by format (in millions of euros) 31/12/2008 31/12/2007 1,529 535 442 411 1,535 526 430 578 Hypermarkets Supermarkets Hard-discount stores Other activities Total Sales Total balance sheet (in millions of euros) 31/12/2008 31/12/2007 Hypermarkets Supermarkets Hard-discount stores Other activities 22,265 7,341 3,009 19,467 24,442 5,662 3,038 18,790 Total 52,082 51,932 2,918 3,069 “Other activities” comprises convenience stores, cash & carry and holding companies. (in millions of euros) 31/12/2008 31/12/2007 Hypermarkets Supermarkets Hard-discount stores Other activities 53,875 18,745 9,629 4,718 50,883 17,665 8,641 4,960 Total 86,967 82,148 Note 4: Net sales (in millions of euros) Sales 31/12/2008 31/12/2007 86,967 82,148 Change 5.9% At constant exchange rates, sales would have been 87,420 million euros. The impact of exchange-rate fluctuations represented (453) million euros as of 31 December 2008, including (250) million euros in Latin America, (132) million euros in Asia and (70) million euros in the Europe zone. 2008 FINANCIAL REPORT 23 Net sales by country (in millions of euros) 31/12/2008 31/12/2007 (in millions of euros) 31/12/2008 31/12/2007 France 37,968 37,621 Latin America Europe (excluding France) Spain Italy Belgium Greece Poland Turkey Romania Portugal (hard-discount stores) 32,418 30,837 13,776 6,384 4,205 2,623 2,129 1,470 1,000 830 13,034 6,373 4,316 2,471 1,713 1,462 728 740 Brazil Argentina Colombia Asia Taiwan China Thailand Malaysia Indonesia Singapore 10,505 7,255 2,135 1,114 6,076 1,302 2,990 550 326 820 88 8,211 5,608 1,659 944 5,480 1,331 2,554 525 281 699 90 Note 5: Other income by type (in millions of euros) Rental income Sub-leasing income Sundry income Total 31/12/2008 31/12/2007 Change 246 149 863 225 124 798 9.3% 19.9% 8.2% 1,258 1,147 9.7% “Sundry income” refers mainly to the cost of loyalty programmes as well as related products, franchise fees and income from finance companies. Note 6: Cost of sales Other than inventory purchases and variation, the cost of goods sold includes other costs that mainly comprise the cost of products sold by financial companies, income from discounts and exchange-rate differences generated by the purchase of goods. Note 7: Sales, general and administrative expenses (in millions of euros) Labour costs Property rentals Maintenance and repairs Fees Advertising Taxes Consumables Other general expenses Total 24 CARREFOUR GROUP 31/12/2008 31/12/2007 Change 8,307 1,049 758 665 1,061 557 728 1,230 7,988 966 771 654 1,057 484 660 1,092 14,355 13,673 4.0% 8.6% (1.7%) 1.8% 0.3% 15.0% 10.3% 12.6% 5.0% CONSOLIDATED FINANCIAL STATEMENTS Note 8: Depreciation, amortization and provisions (in millions of euros) 31/12/2008 31/12/2007 Change Depreciation of tangible fixed assets Depreciation of intangible fixed assets Amortization of financial lease agreements Depreciation of investment properties Allocations and reversals of provisions Total 1,623 198 28 20 (9) 1,484 183 33 18 5 9.4% 8.0% (14.4%) 12.9% n.s. 1,861 1,722 8.0% Note 9: Non-current income and expenses (in millions of euros) Depreciation of assets Restructuring costs Other non-current income and expenses Total 31/12/2008 31/12/2007 (396) (72) (56) (524) (23) (92) 162 47 In 2008, depreciation of assets mainly included impairment of goodwill involving GS (Italy) in the amount of 197 million euros and stores located in Italy in the amount of 131 million euros. Regarding a loss in value of 197 million euros resulting solely from impairment tests on all CGUs, an analysis of susceptibility to discount rates saw the following impact: • a 0.5-point increase in the discount rate, with associated loss in value of 195 million euros; • a 0.5-point reduction in the discount rate, with no loss in value recorded. Restructuring costs include non-recurring costs related to specific events like store closings and conversions. Items that are unusual due to their nature and frequency are accounted for under non-current income and non-current expenses. In 2008, a tax provision of 126 million euros was recorded. 2008 FINANCIAL REPORT 25 Note 10: Interest income (in millions of euros) Other financial expenses and income Debt expense Income from cash and cash equivalents Interest expenses Interest expenses for financial leasing operations Total 31/12/2008 31/12/2007 (92) (471) 67 (500) (38) (562) (58) (468) 42 (474) (36) (526) The breakdown of financial income items related to financial instruments can be analyzed as follows: Recorded on the income statement (in millions of euros) 31/12/2008 31/12/2007 Income from interest on bank deposits Dividends received for assets available for sale Net income from the sale of assets available for sale reclassified from equity Net foreign-currency gain Change in fair value of financial assets held for trading Change in fair value of financial assets, accounted for at fair value through profit or loss Net change in fair value of cash-flow hedging instruments reclassified from equity Change in fair value of financial liabilities Income from interest rate instruments Income from marketable securities Miscellaneous Financial income Interest expenses on financial liabilities valued at amortized cost Net foreign currency losses Change in fair value of financial assets held for trading Change in fair value of financial assets accounted for at fair value through profit or loss Change in fair value of financial liabilities accounted for at fair value through profit or loss Loss in value of securities held to maturity Ineffective portion of the change in fair value of cash-flow hedging instruments Financial expense from discounting Other financial expenses Financial expenses Net financial income 17 10 6 - 117 12 2 115 99 5 - 382 (672) (18) (63) (115) (12) n/a - (41) (24) (945) (562) 38 5 37 12 22 6 1 58 52 5 8 244 (628) - (19) (65) - n/a - (31) (27) (769) (526) Entered directly as shareholders’ equity (in millions of euros) 31/12/2008 31/12/2007 Net change in fair value of financial assets available for sale Net change in fair value of financial assets available for sale transferred to income Ineffective portion of the change in fair value of cash-flow hedging instruments Fair value of cash-flow hedging instruments transferred to income Foreign currency translation resulting from foreign operations Total (6) 6 (39) (2) 828 787 (35) 37 (5) (1) 66 62 26 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Note 11: Income tax (in millions of euros) 31/12/2008 31/12/2007 (in millions of euros) 31/12/2008 Income tax Deferred tax Total tax 573 170 743 619 188 807 Actual tax rate 33.6% 28.7% Current income before tax Standard rate Surplus tax Theoretical tax Effects of permanent differences on tax Tax effects of income not taxed or taxed at a different rate Other Total tax Actual tax rate 2,214 33.3% 1.1% 762 153 (303) 131 743 33.6% Note 12: Net income from discontinued operations (in millions of euros) 31/12/2008 31/12/2007 (cid:2) income from the sale and operations Switzerland, amounting to 12 million euros; for the period of Discontinued operations – Group share Discontinued operations – minority share Total 16 0 16 431 (0) 431 In 2008, net income from discontinued operations was accounted for by: (cid:2) adjustment of the sale price of operations in Portugal for (30) million euros; (cid:2) completion of prior sales amounting to 11 million euros. In 2007, net income from discontinued operations was accounted for by: (cid:2) income for the year and income from the sale of Portuguese hypermarkets, amounting to 431 million euros; (cid:2) the impact of income for the year from Slovakia, amounting to 9 million euros; (cid:2) zero impact on income for the year from Switzerland; (cid:2) income from the sale and operations for the period of Slovakia, amounting to 23 million euros; (cid:2) the final impact of transactions for discontinued operations during prior fiscal years, amounting to (9) million euros. 2008 FINANCIAL REPORT 27 Note 13: Net income per share Net income per share before dilution Net income from recurring operations – Group share (in millions of euros) Net income from discontinued operations – Group share (in millions of euros) Net income – Group share (in millions of euros) Average weighted number of shares Income from recurring operations per share (in euros) – Group share Income from discontinued operations per share (in euros) – Group share Net income – Group share per share (in euros) 31/12/2008 31/12/2007 1,256 16 1,272 686,525,459 1,869 431 2,299 700,118,405 1.83 0.02 1.85 2.67 0.62 3.28 Net income per share after dilution 31/12/2008 31/12/2007 Net income from recurring operations – Group share (in millions of euros) Net income from discontinued operations – Group share (in millions of euros) Net income – Group share Average weighted number of shares Dilutive shares Number of shares restated Income from recurring operations per share (in euros) – Group share Income from discontinued operations per share (in euros) – Group share Net income, Group share per share after dilution 1,256 16 1,272 686,525,459 - 686,525,459 1,869 431 2,299 700,118,405 - 700,118,405 1.83 0.02 1.85 2.67 0.62 3.28 Treasury stock was not taken into account in calculating income per share. A significant amount of treasury stock was purchased during the 2008 fiscal year. These purchases increased the income per share for recurring operations – Group share by 1.6%. Note 14: Intangible fixed assets (in millions of euros) Net goodwill Other gross intangible fixed assets Amortization of other intangible fixed assets Impairment Other net intangible fixed assets Intangible fixed assets in progress Net intangible fixed assets 28 CARREFOUR GROUP 31/12/2008 31/12/2007 11,363 2,430 (1,323) (178) 929 126 11,674 2,282 (1,186) (164) 931 242 12,418 12,847 CONSOLIDATED FINANCIAL STATEMENTS CHANGE TO GOODWILL Net goodwill at the end of December 2006 Acquisi- tions for 2007 Disposals for 2007 Impair- ment for 2007 Foreign currency translation adjust- ments for 2007 Net goodwill at the end of December 2007 Acquisi- tions for 2008 Disposals for 2008 Impair- ment for 2008 Other move- ments Net goodwill at the end of December 2008 Foreign currency trans- lation adjust- ments for 2008 4,059 3,132 954 1,231 313 185 978 45 3 97 505 401 (9) (2) (217) 4,104 3,135 946 1,327 841 161 1,161 95 9 2 88 35 105 24 (24) (1) (197) (164) (6) (78) (200) 4,199 2,947 948 1,415 712 155 988 (in millions of euros) France Italy Belgium Spain Brazil Argentina Other countries Total 10,852 1,051 (228) 0 (1) 11,674 334 0 (197) (200) (248) 11,363 As of 31 December 2008, goodwill in France consisted mainly of Comptoirs Modernes, Euromarché and Hyparlo; in Italy, of GS; in in Spain, of Continente and the buyback of Belgium, of GB; minority-shareholder shares in Centros Comerciales Carrefour; in Brazil, of RDC and Atacadão; in Poland, of Ahold Polska; and in Argentina, exclusively of Norte. The main acquisitions during the year were: Artima in Romania, Alfa in Indonesia, various supermarkets in France, and final adjustments CHANGE TO INTANGIBLE FIXED ASSETS (in millions of euros) As of 31 December 2006 Acquisitions Disposals Foreign-currency adjustments Amortization Impairment Changes in consolidation scope and transfer As of 31 December 2007 Acquisitions Disposals Foreign-currency adjustments Amortization Impairment Changes in consolidation scope, transfers and other movements As of 31 December 2008 on acquisitions for the prior fiscal year (Atacadão in Brazil, Ahold Polska in Poland and Plus Supermercados in Spain). Other movements involved the change in value of commitments to purchase the interests of minority shareholders (accounting method described in the accounting principles [Financial Debt and Instruments]). Gross Reduction in value Net 15,941 (4,050) 11,890 537 (95) 23 537 (95) 23 (183) (183) 591 82 674 16,998 (4,151) 12,847 405 (83) (306) (179) 25 (193) (245) 147 405 (59) (306) (193) (245) (32) 16,835 (4,417) 12,418 2008 FINANCIAL REPORT 29 Note 15: Tangible fixed assets (in millions of euros) 31/12/2008 31/12/2007 Land Buildings Equipment, fixtures, fittings and installations Other fixed assets Fixed assets in progress Leased land Leased buildings Leased equipment, fixtures, fittings and installations Other leased fixed assets Gross tangible fixed assets Depreciation Depreciation of leased fixed assets Impairment 2,913 9,838 14,006 1,159 769 195 1,374 129 17 30,402 (14,321) (1,011) (260) 2,934 9,628 13,219 1,148 790 177 1,378 143 22 29,439 (13,474) (1,012) (202) Net tangible fixed assets 14,809 14,751 Tangible fixed assets mainly include sales areas operated by the Group. At the end of December 2008, the Group operated 14 million sq m in sales area. A breakdown is available in the Consolidated Store Network note at the end of this report. LEASED FIXED ASSETS The Carrefour Group has carried out a review of all its property-leasing agreements. Agreements qualifying as financial-leasing agreements were capitalized, whereas other agreements were treated as simple operating leases. Financial-leasing agreements (in millions of euros) Total Less than 1 year 1 to 5 years More than 5 years Minimum rates to be paid Discounted value Total sub-leasing income receivable Minimum rents paid during the year Conditional rents Sub-leasing income Simple leasing agreements 885 550 20 71 - 17 78 71 n/a n/a n/a n/a 407 305 n/a n/a n/a n/a 400 174 n/a n/a n/a n/a (in millions of euros) Total Less than 1 year 1 to 5 years More than 5 years Minimum rents to be paid Total minimum income to be received from sub-leasing Minimum rents paid during the year Conditional rents 5,864 36 1,152 27 859 n/a n/a n/a 2,076 n/a n/a n/a 2,928 n/a n/a n/a 30 CARREFOUR GROUP CHANGE TO TANGIBLE FIXED ASSETS (in millions of euros) As of 31 December 2006 Acquisitions Disposals Depreciation Impairment Foreign-currency adjustments Changes in consolidation scope and transfer CONSOLIDATED FINANCIAL STATEMENTS Gross Reduction in value Net 27,624 (13,888) 13,736 2,755 (283) 27 (684) (1,514) 11 703 2,755 (283) (1,514) 11 27 19 As of 31 December 2007 29,439 (14,687) 14,751 Acquisitions Disposals Depreciation Impairment Foreign-currency adjustments Changes in consolidation scope, transfers and other movements 2,605 (882) (487) (275) 580 (1,651) (122) 290 2,605 (302) (1,651) (122) (487) 15 As of 31 December 2008 30,401 (15,591) 14,809 Note 16: Other non-current financial assets and investments in companies accounted for by the equity method (in millions of euros) Investments in companies accounted for by the equity method(1) Investments Loans at more than one year Other(2) Total (1) This item corresponds primarily to securities held in Italy (Finiper). Net income from companies consolidated by the equity method amounted to 52 million euros as of 31 December 2008. (2) This item refers primarily to guarantees, deposits and other capitalized receivables. 31/12/2008 31/12/2007 429 420 10 882 436 297 16 806 1,741 1,554 Note 17: Deferred tax (in millions of euros) Deferred tax on assets Deferred tax liabilities Total 31/12/2008 31/12/2007 672 (424) 249 944 (462) 482 The nature of deferred taxes is described in Note 1. They mainly correspond to temporary differences between the book and fiscal values of assets and liabilities. 2008 FINANCIAL REPORT 31 DEFERRED TAX BRIDGE TABLE (in millions of euros) Net deferred tax * Essentially changes in consolidation perimeter UNRECOGNIZED DEFERRED TAX ASSETS 31/12/2007 Foreign- currency effect Allocations/ reversals Other* 31/12/2008 482 (37) (170) (26) 249 (in millions of euros) 31/12/2008 31/12/2007 Deferred tax on temporary differences Deferred tax on deficits that can be carried forward Unrecognized deferred tax assets 403 568 971 236 706 942 The amount of deferred tax on assets not recorded as of 31 December 2008 amounted to 971 million euros. This corresponds principally to tax liabilities that can be carried forward and which were not capitalized because their recovery was considered unlikely. Note 18: Investment properties (in millions of euros) Investment properties at gross value Depreciation Total CHANGE IN INVESTMENT PROPERTIES These changes are presented as follows: Opening balance (01/01/2007) Allowances for depreciation and amortization for the period Foreign-currency effect Investments during the period Disposals during the period Other movements Closing balance (31/12/2007) Allowances for depreciation and amortization for the period Foreign-currency effect Investments during the period Disposals during the period Transfers Other movements Closing balance (31/12/2008) 31/12/2008 31/12/2007 441 (95) 346 596 (96) 500 455 (19) 9 30 (53) 79 500 (20) (38) 17 (3) (91) (21) 346 Rental income generated by these investment properties and recorded on the income statement in 2008 amounted to 72 million euros. Their fair value as of 31 December 2008 was estimated at 786 million euros. As of 31 December 2007, the fair value of investment properties was estimated at 831 million euros. 