Financial report , 4,124,963 2,683,224 1,441,739 1,392,229. Management report

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1 PROPERTY, PLANT AND EQUIPMENT 18,388,750 8,844,559 9,544,190 9,421,559 INTANGIBLE ASSETS Other 299, , , ,744 Transport equipment 4,409,584 2,787,038 1,622,547 1,676,411, Financial report 2007 Management report 78 President s report 83 Consolidated financial statements 98 Financial statements 142, 4,124,963 2,683,224 1,441,739 1,392,229 Management report Organisation chart 78 Overview 79 Significants events 79 Group condensed financial information 81 Outlook 82 77

2 1. ORGANISATION CHART RATP Développement 95.41% RATP Tram Firenze 24.9% Mobicité 100% RATP International Xelis 100% 100% EM Services 90% Flexcité 51% Flexcité 94 51% Orlyval Service 99% TP2A 51% Equival 50% Financière Transdev 49.89% Transdev group 51.3% Alexa 37% LFI 32.46% LFI Services 100% TFT SPA 100% RFT SPA 100% Financière Systra 50% Systra group 71.73% Telecommunications Telcité 100% Naxos 100% Commercial Promo Métro 100% Real estate SEDP 100% SADM 100% Cars Giraux group 100% Gest Spa 51% TVO 35% STBC 15% Autolinee Toscana 100% SQY Bus 52.54% 37.11% Société financière Perrier group 100% Cars Perrier 79.87% 20.13% SCIPerrier 40% 60% Eurailco GmbH 50% Trans Regio 75.1% MDINA Bus 20% SLT 50% Bombela Operating Company 51% SELT 49% TRANSPORTATION ENGINEERING REAL ESTATE AND TELECOMMUNICATIONS 78 Annual report 2007

3 Changes in scope The following companies were newly-consolidated in financial year 2007: Cars Giraux group (operating in the conurbation of Mantes-la-Jolie and Cergy), acquired in February 2007; Autolinee (Italy), fully acquired in October 2007; Bombella Operating Company (BOC), South Africa, formed in financial year The companies that were newly consolidated in 2007 contributed 40.6 million to revenue and 2.3 million to consolidated net income, group share. In addition, following RATP Développement s capital increase, which was not subscribed by Transdev, RATP s stake in RATP Développement increased from 75% to 95.41%. 2. OVERVIEW Consolidated revenue was up by more than 5% to 3,908 million. The contribution of RATP and its subsidiaries increased and the company posted net income, group share of 112 million. Although the last quarter was affected by strike action over the reform of the retirement scheme, as a whole RATP performed well in Gross passenger income increased 1.6% from the previous year, up 3.1% in the first three quarters, before the negative effect of the strike action in the last quarter. The strikes decreased RATP s net income by 30 million, due to the STIF contract terms and the compensation paid to transport users. Despite these circumstances, in 2007 RATP posted high net income of 84 million and net cash from operations was up 12% to 625 million. Traffic measured by number of trips was up 0.3% to 2,873 million, but the strikes decreased overall growth by 3 points. The increase in traffic was also generated by STIF s decisions regarding its service offering, which resulted in a 2% rise in traffic income (additional payments from STIF for new services) and expenses. The other transport entities also posted considerably higher revenue. RATP Développement and Transdev continued to expand and raised capital of 80 million and 253 million respectively at the end of RATP Développement extended its operations in France by purchasing Cars Giraux, a group of companies that operates bus lines in Cergy- Pontoise and Mantes-la-Jolie. Also in France, record levels of traffic were recorded on the Orlyval Service and Open Tour. Outside France, it was the first full year of operations for BOC, the Gautrain project operator in Africa, and RATP Développement further increased its presence in Italy by acquiring Autolinee Toscana, the company operating the majority of the interurban services around Florence. It was a difficult period in Morocco and Germany, with further discussions on the economic environment in Casablanca and more termination costs following the loss of contracts in the Rhineland-Palatinate region. The Transdev group entered into a new development phase with the acquisition during the last quarter of the Dutch group Connexxion in partnership with a local public bank. The Engineering division performed well again: Xelis, which took over management of RATP s contractual plan is ahead of its business plan. The Systra group maintained high growth levels, boosting net income. The Real Estate and Telecommunications division expanded considerably, driven once again by the telecommunications subsidiaries. 3. SIGNIFICANT EVENTS 3.1 Transportation division RATP Net income for the year ended December 31, 2007 amounted to 84 million, up from 41 million for the previous year. While dampened by end-of-year strikes, the one-off decrease in business tax for 2007 introduced by new legal provisions had a positive effect on the year s results. They comprised the following items: (in millions of euros) 12/31/ / CHANGE CHANGE (A) (B) (B) (A) (%) Revenue 3,555 3, Net operating expenses 3,041 3, Gross operating surplus Expenses Net income Cash earnings

4 Effect of the strikes The total impact of the strikes on RATP s gross income was 30 million, while there was practically no impact on STIF. Pursuant to its contract, RATP paid an aggregate 20 million in compensation to travel card holders. This amount was partially offset by savings on running costs. It also paid contractual penalties for not fulfilling its public service obligations. Revenue The revenue recorded by RATP in 2007 was up 4.1% to 3,700 million from 3,555 million in Income from RATP traffic (payment by the STIF for transport services, based on the number of tickets sold times the contractual rate) amounted to 3,260 million (up 4.7%) boosted revenue. It was driven by: Volume of sales Despite the strikes, RATP s gross income was well above expectations. The risk sharing mechanism provided for in the contract boosted remuneration by 19 million compared with Price effect The price escalation clause is based on the cost-weighted allocation of the main production factors. Changes in the costs measured on the basis of Insee indices resulted in a 2.3% increase in the amount invoiced to STIF by RATP. Increased service offering A specific amount is paid by STIF in addition to the basic contract payment. The 2007 decisions and their full year effect from 2006 represented 59 million (up 1.9%). Other income was down 23 million as a result of the strikes, mainly due to the compensation of approximately 20 million paid to travel card holders. Net operating expenses Net operating expenses were up 3.1% to 3,136 million compared with 3,041 million in The most significant changes were due to: inflation (up 1.5%): 46 million increase; STIF s decisions concerning its service offering: 59 million increase; a number of positive external factors: a 32 million decrease in taxes and duties due to the new cap on business tax. Gross operating surplus increased by 50 million, representing 15.2% of revenue from sales compared with 14.5% in Cash earnings ( 625 million) were up significantly from However, they did not fully offset the increase in debt. Capital expenditure amounted to 933 million, including expenditure of 115 million outside the STIF contract. It was up 65 million from Net debt amounted to 4,294 million at the end of 2007, up 93 million from the previous year. The resources recognized only covered 86% of capital expenditure. Other transportation subsidiaries For the transportation subsidiaries, the significant events of financial year 2007 were: In France: Flexcité won the contract to provide transport services for disabled people in the Seine-Saint-Denis area. Flexcité now operates in Val-de-Marne, Yvelines and Seine-Saint-Denis; the majority-owned subsidiary TP2A renewed the operating contract for the Annemasse network; strong performance by the SLT s Open Tour and Orlyval link operated by Orlyval Service on behalf of RATP; Mobicité won the contracts for Aubergenville and Rosny-sous-Bois. Outside France: contract won to operate the Algers metro; Transfegio, the German subsidiary jointly owned with Transdev, lost the bid to renew the contract to operate two of its current lines. The loss of this contract led to the recognition of a substantial provision in 2007 for operating and termination costs in 2008; M Dina Bus is still loss-making. Discussions are underway with the Moroccan Interior Minister on future operating arrangements; Bouygues, Alstom and RATP Développement jointly negotiated the contract to develop, design, build and operate a train network between the main towns on the island of Trinidad. Within the Transdev group, the acquisition of half of the Dutch group Connexion enabled Transdev to double its revenue to 2 billion, with the Netherlands as its primary business area. 3.2 Engineering division Within the Engineering division, revenue generated by the Systra group increased considerably, with a strong market presence in the Middle East (Dubaï, Saudi Arabia) and major infrastructure projects (Algeria). Growth was profitable. 3.3 Real Estate and Telecommunications division In the Real Estate and Telecommunications division, the telecommunications subsidiaries reported further improvement in performance. 80 Annual report 2007

5 4. GROUP CONDENSED FINANCIAL INFORMATION Preliminary remark: the consolidated financial statements as at December 31, 2007 are the first to be prepared under International Financial Reporting Standards (IFRS). Figures for financial year 2006 have also been presented under IFRS for comparative purposes, as pro forma data. 4.1 Changes in consolidated revenue (in millions of euros) CONSOLIDATED REVENUE AS CONSOLIDATED REVENUE AS CHANGE IN REVENUE AT DECEMBER 31, 2006 AT DECEMBER 31, 2007 COMPARED WITH 2006 VOLUME % VOLUME % RATP 3, % 3, % 4.0% Other % % 79.8% Transportation 3, % 3, % 5.1% Engineering % % 10.8% Real Estate and Telecommunications % % 4.8% TOTAL RATP GROUP 3,711 3, % SUBSIDIARY CONTRIBUTION % % Group revenue increased by 5.3%. The subsidiaries, which contributed 247 million, excluding equity-accounted affiliates, performed better than RATP itself (up 28.5%), due to: the first-time consolidation of Cars Giraux, BOC and Autolinee. On a like-to-like basis the contribution of subsidiaries only increased 7.8%; growth from the engineering companies (up 10.8%), particularly Systra; growth from the telecommunications subsidiaries (up 16.1%). The share of the subsidiaries in consolidated revenue increased from 5.2% to 6.3%. 4.2 Changes in consolidated net income (in millions of euros) DECEMBER 31, 2006 DECEMBER 31, 2007 CHANGE % CHANGE RATP % Other transportation subsidiaries % Transportation % Engineering % Real Estate and Telecommunications % TOTAL % RATP s contribution to consolidated net income increased considerably compared with 2006, due to the items mentioned in paragraph 3.1. The contribution of the subsidiaries increased from 11 million to 13 million. The difference reflects the uneven performance reported by: RATP Développement and its subsidiaries, 1.6 million due to: the dilution of Transdev ( 1.5 million) and the financial expense incurred in anticipation of the capital increase, major commercial expenditure by RATP Développement, an increase in the losses reported on Trans Regio in connection with the termination loss recorded following the loss of the bid on two of its lines, companies newly consolidated in 2007 (up 2.3 million); increase in the contribution of Transdev (up 1.5 million); increase in the net income of the Systra group (up 1.2 million), due to a number of exceptional factors, in addition to the good margins generated on the new contracts; considerable increase in the net income of the telecommunications subsidiaries (up 1.4 million). 81

6 4.3 Group net debt as at December 31, 2007 (in millions of euros) GROUP RATP OTHER TRANSPORTATION ENGINEERING REAL ESTATE/ DEBT DIVISION DIVISION TELECOMS Financial assets , ,246 20,688 34,080 Loans and borrowings (1) 4,614 4,579 28,052 4,607,315 6,380 2 NET DEBT 4,236 4,282 2,666 4,284,069 14,308 34,078 including leaseback IFRS restatement 39 RATP DEBT 4,294 (1) Not including accrued interest and deposits and guarantees. Consolidated net debt was up 74 million from December 31, 2006 mainly due to RATP s contribution. The subsidiaries contributed slightly ( 2 million) to lowering debt levels. 5. OUTLOOK For RATP, financial year 2008 will be the first year of implementation of the new STIF contract signed at the beginning of For the other entities of the Transportation division, 2008 will be a year of consolidation, integrating the recent acquisitions by RATP Développement (Cars Giraux, extended operations in Algeria and Trinidad) and Transdev (Connexxion in particular). In the Engineering division, Xelis should continue to expand, while Systra group s growth will probably be slower with profits more in line with industry levels, as no extraordinary events are expected during the period. The subsidiaries of the Real Estate and Telecommunications division should maintain the same levels of performance as reported previously, particularly as the telecommunications companies have found new growth engines. 82 Annual report 2007

7 President s report on the preparation and organisation of the Board of Directors work and internal control for the year ended December 31, 2007 Introduction 84 The Board of Directors 84 The organisation of internal control 85 Control activities 89 Appendices 91 83

8 Introduction The purpose of this document is to report on the preparation and organisation of the Board of Directors work and on the internal control procedures implemented by RATP, in accordance with the provisions of article L of the French Commercial Code. The structure of this report is based on the reference framework on internal control published in January 2007 by the French securities regulator, Autorité des Marchés Financiers (AMF). The AMF set up the Market Advisory Group specifically to develop the reference framework on internal control, which is to be used by French companies governed by the requirements of the Financial Security Act. According to the reference framework, internal control is a system used by the Company to ensure: compliance with current laws and regulations; the implementation of the instructions and guidelines set by Senior Management or the Management Board; the smooth running of the Company s internal processes, particularly those used to safeguard assets; the reliability of financial information. The reference framework on the internal control system is based on five components: internal control environment; risk assessment; financial reporting and disclosures; control activities; management activities. As stated in the reference framework, internal control cannot provide absolute assurance that the Company s objectives will be met. The first part of this report relates to the Board of Directors: the governance body, which guarantees the quality of the internal control system. It describes the way the system works and the most significant work conducted during 2007, followed by the strategic approaches adopted during the year. The second part of the report describes the organisation of the internal control system. The third part describes the control and management activities and the role they play in ensuring the reliability of accounting and financial information. This report is for the attention of the Audit Committee and Board of Directors. 1. THE BOARD OF DIRECTORS 1.1 The work of the Board The RATP Board of Directors comprises 27 members, pursuant to the decree of April 13, 1984, amended by the decrees of June 7, 2004 and of August 11, 2006 (Appendix 1). The Board is chaired by Mr Pierre Mongin, who was appointed Chairman and Chief Executive Officer (CEO) by the decree dated July 12, The Board is responsible for all the Company s major strategic decisions in economic, financial and technological terms, particularly with regard to Company s State-Region Contractual Operating Plan (Contractual Plan), the Business Plan and the RATP/STIF contract. The work of the Board is planned and managed by two standing committees, one of which deals with matters concerning technical and technological modernization and development, and the second economic and strategic issues. The Committee on Economic and Strategic Issues also monitors the implementation of the contract between RATP and STIF, and the Business Plan. The role of the Audit Committee, comprising six Board members, is to advise the Board on a range of issues including the reliability of the information systems used to prepare the financial statements, financial management, accounting and management principles, risk management and financial reporting. The Board s President sets the agenda of strategic issues to be discussed for the purposes of policymaking. He may decide to set up ad hoc working groups on specific issues. 1.2 Significant work conducted by the Board in 2007 The Board approved the financial statements for the year ended December 31, 2006, as well as the individual Company and consolidated financial statements for the six-month period ended June 30, It also approved the Company s budget for 2008 at its meeting in November Following the strike action in November, the Board voted on the President s proposal to pay compensation to transport users. The capital expenditure budget was higher than for previous years, due to the expenditure required for development in connection with the Contractual plan, the purchase of the associated new rolling stock and an overall increase in the internal program. The preliminary conclusions of the Board s working group on the Company s indebtedness were presented at its meeting on June 1, They showed that RATP s indebtedness is not related to operating losses or working capital requirements, but to capital expenditures. Various recovery plans were presented to the Board. The President gave the Directors detailed information on the status of the negotiations on RATP s retirement scheme. In 2007, the Board worked at length on development policy. It decided to enhance the governance rules of the subsidiary RATP Développement and amended the subsidiary s internal procedures to do so. The subsidiary is now required to present its Medium-Term Business Plan and budget to RATP s Board for opinion, every year. RATP s Board also gives an opinion on RATP Développement s investments for amounts above certain thresholds. It has also requested that two independent Directors be appointed on the Board of RATP Développement. An extraordinary Board meeting was convened in March 2007 to provide an opinion on the terms of the bid to operate and maintain the Algers metro, which was subsequently won by RATP Développement. The Board also gave RATP s guarantee to its subsidiaries on two development projects in Germany. 84 Annual report 2007

9 At the same time, the Board s benchmarking group continued its work on comparing RATP s efficiency and effectiveness in relation to other transport operators, particularly for surface transport networks, the Paris metro and the Paris surburban metro/trains (RER). The Board also approved major contracts for the provision and renovation of tramway rolling stock. It approved purchase orders for tyre and bus equipment, infrastructure required to develop operations under the Contractual Plan and operating supplies. It examined the annual report on purchasing policy. During its work, the Audit Committee validated the way in which the annual and half-yearly financial statements had been prepared, and assessed the risks relating to the subsidiaries, to ensure the financial security of the Company. It also approved the work performed by the Company to adapt its accounting system to International Financial Reporting Standards (IFRS) and examined the 2007 report of the Internal Audit function and its annual plan for The list of the main issues addressed by the Board is provided in Appendix Follow-up on the Chairman and CEO s guidelines in 2007 The President decided to set up an ad hoc committee reporting to the Board to monitor the implementation of the 17 commitments laid down in the document presented to the Board at its meeting on October 6, 2006, entitled Building Tomorrow s RATP Together. At its meeting in September 2007, the ad hoc committee conducted a full review on the implementation of these commitments. 1.4 Negotiation of the STIF contract for and preparation of the Business Plan for The Chairman and CEO regularly informed the Board of progress in the negotiations on the contract between RATP and STIF, which were not concluded within the given deadline of December 31, 2007, despite the Company s efforts. The terms of the contract were approved by the Board on February 8, 2008 and the contract for was signed on February 21, The President worked closely with the Board on several occasions to develop the Business Plan for , entitled Ambition 2012: We ll show you how to enjoy getting around town. He gathered input from the Board on the strategy set out in the document during an extraordinary meeting exclusively on the subject. The Board validated the plan as a whole, which specifies the Company s values and performance goals for in five areas: Innovation and Customer Service, Development Strategy, Economic and Financial Performance, Cross-country Integration, and Human Resources Development, and gave comments and recommendations, which have been taken into account. 2. THE ORGANISATION OF INTERNAL CONTROL Due to the complex institutional environment in which it operates, and its status as a public transport company, RATP has a customized internal control system. The system is designed to comply with laws and regulations, create an effective control environment, implement methods to assess and manage the risks inherent in its activities and promote internal communication, to enable all those involved to perform their work efficiently. 2.1 Complex institutional environment RATP adheres to ethical values, through its commitment to charters such as the Charter of the International Association of Public Transport (UITP 1999), the United Nations World Pact (2003), the National Accessibility Charter (2003), and the framework agreement with the Agency for the Environment and Energy (ADEME 2004). Given its field of business and legal status (EPIC), internal controls have always been an integral part of RATP s operations. As a state-owned company, RATP is subject to French government controls, which are conducted by: the Economic and Financial Control Board for Transport (1) ; the French Procurement Board, set up by the order of January 11, 1973 (2) and chaired by a representative of the National Audit Office. In addition, its financial statements are audited by the Statutory Auditors, Pricewaterhouse Coopers and KPMG. RATP entered into a contract with Syndicat des Transports d Île-de- France (STIF) in It has been regularly updated since by riders and new contracts (see 1.4 above). RATP implements the contract at business unit level, by setting contractual objectives and using indicators to measure performance and ensure that contractual obligations are met. Improving quality is a constant concern for the Company. Quality control systems are in place and the Company has received quality certification under French and International Standards (ISO, NF and Qualicert). The certifications, which are issued by independent bodies, concern both management systems and performance in terms of environmental issues and quality of service. At the end of 2007, 82% of RATP employees were working in certified activities. Quality audits are conducted regularly and promote cross-company exchanges. The employees involved in internal control procedures (senior management, operational managers and specialized audit and control staff) base their work on professional audit and internal control standards and on the definition of internal control issued by the professional bodies such as the French Audit and Internal Control Institute (IFACI) for the Internal Audit. The Board also monitored implementation of the Contractual Plan and Business Plan during Details of the work performed by the Board and committees are provided in Appendix 3. (1) As an EPIC, RATP is subject to economic and financial control by the government (decree no of December 18, 2002). (2) Amended by the order of March 23, 2005 (Journal Officiel of April 13, 2005). 85

10 2.2 Compliance with laws and regulations The Company s Legal department provides advice and analysis, draws up contracts, and handles complaints for all the Company s business activities. One of its roles is to prepare for the future by monitoring legal developments (except on technical matters), disseminating information on best practice, assessing risks and setting up insurance coverage. Its permanent primary objective, particularly as it is positioned to provide support to all levels of the Company, is to ensure that the legal aspects of all the projects and operations undertaken by the Company are legally secure and compliant. In 2007, the Legal department participated in setting out the general regulations governing the Company and recasting the authorizations and signatures used within the whole Company in order to adapt them to recent developments and ensure they were reliable and wellmanaged. In addition, it focused on preparing for the consequences of the entry into force of the European regulation on public service transport obligations (3), relations with the public transport authority in the Île-de-France region and the implementation of labour law reforms and those regarding the funding of retirement schemes as provided for by European Union law. 2.3 Governance adapted to the Company s challenges At the Convention on May 29, 2007 entitled Building our Future, the Chairman and CEO announced the Company s growth and competitive objectives for the coming years. He set out two principles in terms of organisation and management to enable these objectives to be met: members of the Executive Board would be fully responsible for one or several departments, enabling them to report on operations on a daily basis, without decreasing their Company-wide responsibilities: the new structure of the Executive Board, effective from the end of August 2007, reflects the implementation of this principle; the sharing of tasks between the contractor and works manager would be clarified in order to enhance engineering work and the Company s efficiency when implementing major investment projects. The creation on January 1, 2008 of two new departments dedicated on the one hand to contracts for transport work and on the other hand to real estate assets was a clear reflection of working toward these objectives. 2.4 The control environment Organisation of internal control The internal control system is effective if all employees are involved at all levels of the Company. This is why the Company involves all of its employees in the internal control system, which is aimed at ensuring the personal safety of its employees and secure operations Business unit level At local level, internal control is performed directly by management, together with control and support groups: operational managers play a key role as they are responsible for ensuring that production processes are in compliance with current legislation and policies, and that transport users are provided with quality services; they are assisted in achieving their goals by support and control groups, which lend their expertise and measure performance. This is the case, for instance, for the management control, human resources, purchases and communication functions Department level Other employees are involved at department level: transport and service controls are decentralized and performed per type of control (transport or maintenance inspections); specialized audits are performed within each department; systems risk management; quality controls are performed within each department Company level The Inspectorate General/Internal Audit, the terms of reference of which are laid down in general regulation 432 C of September 2, The Internal Audit function was set up in 1986 to provide assurance on the level of control over operations by controlling and assessing the business activities of RATP group (4). The Inspectorate General was set up in 1999 to enhance RATP s management and internal control (5). The internal control work is part of an annual plan drafted on the basis of the proposals made by the Executive Board (6) and the main risks identified through the Company s risk mapping. The annual plan is submitted to the Audit Committee, then approved by the Executive Board. The auditor is formally appointed by the Chairman and CEO. The auditor sets out his findings and recommendations in a report drafted for the attention of the Chairman and CEO, which is copied to the other members of the Executive Committee and to the department and business unit Directors directly concerned. The reports issued by the Inspectorate General are strictly confidential and are submitted directly to the Chairman and CEO and to the person that requested the engagement. Within two months following each audit, the managers that have been audited prepare and submit an action plan to the Internal Audit, which ensures that the plan is relevant and appropriate given the recommendations made. The Internal Audit then sends the action plan with its opinion for validation by the managers of the departments concerned or to Senior Management, depending on the type of audit performed. From time to time, the Audit Committee may ask for audit engagements to be performed and have the final report presented by the Internal Audit. Since 2006, the Inspectorate General/Internal Audit has been evaluated by an external body (compliance with professional standards, practices used and overall effectiveness). In 2007 the evaluation gave rise to the preparation of an action plan, which will be initiated in (3) JOUE of December 3, (4) IG 432 C of September 2, 2003, art (5) NG 5265 of May 19, (6) Members of the Executive Committee, department managers and delegates. 86 Annual report 2007

11 General Safety Control, which was set up by the general memo 5294 of February 25, The main role of the General Safety Control is to monitor all the processes relating to Company safety, particularly in terms of railway safety, fire safety, information systems security, the safety of goods and persons and the prevention of natural disasters. The entity comprises two units: the Fire Safety unit and the Corporate Risk Management unit. The Fire Safety unit provides training and guidance on regulations and goals regarding stations and tunnels and on the implementation of fire safety systems. The priority of the Corporate Risk Management Unit is to enhance employee safety and the security of property and ensure compliance with all regulations concerning design, engineering, operations and maintenance. The audits are carried out on the basis of an annual program approved by Senior Management upon the advice of the Controller- General for Security. Systems risk management audits may be performed on a product, procedure, process or monitoring system. The audit procedures comply with the principles set out in French standard NF EN ISO of December A written report with recommendations is issued upon the completion of each audit assignment. The audited departments prepare an action plan based on the recommendations, which is validated, as appropriate, by the departments or Senior Management, upon the advice of the Controller-General for Security. The integrity of the Company was enhanced during 2007, by combining two delegations of Company-wide policy-makers (research and innovation, quality and sustainable development) and creating a Delegation for Innovation and Sustainable Development, which also includes specialists on forward planning and environmental issues (6). The purpose of this new structure is to work closely with the departments to prepare, implement, guide, accompany, and monitor the Company s policies in these fields. The delegation will work to promote quality, sustainable development and research and innovation within the Company by providing methodological and technical assistance to the different entities and implementation guidance. This structure should enhance the synergies generated by innovation and meeting the challenges of sustainable development, and increase the Company s capacity to plan ahead and provide meaning to its action and the action of its employees. The prime objectives of the new delegation are to enhance RATP s corporate responsibility, set up cross-company processes for innovation, make a contribution to the rocade metro project around Paris, streamline the existing management systems and improve service quality. The various sectors within RATP now all believe that sustainable development is part of their responsibility and they are gradually including sustainable development goals in their annual contract. Eleven departments, representing nearly 80% of the total workforce, have officially agreed, by signing an internal charter, to adopt a long-term approach to performance in terms of saving resources, transparency and rigorous practices The Audit network The role of the Inspectorate General/Internal Audit is also to advise the various departments and ensure that they comply with professional ethics and knowledge-sharing methods. This is done through the Audit network, which combines all RATP s Audit and Inspection departments. The Audit network convened four times in The diagram in Appendix 4 illustrates the internal control system. The table in Appendix 5 summarizes the role of the cross-company entities Evaluation and Review of Internal Control: project completed Launched at the end of 2005, the project entitled Evaluation and Review of Internal Control comprises five separate areas of work that are fundamental for internal control. In addition to risk mapping (2005), the system for delegating authority and authorized signatories and the complete set of internal control procedures applicable to RATP group (2006), two other reports were completed in 2007: the review of audit, inspection and control structures, which provides an overview of all the internal control structures currently in place along with the resources allocated to them and their importance within the Company; the inquiry on the training requirements of managers training needs and expectations in terms of governance, risk management and internal control Human resources management policy To deal with institutional change, technological developments and competition, the Company has adopted a human resources policy focused on developing its employees skills with the aim of providing high-quality transport services. To prepare to meet future needs (between now and 2014, 32% of operators, 46% of supervisors and 50% of executives will retire), a list has been drafted identifying the posts that will need to be filled and setting out action plans for the various sectors of the Company. This skills management tool will enhance career development and training within the entire Company. The recruitment process is certified by a quality control body (Qualicert). A satisfaction survey is conducted for each person recruited by the department welcoming the new employee and the quality of service rendered is reported once a year. Since 2006, all those participating in the selection and recruitment process have signed a commitment to comply with a strict internal code of ethics. The staff are trained to work in an open multicultural environment, as stipulated in the Charter on Company diversity, signed by RATP in To facilitate the integration of new managers, a Company-wide training process has been put in place. In addition to obtaining a global understanding of the Company, specific modules are used to develop management skills (people management, micro-economics, human resources management ). (7) General memo 5695 of January 1,

