Shareholder's Summary 2009

shareholder’s summary 2009 02. the share in 2009 04. changes in shareholding structure 05. dialogue with shareholders: investors / employee shareholders 06. dialogue with shareholders: individual shareholders / agenda 08. becoming a shareholder: share ownership / shareholders’ meetings 10. tax treatment of shares: capital gains / dividends / ISF wealth tax the share in 2009

a contrasted year The France Telecom share has lost 29% since the on the stock market outbreak of the financial crisis at the end of 2007, in line with the overall CAC 40 index, which is down The world’s main stock markets enjoyed a sharp 30%, as well as the telecom sector index, which rebound beginning in March, reversing the down- has dropped 29%. However, including dividends ward trend in markets since September 2007. paid (2.70 euros per share over the period), France Stimulated by signs of an end to the recession, cycli- Telecom outperformed these two indices adjusted cal stocks—mainly financial stocks or companies according to the same method, recording a decline tied to raw materials—drew the most investor atten- of 16%, compared with a decrease of 20% for tion since their performance is most likely to benefit the telecom sector index and a 24% decline for the from an economic upturn, and since these stocks CAC 40. significantly under-performed in 2008. The 2009 rebound did not extend to the France Telecom share, which ended the year down 12.7% a dividend yield stock (this decline was limited to 5.4% including dividend payments), despite the fact that the stock recorded France Telecom remains one of the top CAC 40 the second best performance in the CAC 40 index companies in terms of dividend payouts. The yield in 2008 (declining 19%, or 11% including dividend for shareholders in 2009 was 7% (calculated from payments). The share thus suffered from the shifting the closing share price at 31 December 2008 and of assets to cyclical stocks, coupled with concerns based on a cash payment of 1.40 euros per share). raised by trends in the French telecommunications The dividend for 2008 of 1.40 euros per share was market (impending arrival of a fourth mobile opera- paid to shareholders through an interim dividend tor, increased competition in ADSL, regulatory paid in September 2008 and payment of the bal- uncertainties surrounding fibre-optic networks), plus ance in June 2009. Shareholders had an option to the economic slowdown in Eastern Europe, where receive half the outstanding amount in new shares. the Group has an extensive footprint. Shareholders who opted for payment in new shares represent over half the share capital, underlining their confidence in the Group’s strategy.

2 share information

Markets: Eurolist A – Euronext; New York Stock Exchange ISIN code: FR0000133308. Stock code: FTE. Par value: 4 euros. Included in the following indices: CAC 40, Euronext 100, FTS Euroﬁ rst 100, FTS Euroﬁ rst 80, IT. CAC, S&P 100, FTSE4GOOD, ASPI Eurozone and Ethibel. Eligible for deferred settlement service and investment savings accounts. Number of shares in circulation at 31 December 2009: 2,648,709,774.

France Telecom share price (euros)

20 France Telecom

Stoxx Telecom 15

CAC 40

10 December December December 2007 2008 2009

Closing high and low in 2009: Closing high: €20.75 – 5 January 2009 Closing low: €15.55 –10 July 2009

dividend (euros per share) The Board of Directors has proposed distribution 2005 1 of a dividend of 1.40 euros per share for 2009*. An interim dividend was paid on 2 September 2009. The balance of 2006 1.20 the dividend amount of 0.80 euros per share will be payable as of 17 June 2010. This amount is paid entirely in cash. 2007 1.30 * This decision is subject to approval by the Annual General Meeting of Shareholders on 9 June 2010. 2008 1.40

2009 1.40*

3 changes in shareholding structure shareholding structure

At 31 December 2009, France Telecom’s capital com- shareholding structure prised 2,648,709,774 ordinary shares with a par value at 31 December 2009 of 4 euros each, fully paid. treasury shares 0.08% employees In 2009, 33.7 million new shares were issued, repre- 4.02% Government senting a 1.3% increase in capital. This increase was + Erap due mainly to partial dividend payment in new shares + FSI 26.97% in June 2009 and for a marginal amount, to the exercise of stock options.