32 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Note 19: Inventories (in millions of euros) Inventories at gross value Depreciation Inventories at net value Note 20: Commercial receivables (in millions of euros) Trade receivables Depreciation on bad debts Net receivables from customers Supplier receivables Total Trade receivables are primarily those due from Group franchisees. Supplier receivables correspond to rebates and commercial incentives receivable from Group suppliers. Note 21: Other current financial assets (in millions of euros) Assets available for sale Derivatives Deposits at more than 3 months Total Note 22: Other assets 31/12/2008 31/12/2007 7,167 (275) 6,891 7,154 (287) 6,867 31/12/2008 31/12/2007 959 (180) 779 2,140 1,030 (167) 863 2,561 2,919 3,424 31/12/2008 31/12/2007 51 126 69 245 - - - 0 (in millions of euros) 31/12/2008 31/12/2007 Receivables from employees Loans at less than 1 year Receivables from the disposal of intangible, tangible and financial assets Prepaid expenses Other net operating receivables Total 19 14 91 382 590 1,096 25 16 42 228 645 956 2008 FINANCIAL REPORT 33 Note 23: Cash and cash equivalents (in millions of euros) Cash equivalents Cash Total 31/12/2008 31/12/2007 3,338 1,979 1,723 2,442 5,317 4,164 Note 24: Credit risk associated with financial assets The book value of financial assets represents the maximum exposure to credit risk. The maximum exposure to credit risk as of the balance-sheet date is as follows: Exposure to credit risk (in millions of euros) Investments Other long-term financial investments* Total other non-current financial assets Consumer credit from financial companies Commercial receivables Other current financial assets Other assets Cash and cash equivalents Total financial assets * Basically comprising deposits and guarantees. 31/12/2008 31/12/2007 420 892 297 822 1,312 1,119 4,805 2,919 245 1,096 5,317 4,672 3,424 - 956 4,164 15,694 14,335 Maximum exposure to credit risk concerns commercial receivables (operating receivables and credit from financial companies) as of the balance-sheet date, analyzed by geographic region, is as follows: Exposure to credit risk (in millions of euros) France Europe Latin America Asia Total 34 CARREFOUR GROUP 31/12/2008 31/12/2007 5,997 7,080 1,818 799 6,406 5,186 2,062 682 15,694 14,335 CONSOLIDATED FINANCIAL STATEMENTS Consumer credit from financial companies (in millions of euros) < 1 year > 1 year < 5 years > 5 years TOTAL France Belgium Spain Italy Greece Argentina Brazil Dia Spain Total 1,235 95 693 82 10 77 512 4 2,708 1,269 62 342 23 12 9 60 1 311 9 2,564 158 1,346 114 10 89 512 13 1,717 381 4,806 Note 25: Capital and issuance premiums Capital and issuance premiums (in thousands of shares) In circulation as of 1 January Issuance against cash Exercised stock options Ordinary shares 2008 704,903 - - 2007 704,903 - - In circulation as of 31 December 704,903 704,903 As of 31 December 2008, equity capital comprised 704,902,716 ordinary shares with a nominal value of 2.5 euros. All issued shares were fully paid up. Concerning company shares held by the Group, all suspended until these shares are returned to circulation. rights are Note 26: Provisions (in millions of euros) Provisions for retirement benefits Legal risk Restructuring After-sales service Other 31/12/2007 Foreign- currency trans- lation 674 992 78 57 346 (2) (62) (0) 0 (25) Total 2,147 (89) The cost of retirement indemnities is determined at the end of each fiscal year on the basis of employee seniority and the probability of their continued employment at retirement. The calculation is based on an actuarial method that incorporates assumptions as to salary increases and retirement age. The commitment of the Group is entirely covered by provisions and by payments to external agencies. Allowance Discounting Reversals (unused) Reversals (used) Other 31/12/2008 67 376 29 10 144 626 41 (85) (72) (28) (30) (33) (97) (33) (30) (30) (48) 69 (143) 22 31 104 668 1,057 71 37 487 41 (248) (238) 82 2,320 Other provisions comprise elements related to tax, labour and legal risk. In the normal course of business, Group companies are involved in certain legal proceedings and litigation, including disputes with tax and social-security authorities. A provision for contingency and loss has been established for expenses that can be estimated with sufficient reliability and are deemed probable by the companies and their expert assessors. 2008 FINANCIAL REPORT 35 Change in the fair value of hedging assets (in millions of euros) Fair value as of 31 December 2007 Changes in the consolidation perimeter Expected return Benefits paid by the fund Actuarial losses Other Fair value as of 31 December 2008 Provision (in millions of euros) Defined benefit obligations (DBOs) Unrecognized actuarial adjustments Fair value of hedging assets Provision as of 31 December 2008 The criteria are as follows: Retirement age Salary increases Salary expense rate Discount rate Total 292 14 (57) (33) 8 223 Total 835 (15) (223) 597 60-65 years 2.5% to 3.0% 7% to 45% 4.15% to 6.0% Summary of defined benefit schemes’ financial situation in the Group’s three main countries (France, Italy and Belgium) Breakdown of charges to 2008 income statement (in millions of euros) Service costs Financial cost Expected return on financial assets Other Expenses (income) as of 31 December 2008 Balance-sheet movements (in millions of euros) Provision as of 31 December 2007 Impact on income statement Changes in consolidation perimeter Benefits paid Other Provision as of 31 December 2008 Total 26 44 (14) (12) 45 Total 611 45 (53) (6) 597 Note 27: Financial liabilities NOTE 27.1 – NET DEBT The Group’s net debt may be analyzed as follows: (in millions of euros) December 2008 December 2007 Bonds Derivatives – liabilities Other borrowing Other long-term debt Commercial paper Leasing Total borrowing Total borrowing, excluding derivative liabilities Current financial assets Cash Total investment Net debt 36 CARREFOUR GROUP 9,249 791 469 66 1,197 443 12,214 11,424 245 5,317 5,562 6,652 8,149 606 662 89 1,550 466 11,523 10,917 - 4,164 4,164 7,358 CONSOLIDATED FINANCIAL STATEMENTS NOTE 27.2 – BORROWING Breakdown of borrowing, excluding derivative liabilities, according to interest-rate type (in millions of euros) Fixed-rate debt Variable-rate debt Total Fixed-rate debt on issuance (before swaps) is classified as fixed-rate debt. Floating-rate debt on issuance (before swaps) is classified as floating-rate debt. Breakdown of borrowing, excluding derivative liabilities, by currency (in millions of euros) Euro US dollar Brazilian real Chinese yuan Turkish lira Cypriot pound Taiwanese dollar Malaysian ringgit Colombian peso Thai baht Polish zloty Romanian lei Indonesian rupiah Russian ruble Total The debt in euros represented 96% of the total in December 2008, against 95% in December 2007. Breakdown of bonds (in millions of euros) Breakdown of bonds Public issues: Bond, FRF, 10 years, 4.50% Euro MTN bond, EUR, 2.5 years, 6.125% Euro MTN bond, EUR, 2.5 years, 4.375% Euro MTN bond, EUR, 8 years, 4.375% Euro bond, EUR, 5 years, Euribor 3M+15bp Euro MTN bond, GBP, 10 years, 5.375% Euro MTN bond, EUR, 5 years, 6.625% Euro fixed-rate bond, EUR, 8 years, 3.625% Euro fixed-rate bond, EUR, 7 years, 5.125% Euro fixed-rate bond, EUR, 7 years, 5.375% Euro fixed-rate bond, EUR, 10 years, 3.825% Euro fixed-rate bond, EUR, 10 years, 3.85% Euro fixed-rate bond, EUR, 10 years, 4.375% Private issues: December 2008 December 2007 9,984 1,440 8,702 2,215 11,424 10,917 December 2008 December 2007 10,911 9 266 51 2 - 80 7 - 7 57 9 8 18 10,365 0 304 42 4 65 3 103 4 26 - - - 11,424 10,917 Maturity 2009 2010 2011 2011 2012 2012 2013 2013 2014 2015 2015 2015 2016 Total 9,249 8,796 1,000 1,000 300 1,100 200 796 700 750 1,250 1,000 50 50 600 453 2008 FINANCIAL REPORT 37 Breakdown of borrowing, excluding derivative liabilities, by maturity date (in millions of euros) 1 year 2 years 3-5 years Over 5 years Unspecified Total Bank covenants December 2008 December 2007 2,648 1,282 3,808 3,686 0 3,247 1,082 3,223 3,254 111 11,424 10,917 As of 31 December 2008, the Group had no bank covenants. NOTE 27.3 – LIQUIDITY RISK ASSOCIATED WITH FINANCIAL LIABILITIES The contractual residual maturity date of financial liabilities may be analyzed as follows: (in millions of euros) 31/12/2008 Debt hedged for fair value Debt hedged for cash flow Fixed-rate debt Unhedged debt Liabilities related to financial lease agreements Interest-rate derivatives Total borrowing Trade payables Consumer credit refinancing Other liabilities* Total Book value 796 251 8,517 1,417 443 791 Contractual cash flow < 1 year 2-5 years > 5 years 608 301 10,231 2,638 0 1,618 27 9 1,922 2,401 0 68 581 32 4,968 237 0 1,004 0 260 3,341 0 0 546 12,214 15,396 4,427 6,822 4,147 17,276 4,495 2,910 17,276 4,495 2,910 17,276 4,044 2,910 0 451 0 0 0 0 36,894 40,076 28,656 7,273 4,147 Contractual cash flow is not discounted. For variable-rate instruments, the rate taken into account is the spot rate of 31 December. (in millions of euros) 31/12/2007 Debt hedged for fair value Debt hedged for cash flow Fixed rate debt Unhedged debt Liabilities related to financial lease agreements Interest-rate derivatives Total borrowing Trade payables Consumer credit refinancing Other liabilities* Total * See page 39. 38 CARREFOUR GROUP Book value 846 100 7,865 2,111 466 135 Contractual cash flow < 1 year 2-5 years > 5 years 960 101 9,253 2,166 0 1,142 80 101 2,227 1,908 0 127 880 0 4,054 257 0 1,015 0 0 2,972 0 0 0 11,523 13,623 4,444 6,207 2,972 17,077 4,419 3,114 17,077 4,419 3,114 17,077 3,989 3,114 0 430 0 0 0 0 36,132 38,232 28,623 6,637 2,972 CONSOLIDATED FINANCIAL STATEMENTS Other liabilities comprise the following items: (in millions of euros) Trade payables for fixed assets Payables to employees Prepaid income Other liabilities Total 31/12/2008 31/12/2007 757 1,585 64 503 2,910 877 1,633 94 509 3,114 Long-term liabilities (with the exception of provisions) are not discounted, as the effect of discounting on the financial statement would be insignificant. NOTE 27.4 – FINANCIAL ASSETS AND LIABILITIES BY CATEGORY As of 31/12/2008 Breakdown by category of instruments (in millions of euros) Investments Other long-term financial investments Other non-current financial assets Total consumer credit from financial companies Commercial receivables Other current financial assets Other assets(2) Cash and cash equivalents Book value For fair value by result Assets available for sale Loans, receivables and other liabilities Liabilities at amortized cost(1) Derivative instruments 420 892 1,312 4,805 2,919 245 715 5,317 - 5,317 420 420 51 892 892 4,805 2,919 68 715 Assets 15,313 5,317 471 9,398 Total borrowing Total consumer credit refinancing Trade payables Other liabilities(3) 12,214 4,495 17,276 2,846 17,276 2,846 Liabilities 36,830 - - 20,122 15,918 791 As of 31/12/2007 Breakdown by category of instruments (in millions of euros) Investments Other long-term financial investments Other non-current financial assets Total consumer credit from financial companies Commercial receivables Other current financial assets Other assets(2) Cash and cash equivalents Book value For fair value by result Assets available for sale Loans, receivables and other liabilities Liabilities at amortized cost(1) Derivative instruments 297 822 1,119 4,672 3,424 - 728 4,164 - 4,095 297 297 822 822 4,672 3,424 728 Assets 14,107 4,095 297 9,646 Total borrowing Total consumer credit refinancing Trade payables Other liabilities(3) 11,523 4,419 17,077 3,020 17,077 3,020 Liabilities 36,039 - - 20,097 15,336 606 (1) Including financial liabilities that are the subject of a fair-value hedge. (2) Excluding prepaid expenses. (3) Excluding prepaid income. 2008 FINANCIAL REPORT 39 - - 11,423 4,495 - 126 126 791 - - 10,917 4,419 - 69 69 606 Note 28: Financial instruments: Cash-flow hedges The following table indicates the periods during which the Group expects cash flows associated with derivatives qualified for cash-flow hedges to occur and impact the results. 2008 2007 (in millions of euros) Book value Expected cash flow < 1 year > 1 year > 5 years Book value Expected cash flow < 1 year > 1 year > 5 years Interest-rate hedges* Foreign-exchange rate hedges* (16) 311 (24) 314 (4) 314 (20) 0 Total 295 290 309 (20) 1 0 1 0 248 248 0 260 0 260 260 260 0 0 0 0 0 0 * Interest rate risk mainly concerns swaps, whereas currency instruments are essentially comprised of forward contracts. Note 29: Financial instruments: foreign-exchange risk EXPOSURE TO FOREIGN-EXCHANGE RISK The Group’s operations throughout the world are conducted by subsidiaries operating primarily in their own countries (with purchasing and sales in local currencies). As a result, the Group’s exposure to exchange-rate risk in commercial operations is naturally limited, and its susceptibility to foreign-exchange risk is low. Country ARGENTINA BRAZIL CHINA COLOMBIA UNITED STATES UNITED KINGDOM HONG KONG INDIA INDONESIA MALAYSIA POLAND ROMANIA RUSSIA SLOVAKIA SINGAPORE SWITZERLAND TAIWAN THAILAND TURKEY Currency 31/12/2008 31/12/2007 Year-end Average rate Year-end Average rate ARS BRL CNY 1000 COP USD GBP HKD INR 100 IDR MYR PLN RON RUB SKK SGD CHF TWD THB TRY 0.2083 0.3080 0.1053 0.3192 0.7185 1.0499 0.0927 0.0148 0.0066 0.2081 0.2408 0.2486 0.0235 0.0332 0.4990 0.6734 0.0219 0.0207 0.4654 0.2166 0.3738 0.0983 0.3472 0.6798 1.2550 0.0865 0.0157 0.0071 0.2048 0.2837 0.2706 0.0274 0.0300 0.4819 0.6250 0.0216 0.0207 0.5259 0.2157 0.3827 0.0930 0.3372 0.6793 1.3636 0.0871 - 0.0072 0.2054 0.2783 0.2772 - 0.0298 0.4725 0.6043 0.0209 0.0231 0.5824 0.2331 0.3775 0.0961 0.3517 0.7297 1.4604 0.0937 - 0.0080 0.2125 0.2660 0.2985 - 0.0296 0.4849 0.6085 0.0223 0.0222 0.5616 40 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Note 30: Financial instruments: fair value The following table indicates the fair value of financial assets and liabilities as well as their book value on the balance sheet. The principle used to define fair value is indicated in Note 1. Fair value/book value (in millions of euros) Investments Other long-term financial investments 31/12/2008 31/12/2007 Book value 420 892 Fair value 420 892 Book value 297 822 Fair value 297 822 Other non-current financial assets 1,312 1,312 1,119 1,119 Consumer credit from financial companies Operating receivables Other current financial assets Other assets Cash and marketable securities 4,805 2,919 245 1,096 5,317 4,805 2,919 245 1,096 5,317 4,672 3,424 - 956 4,164 4,672 3,424 - 956 4,164 Total assets 15,694 15,694 14,335 14,335 Debt hedged for fair value Debt hedged for cash flow Fixed-rate debt Unhedged debt Liabilities related to financial lease agreements Interest-rate derivatives Total borrowing Trade payables Consumer credit refinancing Other liabilities Total liabilities 796 251 8,517 1,417 443 791 796 251 8,466 1,417 443 791 846 100 7,865 2,111 466 135 846 100 7,814 2,111 466 135 12,214 12,164 11,523 11,472 17,276 4,495 2,910 17,276 4,495 2,910 17,077 4,419 3,114 17,077 4,419 3,114 36,894 36,844 36,133 36,082 Total (+ net liability / - net asset) 21,200 21,149 21,798 21,747 Profit (non-recorded losses) (50) (50) Note 31: Post year-end events There are no post year-end events to report. 2008 FINANCIAL REPORT 41 Note 32: Contingent liabilities In the context of their everyday operations, companies within the Group are regularly subject to tax audits. These tax adjustments, or the identified outstanding tax not subject to adjustment, are the object of appropriate provisions whose amount is regularly reviewed in accordance with the criteria of IAS 37. The Group relies on internal and external advisors to assist in evaluating such litigation or disputes. Furthermore, the Group is subject to litigation or disputes that it believes will not give rise to any significant expenses or have a major impact on its financial situation, business and/or results. Note 33: Off-balance-sheet commitments Commitments made and received by the Group that have not been recorded on the balance sheet correspond to contractual obligations that have not yet been executed and are dependent on the fulfilment of conditions or operations subsequent to the year in progress. These commitments are of three types, relating to cash flow, to the operation of sales outlets and to securities acquisitions. rents Furthermore, payable on leased sales outlets and those receivable from its shopping-mall stores) that also represent future commitments either given or received. the Group has rental contracts (mainly for (cid:2) guarantees for receivables; (cid:2) any other commitments given or received. 