12 2.4.8 Information systems adapted to the Company s objectives The Company s information systems are managed and developed by Information Systems Steering Committees, dedicated to each business process, which validate expenditure. The objectives assigned to these systems and their subsequent development is determined by the project managers. The systems are managed based on a three-year forward-looking master plan. For protection, the information systems are hosted in two separate computer centres, which are equipped with the appropriate technical environment (access controls, fire safety, secure electrical power systems and air conditioning). They are protected on a logical level and are regularly audited. Professional staff training includes components on information systems security. The information systems architecture is based on storage area network infrastructure (SAN technology) which stores critical data on two separate sites. In addition to storage, data is backed up daily. The storage and backup activities are stipulated in the operating procedures. The unit which manages these systems is ISO 9001 certified. Continuity of operations is guaranteed by secure architecture on the two production sites (corporate messaging system, institutional web site) and by the implementation of business continuity plans. The continuity plan for the accounting system is tested annually and the plan for the human resources system will be deployed during The Information Management units manage all the documentation relating to data analysis, programming and processing using the document management procedures. These units are ISO 9001 certified and are audited annually to ensure they remain compliant. 2.5 Risk assessment and management The cartography of risks used by the Company since 2003 and updated at the end of 2005 enables the Company to assess and measure the risks inherent in its business activities. More specific risk management tools (railway business, information security) are also used by the departments concerned. The incidents that occurred during the year were addressed and resolved, and measures were taken to ensure that they do not happen again Business risk Members of the Executive Board, department Directors and delegates and internal auditors all provided input to establish the cartography of risks (8). This tool enables all the risks taken by the Company to be classified in terms of their importance and the extent to which they are controlled. The risk cartography is used to prepare the annual audit plan. In connection with the business plan for , a global framework for risk management will be set out and a risk management Director appointed, who will be responsible for implementing the plan in all the departments. In 2007, several audits were performed on policies and processes, concerning, for instance, commercial activities over the networks, the internal communication function, contract approval management and partnerships. Recommendations were made on ways to improve, which entail: putting in place tools to evaluate systems effectiveness; setting out formal standards to standardize practices; opening and extending certain activities to develop cross-company systems and systems integration within the Company. The audits of the business units were performed based on a set of standards aimed at measuring the units performance, by assessing their control of processes and achievement of goals, as well as the Company s strategic objectives. The audits of subsidiaries led to recommendations on improvements to be made in order to enhance business performance and administrative procedures and secure certain risky contractual clauses. Company-wide audits were also performed by the General Safety Control division in connection with the annual audit program for corporate risk management, approved by Senior Management. In 2007, these audits concerned: the reliability and consistency of databases on incidents, which are used to prepare indicators to manage rail transport security; equipment at risk and the associated continuity plans (conducted jointly with the Inspectorate General/Internal Audit); Decentralized PCC (lines 4, 13 and 14) Risk management relating to the railway business In order to develop a tool to manage the risk relating to the Paris metro and RER, a monthly risk alert report is prepared, using data collected from the Operating and Maintenance departments. The report, which provides recommendations on each of the indicators mentioned, is distributed to Senior Management and the departments concerned Information security risk management The Company has implemented a Company-wide information security policy and system since This system is managed at high level to ensure that all the departments take measures to cover the risks relating to information systems, in compliance with the principles and rules adopted. A specific policy for ticketing, which is a highly critical system, and a framework for classifying the Company s information resources were approved in Specific (organisational, technical, compliance) and Internal Audits are performed to ensure that the policies and framework are correctly applied, along with audits, feedback, exercises, simulations or incident monitoring. A person responsible for data protection was appointed on January 31, (8) Executive Committee members, department Directors and delegate generals, internal auditors. 88 Annual report 2007

13 2.5.4 Risks related to strike action The reform of RATP s special retirement scheme was a major risk for Providing information and discussing the related issues helped limit conflict, although it was not completely avoided. Discussions between all those concerned were possible due to the culture of dialogue generally accepted in the Company. The conflict alert system regularly used by all the unions also enabled social unrest in the Company to be kept in check Targeted response to incidents Feedback on incidents and potentially dangerous situations is reported (e.g. REX files used by the RER) or provided through inspections, when necessary. Decisions are then taken on the corrective measures, training, and organisational or technical improvements required. The human factor, which is often present in risk scenarios, is systematically taken into account in studies and feedback. Some of the major events that occurred in 2007, with consequences well beyond the Company, and high media coverage, were as follows. On July 29, 2007, a short circuit in the motor coach of a train on line 13 caused an explosion and smoke fumes at Varenne station. Passengers evacuated the station spontaneously, and three other stations were also evacuated. Inspections were carried out on several components of rolling stock. It is assumed that the incident was caused by a foreign body, which triggered an electric arc, leading to the short circuit. Following the technical incident, the decision was taken to implement the following measures, from the first quarter of 2008: procedure applicable when closure for work on rectifier station; feedback on how the fire-smoke alarm was triggered, to be used in training; improved formal procedures for those managing the incidents. A report on the incident was presented to BIRMTG (9) on August 8, During the summer of 2007, several accidents occurred, particularly on the bus network, which highlighted anomalies in the organisation and circulation of information, making it difficult to deal with the reaction by the media and also the overly legal-based approach to the victims. The CEO mandated the Inspector General to assess the information available and the share of responsibilities in the internal circulation of information, as well as propose changes in the organisation of media coverage and relations with victims. At the end of 2007, this led the CEO to entrust the RATP mediator with an additional assignment on the follow-up and assistance provided to victims of accidents. The Bus department also requested an audit of the treatment of these accidents and recommended a number of measures, such as improving the services provided by the Bus skeleton staff, more formal arrangements for dealing with incidents, an improved circulation of information internally, a more complete follow up of the driver-operators and better follow up and feedback of the accident. 2.6 Communication and dissemination of information To enable all employees to fulfil their role, the Company has gradually set up systems to ensure that the information they require circulates well: the internal communications system comprises: the Argos website, which is open to RATP employees, and can be accessed from home. This intranet comprises a corporate part and pages per department, supporting neighbourhood communications. There is also a Video Mag, a discussion forum on the corporate intranet, and a magazine published every fifteen days, which is delivered to the homes of 45,000 employees. The magazine is prepared by an editorial board representing all the Company s departments. Management also has an additional tool at their disposal, the Step-Ahead Management application (LAM). It provides news, presentations and comments on new laws and their effects on the Company s operations (service continuity, European regulations). The Communication department holds conventions and seminars and provides expertise for the conventions held by departments; all the publications are widely distributed internally: annual report and report on sustainable development, key indicators, development reports; RATP adopted an inclusive consultative approach for the preparation of its Business Plan for During 2007, a series of discussions were held with employees to establish the Plan, which sets out guidelines on the Company s activities for the next five years. In the first half of the year, five strategic goals were identified on the basis of 23,000 contributions, including 9,000 proposals by more than 6,000 participants. These goals were recognized as priorities by 88% of employees. In the second half of the year, 1,300 proposals were made by 5,000 participants. This has resulted in a great number of employees being fully committed to working on the 22 Company-wide projects currently under way. 3. CONTROL ACTIVITIES 3.1 The internal control procedures for accounting and financial information Accounting principles applicable to RATP Due to its legal status as a public sector trading company (EPIC), RATP applies the same accounting principles as those generally accepted by and legally binding for commercial companies. It also has to meet the requirements specific to public service missions. Consequently, it applies the accounting policies set out in CRC regulation no of April 29, RATP s chart of accounts is tailored to its social security obligations, as instituted by Decree no of February 23, The chart was approved by France s National Accounting Council (CNC) on January 25, 1984, in accordance with the order of April 27, (9) Interdepartmental committee for mechanical lifts and automated transport systems. 89

14 RATP is required to appoint an independent auditor in accordance with the provisions of article 30 of the law no of March 1, 1984, relating to the audit of financial information in public sector trading companies (EPIC) and the provisions of article 33 of decree no of March 1, 1985 (10). The recent regulatory changes and improvements made in order to comply with those changes are presented below. A description of the procedures adopted for the production and control of financial information prepared by RATP is presented in Appendix Financial information The timetable has been set for monthly, half-yearly and annual reporting of financial information. RATP uses the Oracle Financials software system. Monthly statements are available just nine working days after the end of the month, while the level of analysis and detail during the pre-closure period remain the same. The monthly statements enable the departments to carefully monitor their business performance and budget throughout the year. Both individual company and consolidated financial statements, prepared for the first time under IFRS, were presented to the Board of Directors in September 2007, a week earlier than the previous year. In order to meet closing deadlines, for the second consecutive year, the Statutory Auditors audited preliminary financial statements at the end of May in order to prepare their audit of the financial statements at the end of June. Financial statements are controlled at various levels using highly effective query tools, which are available over the majority of the accounting information system and are constantly upgraded International Financial Reporting Standards (IFRS) The IFRS project was completed in 2007 with the preparation of the consolidated financial statements as at June 30, in compliance with IFRS. The final accounting choices were made by the Audit Committee during the first half of 2007, enabling the half-year financial statements and 2006 pro forma financial statements to be prepared in compliance with IFRS. Procedures have been set out to process the information required to prepare the financial statements, particularly in compliance with the following standards, which have a material impact on processes: financial instruments (IAS 39) RATP has set up a tool to monitor cash transactions in compliance with IFRS. This tool has an accounting component, interfaced with the information system and general accounts, thus avoiding manual data entries. It is configured to support the dual accounting principles French GAAP/IFRS and provides input for the Group s financial statements and RATP EPIC s financial statements. The configuration of the accounting entries was validated first by the Statutory Auditors to ensure that the accounting trail complied with current standards. employee benefits (IAS 19) After listing the various benefits to be provisioned for the Company s transport and social security activities, the Statutory Auditors validated the methods used and information required to measure the benefits. A procedure was drafted specifying the participants and data to be reported at each closing date RATP pension fund (CRPRATP) The RATP s pension fund (CRPRATP) was set up on January 1, After transitional arrangements in 2006, 2007 was the first year of ordinary operations between RATP and the CRPRATP, both in terms of contributions and operating costs. The contributions declaration process was reviewed to ensure the separation of the roles of certifying officer and payer. In addition, the contributions paid into the CRPRATP are now declared on pay-in slips in compliance with decree no of December 26, Creation of an audit office within the Company s Accounting department Plans to set up an audit office were finalized in The purpose of this office is to complement the controls already performed by the various accounting offices and to audit certain accounting processes in order to guarantee the reliability of the financial statements. The office works alongside the Inspectorate General/Internal Audit, to ensure that their audit recommendations are implemented on accounting matters, and on specific issues. The audit office is part of the Audit network managed by the Inspectorate General/Internal Audit Continued updating of rules and procedures The regulations and procedures relating to accounting and financial matters have been listed and the impact of changes in regulations is assessed regularly. A timetable now needs to be set for drafting procedures. At the same time, the Company is looking for ways of making these procedures easily accessible, particularly over the intranet Transfer of property tax declarations to the Accounting department Property tax declarations were previously made by the Property department. In order to facilitate exchanges with the accountants who are largely responsible for the information declared, the activity was transferred to the Accounting department during the first half of (10) Implementation of law no of March 1, 1984 on the prevention and settlement of Company difficulties. 90 Annual report 2007

15 3.2 Control of subsidiaries Subsidiaries are subject to a range of specific controls, designed to manage the risks inherent in company development Upstream controls Subsidiaries corporate strategy is controlled on the basis of mediumterm plans. Control is exercised by a Commitments Board comprising representatives of each subsidiary s management, members of RATP s Finance department and Senior Management. Significant decision-making issues concerning budgets, the preparation of financial statements, bids on major calls for tender, major contracts, capital transactions, equity investments and the founding of sub-subsidiaries, are controlled by the Commitments Board of each subsidiary. Major decisions and those affecting major subsidiaries may also be controlled by RATP s supervisory bodies (State Equity Investment Agency, Economic and Financial Control Board for Transport, Budget department, and Transport and Maritime Board). The subsidiaries Commitments Boards convene prior to Board meetings, to enable them to provide input and guide Directors decision-making Downstream controls Monthly financial reporting is performed on the basis of accounting information gathered in the Magnitude application. The information is presented to the Executive Committee in the form of an operating report. The Magnitude application is used for both monthly reporting and consolidation purposes, which guarantees consistent data management. A complete audit of operations is performed on certain subsidiaries every year. Upstream controls and monthly financial reporting are performed by the unit of the Finance and Management Control department responsible for Subsidiaries, Financial Transactions and Tax, while audits are performed by the Internal Audit department Other controls RATP s Board of Directors examines the financial position of subsidiaries twice a year: in March with regard to the previous year s results and consolidated financial statements; in September with regard to the results as at June 30, and the consolidated financial statements for the first six months. In addition, at the end of 2003, the Audit Committee set up a series of risk indicators to report on the key risks facing subsidiaries Developments Since being set up, control procedures relating to subsidiaries have constantly been adapted to take into account changes in the business environment and any incidents that may have occurred. Since 2007, RATP s control has gradually been enhanced by the management control exercised by the subsidiary RATP Développement over its own subsidiaries and equity investments. The governance of RATP Développement has been strengthened by the appointment of an independent Director to the Board. Appendices Appendix I BOARD OF DIRECTORS AND COMMITTEES 1. Board of Directors Pierre Mongin In conformity with decree no of April 13, 1984, amended by decrees of June 7, 2004, and of August 11, 2006, the RATP Board of Directors comprises 27 members, which include: nine government representatives appointed by decree; nine persons appointed by decree: two persons selected for their expertise in transport and mobility policy, three persons with a professional background in business, two representatives of public transport users, two local authority representatives from areas directly affected by the Company s activities; nine employee representatives elected by Company employees. The Board nominates one of the Directors as Chairman and Chief Executive Officer. The appointment is made by decree by the Government Ministers after the Cabinet has heard the report from the Transport Minister. The Government Commissioner and Head of the Economic and Financial Control Board for Transport are entitled to attend all Board meetings, along with the secretary or representative of the Works Committee. The secretary of the Board is nominated by the Chairman and Chief Executive Officer, and appointed by the Board of Directors. The secretary is responsible for preparing the reports and minutes of all the meetings of the Board and of the standing and ad hoc committees. The Board convenes at least six times a year, and may also hold extraordinary meetings to renew the mandate of the Board or Chairman and CEO. 91

16 2. Committees Two standing committees, each comprising an equal number of Directors, are responsible for preparing the Board s work. The first deals with the Company s technical and technological development, particularly in terms of network development and maintenance, improvement of service quality, research and contracts. The Economic and Strategic Committee deals with RATP s operating budget and investment plans, financial statements, public and service provision agreements and contracts. It also addresses business and social issues such as training, housing policy, developments outside the RATP/STIF contract, subsidiaries activities and the annual report and sustainable development report. It also enforces implementation of the RATP/STIF contract and the RATP Business Plan. An Audit Committee, comprising six Directors (two elected by employees, one leading business person and three government representatives) is responsible for advising the Board on the individual and consolidated financial statements and the reliability of the information systems used to prepare them. It also advises on financial management, management and accounting principles, cost accounting, accounting information systems and management control, the quality of the Internal Audit program and methods, and risk management policies. Apart from the management decisions, which are voted on by the Board, the Chairman and CEO may propose issues to the Board for discussion, particularly on subjects where medium and long-term policy-making is required. 3. Subsidiaries and investments The Chairman and CEO appoints the RATP s representative at the shareholders general meetings and Board meetings of companies in which RATP holds equity interests. The RATP s Board of Directors hears a report on each of the companies in which it holds a significant stake at least once a year, and gives its opinion on RATP Développement s medium-term plan. 4. Annual report and sustainable development report The annual report and sustainable development report are submitted to the Board for approval. Appendix II MATTERS EXAMINED BY THE BOARD IN 2007 Progress report on the implementation of the President s commitments. Progress report on the renegotiation of the STIF contract. 2. Economic and strategic issues Economic, business and financial issues Presentation of the RATP group s individual and consolidated financial statements as at December 31, Presentation of RATP group s individual and consolidated financial statements as at June 30, Operating budget for Investment program for 2008 borrowing authorizations. Corporate training program RATP group management report as at December 31, RATP group management report as at June 30, Report on the STIF/RATP contract and Business Plan. Draft annual report and sustainable development report for RATP housing policy for Development issues Information on subsidiaries outlook Participation in the capital increase of Financière Transdev. Bid by RATP Développement for the contract to operate and maintain the Algers metro. Improvement of RATP Développement s governance rules. Capital increase of RATP Développement. RATP surety on RATP Développement s guarantee in connection with the bid for the Mosel Rheinbahn contract. RATP surety on RATP Développement s guarantee in connection with the lease of Mittelrheinbahn rolling stock. 3. Contractual Plan between the State/Regions and other operations AGREED IN PRINCIPLE Extension of tramway T3 Porte d Ivry Porte de la Chapelle. PROJECT DISCLOSED Development of metro and bus areas in the multi-modal division of Mairie de Montreuil. PRE-CONTRACT AGREEMENTS Amendment Creation of public transport between Pompadour and Sucy-Bonneuil. Additional agreement Tramway line Chatillon-Vélizy-Viroflay additional pre-contract agreement on the underground section. 1. Discussions Overview on purchasing policy. Discussion on the Business Plan following the convention of May 29, Business Plan Report by the working group on debt to the Board of Directors. 92 Annual report 2007

17 4. Major contracts Rider to the contract regarding the implementation of the Ouragan control-drive system on line 13 of the metro. Refurbishing the platform façades on lines of 1 and 13 of the metro. Tramway line T1 between Saint-Denis and Bobigny renovation of the railway platform. Cleaning services of areas and trains. Provision of cables for fixed installations in tunnels and underpasses. Renovation of MI79/Z8100 trains of RER line B appraisal and provision of renovation kits. Tyre guided tramway between Saint-Denis, Garges and Sarcelles appraisal and provision of tramway components appraisal, provision and fitting of guiding system. Provision of 356 articulated buses with diesel engines that also run on biofuel (three lots). Provision of fuel (diesel and B30) for RATP s buses. Metro line 4 extension of the line from Porte d Orléans to Bagneux first phase at Mairie de Montrouge. (Two lots of engineering work.) Metro line 12 extension of the line from Porte de la Chapelle to Mairie d Aubervilliers First phase to Proudhon Gardinoux lot T1: civil engineering work on the tunnel and line buildings. Credit card transaction processing at RATP s points of sale. Appendix III BOARD MEETINGS AND WORK IN 2007 MEETINGS NUMBER ACTIVITY NUMBER Board of Directors February 9 March 16 March 30 June 1 September 28 October 6 November 30 8 Decisions 61 December 14 Committee on Corporate Development, Including: contracts of no less than 16 million 19 Technical Issues and Technology 6 Agreements in principle 1 Projects disclosed 1 Pre-contract agreements 2 Committee on Economic and Strategic Issues 7 Audit Committee 7 Working group 5 Discussions 3 TOTAL 33 93

18 Appendix IV ORGANISATION OF THE INTERNAL CONTROL SYSTEM COMPANY Inspectorate General / Internal Audit (IGIA) General Safety Control (CGS) Corporate Risk Management Quality and Sustainability Commission (DGQDD) Fire Safety Unit DEPARTMENT Transport-specific controls Specialized control entities Risk Management Quality Network Inspections of the operating departments (MTS, RER) Inspections of the maintenance departments (EST, MRF, M2E) Decentralized audits departements (BUS, CGF, MES, M2E) Systems Risk Management (EST) Risk Management Engagement (M2E) Quality audit engagements to control ISO- and NF-certified departments Risk Management Committee (MOT, ESP) UNIT Support Group 1 Manager Control Group 1 Verifying the quality of services Support Group 2 Control Group 2 Implementing production processes in conformity with current regulations Production Process 94 Annual report 2007

19 Appendix V COMPANY-WIDE CONTROL BODIES Instance Inspectorate General/Internal Audit department (IG/IA) General Safety Control (GSC) Delegation for Innovation and Sustainable Development Role Conducts work and studies on: business strategy and policies; input for decision-making; sensitive economic subjects. Performs assignments on compliance, effectiveness, management and performance. The Fire Safety unit advises on all aspects of fire safety and evacuation procedures. It has the following objectives: constantly improve the Company s fire safety levels; coordinate the actions of the fire and emergency services with the Company s fire and security services; monitor operational premises and buildings under construction; train employees in fire safety; ensure regulatory compliance with the security procedures and systems in place in railway and metro stations and in buildings under construction or renovation, through the work of the Inspectorate General for Fire Safety. The Corporate Risk Management unit: constantly improve risk management for both current and emerging risks; advise on all aspects of risk (system failures, environmental issues, missed opportunities); conduct controls, investigations, audits and studies at the request of Senior Management and department managers; manage Company-wide committees when an overall systems approach is required; manage the security of IT systems with all departments. The Delegation is in charge of proposing Company-wide projects on innovation and sustainability and implementing them, once they have been approved by management by: promoting quality and sustainable development within the Company; conducting or organizing quality audit engagements; providing methodological and technical assistance; guiding departments and units through implementation. Scope of action Audits are conducted on administrative, technical, and financial matters and on all of RATP group s operating, information and management systems. TWork may focus on a department or subsidiary, on policies and processes, or on project implementation and progress. The Fire Safety unit is active at all levels of the Company, through the Technical Committee for Fire Safety and its network of local contacts. The unit performs smoke and fire tests to measure and analyse air movement in underground areas. The results of the tests are used to improve the security of the underground areas, and to set and upgrade smoke-clearing systems in tunnels and stations. The unit has an Inspectorate General for Fire and Safety that deals with all the public service providers (metro stations and train stations) for RATP s transport service business. The two main activities of the unit are information systems security and systems risk management. The unit heads a Company-wide network on corporate risk management that monitors and coordinates actions taken at Company level and shares information on best practice. The Delegation for Innovation and Sustainable Development works primarily with: Senior Management and the departments to provide guidance in policy-making and ensure that the approach adopted is consistent with Company strategy. three cross-company networks (quality, environment and sustainable development) comprising representatives from each department to prompt ground initiatives, provide units with methodological assistance, and encourage the exchange of information on best practice. Appendix VI RATP ACCOUNTING POLICIES 1. Preparation of the financial statements In addition to its monthly statements produced for internal purposes, RATP prepares audited annual individual and consolidated financial statements and half-yearly individual and consolidated financial statements. The prospectuses prepared by RATP when issuing debt are approved by the Statutory Auditors and by the French Securities and Exchange Commission (AMF). In general, the accounting information produced by RATP fulfils the requirements of its departments and units in terms of budgets and general management. RATP also produces a quarterly operating report for each of its transport networks. 95

20 2. Control procedures on the preparation of the individual financial statements 2.1 Accounting policies RATP ensures that there is a clear separation between the roles of its accountants (employees who generally work for the Management Control and Finance department), treasurers and the departments authorizing expenditure. The accountants have an array of regulatory, management and accounting texts relating to their function, which are prepared and updated in the document system of the Company s Accounting unit. Controls take place throughout the accounting process. 2.2 Midstream controls Department units and support groups are involved in RATP s accounting operations insofar as they authorize Company expenditure and revenue and define their cost accounting systems in line with the Company s common accounting rules. This may involve entering data, such as external expenses, in the Company s accounting information systems. The local accounting offices of the Company s Accounting unit are responsible for controlling the entries made in the management system. They may make the adjustments necessary and record the operations not delegated to the units. All the data is reported to central departments where summary documents are prepared and centralized work is performed: booking of payables and receivables, preparation of tax returns and social security statements, control of accounting quality, preparation of financial statements including the balance sheet, income statement and notes. 2.3 Monthly reporting A partial closing of accounts is performed every month, at which time the accounting offices ensure that the changes in expenses and income have been correctly recorded, and interim balances are recorded. A Central Accounting Office performs a cross-company analysis of the results. 2.4 Balance sheet revision, adjustments and justification Revision of decentralized bank accounts: these are managed by the Company s units and are audited at least once a year to verify compliance with the governing accounting and administrative procedures. Accounting authorizations: some of the Company s businesses allow the delegation of accounting tasks (data entries can be made without involving accountants from the Company s Accounting unit). Work is underway to formalize these authorizations (scope, responsibilities and review). Balance sheet entries are the responsibility of one or several offices within the Accounting unit. They are reviewed on the basis of documentary evidence at least once every six months. 96 Annual report 2007

21 Statutory Auditors report on the report by the Chairman of the Board of Directors on the internal control procedures relating to the preparation of accounting and financial information Year ended December 31, 2007 In compliance with the assignment entrusted to us and in our capacity as Statutory Auditors of RATP ( the Company ), we hereby present our report on the report prepared by the Chairman of your Board of Directors relating to the preparation of accounting and financial information for the year ended December 31, It is the responsibility of the President to report on the manner in which the work of the Board is prepared and organized and on the internal control procedures implemented within the Company, pursuant to the provisions of article L of the French Monetary and Financial Code. Our role is to inform you of our observations on the information set out in the President s report with regard to the internal control procedures relating to the preparation of financial and accounting information. We conducted our work in accordance with the auditing standards generally accepted in France. Those standards require that we perform our work to assess the whether the information presented in the President s report gives a true and fair image of the internal control procedures relating to the preparation of financial and accounting information. Our work involved: obtaining an understanding of the internal control procedures relating to the preparation and processing of financial and accounting information, as set out in the President s report; obtaining an understanding of the work performed in order to prepare the information provided in the report and the associated documents; determining whether any significant weaknesses in the internal control procedures relating to the preparation and processing of financial and accounting information, which we may have found during our engagement, have been appropriately disclosed in the President s report. On the basis of our work, we have no matters to report on the internal control procedures relating to the preparation and processing of accounting and financial information contained in the report of the Chairman of the Board of Directors. Neuilly-sur-Seine and La Défense, April 1, 2008 The Statutory Auditors Salustro Reydel Member of KPMG International Philippe Arnaud PricewaterhouseCoopers Audit Paul Onillon 97