The shareholding structure also changed compared public with end 2008, primarily in terms of the share held by 68.93% the French government. On 15 July 2009 the French government contributed 357,526,133 shares, representing 13.5% of France Telecom’s share capital at that date, to the Fonds Stratégique d’Investissement The Group holds slightly over two million treasury (FSI) . The two parties signed a shareholders’ pact on shares, used in particular to allocate free shares to 25 November to act in concert for France Telecom employees outside of France. shares for a period of two years. Following this transaction the French government held 13.23% of the (1) The FSI is a sovereign fund created by the French government to ﬁ nance the development of growth businesses and enhance share capital and ERAP held 0.24%. the competitiveness of the French economy.

The ownership interest of employees increased sig- niﬁ cantly in 2009, rising from 3.68% to 4.02% due to investments made through the Group savings plan and dividends paid for France Telecom shares through this Group savings plan.

4 dialogue with shareholders investors employee shareholders

France Telecom maintains ongoing relations with the Group employees in France who wish to invest fi nancial community, providing complete information in France Telecom shares through their employee to ensure an understanding of the company’s strat- savings plan have several options. They can allocate egy. Investor relations are anchored in dialogue, trans- incentive, employer contribution or profit-sharing parency and availability. amounts to the FCPE fund invested in France Telecom shares. They can also make voluntary con- The Group holds a quarterly conference call to review tributions, which also benefi t from employer matching results and answer questions from investors. It also funds. Employees also have a diverse range of invest- provides ongoing information by issuing press releases ment instruments available through the Group on major corporate and operational developments. Savings Plan or PERCO corporate collective retire- ment savings plan. Senior executives meet with investors and analysts during roadshows in key fi nancial centres, as well as France Telecom is committed to providing clear and at major investment conferences organised by banks. comprehensive information for all aspects of In 2009 the Group met with nearly 1,500 investors, employee savings and management of these funds. equivalent to 2008, during 445 private meetings A regularly updated Intranet site contains a full range in 35 cities around the world. A total of 68 days were of information and a team of advisors is available dedicated to investor meetings, eight days more than to answer all employee questions concerning their in 2008. employee savings plan or pension. In 2009 over 35,000 employees received information by phone or email.

contacts • Individual shareholders: Telephone: Call 10 10 (or 0 800 05 10 10) toll-free from France from a ﬁ xed line, or +33 1 60 95 87 24 from outside France (help desk available 9 am to 7 pm French time, Monday through Friday). Email: [email protected] • Investors and analysts: Email: [email protected]

• On the web: www.orange.com/ﬁ nance 5 dialogue with shareholders

individual shareholders a special relationship via the France Telecom Club France Telecom builds close relations with a The France Telecom Club is open to all France community of 1.1 million individual shareholders Telecom or Orange customers who own at least ﬁ ve with an emphasis on dialogue and comprehensive bearer shares or one direct registered share. The Club information. plays an important role in nurturing ties between the Group and its shareholders. Members are regularly meeting shareholders face-to-face invited to meetings and events near their home. They Each year the Group organises meetings with share- automatically receive the shareholders newsletter and holders in Paris and other French cities (Nancy, the catalogue from the Club boutique, which features Nantes, Nice and Tours in 2009). These events are a broad selection of products and services with spe- an opportunity for Group executives to personally cial offers for Club members. Members are also discuss a detailed review of ﬁ nancial results and news invited to visit sites to learn more about the Group’s about the company’s different businesses. France vast range of activities, and receive invitations or spe- Telecom Orange also welcomed over 1,500 visitors cial offers for cultural, sport and entertainment events to its stand at the Actionaria personal investing forum partnered by the Group. in Paris at the end of November. Membership in the France Telecom Club is free and Two innovative channels have been created to better valid for up to two years. Beginning in June 2010, address the expectations of the Group’s sharehold- when their membership period expires, France ers. The inter@action blog is a consultative vehicle Telecom will send members who continue to be eligi- to ensure that shareholder voices are heard. Since ble a new membership card. 2009, the CABAI committee for individual shareholder analysis and benchmarking has been working with content-rich electronic channels the Group to develop forward-looking tools for better As in every aspect of modern life, shareholder rela- shareholder information. With 13 shareholder mem- tions are regularly enriched with innovative commu- bers, the CABAI committee met four times in 2009. nications resources that provide clear and It reviewed and offered input on the makeover of the educational information on the company: finance/shareholders section on the orange.com – en actions is a multimedia webzine published four website, the annual general meeting, the sharehold- times a year, featuring highlights from around the ers’ newsletter and the annual report. Group and an all-new format in 2009. The magazine