3. Commitments related to the acquisition of securities These comprise firm commitments received to purchase or sell securities – mainly in France, in the context of Group franchising activities – plus options to purchase securities and liability guarantees. Liability guarantees received are not disclosed. 1. Off-balance-sheet commitments relating to funds comprise: 4. Commitments related to leasing agreements the end of December 2008, At the Group fully owned 664 hypermarkets out of 1,213 consolidated hypermarkets, 669 supermarkets out of 1,745 consolidated supermarkets and 457 hard-discount stores out of 4,795 consolidated hard-discount stores. Stores not fully owned are rented under leasing agreements that represented an expense of 1,049 million euros over the year 2008 (see Note 7). Of these contracts, 14% expire in less than 1 year, 37% in 1-5 years and 49% in more than 5 years. The gross amount of future rental payments, determined on the basis of the maximum future commitment made by the Group in terms of both duration and amount for each of the property- leasing agreements existing to date, amounts to 6,748 million euros. Discounted future rental flow corresponds to a commitment of 5,206 million euros. The Group also owns shopping centres, mainly anchored by its hypermarkets and supermarkets, that are rented out and represented income of 246 million euros in 2008. The gross amount of receivable, dependant on future commitments made by lessees in terms of both the duration and amount of each property-lease agreement existing to date, amounts to 447 million euros. The discounted future rental flow corresponds to a commitment received of 396 million euros. future rental payments (cid:2) lines of credit representing confirmed lines of credit made available to the Group and not yet used as of the balance-sheet date; that can be brought into play, (cid:2) collateral and mortgages given or received, mainly within the context of Group real-estate operations; (cid:2) credit commitments given by the Group’s financial service companies to their customers as part of their operating activities, as well as bank commitments received. 2. Off-balance-sheet commitments related to operations consist of: (cid:2) commitments to purchase plots of land under the Group’s expansion programme; (cid:2) various undertakings arising from commercial contracts; (cid:2) commitments made to carry out construction work as part of the Group’s expansion programme; (cid:2) rental guarantees and guarantees on shopping-mall operators; 42 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS Commitments given: Commitments given (in millions of euros) - 1 year 1-5 years + 5 years 31/12/2008 Breakdown by maturity Relating to funds Relating to financial companies Relating to other companies Relating to operation/property/expansion Relating to acquisition of securities Relating to lease agreements 8,628 7,386 1,242 1,035 1,747 6,748 4,222 3,526 697 434 202 937 4,006 3,533 473 411 1,492 399 327 72 190 54 2,483 3,328 TOTAL 18,159 5,796 8,392 3,971 Commitments received: Commitments received (in millions of euros) - 1 year 1-5 years + 5 years 31/12/2008 Breakdown by maturity Relating to funds Relating to financial companies Relating to other companies Relating to operation/property/expansion Relating to acquisitions of securities Relating to lease agreements 5,031 2,356 2,675 908 350 447 1,416 711 704 262 13 169 3,081 1,366 1,714 425 323 221 534 278 256 222 14 56 TOTAL 6,735 1,860 4,049 827 Note 34: Employees Average number of Group employees Group employees at year-end 31/12/2008 31/12/2007 479,072 495,287 461,260 490,042 2008 FINANCIAL REPORT 43 Note 35: Related parties Remuneration for the year 2008 paid to members of the Group’s Management Committee (excluding the Management Board and the Board of Directors) is detailed in the “Remuneration and benefits” section of the Reference Document. Information on the remuneration of corporate officers is provided in the Carrefour management report prepared by the Board of Directors. Transactions between the parent company and equity affiliates are summarized below: Nature of transaction (in millions of euros) 2008 2007 2008 2007 2008 2007 2008 2007 Transaction amounts Receivables from affiliated companies Payables to affiliated companies Off-balance-sheet commitments Sale of goods Commitments given: firm commitments to purchase securities Commitments received: firm commitments to purchase securities Other 1 4 2 2 1,004 979 (41) (41) (8) (10) 44 CARREFOUR GROUP CONSOLIDATED FINANCIAL STATEMENTS COMPANIES CONSOLIDATED BY FULL INTEGRATION AS OF 31 DECEMBER 2008 FRANCE ACTIS AGON ALFROY ALLU ALODIS ANADIA ANDELYSIENNE DE DISTRIBUTION AUCEMA AUREJAN BCG BDD BELLEVUE DISTRIBUTION BERMITTO BREAL DISTRIBUTION BRUMAT CADS CAMARSYL CANNECAR CAOR CARAUTOROUTES CARCOOP CARCOOP FRANCE CARDADEL CARFUEL CARJORY CARLIER CARMA CARMA VIE CARMIN CARREFOUR ADMINISTRATIF FRANCE CARREFOUR ASSISTANCE A DOMICILE CARREFOUR FORMATION HYPERMARCHES FRANCE (CFHF) CARREFOUR FRANCE CARREFOUR HYPERMARCHES CARREFOUR HYPERMARCHES FRANCE CARREFOUR INTERACTIVE CARREFOUR MOBILIER HYPERMARCHES FRANCE CARREFOUR MONACO CARREFOUR PROPERTY CARREFOUR PROPERTY DEVELOPPEMENT CARREFOUR SERVICES CLIENTS CARREFOUR STATION SERVICE (ex PARIDIS 75) CARREFOUR SYSTEMES D’INFORMATIONS FRANCE CARREFOUR VOYAGES CARTAILLAN Percentage interest used in consolidation Commercial business register number 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0 100.0 100.0 100.0 100.0 50.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 345 274 310 326 803 202 398 260 950 383 966 496 345 130 306 442 769 691 384 418 331 398 656 660 409 581 154 347 514 895 380 060 210 300 513 041 334 897 220 432 807 550 337 730 683 353 110 554 443 499 041 421 295 213 428 777 999 433 970 944 317 599 231 333 955 912 335 014 411 306 094 194 477 732 887 379 535 909 330 598 616 428 798 136 392 312 898 428 240 352 487 596 173 433 970 811 672 050 085 451 321 335 428 767 859 493 123 095 433 970 886 92 502 820 775 632 169 381 844 471 423 697 523 451 321 376 433 929 114 379 601 974 447 729 815 2008 FINANCIAL REPORT 45 CASCH CHAMPION SUPERMARCHES FRANCE (C.S.F) CHAMVOG CHANGE DISTRIBUTION CHARSAC CHRISTHALIE CHRISTING CLAIREFONTAINE COJADIS COLODIS COMIDIS CONTINENT 2001 COVICAR 2 CSD CSD TRANSPORTS CSF France CUBZADIS DAGUI DARTAGNAN DAVARD DDAPS DE LA BUHUETTERIE DEFENSE ORLEANAISE DES JARDINS DES TROIS G DIJOI DIONYESIENNE DE SUPERMARCHES DISANIS DISTRABAUD DISTRAL DISTRIPAS DISTRIVAL DUNIEDIS ESQUIEZIENNE DE SUPERMARCHES (S.E.S) ETADIS ETS CATTEAU EUROMARCHE FINIFAC FLORADIS FORUM DEVELOPPEMENT GEDEL GENEDIS GEOTIS GILVER GML – GRANDS MAGASINS LABRUYERE GML FRANCE GML STATIONS SERVICE GOUDY GUILLOT ET FILS GUIROVI HALLDIS HAMON HONDIS HYPARLO SA IMMODIS (ex HYPARMO) IMMOBILIERE CARREFOUR IMMODIS INTERDIS JBM HOLDING JORI JULIEME 46 CARREFOUR GROUP Percentage interest used in consolidation Commercial business register number 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 74.0 74.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.3 100.0 100.0 100.0 100.0 100.0 100.0 444 531 180 440 283 752 410 907 315 443 738 463 326 313 426 344 389 820 330 305 558 326 964 715 445 018 633 480 569 813 333 903 789 430 209 650 440 274 454 326 220 654 433 859 154 501 238 414 353 125 255 339 443 137 339 211 450 333 940 120 383 946 795 352 295 232 85 580 728 383 329 968 347 852 428 333 134 641 397 728 122 418 544 516 402 068 456 331 057 075 433 842 960 383 257 938 338 434 673 332 136 050 440 274 355 576 280 101 780 060 414 409 468 857 330 202 680 381 485 176 395 104 243 345 130 512 384 878 468 382 944 684 314 832 387 397 894 296 504 801 705 353 898 125 775 543 846 381 618 461 391 982 980 622 007 821 437 939 952 779 636 174 334 440 849 323 439 786 950 340 927 421 437 591 401 634 852 350 832 267 392 746 194 KANY KERRIS KOALA LA BURRIERE LA CHARTREUSE LA CIOTAT DISTRIIBUTION SNC LA FONTAINE LA VOULTE DISTRIBUTION LALAUDIS LAMBIN LAPALUS & FILS (ETABS) LAUL LE RELAIS DE CARIMAI LEDISAND LES REMPARTS LEVALDIS LOGIDIS LOGIDIS COMPTOIRS MODERNES LORDIS LUDIS MADRAS MAISON JOHANES BOUBEE MANDY MATEDIS MEGANE MIBILCO MONDEVILLE 1 MONEDIS MONTEL DISTRIBUTION MONTELIMAR DISTRIBUTION MONTVERT NEUVILLE DISTRIBUTION NODIS NOISY DISTRIBUTION NOVIGRAY OGALIM OOSHOP OSMADIS PERPIGNAN DISTRIBUTION SNC PHILEVE PHIVETOL POLE PONTORSON DISTRIBUTION PRODIM PROFIDIS PROFIDIS & CIE PROMECAR RIOM DISTRIBUTION RIOMOISE DE DISTRIBUTION SA ROBINSON S 2M I S.D.O S.L.M. DISTRIBUTION S2P - SOCIETE DES PAIEMENTS PASS SAB SAINT MICHEL DISTRIBUTION SAMAD DISTRIBUTION SARL DE SAINT HERMENTAIRE SAUDIS SAVIMMO SCI LA SEE SCI POUR LE COMMERCE CONSOLIDATED FINANCIAL STATEMENTS Percentage interest used in consolidation Commercial business register number 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 95.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 60.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 353 484 595 340 382 548 401 401 443 433 511 045 349 857 011 451 625 354 421 787 086 391 571 312 339 176 885 341 092 609 795 920 172 410 261 689 420 047 938 401 140 330 389 347 063 381 681 345 303 010 789 428 240 287 430 160 010 345 316 855 380 239 228 775 583 248 319 449 708 383 230 703 399 381 979 347 737 157 422 382 051 351 036 017 398 834 226 487 596 165 379 843 139 439 525 148 325 485 902 350 498 416 479 570 798 348 302 613 420 153 538 404 239 584 451 603 070 347 970 592 340 721 844 341 455 855 352 725 808 345 130 488 323 514 406 327 753 372 421 194 531 487 596 199 318 623 790 403 877 863 440 272 789 487 280 307 453 585 101 313 811 515 419 278 270 314 208 752 352 729 636 384 235 602 338 625 759 341 876 936 484 144 399 378 384 002 2008 FINANCIAL REPORT 47 SELIMA SES 1 (ex Coviam 7) SETEDIS SICODI SIFO SIGECA SISP SMANG SMSM SOBEDIS SOBRUDIS SOCIETE DE DISTRIBUTION PLOEUCOISE - SODIP SOCIETE DES HYPERMARCHES DE LA VEZERE SOCIETE D’EXPLOITATION AMIDIS & Cie SOCIETE FECAMPOISE DE SUPERMARCHES SOCIETE NOUVELLE SOGARA SODILOC SODISAL SODISCAF SODISOR SODITA SOFEDIS SOFIDIM SOFINEDIS SOFODIS SOGARA SOGARA FRANCE SOGARA STATION SERVICE SOGIPIC SOGRIN SOLADIS SOLEDIS SOPLANDI SOVAL STEMA STROFI SUPER ALBA SUPERDIS SUPERMARCHE MOREL THOMAS DISTRIBUTION TIALMON TILLY DISTRIBUTION TONICLEM TY FRAPP UNICAGES UNIVU VALCAOR VEZERE DISTRIBUTION VIADIX VICUS VIMOUTIERS DISTRIBUTION VIZEGU BOEDIM BEARBULL CARREFOUR MANAGEMENT CARREFOUR SA CHAMNORD COMPTOIRS MODERNES SAS (CMSAS) COSG CRFP10 CRFP11 CRFP13 48 CARREFOUR GROUP Percentage interest used in consolidation Commercial business register number 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 100.0 100.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0 50.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 62.6 100.0 100.0 100.0 100.0 100.0 411 495 369 487 647 091 309 085 280 352 487 722 401 321 344 353 866 619 349 146 878 328 816 004 329 275 978 308 250 240 380 848 051 325 517 464 382 824 761 319 730 339 305 490 039 441 037 405 382 005 916 332 161 686 398 008 565 788 358 588 482 053 352 317 516 441 673 820 601 304 515 380 729 201 384 662 720 341 397 509 647 504 767 104 400 881 058 325 663 771 345 027 171 401 146 311 392 435 905 847 250 503 440 068 625 421 892 134 325 183 655 315 399 063 672 950 078 394 183 040 403 085 467 350 553 517 414 102 657 324 754 555 414 855 650 351 914 460 411 033 129 478 502 651 351 233 010 333 963 627 310 712 278 323 945 154 379 874 571 423 143 718 403 245 061 652 014 051 303 543 128 575 450 317 440 091 114 444 531 628 444 531 719 487 564 590 CRFP16 CRFP4 DAUPHINOISE DE PARTICIPATIONS HAUTS DE ROYA HYPARLO FRANCE P.R.M. TOURANGELLE DE PARTICIPATIONS CARREFOUR IMPORT SAS ( EX CRFP2) CARREFOUR MARCHANDISES INTERNATIONALES COMPAGNIE D’ACTIVITE ET DE COMMERCE INTERNATIONAL -CACI- CARREFOUR EUROPE ED FRANCHISE SAS ED SAS ERTECO IMMOBILIERE ERTECO SNC SARL ERTECO EST SOCIETE NOUVELLE DES MAGASINS ED SNC ED EST HOFIDIS II SET ARGENTINA BANCO CETELEM ARGENTINA SA BANCO DE SERVICIOS FINANCIEROS SA INC S.A. CARREFOUR AMERICAS DIA ARGENTINA SA BELGIUM CENTRE DE COORDINATION CARREFOUR FOURCAR BELGIUM SA FOURFINANCE HOLDING BV GMR NORTHSHORE PARTICIPATION SERCAR SOUTH MED INVESTMENTS ALL IN FOOD BIGG’S SA BRUGGE RETAIL ASSOCIATE CARREFOUR BELGIUM CARREFOUR INFORMATION SYSTEM CARUM CUSTOMER LOYALTY PROGRAMME BELGIUM - CLPB DE NETELAAR DEURNE RETAIL ASSOCIATE Percentage interest used in consolidation 40.0 60.0 100.0 100.0 100.0 Percentage interest used in consolidation 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 CONSOLIDATED FINANCIAL STATEMENTS Percentage interest used in consolidation Commercial business register number 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 507 869 220 440 160 570 337 748 552 428 470 900 439 916 677 352 442 826 339 487 787 434 212 130 385 171 582 352 860 084 420 265 845 434 193 454 381 548 791 303 477 038 389 526 617 401 636 550 352 730 816 402 628 283 423 143 718 433 964 202 Percentage interest used in consolidation DIKON DIZO ECLAIR EXTENSION BEL-TEX FILMAR FILUNIC FIMASER FOMAR FRESHCARE FRESHFOOD GB RETAIL ASSOCIATES SA GENT DAMPOORT RETAIL ASSOCIATE GROSFRUIT HALLE RETAIL ASSOCIATE HEPPEN RETAIL ASSOCIATE LA LOUVIERE RETAIL ASSOCIATE MABE OUDENARDE RETAIL QUIEVRAIN RETAIL ASSOCIATE R&D FOOD ROB ROTHIDI RULUK SAMDIS SCHILCO SINDIS SOCIETE RELAIS STIGAM VANDEN MEERSSCHE NV VERSMARKT VOMARKT WAPRO 100.0 100.0 100.0 100.0 100.0 100.0 60.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 78.8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2008 FINANCIAL REPORT 49 BRAZIL BREPA COMERCIO PARTICIPACAO LTDA CARREFOUR ADMINISTRADORA DE CARTOES DE CREDITO, COMERCIO E PARTICIPACOES LTDA CARREFOUR COMMERCIO E INDUSTRIA LTDA CARREFOUR GALERIAS COMERCIAIS LTDA CARREFOUR PARTICIPACOES SA CARREFOUR VIAGENS E TURISMO LTDA. ELDORADO IMOPAR PARTICIPCOES E ADMINISTRACAO IMOBILIARIA LTDA KORCULA PARTICIPACOES LOJIPART PARTICIPACOES SA NOVA GAULE COMERCIO E PARTICIPACOES S.A. RDC FACCOR FACTORING FOMENTO COMERCIAL LTDA. ZAP DIA BRASIL BULGARIA Percentage interest used in consolidation 100.0 60.