22 Consolidated financial statements Statutory Auditors report 99 Consolidated balance sheets 100 Consolidated statements of income 102 Consolidated statements of cash flows 103 Notes to the consolidated financial statements Annual report 2007

23 Statutory Auditors report on the consolidated financial statements Year ended December 31, 2007 In accordance with the assignment entrusted to us by the French Minister for the Economy, Finance and the Budget, we have audited the accompanying consolidated financial statements of RATP EPIC, for the year ended December 31, The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit. The accompanying financial statements were prepared for the first time in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union. They include data for the year ended 2006 which has been revaluated in accordance with the same standards, for comparative purposes. 1. Opinion on the consolidated financial statements We conducted our audit in accordance with the auditing standards generally accepted on France. Those standards require that we plan and perform our work to obtain reasonable assurance that the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position, assets and liabilities and the results of operations of all the consolidated entities in accordance with the International Financial Reporting Standards adopted by the European Union. 2. Basis of our assessments Pursuant to the provisions of article L of the French Commercial Code relating to the justification of our assessments, we draw your attention to the following matters: Reform of the retirement scheme Note 3 to the consolidated financial statements recalls that subsequent to negotiations between RATP and its employees on the reform of the retirement scheme, a report was issued on December 20, 2007 summarizing the accompanying measures to be taken. The effects of those measures have been accounted for in the consolidated financial statements for 2007, particularly with regard to the valuation of employee benefits. The decree of January 15, 2008 set forth the provisions governing the reform of the retirement scheme. As part of our assessment of the accounting rules and principles applied by the RATP group, we verified that the above-mentioned accounting methods and the information provided in the notes to the financial statements were appropriate to the Group s circumstances and consistently applied. Provisions for employee benefits Note 28 to the consolidated financial statements describes the provisions for employee benefits recorded in the consolidated balance sheet, as well as the method used to evaluate those provisions. We examined the way in which the employee benefits were identified, measured and accounted for. We reviewed the assumptions and calculations made in order to validate the amount of provisions reported under liabilities on the consolidated balance sheet at the beginning of the year and at year-end. Property, plant and equipment Note 4.8 explains the accounting treatment for property, plant and equipment which is fully owned, held under finance lease, or made available for use by RATP by the State or STIF. In accordance with our assessment of the accounting policies implemented by your company, we examined the methods used to capitalize property, plant and equipment and we ensured that the information provided in note 4.8 was appropriate. Our assessments were an integral part of our audit of the consolidated financial statements as a whole, and therefore contributed to the formation of the opinion expressed in the first part of this report. 3. Specific verifications We have also verified the information provided in the Group s management report, in accordance with the auditing standards generally accepted in France. We have no matters to report regarding its fair presentation and conformity with the consolidated financial statements. Paris La Défense and Neuilly-sur-Seine, April 1, 2008 The Statutory Auditors Salustro Reydel Member of KPMG International Philippe Arnaud PricewaterhouseCoopers Audit Paul Onillon 99

24 Consolidated balance sheets At December 31, 2007 (in thousands of euros) ASSETS NOTES 12/31/ /31/2006 Goodwill Note 14 45,739 1,276 Intangible assets Note , ,163 Property, plant and equipment Note 16 9,678,034 9,506,515 Investment grants Note 16 2,497,342 2,415,172 Total property, plant and equipment Note 16 7,180,692 7,091,343 Investment property Note Investments in equity-accounted associates Note ,299 88,720 Available-for-sale financial assets Note 21 5,443 7,253 Derivative financial instruments Note 32 11,436 1,237 Other financial assets Note 22 86,016 67,610 Deferred tax assets Note 13 2,348 1,268 NON-CURRENT ASSETS 7,689,117 7,377,796 Inventories Note , ,313 Trade and other receivables Note , ,711 Tax receivables Derivative financial instruments Note 32 8,380 8,075 Other financial assets Note 22 8,727 8,002 Cash and cash equivalents Note , ,952 CURRENT ASSETS 1,063,178 1,004,122 TOTAL ASSETS 8,752,295 8,381, Annual report 2007

25 (in thousands of euros) EQUITY AND LIABILITIES NOTES 12/31/ /31/2006 Capital stock 283, ,367 Reserve for assets made available 250, ,701 Retained earnings Note 26 1,368,155 1,260,367 Net income 112,143 49,181 EQUITY, GROUP SHARE Note 27 2,014,366 1,843,616 Minority interests 15,503 11,794 TOTAL EQUITY 2,029,869 1,855,410 Provisions for employee benefits Note , ,932 Other provisions Note ,787 97,041 Loans and borrowings Note 30 3,316,820 3,807,754 Derivative financial instruments Note 32 27,462 17,600 Deferred tax payable Note 13 6,748 2,398 Other trade creditors 89,938 99,731 NON-CURRENT LIABILITIES 4,029,100 4,546,456 Other provisions Note 29 55,869 45,447 Short term loans and borrowings Note 30 1,448, ,928 Derivative financial instruments Note 32 11,532 15,115 Trade payables and related accounts Note 31 1,175,133 1,098,114 Income tax liabilities 1,798 1,448 CURRENT LIABILITIES 2,693,326 1,980,052 TOTAL EQUITY AND LIABILITIES 8,752,295 8,381,

26 Consolidated statements of income At December 31, 2007 (in thousands of euros) NOTES 12/31/ /31/2006 Revenue Note 7 3,906,664 3,710,567 Standard contribution Note , ,604 Other income from ordinary activities 7,217 2,774 Income from ordinary activities 4,150,328 3,936,945 Cost of sales 198, ,908 Other purchases and external charges 575, ,191 Taxes and duties 216, ,276 Payroll and payroll-related costs Note 9 2,269,458 2,173,442 Depreciation and amortization 509, ,352 Provisions 24,160 13,733 Other income and operating expenses Note 10 47,534 25,445 Ordinary operating income 309, ,598 Other income and operating expenses Note 11 3,012 3,755 Operating income 306, ,843 Financial income (expense) net Note , ,768 Pretax income 114,500 48,075 Income from equity-accounted associates Note 19 5,671 4,412 Income tax Note 13 6,092 3,187 Consolidated net income 114,079 49,300 Net income, Group share 112,143 49,181 Net income, minority interests 1, Annual report 2007

27 Consolidated statements of cash flows At December 31, 2007 (in thousands of euros) 12/31/ /31/2006 NET INCOME 114,079 49,300 Net income from equity-accounted associates 5,672 4,412 Depreciation and amortization 525, ,514 Fair value gains and losses 16,936 1,967 Gains and losses from asset disposals and dilution effects 5,807 4,345 Other adjustments Discounting 23,233 9,115 Cash flow from operations after net financial expense and tax 632, ,661 Tax expense (income) 6,097 3,187 Change in WCR 56,895 23,957 Income tax paid 6,096 3,212 Net cash provided by operating activities 689, ,679 Acquisition of long-term investments 38, Purchase of property, plant and equipment (excluding change in WCR for capital expenditures) 843, ,036 Capital increases of associates 62, Change in WCR 5,432 5,801 Investment grants (received) 167, ,551 Investment grants (receivable) 2,794 38,182 Proceeds from sale of property, plant and equipment and intangible assets 4,940 3,883 Proceeds from financial assets 150 Dividends received 3,607 2,422 Other net cash provided by investing activities 2,105 31,847 Net cash used in investing activities 774, ,087 Proceeds from issuance of borrowings 355, ,900 Proceeds from issuance of commercial paper 400, ,963 Repayment of borrowings 211, ,867 Repayment of commercial paper 419,060 Change in accrued interest 834 1,279 Refinancing of housing loans 0 73,709 Dividends paid to minority shareholders Other net cash provided by financing activities 403 Net cash from financing activities 125, ,354 Other effects Net increase in cash and cash equivalents 40, ,454 Cash and cash equivalents at beginning of year 293, ,540 Cash and cash equivalents at year-end 334, ,994 Net increase in cash and cash equivalents (see note 25) 40, ,

28 Notes to the consolidated financial statements At December 31, INTRODUCTION TO THE COMPANY RATP group ( the Group ) is one of the major public transport providers in France, operating in towns and suburbs and particularly in and around Paris. The parent company, Régie Autonome des Transports Parisiens (RATP), is registered with the companies register (RCS) in Paris. Its head office is located at 54, quai de la Rapée, 75012, Paris. RATP is a State-owned Industrial and Commercial Company (Établissement Public Industriel et Commercial EPIC). It is a legal person governed by public law, the purpose of which is to manage public transport service provision in the Île-de-France area. The RATP has been mandated by the Île-de-France transport authority (Syndicat des Transports d Île-de-France STIF), to operate the Paris metro system and other urban transport systems in Paris and its suburbs, including an extensive bus system, tramway lines and part of the suburban metro service (RER) on lines A and B. In accordance with the government decree of November 14, 1949 and the order of January 7, 1959, as for other transport providers in the Paris region, RATP has been granted perpetual rights to operate its services. Since 2000, the relations between RATP and STIF have been set out by contract. The contract for terminates this year. It stipulates the services provided and funding received by RATP particularly in terms of: the general operating conditions, new transport tickets and passes and fares applicable; the range of transport services and standard of quality of service expected. Under the French law on solidarity and urban renewal (SRU), RATP is authorized to develop and operate public transport networks via its subsidiaries throughout France and abroad. Measures have been taken to guarantee transparency and the clear separation of accounts relating to activities conducted under the contract between RATP and the STIF and those outside the contract. RATP is a State-owned company and as such the Group s consolidated financial statements are included in the combined financial statements of the State shareholder. The Group s consolidated financial statements as at December 31, 2007, were approved by the Board of Directors at their meeting on March 28, ACCOUNTING POLICIES Pursuant to the European regulation 1606/2002 of July 19, 2002, the consolidated financial statements of RATP group at and for the year ended December 31, 2007, have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union. The consolidated financial statements for financial year 2007 are the first to be prepared under International Financial Reporting Standards. Figures for financial year 2006 have also been presented under IFRS for comparative purposes. 2.1 Accounting choices relating to the first-time adoption of IFRS The IFRS financial information for 2007 has been prepared in accordance with the provisions of IFRS 1, which sets out the specific rules to be implemented for the first-time adoption of IFRS. Of the choices possible under IFRS 1, RATP has opted for the following: not to restate the acquisitions made before January 1, 2006 to the provisions of IFRS 3 Business combinations ; to use fair value as the presumed cost for some property, plant and equipment (note 4); to maintain the currency translation gains and losses recorded at January 1, 2006 reflecting the conversion into euros of the financial statements of foreign subsidiaries located outside the eurozone. All other IFRS have been applied retroactively for the restatement of assets and liabilities at January 1, IFRS/amendments and interpretations effective in 2007 but which do not apply to RATP IFRS 4 Insurance contracts ; IFRIC 7 Applying the Restatement Approach under IAS 29 Financial reporting in hyperinflationary economies ; IFRIC 9 Reassessment of Embedded Derivatives. 2.3 IFRS/amendments and interpretations not yet effective and not implemented early by RATP IAS 23 amended, Borrowing Costs (effective from January 1, 2009) ; IAS 1 amended, Presentation of Financial Statements (effective from January 1, 2009) ; IFRS 8 Operating Segments (effective from January 1, 2009) ; IFRIC 12 Service Concession Arrangements (effective from January 1, 2008). The effect of implementing these IFRS is currently being assessed. 2.4 IFRS/amendments and interpretations not yet effective and which do not apply to RATP IFRIC 14 IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction ; IFRIC 11 IFRS 2 Group and treasury share transactions ; IFRIC 13 Customer loyalty programmes. 3. SIGNIFICANT EVENTS Reform of the retirement scheme: The decree of January 15, 2008 set forth the provisions governing the reform of the retirement scheme. 104 Annual report 2007

29 Subsequent to negotiations before year-end, a report was issued on December 20, 2007, summarizing the decisions taken on the accompanying measures. The effects of those measures on RATP have been reflected in the financial statements for financial year 2007, particularly with regard to the valuation of employee benefits (longer working life and changes in career profiles). The effect on the income statement was an additional expense of 8.8 million and on the balance sheet a reduction of 8 million in shareholders equity. Strikes The impact of the strikes in October and November 2007 has been reflected in the 2007 financial statements, and includes: adjustments to transport revenue to account for the reimbursements totalling 19.2 million paid to transport users at the beginning of These reimbursements were decided before year end; penalties for non-compliance with service provision arrangements totalling 17.5 million, which were recognized under other operating expenses; lower payroll costs as employees were not paid for the strike days. 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 General principles and International Financial Reporting Standards The consolidated financial statements have been prepared in accordance with the historical cost principle, with the exception of available-for-sale financial assets, which have been measured at fair value, and financial assets and liabilities, which have been measured at fair value through profit and loss (including derivatives). Use of estimates and assumptions The preparation of consolidated financial statements in compliance with IFRS requires Group management to make estimates and assumptions, as many of the items included in the financial statements cannot be measured accurately. Management revises the estimates if there is a change in the circumstances upon which they were based, or when new facts arise or it obtains a more extensive understanding of the situation. Consequently, the estimates made as at December 31, 2007 may change significantly. The estimates and assumptions notably concern: asset impairment, particularly of property, plant and equipment (note 4.8), inventories (note 4.13) and goodwill (note 4.10); provisions for contingencies, primarily those for decommissioning (note 29), and items relating to employee benefits (note 28); the measurement to fair value of financial instruments. The main accounting methods used to prepare the consolidated financial statements are described below. Unless otherwise indicated, these methods were consistently applied to the reporting periods presented. The consolidated financial statements have been prepared in accordance with the going concern principle and with the principle on the separation of accounting periods. 4.2 Basis of consolidation Consolidation scope and methods The consolidated financial statements of RATP group comprise the financial statements of RATP and those of its subsidiaries, joint ventures and associates. Subsidiaries are all entities over which the Group exercises control. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activity. Control is presumed to exist if the company holds, either directly or indirectly via its subsidiaries, more than 50% of voting rights. The financial statements of subsidiaries are fully consolidated and those of minority interests are accounted for based on their ownership interest. Companies are consolidated from the date their controlling interest is transferred to the Group. They are deconsolidated from the date the Group ceases to exercise such control. Subsidiaries that are jointly controlled by the Group and other shareholders are proportionately consolidated. Subsidiaries over which the Group exercises significant influence, but not control, are accounted for by the equity method. Significant influence is presumed to exist when the Group holds between 20% and 50% of voting rights. Where necessary, adjustments are made to the financial statements of consolidated subsidiaries and equity-accounted associates to bring them into compliance with the accounting policies applied by the Group. Specific case of the low-cost housing company HLM Logis Transports Assessing the extent of control over low-cost housing (HLM) companies is extremely complicated due to the nature of these companies and the regulatory constraints imposed upon them. Consequently, a more pragmatic than theoretical analysis is used to determine control, and the specific way in which the companies operate is also taken into account. Consequently, despite the fact that RATP holds an 88% stake in SA HLM Logis Transports, the company was not consolidated for the following reasons: HLM regulations impose financial constraints, such as restrictions on distributable profit and liquidating dividend rights, which limit the power to manage the financial policy of the subsidiary and to gain the associated economic benefits; the debt of HLM companies, transaction by transaction, is almost always guaranteed by the local authorities concerned. Consequently, RATP does not bear the risk of not being repaid the loans made to Logis Transports; although RATP exercises influence over certain aspects of Logis Transports management, its influence cannot be qualified as control. For instance, the allocation of housing to RATP employees is carried out by an allocation board in the same way as for external applicants. Therefore, Logis Transports does not meet the consolidation criteria set out in IAS 27. The company s shares are recorded in the balance sheet at their acquisition cost and are classified as available-for-sale financial assets. The main financial information concerning HLM Logis Transports is presented in note

30 4.2.2 Business combinations Acquisitions of subsidiaries are recorded using the purchase method. The acquisition cost comprises the fair value of the assets acquired and the liabilities assumed, including directly-attributable transaction costs. Goodwill represents the difference between the cost of the acquisition and the Group s interest in the fair value of the assets acquired and liabilities and contingent liabilities assumed (note 14). Moreover, if the fair value of the Group s share in the assets and liabilities acquired exceeds the acquisition cost, this surplus is immediately recognised in the income statement. Goodwill is initially measured at cost. Subsequently, it is stated at cost less accumulated amortization and impairment losses. Minority interests are presented in a separate line on the balance sheet under shareholders equity. Their share of consolidated net income is presented separately in the income statement. All intercompany transactions, including profits, losses and dividends, are eliminated upon consolidation. 4.3 Foreign currency Functional currency and reporting currency The consolidated financial statements are presented in euros, which is the Group s reporting currency. The items included in the financial statements of each Group entity are measured in the functional currency, which is the legal tender of the primary economic environment in which the entity operates Financial statements of foreign operations The financial statements of the subsidiaries Systra, Transdev, M Dina Bus and Bombela Operating Company, which are prepared using a functional currency different from that of the parent company have been converted into euros as follows: balance sheet entries, using the exchange rate effective at year-end; income statement entries, using the average exchange rate over the period. Gains and losses from foreign currency translation are recognized directly in equity under Currency translation reserves for those relating to the Group, and under Minority interests for those relating to minority interests. When a foreign operation is sold, the associated currency translation gains and losses recognised in equity are transferred to profit and loss Foreign currency transactions Foreign currency transactions are converted into the functional currency at the exchange rate effective on the date of the transaction. At each year-end: non-monetary assets and liabilities denominated in foreign currencies are recorded at the historical exchange rate effective at the transaction date; monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate effective at year-end. Foreign currency translation adjustments are recorded in the income statement for the period. 4.4 Revenue recognition Revenue is recognized when the associated risks and benefits are transferred to the purchaser, which usually coincides with the transfer of ownership or the provision of the service. Revenue is recognized net of rebates, discounts and income tax and after the elimination of intercompany sales. Income from ordinary activities comprises: revenue; standard contribution Revenue Revenue comprises the following: transport revenue comprising three components: total traffic revenue, including direct traffic revenue from transport users and the tariff compensation paid by STIF, commissions on sales, which constitute 6% of ticket sales, service quality bonuses or surcharges; income from related activities; revenue (excluding transport). Revenue is recognized when users actually use the transport services. The public tariffs are set by the Île-de-France regional transport authority (STIF). They are a public service obligation, and thus give rise to the tariff compensation received by RATP from STIF. Income from related activities primarily consists of revenue from advertising and commercial leases. Revenue (excluding transport) consists primarily of income from services and work rendered to third parties, which is recognized using the percentage-of-completion method, along with sales of products and residual products, mobile telephony and telecommunications. Some subsidiaries (Systra group, RATP Développement) provide and account for their services on a percentage-of-completion basis. The income from engineering and construction contracts and their associated costs are recorded under financial income and expense respectively according to percentage completion at year-end. Margin generated on contracts that are accounted for by the percentage-of-completion method is recognized only when it can be reliably measured. If it is likely that the total costs of the contract will exceed contract income, the expected loss at completion is immediately expensed and recorded as an impairment of the contract receivables, then provisioned under liabilities, as appropriate. Percentage -of- completion is measured on the basis of the costs incurred for the work performed to date in relation to the estimated total costs of the contract Standard contribution The standard contribution received by the RATP parent company, which is set over the duration of the STIF contract, covers the financial and operating expenses incurred by RATP to guarantee transport network security. 106 Annual report 2007

31 4.5 Segment reporting The Group s primary activity is the provision of public transport in Paris and the suburbs in the Île-de-France region. The Group thus considers that it is appropriate to focus on information relating to the transport sector, which is its primary level of segment reporting. The vast majority of the Group s business is conducted in France. Pursuant to IAS 14, business generated in the geographic segment outside France is below the threshold requiring specific segment information. 4.6 Leases Operating leases Operating lease payments are expensed in the income statement on a straight line basis over the duration of the lease Finance leases In accordance with IAS 17, leases are classified as finance leases when in substance the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Assets held under finance lease are initially recognized as assets, with an offsetting entry under liabilities, at their fair value or, if lower, at the present value of the future minimum lease payments. Subsequently, the lease payments are accounted for as repayments of the liability and are broken down into: repayment of principal; interest, based on the interest rate specified in the contract or the discount rate used to measure the outstanding liability. Depreciation and amortization is recorded in the same manner as for the associated fully-owned assets, with interest replacing the lease payments recorded in the Company s financial statements. The Group only uses finance leases for buildings. Lease payments are indexed to the French cost of construction index. Details of the assets recorded under property plant and equipment for finance leases are provided in note 16, and the associated liability is outlined in note Intangible assets Research and development costs Internal development costs are only capitalized under intangible assets if they meet the six criteria set forth by IAS 38 and can be measured reliably. The costs are capitalized from the date management makes the investment decision, if there is proof that the asset will generate sufficient future economic benefits. Internal procedures ensure that records are available on the date management takes the investment decision. Development costs are amortized based on the depreciation periods applied to the associated assets Other intangible assets Other intangible assets are recorded in the balance sheet at their historical value. They are systematically amortized over their useful life. Software is amortized on a straight-line basis over three to ten years. 4.8 Property, plant and equipment The Group s property, plant and equipment comprises the assets made available for use by RATP that are owned by the public authorities, notably the Île-de-France public transport authority (STIF), the Group s fully-owned assets and assets held under finance leases. The breakdown of real estate assets based on ownership is as follows: State: primarily the lines incorporated in the RER network; STIF: primarily Paris metro lines built before 1968, as well as a number of buildings used by RATP for its business; RATP: all the other assets. Ownership arrangements concerning the assets made available to RATP by the State and STIF RATP was formed by the act of March 21, 1948, which provided for the assets and property conceded by the City of Paris or Seine department to la Compagnie du chemin de fer métropolitain de Paris (Paris Metro Company) et Société des transports en commun de la région parisienne (Greater Paris Surface Transport Company) to be made available to RATP upon its formation. The decree of June 4, 1975 provided for the real property allocated to RATP operations to include the assets owned by the State, comprising the public railway track required for the regional transport network, assets owned by STIF (metro lines built before 1968) and the assets acquired or built by RATP itself. The assets made available by the French State and STIF, without transfer of ownership, are presented in RATP s balance sheet under the appropriate fixed asset accounts in order to provide a true economic reflection of the assets under the Group s management. However, RATP does not have full rights to these assets, which are part of the public transport domain. In accordance with its operating terms and conditions, RATP is responsible for maintaining and replacing the property it manages. The French decentralization act of August 2004 did not amend any of the aspects regarding the ownership of these assets. An evaluation is currently being performed in order to list the assets based on their ownership. RATP acquired and self-constructed assets Property, plant and equipment acquired and fully owned by RATP is recorded in the consolidated balance sheet at acquisition or production cost or at the asset s fair value at the consolidation date. RATP contributes to financing the infrastructure, equipment and rolling stock on the lines it operates, whether or not it owns them. In accordance with component-based accounting, RATP s fixed assets have been broken down into components and the useful life specific to each asset component is applied based on how frequently it has to be replaced or renovated. 107

32 For assets subject to decommissioning obligations, the estimated cost of the obligation is included in the acquisition cost of the associated asset, and also under provisions (see note 4.18). Straight-line depreciation is considered to be the most appropriate in economic terms. The depreciation periods used by the Group are as follows: CATEGORY METHOD USEFUL LIFE Railway infrastructure main asset Straight line 70 to 140 years Railway infrastructure asset component Straight line 15 to 60 years Building, shell and brickwork Straight line 70 to 100 years Fixtures and internal fittings Straight line 6.66 to 30 years Tracks Straight line 12.5 to 50 years Track signalling and train operating systems Straight line 5 to 35 years Rolling stock rail Straight line 15 to 40 years Rolling stock road Straight line 4 to 10 years Plant and machinery, equipment and tooling Straight line 5 to 50 years Other property, plant and equipment Straight line 3 to 15 years The useful life of property, plant and equipment is reviewed annually and modified to account for any significant change. 4.9 Investment property The Group has identified three investment properties: the building at quai des Grands Augustins which is not used by RATP, but leased out, and two buildings owned by Systra. These properties have been measured using the cost model, as for fixed assets. If the properties are used/leased within the Group, they are not classified as investment properties, but as properties used in operations in accordance with IAS 16. If the properties are leased to external parties, they are considered to be investment properties, in accordance with IAS Asset impairment Impairment of cash-generating units (CGUs) In accordance with IAS 36, assets to be tested for impairment are combined in CGUs. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. As all of RATP EPIC s business activities are interdependent, they are combined in a single CGU. The other CGUs are defined on the basis of the function they perform and their operating location. In compliance with IAS 36, impairment testing is performed: annually on all CGUs containing goodwill or other intangible assets with indefinite useful lives; when there is an indication that all the assets may be impaired. If there is an indication that an asset may be impaired, the net book value of the asset is compared to its recoverable value. The recoverable value of an asset or cash-generating unit is the higher of an asset s fair value less costs to sell and its value in use. Value in use is determined by discounting the CGU s expected future cash flows using an appropriate discount rate based on the nature of the business, and taking into consideration its residual value. The asset impairment test carried out on January 1, 2006, when the CGU RATP EPIC was transferred, was based on forecast net cash flows after capital expenditures for , (year the STIF contract is presumed to terminate), and on a presumed residual value which is net book value. The test also assumed a theoretical selling price at the end of the contract (which for the requirements of the test and as a conservative measure was assumed to be at least equal to the net book value). The value in use measured as at January 1, 2006 was higher than the value of the asset tested. New public passenger rail and road transport regulations were enacted in 2007 (OSP regulation), setting out the new terms governing the allocation of public service contracts. However, as transitional arrangements are currently in force for existing contracts, the date the new rule will come into effect for these contracts has not been defined. Therefore, the effects on the property, plant and equipment currently operated and recorded as assets by RATP EPIC, whether fully owned or made available, have not yet been determined. During 2007, no impairment was recorded on this CGU Impairment of single assets For all non-financial assets, impairment testing is carried out whenever there is an indication of impairment. The net book value of the nonfinancial asset is compared to its recoverable value, which is defined as the higher of selling price (less costs to sell) and its value in use Measurement and recognition of financial assets In accordance with IAS 39, the Group s financial assets are classified in one of the following three categories: available-for-sale financial assets, loans and receivables (other financial assets) and financial assets at fair value through profit or loss (derivative financial instruments). When initially recorded, financial assets are measured at their acquisition cost including transaction costs. The purchase and sale of financial assets is recognized at the transaction date. 108 Annual report 2007