6 includes video interviews with executives, news businesses through the Individual Shareholder briefs and a Q&A section. support desk (for direct registered shareholders) and – idClub is a service for shareholders who want to the France Telecom Club, either by phone or email receive SMS and/or email messages on Group ([email protected]). news or events reserved to Club members in their region. – www.orange.com : The shareholders page in the fi nance section of the website has been enhanced to improve access, offering clear, comprehensive 2010 financial agenda and regularly updated information on the Group. tuesday 20 april – the Shareholders’ letter and Supplement are sent meeting with shareholders to France Telecom Club members and subscriber in Paris shareholders twice a year. There is also an interac- tuesday 4 may tive version with enriched content on the Web. In meeting with shareholders addition to half-year or annual results, the newsletter in Bordeaux contains information on the Group’s businesses and France Telecom Club activities. wednesday 9 june – annual report: the paper version is enriched with annual General Meeting “fl ashcode” tags that use a mobile phone camera of Shareholders to access videos on different subjects. This year’s thursday 29 july report also includes an augmented reality experience fi rst-half 2010 results using a webcam. tuesday 5 october meeting with shareholders shareholder contact number: 10 10 in Annecy The Shareholder Relations desk is available by calling thursday 28 october 10 10 or 0 800 05 10 10 (free from a France Telecom 3rd Quarter results fi xed line), Monday through Friday, 9 am to 7 pm. Callers can check the share price in real time via the thursday 4 november automated system. Investor relations advisors are also meeting with shareholders in Pau available to answer questions on the Group and its thursday 2 december meeting with shareholders in Rennes becoming a shareholder

share ownership – direct information: documents, including notices to attend shareholders’ meetings, are sent directly France Telecom shares may be purchased by placing to shareholders. a buy order with a fi nancial intermediary. There are For more information, contact the France Telecom three forms of shareholding. direct registered shareholder service on 10 10 (or 0800 05 10 10, free from a France Telecom fi xed bearer shares line). Shares are held by a fi nancial intermediary in a securities investment account or a “PEA” investment sav- administered registered shares ings account. In this case France Telecom does not Shares are held by a fi nancial intermediary as for know the individual shareholders except through peri- bearer shares. However, at the request of the share- odic surveys performed by Euroclear at the request holder, this intermediary contacts BNP Paribas of the company. Securities Services to enable the shareholder to automatically receive personal notices of France Telecom direct registered shares shareholders’ meetings. France Telecom proposes a direct registered share service for shareholders who wish their registered Regardless of the form in which shares are held, shares to be recorded in the company’s account. shareholders enjoy the same rights attached This account is maintained by BNP Paribas Securities to shares, notably the right to dividend payments, Services on behalf of France Telecom. There are no the right to information and the right to vote at share- custodian fees, transaction fees are discounted and holders’ meetings. shareholders enjoy access to personalised service: – an online share account enables shareholders to consult and manage their direct registered shares, as well as to transmit buy or sell orders via Internet;

8 shareholder meetings how to attend All France Telecom shareholders are entitled focus on information and discussion to attend meetings, regardless of the number The Annual General Meeting of Shareholders pro- of shares they hold, on condition that the shares vides a forum where executives can discuss the have been recorded in their accounts for at least results and activities of the previous year with share- three trading days prior to the date of the meeting. holders, along with the outlook for the company. Each direct registered share represents one vote These meetings ensure that shareholders have during the vote on resolutions. access to information and can exercise their right For admittance, shareholders must request an entry to vote on resolutions submitted for their approval. card from France Telecom’s direct registered share service. Owners of bearer shares must contact the different types of shareholder meetings financial intermediary that manages their share The Ordinary Annual General Meeting of account. Shareholders votes on approval of the company’s fi nancial statements and allocation of earnings, as multimedia resources encourage extensive well as the nomination of board members and any participation decisions that do not change the share capital France Telecom deploys a variety of resources or bylaws of the company. A quorum representing to ensure that the largest possible number of share- at minimum 20% of the voting rights must be present holders are informed and can vote: to hold the meeting (fi rst notice of Meeting). – In addition to absentee ballots or proxy forms, Extraordinary General Meetings of Shareholders are France Telecom enables shareholders to vote elec- held to vote on changes in the company bylaws and tronically by Internet. on authorizations given to the board of directors – Meeting proceedings are transmitted live to change the number of shares comprising the share and available for download via the Group’s dif- capital of the company. The quorum for the fi rst ferent media channels: in the finance section notice of Meeting is 25%. on www.orange.com, on Orange TV and on mobile The combined Ordinary and Extraordinary General phones via orange.mobi. Meeting of Shareholders votes on resolutions submitted to both the Annual General Meeting and to an Extraordinary General Meeting.