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 CARREFOUR BULGARIA AD 100.0 Percentage interest used in consolidation CHINA Percentage interest used in consolidation BEIJING CARREFOUR COMMERCIAL CO., LTD. BEIJING CHAMPION SHOULIAN COMMUNITY CHAIN STORES CO LTD BEIJING CHUANGYIJIA CARREFOUR COMMERCIAL BEIJING REPRESENTATIVE OFFICE OF CARREFOUR S.A. CARREFOUR (CHINA) MANAGEMENT & CONSULTING SERVICES CO. CHANGCHUN CARREFOUR COMMERCIAL CO., LTD. CHANGSHA CARREFOUR HYPERMARKET CHENGDU CARREFOUR HYPERMARKET CO LTD CHENGDU YUSHENG INDUSTRIAL DEVELOPMENT CO LTD CHONGQING CARREFOUR COMMERCIAL CO LTD DALIAN CARREFOUR COMMERCIAL CO., LTD. DONGGUAN DONESHENG SUPERMARKET CO DONGGUAN CARREFOUR COMMERCIAL CO., LTD 50 CARREFOUR GROUP 55.0 100.0 100.0 100.0 100.0 100.0 100.0 92.5 100.0 55.0 65.0 100.0 100.0 Percentage interest used in consolidation 100.0 65.0 55.0 100.0 65.0 65.0 60.0 100.0 100.0 65.0 100.0 60.0 97.7 55.0 65.0 100.0 100.0 55.0 100.0 55.0 65.0 100.0 60.0 100.0 100.0 100.0 60.0 60.0 100.0 100.0 87.4 100.0 100.0 FOSHAN CARREFOUR COMMERCIAL CO.,LTD FUZHOU CARREFOUR COMMERCIAL CO LTD GUANGZHOU JIAGUANG SUPERMARKET CO HAIKOU CARREFOUR COMMERCIAL HANGZHOU CARREFOUR HYPERMARKET CO., LTD HARBIN CARREFOUR HYPERMARKET CO., LTD HEFEI YUEJIA COMMERCIAL CO., LTD. JINAN CARREFOUR COMMERCIAL CO., LTD KUNMING CARREFOUR HYPERMARKET CO., LTD NANJING YUEJIA SUPERMARKET CO LTD NINGBO LEFU INDUSTRIAL DEVELOPMENT CO. LTD NINGBO CARREFOUR COMMERCIAL QINGDAO CARREFOUR COMMERCIAL SHANGAI CARHUA SUPERMARKET LTD SHENYANG CARREFOUR COMMERCIAL CO LTD SHENZHEN CARREFOUR COMMERCIAL SHENZHEN LERONG SUPERMARKET CO LTD SUZHOU YUEJIA SUPERMARKET CO., LTD CARREFOUR (CHINA) FOUNDATION TIANJIN JIAFU COMMERCIAL CO., LTD. TIANJIN QUANYE CARREFOUR HYPERMARKET CO., LTD WUHAN HANFU CHAIN SUPERMARKET CO LTD WUXI YUEFU COMMERCIAL CO., LTD. XIAMEN CARREFOUR COMMERCIAL CO LTD XIAN CARREFOUR HYPERMARKET CO LTD XINJIANG CARREFOUR HYPERMARKET XUZHOU YUEJIA COMMERCIAL CO LTD ZHENGZHOU YUEJIA COMMERCIAL CO., LTD. ZHUHAI LETIN SUPERMARKET CO., LTD. ZHUZHOU CARREFOUR COMMERCIAL CO., LTD. BEIJING DIA-SHOULIAN COMMERCIAL RETAIL CO. LTD DIA TIANTIAN (SHANGHAI) MANAGEMENT CONSULTING SERVICE CO. LTD SHANGHAI DIA RETAIL CO. LTD COLOMBIA Percentage interest used in consolidation GSC SA – GRANDES SUPERFICIES DE COLOMBIA 100.0 CONSOLIDATED FINANCIAL STATEMENTS CZECH REPUBLIC IRELAND ALFA SHOPPING CENTER USTI NAD LABEM SHOPPING CENTER SHOPPING CENTRE KRALOVO POLE GERMANY Percentage interest used in consolidation 100.0 100.0 100.0 Percentage interest used in consolidation ERTECO DEUTSCHLAND GMBH PROMOHYPERMARKT AG & CO. KG 100.0 100.0 GREECE CARREFOUR CREDIT CARREFOUR MARINOPOULOS PIRAIKO SA XYNOS SA DIA HELLAS GUEDO Holding Ltd. HONG KONG CARREFOUR GLOBAL SOURCING ASIA CARREFOUR TRADING ASIA LTD (CTA) CARREFOUR ASIA LTD VICOUR LIMITED INDIA Percentage interest used in consolidation 30.0 50.0 50.0 50.0 80.0 25.1 Percentage interest used in consolidation 100.0 100.0 100.0 100.0 Percentage interest used in consolidation CARREFOUR INDIA MASTER FRANCHISE LTD CARREFOUR WC & C INDIA PRIVATE LTD 100.0 100.0 INDONESIA Percentage interest used in consolidation CARREFOUR INSURANCE 100.0 Percentage interest used in consolidation ITALY CARREFOUR DISTRIBUZIONE SRL (ex CONSORZIO CARREFOUR) CARREFOUR ITALIA CARREFOUR ITALIA IMMOBILIARE CARREFOUR SERVIZI FINANZIARI SPA DEMETER ITALIA SPA (ex HYPERMARKET HOLDING) DI PER DI SRL ETNASTORE SPA FINMAR SPA GS SpA (EX ATENA) I.S. CINQUE SRL SOCIETA SVILUPPO COMMERCIALE IL BOSCO SRL LUXEMBOURG VELASQUEZ SA MALAYSIA Percentage interest used in consolidation 99.8 100.0 99.8 60.0 99.8 99.8 99.8 99.8 99.8 99.8 99.8 94.8 Percentage interest used in consolidation 100.0 Percentage interest used in consolidation CARREFOUR MALAYSIA SDN BHD MAGNIFICIENT DIAGRAPH SDN-BHD 100.0 100.0 POLAND CARREFOUR POLSKA CARREFOUR POLSKA PROPER CARREFOUR POLSKA WAW PORTUGAL Percentage interest used in consolidation 100.0 100.0 100.0 Percentage interest used in consolidation PT ALFA RETAILINDO TBK PT CARREFOUR INDONESIA (EX CONTIMAS) 79.9 100.0 DIA PORTUGAL SUPERMERCADOS 100.0 2008 FINANCIAL REPORT 51 ROMANIA SWITZERLAND ARTIMA SA CARREFOUR ROUMANIE CARREFOUR VOIAJ NOU QUALITY SYSTEM SRL TERRA ACHIZITII SRL RUSSIA CARREFOUR RUS SINGAPORE Percentage interest used in consolidation 100.0 100.0 99.0 100.0 100.0 CARREFOUR WORLD TRADE HYPERDEMA (PHS) PROMOHYPERMARKT AG (PHS) TAIWAN Percentage interest used in consolidation 100.0 CARREFOUR INSURANCE BROKER CO CARREFOUR STORES TAIWAN CO CARREFOUR TELECOMMUNICATION CO CHARNG YANG DEVELOPMENT CO PRESICARRE Percentage interest used in consolidation THAILAND CARREFOUR SINGAPOUR PTE LTD CARREFOUR SOUTH EAST ASIA 100.0 100.0 CENCAR LTD NAVA NAKARINTR LTD SSCP THAILAND LTD Percentage interest used in consolidation THE NETHERLANDS SLOVAKIA ATERAITA CARREFOUR SLOVENSKO SPAIN CARREFOUR CANARIAS, S.A. CARREFOUR NAVARRA, S.L. CARREFOUR NORTE, S.L. CARREFOUR ESPANA PROPERTIES, S.L. CARREFOURONLINE S.L (SUBMARINO HISPANIA) CENTROS COMERCIALES CARREFOUR, S.A. ESTABLECIMIENTOS DE CONVENIENCIA GROUP SUPECO MAXOR IMMOBILARIA CARREFOUR INVERSIONES PRYCA, S.A. NORFIN HOLDER S.L CORREDURIA DE SEGUROS CARREFOUR SERVICIOS FINANCIEROS CARREFOUR EF.C. (FINANCIERA PRYCA) SIDAMSA CONTINENTE HIPERMERCADOS, S.A. SOCIEDAD DE COMPRAS MODERNAS, S.A. ( SOCOMO) SUPERMERCADOS CHAMPION, S.A. VIAJES CARREFOUR, S.L.UNIPERSONAL DISTRIBUIDORA INTERNACIONAL DE ALIMENTACION (DIASA) FINANDIA E.F.C. TWINS ALIMENTACION, S.A. PE-TRA SERVICIOS A LA DISTRIBUCION, S.L. 100.0 100.0 Percentage interest used in consolidation 95.9 95.9 95.9 95.9 95.9 95.9 100.0 95.9 95.9 100.0 100.0 71.9 57.7 100.0 95.9 95.9 95.9 100.0 100.0 100.0 100.0 52 CARREFOUR GROUP Percentage interest used in consolidation 100.0 100.0 100.0 Percentage interest used in consolidation 60.0 60.0 30.6 30.0 60.0 Percentage interest used in consolidation 100.0 100.0 100.0 Percentage interest used in consolidation 95.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ALCYON BV CADAM BV CARREFOUR CHINA HOLDINGS BV CARREFOUR NEDERLAND BV CARREFOUR PROPERTY BV CARRETSTRAAT BV HOFIDIS INVESTMENT AND FINANCE INTERNATIONAL (HIFI) FOURCAR BV FOURET BV FRANCOFIN BV EUROPE TRADING COMPANY (ETC) INTERCROSSROADS BV KRUISDAM BV MILDEW BV ONESIA BV SOCA BV HYPER INVEST BV CARREFOUR INTERNATIONAL SERVICES BV (HYPER GERMANY HOLDING BV) HYPER GERMANY BV TURKEY Percentage interest used in consolidation DIA SABANCI SUPERMARKETLERI TICARET ANONIM SIRKETI CARREFOUR SABANCI TICARET MERKEZI AS CARREFOURSA 60.0 58.2 CONSOLIDATED FINANCIAL STATEMENTS COMPANIES CONSOLIDATED BY THE EQUITY METHOD AS OF 31 DECEMBER 2008 FRANCE (1) ALTIS DISTRIMAG HYPERMARCHES DES 2 MERS - H2M PROVENCIA SA SA BLADIS SCI LATOUR SOCIETE RESEAU FRANCE BILLET SOCIETE SUPERMARCHE DU BASSIN - SSB Percentage interest used in consolidation Commercial business register number 50.0 50.0 50.0 50.0 33.3 60.0 45.0 50.0 310 710 223 301 970 471 393 248 554 326 521 002 401 298 583 333 337 053 414 948 638 324 766 047 ARGENTINA (2) POLAND (1) HIPERBROKER ITALY (1) CARREFOUR ITALIA MOBILE SRL FINIPER SPA G.D. PLUS SCARL IPER ORIO SPA IPER PESCARA SPA PEGASO SPA FUTURE SRL (ex TREDI’ ESPANSIONE SRL) DUEFUSION SRL PROMOZIONE SVILUPPO SUD SRL Percentage interest used in consolidation Percentage interest used in consolidation 65.0 CP TELECOM 50.0 SPAIN (1) Percentage interest used in consolidation Percentage interest used in consolidation 50.0 20.0 33.3 49.9 49.9 48.9 25.0 35.0 49.9 COSTASOL DE HIPERMERCADOS, S.L. DIAGONAL PARKING, S.C. GLORIAS PARKING S.A. ILITURGITANA DE HIPERMERCADOS, S.L. INTERING SA UNITED ARAB EMIRATES (1) 32.6 55.1 47.9 32.6 47.9 MAJID AL FUTTAIM 25.0 Percentage interest used in consolidation (1) These companies are not consolidated by full integration because they are not controlled by the Group. (2) These companies are insignificant or in the process of dissolution. 2008 FINANCIAL REPORT 53 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2008 This is a free translation into English of the statutory auditors’ report on the consolidated financial statements issued in the French language and is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the consolidated financial statements and includes explanatory paragraphs discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were made for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. This report should be read in conjunction with, and is construed in accordance with, French law and professional auditing standards applicable in France. To the shareholders, II. Justification of our assessments In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended 31 December 2008, on: (cid:2) the audit of the accompanying consolidated financial statements of Carrefour S.A.; (cid:2) the justification of our assessments; (cid:2) the specific verification required by law. The consolidated financial statements have been approved by the role is to express an opinion on these Board of Directors. Our financial statements based on our audit. I. Opinion on the consolidated financial statements in accordance with professional We conducted our audit standards applicable in France. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, using sample testing techniques or other selection methods, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made, as well as the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at 31 December 2008 and of the results of its operations for the year then ended in accordance with the IFRS as adopted by the European Union. 54 CARREFOUR GROUP In accordance with the requirements of article L. 823-9 of the French Commercial Law (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: Note 1 relating to the Notes on the consolidated financial statements indicates that management of the company is required to take into account estimates and assumptions that may affect the book value of certain assets and liabilities, as well as the disclosures provided in the notes to the financial statements. In the scope of our audit as of 31 December 2008, we have in particular: (cid:2) reviewed the impact of these estimates made by the company on impairment of goodwill and intangible and tangible fixed assets. We have assessed the information and assumptions on which these estimates are based, in particular cash-flow forecasts prepared by the management of your company in the economic environment relating to the current financial crisis, reviewed their calculations, compared accounting estimates for the prior periods with what was achieved and examined the procedure of approval of these estimates by management; (cid:2) assessed the provisions assessment was based on: recorded by the company. Our • obtaining an understanding and testing the procedure undertaken by the company to identify the relating risks, and • comparing independent estimates to those made by the company. These assessments were made in the context of the performance of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the formation of our opinion expressed in the first part of this report. CONSOLIDATED FINANCIAL STATEMENTS III. Specific verification As required by law, we also verified the information presented in the Group’s management report. We have no matters to report regarding its fair presentation and consistency with the consolidated financial statements. Paris La Défense and Neuilly sur Seine, 7 April 2009 The Statutory Auditors French original signed by KPMG Audit A division of KPMG S.A. Jean-Luc Decornoy Partner Deloitte & Associés Jean-Paul Picard 2008 FINANCIAL REPORT 55 REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS ON CONDITIONS GOVERNING THE PREPARATION AND ORGANIZATION OF THE BOARD’S WORK AND INTERNAL CONTROL AND RISK-MANAGEMENT PROCEDURES Pursuant to the provisions of Articles L. 225-68 and L. 225-37 of the French Commercial Code, this report states the conditions for the preparation and organization of the Supervisory Board’s work, and that of the Board of Directors, during the course of 2008, together with the internal control procedures put in place by the Carrefour Group. This report was approved by the Board of Directors at its meeting on 10 March 2009. 1. Corporate governance By decision of the Shareholders’ Meeting of 20 April 2005, the company adopted the form of a public limited company with a Management Board and Supervisory Board. By decision of the Shareholders’ Meeting of 28 July 2008, the company adopted the form of a public limited company with a Board of Directors. The positions of Chairman and Chief Executive Officer have been separated. 1.1. THE MANAGEMENT BOARD AND SUPERVISORY BOARD (1 JANUARY - 28 JULY 2008) Provisions concerning the composition and operation of Management Board and Supervisory Board were as follows: the 1.1.1 The Management Board The company is run by a Management Board comprising at least individuals, who can be two and at most seven members, all shareholders. No serving selected from outside the ranks of the member of the Supervisory Board can be a member of Management Board. The maximum age for members of the Management Board is 65. The Management Board is appointed for two-year terms; its members are appointed and reappointed by the Supervisory Board. Membership in the Management Board may the Shareholders’ be revoked by the Supervisory Board or at Meeting. The Supervisory Board determines the method and amount of remuneration for each member of the Management Board. It also determines the number and price of subscription or purchase options for company shares granted to members of the Management Board and, where applicable, the number of company shares that may be allocated to them free of charge, and establishes conditions for the allocation of such shares. The Management Board meets as often as is required in the interests of the company, in cases provided for by law, and in order 56 CARREFOUR GROUP to examine all operations requiring the prior authorization of the Supervisory Board. Every three months, the Management Board presents the Supervisory Board with a report summarizing the main actions and events that have occurred in the course of managing the company. It must contain all the information needed to inform the Supervisory Board of the progress of business. The Management Board may, at any time, present the Supervisory Board with a special report on any exceptional operations, their exceptional nature being assessed by the Management Board under its own responsibility. A meeting of the Management Board is called by its Chairman or, failing this, by any other member of the Management Board. It meets where indicated in the convocation notice. In order for the deliberations of the Management Board to be valid, at least half of the members in office, including the Chairman, must be present. All decisions of the Management Board must be made by a majority of members present and represented. In the event of a tie, the Chairman will have the deciding vote. The Management Board has full powers to act in the name of the company under all circumstances; it exercises these powers within the limits of the company’s objectives, under the control of the Supervisory Board and subject to the powers expressly assigned to the Shareholders’ Meeting and Supervisory Board by law or via the Articles of Association. The Supervisory Board confers the position of Chairman of the Management Board on a Management Board member for the duration of his/her term of office. The Chairman of the Management Board represents the company in its relations with third parties. At the Supervisory Board meeting on 20 April 2005, the following were appointed as members of the Management Board: Mr. José Luis Durán (Chairman of the Management Board), Mr. Jacques Beauchet, Mr. Javier Campo, Mr. José Maria Folache and Mr. Guy Yraeta. Their terms of office were renewed for a period of two years, effective as of 20 April 2007. On 22 January 2008, the Supervisory Board appointed Mr. Gilles Petit and Mr. Thierry Garnier as members of the Management Board. REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS During the course of the 2008 fiscal year, the Management Board met 17 times, with average attendance of 97%. Discussions of the Management Board related to the following subjects in particular: (cid:2) group organization, definition of its financial strategy, and the issuance of bonds; (cid:2) the study of tactical acquisition operations and rationalization of the business portfolio; (cid:2) valuation of property assets and liabilities; (cid:2) examination of the annual and half-yearly accounts, quarterly results and the related financial announcement; (cid:2) approval of authorizations requested by the Management Board long-term implementation of (share-buyback programme, remuneration plans etc.); (cid:2) reports on the work of the board’s committees (Committee for Remuneration, Appointments and Corporate Governance and the Audit Committee), appointment of two members of the Management Board (increasing the number of members from five to seven). (cid:2) operational matters such as sustainable development, banner image and IT systems structuring; (cid:2) preparation for the Shareholders’ Meeting; 1.2. THE BOARD OF DIRECTORS AND GENERAL CORPORATE MANAGEMENT (SINCE 28 JULY 2008) (cid:2) the budget, the annual and half-yearly accounts, quarterly the related financial announcements, and the results, implementation of a share-buyback programme; (cid:2) human resources issues: the Worldwide Employee Shareholding lifting of affiliation conditions, appointments and the long-term remuneration policy (purchase Programme, definition of options, free share allocation etc.); (cid:2) a one-day strategic seminar with the Supervisory Board; (cid:2) changes to the company’s corporate-governance structure and preparation for the ad-hoc Shareholders’ Meeting. 