33 Available-for-sale financial assets (AFS) Available-for-sale financial assets primarily consist of unconsolidated investments, shares in open-ended mutual funds (SICAV), shares in UCIT funds and shares in open-ended collective investment funds (FCP), which do not qualify for classification as cash and cash equivalents. AFS assets are stated at fair value. Changes in the fair value of the assets are recognized in equity until the investment is sold or disposed of in any other way. However, if it can be shown that the AFS asset is impaired, the accumulated impairment loss is recognized in the income statement and cannot be reversed. If fair value cannot be determined reliably, the available-for-sale financial assets are stated at cost less any impairment losses Loans and receivables (other financial assets) Other financial assets mainly consist of receivables relating to subsidiaries and affiliated companies, loans and security deposits. All of these financial assets are initially measured at fair value, then at their amortized cost, which is measured using the effective interest rate method. If there is any indication of impairment, the assets are tested for impairment. An impairment loss is recognized in the income statement if the carrying amount of the asset exceeds the estimated recoverable amount Derivative financial instruments The Group uses interest rate, currency and commodity forwards and financial instruments such as swaps, caps, floors and swaptions to manage its exposure to interest rate, exchange rate and price escalation risk. The Group uses these instruments only to manage its exposure to risk. Risk management is performed by the Treasury department at head office within the limits set by the Group s Finance department. Presentation of derivative financial instruments in the balance sheet Derivative financial instruments are recognized in the balance sheet under other current assets and liabilities. In accordance with IAS 39, derivative instruments are measured at their fair value when initially recognized, then subsequently re-measured at each year-end until maturity. At each year-end, the fair value of the derivative financial instruments is calculated based on the valuation models and methods commonly used on the markets. The method of accounting for derivative financial instruments varies according to whether they are considered to be fair value hedging instruments, cash flow hedges or are not qualified as hedging instruments. Hedging instruments For hedging transactions, the Group implements the hedge accounting arrangements set out in IAS 39. Derivative financial instruments are recorded in the balance sheet at their fair value at year end, and based on their hedge classification. Fair value hedges A fair value hedge is a hedge of the exposure to a change in the fair value of a recognized asset or liability, or of an unrecognized firm commitment. The hedged item and the hedging instrument are re-measured at the same time, and changes in their fair values are recorded immediately in profit or loss. The net effect of the ineffective portion of the hedge is recognized immediately in the income statement. Cash flow hedges A cash flow hedge is a hedge of the exposure to a highly probable forecast transaction that is not recorded in the balance sheet. Changes in the fair value of the effective portion of the hedging instrument are recognized directly in equity in the line item Cash flow hedge reserves and are transferred to the income statement as the hedged transaction is settled. Changes in the fair value of the ineffective portion are recognized immediately in the income statement. Effectiveness tests are performed when the hedges are set up, and then subsequently at each year end. If the tests show that the ineffective portion is too great, hedge accounting will no longer apply and the derivative will no longer be classified as a hedging instrument. Derivatives not classified as hedges While part of the Group s hedging policy, some transactions do not qualify as hedging operations as they do not meet the specific hedge accounting criteria set out in IAS 39. Any changes in fair value of these derivative financial instruments are immediately recorded in the income statement. Quantitative data on the use of these derivative financial instruments are provided in note Investment grants Grants are recognized if there is reasonable assurance that the Group will comply with the grant conditions and the grant will be received. The grants are associated with particular assets and are presented as a deduction from the assets, then transferred to the income statement over the useful life of those assets as asset depreciation is recorded. The special rate obtained on the loans granted by the Île-de-France region is presented in the same way as the other grants for assets Inventories Inventories are stated at the lower of cost (including associated transaction costs) and net realizable value. Cost is calculated using the weighted average cost method. An impairment loss is recorded if the probable realizable value of an item of inventory is lower than its cost. 109

34 4.14 Trade receivables Trade receivables are recorded at fair value, which equates to their nominal value, as the effect of discounting is not material for assets that are due within one year. Impairment is recorded if there is collectibility risk, to reduce their carrying amount to probable realizable value Cash and cash equivalents Cash equivalents are held exclusively to meet the Group s short term cash requirements. The line item Cash and cash equivalents includes bank accounts, liquid investments and cash equivalents. Cash equivalents comprise risk-free investments with maturities of three months or less, which can almost immediately be converted into cash and with negligeable risk of change in value. They include: negotiable receivables, carried at their nominal value, which is deemed to represent fair value; shares in monetary UCIT funds in euros, which are measured at their liquidating value at year-end. Changes in the fair value of these cash equivalents are recorded in the income statement Equity RATP was formed by the act of March 21, 1948, however no capital was transferred to it at that time. In 1986, the public authorities allocated RATP capital, partially in exchange for the early repayment of the loans previously granted to it by the economic and social development funds Special reserves Reserve for assets made available to RATP This account reflects the residual value of the assets made available for use by RATP as of January 1, 1949 (date at which the Company was created), and assets subsequently made available to RATP (line B and the Saint-Germain-en-Laye stretch of line A). Gains/losses on disposal of property In accordance with the legal provisions governing RATP s operations, gains and losses arising from the sale of property are recorded directly in reserve accounts, with a clear distinction drawn between the assets made available to RATP and those internally developed by RATP. In accordance with the provisions agreed with the supervisory authorities, the reserve accounts may be used to fund capital expenditures. Cash flow hedge reserves This reserve account records the accumulated changes in the fair value of the effective portion of the derivative instruments used as cash flow hedges (transactions not yet recognized). Actuarial gains and losses on post-retirement benefits This reserve account records the actuarial gains and losses on the postretirement benefits granted to the Group s employees, in accordance with the amended version of IAS Provisions A provision is recognized in the balance sheet at year end if the following three conditions are met: the Group has a legal or constructive obligation towards a third party, as a result of a past event; it is probable that an outflow of economic benefits (without expected offsets) will be required to settle the obligation; the obligation can be reliably estimated. Provisions concerning obligations exceeding twelve months are discounted if the effect of discounting is material. Decommissioning costs mainly concern railway rolling stock. A provision is recorded to offset the amount recorded under assets and their asset components are amortized over the useful life of the trains Retirement and other benefits Defined contribution plans RATP social security plan (pension plan) RATP pays employer contributions into the RATP employees pension fund. Pursuant to the decree of December 2005, these contributions are the only requirement incumbent on RATP in terms of retirement obligations. RATP thus has no other actuarial liabilities. The payments made by RATP are expensed in the period they relate to Defined benefit plans for post-retirement benefits The net liability recorded in the balance sheet for defined benefit pension plans corresponds to the present value of the obligation relating to defined benefits at year-end, less adjustments for actuarial gains and losses and the unrecognized cost of past services. The costs of the benefits are estimated using the projected unit credit method. According to this method, the rights to benefits are attached to periods of service based on the vesting plan formula. Rights are calculated on a straight-line basis if the rate of vesting is not stable during the later years of service. There are no plan assets. 110 Annual report 2007

35 The amount of future payments for employee benefits is assessed using assumptions such as salary increase rate, retirement age, number of years service to date and mortality tables. They are discounted to their present value using the Bloomberg 10/15 year rate (IAS 19.78) Actuarial gains and losses are recorded under equity (see note 28) Measurement and recognition of financial assets Apart from derivative instruments which are measured at fair value (see details 4.11), other financial liabilities are measured at fair value when initially recorded in the balance sheet, then subsequently at amortized cost, using the effective interest rate method when discounting its material. Loans and borrowings Loans and borrowings mainly include bond issues, loans from the Île-de-France region, loans from financial institutions and short-term bank loans. They are initially recognized at their fair value, corresponding to the amount received less borrowing costs. For the fair value hedges on loans and borrowings, the hedged part of loans and borrowings is recorded in the balance sheet at fair value, based on the market value. Changes in the fair value are recorded in the income statements and are offset by symmetrical changes in the fair value of the hedging instruments. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the reporting period when the asset is realized or the liability settled, based on the tax rates (and tax regulations) enacted or substantially enacted at the closing date. Deferred taxes concern the subsidiaries, as RATP EPIC is not subject to tax. Deferred tax assets are recognized insofar as it is probable that the temporary difference will reverse in the foreseeable future. Deferred taxes are recognized for all temporary differences arising from investments in subsidiaries, affiliates and jointly controlled entities, unless the date at which the temporary difference will reverse can be controlled and the reversal is not expected to occur in the foreseeable future. For French companies, the statutory tax rate at the date of the financial statements was 33.33%. 5. FIRST-TIME ADOPTION OF IFRS The previously described accounting methods and principles were applied for the preparation of the consolidated financial statements as at December 30, 2007, the comparative information presented for the financial year ended December 31, 2006 and for the preparation of the opening balance sheet as at January 1, 2006 (transition date for Group). Certain amounts previously presented under French GAAP had to be adjusted in the opening balance sheet. The effect of these adjustments on the Group s financial statements is explained in the tables and notes presented below Deferred taxes The Group records deferred taxes for all temporary differences between the carrying amount and taxable value for its assets and liabilities as recognized in the consolidated financial statement using the liability method. Deferred taxes are not recognized if the deferred tax asset associated with the deductible temporary difference is generated by the initial recognition of an asset or liability in a transaction which is not a business combination, that at the transaction date, does not impact earnings, tax income or tax loss. 111

36 5.1 Reconciliation of equity as at January 1 and December 31, 2006 Reconciliation of equity as at January 1, 2006 CRC EQUITY 1,736,256 Adjustments/changes in estimates* 37,283 CRC ADJUSTED EQUITY 1,698,973 RATP IAS 19 Employee benefits Retirement benefits (1) 420,744 Long-term benefits (2) 49,897 Total IAS ,641 IAS 39 Financial instruments (3) Discounting of housing loans 37,705 Discounting of loans 10,726 Valuation of non-hedge derivatives 9,378 CFH derivative valuation 4,847 FVH derivative valuation 658 Other 41 Total IAS 39 44,517 IFRS 1 Revaluation of RATP land (4) 630,669 Total 115,511 Transdev (5) Unamortized goodwill and intangibles 2,282 IAS Retirement benefits 3,926 Other 33 Total 714 Other 2,167 IFRS EQUITY 1,811,603 * The 37,283 thousand reflect the creation of the pension fund ( 30,966 thousand) and provisions for organic ( 6,317 thousand). The housing loans are loans granted by RATP to Interprofessional Housing Committees. (1) The Group recorded provisions for the first time for the following retirement benefits: pensions, guaranteed rate on the corporate savings plan for current employees and retirees, allowances for long-term sick leave, early retirement, death indemnities for employees in post, death indemnities for retirees. (2) The Group provisioned for long-term benefits for the first time as at January 1, 2006: long-term sick leave; unemployment; phased retirement; work-related accidents and disability; seniority bonuses. As at December 31, 2006, RATP EPIC s long-term employee benefits were provisioned in the Company s financial statements and therefore do not require any restatement. (3) The application of IAS 39 mainly impacts the following: The discounting of loans granted by the Île-de-France region, corporate savings plan loans and housing loans; The calculation of bonds at amortized cost using the effective interest rate; The restatement of derivatives to their fair value in the balance sheet. (4) RATP re-measured the value of some of its assets, such as the land used for its bus stations and head office. An assessment of operations and the location of these premises showed that it would be possible to locate the bus stations and head office elsewhere. The value of the land was thus assessed by a combination of methods, and recorded at 630 million, up from the initial amount of 24.6 million. (5) The main effects of the first-time adoption of IFRS on Transdev s share are as follows: termination of the goodwill amortization of the intangible assets reclassified under goodwill at Transdev group level; recognition at Group level of a provision for retirement benefits. 112 Annual report 2007

37 Reconciliation of equity as at December 31, 2006 CRC EQUITY 1,712,895 Adjustments/changes in estimates 6,317 ADJUSTED EQUITY (CRC REQUIREMENT) 1,706,578 RATP IAS 19 impact Retirement benefits 417,114 Long-term benefits 12,602 Total IAS ,716 IAS 39 impact Discounting of housing loans 37,705 Discounting of loans 10,726 Valuation of non-hedge derivatives 9,378 CFH derivative valuation 4,847 FVH derivative valuation 658 Other 41 Subtotal FTA impact 44,517 Change in hedge reserve 847 IAS 39 effect on net income 6,455 Total IAS 39 51,819 Revaluation of RATP land 630,669 Other 77 Total 149,211 Transdev Unamortized goodwill and intangibles 4,756 IAS Retirement benefits 4,030 Other 40 Total 1,349 IFRS 3 Unamortized goodwill 563 Other 2,291 IFRS EQUITY 1,855, Reconciliation of net income as at December 31, 2006 CRC NET INCOME 43,080 IAS 19 adjustments 9,463 IAS 39 adjustments 6,455 Cancellation of goodwill amortization 3,061 Other 32 IFRS NET INCOME 49,

38 5.3 Reconciliation of CRC and IFRS net income as at January 1, 2006 RATP CRC 99-02* CHANGES IN CRC IAS 19 IAS 39 LEASEHOLD REVALUATION IFRS RECLASSI- IFRS BALANCE SHEET ESTIMATES ADJUSTED IMPACT IMPACT ADJUSTMENT OF LAND IMPACT FICATION BALANCE SHEET BALANCE SHEET Goodwill 2,394 2,394 1,305 1,089 Intangible assets 93,458 93, ,515 Property, plant and equipment 8,642,015 8,642, , ,271,832 Investment grants (1) 2,160,086 2,160,086 38,502 2,198,588 Investment properties Investments in equity-accounted associates 65,902 65, ,455 66,725 Available-for-sale financial assets 38,754 38, ,791 Derivative financial instruments 0 Other financial assets (2) 114, ,412 49,709 1, ,938 Deferred taxes Total non-current assets 6,796, ,796, ,174 1, , ,337,362 Inventories 113, , ,540 Trade receivables and related accounts (3) 4,655,626 4,655,626 66,871 4,266, ,672 Income tax receivables 151, , ,762 Available-for-sale financial assets 0 Derivative financial instruments (4) 7,772 7,772 Other current financial assets 4,261 4,261 4,261 Cash and cash equivalents 257, , , ,575 Current assets 5,182, ,182, ,095 4,288, ,582 TOTAL ASSETS 11,979, ,979, ,269 4,290, , ,171,944 * IFRS format. (1) 38,502 thousand: in addition to the investment grants. (2) 49,709 thousand: comprising the following: 37,705 thousand: present value of housing loans (loans at 0%); 12,004 thousand: cancellation of accrued premiums. The redemption premiums are included in the amortized cost of the loans under IFRS. (3) 66,871 thousand: comprising the following: 5,628 thousand: cancellation of bond issue costs; 17,480 thousand: cancellation of prepaid expenses; 36,663 thousand: cancellation of prepaid expenses; 2,253 thousand: cancellation of prepaid expenses; 4,847 thousand: cancellation of accrued interest. (4) 7,772 thousand: corresponding to the valuation of the derivatives recorded in assets (off-balance sheet under French GAAP) which comprise the following: 314 thousand: cash flow hedge derivatives; 2,611 thousand: non-hedge derivatives; 4,847 thousand: accrued interest on derivatives (see 3). (5) See note 4. (6) 7,139 thousand: comprising the following: 8,993 thousand: present value of bonds to cover the interest on the Company savings plan (fixed rate bonds above the market rate), immediate recognition of the additional rate of return in IFRS; 17,724 thousand: impact of recognizing bonds (excluding Company savings plan) at amortized cost; 33,856 thousand: present value of IDF region loans (see (1)). 114 Annual report 2007

39 RATP CRC 99-02* CHANGES IN CRC IAS 19 IAS 39 LEASEHOLD REVALUATION IFRS RECLASSI- IFRS BALANCE SHEET ESTIMATES ADJUSTED IMPACT IMPACT ADJUSTMENT OF LAND IMPACT FICATION BALANCE SHEET BALANCE SHEET Reserve for assets made available 250, , ,701 Share capital 283, , ,367 Retained earnings (5) 1,134,377 37,284 1,097, ,641 44, ,669 2,291 1,210,313 Net income 55,830 55,830 55,830 Minority interest 11,981 11, ,391 Other equity 0 Total equity 1,736,256 37,284 1,698, ,641 44, ,669 2, ,811,602 Provisions for employment benefits 26,524 26, , ,093 Provisions for other liabilities 2,460,096 6,317 2,466,413 2,371, ,575 93,109 Loans and borrowings (6) 3,803,138 3,803,138 7,139 1, ,794,216 Derivative financial instruments (7) 7,600 7,600 Deferred tax liabilities , ,282 Other creditors 41,259 41,259 97, ,583 Total non-current liabilities 6,331,675 6,317 6,337, , ,276, ,590 1,693 4,563,883 Provisions for other liabilities 40,913 40,913 40,913 Trade payables and related accounts (8) 3,218,384 30,967 3,249,351 30, ,856 2,014, ,591 1,094,826 Income tax liabilities Current loans and borrowings 651, , ,887 Derivative financial instruments (9) 8, ,681 Total current equity and liabilities 3,911,336 30,967 3,942,303 30, ,213 2,014, ,591 1,796,459 TOTAL EQUITY AND LIABILITIES 11,979, ,979, ,269 4,290, , ,171,944 * IFRS format. (7) 7,600 thousand: corresponding to the valuation of the derivatives recorded as non-current liabilities (off-balance sheet under French GAAP), which comprise the following: 5,426 thousand: cash flow hedge derivatives; 396 thousand: non-hedge derivatives; 1,778 thousand: FVH derivatives. (8) 111,856 thousand: comprising the following: 18,141 thousand: cancellation of prepaid expenses; 39,497 thousand: cancellation of prepaid expenses; 49,939 thousand: cancellation of prepaid expenses; 4,279 thousand: cancellation of accrued interest. (9) 8,643 thousand: corresponding to the valuation of the derivatives recorded in current liabilities (off-balance sheet under French GAAP) comprising the following: 4,364 thousand: cash flow hedge derivatives; 4,279 thousand: accrued interest on derivatives. 115

40 6. SCOPE OF CONSOLIDATION The list of companies consolidated figures in note Change of scope Newly-consolidated companies The following companies were consolidated for the first time in 2007: Giraux Transports Services and subsidiaries: in February 2007 RATP Développement bought Giraux Transports Services and all its subsidiaries (a total of 13 companies). These companies were consolidated in the RATP group on the basis of their net equity as at March 31, Thus their accounting period for 2007 was only nine months long; Autoline: in October 2007, RATP Développement bought 100% of Autoline. This company was consolidated on the basis of its net equity as at October 31, The accounting period for 2007 was only two months long; Bombella Operating Company (BOC): this company, which was set up in July 2005, is 51% owned by RATP Développement. It is fully consolidated. Disposals/deconsolidated companies Eurailco UK was deconsolidated as it is not material in terms of Group standards. Change in ownership interests: On March 14, 2007, RATP Développement issued an additional 80 million in shares, which were subscribed exclusively by RATP. Following the capital increase, RATP held a 95.41% interest in RATP Développement and 4.59% in Transdev. In November 2007, Transdev increased its share capital exclusively for Financière Transdev, of which RATP owns 49.89%. Following the operation the percentage ownership of RATP in Transdev increased from 25% to 25.6%. 7. BREAKDOWN OF REVENUE 12/31/ /31/2006 Transport 3,475,387 3,305,020 Transport-related activities 104, ,594 Services rendered other than transport 326, ,953 TOTAL REVENUE 3,906,664 3,710,567 Revenue per subsidiary in France and abroad 12/31/ /31/2006 AGGREGATE REVENUE FRANCE OTHER AGGREGATE REVENUE FRANCE OTHER COMPANIES PER SUBSIDIARY COUNTRIES PER SUBSIDIARY COUNTRIES Cars Perrier 1,067 1, EM Services Equival Autolinee Bombela 1,681 1,681 0 Cars Giraux 1,531 1,531 0 CTMI 7,139 7,139 0 Giraux Eure-et-Loire 1,990 1,990 0 Giraux Transports Services Giraux Val-d Oise 6,782 6,782 0 SCI la Procession STIVO 10,489 10,489 0 TIMBUS 4,889 4,889 0 TVM 5,568 5,568 0 Equival Eurailco UK Eurailco GmbH Flexcité 1,340 1, Annual report 2007

41 12/31/ /31/2006 AGGREGATE REVENUE FRANCE OTHER AGGREGATE REVENUE FRANCE OTHER COMPANIES PER SUBSIDIARY COUNTRIES PER SUBSIDIARY COUNTRIES Flexcité 94 2,906 2,906 2,964 2,964 Gest SPA Systra group 114,562 23,107 91, ,873 24,510 79,363 Mobicité 1,506 1,506 1,188 1,188 Naxos 4,193 4,193 3,542 3,542 Promo Métro 18,694 18,694 19,357 19,357 RATP 3,659,603 3,659,603 3,518,231 3,518,231 RATP International RATP Développement 8,649 8,649 11,098 11,098 Orlyval Services Sedp SCI Perrier 0 0 Slt 7,460 7,460 5,989 5,989 Sqybus 25,501 25,501 24,519 24,519 Telcité 14,495 14,495 12,524 12,524 TP2A Trans Regio 3,579 3,579 3,558 3,558 Xelis CONSOLIDATED REVENUE 3,906,664 3,811,187 95,477 3,710,567 3,627,118 83, RESEARCH AND DEVELOPMENT COSTS The research and development costs recorded for 2007 amounted to 2,562 thousand compared with 3,609 thousand for the previous year. 9. PAYROLL AND PAYROLL-RELATED COSTS 9.1 Financial effects 12/31/ /31/2006 Salaries and wages 1,536,291 1,478,235 Social security contributions 697, ,986 Other long-term advantages 2,883 17,828 Profit sharing 32,394 15,393 TOTAL PAYROLL AND PAYROLL-RELATED COSTS 2,269,458 2,173,

42 9.2 Average number of employees 12/31/ /31/2006 CONSOLIDATION % INTEREST AGGREGATE NUMBER GROUP AGGREGATE NUMBER GROUP OF EMPLOYEES SHARE* OF EMPLOYEES SHARE* Alexa EM 37.00% 0 0 Autolinee Toscane FC % NA NC Bombela Operating Company FC % 0 NC Cars Giraux FC % 0 NC Cars Perrier FC % Cité bleue EM 20.00% 0 NC CTVMI FC % NC EM Services FC % 4 4 NA Equival PC 50.00% 6 3 NA Equival 38 PC 50.00% NC NA Eurailco UK PC 50.00% NC NA Eurailco GmbH PC 50.00% 0 NA Financière Cars Perrier FC % 0 0 Financière Systra PC 50.00% 0 0 Financière Transdev EM 50.00% NA 0 Flexcité FC % Flexcité 94 FC % Gest Spa FC % NA NA Giraux Eure-et-Loire FC % NC Giraux Transports Services FC % NC Giraux Val-d Oise FC % NC Systra group PC 50.00% 1, , Transdev group EM 25.00% NA NA LFI EM 12.00% NA NA LFI Services EM 12.00% NA NA M Dina Bus EM 20.00% NA NA Mobicité FC % NA Naxos FC % 0 0 Orlyval Services FC % Promo Métro FC % RATP parent company FC % 43,809 43,809 43,645 43,645 RATP Développement FC % RATP International FC % 0 NA RFT Spa EM 12.00% NA NA SADM FC % 0 0 SCI 132, avenue Général-Leclerc FC % 0 NC SCI Cars Perrier FC % 0 0 SCI Parc de la Sainte-Claire FC % 0 NC SCI La Procession FC % 0 NC SCI Sofitim FC % 0 NC SEDP FC % SELT EM 49.00% NA NA SLT PC 50.00% 7 4 NA Sqybus FC % STBC PC 20.00% NA STIVO PC 50.00% NC Telcité FC % TIMBUS FC % NC TFT Spa EM 12.00% NA NA Tram Di Firenze EM 24.90% NA NA Trans Regio PC 50.00% TP2A FC % NA TVM FC % NC TVO EM 35.00% NA NA Xelis FC % NA AVERAGE NUMBER OF EMPLOYEES 45,879 44,907 NA: not available NC: not consolidated. 118 Annual report 2007

43 9.3 Individual training rights In accordance with the provisions of the French law no of May 4, 2004 on professional training, the Company grants its employees individual training rights of twenty hours minimum per calendar year, which may be accumulated for up to six years at the end of which, if the rights have not been used, they are capped at one hundred and twenty hours. As at December 31, 2007, the aggregate number of hours vested for training amounted to 2,442,942 hours. The number of hours training vested which have not been requested was 2,441,440 hours. 10. OTHER OPERATING INCOME AND EXPENSE 12/31/ /31/2006 Trade receivable write-offs 2,292 4,571 Various operating expenses 45,242 20,874 TOTAL OTHER OPERATING INCOME AND EXPENSE 47,534 25,445 The change in this item was mainly due to the penalties paid to STIF for the strike action in November 2007, which amounted to 17 million. 11. OTHER OPERATIONAL INCOME AND EXPENSE 12/31/ /31/2006 Losses on sale of assets 3,193 4,696 Other TOTAL OTHER OPERATIONAL INCOME AND EXPENSE 3,012 3, NET FINANCING COSTS 12/31/ /31/2006 Borrowing costs and financial income 176, ,489 Interest on outstanding loans 192, ,172 Interest on finance leases 1,297 1,807 Net income from cash equivalents 13,777 8,989 Interest received from other financial assets 3,058 1,386 Other income from other available-for-sale financial assets Hedging expense 4,932 7,274 Impairment of available-for-sale financial assets Provision allocations and reversals for financial risk Change in fair value of unhedged borrowings 0 1,622 Net expense on derivatives (not qualified as hedges) 4,188 6,213 Income from hedging derivatives ineffective portion Income from hedging derivatives effective portion 81 1,794 Currency translation gains and losses 774 1,086 Short term loans and borrowings 10,952 4,995 Leasehold income (1) 16,305 10,892 Other financial income and expense 27,257 5,898 TOTAL 192, ,768 (1) See note 18. The financial expense and interest listed above have been recorded in compliance with the accounting principles set out in note 4 of this document. Gains and losses on currency translation are offset by gains and losses on hedge derivatives. Details on financial risk management are provided in note

44 13. INCOME TAX The breakdown of income tax is as follows: 12/31/ /31/2006 Tax income/expense 6,266 4,145 Adjustment of tax from previous years 18 Tax consolidation income/expense 150 Deferred tax income/expense for temporary differences TOTAL TAXES 6,092 3,187 Changes in net deferred taxes were as follows: 12/31/ /31/2006 OPENING BALANCE 1,130 2,074 Recognized in the income statement Recognized in equity 4 Recognized in goodwill 3,294 CLOSING BALANCE 4,400 1,130 The breakdown of deferred taxes by type is as follows: 12/31/ /31/2006 Temporary differences Valuation difference 4,063 2,061 CB adjustment Employee benefits Regulated provisions Other TOTAL 4,400 1,130 Of which-deferred tax assets 2,348 1,268 deferred tax liabilities 6,748 2,398 In 2007, 2,022 thousand of loss carryforwards were capitalized by Systra group in conformity with the method described in note GOODWILL 12/31/ /31/2006 OPENING BALANCE 1,276 1,089 Acquisitions through business combinations 44, Currency translation gains and losses, net 8 3 CLOSING BALANCE 45,739 1,276 The changes over the period reflect the acquisitions of the Giraux and Autolinee coach companies. In accordance with the method described in note 4.10, impairment tests were performed on the CGUs as at January 1, These tests did not show any impairment. 120 Annual report 2007

