2005 Annual Report

The Annual Report in English is a translation
of the French “Document de référence” for information purposes.
This translation is qualified in its entirety by reference to the “Document de référence”.

Contents


1	Key Figures — Simplified Organization Chart	p. 5

2	Description of the Group and its Businesses — Litigation — Risk Factors	p. 15
	Description of the Group	p. 17
	Description of the Businesses	p. 26
	Seasonality	p. 37
	Statutory Environment and Possible Dependencies	p. 37
	Piracy	p. 42
	Competition	p. 43
	Raw Materials	p. 45
	Research and Development	p. 46
	Litigation	p. 47
	Risk Factors	p. 50

3	Information Concerning the Company — Corporate Governance	p. 53
	General Information Concerning the Company	p. 55
	Additional Information Concerning the Company	p. 56
	Corporate Governance	p. 77
	Report of the Chairman of the Supervisory Board of Vivendi Universal on the Conditions of Preparation and Organization of the Work of the Supervisory Board and Internal Audit Procedures — Fiscal Year 2005	p. 102
	Statutory Auditors’ Report Drawn up Pursuant to the Last Subsection of Article L. 225-235 of the French Commercial Code on the Report of the Chairman of the Supervisory Board on the Internal Audit Procedures Relating to the Financial and Accounting Information — Fiscal Year ended on December 31, 2005	p. 108
	Statutory Auditors’ Report on Regulated Agreements Year Ended December 31, 2005	p. 109

4	Management Board’s Operating and Financial Review and Prospects — Report of Independant Registered Public Accounting Firms — Consolidated Financial Statements — Condensed Statutory Financial Statements	p. 113
	Selected Consolidated Financial Data for the last 5 years	p. 114
	Management Board’s Operating and Financial Review and Prospects	p. 117
	Management Board’s Operating and Financial Review and Prospects for the years ended December 31, 2005 and 2004	p. 118
	Main developments occurred in 2005 and 2004	p. 120
	First time adoption of IFRS	p. 130
	Statement of earnings in 2005 and 2004	p. 133
	Revenues, earnings from operations and cash flow from operations by business segment for the years ended December 31, 2005 and 2004	p. 138
	Capital resources for 2005 and 2004	p. 149
	Forward-looking statements	p. 162
	Appendix to Operating and financial review and prospects	p. 163
	Reconciliation of revenues and earnings from operations as published to revenues and earnings from operations on a comparable basis for the year ended December 31, 2005	p. 163
	Reconciliation of revenues and earnings from operations as published to revenues and earnings from operations on a comparable basis for the year ended December 31, 2004	p. 164
	Reconciliation of adjusted earnings from operations before depreciation and amortization (EBITDA) to earnings from operations	p. 165
	Reconciliation of cash flow from operations to net cash provided by operating activities for the years ended December 31, 2005 and 2004	p. 166
	Reconciliation of revenues and earnings from operations prepared under French Gaap to IFRS revenues and earnings from operations for the year ended December 31, 2004	p. 167

	Consolidated Financial Statements for the year ended December 31, 2005	p. 169
	Statutory Auditors’ Report on the Consolidated Financial Statements	p. 172
	Consolidated statement of earnings for the years ended December 31, 2005 and 2004	p. 174
	Consolidated statement of financial position as at December 31, 2005, December 31, 2004 and January 1, 2004	p. 175
	Consolidated statement of cash flows for the years ended December 31, 2005 and 2004	p. 176
	Consolidated statement of changes in equity for the years ended December 31, 2004 and 2005	p. 177
	Notes to the consolidated financial statements	p. 179

2 2005 Annual Report — Vivendi Universal


	Condensed Statutory Financial Statements	p. 287

	Statutory Auditor’s General Report on the Annual Financial Statements	p. 288
	Statement of Earnings	p. 290
	Statement of Financial Position	p. 292
	Statement of Cash Flows	p. 294
	Subsidiaries and Affiliates	p. 295

5	Recent Events — Outlook	p. 299
	Recent Events	p. 300
	Outlook	p. 300
	Statutory Auditors’ Report on the Forecasts of Adjusted Net Profit Attributable to the Equity Holders of the Parent	p. 301

6	Audit of the Financial Statements	p. 303
	Firms Responsible for the Audit of the Financial Statements	p. 304

	Appendix — Combined Ordinary and Extraordinary General Meeting April 20, 2006	p. 305
	Agenda	p. 306
	Management Board Report	p. 307
	Report of the Supervisory Board	p. 309
	Proposed Resolutions	p. 310
	Report of the Statutory Auditors on the Reduction in Capital by the Cancellation of Shares	p. 313

2005 Annual Report — Vivendi Universal 3

1 Key Figures — Simplified Organization Chart


Revenues by Business Segment			p. 6

2004 Revenues by Geographical Zone			p. 7

2005 Revenues by Geographical Zone			p. 7

Earnings from Operations			p. 8

Adjusted Net Income, attributable to equity holders of the parent			p. 9

Earnings, attributable to equity holders of the parent			p. 9

Total Equity / Financial Net Debt			p. 10

Headcount by Business Segment			p. 11

2003 Headcount by Geographical Zone			p. 12

2004 Headcount by Geographical Zone			p. 12

2005 Headcount by Geographical Zone			p. 12

Simplified Organization Chart			p. 13

2005 Annual Report — Vivendi Universal 5

1 Key Figures — Simplified Organization Chart

Key Figures

Revenues by Business Segment (at December 31)
In IFRS (in euros million)

2004 2005 2004 2005 Comparable basis* As published

Universal Music Group 4,819 4,893 4,989 4,893

Vivendi Universal Games 475 641 475 641

Canal+ Group 3,277 3,407 3,560 3,452

SFR (a) 8,117 8,687 7,192 8,687

Maroc Telecom 1,611 1,860 1,581 1,860

Non core operations and elimination of inter segment transactions (b) (62) (49) 86 (49)

Total revenue 18,237 19,439 17,883 19,484


*		Comparable basis essentially illustrates the effect of the divestitures that occurred in 2004 (mainly the “Flux-divertissement” business of StudioExpand, Canal+ Benelux, UMG’s music clubs, Kencell and Monaco Telecom), of the divestitures that occurred in 2005 (primarily NC Numéricâble) and includes the full consolidation of minority stakes in distribution subsidiaries at SFR and of Mauritel at Maroc Telecom as if these transactions had occurred as at January 1, 2004. In 2004, comparable basis also includes estimated mobile-to-mobile sales at SFR applying the 2005 rate. Comparable basis revenues are not necessarily indicative of the combined revenues that would have occurred had the events actually occurred as at January 1, 2004.

(a)		As of January 1, 2005, SFR revenue and cost of sales include mobile-to-mobile sales for €909 million for the fiscal year ended December 31, 2005. In 2004, comparable basis includes estimated mobile-to-mobile sales applying the 2005 rate, i.e., €875 million for fiscal year 2004.

(b)		Including Vivendi Telecom International, Vivendi Valorisation and other non core businesses.

6 2005 Annual Report — Vivendi Universal

Key Figures — Simplified Organization Chart 1

Key Figures

2004 Revenues by Geographical Zone (at December 31)
In IFRS (in euros million)

1,096 (6%) Rest of world 1,516 (8%) Morocco 2,260 (13%) United States 2,176 (12%) Rest of Europe

2005 Revenues by Geographical Zone (at December 31)
In IFRS (in euros million)

1,148 (6%)
Rest of world

1,773 (9%) Morocco 2,414 (12%) United States 1,933 (10%) Rest of Europe

2005 Annual Report — Vivendi Universal 7

1 Key Figures — Simplified Organization Chart

Key Figures

Earnings from Operations (at December 31)
In IFRS (in euros million)

Earnings from Operations (at December 31)

In IFRS (in euros million)

+ 14 % + 16 %

4 000 3 000 2 000 1 000 0

2004 2005 2004 2005

Comparable basis* As published Universal Music Group 399 480 359 480

Vivendi Universal Games (203) 41 (203) 41

Canal+ Group 187 176 188 203

SFR (a) 2,338 2,422 2,332 2,422

Maroc Telecom 671 762 662 762

Holding & corporate (193) (195) (193) (195)

Non core operations (b) 63 33 88 33

Earnings from operations 3,262 3,719 3,233 3,746


*		Comparable basis essentially illustrates the effect of the divestitures that occurred in 2004 (mainly the “Flux-divertissement” business of StudioExpand, Canal+ Benelux, UMG’s music clubs, Kencell and Monaco Telecom), of the divestitures that occurred in 2005 (primarily NC Numéricâble) and includes the full consolidation of minority stakes in distribution subsidiaries at SFR and of Mauritel at Maroc Telecom as if these transactions had occurred as at January 1, 2004. In 2004, comparable basis also includes estimated mobile-to-mobile sales at SFR applying the 2005 rate. Comparable basis results are not necessarily indicative of the combined results that would have occurred had the events actually occurred as at January 1, 2004.

(a)		As of January 1, 2005, SFR revenues include mobile-to-mobile sales for €909 million for the year ended December 31, 2005.

(b)		Including Vivendi Telecom International, Vivendi Valorisation and other non core businesses.

8 2005 Annual Report — Vivendi Universal

Key Figures — Simplified Organization Chart 1

Key Figures

Adjusted Net Income, attributable to equity holders of the parent (at December 31)
In IFRS (in euros million)

2 500

+ 55 %

1 875 1 250 625 0


	2004		2005
Adjusted Net Income, attributable to equity holders of the parent (a)		1,338		2,078

Earnings, attributable to equity holders of the parent (at December 31)
In IFRS (in euros million)


	2004		2005
Earnings, attributable to equity holders of the parent		3,767		3,154


(a)		Vivendi Universal considers adjusted net income (loss), attributable to equity holders of the parent, which is a non-GAAP measure, to be a relevant indicator of the company’s operating and financial performances. Vivendi Universal management focuses on adjusted net income (loss), attributable to equity holders of the parent, as it best illustrates the performance of continuing operations excluding most non-recurring and non-operating items. Adjusted net income (loss) includes earnings from operations, other income from ordinary activities, income (loss) from equity affiliates, interest, and tax and minority interests relating to these items. As a consequence, it excludes other charges from ordinary activities (corresponding to impairment of goodwill and other intangible assets losses, if any), other financial charges and income and earnings from discontinued operations as presented in the consolidated statement of earnings, the tax and minority interests relating to these adjustments, as well as non recurring tax items (notably the changes in deferred tax assets relating to the Consolidated Global Profit Tax System, the reversal of tax liabilities relating to tax years no longer open to audit).

2005 Annual Report — Vivendi Universal 9

1 Key Figures — Simplified Organization Chart

Key Figures

Total Equity (a) / Financial Net Debt (at December 31)
In IFRS (in euros million)

Total Equity (a) / Financial Net Debt (at December 31)

In IFRS (in euros million)

25 000 20 000 15 000 10 000 5 000 0

2004 2005

Total Equity (a) 18,092 21,608

Financial Net Debt 4,724 3,768


(a)		Attributable to equity holders of the parent, including minority interests.

		Vivendi Universal considers “financial net debt”, a non-GAAP measure, to be an important indicator measuring Vivendi Universal’s indebtedness. Financial net debt is calculated as the sum of long-term and short-term borrowings and other long-term and short-term financial liabilities (including commitments to purchase minority interests) as reported on the Consolidated Statement of Financial Position, less cash and cash equivalents as reported on the Consolidated Statement of Financial Position as well as derivative financial instruments in assets and cash deposits backing borrowings (included in the Consolidated Statement of Financial Position under “non current financial assets”). A reconciliation of the Consolidated Statement of Financial Position items with this measure is presented in section 5 “Capital resources for 2005 and 2004” of Chapter 4 “Management Board’s Operating and Financial Review and Prospects” .

10 2005 Annual Report — Vivendi Universal

Key Figures — Simplified Organization Chart 1

Key Figures

Headcount by Business Segment (at December 31)

60 000 50 000 40 000 30 000 20 000
10 000 0

2003 2004 2005

Universal Music Group 10,849 9,661 7,915 (g) Vivendi Universal Games 1,985 1,654 2,657 (f) Canal+ Group 4,798 4,275 3,880

Vivendi Universal Entertainment (a) 14,187 0 0

SFR (b) 9,036 9,781 8,033

Maroc Telecom (c) 12,145 12,204 11,251

Others (d) 2,451 331 295

Total 55,451 (e) 37,906 34,031


(a)		Vivendi Universal Entertainment exited Vivendi Universal’s consolidation scope on May 11, 2004.

(b)		Excluding Telecom Développement (728 employees) at December 31, 2003 and excluding fixed-line operations at December 31, 2005.

(c)		Excluding Groupe Mauritel.

(d)		In 2003: VU Net, Vivendi Telecom International (VTI), Corporate and Atica & Scipione. In 2004, VU Net, VTI and Corporate. In 2005: Corporate.

(e)		Excluding Babelsberg Studios.

(f)		Excluding High Moon Studios acquired on December 29, 2005.

(g)		In 2005, UMG sold its manufacturing and distribution facilities in the United States and Germany.

2005 Annual Report — Vivendi Universal 11

1 Key Figures — Simplified Organization Chart

Key Figures

2003 Headcount by Geographical Zone (at December 31)

6,504 (12%)
Europe (excluding France) 18,910 (34%) North America

14,740 (27%) 55,451
France

1,199 (2%)
South America

12,776 (23%)
Africa-Middle East1,322 (2%) Asia-Pacific

2004 Headcount by Geographical Zone (at December 31)

4,713 (12%) North America

4,667 (12%)
Europe (excluding France)336 (2%) South America

14,529 (38%) 37,906 1,409 (4%)
France Asia-Pacific

12,252 (32%)
Africa-Middle East

2005 Headcount by Geographical Zone (at December 31)

3,210 (9%)
Europe (excluding France)4,416 (13%) North America

13,142 (39%) 34,031 345 (1%) France South America 11,418 1,500 (4%)

(34%)

Asia-Pacific Africa-Middle East

12 2005 Annual Report — Vivendi Universal

Key Figures — Simplified Organization Chart 1

Simplified Organization Chart

Simplified Organization Chart (at December 31, 2005)

Vivendi Universal Media Telecommunications

Vivendi

Universal Music NBC Maroc Elektrim Canal+ Group Universal SFR SA

Group (2) Universal (2) Telecom* Telekomunikacja (4) 100% (1) (3) Games (2) 56% 92% / 100% 18.5% / 20% 51% 51% 99% / 100%

Canal+ SA* Neuf Cegetel Mauritel SA PTC 49% 28% 51% 51%

CanalSat

66%

StudioCanal

100%

MultiThématiques

100%

Media Overseas

100%

Cyfra+

75%

The percentages indicated in color correspond to Vivendi Universal’s voting rights if they differ from Vivendi Universal’s stake.

(*) Listed company.

(1) In January 2006, Vivendi Universal, TF1 and M6 signed an agreement to combine the pay-TV activities of Canal+ Group and TPS in France and in French-language territories (see chapter 4 “Management Board’s Operating and Financial Review and Prospects”).

(2) Since February 7, 2006 as a result of the transaction with MEI, Vivendi Universal holds 100% of these companies (see chapter 4 “Management Board’s Operating and Financial Review and Prospects”).

