-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UYrpw1g0dN3+B5OemC4PBxkrGRECF/yV3ul5pWdxq6LXWLXRhcHDU1mY8lizDjQ4 DMM5FORDqutA48vUsaFueQ== 0000950123-99-004303.txt : 19990507 0000950123-99-004303.hdr.sgml : 19990507 ACCESSION NUMBER: 0000950123-99-004303 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990506 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PETROFINA CENTRAL INDEX KEY: 0001045182 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-56115 FILM NUMBER: 99612648 BUSINESS ADDRESS: STREET 1: 52 RUE DE LLNDUSTRIE STREET 2: B-1040 BRUSSELS CITY: BELGIUM STATE: C9 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TOTAL CENTRAL INDEX KEY: 0000879764 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 24 COURS MICHELET STREET 2: LA DEFENSE 92800 CITY: PUTEAUX FRANCE STATE: I0 ZIP: 00000 BUSINESS PHONE: 2129693300 MAIL ADDRESS: STREET 1: PROSKAUER ROSE GOETZ & MENDELSOHN LLP STREET 2: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036-8299 SC 14D1 1 SCHEDULE 14D-1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 14D-1 (RULE 14D-100) TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __) PETROFINA (Name of Subject Company) TOTAL (Bidder) SHARES NOMINAL WITH NO PAR VALUE AMERICAN DEPOSITARY SHARES WARRANTS (Title of Class of Securities) 716485206 (CUSIP Number of Class of Securities) ALAIN-MARC IRISSOU GENERAL COUNSEL TOTAL 24, COURS MICHELET LA DEFENSE 10 92800 PUTEAUX, FRANCE (011-33-1) 41-34-40-00 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) CALCULATION OF FILING FEE Transaction Valuation* Amount of Filing Fee - -------------------------------------------------------------------------- US$450,990,497 US$90,199.00 * Pursuant to Rule 457(f)(1), 457(c) and 457(i) under the Securities Act and solely for the purpose of calculating the registration fee, the transaction value was calculated on the basis of (x) in the case of the Total shares, the average of the high and low sale price per American depositary share of PetroFina on April 29, 1999 and (y) in the case of the Total warrants, the average of the high and low sale price per warrant of April 29, 1999, plus additional consideration of $46.94 per American depositary share of Total payable in connection with the exercise of the Total warrants registered in connection with the exchange offer. /[Check/ Check box if any part of the fee is offset as provided by Rule Mark] 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: $125,376.00 Filing Party: Total -------------------------------------------------------------------------- Form of Registration No.: 333-10154 Date Filed: May 6, 1999 Note. The remainder of this cover page is only to be completed if this Schedule 14D-1 (or amendment thereto) is being filed, inter alia, to satisfy the reporting requirements of Section 13(d) of the Securities Act of 1934. See General Instructions D, E, and F to Schedule 14D-1. The Schedule 13D previously filed by Total with respect to PetroFina is hereby amended to incorporate in Item 4 thereof the material appearing under the captions "Total Fina Group Following the Exchange Offer" and "Terms and Conditions of the Exchange Offer" in the Prospectus which is Exhibit (a)(1) to this Schedule 14D-1. Page 1 of 8 2 CUSIP NO. 716485206 14D-1 PAGE 2 OF 8 PAGES 1 NAMES OF REPORTING PERSONS IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Total - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) OR 2(f) / / - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION France - -------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 9,614,190 - -------------------------------------------------------------------------------- 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) / / EXCLUDES CERTAIN SHARES* - -------------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 41.0% - -------------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON* OO (societe anonyme) - -------------------------------------------------------------------------------- Page 2 of 8 3 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is PetroFina, a Belgian societe anonyme ("PetroFina"). PetroFina's principal offices are located at 52, rue de l'Industrie, B-1040 Brussels, Belgium. (b) This statement relates to the exchange offer by Total, a French societe anonyme ("Total") to exchange (i) 9 shares of Total for each 2 properly tendered shares of PetroFina held by a person in the United States; (ii) 9 American depositary shares of Total ("Total ADSs"), each representing one-half of one share of Total, for each 10 properly tendered American depositary shares of PetroFina ("PetroFina ADSs"), each representing one-tenth of one share of PetroFina, held by a person in the United States; and (iii) 81 warrants of Total each granting its holder the right to purchase one Total ADS at a price of $46.94 (subject to adjustment) for each 100 properly tendered warrants of PetroFina, held by a person in the United States, each granting its holder the right to purchase nine-tenths of one petroFina ADS at a price of $42.25 (subject to adjustment), upon the terms and subject to the conditions set forth in the Prospectus / US Offer to Exchange dated May 6, 1999 (the "Prospectus") forming a part of Amendment No. 1 to the Registration Statement on Form F-4 (No. 333-10154) filed by Total with the Securities and Exchange Commission on May 6, 1999, and the relevant Letter of Transmittal, Form of Acceptance, Certificated Share Delivery Instruction Form and Notice of Guaranteed Delivery, copies of which are attached hereto as Exhibits (a)(1), (a)(2), (a)(3), (a)(4), and (a)(5) (which are herein collectively referred to as the "US Offer"). The US Offer is being made for 343,750 shares, including shares held directly or in the form of American depositary shares, and 4,443,179 warrants. (c) The information set forth under "Market Prices for Securities -- PetroFina Shares, PetroFina American depositary shares and PetroFina warrants" in the Prospectus is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(c) This Statement is filed by Total, a societe anonyme organized under the laws of the Republic of France, and its principal office is at Tour Total, 24, cours Michelet, La Defense 10, 92800 Puteaux, France. The information set forth under "Summary--The Companies--Total" in the Prospectus is herein incorporated by reference. (d) Indicated below are the material positions held during the past five years for the Total directors.
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS DIRECTORS Thierry Desmarest................... CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF TOTAL (1993 - PRESENT), CHIEF EXECUTIVE OFFICER OF TOTAL EXPLORATION PRODUCTION (1989 - 1995) FRANCOIS-XAVIER ORTOLI.............. HONORARY CHAIRMAN OF TOTAL (1990 - PRESENT) JEROME MONOD........................ CHAIRMAN OF THE SUPERVISORY BOARD OF SUEZ LYONNAISE DES EAUX (1997 - PRESENT), CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF LYONNAISE DES EAUX (1980 - 1997)
Page 3 of 8 4 NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS Michel Francois-Poncet.............. Chairman of the Supervisory Board of Paribas (1990 - Present) Serge Tchuruk....................... Chairman and Chief Executive Officer of Alcatel (1995 - Present), Chairman and Chief Executive Officer of Total (1990 - 1995) Jean Syrota......................... Chairman and Chief Executive Officer of Compagnie Generale Des Matieres Nucleaires (Cogema) (1988 - Present) Antoine Jeancourt-Galignani......... Chairman of Assurances Generales De France (1994 - Present) Lord Alexander of Weedon, Q.C. Chairman and Chief Executive Officer of Natwest Group (1989 - Present) Professor Bertrand Jacquillat....... Co-founder and Chairman and Chief Executive Officer of Associes En Finance (1991 - Present) Daniel Bouton....................... Chairman and Chief Executive Officer of Societe Generale (1997 - Present), Chief Executive Officer of Societe Generale (1993 - 1997) Bruno Ribeyron-Montmartin........... Secretary of Total Outre-mer (Before 1994 - Present) Didier Houssin...................... Representing the French State (Before 1994 - Present) Director of Hydrocarbon Department Ministry of Economy, Finance and Industry Junior Minister's Office of Industry Baron Frere......................... Chairman and Managing Director of Bruxelles Lambert S.a. (Before 1994 - Present) Thierry De Rudder................... Managing Director of Groupe Bruxelles Lambert S.a. (Before 1994 - Present) Honorable Paul Desmarais............ Chief Executive Officer of Power Corporation of Canada (Before 1994 - Present)
(e)-(f) During the last five years, to the best knowledge of Total, neither it nor any of the persons listed above has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgement, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violations of such laws. (g) Each individual noted above under item 2(d) is a citizen of France except for Lord Alexander of Weedon, who is a citizen of the United Kingdom, Baron Frere and Thierry De Rudder, who are citizens of Belgium and Honorable Paul Desmarais, who is a citizen of Canada. Page 4 of 8 5 ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. This information is set forth under "The Transaction -- The Background of the Transaction", "-- The Belgian Exchange Offer", "Total Fina Group Following the Exchange Offer -- PetroFina Corporate Structure and Management", "The Contribution Transaction" and "Management -- Board of Directors of Total Fina S.A." in the Prospectus, is herein incorporated by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) Total is offering to exchange a maximum of 1,546,875 shares of Total which may be held either directly or in the form of American depositary shares, and 3,598,975 warrants of Total, for, respectively, 343,750 shares of PetroFina which are held either directly or in the form of PetroFina American depositary shares, and 4,443,179 warrants of PetroFina, in the U.S. exchange offer as described under "Terms and Conditions of the Exchange Offer -- Terms of the Exchange Offer", "-- Fractional Shares, American depositary shares and Warrants" and "-- VVPR-Strip" in the Prospectus which is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a) The information set forth under "The Transaction -- The Background of the Transaction", "-- The Reasons for the Transaction", "The Contribution Transaction", "Possible Future Results of Total Fina Group" in the Prospectus, is herein incorporated by reference. (b) The information set forth under "Total Fina Group following the Exchange Offer -- Implementation of the Synergies", "-- Total Fina Group Asset Disposals" in the Prospectus, is incorporated herein by reference. (c) The information set forth under "Total Fina Group Following the Exchange Offer -- PetroFina Corporate Structure and Management" in the Prospectus, is herein incorporated by reference. (d) The information is set forth under "Total Fina Group Following the Exchange Offer -- Dividend Policy" in the Prospectus is herein incorporated by reference. (e) The information is set forth under "Total Fina Group Following the Exchange Offer -- PetroFina Corporate Structure and Management in the Prospectus is herein incorporated by reference. (f)-(g) The information is set forth under "Total Fina Group Following the Exchange Offer -- Delisting of PetroFina American Depositary Shares and Warrants" and "Effect of Offer on Market for Shares" in the Prospectus is herein incorporated by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) Other than as described under "The Transaction -- Opinions on the Exchange Offer -- Opinion of PetroFina Board of Directors", "The Contribution Transaction -- The Contribution Agreement" in the Prospectus, which is incorporated herein by reference, neither Total nor, to the best of Total's knowledge, any of the persons named in Item 2 of this schedule and no associate and majority-owned subsidiary of such persons own any securities of PetroFina. Page 5 of 8 6 (b) To Total's best knowledge, no transaction in securities of PetroFina have been effected during the past 60 days by Total, and to Total's best knowledge, by the persons named in Item 2 or by any executive officer, director or subsidiary of such persons. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth under "The Contribution Transaction -- Resale of Shares" and "-- Standstill Undertaking" in the Prospectus is herein incorporated by reference. Except as disclosed above and under Item 3, there are no contracts, arrangements, understandings, or relationships between Total or any of the persons required to be named in Item 2 of this schedule and any person with respect to any securities of PetroFina. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. No person and class of persons have been employed, retained or are to be compensated by Total or by any person on Total's behalf to make solicitations or recommendation in connection with the exchange offer. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth under Item 18 "Financial Statements" on page 56, and Item 19 "Financial Statements and Exhibits -- Financial Statements" on page 56 of the Amendment No. 1 to Form 20-F filed with the Securities and Exchange Commission under file number 1-10888 ("Form 20-F") is incorporated herein by reference for the purpose of this Schedule 14D-1. Copies of the Total Form 20-F may be obtained through the Securities and Exchange Commission or by requesting them in writing or by telephone at the following address: MacKenzie Partners, Inc., 156 Fifth Avenue, New York, New York 10010, telephone (212) 929-5500 (collect), or (1-800) 322-2885 (toll free). ITEM 10. ADDITIONAL INFORMATION. (a) None. (b)-(c) The information set forth under "Regulatory Matters -- United States Antitrust", "-- European Union", and "-- Other Laws" in the Prospectus is incorporated herein by reference. (d) Not applicable. (e) There are no pending legal proceedings relating to the U.S. offer. (f) The information set forth in the Prospectus, the Letters of Transmittal, the Form of Acceptance, the Certificated Share Delivery Instruction Form, and the Notice of Guaranteed Delivery, copies of which are attached as Exhibits (a)(1), (a)(2), (a)(3), (a)(4) and (a)(5), respectively is incorporated herein by reference in its entirety. Page 6 of 8 7 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Prospectus, dated May 6, 1999.* (a)(2) Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(3) Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(4) Certificated Share Delivery Instruction Form. (a)(5) Notice of Guaranteed Delivery. (a)(6) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(7) Press Release dated May 5, 1999. (b) None. (c) None. (d)(1) Legal opinion of Jones, Day, Reavis & Pogue relating to certain U.S., Belgian and French tax matters.* (e)(1) See Exhibit (a)(1) above. (e)(2) Items 18 and 19 of the Total Form 20-F for 1998, found on page 57 of such document and pages F-1 to F-71 to S-2 referenced herein. (f) None. - --------------------------- * Filed as part of Amendment No. 1 to Total's Form F-4 Registration Statement filed with the Commission on May 6, 1999 (Reg. No. 333-10154). Page 7 of 8 8 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete, and correct. /s/ Charles de Bollardiere --------------------------------------- (Signature) Charles de Bollardiere Treasurer May 6, 1999 Page 8 of 8 EX-99.A.2 2 LETTER OF TRANSMITTAL 1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the exchange offer or about the action you should take, you are recommended to seek your own personal financial advice immediately from an appropriately authorized independent professional advisor. If you have sold or otherwise transferred all your registered holdings of PetroFina ADSs, please pass this document and the accompanying Prospectus dated May 6, 1999 (the "Prospectus"), as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. However, the exchange offer is not being made directly or indirectly in Canada, or any jurisdiction where prohibited by applicable law and such documents should not be distributed, forwarded or transmitted into or from Canada, or any jurisdiction where prohibited by applicable law by any means whatsoever including without limitation mail, facsimile, transmission, telex or telephone. - -------------------------------------------------------------------------------- LETTER OF TRANSMITTAL TO ACCEPT THE OFFER TO EXCHANGE 10 AMERICAN DEPOSITARY SHARES OF PETROFINA EACH REPRESENTING ONE TENTH OF ONE SHARE OF PETROFINA, WITHOUT NOMINAL VALUE, FOR 9 AMERICAN DEPOSITARY SHARES OF TOTAL, EACH REPRESENTING ONE HALF OF ONE SHARE OF TOTAL, NOMINAL VALUE FRF 50 EACH. TOTAL THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 A.M. (NEW YORK CITY TIME), ON FRIDAY, JUNE 4, 1999, UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, ALL PETROFINA SECURITIES VALIDLY TENDERED AND NOT WITHDRAWN WILL BE PURCHASED. HOLDERS OF PETROFINA ADSS WILL HAVE WITHDRAWAL RIGHTS DURING THE EXCHANGE OFFER PERIOD TO WHICH THEY TENDERED, BUT NOT DURING ANY OTHER EXCHANGE OFFER PERIOD. The US Exchange Agent for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Courier: (For Eligible Institutions Tender & Exchange Department Only) Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station For Confirmation Telephone: Receive and Deliver Window New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. 2 - -------------------------------------------------------------------------------------------------------------- DESCRIPTION OF PETROFINA ADSs TENDERED - -------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OF PETROFINA ADSs (PLEASE FILL IN, IF BLANK, EXACTLY PETROFINA ADS CERTIFICATE(S) AND AS NAME(S) APPEAR(S) ON ADS PETROFINA ADSs TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) - -------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF PETROFINA PETROFINA ADSs NUMBER OF ADS CERTIFICATE EVIDENCED BY SHARE PETROFINA ADSs NUMBER(S)* CERTIFICATE(S)* TENDERED** --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total PetroFina ADSs......................... - -------------------------------------------------------------------------------------------------------------- * Need not be completed by holders delivering PetroFina ADSs by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all PetroFina ADSs evidenced by each ADS Certificate delivered to the US Exchange Agent are being tendered hereby. See Instruction 4. - --------------------------------------------------------------------------------------------------------------
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW ACCEPTANCE OF THE EXCHANGE OFFER IN RESPECT OF PETROFINA SHARES (EXCEPT INSOFAR AS THEY ARE REPRESENTED BY PETROFINA ADSs EVIDENCED BY PETROFINA ADRs) CANNOT BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold PetroFina Shares that are not represented by PetroFina ADSs, you may obtain a Certificated Share Delivery Instructions Form (the "Instruction Form") from Mackenzie Partners Inc. as the Information Agent. See Instruction 12 of this Letter of Transmittal. Your bank or broker can assist you in completing this form. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus and this Letter of Transmittal may be directed to MacKenzie Partners, Inc. as the Information Agent at its address and telephone number indicated below. Delivery of a Letter of Transmittal, PetroFina ADRs evidencing PetroFina ADSs (or book-entry transfer of such PetroFina ADSs evidenced by PetroFina ADRs) and any other required documents to the US Depositary by PetroFina ADS holders will be deemed an acceptance of the exchange offer by such holder with respect to such PetroFina ADSs evidenced by PetroFina ADRs subject to the terms and conditions set out in the Prospectus and this Letter of Transmittal. If delivery of PetroFina ADSs is to be made by book-entry transfer to an account maintained by the US Exchange Agent at The Depository Trust Company pursuant to the procedures for book-entry transfer set forth in "Terms and Conditions of the Exchange Offer -- Book-Entry Transfer" in the Prospectus, then either this Letter of Transmittal or an Agent's Message (as defined below) should be used. The term "Agent's Message" means a message, transmitted by The Depository Trust Company and received by the US Exchange Agent and forming a part of a Book-Entry Confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the PetroFina ADSs which are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal. [ ] CHECK HERE IF TENDERED PETROFINA ADSs ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE US EXCHANGE AGENT AT THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE DEPOSITORY TRUST COMPANY MAY DELIVER PETROFINA ADSs EVIDENCED BY PETROFINA ADRs BY BOOK-ENTRY TRANSFER): 2 3 Name of Tendering Institution: - -------------------------------------------------------------------------------- DTC Account Number: ---------------------------------------------------------------------------- Transaction Code Number: ---------------------------------------------------------------------------- Occupation: ---------------------------------------------------------------------------- If a holder of PetroFina ADSs wishes to accept the exchange offer and PetroFina ADRs evidencing such PetroFina ADSs are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the US Exchange Agent prior to the expiration of the Initial Offer Period or any Subsequent Offer Period, as the case may be, such holder's acceptance of the exchange offer may nevertheless be effected using the guaranteed delivery procedure set out under "Terms and Conditions of the Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. See Instruction 2 of this Letter of Transmittal. HOWEVER, RECEIPT OF A NOTICE OF GUARANTEED DELIVERY WILL NOT BE TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE CONDITION, UNLESS PETROFINA ADRs EVIDENCING PETROFINA ADSs REFERRED TO IN THE NOTICE OF GUARANTEED DELIVERY ARE RECEIVED BY THE US EXCHANGE AGENT PRIOR TO THE EXPIRATION OF THE GUARANTEE PERIOD. [ ] CHECK HERE IF THE ADRs REPRESENTING TENDERED PETROFINA ADSs ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE US EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Holder(s): ---------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: -------------------------------------------------------- Window Ticket No. (if any): ---------------------------------------------------------------------------- Name of Institution that Guaranteed Delivery: --------------------------------------------------------------- For ADSs delivered by Book-Entry Transfer, complete the following: DTC Account Number: ---------------------------------------------------------------------------- Transaction Code Number: - -------------------------------------------------------------------------------- NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY [ ] I hereby waive the right to receive the cash net proceeds from the sale of the VVPR-Strips. 3 4 Ladies and Gentlemen: The undersigned acknowledges that such person has received and reviewed the Prospectus, dated May 6, 1999 (the "Prospectus"), of Total, a societe anonyme organized under the laws of the Republic of France ("Total"), and this Letter of Transmittal, which together with any amendments or supplements hereto or thereto constitute the offer of Total (collectively, the "Exchange Offer") to exchange PetroFina securities for Total securities. Unless otherwise defined in this Letter of Transmittal, capitalized terms used herein have the meaning set forth in the Prospectus. The undersigned hereby instructs the US Exchange Agent to accept the exchange offer on behalf of the undersigned with respect to the PetroFina ADSs evidenced by PetroFina ADRs (which expression in this Letter of Transmittal shall, except where the context otherwise requires, be deemed to include, without limitation, the PetroFina shares represented thereby) specified in the box entitled "Description of PetroFina ADSs Tendered," subject to the terms and conditions of the exchange offer, by informing Total in writing that the exchange offer has been so accepted. The undersigned hereby acknowledges that delivery of this Letter of Transmittal, the PetroFina ADRs evidencing tendered PetroFina ADSs (or book-entry transfer of such PetroFina ADSs evidenced by PetroFina ADRs) and any other required documents to the US Exchange Agent by a holder of PetroFina ADSs will be deemed (without any further action by the US Exchange Agent) to constitute acceptance of the exchange offer by such holder in respect of such holder's PetroFina ADSs, subject to the terms and conditions of the exchange offer. The undersigned understands that acceptance of the exchange offer by the undersigned pursuant to the procedures described herein and in the instructions hereto, subject to the withdrawal rights described in the Prospectus, will constitute a binding agreement between the undersigned and Total upon the terms and subject to the conditions of the exchange offer. IF ACCEPTANCE HAS BEEN MADE IN RESPECT OF THE PETROFINA ADSs, THEN A SEPARATE ACCEPTANCE IN RESPECT OF THE PETROFINA SHARES REPRESENTED BY SUCH PETROFINA ADSs MAY NOT BE MADE. The undersigned hereby delivers to the US Exchange Agent the above-described PetroFina ADSs evidenced by PetroFina ADRs for which the exchange offer is being accepted, in accordance with the terms and conditions of the exchange offer, receipt of which is hereby acknowledged. Upon the terms of the exchange offer (including, if the exchange offer is revised, varied, extended or renewed, the terms or conditions of any such revision, variation, extension, or renewal), and effective at the time that the condition to the exchange offer has been satisfied, fulfilled or, where permitted, waived (at which time Total will give notice thereof to the US Exchange Agent), and if he or she has not validly withdrawn his or her acceptance, the undersigned hereby sells, assigns and transfers to, or upon the order of, Total all right, title and interest in and to all PetroFina ADSs evidenced by PetroFina ADRs with respect to which the exchange offer is being accepted (and any and all PetroFina ADSs or other securities or rights issuable in respect of such PetroFina ADSs) and irrevocably constitutes and appoints the US Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned with respect to such PetroFina ADSs (and any such other PetroFina ADSs, securities or rights), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver PetroFina ADSs for such PetroFina ADSs (and any such other PetroFina ADSs, securities or rights), or accept transfer of ownership of such PetroFina ADSs (and any such other PetroFina ADSs, securities or rights) on the account books maintained by The Depository Trust Company together, in any such case, with all accompanying evidences of transfer and authenticity, to, or upon the order of, Total, and (b) receive all benefits and otherwise exercise all rights of beneficial ownership of such PetroFina ADSs (and any such other PetroFina ADSs, securities or rights), all in accordance with the terms of the exchange offer. The undersigned hereby represents and warrants that the undersigned has full power of authority to accept the exchange offer and to tender, exchange, sell, assign and transfer the PetroFina ADSs evidenced by PetroFina ADRs (and the PetroFina shares represented by such PetroFina ADSs) in respect of which the exchange offer is being accepted or deemed to be accepted (and any and all other PetroFina ADSs, securities or rights issued or issuable in respect of such PetroFina ADSs) and Total will acquire good title thereto, free from all liens, equities, charges, encumbrances and other interests and together with all rights now or hereafter 4 5 attaching thereto, including, without limitation, the right to receive and retain all dividends, interest and other distributions hereafter declared, with respect to the PetroFina Shares represented by the PetroFina ADSs. The undersigned will, upon request, execute any additional documents deemed by the US Exchange Agent or Total to be necessary or desirable to complete the sale, assignment and transfer of the PetroFina ADSs evidenced by PetroFina ADRs in respect of which the exchange offer is being accepted (and any and all other PetroFina ADSs, securities or rights). The undersigned irrevocably undertakes, represents, and warrants to and agrees with Total (so as to bind him or her, his or her personal representatives, heirs, successors and assigns) to the effect that the undersigned: (i) has not received or sent copies of the Prospectus or any related documents in, into or from Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law, and has not otherwise utilized in connection with the exchange offer, directly or indirectly, the Canadian, or the mails or any means or instrumentality (including, without limitation, facsimile transmission, telex, and telephone) of interstate or foreign commerce, or any facilities of a national securities exchange, of Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law, (ii) is accepting the exchange offer from outside Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law, and (iii) is not an agent or fiduciary acting on a nondiscretionary basis for a principal, unless such agent or fiduciary is an authorized employee of such principal or such principal has given any instructions with respect to the exchange offer from outside Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law. All authority herein conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Prospectus, this acceptance is irrevocable. Unless otherwise instructed under "Special Issuance Instructions" below, the undersigned hereby instructs the US Exchange Agent to register the Total ADSs to which the undersigned is entitled in the name(s) of the holder(s) shown above under "Description of PetroFina ADSs Tendered." Unless otherwise instructed under "Special Delivery Instructions" below, the undersigned hereby instructs the US Exchange Agent to return, or cause to be returned, any PetroFina ADRs evidencing PetroFina ADSs in respect of which the exchange offer is not being accepted or which are not exchanged (and accompanying documents, as appropriate) and/or deliver the certificates representing the Total ADSs to be delivered to the undersigned pursuant to the exchange offer to the address(es) of the registered holder(s) appearing above under "Description of PetroFina ADSs Tendered." In the case of a book-entry delivery of PetroFina ADSs evidenced by PetroFina ADRs, the undersigned hereby instructs the US Exchange Agent to credit the account maintained at The Depository Trust Company with any PetroFina ADSs in respect of which the exchange offer is not being accepted or which are not purchased. The undersigned recognizes that the US Exchange Agent will not transfer any PetroFina ADSs which are not purchased pursuant to the exchange offer from the name of the registered holder thereof to any other person. SUBJECT TO THE TERMS OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND DELIVERY OF TOTAL ADSs PURSUANT TO THE EXCHANGE OFFER SHALL NOT BE MADE, UNTIL THE PETROFINA ADRs EVIDENCING THE PETROFINA ADSs IN RESPECT OF WHICH THE EXCHANGE OFFER IS BEING ACCEPTED AND ALL OTHER REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US EXCHANGE AGENT AND THE UNDERLYING SHARES HAVE BEEN RECEIVED BY THE CUSTODIAN AS PROVIDED IN THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL. 5 6 SPECIAL ISSUANCE INSTRUCTIONS REGARDING TOTAL ADSS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Total ADSs is to be registered in the name of someone other than the undersigned. Register Total ADS in the name of: Name(s) - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (PLEASE PRINT) Address - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (INCLUDE ZIP CODE) Occupation - ------------------------------------ - ------------------------------------------------ (Employer Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the certificates representing the Total ADSs or any PetroFina ADSs not tendered or not accepted for exchange are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown in the box entitled "Description of PetroFina ADSs Tendered." Mail: [ ] Total ADS Certificate(s) to: [ ] PetroFina ADS Certificate(s) to: Name(s) - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (PLEASE PRINT) Address - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (INCLUDE ZIP CODE) - ------------------------------------------------ (Employer Identification or Social Security Number) [ ] CHECK HERE IF ANY OF THE PETROFINA ADRs REPRESENTING PETROFINA ADSs THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 11. Number of PetroFina ADSs represented by the lost, stolen or destroyed PetroFina ADSs: - -------------------------------------------------------------------------------- 6 7 IMPORTANT ALL TENDERING PETROFINA ADS HOLDERS PLEASE SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW OR, IN THE CASE OF CERTAIN FOREIGN PERSONS, SUBSTITUTE FORM W-8 BELOW) X - -------------------------------------------------------------------------------- X - -------------------------------------------------------------------------------- SIGNATURE(S) OF OWNER(S) Dated: - ------------------------------------ , 1999 (Must be signed by registered holder(s) exactly as name(s) appear(s) on PetroFina ADRs evidencing PetroFina ADSs or on a security position listing or by person(s) authorized to become registered holder(s) by endorsements, stock powers and other documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) Name(s): - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: - ------------------------------------------------------------------------------- Tax Identification or Social Security No.: - -------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) FOR USE BY ELIGIBLE INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE BELOW Signature(s) Guaranteed by an Eligible Institution: Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- (PLEASE PRINT) Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: - ------------------------------------------------------------------------------- Dated: - ------------------------------------ , 1999 7 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on the Letter of Transmittal if (a) the Letter of Transmittal is signed by the registered holder(s) of the PetroFina ADSs evidenced by PetroFina ADRs in respect of which the exchange offer is being accepted herewith and such holder(s) have not completed the box entitled " Special Delivery Instructions" or the box entitled "Special Issuance Instructions" on this Letter of Transmittal or (b) the exchange offer is being accepted in respect of such PetroFina ADSs for the account of an Eligible Institution. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the Signature Guarantee Program, or the Stock Exchange Medallion Program (an "Eligible Institution"). See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND ADSS. This Letter of Transmittal is to be completed if PetroFina ADRs evidencing PetroFina ADSs are to be forwarded herewith. PetroFina ADRs evidencing PetroFina ADSs or confirmation of a book-entry transfer of such PetroFina ADSs into the US Exchange Agent's account at The Depository Trust Company, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by this Letter of Transmittal, must be delivered to the US Exchange Agent at one of its addresses set forth herein. PetroFina ADS holders whose PetroFina ADRs are not immediately available or who cannot deliver their PetroFina ADRs and all other required documents to the US Exchange Agent or complete the procedures for book-entry transfer prior to the expiration of the Initial Offer Period or any Subsequent Offer Period, as the case may be, may accept the exchange offer with respect to their PetroFina ADSs by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set out in "Terms and Conditions of the Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus, Pursuant to the guaranteed delivery procedures: (a) acceptance must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by Total must be received by the US Exchange Agent prior to the expiration of the Initial Offer Period or any Subsequent Offer Period, as the case may be; and (c) the PetroFina ADRs evidencing the PetroFina ADSs in respect of which the exchange offer is being accepted (or, in the case of PetroFina ADSs held in book-entry form, timely confirmation of the book-entry transfer of such PetroFina ADSs into the US Exchange Agent's account at The Depository Trust Company as described in the Prospectus), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or in the case of a book-entry transfer, an Agent's Message), and any other documents required by this Letter of Transmittal, are received by the US Exchange Agent within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF PETROFINA ADSs EVIDENCED BY PETROFINA ADRs AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF PETROFINA ADSs ACCEPTING THE EXCHANGE OFFER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent acceptance will be accepted and no fractional PetroFina ADSs will be accepted. All accepting PetroFina ADS holders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their PetroFina ADSs for payment. 8 9 3. INADEQUATE SPACE. If the space provided herein is inadequate, the series numbers of the certificates and/or the number of PetroFina ADSs should be listed on a separate schedule attached hereto. 4. PARTIAL ACCEPTANCES (NOT APPLICABLE TO BOOK-ENTRY TRANSFERS). If the exchange offer is to be accepted in respect of less than all of the PetroFina ADSs evidenced by any PetroFina ADRs delivered to the US Exchange Agent herewith, fill in the number of PetroFina ADSs in respect of which the exchange offer is being accepted in the box entitled "Number of PetroFina ADSs Tendered." In such case, a new PetroFina ADR for the remainder of the PetroFina ADSs (in respect of which the exchange offer is not being accepted) represented by the old PetroFina ADR will be sent to the registered holders as promptly as practicable following the date on which the PetroFina ADSs in respect of which the exchange offer has been accepted are purchased. The exchange offer will be deemed to have been accepted in respect of all PetroFina ADSs evidenced by PetroFina ADRs delivered to the US Exchange Agent unless otherwise indicated. In the case of partial acceptances, PetroFina ADSs in respect of which the exchange offer was not accepted will not be reissued to a person other than the registered holder. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the PetroFina ADSs in respect of which the exchange offer is being accepted hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without any change whatsoever. If any of the PetroFina ADSs evidenced by PetroFina ADRs in respect of which the exchange offer is being accepted hereby are owned of record by two or more owners, all such owners must sign this Letter of Transmittal. If any of the PetroFina ADSs in respect of which the exchange offer is being accepted are registered in different names on different PetroFina ADRs, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of PetroFina ADRs. If this Letter of Transmittal or any PetroFina ADRs or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Total of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered holder(s) of the PetroFina ADSs listed and transmitted hereby, no endorsements of certificates or separate stock powers are required. Signatures on such PetroFina ADRs or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the PetroFina ADSs listed, the PetroFina ADRs must be endorsed or accompanied by appropriate stock powers signed exactly as the name(s) of the registered holder(s) appear(s) on the PetroFina ADRs evidencing such PetroFina ADSs. Signatures on such PetroFina ADRs or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Total will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale to it or its order of PetroFina ADSs evidenced by PetroFina ADRs pursuant to the exchange offer. If, however, delivery of any of the consideration payable pursuant to the exchange offer is to be made to any persons other than the registered holder(s), or if PetroFina ADSs in respect of which the exchange offer is being accepted are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holders(s) or such person(s)) payable on account of the transfer to such person will be deducted from the purchase price (or new Total Stock will be withheld) unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the PetroFina ADRs listed in this Letter of Transmittal. 9 10 7. SPECIAL DELIVERY INSTRUCTIONS. If any PetroFina ADRs evidencing PetroFina ADSs in respect of which the exchange offer is not being accepted or which are not purchased are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown in the box entitled "Description of PetroFina ADSs Tendered" on the first page of this Letter of Transmittal, or the new Total Stock is to be registered in the name of a person other than the signer of this Letter of Transmittal, the boxes labeled "Special Delivery Instructions" and/or "Special Issuance Instructions" on this Letter of Transmittal should be completed. 8. WAIVER OF CONDITIONS. Total reserves the absolute right in its sole discretion to waive the condition of the exchange offer, in whole or in part, to the extent permitted by applicable law. 9. IMPORTANT TAX INFORMATION; SUBSTITUTE FORM W-9 AND SUBSTITUTE FORM W-8. Under United States federal income tax law, a holder whose tendered PetroFina ADSs are accepted for exchange must provide the US Exchange Agent (as payor) with (i) such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below or (ii) in the case of certain exempt foreign persons, the Substitute Form W-8 below. If the US Exchange Agent is not provided with the correct TIN or an adequate basis for exemption, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS") in addition to backup withholding in an amount equal to 31% of the gross proceeds resulting from the exchange offer. Certain holders (including, among others, all corporations and certain foreign individuals) are exempt from these backup withholding requirements. Certain foreign persons can qualify for this exemption by submitting a Form W-8 or Substitute Form W-8 below, signed under penalties of perjury and attesting to such person's exempt status. If backup withholding applies, the US Exchange Agent is required to withhold 31% of the gross proceeds payable to a stockholder or other payee pursuant to the exchange offer. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in overpayment of taxes, a refund may be obtained from the IRS. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Box 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Even if the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the US Exchange Agent will withhold 31% of all reportable payments made prior to the time a properly certified TIN is provided to the US Exchange Agent. Such amounts will be refunded to such holder if a properly certified TIN is provided to the US Exchange Agent within 60 days. If the ADR(s) representing PetroFina ADSs are in more than one name or are not in the name of the actual owner, consult the enclosed guidelines for information on which TIN to report. Holders of PetroFina ADSs who acquired shares at different times may have different tax bases in their PetroFina ADSs and may wish to consult with their own tax advisors as to the possibility of identifying the specific PetroFina ADSs surrendered in the exchange offer in order to establish the basis of the Total Shares received in exchange therefor. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE US EXCHANGE AGENT, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE US EXCHANGE AGENT, PRIOR TO THE EXCHANGE OFFER EXPIRATION DATE. STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 OR SUBSTITUTE FORM W-8 WITH THEIR LETTER OF TRANSMITTAL. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed 10 11 Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and Substitute Form W-8 may be directed to the Information Agent at the address and telephone number set forth below. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any PetroFina ADR evidencing PetroFina ADSs has been lost, destroyed or stolen, the holder thereof should promptly notify the US Exchange Agent by checking the box immediately following the Special Issuance Instructions -- Special Delivery Instructions boxes and indicating the number of PetroFina ADSs evidenced by such lost, destroyed or stolen PetroFina ADRs. The holder thereof will then be instructed as to the steps that must be taken in order to replace such PetroFina ADRs. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen PetroFina ADRs have been followed. 12. HOLDERS OF PETROFINA SHARES NOT REPRESENTED BY PETROFINA ADSS. Holders of PetroFina shares have been sent a Certificated Share Delivery Instruction Form with the Prospectus and may not accept the exchange offer in respect of PetroFina shares pursuant to this Letter of Transmittal, except insofar as those shares are represented by PetroFina ADSs. If any holder of PetroFina shares which are not represented by PetroFina ADSs needs to obtain a copy of a Certificated Share Delivery Instruction Form, such holder should contact Mackenzie Partners, Inc., at the appropriate address and telephone number set forth in the Prospectus. 13. FRACTIONAL ENTITLEMENTS. Fractional shares of Total securities will not be issued to holders of PetroFina ADSs, but will be aggregated and sold in the market and the net proceeds of the sale will be paid to such holders entitled thereto. 11 12 TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION B) PAYOR'S NAME THE BANK OF NEW YORK SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX NAME: FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING ADDRESS: BELOW TIN: Social Security Number or Employer Identification Number DEPARTMENT OF THE TREASURY PART 2 -- TIN APPLIED FOR [ ] INTERNAL REVENUE SERVICE CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT: PAYOR'S REQUEST FOR (1) the number shown on this form is my correct Taxpayer Identification TAXPAYER Number (or I am waiting for a number to be issued to me). IDENTIFICATION (2) I am not subject to backup withholding either because: (a) I am exempt NUMBER ("TIN") from backup withholding, or (b) I have not been notified by the Internal AND Revenue Service (the "IRS") that I am subject to backup withholding as a CERTIFICATION result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE DATE _____________________ You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax refund and you have not been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. ----------------------------------------- ------------------------------ Signature Date - -------------------------------------------------------------------------------- FOR ASSISTANCE IN COMPLETING THE SUBSTITUTE FORM W-9 PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9." 12 13 CERTIFICATE OF FOREIGN STATUS - -------------------------------------------------------------------------------------------------- ------------------------------------------------------ SUBSTITUTE NAME OF OWNER ------------------------------------------------------ FORM W-8 U.S. TAXPAYER I.D. NUMBER (if any) ------------------------------------------------------ DEPARTMENT OF THE TREASURY, PERMANENT ADDRESS (See enclosed Guidelines) INTERNAL REVENUE SERVICE ------------------------------------------------------ CURRENT MAILING ADDRESS (if different from Permanent CERTIFICATE OF FOREIGN STATUS Address) ------------------------------------------------------------ CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT I AM AN EXEMPT FOREIGN PERSON BECAUSE: (1) I am a nonresident alien individual or a foreign corporation, partnership, estate or trust; (2) I am an individual who has not been, and plans not to be, present in the United States for a total of 183 days or more during the calendar year; and (3) I am neither engaged, nor plan to be engaged during the year, in a United States trade or business that has effectively connected gains from transactions with a broker or barter exchange. ----------------------------------- --------------- Signature Date - --------------------------------------------------------------------------------------------------
FOR ASSISTANCE IN COMPLETING THE SUBSTITUTE FORM W-8 PLEASE REVIEW THE "GUIDELINES FOR CERTIFICATION OF FOREIGN STATUS ON SUBSTITUTE FORM W-8 BELOW." GUIDELINES FOR CERTIFICATION OF FOREIGN STATUS ON SUBSTITUTE FORM W-8 PERMANENT ADDRESS: If you are: Show the address of: An individual Your permanent residence A partnership or corporation Principal office An estate or trust Permanent residence or principal office of any fiduciary
NONRESIDENT ALIEN INDIVIDUAL: For United States federal income tax purposes, "nonresident alien individual" means an individual who is neither a United States citizen nor resident. Generally, an alien is considered to be a United States resident if: The individual was a lawful permanent resident of the United States at any time during the calendar year, that is the alien held an immigrant visa (a "green card"), or The individual was physically present in the United States on: (1) at least 31 days during the calendar year, and (2) 183 days or more during the current year and the two preceding calendar years (counting all the days of physical presence in the current year, one-third the number of days of presence in the first preceding year, and one-sixth of the number of days in the second preceding year). EXEMPT FOREIGN PERSON: If you do not meet the requirements of certification number two or three above, you may instead certify on Internal Revenue Service Form 1001, Ownership, Exemption, or Reduced Rate Certificate, that your country has a tax treaty with the United States that exempts your transactions from United States tax. FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 13 14 The Information Agent for the Exchange Offer is: [MACKENZIE PARTNERS LOGO] MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Phone: (1-212) 929-5500 (call collect) or call toll free: (1-800) 322-2885 EX-99.A.3 3 LETTER OF TRANSMITTAL 1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the exchange offer or about the action you should take, you are recommended to seek your own personal financial advice immediately from an appropriately authorized independent professional advisor. If you have sold or otherwise transferred all your registered holdings of PetroFina warrants, please pass this document and the accompanying Prospectus dated May 6, 1999 (the "Prospectus"), as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. However, the exchange offer is not being made directly or indirectly in Canada, or any jurisdiction where prohibited by applicable law and such documents should not be distributed, forwarded or transmitted into or from Canada, or any jurisdiction where prohibited by applicable law by any means whatsoever including without limitation mail, facsimile, transmission, telex or telephone. - -------------------------------------------------------------------------------- LETTER OF TRANSMITTAL TO ACCEPT THE OFFER TO EXCHANGE 100 WARRANTS OF PETROFINA FOR 81 WARRANTS OF TOTAL. BY TOTAL THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 A.M. (NEW YORK CITY TIME), ON FRIDAY, JUNE 4, 1999, UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, ALL PETROFINA SECURITIES VALIDLY TENDERED AND NOT WITHDRAWN WILL BE PURCHASED. HOLDERS OF PETROFINA WARRANTS WILL HAVE WITHDRAWAL RIGHTS DURING THE EXCHANGE OFFER PERIOD TO WHICH THEY TENDERED, BUT NOT DURING ANY OTHER EXCHANGE OFFER PERIOD. The US Exchange Agent for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Courier: (For Eligible Institutions Tender & Exchange Department Only) Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station For Confirmation Telephone: Receive and Deliver Window New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. - -------------------------------------------------------------------------------------------------------------- DESCRIPTION OF PETROFINA WARRANTS TENDERED - -------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OF PETROFINA WARRANTS (PLEASE FILL IN, IF BLANK, EXACTLY PETROFINA WARRANT CERTIFICATE(S) AND AS NAME(S) APPEAR(S) ON WARRANT PETROFINA WARRANTS TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) - -------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF PETROFINA PETROFINA WARRANTS NUMBER OF WARRANT CERTIFICATE EVIDENCED BY PETROFINA WARRANTS NUMBER(S) CERTIFICATE(S) TENDERED* --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total PetroFina Warrants..................... - -------------------------------------------------------------------------------------------------------------- * Unless otherwise indicated, it will be assumed that all PetroFina Warrants evidenced by each Warrant Certificate delivered to the US Exchange Agent are being tendered hereby. See Instruction 4. - --------------------------------------------------------------------------------------------------------------
2 PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW ACCEPTANCE OF THE EXCHANGE OFFER IN RESPECT OF PETROFINA SHARES CANNOT BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold PetroFina Shares you may obtain a Certificated Share Delivery Instructions Form (the "Instruction Form") from Mackenzie Partners. Inc., as the Information Agent. See Instruction 12 of this Letter of Transmittal. Your bank or broker can assist you in completing this form. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Information Agent at its address and telephone number indicated below. Delivery of a Letter of Transmittal, PetroFina Warrant certificates (or a book-entry transfer of such Warrants) and any other required documents to the US Exchange Agent by PetroFina Warrant holders will be deemed an acceptance of the exchange offer by such holder with respect to such PetroFina Warrants subject to the terms and conditions set out in the Prospectus and this Letter of Transmittal. If delivery of PetroFina warrants is to be made by book-entry transfer to an account maintained by the US Exchange Agent at The Depository Trust Company pursuant to the procedures for book-entry transfer set forth in "Terms and Conditions of the Exchange Offer -- Book-Entry Transfer" in the Prospectus, then either this Letter of Transmittal or an Agent's Message (as defined below) should be used. The term "Agent's Message" means a message, transmitted by The Depository Trust Company and received by the US Exchange Agent and forming a part of a Book-Entry Confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the PetroFina Warrants which are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal. [ ] CHECK HERE IF TENDERED PETROFINA WARRANTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE US EXCHANGE AGENT AT THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE DEPOSITORY TRUST COMPANY MAY DELIVER PETROFINA WARRANTS BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: ------------------------------------------------------------------------------- DTC Account Number: ---------------------------------------------------------------------------- Transaction Code Number: ---------------------------------------------------------------------------- Occupation: ---------------------------------------------------------------------------- If a holder of PetroFina Warrants wishes to accept the exchange offer and PetroFina Warrants are not immediately available or the procedures for book-entry cannot be completed on a timely basis or if time will not permit all required documents to reach the US Exchange Agent prior to the expiration of the Initial Offer Period or any Subsequent Offer Period, as the case may be, such holder's acceptance of the exchange offer may nevertheless be effected using the guaranteed delivery procedure set out under "Terms and Conditions of the Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. See Instruction 2 of this Letter of Transmittal. HOWEVER, RECEIPT OF A NOTICE OF GUARANTEED DELIVERY WILL NOT BE TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE CONDITION, UNLESS PETROFINA WARRANTS REFERRED TO IN THE NOTICE OF GUARANTEED DELIVERY ARE RECEIVED BY THE US EXCHANGE AGENT PRIOR TO THE EXPIRATION OF THE GUARANTEE PERIOD. 2 3 [ ] CHECK HERE IF THE REPRESENTING TENDERED PETROFINA WARRANTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE US EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Holder(s): ---------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: -------------------------------------------------------- Window Ticket No. (if any): ---------------------------------------------------------------------------- Name of Institution that Guaranteed Delivery: --------------------------------------------------------------- For Warrants delivered by Book-Entry Transfer, complete the following: DTC Account Number: - -------------------------------------------------------------------------------- Transaction Code Number: - ------------------------------------------------------------------------------- NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY 3 4 Ladies and Gentlemen: The undersigned acknowledges that such person has received and reviewed the Prospectus, dated May 6, 1999 (the "Prospectus"), of Total, a societe anonyme organized under the laws of the Republic of France ("Total"), and this Letter of Transmittal, which together with any amendments or supplements hereto or thereto constitute the offer of Total (collectively, the "Exchange Offer") to exchange PetroFina securities for Total securities. Unless otherwise defined in this Letter of Transmittal, capitalized terms used herein have the meaning set forth in the Prospectus. The undersigned hereby instructs the US Exchange Agent to accept the exchange offer on behalf of the undersigned with respect to the PetroFina Warrants specified in the box entitled "Description of PetroFina Warrants Tendered," subject to the terms and conditions of the exchange offer, by informing Total in writing that the exchange offer has been so accepted. The undersigned hereby acknowledges that delivery of this Letter of Transmittal, the tendered PetroFina Warrants (or book-entry transfer of such PetroFina Warrants) and any other required documents to the US Exchange Agent by a holder of PetroFina Warrants will be deemed (without any further action by the US Exchange Agent to constitute acceptance of the exchange offer by such holder in respect of such holder's PetroFina Warrants, subject to the terms and conditions of the exchange offer. The undersigned understands that acceptance of the exchange offer by the undersigned pursuant to the procedures described herein and in the instructions hereto, subject to the withdrawal rights described in the Prospectus, will constitute a binding agreement between the undersigned and Total upon the terms and subject to the conditions of the offer. The undersigned hereby delivers to the US Exchange Agent the above-described PetroFina Warrants for which the exchange offer is being accepted, in accordance with the terms and conditions of the exchange offer, receipt of which is hereby acknowledged. Upon the terms of the exchange offer (including, if the offer is revised, varied, extended or renewed, the terms or conditions of any such revision, variation, extension, or renewal), and effective at the time that the condition to the exchange offer has been satisfied, fulfilled or, where permitted, waived (at which time Total will give notice thereof to the US Exchange Agent), and if he or she has not validly withdrawn his or her acceptance, the undersigned hereby sells, assigns and transfers to, or upon the order of, Total all right, title and interest in and to all PetroFina Warrants with respect to which the exchange offer is being accepted (and any and all PetroFina Warrants or other securities or rights issuable in respect of such PetroFina Warrants) and irrevocably constitutes and appoints the US Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned with respect to such PetroFina Warrants (and any such other PetroFina Warrants, securities or rights), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver such PetroFina Warrants (and any such other PetroFina Warrants, securities or rights), or accept transfer of ownership of such PetroFina Warrants (and any such other PetroFina Warrants, securities or rights) on the account books maintained by The Depository Trust Company together, in any such case, with all accompanying evidences of transfer and authenticity, to, or upon the order of Total, and (b) receive all benefits and otherwise exercise all rights of beneficial ownership of such PetroFina Warrants (and any such other PetroFina Warrants, securities or rights), all in accordance with the terms of the exchange offer. The undersigned hereby represents and warrants that the undersigned has full power of authority to accept the exchange offer and to tender, exchange, sell, assign and transfer the PetroFina Warrants in respect of which the exchange offer is being accepted or deemed to be accepted (and any and all other PetroFina Warrants, securities or rights issued or issuable in respect of such PetroFina Warrants) and Total will acquire good title thereto, free from all liens, equities, charges, encumbrances and other interests and together with all rights now or hereafter attaching thereto. The undersigned will, upon request, execute any additional documents deemed by the US Exchange Agent or Total to be necessary or desirable to complete the sale, assignment and transfer of the PetroFina Warrants in respect of which the exchange offer is being accepted (and any and all other PetroFina Warrants, securities or rights). 4 5 The undersigned irrevocably undertakes, represents, and warrants to and agrees with Total (so as to bind him or her, his or her personal representatives, heirs, successors and assigns) to the effect that the undersigned: (i) has not received or sent copies of the Prospectus or any Acceptance Form or any related documents in, into or from Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law, and has not otherwise utilized in connection with the exchange offer, directly or indirectly, the Canadian, or the mails or any means or instrumentality (including, without limitation, facsimile transmission, telex, and telephone) of interstate or foreign commerce, or any facilities of a national securities exchange, of Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law, (ii) is accepting the exchange offer from outside Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law, and (iii) is not an agent or fiduciary acting on a nondiscretionary basis for a principal, unless such agent or fiduciary is an authorized employee of such principal or such principal has given any instructions with respect to the exchange offer from outside Canada, or any jurisdiction into which the sending of such documents is prohibited by applicable law. All authority herein conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Prospectus, this acceptance is irrevocable. Unless otherwise instructed under "Special Issuance Instructions" below, the undersigned hereby instructs the US Exchange Agent to register the Total Warrants to which the undersigned is entitled in the name(s) of the holder(s) shown above under "Description of PetroFina Warrants Tendered." Unless otherwise instructed under "Special Delivery Instructions" below, the undersigned hereby instructs the US Exchange Agent to return, or cause to be returned, any PetroFina Warrants in respect of which the exchange offer is not being accepted or which are not exchanged (and accompanying documents, as appropriate) and/or deliver the certificates representing the Total Warrants to be delivered to the undersigned pursuant to the exchange offer to the address(es) of the registered holder(s) appearing above under "Description of PetroFina Warrants Tendered." In the case of a book-entry delivery of PetroFina Warrants, the undersigned hereby instructs the US Exchange Agent to credit the account maintained at The Depository Trust Company with any PetroFina Warrants in respect of which the exchange offer is not being accepted or which are not purchased. The undersigned recognizes that the US Exchange Agent will not transfer any PetroFina Warrants which are not purchased pursuant to the exchange offer from the name of the registered holder thereof to any other person. SUBJECT TO THE TERMS OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND DELIVERY OF TOTAL WARRANTS PURSUANT TO THE EXCHANGE OFFER SHALL NOT BE MADE, UNTIL THE PETROFINA WARRANTS IN RESPECT OF WHICH THE EXCHANGE OFFER IS BEING ACCEPTED AND ALL OTHER REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US EXCHANGE AGENT AS PROVIDED IN THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL. 5 6 SPECIAL ISSUANCE INSTRUCTIONS REGARDING TOTAL WARRANTS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Total Warrants are to be registered in the name of someone other than the undersigned. Register Total Warrants in the name of: Name(s) - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (PLEASE PRINT) Address - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (INCLUDE ZIP CODE) Occupation - ------------------------------------ - ------------------------------------------------ (Employer Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the certificates representing the Total Warrant or any PetroFina Warrants not tendered or not accepted for exchange are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown in the box entitled "Description of PetroFina Warrants Tendered." Mail: [ ] Total Warrant Certificate(s) to: [ ] PetroFina Warrant Certificate(s) to: Name(s) - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (PLEASE PRINT) Address - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ - ------------------------------------------------ (INCLUDE ZIP CODE) - ------------------------------------------------ (Employer Identification or Social Security Number) [ ] CHECK HERE IF ANY OF THE PETROFINA WARRANTS THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 11. Number of PetroFina Warrants represented by the lost, stolen or destroyed PetroFina Warrants: - -------------------------------------------------------------------------------- 6 7 IMPORTANT ALL TENDERING PETROFINA WARRANT HOLDERS PLEASE SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW OR, IN THE CASE OF CERTAIN FOREIGN PERSONS, SUBSTITUTE FORM W-8 BELOW) X - -------------------------------------------------------------------------------- X - -------------------------------------------------------------------------------- SIGNATURE(S) OF OWNER(S) Dated: - ------------------------------------ , 1999 (Must be signed by registered holder(s) exactly as name(s) appear(s) on PetroFina Warrants or on a security position listing or by person(s) authorized to become registered holder(s) by endorsements, stock powers and other documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) Name(s): - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: - ------------------------------------------------------------------------------- Tax Identification or Social Security No.: - -------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) FOR USE BY ELIGIBLE INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE BELOW Signature(s) Guaranteed by an Eligible Institution: Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- (PLEASE PRINT) Title: - -------------------------------------------------------------------------------- Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No.: - ------------------------------------------------------------------------------- Dated: - ------------------------------------ , 1999 7 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on the Letter of Transmittal if (a) the Letter of Transmittal is signed by the registered holder(s) of the PetroFina Warrants in respect of which the exchange offer is being accepted herewith and such holder(s) have not completed the box entitled "Special Delivery Instructions" or the box entitled "Special Issuance Instructions" on this Letter of Transmittal or (b) the exchange offer is being accepted in respect of such PetroFina Warrants for the account of an Eligible Institution. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program, or the Stock Exchange Medallion Program (an "Eligible Institution"). See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND WARRANTS. This Letter of Transmittal is to be completed and PetroFina Warrants are to be forwarded herewith with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be delivered to the US Exchange Agent at one of its addresses set forth herein. PetroFina Warrants or confirmation of a book-entry transfer of such PetroFina Warrants into the US Exchange Agent's account at The Depository Trust Company, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by this Letter of Transmittal, must be delivered to the US Exchange Agent at one of its addresses set forth herein. PetroFina Warrant holders whose PetroFina Warrants are not immediately available or who cannot deliver their PetroFina Warrants and all other required documents to the US Exchange Agent or complete the procedures for book-entry transfer prior to the expiration of the Initial Offer Period or any Subsequent Offer Period, as the case may be, may accept the exchange offer with respect to their PetroFina Warrants by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set out in "Terms and Conditions of the Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. Pursuant to the guaranteed delivery procedures: (a) acceptance must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by Total must be received by the US Exchange Agent prior to the expiration of the Initial Offer Period or any Subsequent Offer Period, as the case may be; and (c) the PetroFina Warrants in respect of which the exchange offer is being accepted, (or, in the case of PetroFina Warrants held in book-entry form, timely confirmation of the book-entry transfer of such PetroFina Warrants into the US Exchange Agent's account at The Depository Trust Company as described in the Prospectus), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or in the case of a book-entry transfer, an Agent's Message), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other documents required by this Letter of Transmittal, are received by the US Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF PETROFINA WARRANTS AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF PETROFINA WARRANTS ACCEPTING THE EXCHANGE OFFER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent acceptance will be accepted and no fractional PetroFina Warrants will be accepted. All accepting PetroFina Warrants holders, by execution of this Letter of 8 9 Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their PetroFina Warrants for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the series numbers of the certificates and/or the number of PetroFina Warrants should be listed on a separate schedule attached hereto. 4. PARTIAL ACCEPTANCES. If the exchange offer is to be accepted in respect of less than all of the PetroFina Warrants delivered to the US Exchange Agent herewith, fill in the number of PetroFina Warrants in respect of which the exchange offer is being accepted in the box entitled "Number of PetroFina Warrants Tendered." In such case, a new PetroFina Warrant for the remainder of the PetroFina Warrants (in respect of which the exchange offer is not being accepted) represented by the old PetroFina Warrant will be sent to the registered holders as promptly as practicable following the date on which the PetroFina Warrants in respect of which the exchange offer has been accepted are purchased. The exchange offer will be deemed to have been accepted in respect of all PetroFina Warrants delivered to the US Exchange Agent unless otherwise indicated. In the case of partial acceptances, PetroFina Warrants in respect of which the exchange offer was not accepted will not be reissued to a person other than the registered holder. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the PetroFina Warrants in respect of which the exchange offer is being accepted hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without any change whatsoever. If any of the PetroFina Warrants in respect of which the exchange offer is being accepted hereby are owned of record by two or more owners, all such owners must sign this Letter of Transmittal. If any of the PetroFina Warrants in respect of which the exchange offer is being accepted are registered in different names on different PetroFina Warrants, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of PetroFina Warrants. If this Letter of Transmittal or any PetroFina Warrants or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Total of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered holder(s) of the PetroFina Warrants listed and transmitted hereby, no endorsements of certificates are required. Signatures on such PetroFina Warrants or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the PetroFina Warrants listed, the PetroFina Warrants must be endorsed or accompanied by appropriate stock powers signed exactly as the name(s) of the registered holder(s) appear(s) on the PetroFina Warrants. Signatures on such PetroFina Warrant or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Total will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale to it or its order of PetroFina Warrants pursuant to the exchange offer. If, however, delivery of any of the consideration payable pursuant to the exchange offer is to be made to any persons other than the registered holder(s), or if PetroFina Warrants in respect of which the exchange offer is being accepted are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holders(s) or such person(s)) payable on account of the transfer to such person will be deducted from the purchase price (or new Total Warrants will be withheld) unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the PetroFina Warrants listed in this Letter of Transmittal. 9 10 7. SPECIAL DELIVERY INSTRUCTIONS. If any PetroFina Warrants in respect of which the exchange offer is not being accepted or which are not purchased are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown in the box entitled "Description of PetroFina Warrants Tendered" on the first page of this Letter of Transmittal, should be completed. 8. WAIVER OF CONDITIONS. Total reserves the absolute right in its sole discretion to waive any of the specified condition of the exchange offer, in whole or in part, to the extent permitted by applicable law. 9. IMPORTANT TAX INFORMATION; SUBSTITUTE FORM W-9 AND SUBSTITUTE FORM W-8. Under United States federal income tax law, a holder whose tendered PetroFina Warrants are accepted for exchange must provide the US Exchange Agent (as payor) with (i) such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below or (ii) in the case of certain exempt foreign persons, the Substitute Form W-8 below. If the US Exchange Agent is not provided with the correct TIN or an adequate basis for exemption, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS") in addition to backup withholding in an amount equal to 31% of the gross proceeds resulting from the exchange offer. Certain holders (including, among others, all corporations and certain foreign individuals) are exempt from these backup withholding requirements. Certain foreign persons can qualify for this exemption by submitting a Form W-8 or Substitute Form W-8 below, signed under penalties of perjury and attesting to such person's exempt status. If backup withholding applies, the US Exchange Agent is required to withhold 31% of the gross proceeds payable to a Warrant holder or other payee pursuant to the exchange offer. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in overpayment of taxes, a refund may be obtained from the IRS. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Box 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Even if the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the US Exchange Agent will withhold 31% of all reportable payments made prior to the time a properly certified TIN is provided to the US Exchange Agent. Such amounts will be refunded to such holder if a properly certified TIN is provided to the US Exchange Agent within 60 days. If the PetroFina Warrants are in more than one name or are not in the name of the actual owner, consult the enclosed guidelines for information on which TIN to report. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) TOGETHER WITH WARRANT CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE US EXCHANGE AGENT, OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE US EXCHANGE AGENT, PRIOR TO THE OFFER EXPIRATION DATE. WARRANT HOLDERS ARE ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 OR SUBSTITUTE FORM W-8 WITH THEIR LETTER OF TRANSMITTAL. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and Substitute Form W-8 may be directed to the Information Agent at the address and telephone number set forth below. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any PetroFina Warrants have been lost, destroyed or stolen, the holder thereof should promptly notify the US Exchange Agent by checking the box immediately following the Special Issuance Instructions -- Special Delivery Instructions boxes and indicating the number of PetroFina Warrants lost, destroyed or stolen. The holder thereof will then be instructed as to the steps that must be taken in order to replace such PetroFina Warrants. This Letter of Transmittal and 10 11 related documents cannot be processed until the procedures for replacing lost, destroyed or stolen PetroFina Warrants have been followed. 12. HOLDERS OF PETROFINA SHARES. Holders of PetroFina shares [have been sent a Certificated Share Delivery Instruction Form with the Prospectus] and may not accept the exchange offer in respect of PetroFina shares pursuant to this Letter of Transmittal. If any holder of PetroFina shares needs to obtain a copy of a Certificated Share Delivery Instruction Form, such holder should contact MacKenzie Partners, Inc., at the appropriate address and telephone number set forth in the Prospectus. 13. FRACTIONAL ENTITLEMENTS. Fractional Total Warrants will not be issued to holders of PetroFina Warrants, but will be aggregated and sold in the market and the net proceeds of the sale will be paid to such holders entitled thereto. 11 12 TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION B) PAYOR'S NAME THE BANK OF NEW YORK SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX NAME: FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING ADDRESS: BELOW TIN: Social Security Number or Employer Identification Number DEPARTMENT OF THE TREASURY PART 2 -- TIN APPLIED FOR [ ] INTERNAL REVENUE SERVICE CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT: PAYOR'S REQUEST FOR (1) the number shown on this form is my correct Taxpayer Identification TAXPAYER Number (or I am waiting for a number to be issued to me). IDENTIFICATION (2) I am not subject to backup withholding either because: (a) I am exempt NUMBER ("TIN") from backup withholding, or (b) I have not been notified by the Internal AND Revenue Service (the "IRS") that I am subject to backup withholding as a CERTIFICATION result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE _________________________________ DATE _____________________ You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax refund and you have not been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. ----------------------------------------- --------------------------- Signature Date - -------------------------------------------------------------------------------- FOR ASSISTANCE IN COMPLETING THE SUBSTITUTE FORM W-9 PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9." 12 13 CERTIFICATE OF FOREIGN STATUS - -------------------------------------------------------------------------------------------------- ------------------------------------------------------ SUBSTITUTE NAME OF OWNER ------------------------------------------------------ FORM W-8 U.S. TAXPAYER I.D. NUMBER (if any) ------------------------------------------------------ DEPARTMENT OF THE TREASURY, PERMANENT ADDRESS (See enclosed Guidelines) INTERNAL REVENUE SERVICE ------------------------------------------------------ CURRENT MAILING ADDRESS (if different from Permanent CERTIFICATE OF FOREIGN STATUS Address) ------------------------------------------------------------ CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT I AM AN EXEMPT FOREIGN PERSON BECAUSE: (1) I am a nonresident alien individual or a foreign corporation, partnership, estate or trust; (2) I am an individual who has not been, and plans not to be, present in the United States for a total of 183 days or more during the calendar year; and (3) I am neither engaged, nor plan to be engaged during the year, in a United States trade or business that has effectively connected gains from transactions with a broker or barter exchange. ------------------------------- ---------------- Signature Date - --------------------------------------------------------------------------------------------------
FOR ASSISTANCE IN COMPLETING THE SUBSTITUTE FORM W-8 PLEASE REVIEW THE "GUIDELINES FOR CERTIFICATION OF FOREIGN STATUS ON SUBSTITUTE FORM W-8 BELOW." GUIDELINES FOR CERTIFICATION OF FOREIGN STATUS ON SUBSTITUTE FORM W-8 PERMANENT ADDRESS: If you are: Show the address of: An individual Your permanent residence A partnership or corporation Principal office An estate or trust Permanent residence or principal office of any fiduciary
NONRESIDENT ALIEN INDIVIDUAL: For United States federal income tax purposes, "nonresident alien individual" means an individual who is neither a United States citizen nor resident. Generally, an alien is considered to be a United States resident if: The individual was a lawful permanent resident of the United States at any time during the calendar year, that is the alien held an immigrant visa (a "green card"), or The individual was physically present in the United States on: (1) at least 31 days during the calendar year, and (2) 183 days or more during the current year and the two preceding calendar years (counting all the days of physical presence in the current year, one-third the number of days of presence in the first preceding year, and one-sixth of the number of days in the second preceding year). EXEMPT FOREIGN PERSON: If you do not meet the requirements of certification number two or three above, you may instead certify on Internal Revenue Service Form 1001, Ownership, Exemption, or Reduced Rate Certificate, that your country has a tax treaty with the United States that exempts your transactions from United States tax. FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 13 14 The Information Agent for the Exchange Offer is: [MACKENZIE PARTNERS LOGO] MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Phone: (1-212) 929-5500 (call collect) or call toll free: (1-800) 322-2885 EX-99.A.4 4 CERTIFICATED SHARE DELIVERY INSTRUCTION FORM 1 BANQUE PARIBAS Metier Titres France Services aux Emetteurs 3 rue d'Antin 75078 PARIS CEDEX 02 FRANCE Attention: 257 D Mr. Dominique SANCHEZ CERTIFICATED SHARE DELIVERY INSTRUCTION FORM THE UNDERSIGNED ACKNOWLEDGES THAT SUCH PERSON HAS RECEIVED AND REVIEWED THE PROSPECTUS, DATED MAY 6, 1999, OF TOTAL, A SOCIETE ANONYME ORGANIZED UNDER THE LAWS OF THE REPUBLIC OF FRANCE, AND THIS CERTIFICATED SHARE DELIVERY INSTRUCTION FORM, WHICH TOGETHER WITH ANY AMENDMENTS OR SUPPLEMENTS HERETO OR THERETO CONSTITUTE THE OFFER OF TOTAL. I the undersigned Name (Please type or print in capital ----------------------------------------------------------- letters): (First Name) (Last Name) Address (Please type or print in ----------------------------------------------------------- capital letters): (Street Address) ----------------------------------------------------------- (City) (State) (Zip Code)
hereby deliver to The Bank of New York ________ PETROFINA shares represented by share certificates bearing numbers: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- for the purpose of tendering them into the exchange offer for TOTAL shares. I request that my TOTAL shares: [ ] be delivered in the form of share certificates and sent to the address provided above. [ ] be transferred to my account designated here: Name of the Bank: ----------------------------------------------------------- Address of the Bank: ----------------------------------------------------------- Account No.: ----------------------------------------------------------- Date: Signature: Stamp of The Bank of New York
[ ] I hereby waive the right to receive VVPR-Strips. [ ] I hereby elect to receive the VVPR-Strips and I request that they be delivered to the address provided above. EX-99.A.5 5 NOTICE OF GUARANTEED DELIVERY 1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the exchange offer or the action you should take, you are recommended to seek your own personal financial advice immediately from an appropriately authorized independent financial advisor. If you have sold or otherwise transferred all your registered holdings of PetroFina ADSs and warrants, please pass this document and the accompanying Prospectus dated May 6, 1999 (the Prospectus"), as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. The exchange offer is not being made directly or indirectly in Canada, or any jurisdiction where prohibited by applicable law and such documents should not be distributed, forwarded or transmitted into or from Canada, or any jurisdiction where prohibited by applicable law by any means whatsoever including without limitation mail, facsimile, transmission, telex or telephone. - -------------------------------------------------------------------------------- NOTICE OF GUARANTEED DELIVERY TO ACCEPT THE OFFER TO EXCHANGE (I) 10 AMERICAN DEPOSITARY SHARES OF PETROFINA, EACH REPRESENTING ONE TENTH OF ONE PETROFINA SHARE, WITHOUT NOMINAL VALUE FOR 9 AMERICAN DEPOSITARY SHARES OF TOTAL, EACH REPRESENTING ONE HALF OF ONE SHARE, NOMINAL VALUE FRF 50 AND (II) 100 WARRANTS OF PETROFINA FOR EACH 81 WARRANTS OF TOTAL BY TOTAL As set forth under "Guaranteed Delivery Procedures" in the Prospectus, dated May 6, 1999 (the "Prospectus"), this form or one substantially equivalent hereto must be used for acceptance of the exchange offer (as defined in the Prospectus) in respect of American Depositary Shares ("PetroFina ADSs") of PetroFina ("PetroFina") or warrants of PetroFina ("PetroFina Warrants"), if American Depositary Receipts evidencing PetroFina ADSs ("PetroFina ADRs") or certificates evidencing PetroFina Warrants are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or if time will not permit all required documents to reach the US Exchange Agent) prior to the expiration of the Initial Offer Period or any Subsequent Offer Period (each as defined in the Prospectus), as the case may be. Such form may be delivered by hand or mailed to the US Exchange Agent and must include a guarantee by an Eligible Institution (as defined in the Prospectus) in the form set out herein. See "Guaranteed Delivery Procedures" in the Prospectus. The US Exchange Agent for the Offer is: THE BANK OF NEW YORK By Facsimile Transmission: (For Eligible Institutions By Mail: Only) By Hand or Overnight Courier: Tender & Exchange Department (212) 815-6213 Tender & Exchange Department P.O. Box 11248 101 Barclay Street Church Street Station For Confirmation Telephone: Receive and Deliver Window New York, New York 10286-1248 (800) 507-9357 New York, New York 10286
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. 2 Ladies and Gentlemen: The undersigned hereby tenders to Total, a societe anonyme organized under the laws of the Republic of France, upon the terms and subject to the conditions set forth in the Prospectus, and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Exchange Offer"), receipt of each of which is hereby acknowledged, the number of PetroFina ADSs and/or PetroFina Warrants specified below pursuant to the guaranteed delivery procedures described in "Guaranteed Delivery Procedures" in the Prospectus. Number of PetroFina ADSs: Name(s) of Record Holders of PetroFina ADSs: - -------------------------------------------------------------------------------- (Please Type or Print) Address(es): (Include Zip Code) Area Code and Telephone Number: Certificate Number(s) (if available): - -------------------------------------------------------------------------------- [ ] Check here if PetroFina ADSs will be tendered by book-entry transfer Account Number: Name of Depositary Bank: Account Number: Signature(s): - -------------------------------------------------------------------------------- Dated: ________________________ , 1999 Number of PetroFina Warrants: Name(s) of Record Holders of PetroFina Warrants: (Please Type or Print) Address(es): (Include Zip Code) Certificate Number(s) if available: [ ] Check here if PetroFina Warrants will be tendered by book-entry transfer Account Number: Name of Depositary Bank: Account Number: Signature(s): Dated: _______________ , 1999 2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES) The undersigned, a firm that is a member of the Medallion Signature Guarantee Program or is otherwise an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (each of the foregoing is referred to as an "Eligible Institution"), hereby (a) represents that the above-named person(s) "own(s)" the PetroFina ADSs and/or PetroFina Warrants tendered hereby within the meaning of Rule 14e-4 under the Exchange Act ("Rule 14e-4"), (b) represents that the tender of PetroFina ADSs and/or PetroFina Warrants effected hereby complies with Rule 14e-4, and (c) guarantees delivery to the US Exchange Agent, at one of its addresses set forth above, of ADRs evidencing the PetroFina ADSs or certificates evidencing the PetroFina Warrants tendered hereby in proper form for transfer, or in the case of a tender of PetroFina ADSs or PetroFina Warrants through book-entry, confirmation of book-entry transfer of such PetroFina ADSs or PetroFina Warrants into the Exchange Agent's account at The Depository Trust Company, with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees in the case of a tender of PetroFina ADSs and/or PetroFina Warrants (or an Agent's Message (as defined in the section entitled "Procedures for Tendering Book-Entry Transfer" in the Prospectus) in the case of book-entry transfer), and any other documents required by the Letter of Transmittal, within three New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery. The Eligible Institution that completes this form must communicate the guarantee to the US Exchange Agent and must comply with the delivery obligations described above within the required time period. Failure to do so could result in financial loss to such Eligible Institution. Name of Firm: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number: - -------------------------------------------------------------------------- Authorized Signature: - -------------------------------------------------------------------------------- Title: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- (Please Type or Print) Dated: - ---------------------, 1999 NOTE: DO NOT SEND ADRS FOR PETROFINA ADSS OR WARRANTS CERTIFICATES WITH THIS NOTICE, SUCH ADRS OR WARRANTS CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A.6 6 LETTER TO BROKERS 1 THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA, OR ANY OTHER JURISDICTION WHERE THE SENDING OF SUCH DOCUMENT IS PROHIBITED BY APPLICABLE LAW. - -------------------------------------------------------------------------------- OFFER TO EXCHANGE ALL AMERICAN DEPOSITARY SHARES EACH REPRESENTING ONE TENTH OF ONE SHARE WITHOUT NOMINAL VALUE AND ALL WARRANTS OF PETROFINA BY TOTAL THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 A.M. (NEW YORK CITY TIME), ON FRIDAY, JUNE 4, 1999, UNLESS EXTENDED ("INITIAL OFFER PERIOD"). AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, HOLDERS OF PETROFINA WARRANTS AND PETROFINA ADSS, AS THE CASE MAY BE, WILL HAVE WITHDRAWAL RIGHTS DURING THE EXCHANGE OFFER PERIOD INTO WHICH THEY TENDER, BUT NOT DURING ANY OTHER EXCHANGE OFFER PERIOD. To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Total, a societe anonyme organized under the laws of the Republic of France ("Total"), on behalf of PetroFina, a societe anonyme organized under the laws of Belgium ("Petrofina") to act as exchange agent in connection with Total's offer to exchange (i) 10 properly tendered American depositary shares of PetroFina, each representing one-tenth of one share of PetroFina for 9 American depositary shares, each representing one-half of one share of Total, and (ii) 100 Warrants of PetroFina for 81 Warrants of Total, upon the terms and subject to the conditions set forth in the Exchange Offer Prospectus, dated May 6, 1999 (the "Prospectus"), and in the related Certificated Share Delivery Instruction Form, the Letter of Transmittal and Notice of Guaranteed Delivery enclosed herewith. Terms used in this document to the extent not defined herein shall bear the same meaning as in the Prospectus. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold PetroFina securities registered in your name or in the name of your nominee. 2 Enclosed for your information and use are copies of the following documents: 1. Prospectus, dated May 6, 1999; 2. Letter of Transmittal to be used by holders of PetroFina ADSs in accepting the exchange offer and tendering ADSs; 3. Letter of Transmittal to be used by holders of PetroFina Warrants in accepting the exchange offer and tendering Warrants; 4. Notice of Guaranteed Delivery to be used to accept the exchange offer if the ADSs, the Warrants and all other required documents are not immediately available or cannot be delivered to the US Exchange Agent by the expiration of the Initial Offer Period or if the procedure for book-entry transfer cannot be completed by the expiration of the Initial Offer Period; 5. A letter which may be sent to your clients for whose accounts you hold PetroFina Warrants and PetroFina ADSs registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the exchange offer; 6. A Certificated Share Delivery Instructions Form; 7. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 8. Return envelope addressed to the US Exchange Agent. THE EXCHANGE OFFER MAY NOT BE ACCEPTED IN RESPECT OF PETROFINA SHARES BY MEANS OF A LETTER OF TRANSMITTAL AND NOTICE OF GUARANTEED DELIVERY. A CERTIFICATED SHARE DELIVERY INSTRUCTION FORM FOR ACCEPTING THE EXCHANGE OFFER IN RESPECT OF PETROFINA SHARES MAY BE OBTAINED FROM MACKENZIE PARTNERS, INC., AS THE INFORMATION AGENT. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 10:00 A.M., NEW YORK CITY TIME ON JUNE 4, 1999, EXCEPT WITH RESPECT TO PETROFINA SECURITIES TENDERED IN ANY SUBSEQUENT OFFER PERIOD. In all cases, exchange of PetroFina shares tendered and accepted pursuant to the exchange offer will be made only after timely receipt by the (i) U.S. Forwarding Agent of completed Certificated Share Delivery Instruction Form together with certificates evidencing such PetroFina shares, (ii) US Exchange Agent of a Letter of Transmittal or Notice of Guaranteed Delivery (or facsimile thereof) properly completed and duly executed, with any required signature guarantees (or in the case of a book-entry transfer, an Agent's Message) together with ADRs evidencing such PetroFina ADSs or Warrant Certificates and any other required documents. A securityholder who desires to tender PetroFina ADSs and/or PetroFina Warrants and whose American Depositary Receipts ("ADRs") evidencing such PetroFina ADSs or Warrant Certificates are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such PetroFina ADSs and/or PetroFina Warrants by following the procedure for guaranteed delivery set forth in the Prospectus. See "Guaranteed Delivery Procedures". Total will not pay any fees or commissions to any broker, dealer or other person (other than the U.S. Exchange Agent, the Forwarding Agent and the Information Agent as described in the Prospectus) in connection with the solicitation of tenders of PetroFina shares, PetroFina ADSs and PetroFina Warrants pursuant to the exchange offer. However, Total will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Total will pay or cause to 2 3 be paid any stock transfer taxes payable with respect to the transfer of PetroFina shares, PetroFina ADSs and PetroFina Warrants to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the exchange offer should be addressed to Mackenzie Partners, Inc. (the "Information Agent") at their address and telephone numbers set forth on the back cover page of the Prospectus. Additional copies of the enclosed material may be obtained from the Information Agent, at the address and telephone number set forth on the back cover page of the Offer to Exchange. Very truly yours, The Bank of New York NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF TOTAL, PETROFINA, THE U.S. EXCHANGE AGENT, THE INFORMATION AGENT, OR THE FORWARDING AGENT, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.A.7 7 PRESS RELEASE 1 Exhibit (a)(7) TOTAL LAUNCHES PUBLIC EXCHANGE OFFER FOR PETROFINA SHARES TOTAL has announced that it will launch a public exchange offer on May 6 to acquire the 59% of outstanding PetroFina shares it does not already own. The offer will enable PetroFina shareholders to exchange their shares for newly issued TOTAL stock from May 6 through June 4, on the basis of nine TOTAL shares for every two PetroFina shares. The TOTAL shares will carry dividend rights as of January 1, 1998 and TOTAL VVPR strips, which entitle owners to a reduced dividend withholding tax rate in Belgium. The offer prospectus, including a description of the transaction and related tender forms, has been approved by Belgium's Banking and Finance Commission. It may be requested in Belgium from Banque Bruxelles Lambert, General de Banque and KBC Bank, and from designated banks in other European countries. The U.S. Prospectus, which is part of a registration statement, as declared effective by the Securities and Exchange Commission will be mailed to the U.S. security holders beginning on May 6, 1999. The U.S. exchange offer to U.S. security holders will be made only by means of this prospectus. The public exchange offer will be launched as initially scheduled. It represents the last step in the creation of the new TOTAL FINA group, which will rank among the European majors and will be the fifth-largest oil company in the world. EX-99.E.2 8 ITEMS 18 AND 19 OF TOTAL FORM 20-F FOR 1998 1 PART IV ITEM 18. FINANCIAL STATEMENTS See pages F-1 through F-71 and pages S-1 through S-2, incorporated herein by reference. ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS A. FINANCIAL STATEMENTS The following financial statements, together with the report of Arthur Andersen thereon, are filed as part of this annual report.