45 15. INTANGIBLE ASSETS Gross value 12/31/2005 ACQUISITIONS RETIREMENTS, RECLASSIFICATIONS CHANGE 12/31/2006 DISPOSALS OF SCOPE Lease rights 2, ,626 Research and development costs 5, , ,358 Software 259, ,517 43, ,145 Work in progress 19,936 24, , ,934 Other intangible assets 5, ,420 TOTAL 291,997 25,237 59,173 35, ,483 Amortization and impairment 12/31/2005 AMORTIZATION RETIREMENTS, REVERSALS CHANGE OF 12/31/2006 CHANGE DISPOSALS SCOPE AND RECLASSIFICATIONS Lease rights Research and development costs 4, , ,354 Software 191,490 34,799 55, ,956 Work in progress 1, ,083 Other intangible assets Total amortization and impairment 198,483 35,578 58, ,319 INTANGIBLE ASSETS, NET 93,515 10, , ,163 Gross value 12/31/2006 ACQUISITIONS RETIREMENTS, RECLASSIFICATIONS CHANGE 12/31/2007 DISPOSALS OF SCOPE Lease rights 2, ,626 Research and development costs 2, ,332 94, ,329 Software 248,145 1,608 6,045 28, ,287 Work in progress 34,934 25, , ,620 Other intangible assets 5,420 1, , ,328 TOTAL 293,483 27,973 8,405 92, ,189 Less amortization and impairment 12/31/2006 AMORTIZATION RETIREMENTS, TRANSFERS CHANGE OF 12/31/2007 CHANGE DISPOSALS SCOPE AND RECLASSIFICATIONS Lease rights Research and development costs 2,354 3,014 2, ,036 Software 170,956 33,742 5, ,931 Work in progress 1, ,882 Other intangible assets Total amortization and depreciation 175,319 37,161 8, ,844 INTANGIBLE ASSETS, NET 118,163 9, , ,345 The change in research and development costs mainly relates to the costs associated with bringing into service the new rolling stock (MF 2000), which amounted to 94,302 thousand. 121

46 16. PROPERTY, PLANT AND EQUIPMENT Gross value 12/31/2005 ACQUISITIONS RETIREMENTS, RECLASSIFICATIONS CHANGE OF 12/31/2006 DISPOSALS SCOPE Land 793, , ,115 Buildings 6,430,473 2, , , ,668,545 Technical plant, equipment and machinery 3,703,883 6, , , ,859,789 Transport equipment 4,190,208 12,427 43, ,166 1,905 4,347,842 Other property, plant and equipment 227, ,008 30, ,055 Work in progress 1,366, , , ,277,473 Investment grants 3,608, ,754 3,924,009 TOTAL 13,104, , ,974 36,084 1,627 13,229,810 12/31/2005 DEPRECIATION RETIREMENTS, REVERSALS CHANGE OF 12/31/2006 CHANGE DISPOSALS SCOPE AND RECLASSIFICATIONS Amortization and depreciation Land 4, ,848 Buildings 2,435, , , ,476,988 Technical plant, equipment and machinery 2,405, , , ,447,524 Transport equipment 2,428, ,008 41, ,586,853 Other property, plant and equipment 166,673 24,166 58, , ,079 Work in progress Investment grants 1,409,667 99,169 1,508,837 Total amortization and depreciation 6,031, , ,879 99, ,138,467 NET VALUE 7,073, , ,096 63,084 2,419 7,091,343 Gross value 12/31/2006 ACQUISITIONS RETIREMENTS, RECLASSIFICATIONS CHANGE OF 12/31/2007 DISPOSALS SCOPE Land 800, ,716 Buildings 6,668,545 3, , , ,770,407 Technical plant, equipment and machinery 3,859,789 5,392 27, , ,085,949 Transport equipment 4,347,842 80,724 53, , ,512,835 Other property, plant and equipment 200,055 6,127 8,093 17, ,450 Work in progress 1,277, ,369 1, , ,310,142 Advances and down payments 3,924, ,313 4,117,322 TOTAL 13,229, , ,744 97, ,578, Annual report 2007

47 12/31/2006 DEPRECIATION RETIREMENTS, REVERSALS CHANGE OF 12/31/2007 CHANGE DISPOSALS SCOPE AND RECLASSIFICATIONS Amortization and depreciation Land 4, ,504 Buildings 2,476, , , ,473,376 Technical plant, equipment and machinery 2,447, ,912 25, ,621,734 Transport equipment 2,586, ,292 50, ,771,304 Other property, plant and equipment 131,079 22,091 7, ,545 Work in progress Advances and down payments 1,508, ,143 1,619,980 Total amortization and depreciation 6,138, , , , ,397,482 NET VALUE 7,091, , ,195 13, ,180,692 The amount of commitments relating to capital expenditures is indicated in note The property, plant and equipment held under finance leases exclusively concerns buildings. It amounted to the following: 12/31/ /31/2006 Gross value 32,931 32,931 Accumulated depreciation 9,079 7,519 NET BOOK VALUE 23,852 25, INVESTMENT PROPERTY 12/31/ /31/2006 GROSS BOOK ACCUMULATED NET GROSS BOOK ACCUMULATED NET VALUE AMORTIZATION AND VALUE VALUE AMORTIZATION AND VALUE PROVISIONS PROVISIONS Investment property 2,058 1, ,308 4, In 2007, the fair value of the building on the Grands Augustins station was estimated at 21 million and the Systra property at 2 million. 18. SIGNIFICANT OPERATIONS IN American leasehold Between 1997 and 2002, RATP entered into a number of leaseholds. The leasehold arrangements entailed RATP granting the rights to its assets, under specific terms and conditions, to American investors. By assuming economic ownership of the assets, the investors were able to amortize the assets and make substantial tax savings by deferring tax. The tax advantage obtained by the foreign investors was shared with RATP. A leasehold transaction is composed of the main lease granted by RATP and a sublease enabling RATP to retain the right of use of the asset. RATP has an early buyout option (EBO) for a period shorter than the full term of the lease, which enables it to unwind the arrangement by repurchasing the outstanding portion of the lease. In economic and accounting terms, no sale takes place and RATP retains legal ownership of its equipment. The various contracts that make up each leasehold arrangement constitute separate transactions and are thus accounted for as such. The assets and liabilities related to these contracts (deposits that are never actually cashed in by RATP, other assets that are not received and liabilities that are not paid) are offset in the balance sheet and income statement, and appear in a single line as the net present value (NPV) corresponding to the overall profit generated by each transaction. This profit is recorded as deferred income when the contracts are signed and then is recognized as financial income on a straight-line basis over the duration of the contract. The risks to RATP only concern those relating to ownership of the equipment, French law and the counterparty risks on the deposits. For part of the deposits, amounting to 1,028 million as at December 31, 2007 the counterparty risk is hedged by defeasance agreements, which guarantee the offsetting of the deposits with the associated liabilities. On another part of the deposits, amounting to 356 million as at December 31, 2007, counterparty risk is hedged by collateral agreements, which require the replacement of the deposits substitution by American treasury bonds in the event of a lowering of the Company s credit rating. 123

48 On the final part of the deposits, which amounted to 141 million as at December 31, 2007, RATP bears the counterparty risk and has to provide letters of credit on RATP risk to American investors if the rating on these deposits falls below a certain threshold. Since December 31, 2007 RATP has been called on to provide letters of credit for a maximum 120 million Swedish lease The Swedish leasehold agreement relates to the period prior to equipment delivery. The investor pays the supplier the total value of the equipment. RATP leases the equipment over an eighteen year period, at the end of which it may exercise its buy-back option. At the inception of the contract the RATP sets up swapped deposits to cover the payments relating to the lease and equipment buyback option. The Swedish lease is restated in the consolidated financial statements (see accounting policies paragraph relating to property, plant and equipment). 19. INVESTMENTS IN ASSOCIATES 12/31/ /31/2006 COMPANIES % SHARE OF SHARE OF % SHARE OF SHARE OF INTEREST EQUITY NET INCOME INTEREST EQUITY NET INCOME Transdev group ,810 7, ,260 6,221 LFI , , Cité Bleue Not consolidated Tram Di Firenze , , LFI Services , , TVO , , Financière Transdev , , TFT Spa SELT Systra group RFT Spa Alexa STBC M Dina Bus ,750 2, ,189 2,191 TOTAL 155,299 5,671 88,720 4,412 The Group has significant influence over the following companies: STBC, as RATP manages its operations; LFI, LFI Services, TFT Spa, RFT Spa, as RATP is the main shareholder of the group, which holds 30% of LFI. 20. INVESTMENTS IN JOINT VENTURES 12/31/2006 COMPANIES NON-CURRENT CURRENT NON-CURRENT CURRENT NET INCOME ASSETS ASSETS LIABILITIES LIABILITIES Equival Financière Systra 19, Systra group 12,360 72,004 12,821 38,933 2,645 Eurailco UK Eurailco GmbH 2, , SLT 1,201 1, Trans Regio 2,167 2,693 2,831 1,707 1,629 TOTAL 38,618 77,423 17,720 42,294 1, Annual report 2007

49 12/31/2007 COMPANIES NON-CURRENT CURRENT NON-CURRENT CURRENT NET INCOME ASSETS ASSETS LIABILITIES LIABILITIES Equival Financière Systra 19, Systra group 13,498 76,671 12,614 40,655 4,613 Eurailco UK Eurailco GmbH 5, SLT 1,203 3, ,761 1,946 STIVO 1,760 8,050 1,604 4, Trans Regio 2,106 4,672 1,256 5,015 2,614 TOTAL 44,369 93,853 15,600 52,602 4, NON-CURRENT AVAILABLE-FOR-SALE FINANCIAL ASSETS 12/31/2006 FINANCIAL ASSETS AT DISPOSALS ACQUISITIONS/ CURRENCY TRANSLATION OTHER FINANCIAL ASSETS AT 01/01/2006 IMPAIRMENT GAINS AND LOSSES 12/31/2006 Gross value 42,799 31, ,615 Impairment 4, ,362 TOTAL NET WORTH 38,790 31, ,253 12/31/2007 FINANCIAL ASSETS AT DISPOSALS ACQUISITIONS/ CURRENCY TRANSLATION OTHER FINANCIAL ASSETS AT 01/01/2007 IMPAIRMENT GAINS AND LOSSES 12/31/2007 Gross value 11,615 3,288 2, ,605 Impairment 4, ,162 TOTAL NET WORTH 7,254 3,288 1, ,443 Available-for-sale financial assets primarily include non-consolidated shares which comprise the following: NET VALUE Alexa (shares without voting rights) 1,820 14% Irise % Tram de Mulhouse ,5% Société Billétique Monétique 312 < 10% Logis Transports (see note 3.2.1) 33 88% Uijeongbu Light 718 < 10% Linea % Other 484 TOTAL 5,394 % HELD Logis Transports Provisional data as at December 31, 2007 was as follows: revenue: 43,488 thousand; pretax income: 3,477 thousand (last revised forecast validated at a Board meeting). 125

50 22. OTHER FINANCIAL ASSETS 22.1 Other non-current financial assetss 12/31/2006 NET VALUE ACQUISITIONS DECREASES CURRENCY TRANSLATION OTHER NET N 1 DIFFERENCES VALUE N Loans 44,770 4,381 1, ,159 Deposits and guarantees 15,799 1, ,625 Other financial assets 2, ,252 Total net value 63,568 6,940 2, ,036 Loss of value TOTAL NET VALUE 62,937 6,940 2, ,610 12/31/2007 NET VALUE ACQUISITIONS DECREASES CURRENCY TRANSLATION OTHER NET N 1 DIFFERENCES VALUE N Loans 47,159 1,201 1, ,058 49,494 Deposits and guarantees 17,625 15, ,370 Other 3,252 2, ,609 Total net value 68,036 18,871 2, ,083 86,472 Impairment TOTAL NET VALUE 67,610 18,840 2, ,083 86,016 The housing loans mainly correspond to the housing loans granted by RATP to Interprofessional Housing Committees Other current financial assets 12/31/2006 FINANCIAL ASSETS AT CHANGE IN IMPAIRMENT CURRENCY TRANSLATION OTHER FINANCIAL ASSETS AT 01/01/2006 FAIR VALUE DIFFERENCES 12/31/2006 Total gross value 4,261 3, ,875 Impairment TOTAL NET VALUE 4, , ,002 12/31/2007 FINANCIAL ASSETS AT CHANGE IN IMPAIRMENT CURRENCY TRANSLATION OTHER FINANCIAL ASSETS AT 01/01/2007 FAIR VALUE DIFFERENCES 12/31/2007 Total gross value 7, ,600 Impairment TOTAL NET VALUE 8, , Fair value of financial instruments measured at cost In 2006, RATP transferred receivables amounting to 73,709 thousand from low cost housing management companies to a bank. RATP received a loan for the same amount, which it recorded as a liability. RATP still records the receivables transferred under assets as it retains substantially all of the risks relating to these receivables (credit risk). The liability is decreased at the same rate as the receivables, as the repayments are made by the housing management companies. The fair value of the housing loans, recognized at their amortized cost, and transferred, is as follows: HOUSING LOANS 12/31/ /31/2006 Fair value 51,816 53,633 Amortized cost 47,635 46,103 Difference 4,181 7, Annual report 2007

51 22.4 Cash flow hedges The cash flow hedges in place as at December 31, 2007 comprise: either fixed to Euribor swaps: RATP pays a fixed rate and receives a Euribor on its existing floating rate debt, or on fixed rate highly probable debt. As the sensitivity of the swaps is similar to the sensitivity of the debt they back, their effect on profit and loss is not material; or currency swaps: the cash flows paid on borrowings in one currency are perfectly hedged by the currency swaps, so that changes in the exchange rate have no effect on profit and loss. 23. INVENTORIES 23.1 Details of inventories by type 12/31/ /31/2006 GROSS VALUE PROVISION FOR NET VALUE GROSS VALUE PROVISION FOR NET VALUE IMPAIRMENT IMPAIRMENT Raw materials and supplies 157,616 30, ,610 3,022 3,022 Other supplies ,250 29, ,432 Work -in- progress 4, ,190 2,741 2,741 Merchandise Finished goods TOTAL INVENTORIES 162,276 30, , ,131 29, , Changes in inventory impairment 12/31/2006 ADDITION REVERSAL 12/31/2007 Provisions for inventories 29,818 4,200 4,012 30,006 Provisions on work in progress TOTAL 29,818 4,215 4,012 30,021 These provisions are accounted for in accordance with the method set out in note ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES 12/31/ /31/2006 Trade receivables 201, ,642 Impairment 24,794 20,491 Trade receivables 176, ,151 Advances and down payments 1,633 1,459 Prepaid expenses 9,137 8,446 State and local authority receivables 233, ,712 Other receivables 115, ,228 Provisions 4,822 5,285 Other receivables 354, ,560 ACCOUNTS RECEIVABLE 531, ,711 All accounts receivable are due within one year. State receivables and receivables from local authorities correspond to the compensation to be paid by STIF which amounted to 176 thousand and VAT receivables of 50 thousand. 127

52 25. CASH AND CASH EQUIVALENTS 12/31/ /31/2006 Marketable securities 303, ,688 Cash 78,103 72,264 TOTAL 381, ,952 Total cash and cash equivalents presented in the cash flow statement, comprised the following: 12/31/ /31/2006 Cash and cash equivalents (balance sheet) 382, ,952 Short-term bank loans (1) 47,432 40,958 CLOSING CASH AND CASH EQUIVALENTS (CFS) 334, ,994 (1) Note RESERVES FOREIGN CURRENCY REINVESTMENT ACTUARIAL FAIR VALUE HEDGE OTHER TOTAL RESERVES RESERVES GAINS AND LOSSES RESERVES RESERVES RESERVES RESERVES BALANCE AT JANUARY 1, ,260 4, ,026 1,210,313 Profit appropriation 55,830 55,830 Sale of property Currency translation adjustment Change in actuarial gains and losses 5,833 5,833 Change in fair value of derivatives and hedges Other fair value changes 5 5 Other changes 1,428 1,428 BALANCE AT DECEMBER 31, ,818 5, ,694 1,045,284 1,260,367 FOREIGN CURRENCY REINVESTMENT ACTUARIAL FAIR VALUE HEDGE OTHER TOTAL RESERVES RESERVES GAINS AND LOSSES RESERVES RESERVES RESERVES RESERVES BALANCE AT JANUARY 1, ,818 5, ,694 1,045,284 1,260,367 Profit appropriation 49,399 49,399 Currency translation adjustments 1,984 1,984 Change in actuarial gains and losses 35,149 35,149 Change in fair value of derivatives and hedges 24,954 24,954 Other fair value changes Other changes 232 1, , BALANCE AT DECEMBER 31, , ,078 29, ,260 1,095,982 1,368,155 (1) Reinvestment reserves (see note 4.17). 128 Annual report 2007

53 27. STATEMENT OF CHANGES IN EQUITY AS AT DECEMBER 31, 2007 CAPITAL RESERVES CURRENCY ACTUARIAL FAIR HEDGE OTHER NET GROUP MINORITY TOTAL STOCK ASSETS TRANSLATION GAINS AND VALUE RESERVES RESERVES INCOME EQUITY INTERESTS EQUITY MADE RESERVES LOSSES RESERVES AVAILABLE January 1, , , ,847 1,215,287 55,830 1,800,212 11,391 1,811,603 Net income appropriation 55,830 55, Net profit/loss for the period 49,181 49, ,300 Changes in scope and increased minority interests in subsidiaries Minority interests in subsidiaries dividends Currency translation adjustments Actuarial gains and losses 5,833 5,833 5,833 Fair value adjustment Other ,259 Equity at December 31, , , , ,694 1,272,102 49,181 1,843,616 11,794 1,855,410 Net income appropriation 49,181 49, Net profit/loss for the period 112, ,142 1, ,078 Changes in scope and increased minority interests in subsidiaries Minority interests in subsidiaries dividends Currency translation adjustments 1,752 1, ,852 Actuarial gains and losses 35,149 35,149 35,149 Fair value adjustment ,954 25,434 25,434 Other ,948 1,725 EQUITY AT DECEMBER 31, , ,701 1,955 29, ,260 1,321, ,142 2,014,366 15,503 2,029,

54 28. PROVISIONS FOR EMPLOYEE BENEFITS Provisions for employee benefits consist of retirement benefits and other long term benefits. NOTE 12/31/ /31/2006 Provisions for retirement benefit , ,018 Provisions for lump sum payments upon death in service ,172 42,406 Provisions for life insurance for employees in service ,035 12,613 Provisions for early retirement benefits ,577 15,004 Provisions for retirees guaranteed interest rate in the corporate savings plan ,467 34,265 Provisions for work-related accident and disability pensions , ,981 Total post-retirement benefits 408, ,287 Provisions for phased retirement ,628 24,738 Provisions for seniority bonuses ,126 13,568 Provisons for long-term sick leave ,819 8,364 Provisions for unemployment ,301 12,620 Provisions for work-related accident and disability pensions ,043 15,355 Provision measures for transitional/ pension scheme ,610 Total long-term employee benefits 77,527 74,645 TOTAL 486, ,932 The decree of January 15, 2008 set forth the provisions governing the reform of the retirement scheme. Subsequent to negotiations before year-end, a report was issued on December 20, 2007 summarizing the decisions on the measures to be taken. The effects of those measures on RATP have been reflected in the financial statements for 2007, particularly with regard to the valuation of employee benefits (longer working life and changes in career profiles). The effects resulting from changes in actuarial assumptions have been recognized in actuarial gains and losses Retirement benefits Defined benefit plans: summary Retirement benefits comprise the following: termination benefits; death indemnities for retirees; death indemnities for current employees; early retirement benefits (CAA); guaranteed rate of corporate savings plan for current and future retirees; provisions for work-related accidents and disability pensions. TOTAL RETIREMENT DEATH INDEMNITY INDEMNITY WORK-RELATED EARLY GUARANTEED RATE POST-EMPLOYMENT INDEMNITIES (EMPLOYEES IN ALLOCATION ACCIDENT AND RETIREMENT ON THE CORPORATE BENEFITS SERVICE) DISABILITY SAVINGS PLAN ALLOWANCE Obligation at beginning of year 447, ,018 12,613 42, ,981 15,004 34,265 Service cost 15,310 13,508 1, Discount costs 16,842 8, ,721 5,072 1,267 Actuarial gains/losses 35,316 13, ,012 16,304 4, Benefits paid 35,303 15,275 1, ,169 8,321 2,593 Past service costs Value at year-end 408, ,988 12,035 34, ,579 11,577 33,467 Obligation net of plan assets 0 Unrecognized past service costs 23,923 23,923 NET LIABILITY RECOGNIZED AT YEAR-END 432, ,911 12,035 34, ,579 11,577 33, Annual report 2007

55 The main actuarial assumptions are as follows: 12/31/ /31/2006 Discount rate 5.00% 4.00% Inflation rate 2.00% 1.80% Salary increase rate including inflation 3.60% 2.60% Mortality table TGH05 / TGF05 TPG 1993 Retirement age 55.6 years 54.6 years Turnover rate 0.00% 0.00% Description of the various retirement benefits Termination benefits Employees have the right to retirement benefits, unless a more favourable scheme is in place. The amount of the benefit is based on the length of time the employee has been employed by the Company. RATP pays all its employees that fulfil these conditions retirement benefits, calculated on the basis of a gross monthly fee, and a coefficient to reflect the employee s position in the hierarchy at his retirement date. The coefficient depends on the number of years vested at the retirement date and is set in the employment agreements in force at that time. These annuities are determined based on length of service. Average length of service is seventeen years. In 2007, RATP EPIC changed the methods used to calculate the indemnity for vested and future rights. The impact on the past service cost is spread over the remaining vesting period. It amounted to 23,923 thousand. Life insurance indemnitites for retirees RATP pays life insurance indemnities to retirees who have vested rights based on length of service or a proportionate pension. The amount of this indemnity is calculated based on three times the monthly pension payment. The obligation is measured based on historical data. Life insurance indemnities for current employees As for the State social security scheme, RATP s social security provides life insurance coverage. The purpose of life insurance is to guarantee the payment when a person covered by the policy dies, an amount known as the life insurance equal to twelve months salary of the employee at the time of death. The purpose of this amount is to compensate the employee s family for the loss of revenue from the employees professional income. Early retirement Early retirement may be granted, depending on the employees age, to employees who request it. Corporate savings plan for current and future retirees The corporate savings plan is an optional collective savings scheme open to employees who opt to build a portfolio of investments, with a contribution from the Company. RATP enables all its current employees who have worked for the Company for at least three months (unless they are working for the Company but not on the Company s payroll) to build savings. Employees make voluntary payments which are then temporarily blocked and are not taxed. The Company s retirees may also participate in the corporate savings plan after they retire. Work related accident and disability allowance RATP does not make contributions into the scheme for work related accidents and disability as it makes the associated payments itself. Employees who are victims of work-related accidents or illnesses, which result in permanent partial incapacity to work, may request the payment of capital or an annual allowance for the rest of their lives. The committee on work related accidents and illnesses decides whether the victim is eligible and the amount of the allowance. These benefits are paid by the pension fund. The allowances are paid until the death of the employee. 131

56 28.2 Other long-term benefits Other long-term benefits comprise the following: work-related accident and illnesses; long-service medals; phased retirement; unemployment benefits; long-term sick benefits. TOTAL SENIORITY WORK-RELATED PHASED UNEMPLOYMENT LONG-TERM TRANSITIONAL LONG-TERM BONUSES ACCIDENT AND RETIREMENT BENEFITS ILLNESS MEASURES BENEFITS DISABILITY ALLOWANCE Obligation at beginning of year 74,645 13,568 15,355 24,738 12,620 8,364 Service cost 22,942 5,809 2,034 6,818 4, ,610 Benefits paid 20,059 1,251 2,346 8,927 6,004 1,531 Past service costs VALUE AT YEAR-END 77,528 18,126 15,043 22,629 11,301 6,819 3,610 The main actuarial assumptions are as follows: 12/31/ /31/2006 Discount rate 5.00% 4.00% Inflation rate 2.00% 1.80% Salary increase rate including: 3.60% 2.60% Mortality table TGH05 / TGF05 TPG 1993 Retirement age 55.6 years 54.6 years Turnover rate 0.00% 0.00% Description of the various post-retirement benefits Work-related accident and disability pensions The allowances and indemnities for work-related accidents and illnesses paid to employees in post are accounted for as long-term benefits. The portion relating to retirees is accounted for under post-retirement benefits (see description of the allowances in paragraph 28.1). Phased retirement This system entails part time employment remunerated at 70% for employees who wish to take this option at 55 years of age and at 75% for employees who take the option from 55. Unemployment benefits As for the State unemployment benefit fund, RATP guarantees its employees, whose employment contract has reached termination, a replacement revenue entitled unemployment benefit for the duration of which varies depending on the number of years of affiliation and the age of the employment. Long-term sick leave Employees with long and costly illness are granted sick leave to enable them to follow the medical treatment required by their physical state. Although their employment contract is suspended, part or all of their salary is paid, under certain conditions. Seniority bonuses After a certain number of years service, employees receive seniority bonuses and additional holidays. 132 Annual report 2007

57 29. OTHER PROVISIONS 12/31/2006 CHANGE ADDITION PROVISION UNUSED CHANGE IN 12/31/2007 IN METHOD USED PROVISION RECLASSIFICATION SCOPE AND EXCHANGE RATE Non-current provisions 97, ,855 9,139 1,076 6, ,787 Decommissioning costs (1) 71, , ,205 Litigation (2) 4, ,301 1, ,598 Other expenses 11, ,048 7,677 10,468 Other contingencies (3) 9, ,390 7, ,516 Current provisions 45, ,245 26,298 2,289 7,994 55,869 Decommissioning costs (1) 7,952 6,368 14,320 Litigation (2) 8, ,015 1,870 1, ,935 Other expenses 4, ,959 9,282 7,580 6,778 Other contingencies (3) 24, ,904 15, ,836 TOTAL PROVISIONS 142, ,100 35,437 3,365 1, ,655 (1) Provisions for the costs of decommissioning railway rolling stock are recorded with an offsetting entry under components of property, plant and equipment which are amortized over the useful life of the trains. (2) Provisions for litigation concern the provisions for disputes and legal proceedings brought before the commercial courts and industrial tribunal. (3) Provisions for other contingencies comprise RATP EPIC s obligation to insuring risks of accidents occuring on its networks. No provisions were recorded for the effect of discounting, as it was not material. 30. LONG-TERM DEBT 30.1 Breakdown of current and non-current loans and borrowings 12/31/ /31/2006 Bonds 2,848,517 3,368,325 Change in fair value of bonds 5,347 2,439 Île-de-France loans 235, ,604 Corporate savings plan loans 100,482 90,837 Loans and borrowings from financial institutions 102,883 76,807 Loans relating to finance leases 26,449 26,571 Deposits and guarantees received 5,573 4,190 Other loans and borrowings 2,812 1,859 Total non-current liabilities 3,316,820 3,807,754 Bonds 782, ,024 Île-de-France loans 18,404 17,225 Corporate savings plan loans 130, ,060 Bank loans 8,578 3,162 Loans relating to finance leases 852 1,488 Deposits and guarantees received Commercial paper 401, ,510 Other loans and borrowings 59,648 60,370 Short-term bank loans 47,432 40,958 Total current loans and borrowings 1,448, ,928 NET DEBT 4,765,814 4,627,