(3) On February 17, 2006, Lagardère, Vivendi Universal and Canal+ Group announced a draft agreement under the terms of which Lagardère would acquire 20% of Canal+ France (see chapter 4 “Management Board’s Operating and Financial Review and Prospects”). Canal+ France (temporary name) would comprise all the present assets of TPS and Canal+ Group in pay-TV (100% of CanalSat, Canal+, TPS, Multithématiques, MediaOverseas, Sport+, Canal+ Active and Kiosque).

(4) See chapter 4 “Management Board’s Operating and Financial Review and Prospects – 1.1.4 Elektrim Telekomunikacja situation in 2005”.

2005 Annual Report — Vivendi Universal 13

14 2005 Annual Report — Vivendi Universal

2 Description of the Group and its Businesses — Litigation — Risk Factors


1	Description of the Group	p. 17

	1.1. Strategy	p. 17

	1.2. Highlights	p. 18

	2005	p. 18
	2006	p. 20

	1.3. Financial Communications Policy and Value Creation	p. 21

	1.3.1. Investment Strategy	p. 21
	1.3.2. Financial Communications Policy	p. 21
	1.3.3. Value Creation in 2005	p. 22

	1.4. Human Resources	p. 23

	1.4.1. Employee Share Ownership and Save As You Earn Schemes	p. 23
	1.4.2. Dialog Between Management and Labor	p. 23
	1.4.3. Contribution to the Development of Employment	p. 24
	1.4.4. Equality of Chance	p. 24

	1.5. Insurance	p. 25

2	Description of the Businesses	p. 26

	2.1. Universal Music Group	p. 26

	2.1.1. Recorded Music	p. 26
	2.1.2. Legal Digital Distribution of Music	p. 27
	2.1.3. Music Publishing	p. 27

	2.2. Vivendi Universal Games	p. 28

	2.3. Canal+ Group	p. 29

	2.3.1. French Pay-TV	p. 29
	2.3.2. Films	p. 32
	2.3.3. Other Activities	p. 32

	2.4. SFR	p. 32

	2.4.1. 2005 Performance	p. 32
	2.4.2. Network	p. 33
	2.4.3. Services	p. 33

	2.5. Maroc Telecom	p. 34

	2.5.1. Mobile Telephony	p. 34
	2.5.2. Fixed-line Telephony, Data and Internet	p. 34
	2.5.3. Distribution	p. 35
	2.5.4. Network	p. 35
	2.5.5. Mauritel Group	p. 35

	2.6. NBC Universal	p. 36

3	Seasonality	p. 37

	3.1. Universal Music Group	p. 37

	3.2. Vivendi Universal Games	p. 37

	3.3. Canal+ Group	p. 37

	3.4. SFR	p. 37

	3.5. Maroc Telecom	p. 37

4	Statutory Environment and Possible Dependencies	p. 37

	4.1. Universal Music Group	p. 37

	4.2. Vivendi Universal Games	p. 38

	4.3. Canal+ Group	p. 38

	4.4. SFR	p. 40

	4.4.1. Coverage of Dead Zones	p. 40
	4.4.2. Health and Environment	p. 40

	4.5. Maroc Telecom	p. 41

5	Piracy	p. 42

	5.1. Universal Music Group	p. 42

	5.2. Vivendi Universal Games	p. 43

	5.3. Canal+ Group	p. 43

	5.4. SFR	p. 43

6	Competition	p. 43

	6.1. Universal Music Group	p. 43

	6.2. Vivendi Universal Games	p. 44

	6.3. Canal+ Group	p. 44

	6.4. SFR	p. 44

	6.5. Maroc Telecom	p. 44

	6.5.1. Fixed-Line Telephony	p. 45
	6.5.2. Mobile	p. 45
	6.5.3. Internet	p. 45

2005 Annual Report — Vivendi Universal 15

2 Description of the Group and its Businesses — Litigation — Risk Factors


7	Raw Materials	p. 45

8	Research and Development	p. 46

	8.1. Universal Music Group	p. 46

	8.2. Vivendi Universal Games	p. 46

	8.3. Canal+ Group	p. 46

	8.4. SFR	p. 46

	8.5. Maroc Telecom	p. 46

9	Litigation	p. 47

10	Risk Factors	p. 50

16 2005 Annual Report — Vivendi Universal

Description of the Group and its Businesses — Litigation — Risk Factors 2

Description of the Group

1 Description of the Group

Vivendi Universal is a major player in media and telecommunications with activities in music, interactive games, television, cinema and fixed and mobile telecommunications.

Vivendi Universal holds leading positions in each of its businesses:

•		Universal Music Group (UMG): the world leader in recorded music with one out of every four CDs sold worldwide,

•		Vivendi Universal Games (VU Games): a global developer, publisher and distributor of multi-platform interactive games with more than 5 million paying users,

•		Canal+ Group: the number 1 publisher and distributor of pay-TV in France (Canal+ and CanalSat) with 8.25 million subscriptions and one of the world’s most important film libraries (StudioCanal) with more than 5,000 films,

•		SFR: France’s number 2 mobile telecommunications operator with 17.2 million customers,

•		Maroc Telecom: Morocco’s leading mobile and fixed-line telecommunications operator with 8.8 million mobile customers and 1.34 million fixed lines.

Vivendi Universal also holds 20% of NBC Universal since February 7, 2006 versus 18.5% at December 31, 2005 (see Chapter 4 “Management Board’s Operating and Financial Review and Prospects”). NBC Universal is a major player in media and communications with activities encompassing the production of television programs, the production and distribution of motion pictures, the operation of television broadcasting stations and the operation of theme parks.

1.1. Strategy

Vivendi Universal is strengthening its position in media and telecommunications, two business sectors with growth rates which exceed that of the economy. All of the Group’s businesses—music, interactive games, pay-TV and mobile and fixed-line telephony—are focused on customer satisfaction. The Group’s objective is to enhance its businesses by fostering innovation and creativity while building upon their strong operational compatibility.

The number of distribution platforms continues to grow as does the use of digital technology in mobile, satellite and internet applications. Vivendi Universal is investing in:

•		creating and publishing exclusive content,

•		creating and managing distribution platforms for content and other services aimed at the general public by drawing on its vast expertise in management of subscriber databases, building customer loyalty, marketing and distribution networks,

•		investing in telecom and pay-TV infrastructure and the technological innovations that will lead their development, particularly for mobile telephone and broadband applications.

Vivendi Universal ranks either first or second in nearly all of the markets it serves.

This strategy proved successful in 2005. The distribution of digital music tripled at Universal Music Group. VU Games was hugely successful with World of Warcraft game and completed a number of external growth transactions. Canal+ Group boosted subscriptions and announced the plan to combine Canal+ Group’s French pay-TV activities with those of TPS. SFR’s 3G roll-out and the diversification of mobile services were a success, while Maroc Telecom saw continued strong growth of mobile telephony and ADSL. Vivendi Universal also submitted a bid to acquire a 35% stake in Tunisie Telecom, the historic telecommunications operator in Tunisia.

In 2006, as part of this strategy, Vivendi Universal will focus its efforts on:

•		finalizing both the combination of Canal+ and TPS and the agreement with Lagardère,

•		resolving its differences with Elektrim and Deutsche Telekom in order to assert its rights with regard to its 51% equity stake in Elektrim Telekomunikacja and to eventually increase such stake to 100%,

•		moving further into music publishing, and in certain territories, into the production and distribution of recorded music,

•		completing the tender bid, to make it the operator and 35% shareholder of Tunisia Telecom, provided the financial terms are suitable,

•		ensuring the balanced development of VU Games amongst online, console and mobile games.

There are bright growth prospects for third generation mobile telephony and related services, for pay-TV penetration and the development of downloading and interactive exchanges of content (music, games, film and television) over the internet. Vivendi Universal plans to continue investing in all of its businesses in order to benefit from customer demand for innovative products and services.

2005 Annual Report — Vivendi Universal 17

2 Description of the Group and its Businesses — Litigation — Risk Factors

Description of the Group

1.2. Highlights

Vivendi Universal was created in December 2000 through the merger of Vivendi, Canal+ and Seagram Ltd.

2005

JANUARY

•		The Canal+ Group and NBC Universal sign an agreement to broadcast films produced by Universal Studios on Canal+.

•		CanalSat (formerly CanalSatellite) hits the 3-million subscription mark. The digital package confirms its rank as number one in satellite television in France.

•		Blizzard’s World of Warcraft, released in November 2004, breaks all previous North American records with over 600,000 active accounts in North America, Australia, South Korea and New Zealand.

•		Vivendi Universal completes the acquisition of 16% of Maroc Telecom, raising its stake in Morocco’s leading telecommunications operator to 51%.

FEBRUARY

•		The Canal+ ADSL offer continues to expand in France, with a roll-out in six new areas (Aix-en-Provence, Amiens, Bordeaux, Lille, Toulon and the French department of Yvelines).

•		Blizzard’s World of Warcraft is successfully released in Europe in fully adapted versions in French, English and German.

•		SFR signs a virtual operator (MVNO) agreement with NRJ Mobile for retail customers and with Futur Telecom for corporate customers.

MARCH

•		VU Games acquires Radical Entertainment, one of the top independent console game developers, which is well known as the creator of successful games, including The Simpsons: Hit & Run and The Hulk.

•		SFR is the first operator to make widely available unlimited free call packages to three selected SFR phone numbers (“Essentiel” and “Evolution Pro”) and a 3G access open to all from the lowest tariff package.

•		Triumph at the Victoires de la Musique (the annual French music awards) for several artists from Universal Music Group’s French labels: Calogero, Daniel Darc and La Grande Sophie. M is the big winner of the evening with four awards.

APRIL

•		Vivendi Universal Shareholders’ Meeting approves the change in the administration of Vivendi Universal to a Management Board and a Supervisory Board.

•		The Canal+ Group strengthens its ADSL television offer, adding another 20 channels. Subscribers to CanalSatDSL through Free and France Telecom have access to 100 channels.

•		Maroc Telecom earns its ISO 9001 version 2000 certification for all its operations.

•		Release of Empire Earth II in the United States, published by Sierra Entertainment (a VU Games Studio), the sequel to the real-time strategy game which was the event of the year when it was released in 2001. This game was an immediate success and received a number of awards, including “PC Game of the Year”.

•		Universal Music Group acquires Michel Sardou’s label Tréma. Founded in 1969 by the French singer, Régis Talar and Jacques Revaux, Tréma is one of the leading French independent labels and distributes Michel Delpech, Catherine Lara, Matmatah and Louise Attaque.

MAY

•		The Canal+ Group is awarded four out of the eight new digital terrestrial television frequencies from the French Audiovisual Council (Conseil Supérieur de l’Audiovisuel, CSA). The channels selected are i>Télé (continuous news channel) for free services and Canal+ Cinéma, Canal+ Sport and Planète for pay services. They join the Canal+ premium channel (pay-channel) selected by the CSA during the previous bidding round.

•		Blizzard Entertainment (a VU Games Studio) acquires Swingin’ Ape Studios. This console game development studio brings an unrivalled team of designers and programmers to Blizzard Entertainment while increasing Blizzard Entertainment’s position in the console games segment.

•		The Canal+ Group and Neuf Telecom continue their partnership in ADSL television. Canal+ Le Bouquet and CanalSatDSL are available on the NeufTV decoder. As a result, Canal+ Group reinforces its presence in different distribution platforms.

•		The new album from Mylène Farmer, Avant que l’Ombre..., is number one in sales in France with over 490,000 copies sold in less than two months (released by Polydor, a Universal Music Group label).

JUNE

•

SFR reaches 100,000 3G customers. This result is testimony to SFR’s policy to make the French 3G market more dynamic. SFR also becomes the first operator to offer 3G access to its prepaid customers.

18 2005 Annual Report – Vivendi Universal

Description of the Group and its Businesses — Litigation — Risk Factors 2

Description of the Group

•		InterActiveCorp (IAC), Vivendi Universal, and General Electric (GE) simplify the organizational and financial structure of Vivendi Universal Entertainment (VUE). As a result, VUE is wholly-owned by NBC Universal. GE continues to hold 80% of NBC Universal, with the remaining 20% controlled by Vivendi Universal.

•		Blizzard’s World of Warcraft is successfully launched in China with Blizzard Entertainment’s partner The9.

•		At the annual MTV Movie Awards, The Chronicles of Riddick: Escape from Butcher Bay from Vivendi Universal Games wins the trophy for the “Best video game based on a film”.

•		Maroc Telecom reaches 7 million mobile customers. With this new threshold, the operator confirms its position as the leader and driving force of mobile telephony in Morocco.

JULY

•		CanalSat and SFR create the first package of television channels for mobile telephones. The package consists of 17 channels accessible 24 hours a day. This offer is a world premiere: for a monthly subscription fee, users equipped with 3G terminals can watch their favorite television programs anywhere at anytime.

•		SFR signs a major strategic agreement with Universal Music Group to distribute music content on 3G mobile phones. Through this agreement, the number one recorded music company in the world offers over 400,000 titles from its French and international catalogs.

•		Once again, the annual survey by the French Telecommunications Regulatory Authority (ARCEP), on the quality of mobile networks in France, ranks SFR first or equal to first in 56 out of the 59 categories studied.

AUGUST

•

Cegetel and the French fixed-line telecommunications and internet services operator Neuf Telecom complete their merger, becoming the leading alternative fixed-line telecommunications operator in France. Both Louis Dreyfus Group and SFR each hold 28% of the capital of the new entity, Neuf Cegetel, the remaining 44% are held by Neuf Telecom’s shareholders.

SEPTEMBER

•		Blizzard’s World of Warcraft exceeds 4 million subscribers, with 1 million paying users in North America, and more than 1.5 million in China, where it was released in June 2005. World of Warcraft continues to hold its position as the world leader in subscription-based Massively Multi-Player Online Role-Playing Games (MMORPG).

•		SFR breaks the bar of 300,000 3G customers, only nine months after rolling out its 3G consumer offer. 3G sales represent close to 40% of Vodafone live! mobile sales.

•		The Canal+ Group launches the first mobile television experiment (DVB-H) in the Paris metropolitan area. This experiment conducted with SFR, Nokia, and TowerCast offers audiovisual and multimedia content to a very large number of users under optimal technical conditions and economic terms.

OCTOBER

•		SFR acquires exclusive 3G mobile broadcast rights for the 2006 FIFA World Cup (from June 9 until July 9, 2006 in Germany) for the French territory. These rights cover all 64 matches of the 2006 FIFA World Cup, including the opening match and the final.

•		With the launch of “Vodafone Passport”, SFR lowers the tariffs for its customers making or receiving phone calls abroad. Through its partnership with Vodafone, SFR can charge the same home tariff for phone calls from Europe to France and 29 other countries.

•		The Canal+ Group launches CanalPlay, the first legal video download service, accessible on the Internet from a PC. The CanalPlay offer is extensive, and offers the best French and foreign films, nine months after their theatrical release.

•		The 3G offer from CanalSat passes the 10,000 subscribers mark. Launched at the end of June exclusively on SFR’s Vodafone live! portal, this offer was substantially expanded with a large number of channels in each of its themes, particularly Canal+ (free-to-air programs only), Planète, CanalJ, i>Télé, France 2 and MCM Pop.

NOVEMBER

•		The Canal+ Group launches its pay-TV offer on DTT. The two plans that are offered are a premium Canal+ Le Bouquet offer, consisting of Canal+, Canal+ Cinéma and Canal+ Sport, and a “mini-pack” with the Planète, Eurosport, Canal J and Paris Première channels.

•		Blizzard’s World of Warcraft is launched in Taiwan, Hong Kong and Macao.