PAGE ---- Report of Independent Auditors.............................. F-1 Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996............................ F-2 Consolidated Balance Sheets at December 31, 1998 and 1997... F-3 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996...................... F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1998, 1997 and 1996........ F-5 Notes to Consolidated Financial Statements.................. F-6 Supplemental Oil and Gas Information (Unaudited)............ F-59 Schedules for the years ended December 31, 1998, 1997 and 1996 Report of Independent Auditors on Schedule.................. S-1 Schedule II -- Valuation and Qualifying Accounts............ S-2
All other Schedules have been omitted since they are not required under the applicable instructions or the substance of the required information is shown in the financial statements. B. EXHIBITS The following documents are filed as part of this annual report: 1. Statutes of TOTAL (containing amendments through January 27, 1998).* 2. Contribution Agreement between TOTAL, Electrofina, Fibelpar, Tractebel, Electrabel and AG 1824, dated December 1, 1998.* 3. Consent of Arthur Andersen LLP. - --------------- * Previously filed. 57 2 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. TOTAL By: /s/ THIERRY DESMAREST ------------------------------------ Name: Thierry Desmarest Title: Chairman and Chief Executive Officer Dated: April 30, 1999 58 3 REPORT OF INDEPENDENT AUDITORS To the Shareholders and the Board of Directors of TOTAL We have audited the accompanying consolidated balance sheets of TOTAL and its subsidiaries (together, the Company) as of December 31, 1998, and 1997, and the related consolidated statements of income, cash flows and changes in shareholders' equity for each of the three years in the period ended December 31, 1998, all expressed in French francs. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in France and in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles in France. Accounting practices used by the Company in preparing the accompanying consolidated financial statements conform with generally accepted accounting principles in France, but do not conform in certain respects with accounting principles generally accepted in the United States of America. A description of the differences and a complete reconciliation of consolidated net income and shareholders' equity to United States generally accepted accounting principles are set forth in Note 3 of the notes to the consolidated financial statements. ARTHUR ANDERSEN, LLP Paris, France March 17, 1999 F-1 4 TOTAL CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, -------------------------------- FRF FRF FRF -------- -------- -------- 1998 1997 1996 -------- -------- -------- (AMOUNTS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS) Sales (Notes 19 and 20).................................... 159,614 191,085 176,577 Operating expenses......................................... (141,968) (170,448) (159,893) Depreciation, depletion and amortization................... (7,876) (7,565) (6,916) Operating income: (Note 19) Corporate................................................ (504) (551) (444) Business Segments........................................ 10,274 13,623 10,212 -------- -------- -------- TOTAL OPERATING INCOME..................................... 9,770 13,072 9,768 Interest expense, net (Note 21)............................ (988) (738) (917) Dividend income............................................ 326 597 339 Dividends on subsidiaries redeemable preferred shares (Note 14)................................................ (61) (60) (52) Other income (expense), net (Note 22)...................... (215) 71 (134) Provision for income taxes (Note 23)....................... (2,402) (4,077) (2,622) Equity in income (loss) of affiliates (Note 6)............. 372 (58) 66 -------- -------- -------- INCOME BEFORE AMORTIZATION OF ACQUISITION GOODWILL AND MINORITY INTEREST........................................ 6,802 8,807 6,448 AMORTIZATION OF ACQUISITION GOODWILL....................... (686) (860) (663) MINORITY INTEREST.......................................... (302) (336) (139) -------- -------- -------- NET INCOME................................................. 5,814 7,611 5,646 ======== ======== ======== EARNINGS PER SHARE (NOTE 1)................................ 23.7 31.0 23.5
The accompanying Notes are an integral part of these consolidated financial statements. F-2 5 TOTAL CONSOLIDATED BALANCE SHEETS
DECEMBER, 31 --------------------- FRF FRF ------- ------- 1998 1997 ------- ------- (AMOUNTS IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) ASSETS NONCURRENT ASSETS: Intangible assets (Note 4)................................ 17,086 16,339 Accumulated amortization (Note 4)......................... (7,500) (6,965) ------- ------- Intangible assets, net (Note 4)......................... 9,586 9,374 Property, plant and equipment (Note 5).................... 132,163 127,525 Accumulated depreciation, depletion and amortization (Note 5)...................................................... (66,780) (66,125) ------- ------- Property, plant and equipment, net (Note 5)............. 65,383 61,400 Equity affiliates: Investments and loans (Note 6)......... 9,247 8,491 Other investments (Note 7)................................ 5,230 5,811 Other noncurrent assets (Note 8).......................... 4,692 5,489 ------- ------- Total noncurrent assets................................. 94,138 90,565 CURRENT ASSETS: Inventories (Note 9)...................................... 12,219 14,550 Accounts receivable (Note 10)............................. 20,485 23,371 Prepaid expenses and other current assets (Note 11)....... 11,032 8,800 Short-term investments (Note 12).......................... 4,097 1,773 Cash and cash equivalents................................. 9,982 12,652 ------- ------- Total current assets.................................... 57,815 61,146 ------- ------- Total Assets....................................... 151,953 151,711 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY SHAREHOLDERS' EQUITY (NOTE 13): Common shares (FRF 50 par value; shares issued and outstanding: 1998 -- 244,787,638, 1997 -- 244,333,176)................. 12,239 12,217 Paid-in surplus........................................... 13,007 12,918 Retained earnings......................................... 44,164 41,489 Revaluation reserve....................................... 465 458 Cumulative translation adjustments........................ (2,010) (450) ------- ------- Total shareholders' equity.............................. 67,865 66,632 SUBSIDIARIES REDEEMABLE PREFERRED SHARES (NOTE 14).......... 1,406 1,497 MINORITY INTEREST........................................... 1,577 1,605 COMMITMENTS AND CONTINGENCIES (NOTES 26 AND 28) LONG-TERM LIABILITIES: Reserve for crude oil price changes....................... -- 955 Deferred income taxes (Note 23)........................... 5,054 5,230 Employee benefits (Note 15)............................... 3,326 3,216 Other liabilities (Note 16)............................... 5,551 5,272 ------- ------- Total long-term liabilities............................. 13,931 14,673 LONG-TERM DEBT: Loans (Note 17)........................................... 23,919 21,742 Deposits.................................................. 985 939 ------- ------- Total long-term debt.................................... 24,904 22,681 CURRENT LIABILITIES: Accounts payable.......................................... 15,403 18,328 Other creditors and accrued liabilities (Note 18)......... 19,128 17,598 Current portion of long-term debt......................... 1,370 1,818 Short-term borrowings (Note 17)........................... 3,740 4,529 Bank overdrafts........................................... 2,629 2,350 ------- ------- Total current liabilities............................... 42,270 44,623 ------- ------- Total Liabilities and Shareholders' Equity......... 151,953 151,711 ======= =======
The accompanying Notes are an integral part of these consolidated financial statements. F-3 6 TOTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------- FRF FRF FRF ------- ------- ------- 1998 1997 1996 ------- ------- ------- (AMOUNTS IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................ 5,814 7,611 5,646 Adjustments to reconcile net income to net cash flows from operating activities: Minority interest......................................... 302 336 139 Depreciation, depletion and amortization.................. 9,112 9,073 7,965 Long-term liabilities, valuation allowances and deferred income taxes............................................ 681 (1,697) 491 Unsuccessful exploration costs............................ 1,131 1,426 1,172 Reserve for crude oil price changes....................... (933) (1,012) 1,571 (Gains) Losses on sales of assets......................... (768) (813) (778) Equity in income of affiliates (in excess of)/less than dividends received...................................... (159) 110 (38) Changes in operating assets and liabilities (Note 31)..... 1,502 837 (1,039) Other changes, net........................................ (102) 19 320 ------- ------- ------- Net Cash Flows From Operating Activities.................. 16,580 15,890 15,449 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITES Intangible assets and property, plant and equipment additions............................................... (16,950) (16,251) (11,721) Exploration costs directly charged to expense............. (1,084) (1,181) (955) Acquisitions of subsidiaries, net of cash acquired........ (713) (339) (1,636) Investments in equity affiliates and equity securities.... (1,354) (2,840) (978) Increase in long-term loans............................... (1,214) (2,048) (1,086) Proceeds from sale of intangible assets and property, plant and equipment..................................... 893 1,102 1,511 Proceeds from sale of subsidiaries, net of cash sold...... 923 1,326 31 Proceeds from sale of noncurrent investments.............. 1,678 442 1,278 Repayment of long-term loans.............................. 653 708 401 (Increase) decrease in short-term investments............. (2,336) (762) (292) ------- ------- ------- Net Cash Flows Provided by (Used in) Investing Activities............................................ (19,504) (19,843) (13,447) ======= ======= ======= CASH FLOWS FROM FINANCING ACTIVITIES Issuance of shares and repayment of TSDIRAs: Parent company's shareholders (Note 31)................. 111 498 205 Minority shareholders................................... 2 17 6 Cash dividend paid: Parent company's shareholders and holders of TSDIRAs.... (3,139) (2,554) (602) Minority shareholders................................... (150) (189) (249) Net issuance (repayment) of long-term debt (Note 31)...... 4,948 4,315 (1,695) Increase (decrease) in short-term borrowings and bank overdrafts.............................................. (2,014) (16,695) 3,749 Other changes, net........................................ (61) (60) (52) ------- ------- ------- Net Cash Flows Provided by (Used in) Financing Activities............................................ (303) (14,668) 1,362 ------- ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents...... (3,227) (18,621) 3,364 Effect of exchange rates on cash and cash equivalents..... 557 (727) 73 Cash and cash equivalents at the beginning of the year.... 12,652 32,000 28,563 ------- ------- ------- CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR............ 9,982 12,652 32,000 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid during the year for: Interest (net of amount capitalized)...................... 3,059 6,117 2,691 Income taxes.............................................. 1,948 1,919 953
The accompanying Notes are an integral part of these consolidated financial statements. F-4 7 TOTAL CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
COMMON SHARES ISSUED CUMULATIVE -------------------- PAID IN RETAINED REVALUATION TRANSLATION SHAREHOLDERS' NUMBER AMOUNT SURPLUS EARNINGS RESERVE ADJUSTMENTS TSDIRAS EQUITY ----------- ------ ------- -------- ----------- ----------- ------- ------------- (AMOUNTS IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) AS OF JANUARY 1, 1996.......... 235,049,629 11,753 10,672 32,850 477 (3,354) 190 52,588 Cash dividend(a)............. -- -- -- (602) -- -- -- (602) Stock dividend(a)............ 4,446,738 221 1,241 (1,462) -- -- -- -- Net income................... -- -- -- 5,646 -- -- -- 5,646 Issuance of common shares.... 1,632,275 82 308 -- -- -- -- 390 Change in revaluation reserve.................... -- -- -- -- (19) -- -- (19) Translation adjustments...... -- -- -- -- -- 1,255 -- 1,255 Repayment of TSDIRAs into common shares.............. 996,936 50 140 -- -- -- (190) -- ----------- ------ ------ ------ ---- ------ ----- ------ AS OF DECEMBER 31, 1996........ 242,125,588 12,106 12,361 36,432 458 (2,099) -- 59,258 Cash dividend(b)............. -- -- -- (2,554) -- -- -- (2,554) Net income................... -- -- -- 7,611 -- -- -- 7,611 Issuance of common shares.... 2,207,588 111 557 -- -- -- -- 668 Change in revaluation reserve.................... -- -- -- -- -- -- -- -- Translation adjustments...... -- -- -- -- -- 1,649 -- 1,649 ----------- ------ ------ ------ ---- ------ ----- ------ AS OF DECEMBER 31, 1997........ 244,333,176 12,217 12,918 41,489 458 (450) -- 66,632 Cash dividend(c)............. -- -- -- (3,139) -- -- -- (3,139) Net income................... -- -- -- 5,814 -- -- -- 5,814 Issuance of common shares.... 454,462 22 89 -- -- -- -- 111 Change in revaluation reserve.................... -- -- -- -- 7 -- -- 7 Translation adjustments...... -- -- -- -- -- (1,560) -- (1,560) ----------- ------ ------ ------ ---- ------ ----- ------ AS OF DECEMBER 31, 1998........ 244,787,638 12,239 13,007 44,164 465 (2,010) -- 67,865 ----------- ------ ------ ------ ---- ------ ----- ------
- --------------- (a) Dividend paid in 1996: MFRF 2,064 (FRF 8.70 per share and FRF 34.80 per TSDIRA). (b) Dividend paid in 1997: MFRF 2,554 (FRF 10.50 per share) (c) Dividend paid in 1998: MFRF 3,139 (FRF 13.00 per share) The accompanying Notes are an integral part of these consolidated financial statements. F-5 8 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFRF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) 1. ACCOUNTING POLICIES The consolidated financial statements of TOTAL and its subsidiaries (together, the "Company") have been prepared in accordance with French generally accepted accounting principles ("French GAAP"). They also include certain additional information required by the Securities and Exchange Commission of the United States. The financial statements of the consolidated subsidiaries, when prepared in accordance with different accounting principles generally accepted in their country of origin, have been restated. All material intercompany accounts, transactions and income have been eliminated. Certain previously reported amounts have been reclassified to conform with the current year presentation. A) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of all significant subsidiaries. The Company's interests in oil and gas joint ventures are proportionately consolidated. Investments in 20-50% owned significant companies are accounted for by the equity method. Companies in which ownership interest is less than 20%, but over which the Company has the ability to exercise significant influence are also accounted for by the equity method. Under this method, the investment represents the Company's share of the underlying equity of the investee (including income or loss for the period) and is reflected in the consolidated balance sheets in "Equity affiliates". The Company's share of the income or loss of its equity investees is reflected in the consolidated statements of income as "Equity in income (loss) of affiliates". B) FOREIGN CURRENCY TRANSLATION (i) MONETARY TRANSACTIONS Transactions denominated in foreign currencies are translated at the exchange rate prevailing when the transaction is realized. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at the end of the period. The resulting gains or losses are recorded in "Other income (expense)" in the consolidated statements of income. Translation differences arising on foreign currency loans which are specifically contracted to hedge the value of a net investment in a consolidated subsidiary or equity investee from the effect of exchange rates fluctuations are reflected as a cumulative translation adjustment to shareholders' equity. (ii) TRANSLATION OF FINANCIAL STATEMENTS DENOMINATED IN FOREIGN CURRENCIES All assets and liabilities of consolidated subsidiaries or of equity affiliates are translated into French francs on the basis of exchange rates at the end of the period. The consolidated statements of income and consolidated statements of cash flows are translated using the average exchange rates during the period. Foreign exchange differences resulting from such translation are recorded either in "Cumulative translation adjustments" (for the Company's share) or in "Minority interest, as appropriate." F-6 9 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) C) FINANCIAL INSTRUMENTS (i) INTEREST RATE AND FOREIGN CURRENCY AGREEMENTS The Company uses financial instruments for hedging purpose only, in order to manage its exposure to movements in interest rates and foreign exchange rates. - The Company enters into interest rate and foreign currency swap agreements to minimize its borrowing cost and reduce its exposure to interest rate and foreign currency changes. The differential between interest to be paid and interest to be received is recognized as interest expense or interest income, over the life of the hedged item. The Company can also use future rate agreements ("FRAs") and futures to adjust its interest rate positions. Under hedge accounting, changes in the market value of such contracts are recognized as interest expense or interest income in the same period as the gains and losses on the item being hedged are realized. - To reduce the effects of adverse foreign exchange rate movements, the Company can use forward exchange contracts and, in exceptional circumstances, currency options. Under hedge accounting, changes in the market value of these contracts are recognized in income in the same period as the gains and losses on the item being hedged. - Under hedge accounting, to the extent that a qualifying hedge is terminated or ceases to be effective as a hedge, gains and losses on the hedge are still amortized over the life of the underlying item and, to the extent that the hedged item is sold or matures, the related hedge is closed and gains or losses are included in earnings on a current basis. (ii) COMMODITY TRANSACTIONS - In connection with its trading activities, the Company uses hedging strategies to help moderate its exposure to fluctuations in the prices of crude oil, refined products and natural gas, using futures contracts, forward contracts on Brent and Dubai, contracts for difference, refined products swaps and natural gas swaps; options are rarely used. Gains and losses on these contracts are recognized or accrued as a component of the related transactions. - Under hedge accounting, to the extent that a qualifying hedge is terminated or ceases to be effective as a hedge, gains and losses on the hedge are still amortized over the life of the underlying item and, to the extent that the hedged item is sold or matures, the related hedge is closed and gains or losses are included in earnings on a current basis. - The Company also enters into contracts that are not specific hedges. Gains and losses resulting from changes in the market value of these types of contracts are recorded as follows: - forward contracts: unrealized losses are recognized currently while unrealized gains are deferred until the contract is closed out; - futures contracts: unrealized gains and losses are recognized in income or expensed currently. - In connection with the Company's refining and marketing activities, changes in the market value of commodity hedges of petroleum products inventories are accounted for as additions to or reductions in inventory. D) INTANGIBLE ASSETS Acquisition goodwill is amortized using the straight-line basis over periods not exceeding 30 years. F-7 10 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) E) PROPERTY, PLANT AND EQUIPMENT (i) OIL AND GAS EXPLORATION AND PRODUCING PROPERTIES The Company applies the successful efforts method of accounting for its oil and gas exploration and producing properties as follows: Concessions - Costs of acquiring unproved properties are capitalized and impairment is made in the absence of a commercial discovery. Geological and geophysical costs are expensed as incurred. Drilling in progress and wells where proved reserves have been discovered are capitalized. Costs of exploratory wells are capitalized if oil and gas reserves are found and either classified as proved within a year following completion of drilling or if additional exploration work is underway or planned. Otherwise, the costs of exploratory wells are charged to expense. - The costs of productive leasehold and other capitalized costs related to producing activities including tangible and intangible costs are amortized on a unit-of-production basis using the estimated proved reserves. Production sharing contracts The Company conducts oil and gas exploration and development with certain national oil companies under production sharing contracts which entitle the Company to a contractual portion of the oil and gas production to reimburse its operating, exploration and development costs (cost oil). In addition, the Company is generally entitled to share a portion of the net oil and gas revenues subject to the contract (profit oil). Costs incurred under these agreements are accounted for under the successful efforts method. (i) OTHER PROPERTY, PLANT AND EQUIPMENT Other property, plant and equipment are carried at cost with the exception of assets that have been acquired before 1976 whose cost has been revalued under French regulations by the French companies in their own financial statements and for foreign companies, in addition to their own accounts. The revaluation adjustment is included in shareholders' equity in "Revaluation reserve". This surplus is credited to income over the useful life of the related depreciable fixed assets using the corresponding rates of depreciation and depletion or upon disposal of the revalued assets. Fixed assets of significant value which are held under hire purchase and similar agreements are capitalized and depreciated using the straight-line method. The corresponding commitment is recorded as a liability. Assets and capitalized leases are depreciated by the straight-line method over their estimated useful life, as follows:
YEARS OF ESTIMATED USEFUL LIFE ------------------ Transportation equipment.................................... 5-20 Machinery, plant and equipment: Machinery, installations and tools........................ 5-10 Furniture and fixtures.................................... 5-10
F-8 11 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
YEARS OF ESTIMATED USEFUL LIFE ------------------ Refineries: Specialized complex installations......................... 8-20 Storage tanks............................................. 10-15 Pipelines and related equipment............................. 10-15 Buildings................................................... 10-50
Equipment subsidies are deducted from the cost of the related expenditures. Routine maintenance and repairs are charged to income as incurred. However, estimated costs of major refinery turnarounds are accrued over the period from the prior turnaround to the next planned turnaround. F) VALUATION OF LONG-LIVED ASSETS The Company periodically evaluates the carrying value of oil and gas properties by comparing net capitalized costs to undiscounted cash flows on a field-by-field basis. For those oil and gas properties for which the carrying amount exceeds the estimated future cash-flows, a loss is recognized based on the amount by which the carrying value exceeds the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on other long-lived assets, to be held and used, including goodwill and other intangibles assets, are determined in a similar manner. The measurement of the impairment losses to be recognized for assets to be disposed of is based on the difference between their fair market values and their carrying amounts. Fair market value is assessed primarily using the anticipated cash flows. G) OTHER INVESTMENTS Investees over which the Company does not have the ability to exercise significant influence (generally less than 20% owned) or subsidiaries excluded from consolidation after consideration of their materiality to the Company's operations are valued at acquisition cost less allowance for impairment in value. Certain investments were revalued in accordance with French regulations as described in paragraph E(ii). H) INVENTORIES Inventories are stated at the lower of cost or market value. Cost is determined on a first-in, first-out basis (FIFO) for crude oil and refined product inventories. Other inventories are stated primarily on a weighted average basis. I) OPERATING EXPENSES -- RESERVE FOR CRUDE OIL PRICE CHANGES Net income is presented according to the replacement cost method. Under this method, monthly consumption of petroleum inventories (crude oil and refined products) is valued at the replacement cost of crude oil and refined products over the month instead of the historical cost value computed month-by-month (FIFO or weighted production cost). When replacement cost exceeds historical cost value (positive inventory effect), a reserve for crude oil price changes is charged against operating income. This reserve is classified as a long-term liability. When the inventory effect is negative, the reserve for crude oil price changes is reversed up to the previously recorded amount. F-9 12 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) J) SHORT-TERM INVESTMENTS Short-term investments are valued at the lower of cost or market value. K) DISMANTLEMENT, REMOVAL AND ENVIRONMENTAL COSTS UPSTREAM The Company accrues for estimated dismantlement and site restoration costs of oil and gas exploration and producing properties on a unit-of-production basis. Estimated costs are included in "Other liabilities". OTHER SEGMENTS Remediation and other environmental costs are recorded when expenses are probable and can be reasonably estimated. Accruals which are included in "Other liabilities" are based on current legal requirements and existing technology. Estimated liabilities are not discounted to present value. L) DEFERRED TAXES The Company uses the liability method required by Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for income taxes", whereby deferred income taxes are recorded based upon differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities must be revalued to reflect new tax rates in the periods rate changes are enacted. M) SALES AND OPERATING EXPENSES Sales are recorded as products are shipped and services are rendered. Sales are presented net of excise taxes of MFRF 54,320 , MFRF 49,146 and MFRF 43,052, for the years ended December 31, 1998, 1997 and 1996, respectively. Taxes paid to Middle East producing countries are included in operating expenses for the portion which the Company held historically as concessions (Abu Dhabi-offshore, Abu Dhabi-onshore, Dubai-offshore, Oman and Abu Al Bu Khoosh). The corresponding amounts were MFRF 3,586, MFRF 6,136 and MFF 6,069 for the years ended December 31, 1998, 1997 and 1996, respectively. Costs and expenses are charged to income in the period in which the related sales are recognized. N) RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses are charged to income as incurred. The total of such costs expensed for the years ended December 31, 1998, 1997, and 1996 was MFRF 1,398, MFRF 1,289 and MFRF 1,157 respectively. O) INTEREST EXPENSE Interest charges relating to the financing of major projects under construction, including development works on oil and gas properties, are capitalized. All other interest is expensed currently. P) EMPLOYEE BENEFITS PENSION PLANS AND SPECIAL TERMINATION PLANS In accordance with the laws and practices of each country, the Company participates in employee benefit pension plans offering death and disability, retirement and F-10 13 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) special termination benefits. Those plans provide benefits of various types from flat currency amounts per year of service up to systems integrated with social security and multi-employer plans. Most of pension plans are funded with investments made in various instruments such as insurance contracts and securities. There is no significant investment in the Company's shares. For defined contribution plans and multi-employer plans, expenses correspond to the contributions paid. For defined benefit pension plans, accruals and prepaid expenses are determined using the projected unit credit method. Accruals and prepaid expenses are recorded in accordance with the prevailing accounting practice in each country. Adjustments to comply with the Company's accounting policies have been made when necessary. Special termination benefits are recorded on an accrual basis at the time the offer is accepted by the employees or their representatives and can be reasonably estimated. FUTURE LIFE INSURANCE AND HEALTH-CARE COSTS The Company sponsors several defined benefit postretirement plans providing health care and future life insurance for eligible retirees. The related cost is accrued for over the service life of the employees. Q) EARNINGS PER SHARE Earnings per common share are calculated by dividing net income by the weighted average number of common shares and common share equivalents outstanding during the period. 2. ACQUISITIONS AND DIVESTITURES YEAR ENDED DECEMBER 31, 1998 TOTAL MINATOME In September 1998, the Company sold its US wholly owned subsidiary, Total Minatome Corporation (TMC) to US based Energen Resources Corporation in association with Wesport Oil and Gas Company, Inc. Consideration received was MFRF 838 (US$142 million) and the Company posted a net gain of MFRF 21. RESISA In July 1998, the Company acquired for cash, 100% of Resisa, the Cepsa group's resins subsidiary in Spain. Total consideration was MFRF 328 (ESP 8,307 million). YEAR ENDED DECEMBER 31, 1997 CESTARI In February 1997, the Company has acquired in cash 76.5% of Cestari, a Brazilian manufacturer of components for the automotive industry, for MFRF 188. TOTAL PETROLEUM NORTH AMERICA In September 1997, the Company exchanged its 55.1% ownership interest in Total Petroleum North America ("TOPNA") for an 8% stake in Ultramar Diamond Shamrock ("UDS"). The UDS shares were recorded for an amount of MFRF 1,395 (US$231.2 million). ARGON In December 1997, the Company acquired the Argon Group (later renamed Totalgaz Argentina). Argon is the Argentine leader in liquefied petroleum gas (LPG) marketing. The aggregate consideration was MFRF 73 (in addition, loans were granted for MFRF 307). COGEMA In December 1997, the Company acquired an additional 4.54% ownership interest in Cogema for MFRF 876 in cash. F-11 14 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) YEAR ENDED DECEMBER 31, 1996 FAYETTE TUBULAR PRODUCTS In January 1996, the Company acquired all of the issued and outstanding shares of Fayette Tubular Product, Inc. for MFRF 784 in cash (US$153.6 million). Fayette designs, produces and sells automotive air conditioning hoses and tubes. KALON In September 1996, the Company acquired an additional 9.69% ownership interest in Kalon for MFRF 465 (L 57.7 million) in cash. All acquisitions have been accounted for under the purchase method. The results of operations of the acquired businesses are included in the consolidated financial statements from the dates of acquisition. The pro forma effect on consolidated results of operations, as if the transactions had occurred at the beginning of each respective year of acquisition has not been presented herein since the aggregate effect in each of the three years in the period ended December 31, 1998 is not material. 3. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The accompanying consolidated financial statements have been prepared in accordance with French GAAP, which differ in certain significant respects from those applicable in the United States ("US GAAP"). These differences have been reflected in the financial information given in paragraph N below and mainly relate to the following items. A) RESERVE FOR CRUDE OIL PRICE CHANGES The replacement cost method adopted by the Company to reflect the impact of price changes on crude oil and refined products sold and the related reserve for crude oil price changes would not be acceptable under US GAAP. B) INCOME TAXES The Company reported the effect of applying SFAS No 109 on the difference between the reported amount and the tax basis of oil and gas properties acquired before January 1, 1993 as an adjustment to intangible assets. Under US GAAP, the gross-up resulting from the deferred tax liability on nondeductible fixed assets would have been recorded as an addition to the corresponding oil and gas properties with the related depreciation expense included in operating income. C) RETIREE BENEFITS The Company has applied the provisions of SFAS No 87, "Employers' Accounting for Pensions", as follows: - the transition obligation or fund excess has been determined as of January 1, 1987 as being the difference between the liabilities accounted for under prior years' accounting policies and the funded status of the plans resulting from SFAS No 87 calculations. - the net transition obligation has been charged against shareholders' equity as of January 1, 1987. F-12 15 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) For US GAAP reporting purposes, the transition obligation or fund excess have been amortized using the greater of 15 years and the average residual active life of the employees covered by each plan. Also, SFAS No 87 requires the Company to recognize a minimum pension liability equal to the amount by which the actuarial present value of the accumulated benefit obligation exceeds the fair value of plans' assets. The Company adopted the provisions of SFAS No 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", for plans in the United States effective January 1, 1993 and for plans outside the United States effective January 1, 1995. Prior to the implementation of SFAS No 106, postretirement health care and life insurance benefits expense was not accrued and only recognized when claims were paid. The transition obligation has been amortized immediately. D) REVALUATION As described in Note 1, certain noncurrent assets have been revalued on the basis of their appraised value. US GAAP does not permit such revaluation. This US GAAP adjustment only affects shareholders' equity and this revaluation has no impact on net income. E) TREASURY SHARES Subject to authorizations given by shareholders' meetings, the Company can repurchase up to 10% of its common shares on the open market. The corresponding cost of treasury shares is included in short-term investments. Under US GAAP, such treasury shares should be reflected as a reduction of shareholders' equity. In addition, under US GAAP, gains on sales of treasury shares should be excluded from the determination of net income. F) EQUITY SECURITIES MARKETABLE EQUITY SECURITIES Under French GAAP, unrealized gains are not recognized and valuation allowances of marketable equity securities are generally determined based on year-end quotations. Under US GAAP (SFAS No 115, "Accounting for Certain Investments in Debt and Equity Securities") and except for securities classified as "held to maturity securities", unrealized holding gains and losses for "trading" and "available for sale" securities should be included in income or reported as an adjustment to shareholders' equity until realized, respectively. Gross realized gains and gross realized losses (determined on a FIFO basis) on sales of available-for-sale and trading securities were:
DECEMBER 31, ------------ 1998 1997 ---- ---- Gross realized gains Available-for-sale.......................................... 465 29 Trading................................................... -- 5 Gross realized losses Available-for-sale.......................................... -- -- Trading...................................................
F-13 16 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) The carrying amount of securities and their approximate fair value were as follows:
DECEMBER 31, 1998 ------------------------------------------ GROSS GROSS UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----- ---------- ---------- ----- Available-for-sale.................... 2,659 903 (360) 3,202 Trading............................... 14 -- -- 14
DECEMBER 31, 1997 ------------------------------------------ GROSS GROSS UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----- ---------- ---------- ----- Available-for-sale.................... 3,282 1,348 (78) 4,552 Trading............................... 82 1 -- 83
The Company does not hold debt securities that would be categorized as held-to-maturity. NON-PUBLICLY TRADED EQUITY SECURITIES Under US GAAP, previously recorded impairments may not be reversed in subsequent periods. G) INTANGIBLE ASSETS DEPRECIATION AND AMORTIZATION The Company does not amortize all intangible assets. Under US GAAP, all intangible assets should be amortized over the future periods estimated to be benefited, up to a maximum of 40 years. WRITE-DOWNS Under US GAAP, previously recorded write-downs for assets to be held and used may not be reversed in subsequent periods. H) PRESENT VALUE OF LOANS AND ADVANCES Non-interest or low-interest bearing loans and advances (for example housing loans made to the Company's employees) are not discounted whereas under US GAAP they should be recorded at their present value. I) LIFO INVENTORY TOPNA has followed the last-in, first-out method (LIFO) for financial reporting purposes. The inventories have been adjusted to the first-in, first-out method (FIFO) in the consolidated financial statements. Under US GAAP, the inventories would not have been restated to FIFO. As indicated in Note 2, the Company exchanged its stake in TOPNA for 8% in UDS. Consequently, TOPNA was no longer consolidated as of December 31, 1997. J) STOCK COMPENSATION The Company generally grants to its employees a discount from the market price for shares purchased pursuant to share subscription plans, share purchase plans and reserved capital increases. Accounting for this discount is not addressed by French GAAP and these transactions have no effect on net income. F-14 17 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) SFAS No 123, "Accounting for Stock-Based Compensation", established accounting and disclosure requirements using a fair-value based method of accounting for stock-based employee compensation plans. Adoption in the financial statements of SFAS No 123 is optional. The Company continues to apply Accounting Principles Board No 25, "Accounting for Stock issued to Employees" for US GAAP purposes. Compensation cost for share subscription plans, share purchase plans and capital increases reserved to employees, if any, is measured as the excess of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. However, pro forma disclosures as if the Company adopted the cost recognition requirements under SFAS No 123 are presented in paragraph 3-N(ii) below. K) ACCRUAL OF LOSS CONTINGENCIES The Company has recorded loss contingencies in relation to future insurance premium increases based on retrospective rating provisions in multiple-year insurance contracts. Under US GAAP (SFAS No 5 and Emerging Issues Task Force Issue No 93-6) such losses should only be accrued to the extent that they were probable or known at year-end. Accordingly, the corresponding reserves classified as "Long-term liabilities" in the accompanying balance sheets must be reversed and retrospective premium payable must be recognized in the period in which they are incurred. L) CONSOLIDATED STATEMENTS OF INCOME PRESENTATION OTHER INCOME (EXPENSE)/NON-RECURRING ITEMS Under US GAAP, depreciation and amortization of intangible assets (including goodwill) would have been deducted from operating income. In addition, miscellaneous valuation allowances or reversals included in "Other income (expense)" would have been deducted from or added to operating income as follows:
NET AMOUNT ---------- Deduction from operating income Year ended December 31, 1998.............................. (539) Year ended December 31, 1997.............................. (23) Year ended December 31, 1996.............................. (794)
Consolidated statements of income presented under US format are included in paragraph 3-N(ii) below. M) EARNINGS PER SHARE The Company reports earnings per share ("EPS") using the method described in Note 1. Under US GAAP (SFAS No 128, "Earnings per Share"), treasury shares would not have been considered as outstanding. Also, the dilutive effect of stock-based awards issued to employees would not be reflected in the basic EPS. N) CONVERSION TO US GAAP (i) NET INCOME AND SHAREHOLDERS' EQUITY The following is a summary of the estimated adjustments to net income and shareholders' equity for the years ended December 31, 1998, 1997 and 1996 which would be required if US GAAP had been applied F-15 18 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) instead of French GAAP. These US GAAP adjustments are presented net of the portion applicable to minority interest.