1.1.2 The Supervisory Board Taittinger, Mr. Following resolutions adopted by the Shareholders’ Meeting of 30 April 2007, the Supervisory Board comprised 11 members: Mr. Robert Halley (Chairman), Mr. Amaury de Seze (Vice- Chairman), Ms. Anne-Claire René Abate, Mr. Sébastien Bazin, Mr. Nicolas Bazire, Mr. René Brillet, Mr. Jean- Martin Folz, Mr. José-Luis Leal Maldonado, Comet BV (represented by Mr. Bernard Bontoux) and Halley Participations (represented by Mr. Pierre-Jean Brenugat). On 15 April 2008, Comet BV and Halley Participations resigned as members of the Supervisory Board. On 12 May 2008, Mr. Robert Halley resigned from his position as Chairman and member of the Supervisory Board. The Supervisory Board appointed Mr. Robert Halley as Honorary Chairman of the company. The Board then appointed Mr. Amaury de Seze and Mr. Jean-Martin Folz as Chairman and Vice-Chairman, respectively, of the Supervisory Board. Mr. Bernard Arnault was appointed as a member of the Supervisory Board to replace Mr. Robert Halley. During the course of the 2008 fiscal year, the Management Board met 10 times (including once in a one-day strategy seminar with the Management Board), with average attendance of 91%. During its meetings, the Supervisory Board covered the following issues in particular: (cid:2) the budget, the study of tactical acquisitions’ operations, rationalization of the business portfolio, and valuation of property assets and liabilities; (cid:2) the composition of the board and its committees (appointment of a new Chairman and Vice-Chairman following the resignation of the Chairman, and the proposal to appoint a new member), regulations, and the company’s modification of corporate governance; internal Following resolutions adopted by the Shareholders’ Meeting of 28 July 2008, the company has adopted the form of a public limited company with a Board of Directors, and the positions of Chairman and Chief Executive Officer have been separated. The Board of Directors comprises 12 members: Mr. Amaury de Seze (Chairman), Mr. Jean-Martin Folz (Vice-Chairman), Ms. Anne-Claire Taittinger, Mr. René Abate, Mr. Bernard Arnault, Mr. Sébastien Bazin, Mr. Nicolas Bazire, Mr. Jean-Laurent Bonnafé, Mr. Thierry Breton, Mr. René Brillet, Mr. Charles Edelstenne and Mr. José-Luis Leal Maldonado. The members of the Board of Directors were appointed by the Shareholders’ Meeting on 28 July 2008 for a term of three fiscal years. Pursuant to the 19th resolution adopted by the Shareholders’ Meeting, and so that the terms of one-third of the members of the Board are renewed each year, the Board of Directors drew lots to determine the names of those directors whose terms would be subject to early expiration in the first and second year. Accordingly, the Directors whose terms will expire at the end of the 2008 fiscal year will be Mr. René Abate, Mr. Nicolas Bazire, Mr. Jean- Martin Folz and Mr. José Luis Leal Maldonado. The directors whose terms will expire at the end of the 2009 fiscal year will be Ms. Anne- Claire Taittinger, Mr. Sébastien Bazin, Mr. Thierry Breton and Mr. Charles Edelstenne. The terms of Mr. Amaury de Seze, Mr. Bernard Arnault, Mr. Jean- Laurent Bonnafé and Mr. René Brillet will expire at the time of the Shareholders’ Meeting called to approve the financial statements for the fiscal year ended 31 December 2010. The board aims to assess the independence of each member of the board as compared with general corporate management. forth by the AFEP MEDEF corporate Under governance the by recommendations of the Board of that, among its members, nine may be Directors believes considered independent with no relationship of any kind with the company, its group or its management that might compromise their freedom of judgement. Therefore, Ms. Anne-Claire Taittinger Mr. Amaury de Seze, Mr. Jean- Martin Folz, Mr. René Abate, Mr. Thierry Breton, Mr. Charles Edelstenne and Mr. José Luis Leal Maldonado are independent members. Mr. René Brillet’s position as a former employee does not prevent him from qualifying as an independent member, to the extent that Mr. Brillet, who is now retired, has had no relationship with Carrefour that is likely to create a conflict of interest and/or harm his capacity to make judgements. Likewise, the contractual relationships between Carrefour and Cetelem do not bar Mr. Jean- Laurent Bonnafé from being considered independent. Each member of the Board of Directors must own a minimum of 1,000 shares for the duration of their terms. Since 28 July 2008, the Board of Directors met seven times, with an average attendance rate of 91%. for the European Commission, the criteria set companies code listed and 2008 FINANCIAL REPORT 57 During its meetings, the Board of Directors discussed the following issues in particular: the Chairman, (cid:2) the composition of the Board and its Committees (appointment of the Vice-Chairman and the Honorary Chairman), adoption of internal rules, appointment of the Chief Executive Officer and defining the scope of his authority; (cid:2) in the event of a dispute, any settlement or compromise in an amount greater than the values established by the board, which the board may update; (cid:2) any contractual mechanism to establish any share subscription or purchase-option or free-share allocation plans; (cid:2) any change to the company’s organization; (cid:2) the study of acquisitions’ operations and rationalization of the business portfolio, valuation of property assets and liabilities; (cid:2) the remuneration policy for the company’s main executives. (cid:2) approval of the half-yearly accounts, review of quarterly sales and the related financial announcements; (cid:2) implementation of a share-buyback programme; (cid:2) reports on the work of the board’s committees (Committee for Remuneration, Appointments and Corporate Governance and the Accounts and Internal Audit Committee). As of 31 December 2008, Mr. José Luis Durán was serving as Chief Executive Officer, appointed to this position by the Board of Directors at its 28 July 2008 meeting. Based on a proposal of the and Corporate Governance Remuneration, Appointments Committee, the Board of Directors selected Mr. Lars Olofsson to succeed Mr. José Luis Durán as Chief Executive Officer of the Group as of 1 January 2009. During its meeting on 28 July 2008, the Board of Directors decided that the Chief Executive Officer could not carry out the following transactions or actions in the name and on behalf of the company without the board’s prior consent: (cid:2) commitments for any bond, security or guarantee in the name of for the company greater commitments concerning tax and customs authorities); than 500 million euros (no limit (cid:2) disposals of buildings exceeding a value of 50 million euros, the full or partial disposal of equity interests, or the granting of security interests on company property; (cid:2) direct establishment of overseas sites by forming a company, a indirect subsidiary, or by acquiring an interest, or direct or deciding to withdraw from these sites; (cid:2) any merger, spin-off or asset transfer; (cid:2) acquisition, in any form (particularly through investment, subscription to a capital increase or borrowing), of fixed assets for an enterprise value (including assumed debt) greater than or equal to 100 million euros or related sales greater than or equal to 150 million euros. (cid:2) any entry by minority shareholders into the current or potential capital stock of any controlled entity; (cid:2) the sale, in any form (including an asset transfer), of fixed assets in an amount greater than 100 million euros; (cid:2) the total or partial disposal of non-financial assets not valued on the balance sheet that involve brands or customer data; (cid:2) any decision to borrow (excluding the EMTN programme) beyond a cumulative amount greater than 500 million euros in a single fiscal year; 58 CARREFOUR GROUP During its 12 November 2008 meeting, decided that corporate governance code, recommendations on compensation of company officers. the Board of Directors to the AFEP MEDEF 2008 the company would refer including its October The company’s articles of association do not set forth specific details on shareholder participation at the Shareholders’ Meeting. During its 28 July 2008 meeting, the Board of Directors adopted by-laws, divided into six chapters, whose main provisions are as follows: (cid:2) the first chapter sets forth the mission of the Board of Directors, describes board meeting procedures, director information and the board’s assessment of its operations and ability to carry out its missions; (cid:2) the second and third chapters describe the role and authority of the Chairman and Chief Executive Officer; (cid:2) the fourth chapter is dedicated to the board’s committees: the Accounts and Internal Audit Committee, the Remuneration, Appointments and Corporate Governance Committee and the Strategy Committee (composition, missions, operations); (cid:2) the final two chapters mainly address director compensation and the code of conduct that all board members must follow in carrying out their duties. 1.3. THE BOARD OF DIRECTORS’ COMMITTEES The Group has three specialized committees: the Audit Committee (which became the Accounts and Internal Audit Committee in 2008) and the Remuneration, Appointments and Corporate Governance Committee, which were established by the Supervisory Board in 2005, and the Strategy Committee, which was established in 2008 by the Board of Directors. These committees meet at their convenience, with or without the involvement of company management. They can call upon outside experts as necessary. The Committee Chairman can ask the Chairman of the Board or Chief Executive Officer to interview any person within the Group who is responsible for issues that fall within the committee’s purview. They issue advice to the Board of Directors. The chairmen of the committees, or, if they are unavailable, another member of the same committee, present an oral summary of their work to the Board. A written report on committee meetings is prepared and submitted to the directors after approval. 1.3.1. The Accounts and Internal Audit Committee This committee, of which at least two-thirds of all members must be independent directors, meets at least four times per year. No members of the company’s general management may sit on this committee. The committee Chairman is appointed by the Board of Directors. REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS and indicators profitability requirements, The committee’s mission is to analyze the quarterly, half-yearly and annual financial statements issued by the company when the accounts are approved and to delve more deeply into certain items prior to their presentation to the Board of Directors. issues relating to financial statements The committee reviews all and other documents, including the selection of accounting standards, provisions, management accounting data, capital sufficiency any accounting issues that raise methodological concerns or give rise to potential risk. The committee also analyzes internal control reports. The committee manages the procedure for selecting the statutory auditors, expresses an opinion on the amount of fees charged for performing statutory auditing assignments and reports to the board on the outcome of this process. It reviews the statutory auditors’ audit plan, their recommendations and the implementation of these recommendations. It is annually notified of the amount and breakdown of fees paid by Carrefour to the statutory auditors and the networks to which they belong, calculated according to a model approved by the committee. It ensures that the amount and share of the statutory auditors’ likely to compromise the statutory auditors’ independence. It gives its prior consent for any undertaking whose fees (excluding tax) exceed 1 million euros. The committee approves other undertakings after the fact, based on submissions from the Group Finance department. Each year, the committee receives a report from the Finance department on all “non-audit” undertakings carried out by networks to which the Group’s statutory auditors belong. At least twice per year, the committee devotes part of its meeting to a discussion with the statutory auditors’ the presence of the company’s general management. The committee reviews the draft Chairman’s Report on internal- control procedures relating to the preparation and processing of accounting and financial information. issues within its purview, the committee may – as it sees fit On all the presence of any other general-management and without members, it deems this appropriate – interview the Group’s if financial and accounting managers as well as the audit and internal-control manager. Membership of the committee is as follows: represented by Carrefour team without revenues is not 1.3.2. The Remuneration, Appointments and Corporate Governance Committee The majority of Remuneration, Appointments and Corporate Governance Committee members are independent. No members of the company’s general management may sit on the committee. The committee Chairman is appointed by the Board of Directors. As the Remuneration Committee, it is responsible for reviewing all issues relating to the personal status of corporate officers, including remuneration, pension benefits, company subscription or purchase options, and provisions governing the departure of members from the company’s management bodies. It reviews the terms, amounts and allocation basis of stock-option plans, and also reviews conditions for allocating performance- based shares. It is consulted on the remuneration policy for top management. As the Corporate Governance Committee, it assists the Board of Directors to determine Carrefour’s corporate governance rules and assess its operation. It tracks developments in corporate governance at both global and national levels, and presents a summary of such developments to the Board of Directors at least once per year. It selects the measures best suited to the Group, with the aim of bringing its procedures, organization and conduct into line with best practices. It reviews the draft Chairman’s Report on corporate governance. With the Chairman, Shareholders’ Meeting discussions regarding proposals for director nominations. As the Appointments Committee, it is responsible for submitting recommendations for the position of Chairman of the Board of submits Directors. Acting recommendations for the position of chief executive officer and, if applicable, for assistant managing directors. The committee assesses the Chairman’s performance outside of his/her presence. the chief executive officer’s performance and, if applicable, that of the assistant managing directors. In addition, it is responsible for developing plans for the succession of corporate officers. It makes recommendations to the Board of Directors on the appointment of committee chairmen and members. It is also charged with assessing directors’ independence, and suggests corresponding qualifications to the Board of Directors. the Chairman, It evaluates jointly with it prepares for it Chairman: Jean-Martin Folz (independent director) Members: René Brillet (independent director) Sébastien Bazin the committee reviewed the financial During the course of the 2008 fiscal year, the committee met four times (twice in its capacity as the Management Board’s Audit Committee), with an attendance rate of 100%. Among other things, statements of 31 December 2007 and 30 June 2008, the methods of consolidation and the Group’s balance sheet, key events and principal options, summaries of the income statement and balance sheet, the cash- flow statement and financing, and preparation of the year-end accounts for 2008. It also examined the system in place for the insurance strategy and the Group’s delegation of authority, financial-services activities. In addition, it looked at the status of the statutory auditors’ terms. At each meeting, the committee analyzes a summary of work performed by internal auditors. The committee oversees the independence of internal auditors and ensures that the resources allocated to internal auditing are adequate to accomplish the assignment. Membership of the committee is as follows: Chairman: Anne-Claire Taittinger (independent director) Members: René Abate (independent director) Nicolas Bazire (six of them as During the course of fiscal year 2008, the Committee met seven times the Supervisory Board’s Remuneration, Appointments and Corporate Governance Committee), with attendance of 92%. The committee defined and proposed to the Supervisory Board the terms under which a share-purchase option plan and performance share plans might be granted. It determined remuneration amounts for corporate officers, proposed to the Supervisory Board the financial conditions applicable to departing Management Board members, as applicable, and proposed to the Supervisory Board the rules applicable to corporate officers on holding a portion of shares issued upon exercise of stock options granted to them and/or performance shares allocated to them. The committee also evaluated the Supervisory Board’s operation and assessed the independence of its members as compared with general management. In addition, the committee proposed to the Board of Directors remunerating the Chief Executive Officer and methods for 2008 FINANCIAL REPORT 59 the Board of Directors, as well as