•		The interactive game 50 Cent: Bulletproof is released by VU Games in the United States and in English-speaking countries. The game is based on the life of the Universal Music Group rapper 50 Cent. 50 Cent: Bulletproof contains eight hours of exclusive and original music, with titles featuring 50 Cent, Tony Yayo, Lloyd Banks, and Young Buck, with 13 never-before-released tracks and remixes.

•		VU Games wins six trophies at the Spike TV Video Game Awards. Blizzard’s World of Warcraft walks away with four awards, including the “Best multi-player game”, “Best PC game”, and “Best role-playing game”. 50 Cent: Bulletproof wins an award for “Best original song” (Maybe we crazy), and F.E.A.R. is named “Best first-person shooter game”.

DECEMBER

•

Vivendi Universal, TF1, and M6 announce a draft industrial agreement aimed at combining the French pay-TV activities of the Canal+ Group and TPS into a group controlled by Vivendi Universal. Upon completion of this merger, Vivendi Universal would hold an 85% stake in the new group, and TF1 and M6

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		would have stakes of 9.9% and 5.1%, respectively. Although Vivendi Universal’s stake may vary depending upon the outcome of negotiations with Lagardère, Vivendi Universal would in any event, retain control of the new combined entity.

•		Canal+ hits the 5 million subscriptions mark, again confirming its status as the pay-TV leader in France.

•		VU Games completes the purchase of High Moon Studios, an independent interactive game developer. High Moon Studios is the producer of the game Darkwatch. Through this acquisition, VU Games further enhances its position in consoles games.

•		340,000 full tracks of music are downloaded on SFR in the month of December, breaking the bar of one million downloads on January 16, 2006. With a 500,000 title catalog thanks to SFR’s strategic partnerships with major music companies, the SFR Music portal is one of the top 5 legal music download sites in France.

•		Maroc Telecom exceeds 8.8 million mobile telephone customers.

•		SFR reaches 17.2 million customers at year-end 2005 (compared with 15.8 million at year-end 2004), a 9% increase over 2004. SFR remains the leader in terms of net sales on its mobile telephony market for the third consecutive year, with a 39.4% market share for the year 2005. SFR’s share of the mobile telephony market in France increased to 35.8% market share for the year 2005.

2006

JANUARY

•		Vivendi Universal, TF1, and M6 sign an industrial agreement with terms consistent with the announcement made in December 2005. This agreement combines the pay-television activities in France of Canal+ Group and TPS within an entity controlled by Vivendi Universal.

•		Blizzard’s World of Warcraft, the subscription-based massively multi-player online role-playing game, passes the 5.5 million worldwide customers mark. In slightly over one year, World of Warcraft has become the leading MMORPG in the world. At the end of 2006, Blizzard will release the first expansion pack for this game.

•		CanalPlay, Canal Group’s legal video download site, launches its “Kids” offer. With Nickelodeon and Jetix, children can watch the star programs of both catalogs.

•		SFR crosses the symbolic bar of the first million exclusively 3G customers. The operator, which was the first to launch 3G in France in November 2004, had already reached 500,000 3G customers at the end of October, two months ahead of its end-of-year target. SFR is projecting 2.5 million 3G customers at the end of 2006.

•		SFR expands its music offerings with the launch of two totally unprecedented services in France. The “Pass musique illimitée” is the first unlimited music rental package for mobiles in Europe, which provides SFR customers with unlimited access to a music catalog they can download onto their mobiles and listen to as long as they wish. With “SFR Radio DJ”, SFR users can also create their own stations by musical genre while they listen, thus allowing the system to program and subsequently adapt itself to the customer’s musical tastes.

FEBRUARY

•		Vivendi Universal acquires the 7.66% stake in Universal Studios Holding I Corp. (USHI) it does not own for a total of $1,154 million from Matsushita Electric Industrial Co., Ltd.

•		Lagardère, Vivendi Universal, and the Canal+ Group enter into a draft agreement under which Lagardère, already a partner of the Canal+ Group through CanalSat, would join the Canal+ Group, TF1 and M6 in Canal+ France ⁽¹⁾, the entity combining the French pay-TV assets of Canal+ and TPS. The new company will be 65%-owned by Canal+Group, 20%-owned by Lagardère, 9.9%-owned by TF1 and 5.1%-owned by M6. Vivendi Universal would have exclusive control of the new company through its stake in Canal+ Group.

•		Following the Amp’d capital increase, Vivendi Universal and Universal Music Group (UMG) increase their stake in Amp’d to 19.9%. Amp’d is a mobile multi-media content aggregator and creator operating through a platform designed for the user interface and a mobile virtual network operator, offering 3G services within the US territory. Vivendi Universal provides music and video clips, mobile phone games, and video programs through its subsidiaries UMG and VU Games, and through NBC Universal.

•		Once again, at the 48th Grammy Award Ceremony, Universal Music Group artists are widely honored, earning a total of 40 awards. U2 (Interscope Records) dominates the ceremony with five awards, including “Album of the year” for “How to dismantle an atomic bomb” and “Song of the Year” for “Sometimes you can’t make it on your own”. Mariah Carey (Island Records) and Kanye West (Roc-A-Fella) earn three awards each.

•		SFR consolidates its position in the 3G market by operating the HSDPA functionality (3G+) on its Saint-Nazaire network to conduct large-scale tests prior to launching the first 3G+ commercial pilots for companies.


(1)		Canal+ France (temporary name) would comprise all the present assets of TPS and Canal+ Group in Pay-TV, including 100% of CanalSat, Canal+, TPS, Multithématiques, MediaOverseas, Sport+, Canal+ Active and Kiosque. StudioCanal, the advertising company, PSG and i>Télé, on the one hand, and Cyfra+, on the other hand, are not part of Canal+ France and continue to be respectively held 100% and 75% by Canal+ Group.

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MARCH

•

The Victoires de la Musique (the annual French music awards) witness the triumph of eight artists from UMG’s French labels: Juliette (Best Female Artist), Zazie (Best Show), LouiseAttaque (Best Pop Rock Album), NoirDésir (Best Music DVD), Souad Massi (Best World Music Album), Arthur H and M (Best Video Clip), Disiz La Peste (Best Rap, Ragga, Hip Hop, R’n’B Album) and Emilie Simon (Best Soundtrack).

1.3. Financial Communications Policy and Value Creation

1.3.1. Investment Strategy

Value creation for shareholders involves a level of indebtedness allowing Vivendi Universal to maintain an Investment Grade at least equal to BBB-, increased profitability of the company’s operations and their consolidation.

Acquisition projects are chosen selectively according to four main criteria:

•		their impact on the growth of adjusted net income per share and the Group’s ability to generate cash,

•		the medium and long-term return on investment,

•		in-depth risk assessment. The risk must be accurately assessed to guarantee that each project provides the best risk/return on investment ratio,

•		reinforcement of the Group’s businesses and their positions as leading content providers and distributors through the development and strengthening of the complementarities of their activities, especially in the digital world.

Within the framework of the Group’s priorities, formal procedures were introduced in 2002 and reinforced since 2003 (see Chapter 3 “Information Concerning the Company — Corporate Governance”).

1.3.2. Financial Communications Policy

The purpose of financial communications is to provide all shareholders with accurate, precise, and sincere information on the Group’s strategy, situation, results, and financial development. It complies with the procedures introduced in connection with the application of French standards (the Financial Security Act), and US standards (the Sarbanes-Oxley Act).

The following documents are made available to shareholders in French and English or provided upon request: annual report, quarterly and half-year financial statements, press releases, financial notifications, required publications, presentation brochure, and sustainable development report.

Shareholders can also visit Vivendi Universal’s website (www.vivendiuniversal.com) and a helpline is available to shareholders and charged at local rates from a fixed-line in France (0811 902 209).

Communications for institutional investors are primarily provided by Vivendi Universal at meetings organized with the main financial markets around the world and through the participation of its executive officers at investor conferences.

The Investor Relations Department, in Paris and New York, maintains permanent relations with analysts at brokerage firms and investment fund managers and analysts. The department provides information on a regular basis to give financial markets a clear understanding of the various events affecting the Group’s current and future performance. This team also manages a financial website updated in real-time, mainly targeted at institutional investors (http://www.vivendiuniversal.com/ir).

In order to comment on the Group’s results and outlook, 63 road shows were organized in 2005. The executive officers of Vivendi Universal took part in 48 days of the road shows, SFR in four, Universal Music Group in four, the Canal+ Group in two, and Maroc Telecom in nine, and a total of 554 institutions attended. These events were followed up by meetings throughout the year with analysts and investors.

The executive officers of Vivendi Universal and its subsidiaries participated in 21 investor conferences.

At the end of 2005, Vivendi Universal began a new series of regional meetings in France with its individual shareholders. The first meeting took place in November 2005 with Jean-Bernard Lévy, Vivendi Universal’s CEO and Chairman of the Management Board. Additional meetings are scheduled throughout 2006.

On January 17, 2006, Vivendi Universal announced its decision to request the voluntarily delisting of its American Depositary Shares (ADSs) from the New York Stock Exchange (NYSE) and the termination of its American Depositary Receipt (ADR) program. The rationale for this decision is sound management and cost reduction, considering the very low trading volume of shares on the New York Stock Exchange (less than 5% of the total shares traded in both 2004 and 2005) and the fact that the majority of shares held by US domiciled investors are ordinary shares acquired through the Paris Stock Exchange. This decision should contribute to decrease the volatility of the Vivendi Universal shares. It has been observed that, over a period of four years, the average volatility of a security, traded in both the Paris and New York Financial Exchanges largely exceeds that of a security traded in the Paris market only.

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When appropriate, Vivendi Universal will consider the termination of its US Securities Exchange Act of 1934 reporting obligations. Since US investors constitute a significant part of its shareholders, Vivendi Universal will maintain a close relationship with the US market and will continue to provide quality information to all its shareholders.

1.3.3. Value Creation in 2005

In 2004, Vivendi Universal completed the refocusing plan initiated in 2002. In 2005, the Group focused on improving the performance of its businesses, improving its profitability, as well as on consolidation projects within each of its businesses.

With the recovery of VU Games, all of the Group’s businesses are now profitable and expanding.

Several significant value-creating events occurred during fiscal year 2005:

•		in January 2005, the Group increased its stake in Maroc Telecom from 35% to 51%,

•		Cegetel and Neuf Telecom announced their merger to form the largest alternative fixed-line telecommunications operator in France. This merger was completed in August 2005 and since then, SFR holds a 28% stake in Neuf Cegetel, the company created through the merger. Neuf Cegetel expects to generate positive cash flow in 2007,

•		the termination of the Group’s relationship with InterActiveCorp made it possible to simplify the organization and financial structure of Vivendi Universal Entertainment, which is now entirely held by NBC Universal (in which Vivendi Universal holds a 20% stake since February 2006). This transaction had a positive impact of €194 million for Vivendi Universal, and reduced its commitments,

•		the draft industrial agreement announced at the end of the year, between Vivendi Universal, TF1, and M6, to combine the French pay-TV activities of the Canal+ Group and TPS into a new group controlled by Vivendi Universal, subject to approval by the competition authorities, and in consultation with the French broadcasting supervisory authority (Conseil supérieur de I’audiovisuel - CSA), will create value and contribute to the revitalization and expansion of the French pay-TV market, by offering a more varied and improved range of services and by generating synergies.

The Group’s debt was ten times lower than it was during the first half-year of 2002, amounting to €3.8 billion at December 31, 2005. This financial position makes it possible to contemplate investments in sectors where the Group is active, that will help to increase earnings per share, cash flow, and value, while guaranteeing global dividend distribution to Vivendi Universal shareholders of around 50% of the adjusted net income.

SHARE PRICE

Vivendi Universal is listed on the Eurolist by Euronext™ (Paris) Compartment A (ISIN Code: FR0000127771), as well as on the New York Stock Exchange in the form of American Depositary Shares (symbol: V). On December 31, 2005, the quoted price of the share in Paris was €26.46 (+12.6% since December 31, 2004). This growth is in line with the performance of the Euro Stoxx Media Index (+12.5%) over the same period and better than the performance of the Euro Stoxx Telecommunications Index (-1.8%).

DIVIDEND PER SHARE

A dividend of €0.60 per share was distributed in 2005, relating to fiscal year 2004.

For fiscal year 2005, the payment of a dividend of the amount of €1.00 per share in 2006 (+67%, compared to 2004) represents a total payment of €1.15 billion (compared to €689 million for fiscal year 2004). The dividend distribution is subject to the approval of the Extraordinary and Ordinary Shareholders’ Meeting on April 20, 2006. The dividend payment date for ordinary shares is May 4, 2006. As a result of the timetable linked to Vivendi Universal’s voluntary delisting project from the New York Stock Exchange, the dividend payment date for American Depositary Shares is May 25, 2006.

EXTERNAL MEASUREMENT OF VALUE CREATION

From January 1 to December 31, 2005, the return on investment of a Vivendi Universal share amounted to 15.1 %, after taking into account the capital gain and the dividend paid out.

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Description of the Group

1.4.

Human Resources

1.4.1.

Employee Share Ownership and Save As You Earn Schemes

In 2005, the continuing development of employee share ownership within the Vivendi Universal group was encouraged by favorable conditions in the financial markets and of the Vivendi Universal share price. Taking these factors into account, the renewed confidence from employee shareholders can be measured by the significant growth of the results of the share capital increase for the benefit of employees.

Employee saving schemes made good progress in 2005 within the Group’s companies and have become more diversified.

Total amounts paid by the Group’s companies in respect of optional profit-sharing (intéressement), statutory-profit sharing (participation) and additional funding to the Group Savings Scheme (Plan Epargne Groupe — PEG) reached €77.5 million. Total employee savings amounted to €72.3 million, €56.3 million of which were invested in the various PEG funds, the remaining €16 million being allocated by employees to various funds specific to their companies.

The record sum invested in the PEG, resulted both in an increase of the proportion of shares allocated to diversified funds (52%, compared with 42.5% in 2004) and strong growth in savings allocated to employee share ownership.

SHARE CAPITAL INCREASE FOR THE BENEFIT OF EMPLOYEES

As in previous years, a share capital increase for the benefit of employees was carried out in 2005 and offered to employees of Group companies through the PEG. This transaction was approved by the Board of Directors on March 9, 2005, and was successfully completed on July 26th. It brought in savings of €27.2 million, representing an 80% increase compared with the 2004 amount and was multiplied by 2.4 compared to 2003. Pursuant to this transaction, 1,399,097 new shares were issued at a preferential price per share of €19.46 for the benefit of the 5,406 employees who participated in the offer, representing 36% of eligible employees.

REPAYMENTS TO EMPLOYEES WHO PARTICIPATED IN THE “PEGASUS” INTERNATIONAL SAVINGS PLAN

On June 20, 2005, “Pegasus”, the leveraged savings plan for employees outside France reached its scheduled five year maturity. It commenced in June 2000 and received subscriptions from 43,700 employees of the Group (as constituted at that time), in 46 countries.

Despite its complexity due to the large number of countries and companies involved, it produced exceptional profits and 96.5% of the subscribers requested repayment of their assets on its close out.

The plan provided for a guaranteed capital amount in euros, in addition to a guaranteed minimum return of 5% per annum. This performance was even slightly improved upon, as the “Vivendi Growth Fund” (unit trust in euros, supporting the scheme) returned 31.5% over five years, representing an average yield in euros of 5.6% per annum. By virtue of the value of the euro compared to many currencies over the plan’s five-year period, the real profit for many of the employees outside the euro zone was significantly higher.