58 30.2 Net debt The Group defines debt as all its loans and borrowings less part of the the accrued interest and the CA Lyon advance and part of its cash, cash equivalents and the marketable securities classified as non-current available-for-sale financial assets. As at December 31, 2007, Group debt amounted to 4,235,683 thousand, which comprised the following: 12/31/ /31/2006 Loans and borrowings 4,765,814 4,627,682 Accrued interest 58,597 59,571 CA Lyon advance 89,689 73,709 Deposits and guarantees 5,722 4,321 Change in hedged borrowings 2,439 Cash and cash equivalents 381, ,952 Subsidiaries unavailable cash 4,252 4,310 Other 1, NET GROUP DEBT 4,235,683 4,161, Maturities of loans and borrowings TOTAL 12/31/2007 < 1 YEAR 1 TO 5 YEARS > 5 YEARS Bonds 3,630, ,715 1,408,926 1,433,271 Change in fair value of bonds 5,347 5,347 Île-de-France loans 253,855 9, ,136 Corporate savings plan loans 230, , ,767 Bank loans 111,461 8,578 18,816 84,067 Loans relating to finance leases 27, ,449 Deposits and guarantees received 5, ,573 Commercial paper 401, ,218 Other loans and borrowings 3,863 1, ,261 Accrued interest 58,597 58,597 Short-term bank loans 47,432 47,432 TOTAL DEBT 4,765,814 1,434,831 1,546,146 1,784,837 The breakdown by main currency and type of interest rate is presented in note Fair value of financial liabilities measured at cost 12/31/ /31/2006 FAIR VALUE COST FAIR VALUE COST Bonds 3,020,401 3,630,912 3,095,933 3,533,349 Change in fair value of bonds 5,347 2,439 Île-de-France loans 238, , , ,829 Corporate savings plan loans 227, , , ,897 Bank loans 111, ,461 79,969 79,969 Loans relating to finance leases 27,301 27,301 28,059 28,059 Deposits and guarantees received 5,722 5,722 4,321 4,321 Commercial paper 401, , , ,510 Other loans and borrowings 3,863 3,863 2,658 2,658 Accrued interest 58,597 58,597 59,571 59,571 Short-term bank loans 47,432 47,432 40,958 40,958 TOTAL DEBT 4,142,047 4,765,814 4,170,683 4,627, Annual report 2007

59 Method used to determine the fair value of non-derivative financial liabilities For the bond issues, fair value corresponds to the market value of the bonds issued. For the loans from the Île-de-France region and concerning the corporate savings plan, the fair value corresponds to the value of the cash flow generated by the repayment of the principal and interest disounted at the market interest rate at year-end. Interest rate used to determine fair value The interest rates used to discount future cash flows are determined based on the risk-free interest rate curves. As an indication, the ten year rate is 4.74% as at December 31, 2007 and 4.18% as at December 31, Change in amortized cost DEBENTURES AMORTIZED COST AMORTIZED COST VARIATION 12/31/ /31/2006 RATP , ,171 RATP , ,521 5,806 RATP , , RATP , , RATP , , RATP , , RATP , , RATP ,000 50,000 0 RATP 2014 CHF 99, ,523 RATP 2015 CHF 138, ,790 4,173 RATP 2017 CHF 181, ,173 RATP 2019 CHF 189, ,038 5,226 RATP 2007 YEN 0 12,898 12,898 TOTAL 3,630,711 3,533,711 97,000 IDF LOAN AMORTIZED COST AMORTIZED COST VARIATION 12/31/ /31/2006 TOTAL 253, ,831 4,974 Effect of amortized cost on debt: 2,984. Repayment of capital: 17,226. New loans: 9,268. HOUSING LOANS AMORTIZED COST AMORTIZED COST VARIATION 12/31/ /31/2006 TOTAL 47,635 46, Effect of amortized cost on debt: 3,058. Repayment of capital: 2,189. EMPLOYEE PROFIT AMORTIZED COST AMORTIZED COST VARIATION SHARING 12/31/ /31/2006 TOTAL 101,785 89, ,590 Effect of amortized cost on debt: 241. Repayment of capital: 25,218. New loans: 37, TRADE AND OTHER PAYABLES 12/31/ /31/2006 Trade payables 219, ,890 Payables on fixed assets 248, ,103 Accrued tax and social security payables 549, ,727 Other operating payables 16,582 13,603 Deferred income 37,730 56,858 Other payables 103, ,933 TOTAL 1,175,133 1,098,114 All trade payables are due within one year. 135

60 32 DERIVATIVE FINANCIAL INSTRUMENTS 32.1 Financial risk management The Group is not exposed to market risk (interest rate, exchange rate commodity). The hedging strategy used to manage these risks is documented. The means implemented and their effectiveness are presented below. Management of interest rate risk The derivative instrument transactions entered into by the Group mainly concern hedges set up to manage interest rate risk, backing debt or the investment portfolio. Interest rate risk on borrowings and investments is essentially managed by using swaps and options to modulate the fixed and floating rate portion of the liability based on changes in interest rates. This modulation is obtained through the implementation or cancelling of interest rate swaps and optional transactions. The stop loss and take profit are managed by the Finance department and additional limits are imposed on trading operations. Thus, the volatility of financial gains and losses on mark-to-market interest derivatives are well managed. Management of exchange rate risk RATP issues loans in foreign currencies. The resulting exposure to exchange rate risk is systematically hedged using currency swaps. The Systra group sells services in USD and GBP and generally pays interest in euros. Systra s revenue and operating margin are denominated and calculated in euros. The Systra group sets up global currency hedges to cover the exposure to any unfavourable changes in the EUR/USD and EUR/GBP exchange rates, which could have a material impact on operating margin. Exposure to risk of commodity price increases RATP hedges against the risk of commodity price increases for future purchases of diesel fuel and/or increases in the dollar against the euro, by the implementation of financial instruments such as swaps, options (calls and puts) or forwards. The commitments are moduable in terms of: underlying: petroleum, natural gas and refined products; quantity: thousands of tonnes; duration: from one month to several years; currency: hedge possible in euros and other currencies Sensitivity Effect on interest Borrowings (bonds, corporate savings plan, Île-de-France) are now 91% fixed rate which means they have very little exposure to changes in interest rates, as shown in the following tables. Amount of hedged debt before effect of hedging instruments: 12/31/ /31/2006 Fixed rate 0 14,788 Floating rate 0 0 YEN 0 14,788 Fixed rate 629, ,982 Floating rate 0 0 CHF 629, ,982 Fixed rate 3,121,273 3,262,261 Floating rate 568, ,240 EUROS 3,689,609 3,802,501 Fixed rate 3,750,638 3,624,030 Floating rate 568, ,240 TOTAL 4,318,974 4,164,271 Amount of hedged debt after effect of hedging instruments: 12/31/ /31/2006 Fixed rate 0 0 Floating rate 0 14,788 YEN 0 14,788 Fixed rate 629, ,982 Floating rate 0 0 CHF 629, ,982 Fixed rate bonds 3,049,627 3,189,341 Floating rate 639, ,160 EUROS 3,689,609 3,802,501 Fixed rate 3,678,992 3,536,322 Floating rate 639, ,948 TOTAL 4,318,974 4,164,270 Interest on borrowings amounted to 209 million in 2006: a 1% increase in interest rates on the variable part of borrowings would imply an increase in interest of approximately 3.76 million, which is less than 2% of interest. Effect on effectiveness of hedges Forward-looking tests on hedges simulate the effectiveness of hedges in the event of major changes in interest rates (stress scenarios). The hedges are only declared to be effective if, in all the scenarios of change tested, the hedge remains within the limits of 80% 125%. In the event of a change of +/ 1% in interest rates, all the hedges remain effective. 136 Annual report 2007

61 32.3 Maturity of derivative financial instruments (maturity, notional amount, currency) As at December 31, 2006 LONG-TERM DEBT Currency risk CLASSIFICATION MATURITY OF NOTIONAL AMOUNT TOTAL CFH FVH TRADING < 1 YEAR 1 TO 5 YEARS > 5 YEARS Cross currency swap 346,982 14,788 14, , ,769 Total currency risk 361,769 Interest rate risk Fixed for floating swaps 100,000 50, , ,000 Floating for fixed swaps Other swaps fixed 198, , ,000 pre-hedge 550, , ,000 Total swaps 898,000 Cap 448, , ,000 Floor 198, , ,000 Swaptions 50,000 50,000 50,000 Other 0 Total options 696,000 Total interest rate risk 1,594,000 Raw materials risk Swaps vanilla 52,136 T 52,136 T 52,136 T 52,136 T SHORT-TERM DEBT Interest rate risk Fixed for floating swaps (EONIA rate) 180, , , ,000 OTHER LIABILITIES Interest rate risk Fixed for floating swaps lease 22,471 22,471 22,471 Floating for fixed swaps leasebacks 27,080 27,080 27,080 49,

62 As at December 31, 2007 LONG-TERM DEBT Currency risk CLASSIFICATION MATURITY OF NOTIONAL AMOUNT TOTAL CFH FVH TRADING < 1 YEAR 1 TO 5 YEARS > 5 YEARS Cross currency swap 629, , ,365 Total currency risk 629,365 Interest rate risk Fixed for floating swaps 50,000 98,000 50,000 98, ,000 Floating for fixed swaps Other swaps fixed 98,000 98,000 98,000 pre-hedge 650, , ,000 Total swaps 896,000 Cap 148,000 50,000 98, ,000 Floor 98,000 98,000 98,000 Swaptions 50,000 50,000 50,000 Other options 0 Total options 296,000 Total interest rate risk 1,192,000 Raw materials risk Swaps vanilla 0 T 0 T 0 T 0 T SHORT-TERM DEBT Interest rate risk Fixed for floating swaps (EONIA rate) OTHER LIABILITIES Interest rate risk Fixed for floating swaps lease 22,471 22,471 22,471 Floating for fixed swaps leasebacks 26,354 26,354 26,354 Note foreign exchange risk on debt issued in foreign currencies is systematically hedged with cross currency swaps, and those instruments that do not qualify for hedge accounting (trading instruments) under IAS 39 are nevertheless economic hedges. 48, Fair value of derivatives 12/31/2006 NON-CURRENT CURRENT TOTAL NON-CURRENT CURRENT TOTAL ASSETS ASSETS ASSETS LIABILITIES LIABILITIES LIABILITIES Cash flow hedge 1,129 2,339 3,468 14,308 4,983 19,291 Fair value hedge 108 1,959 2,067 3, ,138 Unhedged 0 3,777 3, ,286 9,286 TOTAL 1,237 8,075 9,312 17,600 15,115 32, Annual report 2007

63 12/31/2007 NON-CURRENT CURRENT TOTAL NON-CURRENT CURRENT TOTAL ASSETS ASSETS ASSETS LIABILITIES LIABILITIES LIABILITIES Cash flow hedge 11,436 3,795 15,231 21,358 5,702 27,060 Fair value hedge 0 1,204 1,204 6, ,276 Unhedged 3,381 3,381 5,658 5,658 TOTAL 11,436 8,380 19,816 27,462 11,532 38,994 The fair value of derivative financial instruments is based on quotes made by the banking counterparties. The Group ensures that these quotes are reasonable by discounting the estimated future cash flows, taking into account the terms and maturity of each instrument and using the market interest rates which would apply to similar instruments at the valuation date Effect on balance sheet of fair value recognition of derivative instruments Details on cash flow hedging instruments: EXPECTED PAYMENT OF HEDGED CASH FLOWS YEAR RECOGNIZED IN INCOME Commodity hedges 1 payment per month (5th working day) for one year. Upon each monthly payment, the loss or gain on the hedging instrument is recognized in the income statement. Pre-hedging Issue between September 1, 2008 From the issue date, gradual recognition in the income and November 28, statement at the date of the coupon payments. Swaps on leaseback I1 and I3 Contracts hedged for the periods Recognition in the income statement on the contractual and date of the payments. Payment expected on the first day of each quarter. Swap on leaseback I2 Contract for the period Recognition in the income statement on the contractual Payment expected at the end of each quarter. date of the payments. 33. GUARANTEES 33.1 Guarantees given 12/31/ /31/2006 RATP EPIC OTHER GROUP TOTAL RATP EPIC OTHER GROUP TOTAL Guarantees 2,181,864 28,302 2,210,166 2,520,868 36,354 2,557,222 of which: Guarantees to not-for-profit entities and others 2,122 2,660 Employee benefits 340, ,098 Financial operations (1) 1,839,442 2,165,110 TOTAL 2,181,864 28,302 2,210,166 2,520,868 36,354 2,557,222 (1) Leasehold operations (see note 18) Guarantees received 12/31/ /31/2006 RATP EPIC OTHER GROUP TOTAL RATP EPIC OTHER GROUP TOTAL Guarantees 185,671 3, , , ,648 Financial operations (1) 185, ,825 TOTAL 185,671 3, , , ,648 (1) Leasehold operations (see note 18). 139

64 34. OFF-BALANCE SHEET COMMITMENTS 34.1 Capital expenditures Capital expenditures contracted at year-end but not recorded in the financial statements amounted to 2,811 million as at December 31, 2007 compared with 2,312 million as at December 31, Employee benefits Past service costs for the change in retirement scheme amounted to 23,923 thousand as at December 31, 2007 and will be amortized from Contingent assets and liabilities Asbestos An internal study has been performed to investigate asbestos-related illnesses among employees and assess the financial impact of the Company. All risks arising from cases already declared or which have been brought to the court have been provisioned. Although it is not possible to predict the financial impact of future litigation, RATP believes that the provision of 5,324 thousand recorded in the balance sheet as at December 31, 2007 is adequate and reflects the best estimate of the financial risk borne by the Company (see note 29). 35. INFORMATION ON RELATED PARTIES 35.1 Transactions with related parties As a State-owned industrial and commercial entity, RATP is fully owned by the French State. Consequently, it is a related party in the meaning of IAS 24 with all the companies controlled by the French State. However, given that the objective of IAS 24 is to alert on the terms and conditions of non-current transactions entered into between the Group and related parties, the Group excluded from the scope all ordinary transactions entered into under market conditions. Transactions with the State and public authorities: 12/31/ /31/2006 STIF contract resources (tariff compensation, quality of service bonus/malus, etc.) 1,558,223 1,404,368 Standard contribution 236, ,604 Local council services to maintain loss-making services 14,518 11,261 Investment grants called (State, STIF, RIF, other) 169, ,030 Île-de-France region loans contracted 11,235 35,694 Île-de-France region loans repaid 17,225 15,902 Government and local authority receivables 119, ,697 STIF receivables 176, ,390 Government and local authority borrowings 41,488 33,814 STIF borrowings 169, ,420 RIF loans and borrowings 287, ,980 Transactions with subsidiaries Transactions with fully consolidated companies are eliminated upon consolidation. Transactions with proportionately consolidated companies (uneliminated portion) or equity accounted companies are not material and are ordinary practices used for commerical or financial operations within a group. They are performed under market conditions. Other transactions with public sector companies This refers to ordinary transactions undertaken in normal market conditions Compensation paid to Directors and Executive Officers The main Directors of RATP group are members of the Executive Board. 12/31/ /31/2006 Short-term benefits excluding employer charges (1) 1,223 1,127 (1) Including gross salaries, bonuses, profit sharing and benefits in kind. 140 Annual report 2007

65 36. GROUP SUBSIDIARIES Transport operations division HEAD OFFICE COMPANY % CONTROLLING % METHOD % INTEREST REFERENCE NO. INTEREST INTEREST VARIATION RATP Développement 54, quai de la Rapée, LAC A , Paris Cedex FC Orlyval Services (OVS) Établissement de Wissous, chemin de Fresnes, Wissous FC SQY BUS ZI Les Bruyères, 9, avenue Jean-Pierre-Timbaud, Trappes Cedex FC Société des Lignes Touristiques (SLT) 13, rue Auber, Paris PC Société d Exploitation des Lignes Touristiques (SELT) , rue Saint-Honoré, Paris EM Société des Transports du Val-d Oise (TVO) 1, chemin du Clos-Saint-Paul, Saint-Gratien EM Société des Transports du Bassin Chellois (STBC) 9, place du Grand-Jardin, Chelles EM Autolinee Toscane Florence FC EP Bombela Operating Company 22 Milkyway Limbro Business Park 2090 PO Box 1115 Kelvin 2054 Afrique du Sud FC EP Cars Giraux 48, boulevard du Maréchal-Juin, Mantes-la-Jolie B FC EP Cité Bleue 21, parc d activités Francis-Combe, Cergy B EM EP CTVMI 2, impasse Sainte-Claire-Deville, Mantes-la-Jolie B FC EP TP2A 6, rue des Biches, Ville-la-Grand FC Equival SAS 54, quai de la Rapée, Paris Cedex PC Mobicité 54, quai de la Rapée, Paris Cedex FC Flexcité 54, quai de la Rapée, LAC A 318, Paris Cedex FC Eurailco GmbH Maybachstrasse 6, Stuttgart HRB PC Trans Regio Markstrasse 19, Kaiserslautern HRB PC EM Services 54, quai de la Rapée, Paris Cedex FC Giraux Eure-et-Loire 48, boulevard du Maréchal-Juin, Mantes-la-Jolie B FC EP Giraux Transports Services 48, boulevard du Maréchal-Juin, Mantes-la-Jolie B FC EP Giraux Val-d Oise 35, rue des Fossettes, Génicourt B FC EP M Dina Bus 10, avenue du 2-Mars, Casablanca Maroc EM Tram di Firenze Florence EM Gest Spa Florence FC Flexcite 94 Allée Jean-Baptiste-Preux, Alforville FC Société Financière Groupe Perrier ZI Les Bruyères, 9, avenue Jean-Pierre-Timbaud, Trappes Cedex FC Cars Perrier ZI Les Bruyères, 9, avenue Jean-Pierre-Timbaud, Trappes Cedex FC SCI Perrier ZI Les Bruyères, 9, avenue Jean-Pierre-Timbaud, Trappes Cedex FC SCI 132 Av. du Géneral Leclerc 48, boulevard du Maréchal-Juin, Mantes-la-Jolie FC EP SCI Parc de la Sainte-Claire 48, boulevard du Maréchal-Juin, Mantes-la-Jolie FC EP SCI La Procession 33, rue des Fossettes, Génicourt FC EP SCI Sofitim 48, boulevard du Maréchal-Juin, Mantes-la-Jolie FC EP STIVO 33, rue des Fossettes, Génicourt B PC EP TIMBUS ZA de la Demi-Lune, 7, rue des Frères-Montgolfier, Magny-en-Vexin B FC EP TVM 48, boulevard du Maréchal-Juin, Mantes-la-Jolie B FC EP Financière TRANSDEV L Atrium 6, place Abel-Gance, Boulogne-Billancourt EM TRANSDEV group L Atrium 6, place Abel-Gance, Boulogne-Billancourt EM RATP International 54, quai de la Rapée, LAC A 19, Paris Cedex FC ALEXA Viale dei Mille 115, Florence EM La Ferroviaria Italiana (LFI) Via Guido Monaco 37, Arezzo EM LFI Services Italy EM TFT SPA Italy EM RFT SPA Italy EM Engineering division Financière Systra 5, avenue du Coq, Paris PC Systra group 5, avenue du Coq, Paris PC Xelis Bât. HAUTACAM 12, avenue du Val-de-Fontenay, Fontenay-sous-Bois FC Real Estate division Commercial property Promo Métro 35, boulevard de Sébastopol, Paris FC Telecommunications Telcité 1, avenue Montaigne, Noisy-le-Grand Cedex FC Naxos 1, avenue Montaigne, Noisy-le-Grand Cedex FC Realty SEDP 54, quai de la Rapée, Paris Cedex FC SADM 54, quai de la Rapée, Paris Cedex FC 141

66 Financial statements Statutory Auditors report 143 Balance sheet 144 Income statement 146 Notes to the financial statements Annual report 2007

67 Statutory Auditors report on the financial statements Year ended December 31, 2007 In compliance with the assignment entrusted to us by the Minister for the Economy, Finance and the Budget, we hereby report to you, for the year ended December 31, 2007, on: the audit of the accompanying financial statements of RATP-EPIC; the justification of our assessments; the specific verifications and information required by law. The financial statements have been approved by the Board of Directors. Our role is to express an opinion in these statements based on our audit. 1. Opinion on the financial statements We conducted our audit in accordance with the auditing standards generally accepted in France. Those standards require that we plan and perform our work to obtain reasonable assurance that the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements give a fair and true view of RATP s financial position and assets and liabilities as at December 31, 2007, and of the results of its operations for the year then ended, in accordance with the accounting principles generally accepted in France. 2. Basis of our assessments Pursuant to the provisions of article L of the French Commercial Code relating to the justification of our assessments, we draw your attention to the following matters: Reform of the retirement scheme Note 1 to the consolidated financial statements recalls that subsequent to negotiations between RATP and its employees on the reform of the retirement scheme, a report was issued on December 20, 2007 summarizing the accompanying measures to be taken. The effects of those measures have been accounted for in the consolidated financial statements for 2007, particularly with regard to the valuation of employee benefits. The decree of January 15, 2008 set forth the provisions governing the reform of the retirement scheme. As part of our assessment of the accounting rules and principles applied by RATP, we verified that the above-mentioned accounting methods and the information provided in the notes to the financial statements were appropriate and had been consistently applied. Employee benefits Note 3.13 to the financial statements describes the long-term employee benefits provisioned in the balance sheet and the method used to measure those obligations. We examined the way in which the long-term employee benefits had been identified, measured and accounted for. We reviewed the assumptions and calculations made in order to validate the provisions reported under liabilities on the balance sheet at the beginning of the year and at year-end. Property, plant and equipment Note describes the accounting treatment for property, plant and equipment which are fully owned or made available for use by RATP by the State or STIF. In connection with our assessment of the accounting policies implemented by your company, we examined the methods used to capitalize property, plant and equipment and ensured that the information provided in note was appropriate. Our assessments were an integral part of our audit of the financial statements as a whole, and therefore contributed to the formation of the opinion expressed in the first part of this report. 3. Specific verifications and information We also performed the specific verifications required by law in accordance with the auditing standards generally accepted in France. We have no matters to report regarding the fair presentation and conformity with the financial statements of the information given in the management report of the Board of Directors and in the documents relating to the financial position and the financial statements. Paris La Défense and Neuilly-sur-Seine, April 1, 2008 The Statutory Auditors Salustro Reydel Member of KPMG International Philippe Arnaud PricewaterhouseCoopers Audit Paul Onillon 143

68 Balance sheet December 31, 2007 (in thousands of euros) 12/31/ /31/2006 ACCUM. DEPRECIATION, GROSS AMORTIZATION NET NET ASSETS AND PROVISIONS INTANGIBLE ASSETS 396, , , ,540 Research and development costs 94,329 3,036 91,292 4 Lease rights 2, ,714 1,791 Other 299, , , ,744 PROPERTY, PLANT AND EQUIPMENT 18,388,750 8,844,559 9,544,190 9,421,559 Land 389,906 5, , ,580 Buildings 7,952,826 3,231,584 4,721,241 4,624,163 Technical plant, equipment and industrial tooling 4,124,963 2,683,224 1,441,739 1,392,229 Transport equipment 4,409,584 2,787,038 1,622,547 1,676,411 Other 202, ,209 65,237 67,031 WIP, advances and down payments 1,309,024 1,309,024 1,276,145 FINANCIAL ASSETS 479,579 17, , ,422 Investments and affiliates 259,345 4, , ,374 Receivables from other investments and affiliates 6,638 6,638 16,162 Other portfolio investments Loans 96, ,723 97,682 Other 117,530 12, ,888 93,204 NON-CURRENT ASSETS (I) 19,265,059 9,061,072 10,203,986 9,851,520 Inventories and work in progress 160,054 29, , ,070 Advances and prepayments to suppliers ACCOUNTS RECEIVABLE 5,001,364 18,531 4,982,833 5,140,888 Trade receivables and related accounts 129,169 14, , ,438 State and local authority receivables 282, , ,481 Other 51,725 4,194 47,531 48,987 Receivables from leases 4,538,027 4,538,027 4,672,982 FINANCIAL ASSETS 309, , ,592 Marketable securities 281, , ,536 Cash and cash equivalents 27,666 27,666 34,055 Prepaid expenses 62,463 62,463 55,652 CURRENT ASSETS (II) 5,533,784 48,366 5,485,419 5,585,455 Bond issuance costs (III) 9,244 9,244 7,094 Bond redemption premiums (IV) 6,917 6,917 9,413 Unrealized foreign exchange losses (V) 1,171 1,171 TOTAL ASSETS ( I + II + III + IV + V ) 24,816,176 9,109,438 15,706,737 15,453, Annual report 2007

69 (in thousands of euros) EQUITY AND LIABILITIES 12/31/ /31/2006 Reserve for assets made available to RATP 250, ,701 Revaluation surplus 231, ,210 Capital endowment 283, ,367 RESERVES 285, ,743 Reserve from disposal of assets made available by the STIF and no longer used (redeployment) 184, ,013 Reserve from disposal of assets made available by the State and no longer used Reserve from disposal of assets constructed by RATP and no longer used (reinvestment) 42,890 42,668 General reserve 57,926 57,926 Retained earnings 862, ,451 Net income 83,665 41,092 Investment grants 2,433,137 2,366,990 Tax-regulated provisions 451, ,681 EQUITY (I) 4,881,350 4,741,239 Provisions for contingencies 58,073 43,475 Provisions for commitments 163, ,000 PROVISIONS FOR CONTINGENT LIABILITIES (II) 221, ,475 LOANS AND BORROWINGS 4 747,389 4,607,748 Loan from Île-de-France region 287, ,979 Bonds 3 872,689 3,728,157 Borrowings from and liabilities to financial institutions (credit balance bank accounts) 112, ,705 Other borrowings and loans 415, ,346 Accrued interest 58,578 59,561 Advances on orders in process 22,653 1,422 Trade payables and related accounts 191, ,134 Taxes and social security contributions 550, ,157 Payables to suppliers of assets and related accounts 240, ,013 Other liabilities 107, ,960 Lease payables 4,618,627 4,770,324 Prepaid income 123, ,812 LIABILITIES (III) 10,602,384 10,521,570 Unrealized foreign exchange gains (IV) 1, TOTAL EQUITY AND LIABILITIES ( I + II + III + IV ) 15,706,737 15,453,482 Net debt 4,293,669 4,200,820 (RATP indicator see table 5.13c) 145