methods for Chairman of distributing director’s fees allocated by the Shareholders’ Meeting. Based on a proposal of the Remuneration, Appointments and Corporate Governance Committee, the Board of Directors established principles and rules to determine corporate officers’ remuneration and benefits. Remuneration comprises: (cid:2) gross fixed compensation; (cid:2) a variable portion that can reach 200% of fixed compensation as set forth above, based on achievement of quantitative objectives (sales, EBIT and free cash flow as compared with the budget, for example) and qualitative objectives set by the board; (cid:2) long-term remuneration (stock options and/or allocation of performance shares). Benefits, include a housing benefit (if applicable), health- and personal-insurance benefits, a company car and communications devices (telephone, computer etc.). Agreed-upon compensation that complies, in amount and terms and 2008 AFED MEDEF conditions, with in certain cases, be granted to recommendations, which may, corporate officers in the event of early termination of their duties. There is no supplemental pension scheme within the Carrefour Group. A full description of corporate officers’ remuneration appears in the Reference Document. the October 2. Internal control system 2.1 INTRODUCTION The Carrefour Group uses the following definition of internal control: (cid:2) internal control is a process conducted under the control of the Chairman of is implemented by executive management and company personnel, and is intended to provide reasonable assurance that the following objectives are achieved within each business unit: the Board of Directors. It 1.3.3. The Strategy Committee This committee is composed of four members appointed by the Its Chairman is Board of Directors from among its members. appointed by the Board of Directors. The Strategy Committee’s mission is to assist the Board of Directors in directing and establishing Group strategy (though not to take its place in this regard). Its purpose is to prepare for the most significant decisions regarding study of the Group’s opportunities for external growth, the opening up of new countries) and to guide preparations for organizing the Board of Directors’ annual seminar. It serves as a think tank, carrying out its work assisted by individuals brought in to contribute according to their areas of expertise and experience. The Chairman periodically reports to the Board of Directors on the committee’s work (analysis, studies, comments and conclusions). future (purchase and sale of assets, Membership of the committee is as follows: Chairman: Members: Amaury de Seze (independent director) Bernard Arnault Nicolas Bazire (in the event of Mr Arnault’s absence) Sébastien Bazin René Brillet (independent director) The committee did not meet during the 2008 fiscal year. Section 2 of this report presents the Group’s general internal-control system in reference to the COSO2 standard. Section 3 specifically covers accounting and financial internal control, based on the AMF guide concerning internal control of accounting and financial information. The controls underlying this report involved updating the principles described in the previous report with the main Group functions affected by subjects addressed here, and ensuring that each these department has principles. formal documentation of sufficient • implementing and optimizing operations; • confirming the reliability of financial information; 2.2 RISK MANAGEMENT • establishing compliance with laws and regulations in force. Risk management structure. is adapted to the Group’s decentralized (cid:2) the internal-control process allows the prevention and monitoring of risk resulting from the company’s operations and in terms of involving misstatement or accounting and finance. As with any control system, however, it cannot provide an absolute guarantee that such risk can be totally eliminated. fraud, especially for the Group’s internal control The following report describes procedures, in particular measures relating to the preparation and information. The Group processing of accounting and financial scope covered by subsidiaries the report extends consolidated via the full-integration method, meaning companies in which the Group exercises a decisive influence, whether directly or indirectly. to all 2.2.1 Risk management at country/BU level The monitoring and control of decentralized risk exposure depends on local managers, who are as close as possible to the risks involved in the activities they perform or supervise. The process of drawing up a strategic plan offers a chance to take stock of the principal risks and outside opportunities. Monthly performance reviews contribute to detection of appearance and occurrence. In their services may identify risks and suggest action plans managers with a view to controlling them. role as guarantors and promoters of progress, support to line risk’s 60 CARREFOUR GROUP REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 2.2.2 Risk management at Group level risks and measuring their Risk has been mapped at Group level via the draft Financial Security Act. Mapping is aimed at identifying potential internal and external relative significance and probability of occurrence. Country and Group directors’ assessments of such risks and their potential impact on financial statements facilitated a review of internal process controls over a three-year period, based on self-assessment questionnaires. In 2008, particular: the Group focused its attention on the following in (cid:2) identification of major statements, risk areas supported by a self-assessment process involving the Group’s main business units; in financial (cid:2) updating of risk mapping at country level, implementation of monthly follow-up on such risks, detailed mapping of Group exposure to natural disasters, and steps taken by the Risk Prevention department aimed at enhancing risk awareness and developing preventive actions. The principal risks, and the systems Operational and Support departments described in the Reference Document. implemented by the them, are to control 2.2.3 Crisis management Given its businesses, size, diversity and presence in emerging markets, the Carrefour Group is exposed to a whole range of potential crises. The Institutional Relations and Special Projects department defined and provided all business units with crisis- management standards (“Minimum ticket”) that permit units to implement procedures adapted to their situation. More specifically, as an extension of operational risk mapping, a disaster recovery plan - which includes preparations for a potential pandemic, in particular - was developed at hypermarket level in France. To boost our subsidiaries’ management committees were trained in crisis management and communications. Some of them tested crisis-management systems during crisis simulations as well. A system of feedback on known incidents was also implemented at Group level. teams’ preparation, several of our 2.3 INTERNAL CONTROL ENVIRONMENT 2.3.1 Group organization specific local characteristics of markets to take into The Group is organized geographically in order account in which it operates. Hard-discount operations in the various countries are specially grouped together, with vertical organization better suited to their operation. Represented on the Group’s Executive Committee are France; an area comprising Spain, Belgium, Italy and Poland; the Group’s hard-discount operations; an area comprising the Latin American business unit; an area comprising China and Taiwan; and other Group business units. Carrefour the Sales and Merchandise department and the Financial Management department are also represented on the Group’s Executive Committee, which defines and manages company strategy and priorities (country objectives and major support projects). The Group is decentralized to the extent that each country directly controls the operational aspects associated with its activities, which are divided into business units comprising all stores of a given Property, format (e.g. hypermarkets or supermarkets) in a given country. Each business unit is run by a management team, which includes operational managers and the support service managers required to conduct business. The majority of countries have centralized functions that are not directly related to the stores’ operational activities, particularly administrative, financial and IT functions. Such centralization allows stakeholders (customers, suppliers, employees and managers) the benefit of centralized communication channels that can respond to questions they may have in the course of their relationships with the operational companies. The dissemination of Group principles and values to the Group’s foreign subsidiaries takes place via an active expatriation policy targeting principal management functions. 2.3.2 Delegation of authority requiring prior approval Group executives at all levels exercise their responsibilities within the limits of their defined functions. Each manager is free to determine the actions that he or she must undertake to reach agreed-upon objectives while adapting to circumstances. The freedom of initiative underlying this concept of responsibility requires that rules for the delegation of authority, particularly those that concern commitments to third parties, be observed and adhered to. These lines of authority are now in place for all the main operational and support managers. For the majority of corporate entities, the Group has implemented delegation-of-authority guidelines that list the specific decisions from the Board of Directors or their equivalent in each company involved. Delegation and sub-delegation among managers and their subordinates are the responsibility of each entity, with support from the Group’s Legal department. Investment decisions are governed by Group-defined procedures that require Group Investment Committee approval beyond a certain threshold. lines that are fully The Group favours operational hierarchical responsible for the profitable, controlled development of business units. Operational line managers are also responsible for defining the extent of support services required. Employees and their managers each have job and task descriptions as well as a list of control points allowing them to ensure internal control levels compatible with each brand’s commitments. 2.3.3 Human resources Our human-resources policy contributes to the internal-control environment’s enrichment, in particular through the existence of job descriptions, a system for assessing employee performance. and investment in training. The Group’s Human Resources department leads this function by defining broad approaches, making best practices and tools available and managing their implementation. Job descriptions are available for the main jobs and business units. These job descriptions outline the controls needed to supervise the activity and serve as a framework for the individual assessment system. skills- management programme offers an opportunity to broaden these job descriptions. Training schemes outlined in the annual plan aim to ensure progressive mastery of activities, combining specific know-how and management skills. To ensure individual development, training is provided when an employee moves into a new position. Succession plans have been in place since 2003 for the Group’s main management positions. The majority of countries have implemented an annual employee- the principal management evaluation system. positions are monitored by the Group’s Human Resources of a common implementation Furthermore, Progressive 2008 FINANCIAL REPORT 61 department, which also manages remuneration policies for such positions. Remuneration policies are handled at country level for other positions, in accordance with broadly defined guidelines. implementation of these The Group uses several tools to control feedback on performance broad guidelines, indicators, to determine employee opinions at various levels through questionnaires and focus groups. in-country inspections, and systems including regular 2.3.4 Information systems The Group’s Information Systems department (ISD) is responsible for preparing Carrefour’s information system (IS) strategy and guiding its implementation. • Measuring customer satisfaction • Measuring satisfaction with regard to strategic partners • Measuring employee opinion • Managing relationships with strategic partners • Human-resource management • Communications (cid:2) Organization of ISD in the various countries and at Group level Preparation of the strategy is based on a three-year strategic plan that is validated each year by Group general management during the fourth quarter. This plan is based on the following elements: (cid:2) Management bodies • Request-Management Committee (cid:2) IS objectives, and their alignment with regard to Group priorities; • Investment Committees at country-level ISD or Group level (cid:2) roadmaps from our Skills Centres, and their alignment with regard country-level department priorities and to Operations management; • Performance reviews at Country-level ISD or Group level • Contract reviews (cid:2) major initiatives, to ensure effective implementation of strategy in • Project reviews terms of IS and achievement of objectives; (cid:2) the financial plan, aimed at supporting accomplishment of the roadmap and other major initiatives, alongside its alignment with Group financial objectives. Guiding the IS strategy’s implementation involves the Group’s corporate-governance model, which is characterized by the following elements: (cid:2) Corporate governance activities • Application-portfolio management • Request management • Project-portfolio management • Roadmap management for Skills Centres • Establishing product and service standards • Listing of products and partners • Establishing standards and conditions for contractual terms • Purchasing management • Delegation-of-authority management • Conducting audits and comparative analyses • Country ISD and Group ISD roadmap management in terms of IS security • Risk management for principal agreements • Managing investment, operational expenditure and depreciation • Information technology oversight and innovation 62 CARREFOUR GROUP • Project committees • Crisis meetings • Reviews with strategic partners • Career committees • Management committees • Team meetings • Skills-Centre meetings • Information meetings 2.3.5 Procedures, operating methods and tools staff, Documentary databases of procedures and operating methods are available for most functions and accessible by all authorized persons. Support services guarantee and promote progress. Their task involves designing and implementing tools and reports that can be readily used by operational identifying synergies, and proposing innovations. With respect to methods and practices, they play the role of guarantor and whistleblower. They are organized into functional networks (or “lines”); that is to say, within the various countries appoint a given support department, contacts to operate in a network with other countries or, at Group level, to work on projects, exchange best practices and promote activities in their fields of expertise. special activity experts within the organization of Moreover, operational by making recommendations on matters of merchandising, organization and compliance with the product mix. These specialists provide technical support to operational staff in stores by demonstrating best practices, deploying projects, checking control points and undertaking periodic audits using diagnostics and action plans. Standards have been established for each position and are usually available on-line in electronic format for all authorized persons. operational teams guide lines REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 2.3.6 Principles and values their to fulfil sharing, responsibility, include freedom, In order to develop a shared culture, Carrefour has defined a tasks and framework that allows all employees contribute to the Group’s long-term viability and growth. This framework, which serves as a foundation for individual and collective action, includes values, a mission statement and guidelines. These values respect, integrity, solidarity and progress. The mission statement defines objectives with regard to the various stakeholders in the company’s activities. The guidelines define the conditions for implementing strategy and provide rules of behaviour and operational management. They