1.4.2. Dialog Between Management and Labor

In 2005, management and labor relations were improved as a result of a sustained dialog that went beyond the legal and contractual obligations with respect to information and consultation.

At the Group level, the Group Works’ Council, the European authority for dialog between management and labor, and the Works’ Council at the head office were informed of the Group’s strategy, its financial position, its social policy and its main achievements. Discussions were held throughout 2005. The announcement of the proposed merger within the pay-TV sector in France ended the year.

In 2005, a certain number of French companies within the Group began to study the most effective means of promoting employees’ supplementary pension fund savings with the financial support of the company.

Both management and employees participated in this project which obtained its first concrete results in 2005. A collective agreement was signed by Vivendi Universal (the holding company), creating a corporate retirement savings plan (Plan d’ Epargne Retraited ‘Enterprise — PERE) for all holding company employees starting in December 2005. This plan is funded by compulsory contributions made by the company (which include a contribution from the Works’ Council) and by employees, as well as by additional voluntary contributions from the employees. It enables employees to build up a supplementary pension scheme paid in the form of a life annuity which will benefit from a favorable tax treatment.

Current discussions should lead to the creation of similar retirement savings schemes in other companies within the Group in 2006.

To the extent training is a key element in the recruitment of young people and represents an asset for companies, the Group entered into a Training Charter in which it undertakes to take on apprentices and students at all levels in order to enable them to acquire the qualifications required to gain employment.

Along the same lines, Vivendi Universal took part in the signing of the national framework agreement to help young people join the job market through a youth work contract (contrat de

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Description of the Group

professionnalisation). Due to the variety of skills involved in the different activities of the Group, each entity is responsible for developing its own policy for the training and integration of young people on work experience placements. Each entity within the Group has a considerable number of trainees.

Half of the work placements within the Group involve apprenticeships and half involve youth work contracts. Contracts are generally for a two-year period. Almost all work experience placement contracts within the Group have led to a contract for indeterminate duration (contrat à durée indéterminée), which demonstrates that placements are an effective means of helping young people to gain employment.

The training policy implemented by Vivendi Universal is intended to enable employees to acquire and reinforce the skills they need to achieve their objectives and pursue their professional development. Employees’ requirements regarding training are regularly recorded and are the subject of discussion between management and unions, as well as at each employee’s annual appraisal interview. The proportion of the payroll devoted to training by the Group is in excess of French legal requirements.

One of Vivendi Universal’s priorities in 2005 was occupational safety. The efficiency of the health, safety and working conditions committees, together with the major projects implemented, made it possible to significantly reduce the industrial accident severity rate (3.36 in 2005, compared with 4.46 in 2004). Thus in 2005, the number of employees within the Group who had received safety training increased by 25 %, compared to 2004.

In 2005, the Group also undertook the improvement of mobility measures between the different businesses with the help of the “Invivo” program, which is accessible to all employees on the Group’s Intranet and which displays the internal vacancies for each business unit. In addition, regular meetings of the intra-Group mobility network encouraged an ongoing exchange between the business units. By improving the procedure for advertising vacancies and providing a clearer definition of the positions available within the Group, 650 employees were able to take advantage of the measures favoring mobility in 2005, either within their own entity or elsewhere within the Group.

Within the framework of a decentralized organization of labor relations, sustained dialog between labor and management resulted in numerous agreements throughout the Group in the fields of professional training, salaries, employment, safety and mobility.

For example, the merger of Cegetel and Neuf Telecom led to numerous discussions, which were held from the announcement of the project, aimed at facilitating the process of informing and consulting the works’ councils of the two entities. Alongside this process, negotiation was initiated between the management of Cegetel and Neuf Telecom and the unions of both companies, in order to define certain guarantees making it possible to address the social consequences of the creation of Neuf Cegetel.

An agreement was also signed within VU Games, relating to the organization of shift work and, in France, 341 people were recruited by this unit.

A profit-sharing agreement was signed at Canal+, between management and a majority of the labor unions, to enable employees to benefit from the results of their work.

1.4.3. Contribution to the Development of Employment

In conjunction with its authorization to file under the Consolidated Global Profits tax system, Vivendi Universal made a commitment to the French government to contribute to job creation in areas affected by unemployment and industrial restructuring. These commitments are divided into two categories.

The first category relates to the creation of jobs linked to Vivendi Universal’s businesses (through its subsidiary SFR) with the establishment, through subcontractors, of two call centers representing the creation at least 300 jobs by June 2007. At December 31, 2005, Vivendi Universal is ahead of its objectives with the creation of 180 jobs at a call center in Belfort.

The second category relates to a contribution to the creation of jobs (€5 million per annum over a five-year period for the creation of 1,000 jobs in three years and 1,500 jobs in five years) unrelated to Vivendi Universal’s businesses by way of grants aimed at business creation and development. At December 31, 2005, the number of certified jobs’⁽²⁾’ reached 561 and Vivendi Universal had granted €5.2 million.

1.4.4. Equality of Chance

In partnership with the French Ministry of Education, Higher Education and Research, and the French Ministry of Employment, Work and Social Cohesion, SFR introduced a program called the “Telecoms Engineer Passport” (Passeport Ingénieur Télécoms), to enable young people schooled in depressed areas to obtain a diploma in telecommunications engineering.

The proposed course involves three phases. First, there is a presentation of the various professions within the telecommunications industry and of the program of studies to second year advanced vocational training certificate (BTS) students. Second, there is a preliminary year during which motivated students have the benefit of a tutor who provides them support and guidance to help them prepare, as well as possible, for the entry examination to a state-run telecommunications engineering school. Third, on admission to


(2)		Certified Jobs — jobs being created following a valid application approved by the relevant commitment committee.

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Description of the Group

such a school, the students receive various forms of help offered by the program, such as an SFR tutor, educational support provided for by the school, an SFR grant of €1,500 per year for students who receive financial aid and the possibility of work experience placements. 145 students are currently involved in this program.

The agreement between SFR and the Ministries was signed for an initial period of three years. With this project, SFR has become the first French company to introduce an equality of chance program in association with the French authorities and the higher education institutes with competitive entrance examinations, aimed at promoting greater social diversity among those able to access the most prestigious and high-level studies and to pursue a career in company management.

1.5. Insurance

Vivendi Universal has a centralized insurance policy for risk coverage applicable to its majority-controlled business activities.

The insurance policies supplement risk prevention procedures and operating processes. Plans for business continuity and backup in the event of a disaster at an individual business activity’s nerve center are also in place as well as environmental protection plans.

Vivendi Universal has subscribed to or renewed the following main insurance coverage in 2005.

DAMAGE AND OPERATING LOSSES

General insurance coverage is in effect for the entire Group with a total global coverage of up to €400 million per claim. This coverage is provided by major global insurance companies (Axa, Ace and Chubb) and insures against damages suffered from fire, flood, natural disasters, terrorism (in accordance with the legislative constraints in each relevant country/state) and operating losses incurred following such events. As a general rule, any claim in excess of €100,000 is covered.

Maroc Telecom joined the Group’s program on January 1, 2006.

PUBLIC LIABILITY

Policies covering third-party operating and product liability are in effect for a total amount of €150 million per annum for the whole Group. This amount supplements the various so-called “first-line” policies taken out directly by subsidiary companies (Universal Music Group, Vivendi Universal Games, Canal+ Group, SFR, etc.) for amounts between 2 and 15 million, either in US dollars or euros, depending upon the individual case. These policies are issued by AIG, Ace and Axa.

INDUSTRIAL ACCIDENTS

Some policies are specific to business activities in the US, in particular those covering industrial accidents, which the employer is required by law to provide. Workers compensation policies, which meet the requirements of the various Federal and State laws, have been issued by AIG.

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Description of the Businesses

Description of the Businesses

For further information regarding the Group’s activities in 2004 and 2005, refer to Chapter 4 “Management Board’s Operating and Financial Review and Prospects”.

2.1.

Universal Music Group

Vivendi Universal’s music business is operated through Universal Music Group (UMG), in which Vivendi Universal holds a 100% interest since February 7, 2006, compared to a 92% interest at December 31, 2005 (see Section 4 “Management Board’s Operating and Financial Review and Prospects—Events occurred since December 31, 2005”). UMG is the largest recorded music company in the world in terms of revenues (according to management estimates for 2005 and the International Federation of the Phonographic Industry (IFPI) for 2004). In 2005, UMG held an estimated 25.6% market share of the global physical music market (according to management estimates), compared with 25.5% in 2004 (source: IFPI). UMG acquires, markets and distributes recorded music through a network of subsidiaries, joint ventures and licensees in 75 countries. UMG also sells and distributes music video, DVD products and licenses recordings. UMG participates in and encourages the distribution of music over the Internet and over cellular, cable and satellite networks by making a significant amount of its content available in a digitized form.

UMG is also active in the music publishing market. UMG acquires rights to musical compositions (as opposed to recordings) in order to license them for use in recordings and related uses, such as in films, advertisements or live performances. According to management estimates, UMG is the number three global music publishing company with over one million owned or administered titles.

The key to UMG’s success has been its ability to consistently identify, attract and retain successful artists and market them effectively. UMG believes this is primarily attributable to:

•		the stability of the management team, which has allowed UMG to have a consistent strategy to respond effectively to industry and social trends and challenges,

•		UMG’s size and strength in marketing and distribution, which builds on itself by attracting established artists,

•		UMG’s large catalog of prior hit releases that provide a stable and profitable revenue stream, accounting for approximately 30% of sales, without significant additional investment,

•		UMG’s diverse array of labels in the major markets and local representation across the globe that complement each other through their focus on different genres, sub-genres, music segments and thereby mitigate the effect of changes in consumer tastes,

•		multi-album and multi-year contracts, which secure long-term relationships with some of the most important artists and talent finders in the industry.

2.1.1. Recorded Music

UMG’s recorded music business is the largest in the world with particularly strong positions in the important North American and European markets, which together account for nearly three quarters of global sales.

UMG’s major recording labels include popular music labels Island Def Jam Music Group, Interscope A&M Records, Geffen Records, Lost Highway Records, MCA Nashville, Mercury Nashville, Mercury Records, Polydor and Universal Motown Records Group; classical labels Decca, Deutsche Grammophon and Philips; and jazz labels Verve and Impulse! Records.

Best-selling albums in 2005 were new releases from Mariah Carey, 50 Cent, Black Eyed Peas, Eminem, Kanye West and Jack Johnson, in addition to very strong carryover sales from Gwen Stefani. Other best-sellers included debut releases from The Game, The Pussycat Dolls, Fallout Boy, Akon and the UK’s Kaiser Chiefs. Regional best sellers included Latin artists Juanes and Daddy Yankee, Germany’s Rammstein, Brazil’s Ivete Sangalo and France’s Chimène Badi.

Sales from prior releases account for a significant and stable part of UMG’s recorded music revenues each year. UMG owns the largest catalog of recorded music in the world with performers from the US, the UK and around the world including ABBA, Louis Armstrong, Bee Gees, Chuck Berry, James Brown, The Carpenters, Eric Clapton, Patsy Cline, John Coltrane, Count Basie, Def Leppard, Dire Straits, Ella Fitzgerald, The Four Tops, Marvin Gaye, Johnny Hallyday, Jimi Hendrix, Billie Holiday, Buddy Holly, The Jackson Five, The Jam, Elton John, Herbert von Karajan, Kiss, Andrew Lloyd Webber, Lynyrd Skynyrd, The Mamas & The Papas, Bob Marley, Van Morrison, Nirvana, Luciano Pavarotti, Tom Petty, Edith Piaf, The Police, Smokey Robinson, The Rolling Stones, Diana Ross & The Supremes, Michel Sardou, Cat Stevens, Rod Stewart, Caetano Veloso, Muddy Waters, Barry White, Hank Williams and The Who.

UMG markets its recordings and artists through advertising and exposure in magazines, on radio and TV, via the Internet and through other media and point-of-sale material. Public appearances and performances are also important elements in the marketing process.

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Description of the Businesses

UMG coordinates television and radio appearances and may provide financing for concert tours by some artists. TV marketing of both specially compiled products and new albums is increasingly important. Marketing is carried out on a country-by-country basis, although global priorities and strategies for certain artists are determined centrally.

Following the sale in May 2005 of UMG’s manufacturing and distribution facilities in the United States and Germany to Glenayre Technologies, the parent company of Entertainment Distribution Corporation (EDC), UMG has outsourced the bulk of such facilities to third parties or joint ventures with other record companies. UMG retains distribution facilities in the UK and France and the properties housing the manufacturing and distribution facilities in Germany sold to EDC. UMG generally leases office buildings although a small number are owned.

2.1.2. Legal Digital Distribution of Music

Legal digital distribution of music continued to increase in 2005, evolving into a significant revenue stream. Revenue growth was driven by several factors, including:

•		growth of download and subscription offerings in the US,

•		expansion of download offerings in Europe and Japan,

•		worldwide growth of mobile offerings with particularly strong growth in the US,

•		the monetization of online music video streaming and downloads.

US retail sales of UMG’s digital downloads surpassed the 200 million mark in 2005, an almost three-fold increase over the prior year. This growth was driven by Apple’s iTunes and to a lesser extent, other US digital download retailers such as Napster, Real Networks and Wal-Mart.

Outside the US, with over 44 million downloads in 2005, digital download revenue grew significantly, spurred mainly by growth in Japan and Europe. Growth in European downloads was driven primarily by iTunes and Napster, though local services such as OD2 and Germany’s T-Online also contributed. Download growth in Japan was due to the highly successful launch of iTunes as well as mobile Over-The-Air (OTA) downloads through LabelMobile.

US mobile revenue became a significant revenue stream in 2005, carried by strong sales of mastertone products. UMG sold over 48 million mastertones in the US in 2005, a 380% increase over the 2004 total. Mobile revenue outside the US continued to grow briskly, nearly doubling in 2005.

In 2005, UMG began to generate significant revenue from the online exploitation of its music video assets. UMG led the industry in establishing a business model in which rights holders and artists are paid for free-to-consumer video streams viewed within portals such as Yahoo!, AOL and MSN. Additionally, Apple’s iTunes began selling video downloads for $1.99 each. UMG sold well over 1 million music video downloads in the US in less than 3 months, accounting for nearly half of all iTunes’ music video sales. Outside the US, revenue streams from video (outside of mobile) are less significant, but should increase in 2006 with additional streaming revenue and the continued expansion of download offerings.

In 2005, UMG maintained its leadership position in digital distribution primarily due to the fact that UMG offers the largest digital distribution catalog, delivers new content to digital retailers upon release in the format of the retailers’ choice through UMG’s proprietary digital distribution infrastructure and collaborates with digital retailers to promote its products. UMG continues to innovate by improving its download offerings with, among other enhancements, digital CD booklet artwork, more flexible pricing and other premium and promotional offerings.

In 2006, UMG anticipates continued growth in the download market due to strong sales of digital music players (particularly iPods), increased penetration of broadband and the emergence of new digital retail partners such as MTV. Sales of portable devices should also lead to growth in the subscription market as technology that allows “rented” downloads to be transferred to compatible portable devices improves and gains device penetration.

Video downloads and free-to-consumer video streaming will continue to be an important new source of revenue and adsupported models should emerge for free-to-consumer audio as well. Additionally, mobile revenue should benefit from strong growth in mastertone sales in the US and outside the US, the continued expansion of the ringback-tones market in the US and additional territories internationally, and the rollout of mobile broadband networks in the US, enabling greater consumption of mobile music entertainment products such as OTA audio and video downloads, video ringers and video streams. Across all product categories, UMG will seek to maximize revenue by making more content available and introducing new digital products and bundles.