70 Income statement December 31, 2007 (in thousands of euros) 12/31/ /31/2006 % CHANGE REVENUE FROM TRANSPORT SERVICES (1) 78,057 84, % STANDARD CONTRIBUTION 4,211,858 4,030, % Other operating income (1) 3,404,927 3,267, % Other income 236, , % Income from services other than transport (1) 114, , % Sales of by-products (1) 346, , % Income from services other than transport (1) 133, , % Sales of by-products (1) 6,638 3, % Decrease in stock of manufactured goods 1, NS Capitalized production 76,275 63, % Provision reversals and costs transferred 88,822 80, % Operating subsidies % Other 40,300 36, % Income used to offset depreciation expenses 110, , % Reversal of revaluation provisions 10,203 10, % Portion of investment grants transferred to income 99,899 96, % OPERATING EXPENSES 3,912,855 3,781, % Cost of purchased goods and services 757, , % Energy 160, , % Electricity 76,038 75, % Fuel 73,158 70, % Heating 11,316 11, % Cost of leased tracks 21,631 20, % User rights payable to SNCF 22,987 22, % Equipment, supplies and other external services 552, , % Equipment and supplies 160, , % Other external services 391, , % Tax, duties and other payables 215, , % Payroll costs 2,202,202 2,128, % Wages and salaries 1,533,699 1,496, % Payroll-related costs 647, , % RATP employee benefit plan cost, net 20,522 12, % Depreciation, amortization and provisions 693, , % Asset depreciation and amortization 607, , % Asset provisions % Current assets provisions 5,961 12, % Provisions for contingent liabilities 79,557 43, % Other expenses 44,600 37, % OPERATING INCOME (I) 299, , % 146 Annual report 2007

71 (in thousands of euros) 12/31/ /31/2006 % CHANGE FINANCIAL INCOME 78,057 84, % From investments in subsidies and affiliated companies 6,261 4, % Other long-term investments and asset receivables % Accrued interest and related income 63,509 71, % Provision reversals and operating expenses transferred % Foreign currency translation gains NS Proceeds from disposal of marketable securities 7,227 7, % Financial income (Athens) 100.0% FINANCIAL EXPENSES 275, , % Accrued interest and related expenses 269, , % Aortization and provisions 6,104 5, % Foreign currency tranalation losses % Losses on disposal of marketable securities % FINANCIAL EXPENSE ( II ) 197, , % ORDINARY INCOME ( I + II ) 101,278 48, % NON-RECURRING INCOME 26,146 20, % From operating transactions 4,111 3, % From capital transactions % From leases 16,305 10, % Other 639 2, % Provision reversals and operating expenses transferred 4,652 2, % NON-RECURRING EXPENSES 11,739 13, % From operating transactions 3,975 2, % Other 7,708 9, % Amortization and provisions % NON-RECURRING INCOME 14,407 7, % Employee profit-sharing 32,019 15, % Income taxes % TOTAL INCOME 4,316,061 4,135,902 TOTAL EXPENSES 4,232,396 4,094,810 NET INCOME 83,665 41, % (1) Revenue. 3,658, , % (2) Including staff bonuses. 42,625 51, % 147

72 Notes to the financial statements As at December 31, The financial statements are presented in thousands of euros. 1. SIGNIFICANT EVENTS Reform of the retirement scheme The decree of January 15, 2008 set forth the provisions governing the reform of the retirement scheme. Subsequent to negotiations before year-end, a report was issued on December 20, 2007 summarizing the decisions taken on the accompanying measures. The effects of those measures have been reflected in the financial statements for financial year 2007, particularly with regard to the valuation of employee benefits (longer working life and changes in career profiles). Strikes The impact of the strikes in October and November 2007 has been reflected in the 2007 financial statements, and includes: adjustments to transport revenue to account for the reimbursements made to travellers in 2008; penalties for non-compliance with service provision arrangements, which were recognized in other operating expenses; lower payroll costs as employees were not paid for the strike days. Tax inspection In November 2007, a tax inspection began on the period from 2004 to Subsidies and investments In 2007, RATP committed 80 million to the capital increase of RATP Développement, raising its stake in the company from 75% as at December 31, 2006 to 95.4%. As at December 31, 2007, 64 million of the 80 million had been paid-up. The outstanding amount should be paid within the next five years. In 2007, RATP committed 62.7 million in the capital increase of Financière Transdev in order to maintain its stake at 49.9%. As at December 31, 2007, uncalled and unpaid capital amounted to 11 million. Leaseholds In 2007, four leaseholds were terminated before their term, generating additional income of 5.8 million, corresponding to the remaining net present value of the leases to be allocated to the contracts. 2. SIGNIFICANT ACCOUNTING POLICIES RATP applies a purpose-made chart of accounts, which was approved by the interministerial order of March 21, 1985, and approved by the French National Accounting Board (Conseil National de la Comptabilité). The chart was prepared in accordance with the rules, principles and framework governing the French chart of accounts. It includes specific line items reflecting RATP s special reporting and disclosure requirements and particular characteristics in terms of legal form and financing. 2.1 Balance sheet A detailed breakdown of non-current assets and depreciation and amortization schedules is provided in tables 5.1 and Intangible assets The research and development costs relating to assets that are clearly separable, technically feasible and likely to generate future economic benefits, are capitalized if they meet the criteria set forth in the generally accepted accounting principles. They are amortized based on the useful life of the assets to which they relate. All other research and development costs are expensed. Information systems acquired or developed by the Company are capitalized. They comprise the following components: development and configuration costs, which are amortized over five to ten years, on the basis of the useful life of the system; software and equipment acquired to place the system in service, which are amortized over a three-year period Property, plant and equipment Property, plant and equipment comprises both the assets provided for use by RATP that are owned by the public authorities, notably the Île-de-France public transport authority (STIF), which runs the public transport system in the Paris region, and the assets acquired or created by RATP. RATP records both categories of assets on its balance sheet as it is contractually responsible for servicing, maintaining and replacing them. All assets are recorded at historical cost, with the exception of those in operation at December 31, 1976, which were revalued at that time pursuant to article 61 of the 1977 French Finance Act. Since January 1, 2005, RATP has used component-based accounting to record all its property, plant and equipment. The assets are broken down into their component parts and each component is recognized with a separate useful life based on how often it is replaced or repaired. As of January 1, 2005, RATP adopted the amortized historical cost method. 148 Annual report 2007

73 Pursuant to CRC regulation no of the French Accounting Regulations Committee (Comité de la Réglementation Comptable), the costs of dismantling railway stock are provisioned to offset the amount capitalized for the asset components, which are depreciated over the useful lives of the trains. In accordance with generally accepted accounting principles, annual impairment testing is performed if there is an indication that an asset may be impaired. The impairment test compares the carrying amount of the asset to its present value, which is defined as the higher of fair value and value in use. RATP did not identify any indication of impairment during the period. Due to the specific characteristics of the legal and financial framework currently governing RATP s activities, future service expectations and the replacement value of its assets justify the net carrying amounts recorded on the balance sheet. Provisions for depreciation and amortization are calculated using the straight-line method based on the useful lives of the assets, as defined by RATP technicians. Since January 1, 2007, company cars have been depreciated over a five-year rather than an eight-year period. Commercial and advertising space is depreciated over its useful life, which is five years, rather than being fully amortized when the related expense is incurred. These changes did not have a material effect on the financial statements for financial year The depreciation periods for RATP s main assets are provided in the tables below: USEFUL LIFE Buildings Building shell and brickwork 70 to 100 years Building fixtures and fittings 6 to 30 years Railway infrastructure Tunnels, stations and access ways 35 to 140 years Fittings for stations and access ways 15 to 40 years Tracks 10 to 50 years Conductors, traction power supply for the metro system 5 to 50 years Catenary systems for the regional railway network (RER) and trams 15 to 50 years Track signalling and assisted driving systems Automated train operating system 5 to 35 years Automated driving system 15 to 30 years Track signalling 10 to 40 years Rolling stock Rolling stock (rail) 20 to 40 years Rolling stock (bus) 4 to 10 years Company cars 5 years Plant and equipment, fixtures and fittings Elevators, escalators and moving walkways 10 to 40 years Automatic gates, passenger turnstiles 10 to 20 years Equipment to print, deliver and stamp tickets 5 to 10 years Telecom equipment and alarms Electrical installations Transformers Ventilation and air evacuation equipment Air conditioning systems Sound and lighting equipment Equipment and tooling Other equipment and furniture USEFUL LIFE 5 to 15 years 5 to 30 years 10 to 100 years 15 to 30 years 5 to 10 years 10 to 30 years 5 to 30 years 3 to 15 years Spare parts Spare parts are measured at unit cost or weighed average cost per unit if managed by a computerized maintenance management system. Depreciation of spare parts is calculated on the basis of the depreciation period of the associated assets Leased assets Leased assets (see note 3.12) are recorded as non-current assets on RATP s balance sheet. The assets held under the Swedish lease (see note 3.12) are recorded as long-term deposits rather than non-current assets. The net present value of the payments received is recorded over the term of the leases (see note 5.21a) Financial assets The gross value of financial assets comprises the purchase price and the directly attributable acquisition costs. RATP includes the conveyance stamp duties, fees, commission and other taxes in the acquisition cost. The fair value of investments held by RATP is determined based on the net equity of the subsidiary, or for subsidiaries that hold investments themselves, based on the consolidated net equity of the sub-group and on the earnings outlook of the subsidiary or subgroup. If the fair value of the investments is lower than the net carrying amount, a provision for impairment is recorded (see breakdown of provisions in note 5.3) Inventories All inventories are recognised at the lower of cost (including related acquisition expenses) and net realizable value. Inventories are calculated at weighted average cost (see detailed breakdown of provisions in table 5.4) Accounts receivable Receivables are recorded at face value. An allowance for uncollectible accounts equal to the full amount of the receivable is recorded if there is collection risk (see detailed breakdown of provisions in table 5.3) Bond redemption premiums The cost of bond redemption premiums is spread on a straight-line basis over the term of the bonds. However, if early repayment is decided before the date of the financial statements, the expense is recorded in full. 149

74 2.1.8 Equity The contra-account entitled Reserve for assets made available to RATP essentially represents the residual value as of January 1, 1949 when RATP was created of the assets provided for use by RATP at that time, which were recorded on the balance sheet as of December 31, The revaluation surplus recorded under equity results from the revaluation performed in 1963 on the basis of 1959 data, which amounted to 8.6 million, and the revaluation of non-depreciable assets performed in 1978 on the basis of 1976 data for million (see note 5.8). RATP was formed under the act of March 21, 1948, but no capital was transferred to the entity at that time. In 1986, the public authorities allocated RATP capital of million. Pursuant to the legal provisions governing RATP s operations, gains and losses resulting from the sale of property are recorded directly in reserves, with a separation between the assets made available to RATP and those internally developed by RATP. These reserves may be used to fund the acquisition of new assets, under the terms agreed with the supervisory authorities. Income from investment grants is recognised on the basis of the depreciation schedule of the associated assets, with the exception of grants received for purchasing land, of which one tenth is recognised as income per financial year. Regulated provisions relate to the revaluation of the depreciable assets performed in 1978 on the basis of 1976 data. They are transferred to income as the associated assets are written off. (See breakdown of changes in equity, table 5.7.) Debt and hedging instruments Borrowings are recorded on the balance sheet at their redemption value in euros. Currency transactions Balances denominated in foreign currencies are converted at the yearend exchange rate, with the exception of those that are fully hedged by currency swaps. Fully hedged operations, particularly those concerning debt denominated in foreign currencies, are presented at the hedged rate. If at the date of the financial statements the exchange rate impacts the amounts previously recorded in euros, adjustments are recorded under balance sheet liabilities if they reflect unrealized currency translation gains and under assets if they reflect unrealized currency translation losses. A foreign exchange contingency provision is recognized when unrealized currency translation losses are recorded. Derivative financial instruments RATP uses derivative financial instruments to manage its exposure to changes in interest rates, exchange rates and commodity prices (interest rate and commodity swaps and options and currency swaps). Almost all the derivative instruments qualify for hedge accounting and fully back debt and fuel consumption. The income and expense arising from hedging instruments is systematically recorded in profit and loss when collected or incurred. The difference between the interest receivable and the interest payable on swaps, caps and floors, and the premiums and net payments associated with these transactions, are recorded as an adjustment to interest expense over the term of the instruments. Unrealized gains and losses arising from hedges on future purchases of diesel fuel (budgeted) are deferred and reported in the income statement when the hedged transaction is settled Trade payables Prepayments to suppliers are reported under balance sheet assets. They are provisioned if their fair value falls below their carrying amount. 2.2 Income statement Revenue generated by the contract with the Île-de-France public transport authority (STIF) Revenue generated by the contract originally entered into on July 12, 2000 with the STIF and renewed on January 19, 2004 for the period from 2004 to the end of 2007, comprised: Income included in RATP s reported revenue: direct revenue from users of transport services; compensation for the difference between the actual price paid by passengers and the contractually agreed price of services, by ticket type; commissions on sales generated over the network; service quality bonus or surcharge to encourage RATP to improve its service quality. Income not included in RATP s reported revenue: standard contribution from the State set contractually for the period. This contribution covers the operating expenses that cannot be allocated to contractually agreed services Grants to cover the provision of unprofitable services Pursuant to article 8 6 of decree of January 7, 1959 concerning the Paris regional transport system, RATP receives grants from the local authorities to cover the cost of providing unprofitable public transport services. Details of the revenue generated per business sector are provided in note 5.9 and by type of transport service in note Income used to offset depreciation expenses This item reflects income from investment grants and special revaluation provisions. 150 Annual report 2007

75 2.2.4 Payroll and payroll-related costs Since 1999, RATP has accounted separately for its transport service business and its social security services. The dual accounting system is based on: for its social security service obligations, income statements for each type of risk covered (health, industrial accidents, unemployment, family allowances); employer social security contributions comparable with those applicable to common law social security systems. The system as a whole is known as the Social Security Accounting System. Presentation of payroll costs in the individual financial statements In order to facilitate the understanding and comparison of RATP s income statement with income statements prepared by other transport companies, the payroll costs related to the transport business have been presented in the same way as they are for common law companies, with two separate lines, one reflecting Wages and salaries and the other Payroll-related costs. RATP s social security service obligations are reported in a single line entitled Net cost of RATP employee benefit plan. Further details on RATP s social security service obligations are provided in the table in note The social security services are presented in the same way as for other social security entities as shown: the origin and amount of resources, in particular in terms of the employer s contribution; the amount of benefits paid to plan members; compensation involving other social security funds and entities; management costs. Retirement benefit obligations have not been managed as part of RATP s social security services since the creation of the pension fund in Main characteristics of the social security accounts Employer contributions The resources in the social security accounts mainly comprise the employer contributions recorded as Payroll-related costs in RATP s income statement. In terms of health insurance, as employee contributions have been replaced by the CSG tax, which is paid to URSSAF, RATP receives a contribution to its health insurance fund from the CSG tax collected. The amount received is set by a government order published in the French Official Gazette. Benefits Benefits provided by RATP include: benefits in kind, such as the reimbursement of medical and hospital costs, medical tests and pharmaceuticals, and the services rendered by RATP s healthcare center (Espace Santé); financial benefits, such as wages and salaries paid to employees on sick leave (daily indemnities), lump sums paid upon death in service, work-related accident and disability pensions, family allowances. Health insurance and family allowances under the State social security system RATP has provided health insurance and family allowances since 1972 under the terms of the State social security system. In compliance with its agreement with the State, referred to as the bilateral compensation system, RATP pays contributions to the State health insurance funds (CNAM and CNAF) and the insurance funds reimburse RATP for benefits provided (healthcare benefits in kind only). The arrangements and amounts paid by RATP are set by decree, and the transfers to RATP are governed by the terms and conditions of the Social Security Code. Demographic compensation between systems In 1974, as part of its social policy, the State set up a compensation system to offset the differences in supply and demand between the various local social security systems in France, which had arisen due to demographic differences. The compensation system provides coverage for RATP s health insurance services Extraordinary income and expense Under the line item Extraordinary income and expense, RATP recognizes the items that meet the definition of extraordinary given in the national chart of accounts, and items that are classified as non-recurring, insofar as they are infrequent, unforeseeable and not part of RATP s ordinary business activities. The breakdown of ordinary income and expense is provided in table OTHER INFORMATION 3.1 Maturities of receivables and payables (see note 5.13) 3.2 Receivables and payables (see note 5.14) 3.3 Related parties (see note 5.15) 3.4 Trade receivables and payables (see note 5.15) 3.5 Average number of employees (see note 5.16) 3.6 Compensation of Directors and Executive Officers (see note 5.17) 3.7 Subsidiaries and investments Note 5-18 provides information on the financial position of companies in which RATP holds a minimum 20% stake or shares with a gross value above 1.5 million. 151

76 3.8 Consolidation RATP prepares consolidated financial statements. 3.9 Economic interest groups (see note 5.19) 3.10 Off-balance sheet commitments (see note 5.20) 3.11 Asbestos The plan to eliminate friable asbestos required by the decree of February 7, 1996, has almost been completed. In financial terms, only minor immaterial operations remain outstanding. All non-friable asbestos (covered asbestos or material containing asbestos) will gradually be removed as maintenance work is carried out on plant and equipment. As precise information on the plant and equipment containing asbestos is not available, it is not yet possible to determine the asbestos elimination plan beyond a six month timeframe. Consequently, no provisions were recorded for this purpose in the 2007 financial statements. In 2007, the expenses incurred for asbestos removal amounted to 3 million. RATP also complies with the new obligations set forth by the decree of July 13, 2001, requiring it to take regular measures to control dust accumulation. An internal study has been performed to investigate asbestos-related illnesses among employees and assess the financial impact on the Company. All risks arising from cases already declared or which have been brought to court have been provisioned. Although it is not possible to predict the financial impact of future litigation, RATP believes that the provision of 4.3 million recorded in the balance sheet as at December 31, 2007, is adequate and reflects the best estimate of the financial risk borne by the Company Leases and lease-purchase contracts The detailed impact of lease transactions on the financial statements is shown in note 5.21a. Leaseholds RATP enters into a number of leaseholds, whereby it grants a right of use to its assets enabling foreign investors, particularly those from the United States, to assume economic ownership of the assets and thus amortize the assets and benefit from significant tax breaks. A leasehold transaction is composed of the main lease granted by RATP and a sublease enabling RATP to retain the right of use of the asset. RATP also has an early buyout option (EBO), enabling it to unwind the arrangement before the term of the main lease. Under French generally accepted accounting principles, a lease arrangement is not recognized as a sale during the term of the EBO. The tax advantage gained by the foreign investor is shared with RATP. The overall profit generated on each transaction is included in the down payment received when the contracts are signed. It is immediately used to reduce RATP s debt, and is accounted for on a straight-line basis over the term of the lease as extraordinary income. All associated costs, subleases payments, interest and principal are recorded in a single entry under extraordinary income and expense, in accordance with accounting principles on defeasance transactions. In 2007, RATP terminated four leasehold contracts before term, generating income of 5.8 million. Since 2007, to clarify the balance sheet, leasehold transactions that effect RATP s asset and liability accounts have been reported as a separate line item under balance sheet assets and liabilities. The impact on the account balances is presented in the following tables: 12/31/ /31/2006 ASSETS GROSS LEASE GROSS LESS LEASE GROSS LEASE GROSS LESS LEASE Financial assets 480,834 1, , ,321 1, ,568 State and local authority receivables 316,921 33, , ,812 31, ,481 Other receivables 4,433,716 4,381,991 51,725 4,666,857 4,613,540 48,987 Marketable securities 304,251 22, , ,006 22, ,536 Prepaid expenses 161,106 98,644 62,462 59,539 3,887 55,652 TOTAL IMPACT ON ASSETS 5,696,828 4,538,028 1,158,800 5,653,535 4,672, ,554 12/31/ /31/2006 LIABILITIES GROSS LEASE GROSS LESS LEASE GROSS LEASE GROSS LESS LEASE Provisions for expenses 2,838,458 2,616, ,592 2,870,340 2,723, ,000 Other loans and borrowings 417,255 1, , ,231 1, ,346 Tax and social security payable 866, , , , , ,157 Other payables 346, , , , , ,960 Prepaid income 1,569,028 1,445, ,253 1,656,450 1,522, ,812 TOTAL IMPACT ON LIABILITIES 6,037,259 4,618,627 1,418,632 6,066,601 4,770,324 1,296, Annual report 2007

77 Swedish lease The Swedish lease is effective in the period prior to equipment delivery. The investor pays the supplier the full value of the equipment. RATP makes swapped deposits to cover the lease payments and enters into a buyback option on the equipment. RATP records a profit on the difference between the deposits and the value of the equipment. The lease payments are recognised as operating expenses, and the interest and deposits are recognised as financial income. The net present value is recorded as extraordinary income. Net income is impacted on the one hand by the deferred profit relating to net present value and also by the theoretical asset depreciation charge if the assets are recorded in RATP s balance sheet. Lease-purchase contracts RATP s lease-purchase contracts are presented in note 5.21b Long-term employee benefits Employee benefits are measured using actuarial calculations based on assumptions regarding demographic variables (mortality, employee turnover, etc.) and economic variables (discount rate, salary increase rate, etc.). The discount rate used rose from 4% as at December 31, 2006, to 5% as at December 31, The rate includes a 2% adjustment for inflation. RATP s long-term employee obligations include those relating to: occupational disease and work-related accidents. RATP insures its employees in service and retired employees for occupational disease and accidents. The benefits paid compensate employees for the permanent physical or psychological damage incurred due to the accident or disease and any other negative effects on the employee s career. Only the benefits paid to employees in service are classified as long-term benefits. A provision of 15 million was recorded for such benefits during the period; seniority benefits: 18.1 million; phased retirement: 22.6 million; unemployment benefit: 11.3 million; long-term sick leave: 6.8 million. 4. INFORMATION ON EXPOSURE TO MARKET RISK 4.1 Introductory remark RATP uses financial instruments to manage its exposure to interest rate risk. Its financial instruments are used to back both debt and investments. In accordance with recommended accounting practice, RATP only records accrued interest on derivatives. 4.2 Exposure to interest rate risk Interest rate risk on borrowings and investments is essentially managed using swaps and options to modulate positions in line with changing market values. Interest rate swaps at December 31, 2007 Interest rate swaps by maturity in millions of euros 12/31/ /31/2006 Swaps on long-term borrowings Maturity < 1 year 0 0 Maturity 1 year to 5 years 50 0 Maturity > 5 years Currency swaps on long-term borrowings Maturity < 1 year Maturity 1 year to 5 years 0 15 Maturity > 5 years EONIA swaps on short-term borrowings Maturity < 1 year TOTAL SWAPS 1,525 1,567 Swaps listed by type in millions of euros 12/31/ /31/2006 A Swaps on long-term borrowings 1. Fixed to floating rate swaps (excluding currency swaps) Positions on short-term interest rates Positions on long-term rates Floating to fixed rate swaps (excluding currency swaps) Position on short-term interest rates Position on long-term interest rates Other swaps Basis swaps 0 Fixed to fixed swaps Currency swaps B Swaps on short-term borrowings EONIA swaps-receive TOTAL SWAPS 1,525 1,567 The tables above do not take into account the notional amount of the asset swaps on the 1999 leasehold transaction for which there is no interest rate risk. 153

78 Breakdown of bonds and commercial paper as at December 31, 2007, in millions of euros, excluding the corporate savings plan: EXCLUDING DERIVATIVE INSTRUMENTS INCLUDING DERIVATIVE INSTRUMENTS Bonds Fixed rate 3,651 3,553 Floating rate 0 98 Commercial paper Fixed rate Floating rate 0 0 As at December 31, 2007, 2.68% of the fixed-rate bonds (excluding those relating to the corporate savings scheme) were converted to floating rates using derivatives. Floating rate positions (bonds, commercial paper and derivatives) now represent 2.5% of aggregate debt. In addition, 97.7% of the borrowings contracted in the Île-de-France region ( 288 million) are at floating rates. Options at December 31, 2007 Euro options (long-term borrowings) in millions of euros: Maturity < 1 year 0 Maturity 1 year to 5 years 50 Maturity > 5 years 246 TOTAL 296 Euro options (long-term borrowings) in millions of euros: Sell Cap 98 Buy Cap 50 Sell Floor 98 Buy Floor 0 Sell Swaption 50 Buy Swaption 0 Automatic call 0 TOTAL 296 Hedging transactions at the end of December 2007 generated financial income of 11.4 million comprising 0.3 million for ongoing transactions and 11.7 million relating to the deferred recognition of cash payments and premiums, particularly on positions previously purchased and unwound before the end of December Valuation of the portfolio of derivative financial instruments The fair value of derivative financial instruments corresponds to the amounts which would be paid ( ) or received (+) to terminate the transactions. The fair values of derivatives have been determined on the basis of the listed prices provided by banks and financial institutions. INSTRUMENTS FAIR VALUE AT DECEMBER 31, 2007 IN MILLIONS OF EUROS Swaps (excluding currency swaps) 5.51 Currency swaps Derivative contracts 1.91 Options TOTAL NB : The exchange rate part of the currency swaps is offset by the exchange rate part of the underlying bonds. RATP is not exposed to exchange rate risk. Marked-to-Mark instruments at December 31, 2007 (excluding exchange rate part of currency swaps) amounted to 3.6 million. Marked-to-market instruments are not reported on the balance sheet. 4.3 Exposure to exchange rate risk RATP issues loans in foreign currencies. The resulting exposure to exchange rate risk is systematically hedged using currency swaps. The table below shows the currency swaps in place at December 31, DEBT ISSUED CURRENCY SWAPS AMOUNT IN PAY RECEIVE MILLIONS OF FOREIGN AMOUNT IN MILLIONS OF AMOUNT IN CURRENCY CURRENCY FOREIGN CURRENCY CURRENCY MILLIONS OF EUROS 1,010 CHF 1,010 CHF Exposure to commodity price risk RATP hedges against increases in commodity prices for diesel fuel and also against increases in the dollar against the euro. In 2007, RATP set up one vanilla swap and two collars to fix the price of the ULSD 50 ppm CARGOES CIF NWE MEAN. As at December 31, 2007, financial gains on the hedges amounted to 1.8 million. Floating rate debt at December 31, 2007 As at December 31, 2007, floating rate positions represented 2.68% of bonds (excluding commercial paper and corporate savings scheme) and amounted to 97.8 million. Outstanding commercial paper, excluding the portion relating to the corporate savings scheme, amounted to 270 million. On a comparable basis, a 1% rise in short-term interest rates would increase financial expense by 0.9 million. 154 Annual report 2007