NET INCOME ------------------------ YEAR ENDED DECEMBER 31, ------------------------ 1998 1997 1996 ------ ------ ------ Amounts per accompanying consolidated financial statements................................................ 5,814 7,611 5,646 US GAAP ADJUSTMENTS Increase (decrease) due to: - Reserve for crude oil price changes..................... (871) (927) 1,431 - Pension plans........................................... 18 8 (58) - Treasury shares......................................... (5) -- (76) - Equity securities....................................... (112) (124) (43) - Intangible assets....................................... (18) (40) (62) - Present value of loans and advances..................... 102 (58) (6) - LIFO inventory.......................................... -- 140 (132) - Stock compensation...................................... (17) (142) (123) - Accrual of loss contingencies........................... -- 32 28 - Tax effect of US GAAP adjustments....................... 24 54 (50) ----- ----- ----- Amounts under US GAAP....................................... 4,935 6,554 6,555 ===== ===== =====
SHAREHOLDERS' EQUITY -------------------- YEAR ENDED DECEMBER 31, -------------------- 1998 1997 -------- -------- Amounts per accompanying consolidated financial statements................................................ 67,865 66,632 US GAAP ADJUSTMENTS Increase (decrease) due to: - Reserve for crude oil price changes..................... 31 902 - Retiree benefits........................................ 218 554 - Revaluation............................................. (465) (458) - Treasury shares......................................... (3,773) (1,521) - Equity securities....................................... 322 806 - Intangible assets....................................... (483) (465) - Present value of loans and advances..................... (100) (202) - Accrual of loss contingencies........................... 126 126 - Tax effect of US GAAP adjustments....................... (245) (187) - Cumulative translation adjustment of US GAAP adjustments............................................ (55) (8) ------ ------ Amounts under US GAAP....................................... 63,441 66,179 ====== ======
(II) US GAAP CONSOLIDATED STATEMENTS OF INCOME The consolidated statements of income for the years ended December 31, 1998, 1997 and 1996 presented below have been restated to reflect the principal differences between US GAAP and French GAAP discussed above. F-16 19 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
NET INCOME ----------------------------------------- YEAR ENDED DECEMBER 31, ----------------------------------------- 1998 1997 1996 ----------- ----------- ----------- Sales....................................... 159,614 191,085 176,577 Cost of sales............................... (136,981) (169,010) (154,209) Impairment of long-lived assets............. (584) (346) (477) Other operating expenses.................... (14,926) (11,247) (12,822) ----------- ----------- ----------- OPERATING INCOME............................ 7,123 10,482 9,069 Interest expense, net....................... (988) (738) (917) Dividend income............................. 326 597 339 Dividends on subsidiaries redeemable preferred shares.......................... (61) (60) (52) Other income (expense)...................... 789 719 895 Provision for income taxes.................. (2,358) (4,031) (2,691) Equity in income (loss) of affiliates....... 372 (58) 66 Minority interest........................... (268) (357) (154) ----------- ----------- ----------- NET INCOME.................................. 4,935 6,554 6,555 =========== =========== =========== BASIC EARNINGS PER SHARE.................... 20.5 27.1 27.4 =========== =========== =========== DILUTED EARNINGS PER SHARE.................. 20.4 26.9 27.3 SHARES USED IN COMPUTING BASIC EARNINGS PER SHARE Shares outstanding, January 1............... 244,333,176 242,125,588 235,049,629 TSDIRAs shares equivalents, January 1....... -- -- 996,936 Issuance of common shares................... 227,231 1,190,031 881,799 Stock dividend.............................. -- -- 2,223,374 Treasury shares............................. (3,857,038) (1,108,302) (102,561) ----------- ----------- ----------- Weighted average number of shares --basic... 240,703,369 242,207,317 239,049,177 =========== =========== =========== Dilutive effect of stocks plans............. 1,525,132 1,483,506 1,128,359 ----------- ----------- ----------- Weighted average number of shares -- diluted......................... 242,228,501 243,690,823 240,177,536 =========== =========== ===========
Had compensation cost for the Company's grants for stock-based compensation plans and transactions been determined consistent with SFAS No 123, the Company's net income and net income per share would approximate the following pro forma amounts:
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1998 1997 1996 --------------------- --------------------- --------------------- AS AS AS REPORTED PRO FORMA REPORTED PRO FORMA REPORTED PRO FORMA -------- --------- -------- --------- -------- --------- Net income...................... 4,935 4,886 6,554 6,524 6,555 6,541 Basic earnings per share........ 20.5 20.3 27.1 26.9 27.4 27.4
F-17 20 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for those options granted in 1998, 1997 and 1996.
1998 1997 1996 ----- ----- ----- Risk-free interest rate(%).................................. 3.9 4.2 4.1 Dividend yield(%)........................................... 1.9 3.4 4.0 Expected volatility(%)...................................... 29 23 23 Expected life (years)....................................... 5 3 3 Weighted average fair value of options granted (FRF)........ 24.01 24.01 35.85
SFAS No 123 does not apply to awards granted prior to 1995. (i) US GAAP CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Comprehensive Income In 1998, the Company adopted for US GAAP purposes SFAS No 130, "Reporting Comprehensive Income", which requires companies to report all changes in equity during a period, except those resulting from investment by owners and distribution to owners, in a financial statement for the period in which they are recognized. The Company has chosen to disclose comprehensive income, which encompasses net income, foreign currency translation adjustments, unrealized gains on losses on the Company's available for sale securities and the minimun pension liability adjustment, in the Consolidated Statement of Shareholders' Equity. Prior years have been restated to conform to the SFAS No 130 requirements. F-18 21 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
ACCUMULATED OTHER TOTAL COMPREHENSIVE COMMON PAID IN RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS' INCOME SHARES SURPLUS EARNINGS INCOME TSDIRA'S SHARES EQUITY ------------- ------ ------- -------- ------------- -------- -------- ------------- AS OF JANUARY 1, 1996........ 11,753 10,672 32,774 (3,465) 190 -- 51,924 Net income 1996.............. 6,555 6,555 6,555 Other comprehensive income, net of tax: Unrealized foreign currency translation adjustments.............. 1,215 Realized foreign currency translation adjustments.............. 44 Unrealized gains on equity securities............... 511 Gains on equity securities included in net income... (143) ------ Other comprehensive income... 1,627 1,627 1,627 ------ Comprehensive income....... 8,182 ====== Cash dividend.............. (602) (602) Stock dividend............. 221 1,241 (1,462) -- Issuance of common shares................... 82 308 390 Stock compensation(a)...... 114 114 Treasury shares(a)......... 151 151 Repayment of TSDIRAs....... 50 140 (190) -- ------ ------ ------ ------ ---- -- ------ AS OF DECEMBER 31, 1996...... 12,106 12,361 37,530 (1,838) -- -- 60,159 ====== ====== ====== ====== ==== == ======
- --------------- (a) Stock compensation cost and elimination of gains on treasury shares are reflected in net income above.
ACCUMULATED OTHER TOTAL COMPREHENSIVE COMMON PAID IN RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS' INCOME SHARES SURPLUS EARNINGS INCOME SHARES EQUITY ------------- ------ ------- -------- ------------- -------- ------------- AS OF JANUARY 1, 1997................. 12,106 12,361 37,530 (1,838) -- Net income 1997....................... 6,554 6,554 6,554 Other comprehensive income, net of tax: Unrealized foreign currency translation adjustments........... 1,286 Realized foreign currency translation adjustments........... 393 Unrealized gains on equity securities........................ 980 Gains on equity securities included in net income..................... (9) ------ Other comprehensive income.......... 2,650 2,650 2,650 ------ Comprehensive income................ 9,204 ====== Cash dividend....................... (2,554) (2,554) Issuance of common share............ 111 557 668 Stock compensation(a)............... 223 223 Treasury shares(a).................. (1,521) (1,521) ------ ------ ------ ------ ------ ------ AS OF DECEMBER 31, 1997............... 12,217 12,918 41,753 812 (1,521) 66,179 ====== ====== ====== ====== ====== ======
F-19 22 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
ACCUMULATED OTHER TOTAL COMPREHENSIVE COMMON PAID IN RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS' INCOME SHARES SURPLUS EARNINGS INCOME SHARES EQUITY ------------- ------ ------- -------- ------------- -------- ------------- AS OF JANUARY 1, 1998................. 12,217 12,918 41,753 812 (1,521) 66,179 Net income 1998....................... 4,935 4,935 4,935 Other comprehensive income, net of tax: Unrealized foreign currency translation adjustments........... (1,626) Realized foreign currency translation adjustments........... 19 Unrealized gains on equity securities........................ (80) Gains on equity securities included in net income..................... (384) Minimum pension liability adjustment........................ (344) ------ Other comprehensive losses.......... (2,415) (2,415) (2,415) Comprehensive income................ 2,520 ====== Cash dividend....................... (3,139) (3,139) Issuance of common share............ 22 89 111 Stock compensation(a)............... 17 17 Treasury shares(a).................. 5 (2,252) (2,247) ------ ------ ------ ------ ------ ------ AS OF DECEMBER 31, 1998............... 12,239 13,007 43,571 (1,603) (3,773) 63,441 ====== ====== ====== ====== ====== ======
- --------------- (a) Stock compensation cost and elimination of gains on treasury shares are reflected in net income above. DISCLOSURE OF ACCUMULATED OTHER COMPREHENSIVE INCOME BALANCES The components of other comprehensive income (loss) balances are as follows:
YEARS ENDED DECEMBER 31, --------------------------------------------------------------------------------------- 1998 1997 1996 --------------------------- --------------------------- --------------------------- TAX TAX TAX PRE-TAX EXP. NET PRE-TAX EXP. NET PRE-TAX EXP. NET AMOUNT (CREDIT) AMOUNT AMOUNT (CREDIT) AMOUNT AMOUNT (CREDIT) AMOUNT ------- -------- ------ ------- -------- ------ ------- -------- ------ Foreign currency translation Adjustments: Unrealized foreign currency translation adjustments....... (2,098) 14 (2,084) (848) (3) (851) (2,198) 17 (2,181) Realized foreign currency translation adjustments....... 19 -- 19 393 -- 393 44 -- 44 ------ --- ------ ----- -- ----- ------ -- ------ Net foreign currency translation adjustments..... (2,079) 14 (2,065) (455) (3) (458) (2,154) 17 (2,137) Unrealized gain (loss) on equity securities: Unrealized holding gain (loss)........................ 1,282 (92) 1,190 1,279 -- 1,279 442 -- 442 Reclassification adjustment..... (384) -- (384) (9) -- (9) (143) -- (143) ------ --- ------ ----- -- ----- ------ -- ------ Net unrealized gain (loss).... 898 (92) 806 1,270 -- 1,270 299 -- 299 Minimum pension liability adjustment...................... (354) 10 (344) -- -- -- -- -- -- ------ --- ------ ----- -- ----- ------ -- ------ Other comprehensive (loss) income.......................... (1,535) (68) (1,603) 815 (3) 812 (1,855) 17 (1,838) ====== === ====== ===== == ===== ====== == ======
F-20 23 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) O) ADDITIONAL US GAAP INFORMATION (i) INFORMATION ON EQUITY AFFILIATE US GAAP summarized information for COGEMA was as follows (100% amounts):
DECEMBER 31, ---------------- 1998 1997 ------ ------ BALANCE SHEET DATA Noncurrent assets........................................... 57,782 60,439 Current assets.............................................. 35,175 36,360 ------ ------ Total assets................................................ 92,957 96,799 ====== ====== Shareholders' equity and accumulated other comprehensive income.................................................... 17,795 15,995 Minority interest........................................... 846 786 Noncurrent liabilities...................................... 55,824 61,112 Current liabilities......................................... 18,492 18,906 ------ ------ Total liabilities and shareholders' equity.................. 92,957 96,799 ====== ======
YEAR ENDED DECEMBER 31, 1998 ------------ STATEMENT OF INCOME DATA Net sales................................................... 31,437 Operating income............................................ 686 Net income.................................................. 726
COGEMA was accounted for under the equity method as effective December 31, 1997. Hence, statement of income data have been only presented for the year ended December 31, 1998. (ii) OTHER US GAAP REQUIREMENTS RELATED PARTIES Under US GAAP, information provided in Note 25 would be presented on the face of the consolidated balance sheets and consolidated statements of income. (iii) DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES NATURE OF OPERATIONS The Company is an integrated oil and gas group with operations in more than 100 countries. The Company engages in all aspects of the petroleum industry including upstream and downstream operations and the trading of crude oil and petroleum products. The Company is also a significant producer of chemicals products for industrial and consumer use (rubber-based products and specialty chemicals: resins, inks, paints, adhesives). ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-21 24 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) (iv) RECENTLY ISSUED US ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999 and but cannot be applied retroactively. The Company has not yet determined the timing of adoption of SFAS No. 133 and has not yet quantified the accounting consequences on its hedging activities under this new standard. 4. INTANGIBLE ASSETS Intangible assets consist of the following:
DECEMBER 31, -------------------------------------- 1998 1997 ----------------------------- ----- ACCUMULATED COST AMORTIZATION NET NET ------ ------------ ----- ----- ACQUISITION GOODWILL Downstream...................................... 3,027 1,885 1,142 544 Chemicals....................................... 9,087 2,676 6,411 6,625 Other........................................... 114 114 -- 12 ------ ----- ----- ----- Total Acquisition Goodwill................. 12,228 4,675 7,553 7,181 OTHER INTANGIBLES Goodwill........................................ 1,499 530 969 813 Patents and trademarks.......................... 673 507 166 100 Entrance fee.................................... 163 103 60 55 Other(a)........................................ 2,523 1,685 838 1,225 ------ ----- ----- ----- Total Other Intangibles.................... 4,858 2,825 2,033 2,193 ------ ----- ----- ----- Total(b).............................. 17,086 7,500 9,586 9,374 ====== ===== ===== =====
- --------------- (a) Further to the implementation of SFAS 109, certain assets of the upstream segment acquired before January 1, 1993, whose depreciation was not tax deductible were revaluated. Such revaluation (gross-up) is equal to the value of the tax deduction attached to the assets should their depreciation have been deductible. The opposite entry of the grossing-up of the assets, which had no impact on the net income, has been recorded in deferred tax liabilities.
DECEMBER 31, ------------- 1998 1997 ---- ----- Cost................................................. 773 1,035 Accumulated amortization............................. (502) (415) ---- ----- Net........................................ 271 620 ==== =====
F-22 25 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) (b) As of December 31, 1997, aggregate cost and accumulated amortization amounted to MFRF 16,339 and MFRF 6,965 respectively. 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment and the related accumulated depreciation, depletion and amortization after effect of legal revaluation are as follows:
DECEMBER 31, ----------------------------------------- 1998 1997 -------------------------------- ------ ACCUMULATED DEPRECIATION, DEPLETION AND COST AMORTIZATION NET NET ------- ------------- ------ ------ OIL AND GAS EXPLORATION AND PRODUCING PROPERTIES Proved properties............................. 56,702 29,214 27,488 25,323 Unproved properties........................... 938 276 662 727 Work in progress.............................. 11,050 74 10,976 9,565 ------- ------ ------ ------ Total Oil and Gas Exploration and Producing Properties............................... 68,690 29,564 39,126 35,615 OTHER PROPERTY, PLANT AND EQUIPMENT Transportation equipment...................... 1,409 390 1,019 1,023 Machinery, plant and equipment................ 22,868 16,672 6,196 6,258 Land.......................................... 3,499 168 3,331 3,302 Buildings..................................... 16,024 8,337 7,687 8,040 Construction in progress...................... 1,652 4 1,648 1,608 Other......................................... 18,021 11,645 6,376 5,554 ------- ------ ------ ------ Total Other Property, Plant and Equipment................................ 63,473 37,216 26,257 25,785 ------- ------ ------ ------ Total(a).............................. 132,163 66,780 65,383 61,400 ======= ====== ====== ======
- --------------- (a) As of December 31, 1997, aggregate cost and accumulated depreciation, depletion and amortization amounted to MFRF 127,525 and MFRF 66,125, respectively. Property, plant and equipment presented above include the following amounts for facilities and equipment leases that have been capitalized:
DECEMBER 31, ----------------------------------- 1998 1997 ---------------------------- ---- ACCUMULATED DEPRECIATION, DEPLETION, AND COST AMORTIZATION NET NET ----- -------------- --- ---- Machinery, plant and equipment...................... 4,312 4,273 39 94 Buildings........................................... 860 546 314 374 ----- ----- --- --- Total..................................... 5,172 4,819 353 468 ===== ===== === ===
Amortization expense of capital lease assets amounted to MFRF 74 in 1998, MFRF 60 in 1997, MFRF 71 in 1996. F-23 26 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 6. EQUITY AFFILIATES: INVESTMENTS AND LOANS The Company's share in the equity and income or loss of equity affiliates is summarized below:
DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------------- --------------------------------- 1998 1997 1998 1997 1998 1997 1996 ----- ----- ------ ------ --------- --------- --------- EQUITY EQUITY EQUITY % % EQUITY EQUITY IN INCOME IN INCOME IN INCOME OWNED OWNED VALUE VALUE (LOSS) (LOSS) (LOSS) ----- ----- ------ ------ --------- --------- --------- COGEMA.............................. 15.00 15.00 2,429 2,396 110 -- -- Ocensa.............................. 15.20 15.20 572 597 78 72 26 Gisco............................... 10.00 10.00 532 13 37 13 -- SARA................................ 25.00 25.00 401 373 49 12 33 Cie Francaise du Methane Holding.... 15.00 -- 399 -- 23 -- -- Qatargas LNG........................ 10.00 10.00 358 156 13 8 -- Abu Dhabi Gas Industries Ltd........ 15.00 15.00 356 379 -- -- -- Statoil Thailande Limited........... 33.33 -- 244 -- -- -- -- I.P.C............................... 23.75 23.75 153 164 -- -- -- Trapil.............................. 34.72 34.72 147 156 33 22 20 Ruwais Fertilizer Industries........ 33.33 33.33 141 150 -- -- -- Gaz de Strasbourg................... 24.98 49.88 93 189 5 11 -- Depots petroliers de Fos............ 25.69 25.69 117 131 (14) (14) (15) Graficart........................... 47.98 -- 61 -- 5 -- -- POHOL............................... 10.00 10.00 38 40 -- -- -- A.D.P.C............................. 23.75 23.75 28 28 -- -- -- Other............................... (136) (152) 33 (182) 2 ----- ----- --- ---- --- 5,933 4,620 372 (58) 66 ----- ----- --- ---- --- Loans..................... 3,314 3,871 ----- ----- Total..................... 9,247 8,491 ===== =====
F-24 27 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 7. OTHER INVESTMENTS As of December 31, 1998 and 1997, other investments consisted of:
DECEMBER 31, --------------------------------- 1998 1997 ------------------------- ----- VALUATION COST ALLOWANCE NET NET ----- --------- ----- ----- PUBLICLY TRADED EQUITY SECURITIES Ultramar Diamond Shamrock......................... 1,310 -- 1,310 1,395 Societe Generale.................................. 499 -- 499 499 Eiffage........................................... 182 -- 182 83 Paribas........................................... 160 -- 160 410 Compagnie Generale de Geophysique................. 131 -- 131 147 Societe Centrale des AGF.......................... 128 -- 128 356 Technip........................................... 56 -- 56 56 Unibail........................................... -- -- -- 153 Other............................................. 52 4 48 108 ----- --- ----- ----- Total publicly traded.......................... 2,518 4 2,514 3,207 ----- --- ----- ----- Market value of publicly traded equity securities... -- -- 3,019 4,459 ===== ===== OTHER EQUITY SECURITIES Wepec............................................. 296 -- 296 296 Oman LNG LLC...................................... 163 -- 163 16 Bianco-Tramier-Tardy.............................. 97 75 22 22 Nogat............................................. 92 -- 92 98 Gasandes Argentina................................ 82 -- 82 -- Oleoducto de Colombia............................. 76 -- 76 89 Totalgaz Argentina(a)............................. -- -- -- 73 Graficart(b)...................................... -- -- -- 61 Other(c).......................................... 2,890 905 1,985 1,949 ----- --- ----- ----- Total other equity securities.................. 3,696 980 2,716 2,604 ----- --- ----- ----- Total(d)..................................... 6,214 984 5,230 5,811 ===== === ===== =====
- --------------- (a) This subsidiary acquired in December 1997 was consolidated effective January 1, 1998. (b) Investment reported as "Equity affiliates: investments and loans" (note 6) as of December 31, 1998. (c) Investments in subsidiaries excluded from consolidation after considering their materiality to the Company's operations account for MFRF 1,213 and MFRF 1,222 as of December 31, 1998 and 1997, respectively. (d) As of December 31, 1997, the aggregate cost of other investments and valuation allowances amounted to MFRF 6,847 and MFRF 1,036, respectively. F-25 28 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 8. OTHER NONCURRENT ASSETS The table below sets forth the main items included under this caption in the consolidated balance sheets as of December 31, 1998 and 1997:
DECEMBER 31, --------------------------------- 1998 1997 ------------------------- ----- VALUATION COST ALLOWANCE NET NET ----- --------- ----- ----- Deferred income taxes(a)............................... 1,027 -- 1,027 1,008 Loans and advances(b).................................. 3,517 (820) 2,697 3,526 Other.................................................. 968 -- 968 955 ----- ---- ----- ----- Total........................................ 5,512 (820) 4,692 5,489 ===== ==== ===== =====
- --------------- (a) Note 23. (b) Excluding loans to equity affiliates (Note 6). 9. INVENTORIES As of December 31, 1998 and 1997, inventories consisted:
DECEMBER 31, ---------------- 1998 1997 ------ ------ Crude oil and natural gas................................... 1,774 2,390 Refined petroleum products and products in process.......... 4,960 7,057 Chemical products........................................... 4,344 3,948 Supplies and other inventories.............................. 1,141 1,155 ------ ------ Total............................................. 12,219 14,550 ====== ======
10. ACCOUNTS RECEIVABLE The breakdown between accounts and notes receivable is the following:
DECEMBER 31, --------------------------------------- 1998 1997 ----------------------------- ------ VALUATION COST ALLOWANCE NET NET ------ --------- ------ ------ Receivables from customers.................... 21,053 (1,646) 19,407 21,835 Notes receivable.............................. 1,078 -- 1,078 1,536 ------ ------ ------ ------ Total............................... 22,131 (1,646) 20,485 23,371 ====== ====== ====== ======
- --------------- (a) As of December 31, 1997, aggregate cost and valuation allowance amounted to MFRF 24,925 and MFRF 1,554, respectively. F-26 29 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 11. PREPAID EXPENSES AND OTHER CURRENT ASSETS The detail of these captions as of December 31, 1998 and 1997 is shown below:
DECEMBER 31, -------------------------------------- 1998 1997 ----------------------------- ----- VALUATION COST ALLOWANCE NET NET ------ --------- ------ ----- Advances to suppliers(a)....................... 830 -- 830 1,055 Current accounts(a)............................ 2,623 (2) 2,621 1,905 Receivables from States (including taxes and duties)...................................... 3,481 -- 3,481 1,695 Prepayments and accrued income................. 1,041 -- 1,041 969 Deferred income taxes(b)....................... 333 -- 333 367 Other.......................................... 2,771 (45) 2,726 2,809 ------ --- ------ ----- Total................................ 11,079 (47) 11,032 8,800 ====== === ====== =====
- --------------- (a) Including advances to and current accounts with related parties (Note 25). (b) Note 23. 12. SHORT-TERM INVESTMENTS Short-term investments consist of:
DECEMBER 31, ---------------------------------- 1997 1998 --------------- --------------- MARKET MARKET NET VALUE NET VALUE ----- ------ ----- ------ Marketable securities........................... 4,064 4,010 1,744 1,984 Other........................................... 33 -- 29 -- ----- ----- ----- ----- Total................................. 4,097 4,010 1,773 1,984 ===== ===== ===== =====
13. SHAREHOLDERS' EQUITY A) COMMON SHARES DESCRIPTION The Company's common shares, par value of FRF 50, are the only class of shares. Shares may be held in either bearer or registered form. However, the shares owned by the French State must be registered. Holders of the Company's shares have a preemptive right to subscribe for additional shares issued by the Company on a pro rata basis according to their respective holding of shares. Each share confers to its holder the right to one vote at the Shareholders' Meeting. However, all fully paid-up shares registered in the name of the same shareholder for at least two years, and any shares issued to such shareholders without consideration in registered form in connection with any increase in the registered capital of the Company by way of capitalization of reserves, of profits or of premiums, carry double voting rights. The merger of the Company has no impact on such double voting rights, which may be exercised at the meeting of shareholders of the absorbing company if so provided for in the bylaws of such company. F-27 30 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) At a Shareholders' Meeting, the number of single voting rights which may be exercised by a shareholder acting on his own behalf or by proxy, with respect to the shares held directly and indirectly and the proxies given to such shareholder, may not exceed 10% of the total number of voting rights attached to the Company's shares. However, should the shareholder possess and/or represent double voting rights, the resulting additional voting rights, and only these, may be exercised in excess of the limit so defined, provided that the total voting rights exercised by such shareholder shall not exceed 20% of the total voting rights attached to the Company's shares. The above restrictions shall become null and void if any individual or entity, acting alone or in cooperation with one or more individuals or entities, holds at least two thirds of the total registered capital of the Company following a public tender offer for all of the Company's shares. PRINCIPAL SHAREHOLDERS Percentages have been determined in accordance with shares issued and outstanding at year-end and existing voting rights, respectively.