2.1.3. Music Publishing

Music publishing involves the acquisition of the rights to and the licensing of musical compositions (as opposed to recordings). UMG enters into agreements with composers and authors of musical compositions for the purpose of acquiring an interest in the underlying copyright so that the compositions may be licensed for use in sound recordings, films, videos, commercials and by way of live performances and broadcasting. UMG also licenses compositions for use in printed sheet music and song folios. UMG generally seeks to acquire rights, but also administers musical compositions on behalf of third-party owners such as other music publishers, composers and authors who have retained or re-acquired rights.

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UMG’s publishing catalog includes more than one million titles that are owned or administered, including some of the world’s most popular songs, such as “American Pie”, “Strangers in the Night”, “Girl from Ipanema”, “Good Vibrations”, “I Want to Hold Your Hand”, “Candle in the Wind”, “I Will Survive” and “Sitting on the Dock of the Bay”, among many others. Among the significant artists and songwriters represented are ABBA, Avril Lavigne, 50 Cent, The Beach Boys, Mary J. Blige, Jon Bon Jovi, The Corrs, Gloria Estefan, No Doubt, Prince, Michel Sardou, Paul Simon, Andre Rieu, ShaniaTwain, Andrew Lloyd Webber and U2. Legendary composers represented include Leonard Bernstein, Elton John and Bernie Taupin, and Henry Mancini. In 2005, UMG concluded two separate deals to administer the remaining copyrights attributable to the esteemed songwriting team of Elton John and Bernie Taupin (UMG already owned certain other rights pursuant to a prior acquisition). Other new deals in 2005 included Mark Batson, Maximo Park, The Bravery, Ciara, Rock Music Publishing, Wolfmother,lris Gruttmann (Schnappi), Chamillionaire, The D.O.C. and Wind-Up Entertainment.

2.2. Vivendi Universal Games

Vivendi Universal Games (VU Games) is a global developer, publisher and distributor of multi-platform interactive entertainment. It is the leader in the subscription-based Massively Multi-Player Online Role-Playing Games (MMORPG) category and also holds leading market positions in PC and console games. The company’s development studios and publishing labels include Blizzard Entertainment, Sierra Entertainment, Radical Entertainment, Massive Entertainment, Swordfish Studios and High Moon Studios.

VU Games’ library contains over 700 titles, many of which were developed in-house and for which VU Games holds intellectual property rights, including Warcraft, StarCraft, Diablo and World of Warcraft, each from Blizzard Entertainment, Crash Bandicoot, Spyro the Dragon, Empire Earth, Leisure Suit Larry, Ground Control and Tribes. VU Games also maintains commercial relations with strategic partners such as NBC Universal and 20th Century Fox. In 2005, Sierra signed an exclusive global agreement to publish games based on the literary works of Robert Ludlum, whose books have sold more than 290 million copies worldwide and spawned the theatrical box office hits with The Bourne Identity and The Bourne Supremacy. Top selling titles in 2005 included Blizzard’s World of Warcraft and Sierra’s 50 Cent: Bulletproof, Crash Tag Team Racing, Robots and F.E.A.R. VU Games owns five global development studios which create online, PC and console games for the company’s owned intellectual properties and licensed content. VU Games’ world-renowned development studio, Blizzard Entertainment, is best known for its Warcraft, StarCraft and Diablo franchises.

Blizzard’s World of Warcraft is the world’s most popular game in the MMORPG category. Either directly or in cooperation with local partners, Blizzard Entertainment has managed to deploy the game in over six countries within 12 months, and set up in all regions the appropriate in-game support service to the users. At the end of 2005, World of Warcraft had more than five million users. Blizzard Entertainment’s track record includes nine number one selling games and multiple “Game of the Year” awards. Its free Internet gaming service, Battle.net, also reigns as the largest in the world, with millions of active users. In May 2005, Blizzard Entertainment acquired Swingin’ Ape studios, now renamed Blizzard Console.

In October 2005, VU Games sold Coktel, its studio specialized in educational games.

During fiscal year 2005, Sierra strengthened its internal development capabilities through the acquisition of three independent studios. In March 2005, Sierra completed the purchase of Radical Entertainment, based in Vancouver, Canada, which developed VU Games’ critically acclaimed 2005 release The Incredible Hulk: Ultimate Destruction and the commercially successful The Simpsons: Hit & Run, which VU Games released in 2003. In June 2005, Sierra acquired UK-based Swordfish Studios, which was named “Developer of the Year” in 2004, by The Independent Game Developers Association.

In December 2005, Sierra purchased High Moon Studios, based in Carlsbad, CA. Sierra also owns Massive Entertainment, creator of the Ground Control PC franchise which established the studio as atop developer in the real time strategy genre.

VU Games is also intensifying its development efforts for the next generation of consoles from Sony, Microsoft and Nintendo. VU Games’ newly acquired studios have diversified the company’s internal development competencies and all of them are well positioned to develop the next generation titles in the coming years. High Moon and Swordfish studios use Unreal 3 technology, licensed in 2005 by VU Games, as the basis for their engine, while Radical Entertainment will be transitioning its proprietary engine to the next generation.

In the subscription-based MMORPG games market, Blizzard’s World of Warcraft will continue to expand its customer base with its expansion pack, World of Warcraft: The Burning Crusade and additional content patches bringing attractive new features throughout the year.

The 2006 PC and console product line-up includes StarCraft: Ghost from Blizzard Entertainment and Sierra titles such as Scarface: The World is Yours, Ice Age II, Caesar IV, Empire Earth II: The Art of Supremacy and SWAT4: The Stetchkov Syndicate. VU Games will release titles for the next generation of consoles starting late 2006 and continuing in 2007 more prominently.

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VU Games also has a new mobile division, VU Games Mobile, which was launched in 2005 and will begin publishing and distributing games through mobile carriers and portals in 2006.

In the US, VU Games operates an assembling and distribution facility which it leases in Fresno, CA. All property and equipment in the building are owned by VU Games. In Europe and Australia, VU Games uses external partners for manufacturing and physical distribution. VU Games leases its offices (major offices are located in Los Angeles, CA, Irvine, CA, Seoul, South Korea, and Vélizy and Meudon, France).

2.3. Canal+ Group

The Canal+ Group develops its business activities in two main sectors:

• the programming and production of pay-TV channels, including premium channels (Canal+Le Bouquet) and specialized channels (Sport +, i>Télé, the CinéCinéma channels, the Planéte channels, Jimmy, Seasons, Comédie ! and Cuisine TV),

• distribution of premium and multi-channel services (CanalSat) in France via analog and digital terrestrial networks, and satellite networks. The services provided by the Canal+ Group are also available via cable TV, ADSL TV and 3G mobile telephony. The Canal+ and CanalSat packages are marketed outside mainland France by its subsidiary, Media Overseas.

The Canal+ Group is also involved in producing and distributing films through its subsidiary StudioCanal.

The Canal+ Group is a wholly-owned subsidiary of Vivendi Universal and includes Canal+ SA (which holds the license to broadcast the premium channel), in which it has a 49% stake and CanalSat (formerly CanalSatellite), in which it has a 66% stake.

On January 6, 2006, after consultation with employee representatives, Vivendi Universal, TF1 and M6 signed an industrial agreement aimed at bringing together the French pay-TV activities of the Canal+ Group and TPS in a company controlled by Vivendi Universal. After this merger, Vivendi Universal will have an 85% stake in the new company, while TF1 and M6 will have stakes of 9.9% and 5.1%, respectively. This draft industrial agreement is subject to the approval of the French antitrust authorities. The French Broadcasting Authority (Conseil Supérieur de I’Audiovisuel, CSA) must also be notified of the transaction.

On February 17, 2006, Lagardère, Vivendi Universal and the Canal+ Group entered into a draft agreement under which terms Lagardere, already a partner of the Canal+ Group through CanalSat, would join Canal+ Group, TF1 and M6 in Canal+France ⁽¹⁾ (the new company combining the French pay-TV assets of Canal+ and TPS). The new company will be owned by Canal+Group (65%), Lagardere (20%), TF1 (9.9%) and M6 (5.1 %). Vivendi Universal would have exclusive control of the new company through Canal+ Group. This draft agreement was submitted to consultation with the relevant labor relations and employee representatives committees. It is subject to the approval of the CSA and the antitrust authorities. The objective is that the new company, which will, in particular, hold 100% of CanalSat and TPS, be put into place during the third quarter of 2006.

The new company will be a major player in the French audiovisual market, in a position to face the emerging competitive environment linked to the appearance of new players, in particular cable and internet operators. It will reinvigorate and broaden the French television market, offering consumers a richer, more diversified and attractive products.

2.3.1. French Pay-TV

2.3.1.1. PROGRAMMING ACTIVITIES

With Canal+ and about twenty theme channels, the Canal+ Group is a major player in the field of programming channels that combine exclusive rights, quality and variety to give maximum satisfaction to subscribers.

The Premium Channel Canal+

Canal+ has been a pioneer in the field of pay-TV since 1984. It is available via terrestrial, satellite, cable and ADSL networks, and since November 2005, via digital terrestrial television (DTT). Since March 5, 2005, the digital subscribers of Canal+ receive Canal+ Le Bouquet, which offers premium content channels built around Canal+ (Canal+ Cinéma, Canal+ Sport, Canal+ Décalé, each with their own identity and programs, and Canal+ Hi- Tech). Canal+ is the first premium multi-channel service in France. Since November 2004, Canal+ has been the only French channel to broadcast films in Dolby Digital 5.1 on its dedicated 16:9 format channel.

Canal+ is a premium general-interest channel. It offers a unique style of programming, with recent and exclusive film broadcast, sports, news, documentaries, French and foreign drama and original entertainment programs.


(1)		Canal+ France (temporary name) would comprise all the present assets of TPS and Canal+ Group in Pay-TV, including 100% of CanalSat, Canal+, TPS, Multithematiques, MediaOverseas, Sport+, Canal+ Active and Kiosque. StudioCanal, the advertising company, PSG and i> Télé, on the one hand, and Cyfra+, on the other hand, are not part of Canal+ France and continue to be respectively held 100% and 75% by Canal+ Group.

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Canal+, the movie channel, broadcasts 430 films each year 300 of which are new releases. Canal+ offers subscribers all types of films, as well as exclusive coverage of the major events in the Seventh Art (Cannes, César, Oscars...). In 2005, Canal+ devoted more than €135 million to the acquisition of French-language films. Canal+ holds exclusive rights to broadcast new releases for several major motion picture studios including 20th Century Fox, NBC Universal, Sony/ Columbia and DreamWorks. Canal+ also has exclusive rights to broadcast new releases of feature films by the animated film studios Walt Disney and Pixar. In January 2005, Canal+ renewed its agreement with Luc Besson’s company, EuropaCorp, for a three-year period.

On May 16, 2004, Canal+ and the French professional film organizations signed an agreement guaranteeing a stronger partnership with the world of cinema and a greater range of films for Canal+ subscribers. This agreement (see Section “Statutory Environment and Possible Dependencies” of this Chapter 2) came into effect on January 1, 2005, for a five-year period.

Canal+ has developed expertise in sports coverage, characterized in particular by exclusive rights, the absence of commercial breaks, sufficient airtime to be able to offer pre-match, half-time and post-match items, accurate and relevant commentary with well-known commentators and high quality production methods with original camera positions and technical innovation.

On December 10, 2004, the French Football League granted the Canal+ Group exclusive coverage rights of all League 1 matches for the 2005-2008 seasons. This agreement came into effect in July 2005, with the beginning of the League 1 season. On each day of the League 1 championship, subscribers to Canal+ Group services can follow all of the matches (10 matches in all, and a magazine program on Canal+, Canal+Sport and Foot+), with an improved on-demand payment service. In particular “Zapfoot”, this service offers viewers live coverage of all of the evening’s goals and is available via satellite (CanalSat) and ADSL (on Ma Ligne TV, following the signing of an exclusive distribution agreement with France Telecom).

On December 31, 2005, Canal+ had 5.06 million subscriptions (collective and individual subscriptions, in France and in French overseas departments and territories), a net increase of more than 105,000, compared with 2004. Over the year, the channel posted its best sales since 1987, with a total of 640,000 new subscriptions. The churn rate stood at 11.4%.

Theme Channels

The Canal+ Group programs a total of 17 theme channéls mainly intended for the French market. These channels cover leading themes, including films (seven Cinécinéma channels), sport (Sport+), news (i>Télé), documentaries (four Planéte channels), entertainment (Comédie!), lifestyle (Cuisine TV, Seasons) and series (Jimmy).

On January 3, 2005, the Lagardére and Canal+ groups signed an agreement whereby the Lagardére group transferred all of its interest in MultiThématiques to the Canal+ Group in exchange for the transfer of all of Canal+ Group’s minority interest in Lagardére Thématiques to Lagardere. The Canal+ Group now has a 100% stake in MultiThématiques and its subsidiaries and no longer has any interest in Lagardére Thématiques or its subsidiaries.

2.3.1.2. DISTRIBUTION ACTIVITIES

CanalSat

The Canal+ Group has a 66% stake in CanalSat (formerly CanalSatellite), the leading digital package of theme channels in France. As the leading digital service provider, it had almost 3.2 million subscriptions by the end of 2005, a net increase of almost 205,000 subscriptions, compared to the end of 2004. Over the year, CanalSat gained over 480,000 new subscribers (+8% compared to 2004), while maintaining its churn rate at a level slightly below 10%.

CanalSat offers a range of over 280 channels and services, 55 of which are satellite exclusives. CanalSat has a multi-platform strategy: in addition to satellite and ADSL services, CanalSat launched a package of channels specially designed for 3G telephones which is broadcast on SFR’s network since June 2005, and in November 2005, CanalSat introduced “Minipack CanalSat” on the pay DTT service.

In September 2005, CanalSat broadened its commercial offer with new types of subscriptions and a wider price range. Regarding programs, CanalSat introduced 14 new channels, including exclusive satellite broadcasting of Discovery Real Time, the lifestyle channel that is the first of its kind in the CanalSat package, FOXIife, the channel for everyday heroes who live life to the fullest and Sci Fi, the channel for science fiction lovers. The new channels also include channels and services for children with Adibou TV and Nickelodeon, adult channels with Private Gold and Playboy TV, as well as two new music channels specially designed for France, MTV Pulse and MTV Idol. CanalSat also offers its subscribers new technology with the Mediasat+, a new receiver offering reception of satellite channels, as well as all of the free digital quality DTT channels (including TF1 and M6).

Media Overseas

Media Overseas is a wholly-owned subsidiary of the Canal+ Group, and is the operator of Canal+ and of the CanalSat package in French overseas departments and territories. Media Overseas is the only French overseas network and directly operates four satellite platforms (Africa, Caribbean, Indian Ocean and Pacific), in which it is the majority shareholder, covering 500 million people in the world and two-thirds of all French-speaking countries. Media Overseas also manages Cyfra+, the Polish platform of the Canal+ Group.

By developing packages of channels in French for direct satellite reception, Media Overseas continues to fulfill its mission to promote French language and culture abroad.

At the end of 2005, Media Overseas had a total of 660,000 active subscriptions in the French overseas departments and territories and in Africa.