serve as a point of reference for decision making. The dissemination of this framework and its implementation is first achieved through training and then via its integration into the company’s structures. For example, values have been integrated into the system for evaluating the performance of top management. The framework defines a working environment that is also used as a context for internal-control activities. For example, the two-level decision rule aims to ensure that unusual actions are subject to approval by line management. A code of ethics, commitments, was released in 2004 and updated in 2007. In addition, countries may implement an ethics hotline to deal with the environment and risks specific to each country. the expression of Group values and 2.4 CONTROL ACTIVITIES Monitoring of operations and projects is ensured by monthly performance reviews that are systematically conducted for both operational and support lines. The establishment of a corporate model as part of our risk-mapping procedures has made it possible to segment Group activities into major processes of a strategic, operational and support nature. As of the end of 2006, all Group business-unit managers had at their disposal complete documentation on internal-control procedures resulting from self-assessment questionnaires, since all key Group This processes were covered during the 2003-2006 period. documentation indicates key control points and best practices that should be implemented to effectively cover It also draws attention to malfunctions likely to occur when controls are not effective, thus boosting accountability for the managers involved. This process-control-point documentation is giving rise to a shared repository of best practices for internal control procedures that can be used by all Group countries and functions. This work has contributed to standardized internal-control levels throughout the Group, and enables each activity to benefit from best practices. internal-control In 2008, the Group focused on business-unit-level self-assessment, which concerns accounting and financial control activities. risk. 2.5 INFORMATION AND COMMUNICATIONS In order to allow everyone in the Group to assess their material contributions and the importance of their responsibility in terms of internal controls, the Group relies on a unique, uniform process for setting objectives and analyzing performance. Objectives are set annually within the context of a budgetary process based on a multi-year strategic plan. This process focuses on collecting budgetary data at appropriate responsibility levels (i.e. at department level for hypermarkets and supermarkets and at for hard-discount stores). The information-gathering store level process is supported at various approval stages; one of the main is an essential component such stages is at business-unit level. Making all managers (that is, all those responsible for leading teams or overseeing an income statement or activity) accountable for agreed-upon, approved budget objectives in effective management control. The budget is broken down on a monthly basis so that everyone, at each level, can monitor his or her performance throughout the year. It contains commercial and financial data as well as specific performance indicators. During the year, capital expenditure planned for in the budget is subject to updated profitability studies and specific authorizations. The various countries send this management-reporting data to the Group on a monthly basis. It concerns commercial activities (especially sales, customer flows, average baskets, sales areas and (especially income store openings) and financial activities statements, balance sheets and cash-flow statements). Accounting data is reconciled with management data each time financial statements are drawn up. The scope of this reporting (companies, methods of consolidation, interest percentages etc.) matches the reporting involved in Group consolidated financial statements. In this way, the Group uses the same management reporting information as that obtained via consolidated accounting. The same figures are used for financial communications when half-yearly statements are produced. Each month, actual performance is compared to budgeted performance and the previous year’s performance. A summary of Group and country performance is presented to the Group’s Executive Committee. The Board of Directors also receives a summary of sales trends and performance indicators each month. The financial control team is available to help managers draw up and monitor budgets, participate in validation phases and propose action plans made necessary by discrepancies in their implementation, and, broadly speaking, to help ensure the the entire process and the financial data thus reliability of collected. financial 2.6 SYSTEM MONITORING 2.6.1 Managerial control insofar as commercial operations The monitoring of internal control by management is carried out on a continuous basis, require attention at all times, particularly on store sales floors. Line and business experts actively participate in country/BU control activities and implement control systems to allow for measurement of the correct application of stated principles. In the scope of the Group’s decentralized structure, each business unit defines and implements the appropriate organization for managing the internal control system within its context. Several of them have implemented internal-control focus mainly on compliance. Performance reviews contribute to regular monitoring of the system at each management level. Each year, the executive and financial directors of each Group business unit formally attest to the quality of internal controls in the companies they manage. functions that 2.6.2 Internal audit 2.6.2.1 Assignment Within the context of the Group’s annual audit plan, the Internal involved in evaluating internal-control Audit department is performed management independently of management. for all operations. This assignment is 2008 FINANCIAL REPORT 63 The Audit department is involved at all Group levels and in all Group companies. This evaluation relates, in particular, to the following components: (cid:2) the reliability and integrity of financial and operational information; (cid:2) the effectiveness and efficiency of operations; (cid:2) asset protection; (cid:2) compliance with laws, regulations and agreements. The Internal Audit department’s assignments and responsibilities are governed by a charter validated by the Group Executive Committee and the Audit Committee. 2.6.2.2 Organization The Audit department reports to the Chief Executive Officer. Internal-audit functions are performed by full-time auditors whose professionalism is ensured through appropriate training and experience, encompassing all regions where the Group operates. Internal-audit managers in each region report to the Group Audit Director, who reports to the Chief Executive Officer. The Audit department’s budget, which allows it to properly carry out its mission, is validated each year by the Chief Executive Officer. This budget is also reviewed annually, in accordance with the development of Group functions and scope. At the end of December 2008, the Carrefour Group had 42 internal auditors. 2.6.2.3 Internal audit plan A draft annual audit plan is drawn up by the Audit department, which relies, in particular, on the Group’s process repository and the risk mapping of Group functions. This draft serves as a basis for discussions with the Group’s principal managers. The annual audit plan may be supplemented at the request of the main operational and support managers. The Audit Manager assesses requests before deciding whether to incorporate them into the annual audit plan. An assignment’s content is thus defined according to the requesting party. The projected audit plan is then reviewed and validated by the Chief Executive Officer and presented to the Audit Committee. Special assignments may also be organized at the request of the Audit Committee or Chairman of the Board, in consultation with the Chief Executive Officer. 2.6.2.4 Organization of internal-audit assignments The Internal Audit department relies on professional standards and practices in carrying out its assignments. Much attention is paid to the specifics and challenges inherent in each Group activity so that audits serve as a source of value-added for the companies involved. Assignments are always coordinated with the departments to be audited in order to avoid disturbing their operations as much as possible. Assignments are carried out either by the Internal Audit department itself or – when it is necessary to have access to all useful skills for a relevant analysis of risks and procedures – by teams that bring together members of the Internal Audit department with staff from other Group departments and divisions. If necessary, an internal audit may also involve outside advisors. 2.6.2.5 Internal audit reports and summaries A detailed report and summary are drawn up for each audit, and then validated and distributed as follows: (cid:2) a final document, which includes the audit report, summary, any written management observations and corrective action plans, plus any Audit department replies to management observations, is provided to the audited party, the executive director and the audited company’s finance manager. Corrective action plans specify the major lines of action, responsibilities for implementing the plan and implementation schedule; (cid:2) a summary of this report is provided to the chief executive officer, the Group’s chief financial officer and the manager of the region concerned. Audits are subject to monitoring with regard to the implementation of management action plans. The audit manager informs the chief executive officer and the Audit Committee of the audit plan’s proper functioning, as follows: (cid:2) each quarter, a detailed report addressing the audit programme’s execution and main findings, analyses and recommendations is presented to the chief executive officer. A summary is presented to the Group Executive Committee; (cid:2) each quarter, a summary report on the audit programme’s performance and recommendations is presented to the Audit Committee. Results derived from monitoring the recommendations’ implementation are presented to the Audit Committee. its main analyses findings, plus 3. Data relating to internal accounting and financial control 3.1 MANAGEMENT OF THE ACCOUNTING AND FINANCE ORGANIZATION 3.1.1 Organization of accounting and management reporting functions Accounting is conducted by centralized teams in each country. These teams belong to the Finance line and are led by the Group Finance department. In recent years, the Group has standardized the accounting systems used in the various countries. This has led, in particular, to the implementation of an organizational model that includes the establishment of shared service centres (for the processing and payment of invoices involving merchandise, fixed assets, general expenses and payroll), standardizing and documenting procedures in various countries and ensuring the appropriate separation of tasks. Operating instructions are available to all users. reporting functions guarantee the reliability of Management financial management data. thus 64 CARREFOUR GROUP REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 3.1.2 Organization of consolidation functions Each country is responsible for consolidating financial statements at is provided by centralized its own level. Consolidation at this level financial teams in each country. The Group consolidation team leads this process and is responsible for producing the Group’s consolidated statements. Responsibilities have been defined by region, as have cross-functional analysis responsibilities within the Group team. Group accounting principles are specified in a regularly-updated document that is distributed to all those involved in the process. Each country implements tools to address its specific consolidation needs. A tool was developed at Group level to facilitate transmission of data, controls and consolidation operations. 3.2 PROCESS FOR PREPARING ACCOUNTING AND FINANCIAL INFORMATION 3.2.1 Risk and control activities In 2008, a self-assessment questionnaire focusing on a limited number of major risks was sent to finance directors in our main countries. Our major business risks were identified by intersecting analysis points suggested by the AMF reference framework with risk mapping and the specifics of the sector and Group. The LSF documentary basis established by the Group constitutes a reference baseline for internal activity control on which countries/ BUs can rely. In the scope of its regional and cross-functional responsibilities, the Group consolidation team carries out controls at country consolidation level reporting (in-country inspections, packages, identification of main options and any necessary corrections) and Group consolidation level (especially involving cross-functional analyses of items). review of 3.2.2 Half-yearly and annual financial statements Since 2008, consolidation has occurred in each quarter. Subsidiaries prepare their own statutory accounts and consolidated financial statements for their region, and then convert these reports into euros. Financial directors in these countries have a list, prepared by the Group consolidation team, of standard controls to be carried out on their consolidated financial statements. The main options and accounting estimates are subject systematic review by the Group and the country’s directors, in cooperation with local external auditors. The Group consolidation team’s regular in-country visits at the time of financial-statement preparation are an opportunity to improve processes within the country (by aiding in the understanding and dissemination of Group accounting principles, addressing the specific issues and performing on-site controls). country’s If necessary, inspections can lead to recommendations aimed at improving the country’s consolidation procedures. to financial 3.3. CONTROL OVER FINANCIAL COMMUNICATIONS 3.3.1 Role and mission of financial communications The objective of informed: financial communications is to keep people (cid:2) on a continuous basis: the regularity and continuity of information flows must be ongoing, as they are fundamental to company credibility and guarantee shareholder loyalty; (cid:2) by sending a clear, coherent message: communications must allow investors to gain a precise, accurate understanding of the company’s value and management’s capacity to further boost value. Investors must be properly informed in order to make decisions; (cid:2) by respecting the principle of shareholder equality with regard to information: by ensuring that any financial information that might have an impact on market price is made public via a single, centralized source at Group level. 3.3.2 Organization of financial communications Financial announcements address a diverse audience, primarily comprised of institutional investors, individuals and employees, via four channels: (cid:2) the Shareholder Relations department is responsible for informing the general public (individual shareholders); (cid:2) the Investor Relations department, Finance department and chief executive officer are the sole contacts for analysts and institutional investors; (cid:2) the Human Resources department, with support from the Communications department, manages information intended for employees; (cid:2) the Communications department manages press relations. financial messages are prepared via close In practice, collaboration between the Finance and Communications departments. They are delivered as required by law (via an annual the French Shareholders’ Meeting) and by the regulations of Financial Markets Authority (periodic publications, press releases). Furthermore, beyond its legal obligations, Carrefour employs a wide array of media for its financial communications. The Group chooses from among the press, the Internet, direct telephone contact, in response to individual meetings and special meetings exceptional events, depending on the significance of the event. 