71Management reportConsolidated nancial statementsNotes on the consolidated nancial statements 131 Statutory auditors’ reportsCONSOLIDATED FINANCIAL STATEMENTS 132LSF REPORT - 2005 145TOTAL STORES 149COMMERCIAL STATISTICS 151ADDRESSES OF PRINCIPAL SUBSIDIARIES FINANCIAL REPORTIn the pages that follow, the Carrefour Group Financial Report presents the Group’s results for the twoscal years 2004 and 2005. It comprises the following: the Group Management Report presents the activity and maingures for 2005, for the Group in its entirety and for each of the geo- graphical operating regions: France, Europe (excluding France), Latin America and Asia. It ends by focusing on recent developments and the 2006 objectives for the Group, as presented at the time of the publication of the consolidated earnings on March 9, 2006; the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements present all summary statements and comments on the Group’snancial situation, including both the parent company and its subsidiaries; the report by the Chairman of the Supervisory Board on corporate governance and internal control procedures; nally the store network and commercial statistics, summarizing ten years’ worth of trends in the number of consolidated stores in each country and sundry statistics, in particular as regards sales areas and the number of branded stores. Annual Report 2005Financial report - Consolidatednancial statements MANAGEMENT REPORT ACCOUNTING PRINCIPLES The Carrefour Group consolidatednancial statements for the scal year 2005 have been drawn up in accordance with IAS/IFRS international accounting standards. The comparativenancial statements are the 2004 statements restated in accordance with IFRS standards, which were pre- sented in the update to the 2004 reference document dated August 24, 2005. The accounting principles applied in 2005 are comparable to those applied in the 2004 statements restated in accordance with IFRS standards, with the exception of the two following points: the Group decided in 2005 to make a change in its estimate of its buildings depreciation period, raising it from 20 to 40 years. Information that has been restated to take into consideration build- ings depreciation over 40 years is therefore shown for 2004. since the early application of the standards relating tonancial instruments (IAS 32 and 39) had not been adopted on January 1, 2004, they are being applied for therst time in 2005 without a comparison with 2004. For the purposes of comparison, the aggregates noted below are based on the 2004nancial statements restated in accordance with IFRS standards and taking into consideration buildings depre- ciation over 40 years. ACTIVITY – RESULTS Carrefour had established the following 4 priorities for 2005: improving the price competitiveness of hypermarkets in France: continuing the investments made on pricing by targeting them more effectively to improve price competitiveness; winning market share in France; improving profitability and return on capital employed (ROCE) for international operations: consolidating strong market positions in Europe, Asia and Latin America through the rationalization and optimization of the asset portfolio; establishing the basis for faster pro table growth as from 2006 by creating 1 million m2 in 2005 and by preparing the foundations for a programme to accelerate openings as from 2006. Thus, in 2005: Carrefour maintained a constant and determined commercial policy, in particular in France, where for therst time since 2000 the Group won grocery market share over the whole year; Carrefour’s commitment to maintaining low prices, especially in France, is partly re ected in the change in the Group’s pro t margin, which has fallen by 0.2%; Carrefour pursued its programme of selling off insuf ciently pro t- able or non-strategic assets (sale of Japan, sale of Mexico, sale of food service in France (Prodirest), sale of the Czech Republic and of Slovakia, closures or sales of supermarkets in Spain and Brazil and the sale of Puntocash in Spain). At the same time, the Group has strengthened its position in key markets, thanks to tactical acquisitions (Greece, Poland, Turkey) and franchising agreements (France, Italy); the level of EBIT against sales in our countries progressed, thanks to improved operating performance and the sale of insuf ciently pro table operations: in 2005, no country was any longer showing a de cit and 8 countries out of 19 recorded pro ts of more than 4% of sales; the preparation for accelerated growth by creating additional sales area is re ected in the creation of almost 1.5 million m2 of additional surface area, both by store openings and extensions and acquisitions. Annualgures (in millions of euros) December 2005 December 2004 restated Dep / 40 years Var.% 2005/2004 restated Dep / 40 years Net sales74,49772,6682.5% Activity contribution3,1753,271(2.9%) Net income from recurring operations – Group share1,8071,7861.2% Net income from discontinued operations – Group share(371) (85) Net income – Group share1,4361,701(15.6%) Net sales (in millions of euros) December 2005 December 2004 restated Dep / 40 years Var.%Var.% at constant exchange rate France35,57735,723(0.4%)(0.4%) Europe (excl. France)28,10227,1233.6% 2.4% Latin America 5,0754,7217.5% (6.4%) Asia5,7435,10112.6% 9.1% Total74,49772,6682.5% 0.9% CONSOLIDATED FINANCIAL STATEMENTSAnnual Report 2005 Net sales were 74,497 million euros, up 0.9% on 2004 sales, at a constant published exchange rate. After the positive impact of the exchange rate, sales increased by 2.5%. Excluding the sales of Japan, Mexico, the Czech Republic and Slovakia, of the food service business in France (Prodirest), of supermarkets in Spain and Brazil and of Puntocash in Spain, sales would have risen by 6.0%, and by 4.3% on a constant exchange rate basis. Breakdown of net sales by business 2005 20042003 Hypermarkets59%58%59% Supermarkets18%18%18% Hard Discount stores9%8%7% Other14%16%16% TOTAL100% 100%100% Breakdown of net sales by geographic region 2005 20042003 France48%49%51% Europe (excl. France)38%37%36% Latin America7%7%7% Asia7%7%6% TOTAL100% 100%100% ACTIVITY CONTRIBUTION Activity contribution was 3,175 million euros and represented 4.2% of our sales as against 4.4% in 2004 (earnings restated as a result of the change in buildings depreciation periods over 40 years). It fell by 2.9% compared to 2004. (in millions of euros) December 2005 December 2004 restated Dep / 40 years Var.%Var.% at constant exchange rate France1,7132,039(16.0%)(16.0%) Europe (excl. France)1,14599615.0% 14.2% Latin America1339047.8% 22.2% Asia18414626.0%24.2% Total3,1753,271(2.9%)(4.0%) Breakdown of Activity contribution by geographic region 2005 2004 France54%63% Europe (excl. France)36%30% Latin America4%3% Asia6%4% TOTAL100% 100% DEPRECIATION AND PROVISIONS Depreciation and provisions totalled 1,474 million euros. They represented 2.0% of sales. NON-CURRENT INCOME AND EXPENSES Non-current income and expenses represented a net expense of 21 million euros. This included: costs of restructuring or closing sites in the amount of 204 million euros; an expense of 31 million euros relating to stock options; capital gains or losses from sales representing income of 188 million euros (mainly from sales of shopping malls in France, Italy, Turkey and Greece); oth