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Cyfra+ (Poland)

The Canal+ Group is a major player in pay-TV in Poland through its activities as programmer of the Canal+ premium package, which celebrated its 10th anniversary in 2005. The Canal+ Group also programs specialized channels and operates the Cyfra+ digital platform.

Cyfra+ offers subscribers 81 television and radio channels, 63 of which are in Polish, as well as approximately one hundred additional channels available free-to-air via satellite. It is by far the leading platform in Poland with close to 800,000 subscribers.

The Canal+ Group has a 49% stake in the activities of Cyfra+ in Poland, and has a 100% stake in Polcom which, in turn, holds a 26% stake in Cyfra+.

ADSL TV

The Canal+ Group began television broadcasting via ADSL in the first quarter of 2004, to make its services available to a greater number of homes, especially in the center of large cities. The Group’s packages Canal+ Le Bouquet and CanalSat (100 channels and services) have been made available with Neuf Cegetel, formerly Neuf Telecom (since March 2004), France Telecom (since the end of June 2004) and Free (since November 2004). The Canal+ Group had over 200,000 ADSL subscriptions at year-end 2005.

Digital Terrestrial Television (DTT)

In May 2005, the French broadcasting supervisory body (Conseil supérieur de I’audiovisuel — CSA) granted the Canal+ Group four new DTT authorizations, in addition to the authorization already held for the channel Canal+.

Since November 2005, Canal+ Group’s offer includes two pay-TV packages. The first package comprises Canal+, Canal+Cinéma and Canal+Sport and is the only premium multi-channel package that is immediately accessible via a plug-and-play receiver. The second package comprises Planéte, Canal J, Eurosport and Paris Premiére, and represents a low-cost service of additional specialized channels. In addition, on October 15, 2005, the Canal+ Group launched i>Télé on DTT, the first free-to-air continuous general-interest news channel.

Mobile TV

On June 29, 2005, the Canal+ Group launched a package of CanalSat channels for SFR’s 3G subscribers. This package offers channels that can be viewed live, including Canal+ (free-to-air programs only), as well as channels covering the main themes within television broadcasting, including young people (Canal J, Jetix, etc.), discovery and lifestyle (Discovery, Planéte, etc.), entertainment (Comedie!), music (MCM pop, etc.), news (i>Télé, etc.), films (Cinécinéma Info), French public service channels (France 2, France 3 etc.) and sport (L’Equipe TV). As at December 31, 2005, the service had close to 20,000 subscribers.

On October 27, 2005, Canal+Orange Vidéo, a service available on the Orange World portal, was launched. This mobile multimedia service is based on the content of the Canal+ channel, focusing on the five themes of film, sport, comedy, news and adult content. For each theme, this service offers videos adapted to telephone reception that are accessible simply on selection from the Orange World Video homepage. The programs include Les Guignols de I’info, 7 jours au Groland, Jour de cinéma, Ligue 1 and Top 14.

In September 2005, the Canal+ Group, leading a consortium that also included Nokia, SFR and Towercast, launched an experimental mobile TV project within Paris and its suburbs using the DVB-H standard, among 500 subscribers (including 250 Canal + subscribers). This initial experimental project was authorized by the CSA on September 13, 2005, and in addition to verifying technical solutions, is intended to determine the habits of mobile TV viewers. For this purpose, a package of channels and services on varied themes are available as part of this experimental project including Canal+, i>Télé, Planéte, Sport+, France3, France3, MCM and NRJ 12.

Legal Downloading of Video and Video-On-Demand

On October 12, 2005, the Canal+ Group launched CanalPlay, its legal video downloading service. Accessible via a PC, www.canalplay.com offers a large variety of videos available for download. CanalPlay has a library of close to 1,000 videos, including recent films and older films, and since December 20th, offers videos for young people, in particular with the catalogs of Nickelodeon and Jetix. It allows viewers to watch what they want, when they want and where they want.

The service makes it possible to watch the video almost instantly before the end of downloading by means of progressive downloading, or to watch the video later on, on the move (on a PC) using the downloaded copy. Users have one month to watch the video in a 24-hour window that begins with the start of viewing. For videos for young viewers, users can watch the video as many times as they wish during a one-month period. In December, CanalPlay also became available as part of French telecommunications operator Free’s ADSL TV package. Also in December, an interprofessional memorandum of understanding on films and video-on-demand was signed (see Section “Statutory Environment and Possible Dependencies” of this Chapter 2).

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2.3.2. Films

StudioCanal, a wholly-owned subsidiary of the Canal+ Group, is a major player in France and in Europe in the financing, acquisition and distribution of motion pictures. Alongside Canal+, StudioCanal is one of the main partners of the French film industry, through its financial involvement in co-productions and in the provision of guaranteed minima for the distribution of films. StudioCanal has a library of over 5,000 French, English and American films, such as Basic Instinct, Les Bronzés, The Pianist and Podium. Some rights are held by StudioCanal for the whole world, others are limited to Europe or France.

In 2005, two StudioCanal films were among the 10 biggest box office hits in France: Million Dollar Baby with ticket sales totaling 3,200,000 and The Russian Dolls with ticket sales totaling 2,860,000. These films also achieved very high DVD sales, each selling over 400,000 copies. This performance, together with that of comedy DVDs such as De Caunes/Garcia 2, once again put StudioCanal into the lead for end-of-year video sales.

In 2005, StudioCanal signed an agreement with the film producer John Woo and his company for the co-production of remakes of motion pictures which are part of StudioCanal’s library and signed a contract with Universal Studios to distribute its films outside the US on video and television.

2.3.3. Other Activities

TheCanal+ Group has a 100% stake in Paris Saint-Germain (PSG), one of the leading French football clubs and the only League 1 club based in Paris.

2.4. SFR

SFR was created in 1987 and is the second largest telecommunications operator in France, with 17.2 million customers as at December 31, 2005⁽³⁾. Vivendi Universal has a 56% stake in SFR, while Vodafone holds a 44% stake (the 0.3 % interest held by minority shareholders was bought back by SFR in August 2005 and the corresponding securities were cancelled by SFR in accordance with regulations).

SFR offers mobile telephony services on a subscription basis (postpaid basis) and via phone cards (pre-paid basis), with or without a terminal, as well as mobile multimedia services (broadcasting of pictures and sound) and data transmission for individuals, professionals and corporate customers in metropolitan France, as well as in Réunion and Mayotte through its wholly-owned subsidiary, Société Réunionnaise du Radiotéléphone (SRR).

SFR is also present in fixed-line telecommunications (voice, data transmission and broadband Internet access) through its 28% interest in Neuf Cegetel. SFR’s stake in Cegetel S.A.S. was sold to Neuf Telecom in August 2005, in exchange for a 28% stake in Neuf Telecom. The newly-formed entity, Neuf Cegetel, is the second largest fixed-line telecommunications operator in France, and is the leading alternative operator within the markets for the general public and for professionals, corporate customers and operators. Neuf Cegetel markets its services under two brands, Neuf Telecom and Cegetel. At the end of 2005, Neuf Cegetel had close to 1.2 million customers for its ADSL Internet services.

2.4.1. 2005 Performance⁽⁴⁾

The mobile phone market continued to grow in France, with an increase in the mobile phone customer base, of 3.5 million (an annual growth of 7.9%). The number of mobile customers in France totaled 48 million at year-end 2005. The market penetration rate increased from 73.9% to 79.7%.

In 2005, the French market experienced strong competition, characterized, on the one hand, by the entry of eight Mobile Virtual Network Operators (MVNO) and, on the other hand, by the steady development of third generation (3G) mobile services, SFR and Orange having implemented UMTS services over the French territory.

SFR benefited from this activity with 1.38 million new customers over the year bringing its total customer base to 17.2 million (a 9% increase compared with 2004). For the third consecutive year, SFR was the leader within its market in terms of net sales, with a market share of 39.4%. In 2005, SFR’s market share in the mobile phone market in France increased to reach 35.8%, compared with 35.5% in 2004 and 35.3% in 2003.

SFR’s Average Revenue Per User (ARPU) remained stable at €429 in 2005, in spite of a 16.3% reduction of the regulated call termination tariffs introduced on January 1, 2005.

This performance illustrates the success of SFR’s offerings that aim both to increase the use of voice calls on the mobile network, and to develop new services, mainly involving TV/Video and music. In this context, three elements were decisive:


(3)		Excluding customers on behalf of third parties.

(4)		Source: Autorité de régulation des communications électroniques et des postes (ARCEP) and SFR estimates.

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•		SFR’s investment strategy in its own telecommunications networks, and in particular, in its UTMS network. This enables SFR to meet the diversification of customer needs through a significant increase of available capacities for voice calls and data transfer,

•		multiple initiatives aimed at boosting the French market, including: 3G access regardless of the plan chosen (subscription, pre-paid or rechargeable blocked accounts), from the lowest monthly subscription rate at €22 and the cheapest pre-paid card at €10, and the significant decrease in the price of 3G handsets,

•		a strong commercial presence throughout France with 5,000 outlets.

2.4.2. Network

SFR’s mobile phone services operate on the GSM/GPRS network, the international standard for mobile communications systems and the leading digital standard in Europe, or on the UMTS network.

At year-end 2005, SFR’s network covered 98% of the French population and 87% of French territory via GSM/GPRS. The UMTS (3^rd generation mobile telephony—3G) network covers 60% of the population. UMTS coverage is expected to increase in 2006, thanks to a significant investment program in this technology planned throughout 2006. Since 2005, SFR has also been preparing the introduction of the new HSDPA functionality (3G+) on its 3G network. The first HSDPA commercial pilots for corporate customers will be launched in March 2006.

In addition, SFR decided to improve its GSM/GPRS coverage by implementing the Enhanced Data for Global Evolution (EDGE) standard in areas which are not covered by the UMTS network, in order to offer its corporate customers higher levels of communication output than those provided by the GSM/GPRS network.

The priority given to the quality of customer services is reflected in the quality and customer satisfaction surveys conducted by the ARCEP. SFR was ranked in first or equal to first position 56 times, based on the criteria taken into account by the ARCEP in its 2004/2005 annual audit of the quality of mobile telecommunications networks in France. SFR is the only operator to have achieved this ranking for two consecutive years.

The conditions for renewal of SFR’s GSM license (which expires on March 25, 2006) were specified by the French authorities in the first quarter of 2004. After that date and for a period of 15 years thereafter, mobile operators must pay an annual charge comprising a fixed amount of €25 million and a variable amount of 1% of the corresponding turnover.

In 2001, SFR was granted a 20-year UMTS license by the French State, in return for the payment of €619 million, paid in a single payment in September 2001 and an annual fee equal to 1% of the future turnover generated by this 3rd generation network.

2.4.3. Services

In 2005, SFR’s voice usage per user increased by 10.5%, compared to 2004, bringing the monthly average for the length of communications to 296 minutes. This strong growth is, in part, the result of the launch of new offers in April 2005, including unlimited communications to three other SFR customers, which contributed to significantly decrease the price per minute paid by customers.

For “non-voice” communications, 2005 showed a strong increase in the number of 3G customers and associated services, including video teleconferencing, downloading of music and access to video and television.

SFR passed the one million exclusively 3G customer threshold at year-end 2005, largely exceeding its objective of 500,000 customers.

The SFR music portal has a music catalog comprising 500,000 titles, owing to strategic agreements with the major record companies. It is one of the top 5 leading legal platforms for downloading music in France, with 830,000 downloads in 2005, and passed the one million download mark on January 16,2006. The TV/Video service for SFR mobile phones offers 54 channels (including the 26 channels of the CanalSat package that had close to 20,000 customers at the end of December 2005) and more than 60 video programs, including 1.2 million TV/Video sessions in December, for a total of 4.3 million TV/Video sessions in 2005. The use of video teleconferencing also expanded in 2005, with almost 2 million video teleconferences held on the SFR network by year-end 2005.

At year-end 2005, SFR totaled 4.8 million Vodafone live! customers, compared with 2.2 million at the end of 2004. In addition, in the number of text messages continued to grow in 2005, with 5.4 billion short messaging services (SMS) and 98 million multimedia messaging services (MMS) sent over SFR’s network over the year, compared with 4.5 billion and 37 million in 2004, respectively.

In the area of corporate services, 2005 was marked by strong sales, which confirmed the trend of the past years, as well as by significant strategic innovations. The launch, in October, of the “SFR Service Management” offer, which provides mobile phone deployment and fleet management services, illustrates SFR’s ambition to provide a comprehensive service to its corporate customers. 2005 was also marked by a very strong increase in data transmission services, in particular with increased sales of the Vodafone Mobile Connect Card (+300%) and of Blackberry^® Mobile Messaging services (+244%).

SFR has GSM/GPRS roaming agreements with over 212 countries or destinations and UMTS roaming agreements with 25 countries. In 2005, SFR also launched the Vodafone Passport option, which allows SFR customers calling from outside of France to make calls charged at the same rate as for national calls (at the rate specified for calls beyond the minutes provided by each customer’s package).

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Description of the Businesses

2.5. Maroc Telecom

Maroc Telecom was created in 1998, following its spin-off from the Office national des postes et télécommunications, the Moroccan National Postal and Telecommunications Office. Maroc Telecom is Morocco’s historic and leading telecommunications operator in both the fixed-line and the fast-growing mobile businesses. Maroc Telecom also controls 51% of Mauritel, the national telecommunications operator in Mauritania, together with a group of local investors.

Vivendi Universal became the Kingdom of Morocco’s strategic partner in Maroc Telecom after acquiring a 35% equity interest in Maroc Telecom in 2001, following an auction process organized by the Moroccan government. By virtue of a shareholders agreement entered into at the time of the acquisition of 35% of Maroc Telecom’s share capital, Vivendi Universal held a controlling interest in the company. On November 18, 2004, the Kingdom of Morocco and Vivendi Universal announced that they had reached an agreement regarding the sale of a 16% stake in Maroc Telecom to Vivendi Universal. As a result of this transaction, which closed on January 4, 2005, Vivendi Universal holds 51% of Maroc Telecom’s share capital.

The Moroccan government continued the privatization of Maroc Telecom by conducting an equity offering of 14.9% of Maroc Telecom’s share capital. The equity offering was successful and led to the simultaneous listing of Maroc Telecom on the Casablanca and Paris stock exchanges on December 13, 2004.

As a result of this transaction, Vivendi Universal holds 51% of Maroc Telecom’s share capital and the remaining 34.1% and 14.9% are held by the Kingdom of Morocco and the public, respectively.

2.5.1. Mobile Telephony

The Moroccan mobile telecommunications market grew significantly as a result of the introduction of prepaid offers in 1999 and the liberalization of the sector in 2000.

At year-end 2005, the market penetration rate of mobile telephony in Morocco was 41.3% and Maroc Telecom held a 66.7% market share (source: Agence nationale de réglementation des télécommunications — Moroccan National Telecommunications Regulation Agency (ANRT)). In 2005, Maroc Telecom’s mobile customer base increased by more than 2.4 million, up 38%, to reach 8.8 million customers, 96% of which were prepaid customers. The prepayment system meets the needs of customers, allowing them to better control their communication costs and remain within their contract packages.

Maroc Telecom continued to improve its commercial offer and introduce new services in order to retain existing customers and attract new ones. In 2005, innovations included: a more comprehensive handset range, a reduction in pack prices starting at 290 dirhams including tax (approximately €26); the introduction of 50 dirhams cards including tax (approximately €4.5); increased offerings with the introduction of “no commitment” tariff plans and the development of its loyalty program through the remuneration of incoming traffic with loyalty points.