79 5. ADDITIONAL INFORMATION ON THE BALANCE SHEET AND INCOME STATEMENT Note 5.1 Assets 156 Note 5.2 Depreciation and amortization 157 Note 5.3 Provisions 158 Note 5.4 Inventories 159 Note 5.5 Prepaid income and expenses 159 Note 5.6 Loan transaction expenses 159 Note 5.7 Changes in equity 159 Note 5.8 Revaluation surplus 160 Note 5.9 Breakdown of revenue 161 Note 5.10 Income from passenger transport services 161 Note 5.11 RATP social security income statement 162 Note 5.12 Breakdown of extraordinary income 163 Note 5.13a Maturities of receivables 163 Note 5.13b Maturities of payables 164 Note 5.13c Net debt 165 Note 5.14 Receivables and payables 165 Note 5.15 Other items included in several balance sheet accounts 166 Note 5.16a Average number of employees 166 Note 5.16b Employee training rights 166 Note 5.17 Compensation paid to Directors and Executives Officers 167 Note 5.18 Subsidiaries and investments 167 Note 5.19 Economic interest groups 168 Note 5.20 Off-balance sheet commitments 169 Note 5.21a Lease transactions and subleases 170 Note 5.21b Lease purchase commitments

80 Note 5.1 Assets at December 31, 2007 POSITION AND CHANGES A B C D E GROSS VALUE TRANSFERS GROSS VALUE AT INCREASE BETWEEN DECREASE AT YEAR-END (1) 12/31/2006 LINE ITEMS Intangible assets Research and development costs 2,358 94,303 2,332 94,329 Lease rights 2,626 2,626 Other Software in use 243,649 28,663 6, ,295 Software in process 33,645 24,892 25,057 33,480 TOTAL 282,278 24,892 97,909 8, ,730 Property, plant and equipment Land 390, ,906 Buildings 7,787, , ,533 7,860,589 Buildings on land not owned 79,575 12,661 92,236 Technical plant, equipment and industrial tooling 3,905, ,413 27,952 4,124,963 Transport equipment 4,316,380 8, ,768 53,138 4,409,585 Other 191,974 17,354 6, ,446 Work in progress 1,276, , ,974 1,309,024 TOTAL 17,947, ,654 97, ,635 18,388,749 Financial assets Investments 116, , ,345 Receivables from investments 16,161 40,100 49,623 6,638 Other investments Loans (2) 98,107 2,634 4,675 96,066 Other (deposits and guarantees) 102,695 20,729 5, ,530 TOTAL 333, , , ,579 TOTAL ASSETS 18,563,486 1,029, ,186 19,265,058 (1) Gross value at year-end is calculated as follows: ( A + B + C + D = E ). (2) The net change in loans comprises: 1,654 Employee loans (accrued interest 129) 386 Other loans 2, Annual report 2007

81 Note 5.2 Depreciation and amortization at December 31, 2007 SITUATION AND MOVEMENTS A B C D ACCUMULATED AMORTIZATION INCREASE IN DECREASE IN ACCUMULATED AMORTIZATION AND DEPRECIATION DEPRECIATION AND DEPRECIATION AND AND DEPRECIATION AT BEGINNING OF YEAR AMORTIZATION AMORTIZATION AT YEAR-END (1) Intangible assets Research and development costs 2,354 3,014 2,332 3,036 Lease rights Other 168,549 32,181 5, ,037 TOTAL 171,737 35,272 8, ,984 Property, plant and equipment Buildings 3,173, , ,640 3,156,337 Buildings on land not owned 69,568 5,678 75,246 Technical plant, equipment and industrial tooling 2,513, ,827 26,650 2,683,224 Transport equipment 2,639, ,442 51,373 2,787,038 Other 124,943 18,803 6, ,209 TOTAL 8,521, , ,200 8,839,054 Deferred operating expenses Bond issue costs 8,483 1, ,833 TOTAL 8,483 1, ,833 Bond redemption premiums 24,358 2, ,853 TOTAL DEPRECIATION AND AMORTIZATION 8,725, , ,606 9,075,724 (1) Total depreciation and amortization at year-end is calculated as follows: (A + B + C = D). The share of assets allocated to social security service obligations Software (other intangible assets) 640 Building 99 Buildings on land not owned 0 Industrial equipment and tooling 1,839 Transport equipment 0 Other 243 2,

82 Note 5.3 Provisions at December 31, 2007 POSITIONS AND CHANGES A B C D E PROVISIONS AT CHANGE OF INCREASE IN DECREASE: PROVISIONS AT BEGINNING OF ACCOUNTING PROVISIONS REVERSALS DURING YEAR YEAR-END YEAR METHOD USED ADJUSTMENTS (A + B + C = D) Regulated provisions (special revaluation provision) 461,681 10, ,423 TOTAL 1 461, , ,423 Provisions for contingent liabilities Provisions for contingencies Provisions for litigation 10,334 17,368 1,411 2,442 23,849 Provisions for work-related accidents 18,311 22,062 17,523 22,850 Provisions for operating or financial liabilities 5,906 1, ,989 Provisions for extraordinary liabilities 8, ,362 1,234 4,385 43,475 41,474 22,994 3,882 58,073 Provisions for expenses Other provisions for expenses 147, ,139 21, , , ,139 21, ,520 TOTAL 2 190, ,613 44,527 3, ,593 Provisions for impairment Intangible assets 4, ,504 Financial assets 14,146 3, ,529 Inventories 29,581 4,168 2,827 1,087 29,835 Trade receivables and related accounts 13,951 1, ,337 Marketable securities 0 0 Other 4, ,194 TOTAL 3 66, ,108 3,769 1,796 71,399 TOTAL 719, ,721 58,554 5, ,415 (1) Appropriation: Op.: operating activities 695, ,173 55,153 4, ,501 Fin.: financing activities 14, , ,529 Ex: extraordinary activities 8, ,362 1,234 4, , ,721 58,555 5, , Annual report 2007

83 Note 5.4 Inventories (gross) at December 31, /31/ /31/2006 Commodities and supplies 157, ,707 Work in progress 3,009 1,944 TOTAL 160, ,651 Note 5.5 Prepaid income and expenses at December 31, /31/ /31/2006 EXPENSES INCOME EXPENSES INCOME Operating activities 4,500 34,738 5,221 39,852 Financing activities 55,138 77,194 47,388 81,877 Extraordinary activities 2,825 11,321 3,043 12,083 TOTAL 62, ,253 55, ,812 Note 5.6 Loan transaction expenses at December 31, 2007 NET AMOUNT AT INCREASES DECREASES OR NET AMOUNT BEGINNING OF YEAR ADJUSTMENTS AT YEAR-END Loan transaction expenses (1) 7,093 6,506 4,355 9,244 TOTAL 7,093 6,506 4,355 9,244 (1) Loan transaction expenses are amortized over the term of the loans. However, if early repayment is decided before the date of the financial statements, the expenses are fully amortized. Note 5.7 Changes in equity at December 31, /31/2006 INCREASES REDUCTIONS 12/31/2007 Reserve for assets made available to RATP 250, ,701 Revaluation surplus (3) 231, ,141 Capital endowment 283, ,367 Statutory reserves 184, ,419 Reserves from sale of assets constructed by RATP 42, ,026 General reserve 57,926 57,926 Retained earnings (1)(2) 821,451 41, ,544 Net income 41,093 83,665 41,093 83,665 Investment grants 2,366, , ,711 2,433,137 Regulated provisions (3) 461,682 10, ,424 TOTAL 4,741, , ,132 4,881,350 (1) Net income from 2006 was allocated to retained earnings. (2) See part 1 in the notes. (3) Details of the revaluation surplus are provided in note

84 Note 5.8 Revaluation surplus at December 31, Revaluation in 1976 POSITION AND CHANGES DIFFERENCES AT DIFFERENCES DIFFERENCES BEGINNING OF YEAR DURING YEAR AT YEAR-END GROSS VALUE ACCUMULATED RETIREMENT DEPRECIATION, GROSS VALUE ACCUMULATED OF AMORTIZATION AND OF ASSETS AMORTIZATION AND OF AMORTIZATION AND ASSETS PROVISIONS PROVISIONS ASSETS PROVISIONS Property, plant and equipment Land 222, ,568 0 Buildings 1,226, ,815 13,511 4,709 1,212, ,106 Technical plant, equipment and industrial tooling 80,659 79,673 1, ,574 78,764 Transport equipment 76,316 70,736 2,305 1,025 74,011 69,711 Other ,606, ,224 16,971 6,643 1,589, ,581 Financial assets Investments TOTAL 1,606, ,224 16,971 6,643 1,589, ,581 Net total 674, Revaluation of 1963 (base 1959) Revaluation surplus 8,557 TOTAL REVALUATION SURPLUS 682, Annual report 2007

85 Note 5.9 Breakdown of revenue at December 31, /31/ /31/2006 Transport revenue (excluding Orlyval) 1,862,172 1,826,210 Tariff compensation 1,435,484 1,345,836 Bandwidth (risks shared with STIF) Excluding VAT 141, ,759 Additional contribution 103,520 44,907 Revenue from transport services (excluding VAT) 3,259,631 3,112,194 Sales incentives 114, ,913 Service quality bonus 7,591 7,429 Other transport income 22,849 35,216 1 Transport revenue (excluding VAT) 3,404, ,752 2 Income from transport-related business (excluding VAT) 95,578 92,863 3 Penalties 18,666 22,711 4 Income from other services 139, ,878 Subtotal (1) 3,658,820 3,519,204 5 Other ordinary income (including capitalized production) 41,365 36,791 TOTAL REVENUE EXCLUDING VAT 3,700,185 3,555,995 (1) Revenue is measured on the basis of the principles set out in paragraph Note 5.10 Income from passenger transport services (VAT included) at December 31, 2007 INCOME IN THOUSANDS OF EUROS 12/31/2007 % 12/31/2006 RATP network: métro, RER and autobus (including VAT) 1,964, % 1,926,652 Monthly, weekly and annual Orange travel passes 1,138, % 1,112,002 Other subscriptions (police, Émeraude, Améthyste) 102, % 99,413 Tickets 641, % 641,036 Flat-rate travel cards (Mobilis, youth tickets) 27, % 25,407 Unsubsidized tickets (Paris-visite, Orlybus, Roissybus) 52, % 47,064 Weekly travel passes, subsidized school subscriptions, fire department subscription and night buses 1, % 1,730 Free services for Olympiades station opening % 0 Special ticket rates (VAT included) 22,381 2,221 Transport services and leases (VAT included) 5,117 4,127 Income/long-term subscriptions (VAT included) (administrative expenses) 4,264 3,680 Orlyval income (VAT included) 21,530 20,813 Transport service income from previous years (VAT included) 1, ALL NETWORKS 1,975,110 1,953,

86 Note 5.11 RATP social security income statement 12/31/ /31/2006 Health insurance plan Employer contribution 213, ,543 Transfers received from CSG tax collected (ACOSS) and employee contributions 97,984 94,406 CNSA contribution (for disabled transport users) 1,250 1,016 Benefits in kind 220, ,605 Cash benefits (paid sick leave, death benefits) 57,859 56,146 Healthcare services 9,154 9,570 Special plan expense (including general compensation) 1,225 1,953 Management expense (net) 18,338 17,610 Bilateral compensation with State health insurance fund (CNAM) Contributions paid to the RATP special scheme 257, ,290 Allowance for management expense 10,678 12,742 Reimbursement of benefits in kind from the national social security scheme 218, ,007 Net income/loss 22,787 12,460 Work-related accident insurance plan Employer contributions 25,251 23,649 Special scheme expense (incl. contributions to the work accident fund) Benefits in kind and pensions 11,365 10,583 Cash benefits (paid sick leave) 8,763 9,001 Management expense (net) 3,398 3,571 Net income/loss Unemployment insurance plan Employer contribution 7,088 7,023 Benefits paid 4,974 6,740 Management expense (net) Net income/loss 1, Family allowance plan Employer contribution 66,304 65,070 Statutory benefits 16,910 17,972 Other benefits Management expense (net) 1,627 1,573 Bilateral compensation with State family fund (CNAF) Contributions paid to the RATP special scheme 67,072 65,055 Allowance for management expense 2,484 2,409 Reimbursement of statutory benefits (national social security scheme) 16,910 17,972 Net income/loss RATP SOCIAL SECURITY, NET LOSS 20,521 12, Annual report 2007

87 Note 5.12 Breakdown of extraordinary income at December 31, 2007 EXTRAORDINARY INCOME 14,407 Proceeds from disposal of property, plant and equipment, and intangible assets 3,691 Transfer to inventories of equipment recovered 3,927 Asbestos-related disease benefits paid and provisions reversed (net) 706 Asbestos removal work 3,007 Leases (1) 16,305 Swedish lease: NPV (1) 125 Other 42 (1) See table 21a. Note 5.13a Maturities of receivables GROSS LIQUIDITY OF ASSETS AMOUNT (1) MATURITIES RECEIVABLES DUE WITHIN 1 YEAR MORE THAN 1 YEAR Receivables relating to non-current assets Receivables from investments 6, ,491 Loans (2) (3) 96,066 4,536 91,530 Other 117, , ,234 5, ,960 Receivables relating to current assets Trade receivables and related accounts 129, ,169 State and local authority receivables 282, ,443 Other 51,725 48,371 3, , ,983 3,354 Financial assets Marketable securities (4) 281, ,781 0 Cash and cash equivalents 27,666 27, , ,447 0 Prepaid expenses 62,463 8,975 53,488 TOTAL 1,055, , ,802 (1) Gross amount reported on the balance sheet before deduction of provisions for impairment, which amounted to 31,517 thousand. (2) Employee loans granted during period: 450 thousand. Employee loans repaid during period: 1, 974 thousand. (3) Loans granted by RATP to employees and housing management entities, under the 1% mandatory employer contribution. Such loans bear lower interest than the usual market rates for loans of similar maturities. (4) With accrued interest of 680 thousand. 163

88 Note 5.13b Maturities of payables at December 2007 GROSS MATURITY DEBT AMOUNT LESS THAN 1 YEAR BETWEEN 1 AND 5 YEARS MORE THAN 5 YEARS Loans and borrowings Île-de-France loans (1) (4) 287,988 18,404 59, ,019 (1) (4) Bonds On eurozone financial markets 3,021, ,407, ,000 On international financial markets 629, ,365 Tick épargne loans 221, ,318 61,090 30,242 Borrowings from and liabilities to financial institutions Loans (5) 71,747 2,599 4,726 64,422 Bank accounts (creditor) 40,260 40,260 Postal cheques Other loans and borrowings (2) 415, , ,942 Accrued interest (3) 58,578 58,578 4,747,389 1,435,522 1,532,876 1,778,990 Accounts payable Trade payables and related accounts 191, ,784 Tax and social security liabilities 550, ,773 Payables to suppliers of assets and related accounts 240, ,310 Other payables 107, ,594 1,090,461 1,090, Prepaid income 123,253 48,706 10,820 63,727 Foreign curency translation gain 1,411 1,411 TOTAL 5,962,514 2,574,689 1,545,107 1,842,717 (1) Loans contracted during period (in thousands): 342,118 Loans repaid during period (in thousands): 205,538 (2) Including: commercial paper: 270,000 Tick épargne commercial paper: 130,318 (3) Including: accrued interest on IDF loans: 1,582 accrued interest on eurozone financial market: 47,229 accrued interest on international financial markets: 3,518 accrued interest on Tick épargne loans: 6,239 (4) Including: loans at fixed interest rates: 3,657,681 loans at floating interest rates: 502, Annual report 2007

89 Note 5.13c Net debt at December 31, /31/ /31/2006 Financial assets (A) 309, ,569 Marketable securities (1)(3) 281, ,514 Cash and cash equivalents (1) 27,666 34,055 Foreign currency translation losses 1,171 0 Loans and borrowings (B) 4,603,607 4,474,389 Île-de-France loan 287, ,979 Loan on financial markets 3,651,039 3,535,892 Tick épargne loan 221, ,265 Borrowings from and liabilities to financial institutions 41,201 32,995 Commercial paper (2) 400, ,060 Foreign currency translation gains 1, NET DEBT (B A) 4,293,669 4,200,820 (1) Excluding financial assets allocated to lease transactions (see details in note 5.21a). (2) See (2) below table 5.13b. (3) Excluding accrued interest. Note 5.14 Receivables and payables at December 31, /31/ /31/2006 Receivables Financial assets 1,732 1,888 Trade receivables and related accounts 41,237 39,429 State and local authority receivables (1) 226, ,094 Other receivables 197, ,623 Marketable securities Cash and cash equivalents TOTAL 467, ,057 Payables Île-de-France loan 1,582 1,441 Bonds on French financial market 47,229 50,345 Bonds on international financial markets (2) 3,518 2,173 Private bonds 6,238 5,586 Loans and borrowings from financial institutions Trade payables and related accounts 153, ,187 Tax and social security liabilities 490, ,537 Payables to suppliers of assets and related accounts 123, ,390 Other payables 21,202 21,339 TOTAL 846, ,031 (1) Including investment grants due but not yet received. (2) In Swiss francs. 165

90 Note 5.15 Other items included in several balance sheet accounts at December 31, 2007 Commercial paper Assets: POSITION AT 12/31/ /31/2006 Trade receivables and related accounts 2 15 TOTAL 2 15 Liabilities: Trade payables and related accounts 0 0 Payables for assets and related accounts 0 0 TOTAL 0 0 Related parties (1) Assets: Financial assets 284, ,307 Trade receivables and related accounts 22,657 15,733 Other receivables 3,457 3,454 TOTAL 310, ,494 Liabilities: Loans and borrowings Trade payables and related accounts 2,399 2,274 Payables for assets and related accounts 27,176 0 Other payables 1,224 1,402 TOTAL 30,811 3,693 (1) Ratp Developpement, Sqybus, Promo Métro, Logis Transports, SEDP, SADM, Telcite, RATP International, Systra, Naxos, Mobicité, SLT, TVO, Orlyval, Flexcité, STBC, M Dina Bus, Flexicité 94, EM Services, Société Billetique Monétique Services, Cars Perrier, Equival, TP2A, Cars Giraux, Xelis. Note 5.16a Average number of employees 12/31/ /31/2006 CHANGES IN FIGURES % Average number of employees 43,809 43, % Breakdown by category Executives + managers 10,949 11, % Other employees 32,860 32, % Breakdown by contract Indefinite 43,266 43, % Fixed-term contract % Note 5.16b Employee training rights In accordance with the provisions of French act no of May 4, 2004 on vocational training, RATP grants its employees a minimum twenty hours individual training per calendar year, which can be accumulated for a six year period. If the rights are not used at the end of the six year period, they are capped at one hundred and twenty hours. At December 31, 2007, employees had accrued 2,442,942 hours of training rights. The number of unused accrued training hours amounted to 2,441,440 hours. 166 Annual report 2007

91 Note 5.17 Compensation paid to Directors and Executive Officers (in thousands of euros) for the year ended December 31, Members of the Board of Directors 29 2 Executive Officers (aggregate amount of the ten highest salaries) 1,906 1,727 Note 5.18 Subsidiaries and investments SHARE ADDITIONAL % INTEREST CARRYING AMOUNT LOANS AND GUARANTEES REVENUE PROVISIONAL DIVIDENDS CAPITAL PAID-IN HELD BY OF SHARES ADVANCES GIVEN EXCLUDING RESULT AT RECEIVED CAPITAL RATP GRANTED BY BY RATP VAT AT DECEMBER BY RATP GROSS NET RATP AND DECEMBER 31, 2007 IN 2007 NOT YET 31, 2007 POSITION AT DECEMBER 31, 2007 REPAID (1) 1 Subsidiaries SEDP 2, square Félix-Nadar Vincennes Cedex (Siren ) , , RATP Développement Société de participation pour l exploitation 54, quai de la Rapée (Siren ) 98,000 12,780 95,41 93,499 93,457 2,241 1,000 13,402 4,290 0 Logis Transports 158, rue de Bagnolet Paris (Siren ) 40 37, ,772 1,695 43,488 3,477 0 Promo Métro 43-45, rue du Gouverneur- Général-Félix-Éboué Issy-les-Moulineaux (Siren ) 910 2, ,619 2,619 19, RATP International 54, quai de la Rapée Paris Cedex 12 (Siren ) 19, ,721 19,343 5, ,125 0 Telcité 1, avenue Montaigne Noisy-le-Grand (Siren ) 1,525 12, ,524 1, ,892 2,570 1,800 Financière Transdev 6, place Abel-Gance Boulogne-Billancourt (Siren ) 147,025 6,768 49,88 74,570 74, ,213 2,934 BMS 25, rue de Ponthieu Paris (Siren ) 20,995 16, , ,096 AI AI 2 Other investments (1) Including accrued interest. NA = not available. 167

92 Note 5.19 Economic interest groups POSITION AT December 31, 2006 RATP % SHARE OF OVERHEADS Eurailtest 75, avenue Parmentier Paris Cedex 11 (Siren ) 10% Sectans 29, rue Lebrun Paris (Siren ) 50% Comutitres 185, rue de Bercy Paris (Siren ) 33.33% EMIF 54, quai de la Rapée Paris (Siren ) 50% Ville et Transports In liquidation Quai 54 In liquidation Tothème 54 In liquidation Armonia In liquidation Microbus In liquidation 168 Annual report 2007

93 Note 5.20 Off-balance sheet commitments at December 31, 2007 Commitments given 1 Subsidiaries and investments 12/31/ /31/2006 Guarantee for LOGIS TRANSPORTS 1,157 1,695 Guarantee for SEDP Guarantee backing a security given by RATP Développement 4,000 1,000 2 Not-for-profit entities Guarantee for IAPR Guarantee for Compagnons du Voyage Employee benefits Employee loans: guarantee granted for SBE 13,691 15,440 Employees: Low income housing guarantees 326, ,658 Retirement benefits 197, ,458 Lump sum payment upon death in service 12,035 12,613 Life insurance for retired employees 34,171 42,406 Pensions for work-related illnesses and accidents to retired employees and those with vested rights 115, ,980 Guaranteed interest rate under the corporate savings plan for retired employees 33,468 34,265 Early retirement 11,577 15,004 4 Financial transactions Interest rate swaps on bonds (1) 1,525,365 1,259,769 Interest rate swaps on commercial paper 0 305,131 Caps 98, ,000 Floors 98, ,000 Sales of swaptions 50,000 50,000 Lease-transactions: subleases of trains 1,837,942 2,162,510 Other commitments given 1,500 2,600 TOTAL 4,361,695 5,106,638 Commitments received Interest rate swaps (1) 1,525,365 1,259,769 Interest rate swaps on commercial paper 0 305,131 Caps 50, ,000 Buyback options on bonds 50,000 50,000 Bank credit letters 57,162 58,307 Bank guarantees 128, ,518 TOTAL 1,811,036 1,944,725 * NC = not calculated. (1) RATP has opted to account for swaps in the same way as for traditional loans and borrowings. The breakdown of swaps by maturity is as follows: < 1 YEAR 1 TO 5 YEARS > 5 YEARS TOTAL INTEREST RATE SWAPS (on bonds and commercial paper) 0 90,000 1,475,365 1,565,365 The discount rate used to calculate post-retirement benefits was 5% at December 31, The discount rate includes 2% for the inflation rate. The rate used as at December 31, 2006 was 4%. 169

94 Note 5-21a Lease transactions and subleases I American lease transactions Impact on cash position (in thousands of euros) LEASES Income from main lease 560, , , , , ,943 Sublease expenses 526, , , , , ,049 RATP NET PROFIT 33,474 30,274 23,610 40,788 39,217 7,894 As the leases are effective over variable periods, the profit generated is recorded as extraordinary income over the terms of the leases. No impact on cash position since Impact on net income for 2007 (in thousands of euros) Leases generated income of 16,743 thousand in 2007: LEASE SIGNATURE DATE TOTAL TOTAL IN 2006 Income from main lease (1) 72,540 41, ,048 28,699 20,723 21, , ,123 Interest paid on subleases (2) 23,946 14,835 9,622 67,112 35,120 17, , ,343 Provision reversal (3) 250, ,290 16, ,012 33,219 Prepaid interest 3,246 1,969 3,360 8,575 5,379 Sublease expenses (4) 35,285 16,029 24,365 91,577 29,789 26, , ,927 Income from other leases 1, ,572 Early buyout option 91,494 38, ,675 Expenses 38,768 24, , Excess lease payments 116,964 71, ,568 Provision for termination costs (3) 65,917 40, ,138 18,316 23,617 14, , ,862 Exchange rate Interest NET INCOME 3,755 1,444 5,201 3,023 2, ,743 10,892 (1) The main lease payment is received in full upon signature of the lease. The annual instalment is recorded in the income statement as a balancing entry against prepaid income. (2) Interest received or to be received on sublease payments to financial institutions (deposits). (3) Income from the termination indemnity and excess lease payments is spread on a straight-line basis over the term of the leases. (4) Subleases paid or payable by financial institutions. Sublease expenses, income from the main lease and interest are recorded under extraordinary income and expenses. The provision for final termination cost is recorded under extraordinary expenses. II Swedish lease Impact on cash position (in thousands of euros) LEASES Swedish lease tranche 1 completed in Swedish lease tranche 1 completed in Swedish lease tranche 2 completed in ,444 RATP NET PROFIT 620 1,562 Impact on 2007 net income 12/31/ /31/2006 Spread of NPV (2) See note Annual report 2007

95 Note 5-21b Lease purchase commitments at December 31, 2007 RATP has two lease-purchase contracts with floating rate payments. They are covered by fixed-rate hedging instruments. The figures presented below include the hedges. LEASE AGGREGATE VALUE TERM RESIDUAL VALUE Cours de Vincennes 5, Philidor Maraîchers 25, ,373 LEASED ASSETS INITIAL COST DEPRECIATION NET VALUE BALANCE SHEET ITEMS YEAR (1) ACCUMULATED (1) Land Buildings 30,644 1,472 7,198 23,446 Plant, property and equipment Other property and equipment Work in progress TOTAL 30,644 1,472 7,198 23,446 (1) Depreciation for the period and the accumulated depreciation that would have been recorded, had RATP owned these assets. LEASE COMMITMENTS INSTALMENTS PAID PAYMENTS OUTSTANDING RESIDUAL PURCHASE BALANCE SHEET ITEMS YEAR ACCRUED < 1 YEAR 1 TO 5 YEARS > 5 YEARS PRICE Land Buildings 2,425 12,026 2,435 9,835 33,299 2,373 Plant, equipment and tooling Other property and equipment Work in progress TOTAL 2,425 12,026 2,435 9,835 33,299 2,

96 Attestation of the persons responsible for the annual report We, the undersigned, hereby attest that to the best of our knowledge the financial statements have been prepared in accordance with generally accepted accounting principles and give a true and fair view of the assets, liabilities, financial position and results of operations of the company and all the companies consolidated, as well as a description of the main risks and uncertainties facing them. Chairman and Chief Executive Officer Chief Financial Officer Pierre Mongin Alain Le Duc 172 Annual report 2007