DECEMBER 31, 1998 -------------------- % OF STOCK % OF OWNERSHIP VOTING (B) RIGHTS ---------- ------ 1. Principal shareholders represented within the Board of Directors as of December 31, 1998 AGF................................................... 0.96 1.11 COGEMA................................................ 5.50 10.31 Societe Generale...................................... 1.84 2.53 Paribas............................................... 0.50 0.92 2. Company's Employees................................... 2.87 4.50 3. Other registered shareholders......................... 0.91 1.17 ----- ----- Total.......................................... 12.58 20.54 Company's holdings TOTAL............................................... 1.82 0.00 TOTAL Nucleaire..................................... 0.86 0.00 ----- ----- Total.......................................... 2.68 0.00 Other shareholders....................................... 84.75 79.46 (among which ADR(a) holders)............................. 11.48 10.76
- --------------- (a) American depositary receipt (b) As of December 31, 1998, the Company owned 6,548,894 of its own shares (2.68%). In addition to the legal obligation to notify the Company of the acquisition of shares in excess of certain percentages of its stock, any individual or legal entity who becomes the owner, directly or indirectly, of shares, voting rights or any securities convertible or otherwise exchangeable for shares representing 1% of the Company's stock or any multiple thereof must notify the Company thereof within fifteen days of exceeding each of these levels, by registered mail, stating the number of securities held and requesting acknowledgement of receipt (Article 12 of the Statuts). Failure to make this disclosure as explained in the foregoing paragraph results in the withholding of voting rights at Shareholders' Meetings, in the manner prescribed by law, in respect of shares exceeding the fraction which should have been disclosed, if at any such Meeting the failure to disclose has been noted and if one or more shareholders holding in the aggregate not less than 3% of the equity or voting rights so request. F-28 31 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Any individual or legal entity must also notify the Company in the manner and within the time limits set forth above when the direct or indirect holding thereof falls below each of the levels mentioned. AUTHORIZED CAPITAL
COMMON SHARES ------------- As of January 1, 1996....................................... 649,459,740 Increase (Decrease) in authorized shares.................... 6,540,076 ----------- As of December 31, 1996..................................... 655,999,816 Increase (Decrease) in authorized shares.................... (217,598) ----------- As of December 31, 1997..................................... 655,782,218 Increase (Decrease) in authorized shares.................... 4,091,809 ----------- As of December 31, 1998..................................... 659,874,027 ===========
SHARES ISSUED AND OUTSTANDING
COMMON SHARES ------------- As of January 1, 1996....................................... 235,049,629 Issued in connection with: Capital increase reserved to employees.................... 1,244,892 Stock dividend............................................ 4,446,748 Exercise of employees share subscription options.......... 387,383 Repayment of TSDIRAs...................................... 996,936 ----------- As of December 31, 1996..................................... 242,125,588 Issued in connection with: Capital increase reserved to employees.................... 1,630,756 Exercise of employees share subscription options.......... 576,832 ----------- As of December 31, 1997................................... 244,333,176 Issued in connection with: Exercise of employees share subscription options.......... 454,462 ----------- As of December 31, 1998..................................... 244,787,638 ===========
B) PAID-IN SURPLUS In accordance with French law, the paid-in surplus corresponds to share premiums of the parent company which can be capitalized or used to offset losses if the legal reserve has reached its minimum required level (see C) below). The amount of the paid-in surplus may also be distributed subject to taxation unless the unrestricted reserves of the parent company are distributed prior to or simultaneously with this item. F-29 32 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) C) RETAINED EARNINGS As of December 31, 1998, consolidated retained earnings consist of:
AMOUNT ------ Parent company: Legal reserve............................................. 1,222 Unrestricted reserves..................................... 23,340 ------ Total parent company...................................... 24,562 Consolidated subsidiaries................................... 19,329 Equity affiliates........................................... 273 ------ Total retained earnings..................................... 44,164 ======
Under French law, 5% of net income must be transferred to the legal reserve until the legal reserve reaches 10% of the capital par value. This reserve cannot be distributed to the shareholders other than in liquidation but can be used to offset losses. If wholly distributed, the unrestricted reserves of the parent company would be taxed for an approximate amount of MFRF 753 as of December 31,1998. The individual financial statements of consolidated subsidiaries and equity affiliates include reserves which are legally restricted as to disposal. Based upon the Company's ownership percentages, these amounted to MFRF 5,714 as of December 31, 1998. A)PERPETUAL SUBORDINATED SECURITIES REPAYABLE IN SHARES ("TSDIRAS") On June 28, 1990, the Company issued 8,804,204 TSDIRAs with a par value of FRF 761 each for an aggregate par value of FRF 6,699,999,244. These securities were subscribed for by the French State in connection with the Company's acquisition of assets from the Orkem Group. In the second half of 1990, the French State transferred 854,240 TSDIRAs to Groupe des Assurances Nationales (GAN) and 1,971,000 TSDIRAs to Assurances Generales de France (AGF). In May 1994, the French State transferred an additional 467,290 TSDIRAs to AGF and, in December 1994, AGF transferred 362,950 TSDIRAs to COGEMA. On December 28, 1994, the Company repurchased all of the 1,106,225 remaining TSDIRAs held by the French State at a price of FRF 1,142.96 per TSDIRA, that is FRF 285.74 per equivalent share. Such TSDIRAs have been cancelled as provided in the issue agreement. All TSDIRAS outstanding as of December 31, 1995 were repaid in shares in 1996 through various capital increases. B) REPAYMENT The duration of TSDIRAs was equal to that of the Company. Each TSDIRA was repayable at the holders' discretion on the basis of four shares of the Company for one TSDIRA on the following terms: - upon each new issuance of shares of the Company for cash, the maximum number of shares of the Company that could be obtained in repayment of TSDIRAs was limited to 35/65ths of the number of new shares subscribed by persons other than the French State, after deduction of new shares of the Company effectively subscribed for by the French State; F-30 33 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) - upon each new issuance of shares of the Company reserved for investors other than the French State, subscribed in cash or in kind, and upon each new issuance of shares of the Company resulting from conversion, exchange, repayment, exercise of a warrant or stock option or otherwise subscribed by investors other than the French State, the maximum number of shares of the Company that could be obtained in repayment of the perpetual subordinated securities repayable in shares was limited to 35/65ths of the number of new shares issued; - in case of liquidation of the Company, the perpetual subordinated securities repayable in shares were repaid in shares. 14. SUBSIDIARIES REDEEMABLE PREFERRED SHARES These non-voting shares were issued by two North American subsidiaries: - TOTAL Energy Resources Finance, Inc. (TERFIN), (USA) - TOTAL Energy Capital, Inc. (TECI), (USA). TOTAL Energy Resources Finance, Inc. (TERFIN) and Total Energy Capital, Inc. (TECI), wholly-owned subsidiaries of the Company, have been established for the purpose of issuing Auction Preferred Stock (APS). In 1987, TERFIN issued $100 million of APS and in 1988 TECI issued $150 million of APS. The shares of APS are adjustable rate securities with dividend rates set at auction every 49 days. Dividends are cumulative from date of issue and are payable every 49 days in arrears. The effective dividend rates of the APS were 4% and 4% in 1998 and 1997, respectively. The shares may be redeemed at the option of TERFIN and TECI at their liquidation preference ($100 million for the TERFIN APS and $150 million for the TECI APS) plus accumulated and unpaid dividends. The shares become mandatorily redeemable if certain required coverages are not met, if dividends paid are not eligible for the dividend-exclusion deduction under United States tax law or if TECI must register as an investment company under the Investment Company Act of 1940, as amended. During any period that accumulated dividends payable are unpaid or that TERFIN and TECI have not redeemed shares when required, holders of a majority of the APS, voting as a single class, can elect a majority of the board of directors of the respective companies. The assets of TERFIN and TECI are not available to satisfy claims of the creditors of the Company and its affiliates while shares of APS are outstanding. Balances at the end of periods were as follows:
DECEMBER 31, --------------------------------------------- 1998 1997 --------------------- -------------------- IN MILLIONS IN MILLIONS OF LOCAL OF LOCAL CURRENCY MFF CURRENCY MFF ------------ ----- ----------- ----- TERFIN....................................... US$100 562 US$100 599 TECI......................................... US$150 844 US$150 898 ----- ----- Total.............................. 1,406 1,497 ===== =====
F-31 34 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) A) CHANGES IN SUBSIDIARIES REDEEMABLE PREFERRED SHARES
AMOUNT ------ December 31, 1997........................................... 1,497 Foreign currency translation effect......................... (91) ----- December 31, 1998........................................... 1,406 =====
B) DIVIDENDS ON SUBSIDIARIES REDEEMABLE PREFERRED SHARES
YEAR ENDED DECEMBER 31, -------------------- 1998 1997 1996 ---- ---- ---- Redeemable preferred shares issued by: TERFIN.................................................... 24 24 21 TECI...................................................... 37 36 31 -- -- -- Total............................................. 61 60 52 == == ==
F-32 35 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 15. EMPLOYEE BENEFITS The funded status of defined benefits pension plans and other than pension benefits plans presented and determined under US GAAP was as follows (prior years data have been restated in accordance with SFAS No 132 "Employers' Disclosures about Pensions and other Postretirements Benefits"):
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------- -------------- 1998 1997 1998 1997 ------ ------ ----- ----- CHANGE IN BENEFIT OBLIGATION Benefit Obligation at beginning of year............ 9,409 8,362 360 390 Service Cost....................................... 233 252 7 7 Interest cost...................................... 622 596 22 22 Plan participants contributions.................... 54 49 -- -- Business combinations.............................. -- 343 -- -- Disposal........................................... -- -- (4) (83) Curtailment........................................ 90 (111) -- -- Actuarial loss (gain).............................. 240 348 (21) 34 Benefits paid...................................... (525) (559) (15) (15) Others (foreign currency translation).............. (276) 129 (9) 5 ------ ------ ---- ---- Benefit Obligation at end of year.................. 9,847 9,409 340 360 CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year..... (8,042) (4,055) -- -- Actuarial return on plan assets.................... (836) (975) -- -- Company contributions(a)........................... (110) (2,532) -- -- Plan participants contributions.................... (55) (49) -- -- Business combinations.............................. -- (473) -- -- Benefits paid...................................... 349 158 -- -- Others (foreign currency translation).............. 35 (116) -- -- ------ ------ ---- ---- Fair value of plan assets at end of year........... (8,659) (8,042) -- -- Funded status of the plan.......................... 1,188 1,367 340 360 Unrecognized actuarial loss........................ 756 467 6 (13) Unrecognized actuarial prior service cost.......... 59 73 17 19 Unrecognized actuarial transition obligation....... (17) (35) -- -- ------ ------ ---- ---- Accrued benefit cost............................... 1,986 1,872 363 366
- --------------- (a) In 1997, the Company covered certain French employee pension benefit plans through insurance companies for an amount of MFRF 2,441. Further to this externalization, employee benefits provision was reduced by an amount of MFRF 2,441 and the funding of insurance premium was charged to expenses. As a consequence, the externalization had no impact on net income. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligation in excess of plan assets were MFRF 3,389, MFRF 3,209, and MFRF 487, respectively, as of December 31, 1998 and MFRF 3,271, MFRF 3,113, and MFRF 512, respectively, as of December 31, 1997. F-33 36 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Amounts recognized in the balance sheets consist of:
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------- -------------- 1998 1997 1998 1997 ------ ------ ----- ----- Accrued benefit liability (including Minimum Liability Adjustments -- MLA)...................... 3,127 2,712 363 366 Prepaid benefit cost................................. (784) (840) -- -- ----- ----- ---- ---- Net amount accrued for under US GAAP................. 2,343 1,872 363 366 ----- ----- ---- ---- Accumulated other comprehensive income (MLA)......... (357) -- -- -- ----- ----- ---- ---- Net amount recognized under US GAAP.................. 1,986 1,872 363 366 ===== ===== ==== ====
Net accruals as of December 31, 1998 and 1997 in the accompanying consolidated balance sheets can be compared with balances determined under US GAAP as follows:
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, ---------------- -------------- 1998 1997 1998 1997 ------ ------ ----- ----- Net amount accrued for under US GAAP................. 2,343 1,872 363 366 - Excess funding of plans recognized in income only when paid back to the Company............ 451 497 -- -- - Impacts of transition obligation, of prior service cost and of actuarial gains recognized with a different timing under local regulations................................... 90 58 (1) -- - Minimum liability adjustment (MLA)............ (357) -- -- -- ----- ----- ---- ---- Net amount accrued for under French GAAP in the accompanying consolidated balance sheet............ 2,527 2,427 362 366 ===== ===== ==== ==== - Accrued....................................... 2,964 2,850 362 366 - Prepaid....................................... (437) (423) -- --
COMPONENTS OF NET PERIODIC BENEFIT COST Net periodic cost under US GAAP (after minority interests) was as follows:
PENSION BENEFITS OTHER BENEFITS ----------------------- ----------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ----------------------- ----------------------- 1998 1997 1996 1998 1997 1996 ----- ----- ----- ----- ----- ----- Service Cost(a)............................... 233 252 259 7 7 13 Expected interest cost........................ 622 596 546 22 22 25 Expected return on plan assets................ (663) (403) (278) -- -- -- Amortization of unrecognized prior service cost........................................ (6) (7) 3 (2) (1) (1)
F-34 37 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
PENSION BENEFITS OTHER BENEFITS ----------------------- ----------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ----------------------- ----------------------- 1998 1997 1996 1998 1997 1996 ----- ----- ----- ----- ----- ----- Amortization of actuarial net loss (gain)..... 64 37 (89) -- -- -- Amortization of net transition obligation..... 23 24 26 -- -- -- Curtailments/Settlements...................... 91 (91) 219 1 (3) ---- ---- ---- ---- ---- ---- Net periodic benefit cost..................... 364 408 686 28 25 37 ==== ==== ==== ==== ==== ====
- --------------- (a) In 1998, service cost is presented free from plan participants contributions. 1997 and 1996 data have been restated for comparison purposes. Annual cost under French GAAP was MFRF 390, MFRF 422 and MFRF 614 for the years ended December 31, 1998, 1997 and 1996, respectively. The difference between these amounts and the annual cost under US GAAP primarily results from the difference in timing of amortization of the initial transition liability and of actuarial gains and losses. In addition, certain companies do not recognize the excess funding. WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31,
PENSION BENEFITS OTHER BENEFITS ------------------------- ------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------------- ------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Discount rates................... 7.1% 7.4% 6.6% 6.6% Future salary increases.......... 4.0% 4.0% 4.0% 4.0% Expected long-term return on assets......................... 8.1% 8.0% -- -- Residual active life............. 10-25 years 10-25 years 10-25 years 10-25 years
Regarding the other benefits plans, the assumed increase of health care costs is a fixed amount per person agreed upon between the employer and the trade unions under the existing cost sharing agreements which represent 2.5% for 1999. This percentage will decrease in the future as these increases are fixed in French Francs. For other benefits plans, a one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-PERCENTAGE- 1-PERCENTAGE- POINT POINT INCREASE DECREASE ------------- ------------- Effect on total of service and interest cost components.... 4 (4) Effect on the postretirement benefit obligation............ 46 (42)
F-35 38 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 16. OTHER LIABILITIES
DECEMBER 31, -------------- 1998 1997 ----- ----- Litigation and accrued penalty claims....................... 595 388 Major refinery turnarounds.................................. 613 572 Site restoration and environmental contingencies............ 1,627 1,516 Other....................................................... 2,716 2,796 ----- ----- Total....................................................... 5,551 5,272 ===== =====
17. DEBT A) LONG-TERM DEBT
DECEMBER 31, ----------------------------------------------------------- 1998 1997 ---------------------------- ---------------------------- SECURED UNSECURED TOTAL SECURED UNSECURED TOTAL ------- --------- ------ ------- --------- ------ Debenture loans(a)............. 5 16,052 16,057 7 13,874 13,881 Capital lease obligations...... 418 -- 418 567 -- 567 Banks and other: Fixed rate................... 25 444 469 52 414 466 Floating rate................ 9 6,966 6,975 22 6,806 6,828 --- ------ ------ --- ------ ------ 34 7,410 7,444 74 7,220 7,294 --- ------ ------ --- ------ ------ Total................ 457 23,462 23,919 648 21,094 21,742 === ====== ====== === ====== ======
- --------------- (a) Including two loans issued by the parent company which are presented as debenture loans. F-36 39 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Debenture loans can be analyzed as follows:
DECEMBER 31, ---------------- 1998 1997 ------ ------ PARENT COMPANY 6% Notes 1993-2000 (Swiss francs 150 million)(a)............ 553 589 9 1/2% Bonds 1991-1998 (French francs 750 million)(a)....... -- 789 8 1/2% Bonds 1991-2001 (German marks 200 million)(a)........ 711 758 7 1/8% Bonds 1991-2001 (Swiss francs 100 million)(a)........ 405 432 8 1/4% Bonds 1992-2002 (German marks 300 million)(a)........ 1,015 1,081 8 1/5% Bonds 1995-2005 (French francs 500 million) (a)...... 547 582 7.62% Single Coupon Bonds 1995-2005 (French francs 950 million)(a)............................................... 1,040 1,108 7 1/2% Bonds 1995-2005 (French francs 400 million)(a)....... 438 467 6.90% Bonds 1996-2006 (French francs 990 million)(a)........ 1,103 1,175 6 3/4% Bonds 1996-2008 (French francs 950 million)(a)....... 1,029 1,096 6 3/4% Bonds 1996-2008 (French francs 800 million)(a)....... 887 945 6 3/4% Bonds 1996-2008 (French francs 700 million)(a)....... 758 807 6.20% Bonds 1997-2009 (French francs 900 million)(a)........ 971 1,034 6 7/8% Bonds 1997-2004 (US Dollars 300 million)............. 1,687 1,796 5 1/4% Bonds 1997-2003 (German marks 250 million)(a)........ 817 870 5.03% Bonds 1997-2007 (French francs 620 million)(a)........ 555 591 6 4/5% Bonds 1997-2007 (Spanish Pesetas 12 billion)(a)...... 463 493 3 months Pibor + 0.38% Bonds 1998-2008 (French francs 230 million)(a)............................................... 215 -- 2 1/4% Bonds 1998-2003 (Swiss francs 200 million)(a)........ 754 -- 5% Bonds 1998-2013 (French francs 1 billion)(a)............. 939 -- 3 months ATHIMID 0.9% Bonds 1998-2003 (Greek drachmas 10 billion)(a)............................................... 184 -- 5 1/8% Bonds 1998-2009 (French francs 1 billion)(a)......... 932 -- Short-term portion(b)....................................... -- (789) ------ ------ Total Parent company................................... 16,003 13,824 ------ ------ Consolidated subsidiaries................................... 54 57 ------ ------ Total............................................. 16,057 13,881 ====== ======
- --------------- (a) Through the use of issue swaps, each debenture loan becomes equivalent to a US dollar floating rate debt. (b) Amounts: -- as of December 31, 1998: nil -- as of December 31, 1997: 9 1/2% Bonds 1991-1998 parent company MFRF 789 F-37 40 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Loan repayment schedule (excluding short-term portion):
DECEMBER 31, ------------------------------ YEAR 1998 % 1997 % ---- ------ --- ------ --- 1999................................................. -- -- 803 4 2000................................................. 1,671 7 1,448 7 2001................................................. 1,672 7 1,872 8 2002................................................. 2,458 10 3,877 18 2003................................................. 2,752 12 13,742 63 2004 and after....................................... 15,366 64 -- -- ------ --- ------ --- Total...................................... 23,919 100 21,742 100 ====== === ====== ===
Analysis by currency and interest rate: These analyses take into account interest rate and foreign currency swap operations which hedge long-term debt.
DECEMBER 31, ------------------------------ 1998 % 1997 % ------ --- ------ --- US dollar............................................ 15,006 63 13,067 60 Pound sterling....................................... 5,311 22 5,699 26 Norwegian krone...................................... 2,400 10 1,582 7 French franc......................................... 711 3 931 5 Italian lira......................................... 193 1 75 -- Australian dollar.................................... 169 1 209 1 Spanish peseta....................................... 15 -- 37 -- Other currencies..................................... 114 -- 142 1 ------ --- ------ --- Total...................................... 23,919 100 21,742 100 ====== === ====== ===
DECEMBER 31, ---------------- 1998 1997 ------ ------ Fixed rates: Below 7%.................................................. 198 137 7% to 11%................................................. 356 394 11% and over.............................................. 26 38 Floating rates(a)........................................... 23,339 21,173 ------ ------ Total....................................................... 23,919 21,742 ====== ======
- --------------- (a) Mainly composed of:
CURRENCY MAIN REFERENCE AVERAGE SPREAD EFFECTIVE RATE - -------- -------------- -------------- -------------- US dollar.................. Libor USD 6 months 0.04% 5.35% Pound sterling............. Libor GBP 3 months 0.19% 6.62%
As of December 31, 1998, the parent company had an amount of US$ 3,327 million of long-term lines of credit, of which US$ 3,292 million were not used (US$ 2,981 million and US$ 2,933 million, respectively, as of December 31, 1997). F-38 41 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) These facilities are primarily contracted with international banks for periods initially extending up to 5 years (with an average maturity of approximately 3.2 years). Interests on borrowings under these agreements are based on prevailing money market rates. Besides, the credit lines are subject to various commitment fees on the unused portions. (b) Short-Term Borrowings
DECEMBER 31, ---------------------------------------------------------------- 1998 1997 ------------------------------ ------------------------------ WEIGHTED WEIGHTED BALANCE AT AVERAGE BALANCE AT AVERAGE END OF PERIOD INTEREST RATE END OF PERIOD INTEREST RATE ------------- ------------- ------------- ------------- French commercial paper.............. 1,120 3.50% 2,000 3.49% Short-term loans..................... 2,620 6.46% 2,529 ----- ----- Total........................... 3,740 4,529 ===== =====
18. OTHER CREDITORS AND ACCRUED LIABILITIES The main items included under this caption in the consolidated balance sheets are as follows:
DECEMBER 31, ---------------- 1998 1997 ------ ------ Advances from customers(a).................................. 3,095 3,258 Accruals and deferred income................................ 766 897 Payables to States (including taxes and duties)............. 9,535 8,422 Payroll..................................................... 1,717 1,636 Other....................................................... 4,015 3,385 ------ ------ Total............................................. 19,128 17,598 ====== ======
- --------------- (a) Including advances from related parties (Note 25). 19. BUSINESS SEGMENT INFORMATION Business segments are defined in accordance with the structure of the internal reporting which is designed for evaluating segments performance by management. Each segment is managed as a separate profit center responsible for its worldwide results. Since 1995, the Company's activities are conducted through three segments: - The Upstream segment is responsible for the oil and gas exploration and production activities (including Middle East). Residual mining activities and the investment in Cogema are also integrated in this segment. - The Downstream segment includes Refining and Marketing, Trading and Shipping operations. - Chemicals are organized into five divisions (rubber processing, resins, inks, paints and adhesives). The Company's other activities, not falling within these segments, are grouped under the classification "Corporate" which also includes the residual corporate administration costs. F-39 42 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) The accounting policies of the business segments are the same as those described in Note 1 (Accounting Policies). Operating profit and assets for each segment have been determined after making consolidation and intersegment adjustments as appropriate. Sales prices between business segments approximate market prices. A summary of the Company's operations by business segment is presented below:
YEAR ENDED DECEMBER 31, 1998 ----------------------------------------------------------------------- CONSOLIDATION UPSTREAM DOWNSTREAM CHEMICALS CORPORATE ADJUSTMENTS TOTAL -------- ---------- --------- --------- ------------- ------- Statement of income: Non-Group sales....................... 15,496 112,742 31,131 245 -- 159,614 Intersegment sales.................... 15,420 274 39 1,902 (17,635) -- ------ ------- ------ ------ ------- ------- Total sales.................... 30,916 113,016 31,170 2,147 (17,635) 159,614 ====== ======= ====== ====== ======= ======= Operating income........................ 4,813 2,993 2,468 (504) -- 9,770 Depreciation, depletion and amortization per accompanying consolidated statements of income.................. 4,196 2,439 1,110 131 -- 7,876 Additional depreciation (write-backs) on tangible assets (included in operating expenses)............................. 86 -- (3) -- -- 83 Amortization of intangible assets (Note 22)................................... 144 147 47 129 -- 467 Amortization of acquisition goodwill.... -- 207 457 22 -- 686 ------ ------- ------ ------ ------- ------- Depreciation, depletion and amortization charged to income..................... 4,426 2,793 1,611 282 -- 9,112 ====== ======= ====== ====== ======= ======= Interest income......................... 190 432 64 889 -- 1,575 Interest expense........................ (475) (517) (280) (1,847) -- (3,119) Equity in net income (loss) of affiliates............................ 295 72 5 -- -- 372 Income tax expense (credit)............. 1,570 450 270 112 -- 2,402 Segment assets(a)....................... 39,831 18,855 15,344 939 -- 74,969 Intangible assets and property, plant and equipment additions............... 11,849 2,954 1,964 183 -- 16,950 Equity affiliates: investments.......... 2,742 672 68 2,451 -- 5,933
- --------------- (a) Intangible assets and property, plant and equipment F-40 43 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1997 ----------------------------------------------------------------------- CONSOLIDATION UPSTREAM DOWNSTREAM CHEMICALS CORPORATE ADJUSTMENTS TOTAL -------- ---------- --------- --------- ------------- ------- Statement of income: Non-Group sales....................... 16,539 145,613 28,537 396 -- 191,085 Intersegment sales.................... 20,299 334 39 1,631 (22,303) 0 ------ ------- ------ ------ ------- ------- Total sales.................... 36,838 145,947 28,576 2,027 (22,303) 191,085 ====== ======= ====== ====== ======= ======= Operating income........................ 8,217 3,082 2,324 (551) -- 13,072 Depreciation, depletion and amortization per accompanying consolidated statements of income.................. 3,542 2,785 1,019 219 -- 7,565 Additional depreciation (write-backs) on tangible assets (included in operating expenses)............................. 114 1 -- -- -- 115 Amortization of intangible assets (Note 22)................................... 60 148 48 277 -- 533 Amortization of acquisition goodwill.... -- 252 590 18 -- 860 ------ ------- ------ ------ ------- ------- Depreciation, depletion and amortization charged to income..................... 3,716 3,186 1,657 514 -- 9,073 ====== ======= ====== ====== ======= ======= Interest income......................... 171 307 65 1,953 -- 2,496 Interest expense........................ (403) (635) (271) (2,287) -- (3,596) Equity in net income (loss) of affiliates............................ (92) 30 4 -- -- (58) Income tax expense (credit) Segment assets(a)..................... 36,682 18,199 14,888 1,005 -- 70,774 Intangible assets and property, plant and equipment additions............... 9,995 4,084 1,862 310 -- 16,251 Equity affiliates: investments.......... 1,529 687 8 2,396 -- 4,620
- --------------- (a) Intangible assets and property, plant and equipment
YEAR ENDED DECEMBER 31, 1996 ----------------------------------------------------------------------- CONSOLIDATION UPSTREAM DOWNSTREAM CHEMICALS CORPORATE ADJUSTMENTS TOTAL -------- ---------- --------- --------- ------------- ------- Statement of income: Non-Group sales....................... 12,160 139,441 24,568 408 -- 176,577 Intersegment sales.................... 16,235 234 45 1,451 (17,965) -- ------ ------- ------ ------ ------- ------- Total sales.................... 28,395 139,675 24,613 1,859 (17,965) 176,577 ====== ======= ====== ====== ======= ======= Operating income........................ 6,767 1,529 1,916 (444) -- 9,768 Depreciation, depletion and amortization per accompanying consolidated statements of income.................. 3,391 2,525 901 99 -- 6,916 Additional depreciation (write-backs) on tangible assets (included in operating expenses)............................. 39 1 -- -- -- 40 Amortization of intangible assets (Note 22)................................... 69 141 72 64 -- 346 Amortization of acquisition goodwill.... -- 253 389 21 -- 663 ------ ------- ------ ------ ------- ------- Depreciation, depletion and amortization charged to income..................... 3,499 2,920 1,362 184 -- 7,965 ====== ======= ====== ====== ======= ======= Interest income......................... 82 251 53 1,787 -- 2,173 Interest expense........................ (550) (623) (271) (1,830) -- (3,274) Equity in net income (loss) of affiliates............................ 22 41 3 -- -- 66 Income tax expense (credit)
F-41 44 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1996 ----------------------------------------------------------------------- CONSOLIDATION UPSTREAM DOWNSTREAM CHEMICALS CORPORATE ADJUSTMENTS TOTAL -------- ---------- --------- --------- ------------- ------- Segment assets(a)..................... 27,908 21,362 13,252 1,161 -- 63,683 Intangible assets and property, plant and equipment additions............... 6,655 3,231 1,604 231 -- 11,721 Equity affiliates: investments.......... 1,316 704 19 -- -- 2,039
- --------------- (a) Intangible assets and property, plant and equipment 20. GEOGRAPHICAL AREAS Information concerning principal geographic areas was as follows:
FAR EAST REST OF NORTH AND REST OF FRANCE EUROPE AMERICA AFRICA THE WORLD TOTAL ------ ------- ------- ------ ----------- ------- YEAR ENDED DECEMBER 31, 1998 Non-Group sales................ 42,663 43,673 8,290 12,193 52,795 159,614 Intangible assets and property, plant and equipment......... 13,279 26,598 4,035 8,899 22,158 74,969