The average churn rate stands at 12.2% at the end of 2005, compared to 11.6% at the end of 2004, in spite of significant growth in the customer base.

The strategy to develop the customer base, combined with increased prepaid customer usage, contributed to improve Average Revenue Per User (ARPU) in 2004. In 2005, due to the significant growth of the customer base and the 7% decrease of fixed-to-mobile interconnection costs as of September 1, 2005, ARPU amounted to 119 dirhams (approximately €11), compared to 123 dirhams in 2004. Excluding the impact of the January 1, 2005 incoming international tariff increase, blended ARPU decreased by 9% in 2005.

Maroc Telecom remains the benchmark for short messaging services (SMS) and the multimedia messaging services (MMS) in Morocco and offers MMS and GPRS roaming to postpaid customers. In 2005, Maroc Telecom introduced the first SMS/MMS tariff plans and the “GPRS Free Access” offer, which allows customers to benefit from the range of GPRS services free from any subscription or commitment. In 2005, the total number of outgoing SMS messages on the Maroc Telecom network reached more than 1.1 billion.

2.5.2. Fixed-line Telephony, Data and Internet

At year-end 2005, Maroc Telecom was the sole provider of fixed-line telecommunications services, and the main provider of Internet and data services in the market. The market was opened to competition in 2005, with the granting of fixed-line licenses to two new operators. As at December 31, 2005, those licenses were not operational.

The principal fixed-line telecommunications services provided by Maroc Telecom are:

•		telephony services,

•		interconnection services with national and international operators,

•		data transmission services to professional markets and to Internet service providers, as well as to other telecoms operators,

•		Internet services which include Internet access services and related services such as hosting.

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Description of the Businesses

The number of fixed lines was slightly over 1.3 million as at December 31, 2005, up 2.4%, compared to the prior year.

The residential customer base reached 884,546 lines at the end of 2005, a slight decrease of 0.6%, from 2004. The new line of products dedicated to this segment, marketed under the El Manzil brand, includes calling plans, packages and capped-fee plans with refill options.

The number of professional and corporate users reached 292,519 at the end of 2005, representing a 3.5% increase over 2004.

Public telephony is comprised of a network of public booths and an extensive network of phone shops. This activity has shown significant growth since October 2004, primarily as a result of the termination of the “chaining” requirement, which imposed a minimum distance of 200 meters between each phone shop, allowing the creation of a denser network. This growth continued in 2005 and the number of lines reached 164,091 at year-end 2005, a 20.6% increase from 2004.

Phone shops are managed by private entrepreneurs who lease an average of four lines per shop. Phone shops generate revenue equal to the difference between the retail price and the rate they are charged by Maroc Telecom.

Data transmission services provided by Maroc Telecom to corporate customers include X25, Frame relay, digital and analog lease lines, and IP VPN links.

Maroc Telecom offers Internet access packages to residential and professional customers under the Menara brand. Since the launch of ADSL services in October 2003, Maroc Telecom’s Internet customer base has increased considerably. At year-end 2005, as a result of both the rate decrease, which was introduced in March 2005, and year-end promotions, Maroc Telecom had more than 252,000 subscribers to its Internet access services, more than 96% of whom were ADSL subscribers.

2.5.3. Distribution

Maroc Telecom has an extensive distribution network with a direct and indirect network comprising approximately 40,000 points-of-sale (approved by Maroc Telecom) which are subject to distribution agreements with local resellers or with national retailers.

At December 31, 2005, the various distribution channels were as follows:

•		the direct network, composed of 277 sales agencies,

•		the local indirect network, comprised of independent resellers which are subject to exclusive agreements and which are managed by the closest Maroc Telecom commercial agency. A significant part of these resellers also operate phone shops approved by Maroc Telecom,

•		an independent local network, primarily dedicated to mobile telephony, managed by GSM Al Maghrib, a company in which Maroc Telecom has held a 35% stake since July 2003,

•		retailers with nationwide networks whose main business is not in telecommunications (supermarkets, newspaper and magazine retailers, tobacco shops or Moroccan post offices).

2.5.4. Network

Maroc Telecom’s fixed-line telephony and data transmission network has a switching capacity of close to 1.9 million lines and provides national coverage thanks to the company’s focus on servicing newly created urban residential areas.

Maroc Telecom manages a fully digitized network, as well as a fiber optic interurban transmission infrastructure capable of carrying data at high speed. To meet customers’ needs, the international Internet bandwidth increased five-fold from 1.4 Gbits/s at year-end 2004 to 7.1 Gbits/s by year-end 2005.

In mobile telephony, Maroc Telecom has focused on enhancing both population and geographic coverage. At year-end 2005, Maroc Telecom had more than 4,180 GSM sites (compared to 3,750 in 2004) covering close to 97% of the Moroccan population. As at December 31, 2005, Maroc Telecom had entered into a total of 399 roaming agreements—more than 353 of which are operational— with operators in 207 countries for its postpaid customers. In addition, Maroc Telecom also offers roaming to its pre-paid customers through 68 roaming agreements with operators in 41 countries, and MMS and GPRS roaming through 80 agreements in 54 countries.

2.5.5. Mauritel Group

Maroc Telecom acquired a 54% stake in the Mauritanian historic telecommunications operator on April 12, 2001 and transferred its stake to a holding company Compagnie Mauritanienne de Communications (CMC). Maroc Telecom disposed of 20% of its stake to a group of Mauritanian investors and, in 2003, assigned 3% of the shares in Mauritel SA to the employees.

Maroc Telecom currently holds 80% of the share capital of CMC, which in turn holds 51% of the share capital in the Mauritel Group.

The Mauritel Group is comprised of Mauritel SA and its wholly-owned subsidiary, Mauritel Mobiles.

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Description of the Businesses

Mauritel SA is the only fixed-line telecommunications operator in Mauritania. It provides both fixed-line telecommunications (voice and data) and Internet access services. As at December 31, 2005, the customer base for fixed-lines reached close to 40,000 lines, representing a 1.5% penetration rate.

By year-end 2005, Mauritel SA had completed all of the commitments made to the Mauritanian government by Maroc Telecom when it entered the Mauritel Group in 2001. Fifteen new towns have been linked to the fixed telephone network since April 2001.

Mauritel Mobiles is focused on mobile telecommunications. Mauritel Mobiles’ customer base increased from less than 7,200 customers at year-end 2000, to more than 465,000 customers at December 31, 2005. The penetration rate for mobiles in Mauritania is estimated at approximately 23%.

Mauritel Mobiles is the leading mobile telecommunications operator in Mauritania with an estimated market share of 70% (estimate by Mauritel Mobiles) ahead of its competitor, Mauritano-Tunisienne de Télécommunications (Mattel), which is part-owned by the Tunisian historic telecommunications operator.

2.6. NBC Universal

In May 2004, Vivendi Universal completed the combination of the businesses of NBC with those of VUE and certain related assets to create NBC Universal (NBCU), one of the world’s leading media companies. As at December 31, 2005, General Electric Company held 80% of NBCU and Vivendi Universal 18.5% of NBCU. For a description of the business combination and the related control structure, please refer to Chapter 4 “Management Board’s Operating and Financial Review and Prospects” — Combination of NBC VUE and NBC to form NBC Universal (NBC — Universal transaction — May 2004).”

As of February 7, 2006, Vivendi Universal holds 20% of NBC Universal (see Chapter 4 “Management Board’s Operating and Financial Review and Prospects — Events occurred since December 31, 2005”.)

NBCU is engaged in a variety of media and entertainment businesses, including the production of live and recorded television programs, the production and distribution of motion pictures, the operation, under licenses from the Federal Communications Commission (FCC), of television broadcasting stations, the furnishing of US network television services to affiliated stations, the ownership of several cable/satellite networks around the world, the operation of theme parks and investment and programming activities in multimedia and the Internet. The NBC television network is one of four major US commercial broadcast television networks and serves 230 affiliated stations in the US. NBC owns and operates Telemundo, a leading US Spanish-language commercial broadcast television network.

At December 31, 2005, NBC owned and/or operated 30 VHF and UHF television stations including those located in Birmingham, Alabama; Los Angeles, California; San Diego, California; Hartford, Connecticut; Miami, Florida; Chicago, Illinois; New York, New York; Raleigh-Durham, North Carolina; Columbus, Ohio; Philadelphia, Pennsylvania; Providence, Rhode Island; Dallas, Texas; and Washington, DC. Broadcasting operations of the NBC Television Network, the Telemundo network, and the company’s owned stations are subject to FCC regulation.

NBCU operations also include investment and programming activities in cable television, principally through USA Network, Bravo, CNBC, SCI Fl Channel, MSNBC, CNBC Europe, CNBC Asia Pacific, and entertainment channels across Europe and Latin America. NBCU has equity investments in Arts and Entertainment, The History Channel, the Sundance Channel, ValueVision Media, Inc., and a non-voting interest in Paxson Communications Corporation. NBCU has secured exclusive US television rights to the Olympic Games through 2012.

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Seasonally — Statutory Environment and Possible Dependencies

3 Seasonality

3.1. Universal Music Group

Music sales are weighted towards the last quarter of the calendar year when approximately one-third of annual revenues are generated.

3.2. Vivendi Universal Games

PC and console software sales are historically higher during the last quarter of the year. The subscription-based MMORPG business provides a more consistent revenue stream throughout the year as consumers are required to pay a monthly subscription fee or purchase hourly time cards in order to play the game. The more continuous revenue flow from World of Warcraft has helped reduce the seasonality of VU Games’ revenues. For mobile games, there is a slight increase in sales at the end of the year due to the acquisition of cellular phones during the holidays.

3.3. Canal+ Group

Since the pay-TV business of the Canal+ Group is based on subscription contracts, and in view of the duration of these contracts, monthly income is regular and its revenues are therefore predictable. Regarding new subscriptions, these follow a cyclical pattern over the year with over 50% of new subscriptions taken out in the last four months of the year.

3.4. SFR

SFR sales (gross customer acquisitions) are highly seasonal with higher sales at the end of the year.

3.5. Maroc Telecom

Maroc Telecom’s revenues in mobile and public telephony traditionally increase in July and August, with the return of Moroccans residing abroad, and in the two-week period preceding Aïd El Adha (which was on January 21, 2005), while the month of Ramadan (from October 5 to Novembers, 2005) is a low point in consumption for both fixed-line and mobile telephony.

4 Statutory Environment and Possible Dependencies

4.1. Universal Music Group

UMG is not dependent on a particular artist and its 15 best-selling albums represented 13% of its sales volumes in 2005 (13% in 2004 and 10% in 2003).

UMG’s businesses are subject to laws and regulations in each jurisdiction in which they operate. In the US, certain UMG companies entered into a Consent Decree in 2000 with the Federal Trade Commission (FTC) under which they agreed for seven years not to make the receipt of any co-operative advertising funds for their pre-recorded music products contingent on the price or price level at which such product is advertised or promoted. Also in the US,

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Statutory Environment and Possible Dependencies

a UMG company entered into a Consent Decree with the FTC in 2004, under which it agreed to comply with the provisions of the Children’s Online Privacy Protection Act and to maintain records demonstrating compliance. In 2003, following a lawsuit filed by the FTC, the FTC issued an order that generally prohibits UMG from entering into agreements with unaffiliated entities (i) to fix, raise or stabilize prices or price levels for sales of audio or video products in the United States and (ii) to prohibit, restrict, regulate or otherwise limit truthful, non-deceptive advertising for audio or video products in the United States.

In 2004, UMG was made aware of an investigation by the New York State Attorney General regarding the business dealings of major record companies with radio stations in New York, as well their use of independent radio promoters in New York State. UMG is cooperating with the investigation which is ongoing. Sony-BMG and Warner Music Group have settled the investigation as it applies to those companies. As part of their settlement, Sony-BMG and Warner agreed to a series of business reforms, as well as cash payments in the amount of $10 million and $5 million, respectively. In December 2005, the New York State Attorney General opened an investigation into matters concerning the pricing of digital downloads. In connection with that inquiry, the New York State Attorney General has served a subpoena on the four major record companies. UMG is currently in the process of responding to that subpoena.

In Canada, in connection with Vivendi’s purchase of Seagram, UMG is required to continue its investments in Canada’s domestic music industry as part of an undertaking given to the Canadian Department of Heritage.

4.2. Vivendi Universal Games

VU Games voluntarily participates in self-regulatory ratings systems established by various industry organizations around the world. In Europe and the United States for example, VU Games adheres to the principles adopted by the Entertainment Software Rating Board (ESRB). It also adheres to the Pan European Game Information (PEGI) rating system pursuant to which, VU Games displays on its product packaging and advertising the age group for which a particular product is intended, respects advertising guidelines and online privacy principles and provides a brief description of the product’s content on its packaging.

4.3. Canal+ Group

In accordance with French law, the Canal+ Group is not allowed to hold more than a 49% stake in the programming activities of the Canal+ channel. The Canal+ Group has this level of holding in Canal+ SA, a company listed on Eurolist by Euronext™ (Paris) Compartment B, which holds the authorization to broadcast the Canal+ channel. Furthermore, the capital of the company which holds the authorization to broadcast can only be held up to 20% by a non-European Union shareholder.

In virtue of its authorization to broadcast in France, Canal+ SA is subject to the following obligations: (i) as specified above, a single shareholder may not hold more than 49% of its capital, (ii) 60% of the films broadcasted by the channel must be of European origin and (iii) 40% of the films must be French-language films.

Canal+ must invest 4.5% of its turnover in audiovisual works.

On May 16, 2004, Canal+ and all of the French professional film organizations signed an agreement guaranteeing a stronger partnership with the film industry and a greater range of films for Canal+ subscribers. This agreement, which came into effect for a five-year period on January 1, 2005, provides, among other things, for:

• new broadcasting slots on Canal+ to enhance films’ exposure. Canal+ can now offer feature films to its subscribers every weekday evening (on Friday evenings, regardless of box-office sales, on Saturday evenings with the broadcasting of films with box-office ticket sales of less than 1.2 million) and on Wednesday afternoons,

• an enhanced digital offering of the Canal+ premium channel: a third of the programs of the digital versions of Canal+ can differ from those broadcast on the premium channel,

• a more ambitious diversity policy: Canal+ devotes 17% of the amount it must spend on acquiring French-language films on films with a budget lower or equal to €4 million.

The channel also ensures that it is involved in financing a wide variety of films and that its involvement is well-balanced between the different budget levels in the market.

Canal+ renewed its financial commitment towards the film industry and devotes at least 9% of its turnover to acquiring French-language films (included in its obligation to devote 12% of its turnover to the acquisition of European films). This investment may reach 12.5% as a result of the development of the success bonus system. As part of this agreement, Canal+ agreed to maintain its prepayment policy by continuing to devote 80% of the amount it must spend on French films to the prepayment of films before the first filming day. This agreement, dated May 16, 2004, was ratified by changes to the regulations applicable to film channels and on January 6,

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Statutory Environment and Possible Dependencies

2005, by an amendment to the agreement, entered into between Canal+ and the CSA.