3.3.3 Procedures for controlling financial information financial is the exclusive purveyor of The Finance department information. Internal control over the financial-communications process essentially rests on adhering to the principle of equality among shareholders. Any press release or significant announcement is the Financial prepared by mutual agreement between Communications department, which is part of the Finance department, and the Group Communications department. strict Segregation of independence between the Group Executive Committee, the departments concerned (e.g. Mergers and Acquisitions) and the Financial Communications department. roles and responsibilities allows for 2008 FINANCIAL REPORT 65 STATUTORY AUDITORS’ REPORT PREPARED IN ACCORDANCE WITH ARTICLE L. 225-235 OF THE FRENCH COMMERCIAL LAW (CODE DE COMMERCE), ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS OF CARREFOUR S.A. Year ended 31 December 2008 This is a free translation into English of the statutory auditors’ report issued in French prepared in accordance with Article L. 225-235 of the French Commercial Law on the report prepared by the Chairman of the Board of Directors on the internal control procedures relating to the preparation and processing of accounting and financial information issued in French and is provided solely for the convenience of English speaking users. This report should be read in conjunction and construed in accordance with French law and the relevant professional standards applicable in France. To the Shareholders, In our capacity as Statutory Auditors of Carrefour S.A. and in accordance with Article L. 225-235 of the French Commercial Law (Code de commerce), we hereby report on the report prepared by the Chairman of your company in accordance with Article L. 225-37 of the French Commercial Law (Code de commerce), for the year ended 31 December 2008. It is the Chairman’s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk management procedures implemented by the company and containing the other disclosures required by Article L. 225-37 of the French Commercial Law (Code de commerce), particularly in terms of corporate governance. It is our responsibility: (cid:2) to report to you on the information contained in the Chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and financial information, and (cid:2) to attest that this report contains the other disclosures required by Article L. 225-37 of the French Commercial Law (Code de commerce), it being specified that we are not responsible for verifying the fairness of these disclosures. We conducted our work in accordance with professional standards applicable in France. Information on the internal control procedures relating to the preparation and processing of accounting and financial information These professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and financial information. These procedures consisted mainly in: (cid:2) obtaining an understanding of the internal control procedures relating to the preparation and processing of the accounting and financial information on which the information presented in the Chairman’s report is based and the existing documentation; (cid:2) obtaining an understanding of the work involved in the preparation of this information and the existing documentation; (cid:2) determining if any significant weaknesses in the internal control relating to the preparation and processing of the accounting and financial information that we would have noted in the course of our engagement are properly disclosed in the Chairman’s report. On the basis of our work, we have nothing to report on the information in respect of internal control the company’s relating to the preparation and processing of procedures accounting and financial information contained in the report prepared by the Chairman of the Board of Directors in accordance with Article L. 225-37 of the French Commercial Law (Code de commerce). 66 CARREFOUR GROUP REPORT BY THE CHAIRMAN OF THE BOARD OF DIRECTORS Other disclosures We hereby attest that the Chairman’s report includes the other disclosures required by Article L. 225-37 of the French Commercial Law (Code de commerce). Paris La Défense and Neuilly sur Seine, 7 April 2009 The Statutory Auditors French original signed by KPMG Audit A division of KPMG S.A. Jean-Luc Decornoy Partner Deloitte & Associés Jean-Paul Picard 2008 FINANCIAL REPORT 67 ADDITIONAL INFORMATION CONSOLIDATED STORE NETWORK FRANCE Hypermarkets Supermarkets Hard-discount stores Other formats 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 117 398 384 357 179 530 418 576 179 539 424 584 175 534 459 127 178 547 487 126 178 566 578 126 179 588 630 129 179 595 782 108 192 615 811 101 194 604 840 61 203 590 842 9 Total 1,256 1,703 1,726 1,295 1,338 1,448 1,526 1,664 1,719 1,699 1,644 EUROPE excluding France Hypermarkets Supermarkets Hard-discount stores Other formats Total BELGIUM Hypermarkets Supermarkets Other formats Total CZECH REPUBLIC Hypermarkets Total GREECE Hypermarkets Supermarkets Hard-discount stores Other formats Total ITALY Hypermarkets Supermarkets Other formats Total POLAND Hypermarkets Supermarkets Total 73 142 181 1,965 76 187 480 2,099 263 253 548 2,210 173 268 650 2,325 130 281 651 2,464 210 288 690 2,606 240 321 765 2,789 223 365 746 2,969 241 399 957 3,136 229 437 974 3,038 236 73 2,364 3,029 3,184 3,373 3,606 3,824 4,098 4,321 4,721 4,685 57 72 1 57 73 1 56 73 1 56 77 1 56 79 56 79 56 79 57 63 130 131 130 134 135 135 135 120 3 3 4 142 6 6 11 85 181 46 7 7 11 82 199 46 8 8 13 142 212 9 9 13 101 221 47 10 10 16 120 251 60 19 148 267 52 25 164 295 51 28 197 300 32 31 209 271 33 146 323 338 367 382 447 486 535 557 544 6 6 3 3 6 46 31 192 190 34 173 98 34 203 98 39 205 130 38 226 147 50 238 171 55 247 190 58 249 194 66 236 192 52 413 305 335 374 411 459 492 501 494 7 6 13 8 15 23 9 51 60 13 55 68 15 67 82 17 70 87 32 71 42 83 72 247 78 225 103 125 319 303 68 CARREFOUR GROUP ADDITIONAL INFORMATION 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 4 4 5 273 5 272 5 276 6 281 7 283 7 286 7 292 10 320 348 364 278 277 281 287 290 293 299 330 348 364 7 7 11 11 21 20 41 2 2 4 4 4 4 4 4 4 4 58 112 175 1,541 30 116 187 1,609 27 108 167 1,649 28 115 174 1,700 31 119 200 1,778 32 121 190 1,836 32 136 143 1,891 148 82 1,961 155 86 2,072 3 162 96 1,972 11 58 1,858 1,939 1,952 2,020 2,129 2,179 2,170 2,191 2,316 2,079 8 8 10 3 86 8 8 10 3 132 8 8 11 5 182 8 8 11 7 233 9 9 12 86 339 9 9 13 91 393 19 99 416 22 125 431 99 145 198 251 437 497 534 578 124 263 263 135 249 313 147 254 413 157 211 488 148 149 520 204 118 539 255 141 572 5 288 151 606 8 2 5 9 2 14 101 112 83 106 8 1 37 46 120 253 201 PORTUGAL Hypermarkets Hard-discount stores Total ROMANIA Hypermarkets Supermarkets Total SLOVAKIA Hypermarkets Total SPAIN Hypermarkets Supermarkets* Hard-discount stores Other formats Total SWITZERLAND Hypermarkets Total TURKEY Hypermarkets Supermarkets Hard-discount stores Total LATIN AMERICA Hypermarkets Supermarkets Hard-discount stores Other formats Total 101 301 574 650 697 814 856 817 861 973 1,053 ARGENTINA Hypermarkets Supermarkets Hard-discount stores Total BRAZIL Hypermarkets Supermarkets Hard-discount stores Other formats 21 22 106 22 138 201 22 132 246 23 141 246 24 141 285 28 114 310 28 114 319 30 118 325 59 103 329 67 112 339 21 128 361 400 410 450 452 461 473 491 518 59 69 83 74 115 74 131 17 79 108 67 85 113 128 85 97 178 99 35 201 143 214 150 38 243 5 162 39 267 8 Total 59 152 189 222 254 326 360 335 357 436 476 2008 FINANCIAL REPORT 69 CHILE Hypermarkets COLOMBIA Hypermarkets MEXICO Hypermarkets ASIA Hypermarkets Supermarkets Hard-discount stores Total CHINA Hypermarkets Supermarkets Hard-discount stores Total HONG KONG Hypermarkets INDONESIA Hypermarkets Supermarkets SOUTH KOREA Hypermarkets Total JAPAN Hypermarkets MALAYSIA Hypermarkets SINGAPORE Hypermarkets TAIWAN Hypermarkets THAILAND Hypermarkets GROUP Hypermarkets Supermarkets Hard-discount stores Other formats 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 3 3 18 94 4 5 4 8 19 21 11 27 105 123 144 55 15 29 170 6 164 21 31 46 59 191 8 225 202 255 238 275 285 30 309 94 105 123 199 340 424 457 513 624 1 1 19 59 59 14 2 2 17 80 80 20 24 24 32 40 55 95 56 6 164 70 8 225 90 255 112 0 275 134 0 309 226 303 345 387 443 14 20 24 24 32 4 1 6 1 5 1 21 7 350 398 384 357 4 5 12 5 6 1 23 9 7 8 10 11 15 20 29 37 43 30 20 22 7 1 6 1 24 11 8 3 6 1 26 15 25 10 4 6 1 28 17 27 11 7 7 2 31 19 27 15 8 8 2 34 20 31 20 8 2 37 23 29 37 73 10 2 47 24 12 2 48 27 16 2 59 31 513 794 2,489 652 580 1,272 2,724 847 657 1,345 2,932 300 704 1,446 3,125 256 750 1,471 3,510 336 794 1,495 3,888 369 839 1,517 4,316 331 963 1,479 4,574 342 1,086 1,702 4,823 295 1,213 1,745 4,795 253 Total 1,489 4,448 5,423 5,234 5,531 6,067 6,546 7,003 7,358 7,906 8,006 * In 2006, the supermarket format in Spain consolidated the Carrefour Express stores. The entire supermarket network was sold or closed and reclassified in accordance with IFRS 5 as income from discontinued operations. 70 CARREFOUR GROUP ADDITIONAL INFORMATION Sales area per format (consolidated stores) In thousands of sq m Hypermarkets Supermarkets Hard-discount stores 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 3,489 232 4,580 1,195 794 5,256 1,968 906 5,674 2,117 997 6,180 2,132 1,093 6,510 2,277 1,255 6,885 2,321 1,466 7,087 2,319 1,674 7,620 2,283 1,850 8,539 2,446 2,065 9,206 2,507 2,101 Sales area by country (consolidated stores) Hypermarkets Supermarkets Hard-discount stores Total France Europe (excluding France) Belgium Greece Italy Poland Portugal Romania Spain Turkey Latin America Argentina Brazil Colombia Asia China Indonesia Malaysia Singapore Thailand Taiwan Group 1,943 3,208 375 176 458 423 156 1,451 169 1,909 406 1,172 330 2,146 1,009 321 140 16 242 418 9,206 1,112 1,126 116 220 281 207 19 141 143 204 140 63 0 64 0 64 0 0 0 0 554 3,609 1,276 88 147 941 100 201 103 98 70 70 5,610 491 484 739 630 147 175 2,533 413 2,315 650 1,334 330 2,280 1,079 386 140 16 242 418 2,507 2,101 13,814 The total does not include the sales areas of other Group formats such as convenience stores. 2008 FINANCIAL REPORT 71 COMMERCIAL STATISTICS Consolidated hypermarket data Sales per sq m (Annual net sales in euros) Sales per store (Annual net sales in millions of euros) Annual number of cash transactions 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 7,410 7,410 8,110 7,214 6,594 6,319 6,109 6,201 6,023 5,959 5,852 74 66 67 65 58 55 53 52 48 47 44 818 974 1,115 1,206 1,264 1,355 1,466 1,487 1,563 1,680 1,773 Annual number of customers passing through check-outs in consolidated hypermarkets by region as of 31 December 2008 In millions France Europe Latin America Asia Total 2008 2007 361 516 310 586 371 487 277 546 1,773 1,680 Gross sales according to region and format as of 31 December 2008 (in millions of euros) France Europe Latin America Asia Total Hypermarkets Supermarkets Hard-discount stores Other formats 22,664 19,685 9,744 6,464 9,372 6,180 1,009 110 2,881 5,184 1,013 140 7,571 5,030 505 7 Total 42,488 36,079 12,271 6,721 58,557 16,672 9,217 13,113 97,560 72 CARREFOUR GROUP ADDITIONAL INFORMATION Information on store network under banners All formats France Europe Latin America Total commercial stores incl. tax (in millions of euros) 2008/2007 change (as a %) % of total commercial sales incl. tax Number of stores Sales area (in sq m) Hypermarkets Total commercial sales incl. tax (in millions of euros) 2008/2007 change (as a %) % of total commercial sales incl. tax Number of stores Sales area (in sq m) Total commercial sales incl. tax/sq m (in euros) Supermarkets Total commercial sales incl. tax (in millions of euros) 2008/2007 change (as a %) % of total commercial sales incl. tax Number of stores Sales area (in sq m) Total commercial sales incl. tax/sq m (in euros) Hard-discount stores Total commercial sales incl. tax (in millions of euros) 2008/2007 change (as a %) % of total commercial sales incl. tax Number of stores Sales area (in sq m) Total commercial sales incl. tax/sq m (in euros) Other formats Total commercial sales incl. tax (in millions of euros) 2008/2007 change (as a %) % of total commercial sales incl. tax Number of stores 47,119 1.4% 43.4% 5,517 5,573,381 24,261 (0.5% ) 22.3% 228 2,093,583 11,588 17,177 3.9% 15.8% 1,001 1,814,442 9,467 3,129 4.1% 2.9% 914 609,673 5,133 2,552 0.6% 2.3% 3,374 42,474 6.1% 39.1% 8,085 7,640,433 23,373 5.7% 21.5% 494 3,655,522 6,394 12,058 11.4% 11.1% 1,737 1,894,923 6,363 6,642 11.4% 6.1% 4,279 1,618,100 4,105 401 (64.9% ) 0.4% 1,575 12,094 24.8% 11.1% 1,184 2,350,861 9,744 22.9% 9.0% 288 1,909,162 5,104 1,009 26.8% 0.9% 151 203,939 4,948 1,160 30.9% 1.1% 737 237,278 4,887 181 112.0% 0.2% 8 Asia 6,942 11.0% 6.4% 644 2,347,137 6,685 8.9% 6.2% 292 2,211,019 3,024 110 (86.1% ) 0.1% 30 64,382 1,713 141 23.6% 0.1% 322 71,737 1,969 6 N/A 0.0% 0 Group 108,629 6.0% 100.0% 15,430 17,911,812 64,063 5.8% 59.0% 1,302 9,869,286 6,491 30,354 7.8% 27.9% 2,919 3,977,685 7,631 11,072 11.3% 10.2% 6,252 2,536,788 4,365 3,139 (16.6% ) 2.9% 4,957 2008 FINANCIAL REPORT 73 OTHERS PUBLICATIONS: 2008 Sustainable Development Report 2008 Annual Report ADDITIONAL INFORMATION AND GROUP FINANCIAL REPORTS ARE AVAILABLE AT WWW.GROUPECARREFOUR.COM Design, creation, copywriting and production: Translation: Photocredits: Carrefour Photo Library, Lionel Barbe. Paper: The Carrefour Group is committed to the responsible management of its paper purchasing. The paper used in the 2008 Challenges Booklet is FSC (Forest Stewardship Council) certified. This certification attests to its compliance with a set of internationally recognised forest management principles and criteria. The aim of the FSC is to promote environmentally responsible, socially beneficial and economically viable management of the Earth’s forests. Printing: This document has been produced in association with RR Donnelley. The print facility used is CarbonNeutral® and its Environmental Management System is certified to ISO14001:2004. OTHERS PUBLICATIONS: 2008 Sustainable Development Report 2008 Annual Report ADDITIONAL INFORMATION AND GROUP FINANCIAL REPORTS ARE AVAILABLE AT WWW.GROUPECARREFOUR.COM Design, creation, copywriting and production: Translation: Photocredits: Carrefour Photo Library, Lionel Barbe. Paper: The Carrefour Group is committed to the responsible management of its paper purchasing. The paper used in the 2008 Challenges Booklet is FSC (Forest Stewardship Council) certified. This certification attests to its compliance with a set of internationally recognised forest management principles and criteria. The aim of the FSC is to promote environmentally responsible, socially beneficial and economically viable management of the Earth’s forests. Printing: This document has been produced in association with RR Donnelley. The print facility used is CarbonNeutral® and its Environmental Management System is certified to ISO14001:2004. OTHERS PUBLICATIONS: 2008 Sustainable Development Report 2008 Annual Report ADDITIONAL INFORMATION AND GROUP FINANCIAL REPORTS ARE AVAILABLE AT WWW.GROUPECARREFOUR.COM Design, creation, copywriting and production: Translation: Photocredits: Carrefour Photo Library, Lionel Barbe. Paper: The Carrefour Group is committed to the responsible management of its paper purchasing. The paper used in the 2008 Challenges Booklet is FSC (Forest Stewardship Council) certified. This certification attests to its compliance with a set of internationally recognised forest management principles and criteria. The aim of the FSC is to promote environmentally responsible, socially beneficial and economically viable management of the Earth’s forests. Printing: This document has been produced in association with RR Donnelley. The print facility used is CarbonNeutral® and its Environmental Management System is certified to ISO14001:2004. OTHERS PUBLICATIONS: 2008 Sustainable Development Report 2008 Annual Report ADDITIONAL INFORMATION AND GROUP FINANCIAL REPORTS ARE AVAILABLE AT WWW.GROUPECARREFOUR.COM Design, creation, copywriting and production: Translation: Photocredits: Carrefour Photo Library, Lionel Barbe. Paper: The Carrefour Group is committed to the responsible management of its paper purchasing. The paper used in the 2008 Challenges Booklet is FSC (Forest Stewardship Council) certified. This certification attests to its compliance with a set of internationally recognised forest management principles and criteria. The aim of the FSC is to promote environmentally responsible, socially beneficial and economically viable management of the Earth’s forests. Printing: This document has been produced in association with RR Donnelley. The print facility used is CarbonNeutral® and its Environmental Management System is certified to ISO14001:2004. 2008 FINANCIAL REPORT Carrefour SA with capital of 1,762,256,790 euros RCS Nanterre 652 014 051 www.groupecarrefour.com I T R O P E R L A C N A N F 8 0 0 2 I