FAR EAST REST OF NORTH AND REST OF FRANCE EUROPE AMERICA AFRICA THE WORLD TOTAL ------ ------- ------- ------ ----------- ------- YEAR ENDED DECEMBER 31, 1997 Non-Group sales................ 49,223 44,792 18,098 12,879 66,093 191,085 Intangible assets and property, plant and equipment......... 13,783 26,314 4,732 8,282 17,663 70,744
FAR EAST REST OF NORTH AND REST OF FRANCE EUROPE AMERICA AFRICA THE WORLD TOTAL ------ ------- ------- ------ ----------- ------- YEAR ENDED DECEMBER 31, 1996 Non-Group sales................ 44,592 39,163 20,331 11,772 60,719 176,577 Intangible assets and property, plant and equipment......... 14,378 24,310 8,132 6,201 10,662 63,683
Sales are attributed to geographic areas based on the location of the assets producing revenues. 21. INTEREST EXPENSE, NET
YEAR ENDED DECEMBER 31, -------------------------- 1998 1997 1996 ------ ------ ------ Interest income.......................................... 1,575 2,496 2,173 Interest expense......................................... (3,119) (3,596) (3,274) ------ ------ ------ (1,544) (1,100) (1,101) ------ ------ ------ Amounts capitalized...................................... 556 362 184 ------ ------ ------ Total.......................................... (988) (738) (917) ====== ====== ======
F-42 45 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 22. OTHER INCOME (EXPENSE)
YEAR ENDED DECEMBER 31, ----------------------- 1998 1997 1996 ----- ----- ----- Foreign exchange gains (losses)............................. (139) (180) 78 Gains (losses) on sales of assets........................... 845 974 851 Amortization of intangible assets........................... (467) (533) (346) Other....................................................... (454) (190) (717) ---- ---- ---- Total............................................. (215) 71 (134) ==== ==== ====
23. INCOME TAXES Pursuant to the provisions of the French Tax Code (Article 209 quinquies) and in accordance with a tax agreement from the French Tax Authorities, the parent company files a worldwide consolidated tax return. This regime provides that the basis for income tax computation of the parent company is not limited to French or foreign consolidated subsidiaries or equity investees, but also applies to direct or indirect shareholdings over 10% in the energy segment and over 50% for other activities. It allows the parent company to offset, within certain limits, the taxable income of profitable companies against the losses of other entities. The previous agreement ended on December 31, 1998 and the Company expects that it will be renewed by the French Tax Authorities for a further three-year period which will end on December 31, 2001. A valuation allowance is recorded to reduce deferred tax assets to the net amount which is more likely than not to be realized, based on all available evidence. French income and foreign withholding taxes are not provided for the temporary differences related to the financial statement carrying amount and tax bases of investments in foreign subsidiaries which are considered to be permanent investments. Undistributed earnings of foreign subsidiaries considered to be reinvested indefinitely amounted to MFRF 9,000 as of December 31, 1998. The determination of the tax effect relating to such reinvested income is not practicable. In addition, no provision for income taxes has been made for approximately MFRF 12,208 of unremitted earnings of the Company's French subsidiaries in that: - the remittance of such earnings would be tax exempt for 95% or more owned subsidiaries, - the income tax which would be paid upon distribution of the undistributed earnings of 95% or less owned subsidiaries and equity investees could be offset by foreign tax credits in the consolidated tax agreement and reimbursed to the Company. Income tax expense:
YEAR ENDED DECEMBER 31, ----------------------- 1998 1997 1996 ----- ----- ----- Current income taxes........................................ 2,189 3,311 2,869 Deferred income taxes....................................... 213 766 (247) ----- ----- ----- Provision for income taxes.................................. 2,402 4,077 2,622 ===== ===== =====
F-43 46 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Reconciliation between provision for income taxes and pre-tax income:
YEAR ENDED DECEMBER 31, ------------------------- 1998 1997 1996 ----- ------ ------ Net income................................................ 5,814 7,611 5,646 Minority interest......................................... 302 336 139 Provision for income taxes................................ 2,401 4,077 2,622 Equity in (income) loss of affiliates..................... (372) 58 (66) ----- ------ ------ Pre-tax income before non-recurring items................. 8,145 12,082 8,341 French statutory tax rate................................. 41 2/3% 41 2/3% 36 2/3% French statutory rate applied to pre-tax income before non-recurring items..................................... 3,394 5,034 3,058 Differences between French and foreign income tax rates... (145) 108 223 Permanent differences..................................... 153 363 809 Effects of consolidated tax agreement, net................ (712) (1,100) (1,177) Change in valuation allowance............................. (317) (339) (236) Other, net................................................ 29 11 (55) ----- ------ ------ Provision for income taxes................................ 2,402 4,077 2,622 ===== ====== ======
The components of deferred tax balances were as follows:
DECEMBER 31, ---------------- 1998 1997 ------ ------ Deferred tax assets: Net operating losses (NOLs) and tax credit carryforwards.......................................... 2,334 2,453 Employee benefits......................................... 492 458 Accrued liabilities....................................... 811 753 Exploration costs......................................... 368 542 Miscellaneous............................................. 2,285 1,839 ------ ------ Gross deferred tax asset.................................. 6,290 6,045 Valuation allowance....................................... (1,509) (1,636) ------ ------ Net deferred tax asset.................................... 4,781 4,409 Deferred tax liabilities: Excess tax over book depreciation......................... (4,383) (5,370) Temporary tax deductions.................................. (1,253) (1,537) Miscellaneous............................................. (2,839) (1,357) ------ ------ Total deferred tax liabilities............................ (8,475) (8,264) ------ ------ Net deferred tax liabilities................................ (3,694) (3,855)
F-44 47 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Deferred taxes are presented as follows in the balance sheet:
DECEMBER 31, ---------------- 1998 1997 ------ ------ Noncurrent deferred tax assets.............................. 1,027 1,008 Current deferred tax assets................................. 333 367 Deferred tax liability...................................... (5,054) (5,230) ------ ------ Net......................................................... (3,694) (3,855) ====== ======
Deferred tax assets relating to NOLs and tax credit carryforwards were available in various tax jurisdictions as of December 31, 1998 expiring in the following years:
NOLS AND TAX CREDIT CARRYFORWARDS ------------- 1999........................................................ 102 2000........................................................ 32 2001........................................................ 120 2002........................................................ 139 2003........................................................ 237 2004 and after.............................................. 613 Unlimited................................................... 1,091 ----- Total carryforwards............................... 2,334 =====
24. LEASES The Company leases real estate, service stations and other equipment through noncancelable capital and operating leases. The future minimum lease payments on noncancelable leases to which the Company is committed as of December 31, 1998 is set forth below:
CAPITAL OPERATING LEASE LEASES OBLIGATION --------- ----------- 1999........................................................ 246 207 2000........................................................ 210 217 2001........................................................ 189 72 2002........................................................ 148 69 2003........................................................ 81 26 2004 and after.............................................. 84 122 --- ---- Future lease payments....................................... 958 713 Less amount representing interest........................... (128) ---- Present value of net minimum lease payments................. 585 Less current portion of capital leases...................... (167) ---- Long Term Obligation........................................ 418 ====
F-45 48 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Net rental expense incurred under operating leases for the years ended December 31, 1998, 1997 and 1996 was MFRF 248, MFRF 364 and MFRF 396, respectively. Operating leases also include long-term charters of several tankers. 25. RELATED PARTIES The main transactions with related parties (principally all the investments carried under the equity method and subsidiaries excluded from consolidation) and balances receivable from and payable to them were as follows:
DECEMBER 31, --------------- 1998 1997 ------ ----- Receivables Trade accounts............................................ 468 453 Loans (excluding loans to equity affiliates).............. 573 1,708 Payables Trade accounts............................................ 973 1,204 Loans..................................................... 116 101
YEAR ENDED DECEMBER 31, ------------------------ 1998 1997 1996 ----- ------ ----- Sales.............................................. 2,790 3,220 3,113 Purchases.......................................... 6,945 10,530 9,723 Interest expense................................... 3 2 141 Interest income.................................... 56 42 68
26. COMMITMENTS AND CONTINGENCIES A summary of commitments given and received is as follows:
DECEMBER 31, ---------------- 1998 1997 ------ ------ COMMITMENTS GIVEN Discounted notes not yet matured.......................... 30 16 Guarantees given on customs duties........................ 9,329 9,106 Bank guarantees........................................... 1,464 1,759 Pledged assets............................................ 26 64 Other commitments given................................... 1,201 1,323 ------ ------ Total Commitments Given........................... 12,050 12,268 ====== ====== COMMITMENTS RECEIVED Commitments received on receivables....................... 819 810 Other commitments received................................ 1,098 930 ------ ------ Total Commitments Received........................ 1,917 1,740 ====== ======
Commitments relating to leases are mentioned in Note 24. F-46 49 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) FINANCIAL INSTRUMENTS AND COUNTERPARTY RISKS The Company uses basic financial derivative instruments to manage its exposure to fluctuations in interest rates, foreign currency rates and prices of crude oil and natural gas. During fiscal year 1998, the Company has continued its policy of favoring the daily interest rate as a benchmark for its cash investments. This justifies the use of short-term interest rate swaps which reduce to a daily reference liquidities invested for a few weeks or months. The cash investment operations explain part of the high outstanding amount of the short term currency swaps. Currency swaps are also used when the parent company finances subsidiaries in order to ensure a balance between their demands and the refinancing of the parent company. In order to minimize the cost of its long-term debt, the Company has borrowed at a fixed rate on international markets and uses issue swaps (long-term interest rate and foreign currency swaps) in order to convert this debt into US dollars at a variable rate. Long-term interest rate swaps can also hedge certain long-term debts in order to modify the indebtedness structure of the Company. Currency exposures are hedged by purchases/sales of currencies primarily on the spot market, which explains the relatively low level of use of foreign currency instruments. Forward currency purchases/sales have, for the most part, a very short maturity (several days to a few months). The Company does not anticipate any third-party default which could have a significant impact on its financial position and the results of its transactions. INTEREST RATE AND FOREIGN CURRENCY AGREEMENTS The contractual amounts stated below are outstanding as of December 31, 1998 and 1997. These amounts represent the levels of involvement by the Company and are not indicative of gains or losses. The amounts are in million FRF. F-47 50 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
- --------------------------------------------------------------------------------------------------------------- 2004 AND AS OF DECEMBER 31, 1998 TOTAL 1999 2000 2001 2002 2003 AFTER - --------------------------------------------------------------------------------------------------------------- INTEREST RATE HEDGING ACTIVITY ISSUE SWAP Receive-fixed swap Notional amount 16,003 -- 553 1,116 1,015 1,755 11,564 Received rate 6.43% Paid rate (as of 12.31.98) 5.30% - --------------------------------------------------------------------------------------------------------------- LONG-TERM CURRENCY SWAP Notional amount 388 -- -- 388 -- -- -- Received rate (as of 12.31.98) 4.08% Paid rate (as of 12.31.98) 7.85% - --------------------------------------------------------------------------------------------------------------- LONG-TERM INTEREST RATE SWAP Receive-fixed swap Notional amount 795 122 122 122 308 113 8 Received rate 8.00% Paid rate (as of 12.31.98) 7.10% Pay-fixed swap Notional amount 190 190 -- -- -- -- -- Paid rate 4.89% Received rate (as of 12.31.98) 3.44% - --------------------------------------------------------------------------------------------------------------- SHORT-TERM CURRENCY SWAP Notional amount 14,661 2 days to 6 months - --------------------------------------------------------------------------------------------------------------- SHORT-TERM INTEREST RATE SWAP Receive-fixed swap Notional amount 793 1 month Received rate 3.44% to 4 months Paid rate (as of 12.31.98) 3.24% Pay-fixed swap Notional amount 12,344 7 days Paid rate 3.17% to 6 months Received rate (as of 12.31.98) 3.06% - --------------------------------------------------------------------------------------------------------------- CAP/FLOOR* Notional amount 144 9 months Guaranteed rate 22.00% - --------------------------------------------------------------------------------------------------------------- FUTURE RATE AGREEMENT* Notional amount 144 9 months Guaranteed rate 19.86% - --------------------------------------------------------------------------------------------------------------- FOREIGN CURRENCY HEDGING ACTIVITY CURRENCY OPTION Option bought-notional -- -- -- -- -- -- -- Option sold-notional -- -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------- FORWARD EXCHANGE CONTRACT Notional amount 488 475 9 4 -- -- -- - ---------------------------------------------------------------------------------------------------------------
* These contracts were negotiated in South African rands (ZAR), which explains the high level of the guaranteed rates. F-48 51 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
- --------------------------------------------------------------------------------------------------------------- 2003 AND AS OF DECEMBER 31, 1997 TOTAL 1998 1999 2000 2001 2002 AFTER - --------------------------------------------------------------------------------------------------------------- INTEREST RATE HEDGING ACTIVITY ISSUE SWAP Receive-fixed swap Notional amount 14,613 789 -- 589 1,189 1,081 10,965 Received rate 7.06% Paid rate (as of 12.31.97) 5.91% - --------------------------------------------------------------------------------------------------------------- LONG-TERM CURRENCY SWAP Notional amount 414 -- -- -- 414 -- -- Received rate (as of 12.31.97) 3.45% Paid rate (as of 12.31.97) 7.11% - --------------------------------------------------------------------------------------------------------------- LONG-TERM INTEREST RATE SWAP Receive-fixed swap Notional amount 981 130 130 130 130 329 132 Received rate 7.99% Paid rate (as of 12.31.97) 8.24% Pay-fixed swap Notional amount 190 -- 190 -- -- -- -- Paid rate 4.89% Received rate (as of 12.31.97) 3.61% - --------------------------------------------------------------------------------------------------------------- SHORT-TERM CURRENCY SWAP Notional amount 16,476 2 days to 6 months - --------------------------------------------------------------------------------------------------------------- SHORT-TERM INTEREST RATE SWAP Receive-fixed swap Notional amount 50 1 month Received rate 3.48% Paid rate (as of 12.31.97) 3.38% Pay-fixed swap Notional amount 19,067 2 days Paid rate 3.52% to 6 months Received rate (as of 12.31.97) 3.48% - --------------------------------------------------------------------------------------------------------------- FUTURE RATE AGREEMENT Notional amount 0 -- -- -- -- -- -- Guaranteed rate - --------------------------------------------------------------------------------------------------------------- FOREIGN CURRENCY HEDGING ACTIVITY CURRENCY OPTION Option bought notional -- -- -- -- -- -- -- Option sold-notional -- -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------- FORWARD EXCHANGE CONTRACT Notional amount 1,159 1,134 13 12 -- -- -- - ---------------------------------------------------------------------------------------------------------------
F-49 52 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED)
DECEMBER 31, ------------ 1998 1997 ---- ---- Impact on the reported interest expenses(a) Long-term interest rate swaps............................. (20) (19) Short-term interest rate swaps............................ (10) (12) Caps/Floors............................................... (1) -- Short-term foreign currency swaps......................... (258) (461)(b) Currency options.......................................... -- 73
- --------------- (a) The Company does not consider as meaningful to measure this impact for the issue swaps. These swaps are contracted as part of the issuance of most of the debenture loans, the fixed rate of which is in this way converted into a US dollar floating rate. The absolute level of this fixed rate, hence the amount of interest paid on the debenture loans (at fixed rate) and received on the swap (at the same fixed rate) are therefore not meaningful. It is worth noting that these flows of fixed rate interest are netted by the banks which manage these swaps. (b) A large part of these currency swaps are used by the Parent Company to place French francs deposits on foreign money markets, especially US dollar. This policy results, in the course of 1998, in a higher financial result, which was compensated by a significant amount of exchange premium. COMMODITY CONTRACTS The commitments related to the Company's operations on crude oil, petroleum products and natural gas futures markets are stated below. These amounts represent the levels of involvement by the Company and are not indicative of gains or losses. The commitments relating to financial instruments represent the purchase involvement of the swaps. The commitments relating to non financial instruments are valued based on quoted market prices at year end.
DECEMBER 31, -------------- 1998 1997 ----- ----- FINANCIAL INSTRUMENTS Refined products swaps.................................... 384 879 Crude oil swaps (contracts for difference)................ 1,342 1,170 Natural gas swaps (contracts for difference).............. -- 341 NON FINANCIAL INSTRUMENTS Futures contracts (exchanges): Purchase............................................... 751 76 Sale................................................... 821 333 OTC contracts (Brent, Dubai and natural gas): Purchase............................................... 3,060 1,280 Sale................................................... 3,946 1,992
27. FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No 107 and No 119, issued by the FASB, require the disclosure of the estimated fair value of all financial instruments other than specified items such as lease contracts, subsidiary and affiliate investments and employers' pension and benefit obligations. Except for publicly traded equity and marketable securities for which market prices were used, these values have been estimated for the majority of the Company's financial instruments. Accordingly, fair values are based on estimates using various valuation techniques, such as present value of future cash-flows. However, methods and assumptions followed to disclose data presented herein are inherently judgmental and involve various limitations including the following: - fair values presented do not take into consideration the effects of future interest rate and currency fluctuations, F-50 53 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) - estimates as of December 31,1998 and 1997 are not necessarily indicative of the amounts that the Company would record upon further dispositions/terminations of the financial instruments. As a consequence, the use of different estimations, methodologies and assumptions may have a material effect on the estimated fair value amounts. The methodologies used are as follows: CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, BANK OVERDRAFTS, SHORT-TERM BORROWINGS, ACCOUNTS AND NOTES PAYABLE The carrying amounts reflected in the consolidated statements are reasonable estimates of the fair value because of the relatively short period of time between the origination of the instruments and their expected realization. INVESTMENTS Estimated fair values for publicly traded equity securities are based on quoted market prices as of December 31, 1998 and 1997. For other investments for which there is no quoted price, a reasonable estimate of fair value could not be made without incurring excessive costs. LOANS AND ADVANCES The fair values for loans have been determined by discounting the estimated future cash flows, using the zero coupon interest rate curves at year end taking into account a spread that corresponds to the average risk classification of the Company. Loans to subsidiaries excluded from consolidation are not fair valued. LONG-TERM DEBT, CURRENT PORTION OF LONG-TERM DEBT, LONG-TERM INTEREST RATE AND FOREIGN CURRENCY SWAPS The fair values of these financial instruments were determined by estimating future cash flows on a borrowing-by-borrowing basis and discounting these future cash flows using the zero coupon interest rate curves at year end and taking into account a spread that corresponds to the average risk classification of the Company. All issue swaps (long-term interest rate and foreign currency swaps) specifically hedge debenture loans. They were concluded under ISDA agreements, in order to create long-term debt in US dollars on a Libor basis. Fair values of these swaps have to be considered together with the fair values of hedged debenture loans, as set forth below. Also, some long-term interest rate swaps were concluded to modify partially the interest rate exposure. The corresponding fair value is set forth below and should be considered together with the fair value of the long-term debt. BANK GUARANTEES These instruments were fair valued based on average fees currently charged for similar agreements, taking into account the average risk classification of the Company. OTHER OFF-BALANCE SHEET FINANCIAL INSTRUMENTS The fair value of the interest rate swaps is calculated by discounting future cash flows on the basis of the zero coupon interest rate curves existing at year end. The FRAs are valued based on the forward rates deduced from the curve of the interest rates observed at year end. As to the single Cap existing as of December 31, 1998, it was estimated, given its approaching maturity and its low liquidity, that the premium paid was a good indicator of its fair value. Forward exchange transactions (forward exchange rates and currency swaps) are valued on the basis of a comparison of the forward rates negotiated with the rates in effect on the financial markets at year end for similar maturities. Nota.: Short-term currency swaps are used in the context of managing the current position of the Company, in order to be able to borrow or invest cash in markets other than the French franc market. Thus, their fair value, if it is significant, is compensated by the value of the short-term loans and borrowings which they hedge. Likewise, the fair value of the short-term interest rate swaps correlates with the value of the short-term loans and borrowings; these swaps are used in order to reduce the negotiated rates to the daily rate which is the benchmark. F-51 54 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) The carrying values and the fair values determined are as follows:
DECEMBER 31, ---------------------------------------------- 1998 1997 --------------------- --------------------- ESTIMATED ESTIMATED CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- --------- -------- --------- BALANCE SHEET Other investments: Publicly traded............................. 2,514 3,019 3,207 4,459 Non publicly traded Subsidiaries excluded from consolidation.......................... 1,213 -- 1,222 -- Others................................... 1,503 -- 1,382 -- Short-term investments: Publicly traded............................. 4,064 4,010 1,744 1,984 Non publicly traded......................... 33 -- 29 -- Loans and advances Loans to subsidiaries excluded from consolidation............................ 1,443 -- 1,798 -- Other loans................................. 1,254 1,155 1,728 1,354 Debenture loans (before swaps and excluding current portion)............................ 16,057 18,215 13,881 14,147 Issue swaps................................... -- (2,226) -- (235) Bank loans(a): Fixed rates................................. 1,109 1,217 466 536 Floating rates.............................. 6,335 6,335 6,828 6,828 Current portion of long-term debt (excluding current portion of capital lease obligation)................................. 1,204 1,278 1,658 1,757 OFF-BALANCE SHEET TREASURY MANAGEMENT Bank guarantees............................. -- (82) -- (22) Long-term interest rate swaps............... -- 34 -- 30 Short-term interest rate swaps.............. -- (b) -- (b) Long-term interest rate and currency swaps(c)................................. -- (b) -- -- Forward exchange contracts.................. -- 39 -- (b) Forward rate agreements..................... -- (b) -- -- Caps/Floors................................. -- (b) -- (b) COMMODITIES TRADING MANAGEMENT Refined products swaps and contracts for difference............................... -- (b) -- (b) Natural gas swaps........................... -- -- -- 13
- --------------- (a) The market value does not take into account the interest rate swaps, since they are presented separately. (b) Estimated fair value is immaterial (below FRF 10M). (c) These swaps do not specifically hedge debenture loans. F-52 55 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) Estimated fair values for the other off-balance-sheet instruments held as at December 31, 1998 and 1997 are not material (below FRF 10M). 28. ENVIRONMENTAL CONTINGENCIES The Company operates in an industry and in countries where regulations and laws concerning environmental protection are increasing. The reasonably estimable future costs of probable environmental obligations have been provided for in the Company's consolidated statements of income. As the scope of environmental obligations becomes better defined, there may be changes in the estimated future costs. The ultimate amount of such future costs cannot be determined due to such factors as the unknown magnitude of possible contamination, the unknown timing and extent of the corrective actions that may be required and the determination of the Company's liability in proportion to other responsible parties. While it is not possible at this time to establish the ultimate amount of liability with respect to future environmental costs, the Company does not expect that these contingencies will materially affect its consolidated financial statements. 29. EMPLOYEES SHARE SUBSCRIPTION PLANS SHARE SUBSCRIPTION PLANS
1992 PLAN 1993 PLAN 1994 PLAN 1995 PLAN 1996 PLAN (A) (A) (A) (A) (B) TOTAL ---------- ------------ ------------ --------- --------- --------- Price per share (FRF).......... 225 210 286 291 392 Options exercisable and granted prior to January 1, 1996..... 657,497 686,300 795,000 946,500 -- 3,085,297 Granted...................... -- -- -- -- 960,000 960,000 Cancelled or expired......... 600 (17,100) (3,500) (4,900) -- (24,900) Exercised.................... (272,143) (100,740) (10,500) (4,000) -- (387,383) - ------------------------------------------------------------------------------------------------------------- Exercisable as of January 1, 1997....................... 385,954 568,460 781,000 937,600 960,000 3,633,014 Granted...................... -- -- -- -- -- -- Cancelled or expired......... -- -- (1,150) (500) (2,200) (3,850) Exercised.................... (277,117) (222,947) (70,968) (3,300) (2,500) (576,832) - ------------------------------------------------------------------------------------------------------------- Exercisable as of January 1, 1998....................... 108,837 345,513 708,882 933,800 955,300 3,052,332 Granted...................... Cancelled or expired......... (15,300) (200) (500) (1,000) (2,100) (19,100) Exercised.................... (93,537) (168,483) (102,302) (85,240) (4,900) (454,462) - ------------------------------------------------------------------------------------------------------------- Exercisable as of December 31, 1998................... -- 176,830 606,080 847,560 948,300 2,578,770 ---------- ------------ ------------ --------- -------- --------- Expiration date................ March 1998 June 1999 November September December June 1998 October 1999 2000 2001 2002
- --------------- (a) Grants decided by the Board of Directors and authorized by the Extraordinary Shareholders' Meeting held June 17, 1991. The options are exercisable only after a 3-year period from the date the option is granted to the individual employee and must be exercised within 6 years from the date of grant. (b) Grants decided by the Board of Directors and authorized by the Extraordinary Shareholders' Meeting held June 4, 1996. The options are exercisable only after a 3-year period from the date the option is granted to the individual employee and must be exercised within 6 years from the date of grant. F-53 56 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) SHARE PURCHASE PLANS As approved by the Extraordinary General Shareholders' Meeting held June 12, 1989, the Board of Directors was authorized to make available to eligible employees options to purchase shares of the Company. This program, limited to 1,200,000 shares, has been implemented as follows: Board of Directors held January 24, 1990: 240,000 options granted at an exercise price of FRF 112.5 per share. Board of Directors held December 12,1990: 960,000 options granted at an exercise price of FRF 148.5 per share: 904,800 options were individually granted and 24,800 options were cancelled after they had been granted The exercise period of those share purchase options was 5 years from the date of grant. As of December 31, 1996, all the options granted had been either exercised (1,111,200) cancelled (24,800) or expired (8,800). As approved by the Extraordinary General Shareholders' meeting held May 21, 1997 the Board of Directors was authorized to make available to eligible employees options to purchase shares of the Company. The Board of Directors held on March 17, 1998 decided to grant 955,000 options on an individual basis at an exercise price of FRF 615. These options are exercisable after a 5-year period from the date of grant and must be exercised within 8 years from the date of grant. 30. PAYROLL AND STAFF The main data relating to this caption consist of the following:
YEAR ENDED DECEMBER 31, -------------------------- 1998 1997 1996 ------ ------ ------ PERSONNEL EXPENSE Wages and salaries (including social charges) (MFRF)..... 14,206 13,906 13,052 ------ ------ ------ AVERAGE NUMBER OF EMPLOYEES France Management.......................................... 5,164 4,942 4,829 Other............................................... 16,904 16,586 16,815 International Management.......................................... 4,391 4,337 3,924 Other............................................... 30,707 28,526 31,987 ------ ------ ------ Total.................................................... 57,166 54,391 57,555 ====== ====== ======
Average number of employees includes employees of consolidated subsidiaries. 31. CONSOLIDATED STATEMENTS OF CASH FLOWS (i) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES ISSUANCE OF SHARES No significant non-cash investing and financing activities were undertaken in 1998. 1997: Proceeds exclude subscriptions made by employees through the conversion of loans for FRF 170M. F-54 57 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 1996: Proceeds exclude subscriptions made by employees through the conversion of loans for FRF 185M. (ii) DISCLOSURE OF ACCOUNTING POLICY The consolidated statements of cash flows have been translated into French francs at the average exchange rates. They exclude the currency translation differences arising from translation of assets and liabilities denominated in foreign currency into French francs using exchange rates prevailing at the end of periods (except for cash and cash equivalents). Therefore, the consolidated statements of cash flows will not agree with the differences derived from the consolidated balance sheet amounts. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments that are readily convertible to cash and have original maturities of three months or less. Changes in bank overdrafts are included in cash provided by financing activities. LONG-TERM DEBT Changes in long-term debt have been presented net to reflect that significant changes mainly related to revolving credit agreements. The detailed analysis is as follows:
YEAR ENDED DECEMBER 31, -------------------------- 1998 1997 1996 ------ ------ ------ Increase in long-term debt............................... 6,009 7,638 4,282 Repayment of long-term debt.............................. (1,061) (3,323) (5,977) ------ ------ ------ Net increase (decrease) in long-term debt................ 4,948 4,315 (1,695) ====== ====== ======
Changes in operating assets and liabilities
YEAR ENDED DECEMBER 31, ------------------------- 1998 1997 1996 ------ ----- ------ Inventories............................................... 2,149 348 (2,680) Accounts receivable....................................... 2,664 (255) (1,338) Prepaid expenses and other current assets................. (2,734) (881) (507) Accounts payable.......................................... (2,422) 531 1,277 Other creditors and accrued liabilities................... 1,845 1,094 2,209 ------ ----- ------ 1,502 837 (1,039) ====== ===== ======
32. LIST OF THE PRINCIPAL CONSOLIDATED SUBSIDIARIES AS OF DECEMBER 31, 1998 As of December 31, 1998, 489 subsidiaries were consolidated of which 453 were fully consolidated, 4 were proportionately consolidated and 32 were accounted for under the equity method. F-55 58 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) A list of the principal consolidated subsidiaries is as follows:
COMPANY'S SHARE % --------- UPSTREAM EUROPE: Total Oil Marine 100.0 Total Norge 100.0 Total Oil & Gas Nederland BV 100.0 Total Exploration Production Russie 99.7 Total Exploration Production Kazakhstan 99.7 AFRICA: Total Upstream Nigeria 100.0 Total Exploration Production Algerie 100.0 T.L.O.G. (Libye) 99.8 Total Angola 100.0 Total Exploration South Africa 85.1 Total Marine Gabon 100.0 MIDDLE EAST/ASIA: Total Yemen 100.0 Total Abu Al Bu Khoosh 99.7 Total Qatar Oil & Gas 99.7 Total Thailande 100.0 Total Indonesie 100.0 Total Myanmar Exploration Production 99.7 Total Oman 99.8 Total Sirri 99.8 Total South Pars 99.8 NORTH AND SOUTH AMERICA: Tepma Colombie 100.0 Total Austral 99.7 Total Exploration Production Venezuela 99.6 Total Exploration Production USA 100.0 DOWNSTREAM FRANCE: Total Raffinage Distribution 100.0 Totalgaz 100.0 Compagnie Petroliere de l'Est 100.0 Distributeurs de Combustibles Associes 100.0 Charvet 100.0 Sud Ouest Fioul Total 100.0 Stela 100.0 Petroliers Reunis de l'Ouest 100.0 Total Solvants 100.0 Francilienne de Confort 100.0 Yacco 100.0 EUROPE: Total Oil Great Britain 100.0 Total Nederland 100.0 Total Belgique Luxembourg 100.0 Total Deutschland 100.0 Total Espana 100.0 Total Hungaria 100.0 P Lindsey Oil Refinery 50.0 P Total Raffinaderij Nederland 55.0 - --------------- P = Proportionately consolidated
COMPANY'S SHARE % --------- DOWNSTREAM MEDITERRANEAN/AFRICA: Total Turkiye 51.0 Total Maroc 100.0 Total Nigeria 60.0 Total Kenya 78.6 Total Tunisie 90.0 Total Outre-Mer 100.0 Total Cote d'Ivoire 77.3 Total Liban 99.8 Total Senegal 91.0 Total South Africa (Pty) Ltd 57.6 SOUTH AMERICA: Totalgaz Argentina 100.0 Total Gasandes SA 100.0 INTERNATIONAL: Total Transport Maritime 100.0 Total Transport Corporation 100.0 Total International 100.0 Air Total International 99.0 New Wisdom Operating Cy 100.0 New Vision Operating Cy 100.0 CHEMICALS FRANCE: Hutchinson 100.0 Euridep 65.9 Cray Valley SA 100.0 Coates Lorilleux SA 100.0 Bostik SA 100.0 EUROPE: Resinas Sinteticas SA 100.0 Total Inchiostri 100.0 Kalon 65.9 Coates Brothers PLC 100.0 NORTH AND SOUTH AMERICAS: Bostik Inc. 100.0 Cook Composites & Polymers Co 70.0 Hutchinson FTS, Inc. 100.0 Sinclair 100.0 CORPORATE AND OTHER ACTIVITIES Total (Parent company) 100.0 Societe Financiere d'Auteuil 100.0 Total Nucleaire 100.0 Omnium de Participations SA 99.9 Omnium Insurance and Reinsurance Cy 100.0 Total Oil Holdings Ltd 100.0 Total Finance Nederland 100.0 Total America, Inc. 100.0 Total Chimie 100.0
F-56 59 TOTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN MILLIONS OF FRENCH FRANCS ("MFF"), EXCEPT FOR PER SHARE AMOUNTS OR WHERE OTHERWISE INDICATED) -- (CONTINUED) 33. SUBSEQUENT EVENT On January 14, 1999, shareholders at the Combined General Meeting approved the proposed combination of TOTAL and PETROFINA announced on December 1, 1998. This involves as a first step the acquisition of PETROFINA shares held by ELECTROFINA, FIBELPAR, TRACTEBEL, ELECTRABEL and AG 1824, representing 41% of PETROFINA's issued capital. This acquisition takes the form of an exchange for new shares of TOTAL. The exchange parity is on the basis of 9 TOTAL shares for 2 PETROFINA shares. The above-mentioned companies will therefore contribute 9,614,190 fully paid-in shares of PETROFINA common stock and will receive in exchange 43,263,855 shares of TOTAL. TOTAL will increase its capital by issuing new ordinary shares with an effective date of January 1, 1998. The share contribution and the capital increase will be finalized only after approval from the European and US antitrust authorities. As soon as the approved share issue is carried out, TOTAL will file notice with the Belgian banking and finance Committee of its intention to make a public offer to acquire all the remaining outstanding share of PETROFINA in exchange for TOTAL shares, based on the same exchange ratio. F-57 60 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) Information shown in the following tables is presented in accordance with Statement of Financial Accounting Standards No 69 ("SFAS 69"), "Disclosures About Oil and Gas Producing Activities." The amounts shown under the caption "Company's share of equity affiliates" relate to certain Middle East affiliates. CAPITALIZED COSTS Capitalized costs represent the amounts of capitalized proved and unproved property costs, including support equipment and facilities, along with the related accumulated depreciation, depletion and amortization. The amount of proved and unproved properties relating to production sharing contracts is reflected in capitalized costs net of amounts recovered. The following presents a detail of the capitalized costs as of December 31, 1998, 1997, and 1996, relating to the Company's oil and gas exploration and production activities:
AMOUNTS IN MILLIONS OF FRENCH FRANCS ---------------------------------------------- CONSOLIDATED SUBSIDIARIES ---------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL ------ ------- -------- ------- ------ AS OF DECEMBER 31, 1998 Proved properties............................... 35,791 -- 8,093 22,841 66,725 Unproved properties............................. 156 273 147 2,175 2,751 ------ ----- ----- ------ ------ Total capitalized costs......................... 35,947 273 8,240 25,016 69,476 Accumulated depreciation, depletion and amortization.................................... 21,920 2 1,102 7,054 30,078 ------ ----- ----- ------ ------ Net capitalized costs........................... 14,027 271 7,138 17,962 39,398 Including capitalized general and administrative expenses..................................... 50 -- 17 72 139 Company's share of equity affiliates' net capitalized costs........................... 3,591 AS OF DECEMBER 31, 1997 Proved properties............................... 35,475 3,637 6,466 19,955 65,533 Unproved properties............................. 534 254 205 915 1,908 ------ ----- ----- ------ ------ Total capitalized costs......................... 36,009 3,891 6,671 20,870 67,441 Accumulated depreciation, depletion and amortization.................................... 21,821 2,891 816 5,648 31,176 ------ ----- ----- ------ ------ Net capitalized costs........................... 14,188 1,000 5,855 15,222 36,265 Including capitalized general and administrative expenses..................................... 48 2 -- 70 120 Company's share of equity affiliates' net capitalized costs........................... 2,173 AS OF DECEMBER 31, 1996 Proved properties............................... 31,279 3,208 4,194 13,712 52,393 Unproved properties............................. 615 149 209 278 1,251 ------ ----- ----- ------ ------ Total capitalized costs......................... 31,894 3,357 4,403 13,990 53,644 Accumulated depreciation, depletion and amortization.................................... 19,075 2,648 716 3,657 26,096 ------ ----- ----- ------ ------ Net capitalized costs........................... 12,819 709 3,687 10,333 27,548 Including capitalized general and administrative expenses..................................... 27 3 191 175 396 Company's share of equity affiliates' net capitalized costs........................... 2,468
F-58 61 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED) COSTS INCURRED Costs incurred represent amounts capitalized or expensed during the year in the Company's oil and gas property acquisition, exploration and development activities:
AMOUNTS IN MILLIONS OF FRENCH FRANCS -------------------------------------------------- CONSOLIDATED SUBSIDIARIES -------------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL ------ ------- -------- ------- ------ AS OF DECEMBER 31, 1998 Proved property acquisition.......... 69 -- -- 58 127 Unproved property acquisition........ 5 109 4 180 298 Exploration costs.................... 261 192 298 1,854 2,605 Development costs.................... 2,974 246 2,091 4,389 9,700 ----- --- ----- ----- ------ Total costs incurred.............. 3,309 547 2,393 6,481 12,730 ===== === ===== ===== ====== AS OF DECEMBER 31, 1997 Proved property acquisition.......... -- 24 -- -- 24 Unproved property acquisition........ -- 98 36 232 366 Exploration costs.................... 361 56 285 1,035 1,737 Development costs.................... 2,348 333 1,844 4,404 8,929 ----- --- ----- ----- ------ Total costs incurred.............. 2,709 511 2,165 5,671 11,056 ===== === ===== ===== ====== AS OF DECEMBER 31, 1996 Proved property acquisition.......... 3 -- 48 76 127 Unproved property acquisition........ -- 6 4 3 13 Exploration costs.................... 319 42 314 596 1,271 Development costs.................... 1,652 197 1,120 3,129 6,098 ----- --- ----- ----- ------ Total costs incurred.............. 1,974 245 1,486 3,804 7,509 ===== === ===== ===== ======
Company's share of equity affiliates' costs of property acquisition, exploration and development: Year ended December 31, 1998................................ 686 Year ended December 31, 1997................................ 651 Year ended December 31, 1996................................ 650
RESULTS OF OPERATIONS OF OIL AND GAS PRODUCING ACTIVITIES The following table includes revenues and expenses associated directly with the Company's oil and gas producing activities. It does not include any allocation of the Company's interest costs or corporate overhead and, therefore, is not necessarily indicative of the contribution to consolidated net earnings of the Company's oil and gas operations. Operations pursuant to Production Sharing Contracts (Far East and Rest of World) are reflected as follows: - operating costs are reported as "Production costs" or "Exploration expenses"; - capital costs incurred are classified as "Depreciation, depletion and amortization and valuation allowances". F-59 62 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED) In the Consolidated Financial Statements, the Company's share of results of oil and gas producing activities for equity affiliates is reflected through internal billing in the Upstream operating income. Production taxes paid by two consolidated subsidiaries operating in the Middle East have been included in production costs. The corresponding amounts were FRF 217M, FRF 299M and FRF 236M for the years ended December 31, 1998, 1997 and 1996, respectively. Transportation tariffs paid in the North Sea, Columbia and Africa are included in production costs. The corresponding amounts were FRF 1,175M, FRF 1,043M and FRF 730M for the years ended December 31, 1998, 1997 and 1996, respectively. The liquefaction costs of the Bontang LNG facility in East Kalimantan (Indonesia) and related transportation costs, are included both in revenues and in production costs. The corresponding amounts were FRF 488M, FRF 489M and FRF 434M for the years ended December 31, 1998, 1997 and 1996, respectively. Transportation revenues from pipelines where the Company has an interest were FRF 582M, FRF 605M and FRF 549M for the years ended December 31, 1998, 1997 and 1996, respectively. The corresponding production costs were FRF 125M, FRF 104M and FRF 44M for 1998, 1997 and 1996, respectively. Depreciation costs for the same period were FRF 208M, FRF 211M and FRF 148M respectively.
AMOUNTS IN MILLIONS OF FRENCH FRANCS -------------------------------------------------- CONSOLIDATED SUBSIDIARIES -------------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL ------ ------- -------- ------- ------ YEAR ENDED DECEMBER 31, 1998 Revenues Sales to unaffiliated parties............... 3,860 392 3,366 1,380 8,998 Transfers to affiliated parties............. 2,155 -- 480 4,551 7,186 ------ ---- ------ ------ ------ Total Revenues................................ 6,015 392 3,846 5,931 16,184 Production costs.............................. (2,053) (178) (1,052) (2,886) (6,169) Exploration expenses.......................... (173) (85) (232) (636) (1,126) Depreciation, depletion and amortization and valuation allowances........................ (2,100) (163) (503) (2,112) (4,878) ------ ---- ------ ------ ------ Pretax income from producing activities....... 1,689 (34) 2,059 297 4,011 Income tax.................................... (255) 14 (1,041) (78) (1,360) ------ ---- ------ ------ ------ Results of oil and gas producing activities... 1,434 (20) 1,018 219 2,651 ====== ==== ====== ====== ====== YEAR ENDED DECEMBER 31, 1997 Revenues Sales to unaffiliated parties............... 4,211 680 3,722 1,612 10,225 Transfers to affiliated parties............. 3,102 -- 732 5,544 9,378 ------ ---- ------ ------ ------ Total Revenues................................ 7,313 680 4,454 7,156 19,603 Production costs.............................. (1,999) (231) (1,259) (3,205) (6,694) Exploration expenses.......................... (355) (67) (235) (824) (1,481) Depreciation, depletion and amortization and valuation allowances........................ (1,850) (234) (166) (1,731) (3,981) ------ ---- ------ ------ ------ Pretax income from producing activities....... 3,109 148 2,794 1,396 7,447 Income tax.................................... (1,295) (50) (1,239) (372) (2,956) ------ ---- ------ ------ ------ Results of oil and gas producing activities... 1,814 98 1,555 1,024 4,491 ====== ==== ====== ====== ======
F-60 63 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED)
AMOUNTS IN MILLIONS OF FRENCH FRANCS -------------------------------------------------- CONSOLIDATED SUBSIDIARIES -------------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL ------ ------- -------- ------- ------ ====== ==== ====== ====== ====== YEAR ENDED DECEMBER 31, 1996 Revenues Sales to unaffiliated parties............... 3,663 698 3,157 1,223 8,741 Transfers to affiliated parties............. 2,915 -- 701 4,450 8,066 ------ ---- ------ ------ ------ Total Revenues................................ 6,578 698 3,858 5,673 16,807 Production costs.............................. (1,709) (245) (975) (2,496) (5,425) Exploration expenses.......................... (321) (29) (307) (565) (1,222) Depreciation, depletion and amortization and valuation allowances........................ (2,274) (222) (170) (1,232) (3,898) ------ ---- ------ ------ ------ Pretax income from producing activities....... 2,274 202 2,406 1,380 6,262 Income tax.................................... (1,041) (71) (1,332) (585) (3,029) ------ ---- ------ ------ ------ Results of oil and gas producing activities... 1,233 131 1,074 795 3,233 ====== ==== ====== ====== ======
Company's share of equity affiliates' results of oil and gas producing activities: Year ended December 31, 1998................................ 684 Year ended December 31, 1997................................ 633 Year ended December 31, 1996................................ 639
OIL AND GAS RESERVE INFORMATION The following summarizes the policies used by the Company in preparing the accompanying oil and gas reserve disclosures, Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves and the reconciliation of such standardized measure from year to year. Proved reserves are estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can reasonably be expected to be recovered through existing wells with existing equipment and operating methods. Reserve quantities exclude royalties and interests owned by others. Proved reserves do not include additional quantities recoverable beyond the term of lease or concession. Production quantities shown for crude oil (which include condensate and natural gas liquids) and natural gas are the Company's net share of volumes withdrawn from the oil and gas reserves. The natural gas quantities produced differ from the quantities of gas delivered for sale due to volumes flared or consumed in the production, liquefaction and transport process. Such quantities amounted to approximately 43.4 billion cubic feet in 1998, 32.2 billion cubic feet in 1997 and 42.6 billion cubic feet in 1996. The amounts shown for the caption "Company's net share of equity affiliates" relate to certain Middle East affiliates. In addition, the Company has Middle East oil reserves in consolidated subsidiaries included in the "Rest of world" column. The Company's share of oil reserves included in all Middle East affiliates aggregated 2,106, 2,014 and 2,061 million barrels as of December 31, 1998, 1997 and 1996, respectively. Under production sharing contracts, the Company has the right to share in revenues through production of oil and gas reserves. Proved reserves include estimated quantities allocable to the Company for recovery of costs as well as the Company's net share after recovery of costs. The reserve estimates are subject to revision as prices fluctuate due to the cost recovery feature under the production sharing contract. F-61 64 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED) The following reserve quantities as of December 31, 1998 include: - extension and discoveries made in South Pars (Iran) and Vuite (Angola) - additions in Hamra (Algeria), Tin Fouye Tabankort (Algeria) and Asgard (Norway) The standardized measure of discounted future net cash flows from production of proved reserves was developed as follows: 1. Estimates are made of quantities of proved reserves and the future periods during which they are expected to be produced based on year-end economic conditions. 2. The estimated future cash flows from proved reserves are determined based on year-end prices, except in those instances where fixed and determinable price escalations are included in existing contracts. 3. The future cash flows are reduced by estimated production costs (including production taxes), future development costs and abandonment costs. All estimates are based on year-end economic conditions. 4. Future income taxes are computed by applying the year-end statutory tax rate to future net cash flows after consideration of permanent differences and future income tax credits. 5. Future net cash flows have been discounted at 10 percent in accordance with SFAS 69. The standardized measure of discounted future net cash flows does not purport nor should it be interpreted to present the fair value of the Company's oil and gas reserves. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs and a discount factor more representative of the time value of money and the risks inherent in reserve estimates. F-62 65 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED) ESTIMATED NET PROVED RESERVES OF CRUDE OIL AND NATURAL GAS The following tables reflect the estimated proved reserves of crude oil and natural gas as of December 31, 1996, 1997 and 1998, and the changes therein.
CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS (MILLIONS OF BARRELS) --------------------------------------------------- CONSOLIDATED SUBSIDIARIES --------------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL ------ ------- -------- ------- ------- BALANCE AS OF JANUARY 1, 1996................. 191.1 11.8 124.6 546.6 874.1 Revisions of previous estimates............... 5.2 3.1 (14.3) 9.8 3.8 Extensions, discoveries and other............. 45.4 0.4 -- 117.5 163.3 Acquisitions of reserves in place............. 15.3 -- -- -- 15.3 Sales of reserves in place.................... -- (0.1) -- (0.4) (0.5) Production for the year....................... (30.6) (2.2) (8.8) (49.4) (91.0) ===== ===== ===== ===== ======= BALANCE AS OF DECEMBER 31, 1996............... 226.4 13.0 101.5 624.1 965.0 Revisions of previous estimates............... 30.8 1.9 19.1 145.3 197.1 Extensions, discoveries and other............. 11.4 0.6 1.2 4.9 18.1 Acquisitions of reserves in place............. -- 0.1 -- -- 0.1 Sales of reserves in place.................... (5.5) (0.6) -- -- (6.1) Production for the year....................... (29.5) (1.7) (8.6) (60.4) (100.2) ===== ===== ===== ===== ======= BALANCE AS OF DECEMBER 31, 1997............... 233.6 13.3 113.2 713.9 1,074.0 Revisions of previous estimates............... 40.0 3.2 21.8 131.0 196.0 Extensions, discoveries and other............. 2.8 -- -- 227.2 230.0 Acquisitions of reserves in place............. -- -- -- 0.2 0.2 Sales of reserves in place.................... (0.6) (15.5) -- -- (16.1) Production for the year....................... (26.8) (1.0) (10.2) (72.8) (110.8) ===== ===== ===== ===== ======= BALANCE AS OF DECEMBER 31, 1998............... 249.0 -- 124.8 999.5 1,373.3 Proved developed reserves as of: December 31, 1996........................... 129.3 13.0 71.6 529.9 743.8 December 31, 1997........................... 144.6 13.3 84.6 564.2 806.7 December 31, 1998........................... 175.8 -- 92.5 706.5 974.8 Company's net share in proved reserves of equity affiliates as of: December 31, 1996..................................................................... 1,853.3 December 31, 1997..................................................................... 1,765.5 December 31, 1998..................................................................... 1,647.5
F-63 66 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED)
NATURAL GAS (BILLIONS OF CUBIC FEET) ---------------------------------------------------- CONSOLIDATED SUBSIDIARIES ---------------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL ------- ------- -------- ------- ------- BALANCE AS OF JANUARY 1, 1996............... 1,575.0 132.2 5,955.8 853.5 8,516.5 Revisions of previous estimates............. 109.6 7.2 108.2 143.9 368.9 Extensions, discoveries and other........... 295.8 35.0 -- 261.1 591.9 Acquisitions of reserves in place........... 18.0 -- -- -- 18.0 Sales of reserves in place.................. (1.4) (2.6) -- -- (4.0) Production for the year..................... (191.1) (34.0) (208.7) (73.7) (507.5) ======= ====== ======= ======= ======= BALANCE AS OF DECEMBER 31, 1996............. 1,805.9 137.8 5,855.3 1,184.8 8,983.8 Revisions of previous estimates............. 180.6 2.0 312.4 411.8 906.8 Extensions, discoveries and other........... 143.7 49.9 86.7 15.5 295.8 Acquisitions of reserves in place........... -- 0.4 -- -- 0.4 Sales of reserves in place.................. (88.1) (3.7) -- -- (91.8) Production for the year..................... (185.1) (34.9) (217.0) (71.1) (508.1) ======= ====== ======= ======= ======= BALANCE AS OF DECEMBER 31, 1997............. 1,857.0 151.5 6,037.4 1,541.0 9,586.9 Revisions of previous estimates............. 210.5 51.7 329.2 231.1 822.5 Extensions, discoveries and other........... 128.1 -- 93.3 12.5 233.9 Acquisitions of reserves in place........... 0.4 -- -- 24.4 24.8 Sales of reserves in place.................. (9.8) (179.6) -- -- (189.4) Production for the year..................... (158.9) (23.6) (252.6) (71.0) (506.1) ======= ====== ======= ======= ======= BALANCE AS OF DECEMBER 31, 1998............. 2,027.3 -- 6,207.3 1,738.0 9,972.6 ======= ====== ======= ======= ======= Proved developed reserves as of: December 31, 1996......................... 1,322.2 137.8 3,568.0 497.9 5,525.9 December 31, 1997......................... 1,358.3 151.5 3,519.0 457.3 5,486.1 December 31, 1998......................... 1,367.8 -- 4,457.3 670.9 6,496.0 Company's net share in proved reserves of equity affiliates as of: December 31, 1996.................................................................... 921.8 December 31, 1997.................................................................... 876.0 December 31, 1998.................................................................... 857.2 Nota: the Company's share in the proved reserves accounted for by the cost method is as follows: December 31, 1996.................................................................... 286.7 December 31, 1997.................................................................... 714.0 December 31, 1998.................................................................... 745.4
F-64 67 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS The following is the projected standardized measure of discounted future net cash flows relating to proved oil and gas reserves:
AMOUNTS IN MILLIONS OF FRENCH FRANCS -------------------------------------------------------- CONSOLIDATED SUBSIDIARIES -------------------------------------------------------- NORTH REST OF EUROPE AMERICA FAR EAST WORLD TOTAL --------- -------- --------- --------- --------- AS OF DECEMBER 31, 1996 Future cash inflows...................... 64,029.9 4,201.9 89,082.1 86,743.9 244,057.8 Future production costs.................. (19,656.1) (1,176.2) (15,518.9) (32,227.6) (68,578.8) Future development costs................. (7,026.3) (245.7) (10,736.2) (8,200.8) (26,209.0) --------- -------- --------- --------- --------- Future net cash flows, before income taxes................................. 37,347.5 2,780.0 62,827.0 46,315.5 149,270.0 Future income taxes...................... (19,704.2) -- (28,741.2) (12,809.8) (61,255.2) --------- -------- --------- --------- --------- Future net cash flows, after income taxes................................. 17,643.3 2,780.0 34,085.8 33,505.7 88,014.8 Discount at 10%.......................... (6,511.5) (874.7) (18,622.0) (14,845.0) (40,853.2) --------- -------- --------- --------- --------- Standardized measure of discounted future net cash flows........................ 11,131.8 1,905.3 15,463.8 18,660.7 47,161.6 ========= ======== ========= ========= ========= AS OF DECEMBER 31, 1997 Future cash inflows...................... 63,125.5 3,572.6 76,955.5 78,777.7 222,431.3 Future production costs.................. (21,443.2) (1,418.6) (14,587.0) (30,299.0) (67,747.8) Future development costs................. (6,518.4) (255.7) (11,341.5) (7,231.8) (25,347.4) --------- -------- --------- --------- --------- Future net cash flows, before income taxes................................. 35,163.9 1,898,3 51,027.0 41,246.9 129,336.1 Future income taxes...................... (18,421.2) -- (22,773.9) (10,899.2) (52,094.3) --------- -------- --------- --------- --------- Future net cash flows, after income taxes................................. 16,742.7 1,898.3 28,253.1 30,347.7 77,241.8 Discount at 10%.......................... (6,315.0) (547.8) (15,228.9) (11,929.5) (34,021.2) --------- -------- --------- --------- --------- Standardized measure of discounted future net cash flows........................ 10,427.7 1,350.5 13,024.2 18,418.2 43,220.6 ========= ======== ========= ========= ========= AS OF DECEMBER 31, 1998 Future cash inflows...................... 50,766.3 -- 54,755.7 67,554.8 173,076.8 Future production costs.................. (20,414.8) -- (13,959.1) (27,382.3) (61,756.2) Future development costs................. (5,435.6) -- (8,932.0) (10,066.8) (24,434.4) --------- -------- --------- --------- --------- Future net cash flows, before income taxes................................. 24,915.9 -- 31,864.6 30,105.7 86,886.2 Future income taxes...................... (11,332.6) -- (13,031.2) (5,756.7) (30,120.5) --------- -------- --------- --------- --------- Future net cash flows, after income taxes................................. 13,583.3 -- 18,833.4 24,349.0 56,765.7 Discount at 10%.......................... (5,059.6) -- (9,761.3) (10,444.9) (25,265.8) --------- -------- --------- --------- --------- Standardized measure of discounted future net cash flows........................ 8,523.7 -- 9,072.1 13,904.1 31,499.9 ========= ======== ========= ========= =========
Company's net share of equity investees' standardized measure of discounted future net cash flows as of: December 31, 1996........................................... 9,065.8 December 31, 1997........................................... 8,331.8 December 31, 1998........................................... 5,904.3
F-65 68 TOTAL SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED) CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS The following table reflects the changes in standardized measure of discounted future net cash flows for each of the years 1998, 1997, and 1996:
AMOUNTS IN MILLIONS OF FRENCH FRANCS -------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Consolidated: Beginning of year....................................... 43,220.6 47,161.6 29,159.9 Sales and transfers, net of production costs............ (10,242.0) (13,202.0) (11,619.1) Net change in sales and transfer prices, net of production costs................................................ (24,645.9) (25,731.1) 19,086.4 Extensions, discoveries and improved recovery, net of future production and development costs.............. 6,220.2 7,794.9 11,093.5 Changes in estimated future development costs........... (2,134.9) (2,087.0) (2,115.2) Previously estimated development costs incurred during the year............................................. 7,871.8 7,750.8 5,141.9 Revisions of previous quantity estimates................ 427.2 3,700.5 84.7 Accretion of discount................................... 6,608.8 8,626.5 4,991.7 Net change in income taxes.............................. 11,699.7 9,369.8 (10,896.3) Purchases of reserves in place.......................... 64.3 6.2 769.6 Sales of reserves in place.............................. (1,168.7) (527.8) (60.4) Changes in production rates (timing) and other.......... (6,421.2) 358.2 1,524.9 --------- --------- --------- End of year............................................. 31,499.9 43,220.6 47,161.6 ========= ========= =========
F-66 69 REPORT OF INDEPENDENT AUDITORS TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF TOTAL, Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. This Valuation and Qualifying Account schedule listed in the index above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ARTHUR ANDERSEN, LLP Arthur Andersen, LLP Paris, France March 17, 1999 S-1 70 SCHEDULE II TOTAL VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHANGES IN CHARGED TO BALANCE AT BEGINNING REPORTING COSTS AND END OF PERIOD ENTITY EXPENSES DEDUCTIONS OF PERIOD ---------- ---------- ---------- ---------- ---------- (AMOUNTS IN MILLIONS OF FRENCH FRANCS) VALUATION AND QUALIFYING ACCOUNTS DEDUCTED FROM THE RELATED ASSETS ACCOUNTS 1998 Investments and other noncurrent assets... 1,359 473 244 272 1,804(a) Inventories............................... 298 46 169 119 394 Accounts receivable....................... 1,554 (73) 359 194 1,646 Marketable securities..................... 6 -- 2 5 3 Other current assets...................... 38 4 7 2 47 ------ ----- ----- ----- ------ Total............................. 3,255 450 781 592 3,894 1997 Investments and other noncurrent assets... 1,419 2 257 349 1,359(a) Inventories............................... 270 19 152 143 298 Accounts receivable....................... 887 734 261 328 1,554 Marketable securities..................... 11 -- -- 5 6 Other current assets...................... 44 (12) 28 22 38 ------ ----- ----- ----- ------ Total............................. 2,631 773 698 847 3,255 1996 Investments and other noncurrent assets... 1,389 (31) 196 135 1,419(a) Inventories............................... 229 19 143 121 270 Accounts receivable....................... 790 50 249 202 887 Marketable securities..................... 8 -- 4 1 11 Other current assets...................... 48 (7) 7 4 44 ------ ----- ----- ----- ------ Total............................. 2,464 31 599 463 2,631 LONG-TERM LIABILITIES 1998 Reserve for crude oil price changes....... 955 (22) -- 933 -- Employee benefits......................... 3,216 (40) 513 363 3,326 Other liabilities and deferred income taxes.................................. 10,502 (491) 2,260 1,666 10,605 ------ ----- ----- ----- ------ Total............................. 14,673 (553) 2,773 2,962 13,931 1997 Reserve for crude oil price changes....... 1,977 (10) -- 1,012 955 Employee benefits......................... 5,623 286 511 3,204 3,216 Other liabilities and deferred income taxes.................................. 9,866 (97) 2,525 1,792 10,502 ------ ----- ----- ----- ------ Total............................. 17,466 179 3,036 6,008 14,673 1996 Reserve for crude oil price changes....... 393 13 1,571 -- 1,977 Employee benefits......................... 5,545 312 473 707 5,623 Other liabilities and deferred income taxes.................................. 8,494 681 2,056 1,365 9,866 ------ ----- ----- ----- ------ Total............................. 14,432 1,006 4,100 2,072 17,466
- --------------- (a) The breakdown between investments and other noncurrent assets is as follows:
DECEMBER 31, --------------------- 1998 1997 1996 ----- ----- ----- Investments........................................... 984 1,036 1,045 Other noncurrent assets............................... 820 323 374 ----- ----- ----- 1,804 1,359 1,419 ===== ===== =====
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