9 tax treatment of shares

Shares held by individuals who are residents Under the terms of the 2010 French fi nance law, this of France and distributions paid on these shares are threshold is no longer applicable for payment subject to income tax and social security levies of social levies, which are due on capital gains in France as defi ned by the French tax code and realised as of the fi rst euro. annual fi nance law. The main applicable measures Capital losses can be deducted from capital gains depend on whether the shares are held in a stand- realised during the year or during the following fi ve ard securities investment account or a PEA share years if the threshold has been reached the year savings plan. The following information summarizes these capital losses are booked. the main measures applicable at 31 March 2010 and are subject to change. PEA share savings accounts The tax treatment of capital gains depends on the PEA disposal date. Any sale of securities prior to the capital gains 8th year from the date these accounts were opened results in closing of the account: In all cases, capital gains realized when shares are – exemption from tax after eight years or if the PEA sold or when the PEA investment account is liqui- account is closed after fi ve years; dated are subject to social charges. In 2010 these – 18% tax rate if the account is closed between two charges total 12.1% of the amount, broken down and fi ve years after it was opened; as follows: CSG social security levy, of which 5.8% – 22,5% if it is closed less than two years after it was is deductable from overall taxable income (2.4% opened. of this levy is non-deductable); a CRDS social security In the last two cases, capital gains are taxed if the debt contribution at a rate of 0.5%; a general social threshold for securities sold exceeds 25,830 during charge of 2%; an additional levy of 0.3% and a 1.1% the year. tax to fi nance the RSA minimum guaranteed income programme. standard securities investment accounts Capital gains realised during a fi scal year are taxed at 18% when the amount of securities (shares, bonds, investment certifi cates, mutual funds, pooled investment funds, etc.) divested for a tax household during the year exceeds a threshold, which has been set at 25,830 euros for 2010.

10 dividends ISF wealth tax The ISF wealth tax is levied on assets in excess standard securities investment accounts of 790,000 euros in 2010. Shares are included Dividends are subject to a 12.1% social security in assets subject to this tax, with valuation dependent levy. upon the method of ownership. For income tax, shareholders have a choice between two methods of taxation: standard securities investment accounts – general system: dividends are taxed as income. For the value applicable for taxation, shareholders The amount taxed is the total amount of dividends have a choice between the last reported share price received, after an initial 40% reduction plus a second on 1 January of the tax year or an average share allowance of 1,525 euros for a single taxpayer price calculated for the last 30 trading days of the or 3,050 euros for couples. Furthermore, a tax credit previous year. is allocated equivalent to 50% of the received divi- For each security the shareholder must report the dend and capped at 115 euros for a single taxpayer most beneﬁ cial valuation in terms of taxation. or 230 euros for couples. – Optional Prélèvement Forfaitaire system, taxed PEA share savings plans at 18%. PEA share savings plans are subject to the ISF wealth In this case the above-mentioned allowances and tax tax on the basis of their book value (cash and securi- credits do not apply. ties) at 1 January of the tax year. share savings accounts Dividends are exempt from tax if they are paid into the PEA account (except in certain cases related to unlisted securities). They beneﬁ t from a 50% tax credit capped at 115 euros for a single taxpayer or 230 euros for couples.

11 France Telecom Group 6, place d’Alleray 75505 Paris Cedex 15 – France Tel.: 33 (0) 1 44 44 22 22

www.orange.com www.francetelecom.com

France Telecom – French limited company with share capital of €10,594,839,096 – RCS Paris 380 129 866 Design and production: – Photo credits: Orange – Document printed on PEFC-certiﬁ ed paper.