French Act No. 86-1067 of September 30, 1986 relating to the freedom of communications, was again amended on July 9, 2004, by French Act No. 2004-669, relating to electronic communications and to audiovisual communications services, regarding two areas which are most likely to be relevant to the activities of the Canal+ Group:

•

confirmation and standardization of the must-carry system, (the obligation for distributors of services on networks that do not use terrestrial frequencies allocated by the CSA, such as cable, satellite and ADSL TV in particular):

	–		to make available free of charge the services of channels belonging to the France Télévisions group (France 2, France 3 and France 5), Arte and TV5, as well as the services specifically intended for viewers within metropolitan France programmed by RFO, to their subscribers, unless these programmers consider that the range of services is clearly incompatible with their public service missions, the cost of transport and broadcasting are payable by the service distributors,

	–		to make available free of charge to their subscribers, RFO services which are broadcast via the terrestrial network in French overseas departments and territories, unless RFO considers that the range of services is clearly incompatible with its public service missions, the costs of transport and broadcasting are payable by the service distributors,

	–		to broadcast the programs and interactive services of La Chaîne Parlementaire free-to-air and at their own expense, using technical methods for broadcasting equivalent to those employed by the French national television companies, unless this is opposed by the governing bodies of the television companies which produce La Chaîne Parlementaire,

	–		to make the services for the deaf and hearing-impaired associated with the television services offered freely available to the general public, with all necessary technical measures being at their cost.

Finally, any service distributor via a network that does not use frequencies allocated by the CSA and that is not a satellite network must make available to its subscribers the services provided by local public bodies intended to give local information, subject to certain limitations and conditions which are set forth in decree no. 2005-1355 as of October 31, 2005, regarding the declarative regime applicable to distributors of audiovisual communication services.

•

increase in the number of authorizations: the number of authorizations that a single person may hold either directly or indirectly, for the provision of a national television service broadcast via the digital terrestrial network, was increased from five to seven.

Regarding digital terrestrial television (DTT), by a decision dated October 20, 2004, the French Council of State (Conseil d’Etat) cancelled the authorizations granted by the CSA on June 10, 2003, for DTT broadcasting of the Sport+, i>Télé, CinéCinéma, Planète, CanalJ and MCM channels. The authorization for the Canal+ channel is not affected by this decision. Prior to this decision, the law had been amended, increasing the maximum number of authorizations from five to seven (see above). On July 19, 2005, following a further call for applications, the CSA assigned four new authorizations to the Canal+ Group, in addition to the authorization already held for the Canal+ channel. The Canal+ Group now holds five authorizations, which include four for pay-channels (Canal+, Canal+Cinéma, Canal+Sport and Planète) and one for the free channels (i>Télé).

The French government has selected MPEG2 as the standard for free DTT services and MPEG4 for pay services.

Regarding Canal+ Active’s video-on-demand business, an interprofessional memorandum of understanding on movies-on-demand was signed on December 20, 2005. This agreement was entered into for a 12-month period and will allow the insert of this new mode of film distribution in the media chronology.

The audiovisual communications industry in Europe is subject to national laws and regulations which are enforced by regulatory authorities such as the CSA in France. In general, these authorities grant broadcasting authorizations for specific periods. In France, Canal+ has an authorization to broadcast the Canal+ channel via the terrestrial, satellite and cable networks. This authorization was renewed in December 2000, for a five-year period and renewed for a subsequent five-year period from December 6, 2005, by a decision of the CSA dated November 22, 2005 (published in the “Journal officiel”, the French official gazette, dated December 4, 2005) with the launch of DTT broadcasting services.

The European Union regularly issues directives that monitor the activities of the Canal+ Group, in particular with respect to competition. The European Union also adopted a series of directives that affect the communications industry, in particular the “Television without Frontiers” directive, and those concerning intellectual property, e-commerce, data protection and telecommunications.

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Statutory Environment and Possible Dependencies

4.4. SFR

As a service operator, SFR does not intervene directly in any industrial processes. The different elements of its network infrastructure, as well as the terminals and the SIM cards that it sells to its customers, are bought from a variety of different suppliers to avoid any dependency in this respect.

SFR has built up numerous industrial and service agreements required for its activities, which form two distinct groups:

•		agreements entered into with the manufacturers of telecommunications network infrastructures, of service platforms and mobile terminals, and agreements for the integration or development of software solutions (network and management software): these agreements have provisions whereby the entity concerned within SFR is either granted a license to use the intellectual property rights of the supplier, or transferred ownership of the software, improvements and studies carried out,

•		agreements for marketing services developed by third parties: these agreements authorize the entity concerned within SFR to include the services developed by third parties in its own range of services. The extent and duration of the rights granted by the third party vary according to the duration for which the agreement is concluded.

Regarding regulations, 2005 saw the continuation of the market analyses conducted by ARCEP, in particular with the decision of the regulatory authority to abandon its project to introduce regulations on the market for mobile access and call origination (market 15). This market, together with the associated retail market, is being monitored by the French regulatory authority until the end of 2006, and monitoring indicators for this market have been introduced. Two other markets are also being analyzed by ARCEP:

•		the market for SMS call termination (new within the European Union): the French regulatory authority considered that each of the mobile operators had a monopoly on SMS call termination. Legal proceedings, which contemplate imposing a cost orientation SMS call termination rate on operators, are currently under way. The final decision of the French regulatory authority, as well as the opinion of the French Competition Council and of the European Commission (with the possibility of a veto), should be given in 2006,

•		the international roaming market (market 17): in its proposed decision ARCEP concludes that there is no single mobile operator that dominates the retail market, and no joint domination of the wholesale market. ARCEP has nevertheless appealed to the European Commission for regulation of this market. In February 2006, the European Union Information Society Commissioner contemplated an EU regulation proposal aimed at containing international roaming prices considered as too high. The final decision in this matter could be rendered by year-end 2007.

The most important legislative development in the telecommunications and electronic communications sector in 2005 was the adoption of measures aimed at protecting consumers. Thus, one of the provisions of the law in favor of small businesses adopted on August 2, 2005, will allow all subscribers to retain their phone numbers when switching operators, provided this is requested within ten days of the switch (against two months currently). The decree implementing portability was published on January 27, 2006, and its implementation by operators is scheduled for early 2007. In this perspective, SFR unilaterally decided to offer its customers a temporary one-month period for portability starting on April 12, 2006.

In addition, several government committees were set up in 2005. The conclusions of these working groups could lead to proposed laws in the fields of consumer protection (collective actions and various measures) or of broadcasting (in particular adaptation of the legal framework to allow broadcasting of television services on mobile phones).

4.4.1. Coverage of Dead Zones

In July 2003, the French State, the Assembly of French Departments (Assemblée des départements de France), the French Mayors’ Association (Association des maires de France), ARCEP and the mobile phone operators, including SFR, signed an agreement to implement a plan to provide mobile phone coverage in dead zones (areas not covered by an operator). This general framework was completed in July 2004, by an amendment that allowed the start of the second phase of the program that is wholly financed by the operators.

By the end of 2007, over 3,000 communities throughout France will receive mobile network coverage, extending coverage to 99% of the French population.

With 163 opened sites, representing the coverage of 251 areas, SFR alone achieved almost half of the deployment scheduled for 2005 by all French mobile operators. This deployment schedule goes beyond the initial commitments of all three French network operators (a total of 378 installed sites, compared with 300, as initially scheduled).

The program as a whole represents an investment of approximately €150 million for SFR.

4.4.2. Health and Environment

The rapid development of mobile telephony in recent years has opened up an international debate on the potential risks of electromagnetic waves on human health. Thus, at the end of 2000,

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Statutory Environment and Possible Dependencies

SFR set up a department supported by a scientific council comprising an epidemiologist, an environmental specialist and a sociologist. Its objective is to monitor research carried out in these areas, improve understanding of the different parties involved and if necessary, recommend suitable measures that are approved by a health and environment steering committee which is chaired by the Senior Executive Vice President.

Comprehensive analysis of the scientific data available on the effects of electromagnetic waves does not currently indicate any harmful effects for human health below the limits established at the international level. In Ottawa, in July 2005, the World Health Organization (WHO) confirmed the position it had adopted in June 2000, that “none of the studies recently undertaken make it possible to conclude that exposure to radiofrequency fields emitted by mobile phones or base stations has any harmful effect whatsoever on human health.” This observation is repeated in the various studies by experts throughout the world and in particular in the report of the French Institute for Environmental and Occupational Health (AFSSET), published in June 2005. SFR is paying close attention to the studies carried out by experts throughout the world; these studies all converge towards the harmlessness of antennas.

Unlike the base station antennas for which the radio waves are comparable to those emitted by radio and television transmitters, studies focusing on the health effects in relation to the use of mobile phones do not have the benefit of long-term research. Furthermore, certain results need to be analyzed in more depth, in particular with regards to the long-term effects of mobile phone usage. For this reason, research in this field is ongoing. The International Agency for Research on Cancer (IARC), was appointed by the WHO to carry out a large-scale epidemiological study involving thirteen countries. The conclusions of this study should be published in 2006.

Since September 2002, SFR has provided its customers with a free of charge earphone kit with each package distributed, in accordance with the recommendations of the French Ministry of Health, to allow customers who wish to do so to reduce their exposure. SFR also indicates the exposure levels (provided by the manufacturers) of the telephones that it sells on its website and in its sales brochures since mid-2002, and on shelf displays at its outlets since the beginning of 2003.

In connection with its active attempts to promote scientific research relating to the effects of radiofrequencies on human health, SFR has, with the support of the French Ministry responsible for research and in partnership with other companies, made every effort during 2004 to bring about the creation of a “Health and Radiofrequencies Foundation”. In January 2005, the foundation was officially recognized as beneficial to the public at large. It has set itself the task firstly of defining, promoting and financing research relating to the effects of human exposure to the electromagnetic fields used in particular for electronic communications, and secondly, to publicize the results of this research among professionals and the general public.

In addition to respecting the regulations introduced in France by the decree of May 3, 2002, concerning the limits for exposure of the public to electromagnetic fields, SFR continues to inform the general public, the authorities and its lessees of the current state of knowledge and the regulations in this field. In particular, SFR has relied on the support of the French Association of Mobile Phone Operators (Association francaise des opérateurs mobiles — AFOM) set up in February 2002, to further its efforts at dialog and transparency which have intensified over the past three years.

In particular, a Good Practice Guide was approved in April 2004, by the AFOM and the French Mayors’ Association, to extend to the whole of France the consultative approach already applied by the operators, to provide greater dialog, transparency and coordination with regards to the installation of phone masts. These commitments have resulted in an increased mobilization of SFR’s regional technical teams, and in particular in heightened campaigns to measure electromagnetic fields, carried out by independent and accredited inspection bodies, in accordance with the official procedure of the French Frequency Agency (Agence nationale des fréquences). In May 2005, the AFOM and the French Mayors’ Association published a first assessment of the application of the Good Practice Guide, through the introduction of monitoring indicators. The French Mayors’ Association and the AFOM have not only decided to continue the approach, but to reinforce it.

SFR is also introducing a system of environmental management aimed at achieving ISO 14001 certification for some of its activities by the start of 2008.

In 2005, two earlier environmental projects implemented by SFR reached their final stages: 90 % of new phone masts installed during the year were integrated into their surroundings and almost 60,000 used mobile phones were collected for recycling.

4.5. Maroc Telecom

The Kingdom of Morocco created the “Agence nationale de régie-mentation des telecommunications” (ANRT), a telecommunications regulatory authority, which is in charge of liberalizing and regulating the telecommunications market in Morocco and which manages the liberalization and privatization program of the telecommunications market advocated by the World Bank. Maroc Telecom fulfils its obligations as a fixed-line operator by providing universal service.

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Piracy

In 2004, the Government of the Kingdom of Morocco re-launched the liberalization process in the telecommunications sector by:

•		amending and supplementing the Post and Telecommunications Act 24-96 of August 7, 1997, with Moroccan Law 55-01, which institutes a more gradual sanction system based on fines, relieves the operators of certain obligations related to universal service and land development, and authorizes the use of alternative infrastructures,

•		publishing a policy paper in November 2004 for the liberalization of the sector f or the 2004-2008 period. The aim of the paper was to set out the framework for the future liberalization process and specifically stated (i) the specific measures to be taken in respect of regulation, and (ii) the long-term aim of the liberalization strategy to establish competition between three operators (including those already established) in all segments of the fixed and mobile markets.

In 2005, the regulatory environment evolved further with the granting of new fixed-line telecommunications licenses, changes to the implementing decrees of Moroccan Law 24-96 and the publication of precisions regarding the timetable for the liberalization of the sector.

On February 24, 2005, the ANRT launched an invitation to tender for the allocation of additional fixed-line telecommunications licenses for local loop, national and international transmission. In July and September, two new licenses were granted to Médi Télécom and Maroc Connect.

In 2005, acts related to interconnection, and general conditions for the operation of a telecommunications network were modified and supplemented, respectively, by decrees numbered 2-05-770 and 2-05-771, as of July 13,2005. These two decrees and an additional decree no. 2-05-772, dated July 13, 2005, related to ANRT court submission, were published in the Official Moroccan Gazette (Bulletin Official) No. 5336, dated July 21, 2005.

The ANRT also made the following decisions at its Board Meeting on December 23, 2005:

•		the launch, on May 2, 2006, of an invitation to tender for 3G mobile licenses (the possible number of mobile licenses is of three),

•		the implementation of regulatory controls according to the following timetable:

	–		pre-selection of the carrier on July 8, 2006,

	–		partial unbundling of the local loop on January 8, 2007,

	–		total unbundling of the local loop on January 8, 2008.

The legal framework has also been supplemented by a number of decisions made by ANRT on both a general and an individual basis. These decisions have been taken both for the purposes of regulating the sector and for settling disputes between operators.

5 Piracy

5.1. Universal Music Group

The recorded music business continues to be adversely affected by pressed disc and CD-R piracy, home CD burning and illegal downloading from the Internet. According to IFPI, the worldwide music market decreased by 1.9% in value in the first half of 2005 with a 6.3% drop in physical music sales partly offset by growing demand for music on the Internet and mobile phones. Sales of pirated music amounted to $4.6 billion in 2004 (most recent available data) as compared to $4.5 billion in 2003. IFPI further estimates that one in three discs sold worldwide is a pirate copy and in 31 countries of the world, illegal recordings outsell the legitimate alternative.

Online music services continue to be developed to offer consumers a viable, legal, copy-protected online source of music. The industry and UMG are increasing their anti-piracy activities with a multi-pronged approach focusing on legal action, including participating in industry legislative efforts, public relations and education, and technical countermeasures while offering consumers new products and services.

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Competition

5.2. Vivendi Universal Games

Piracy is a serious concern for game publishers, and one that VU Games’ anti-piracy department combats directly and in collaboration with third parties such as other publishers and trade associations. VU Games has pursued emerging business models, such as MMORPG games by Blizzard Entertainment, which embrace the Internet while at the same time utilizing technology to prevent piracy. A new threat in the form of unauthorized server systems (which facilitate the play of pirate software) is currently posing an international enforcement challenge. VU Games is meeting this challenge by aggressively investigating and taking legal actions against high level targets.

5.3. Canal+ Group

The Canal+ Group actively combats piracy of its programs in order to protect its own commercial interests, as well as those of its beneficiaries.

The Canal+ Group has taken the necessary steps to be able to act effectively against the various forms of audiovisual piracy by creating CK2 Security, a subsidiary dedicated to technology watch and research, comprising about fifteen people. At the judicial level, the Canal+ Group is continuing its legal action against pirates.

In 2003, the agreement signed with Nagra+ renewed the supply by Nagra+ of the conditional access system used for analog broadcasting of the premium channel, Canal+, in France. This enabled the Canal+ Group to change all of the analog keys in February 2005 to further improve the security of the system.

5.4. SFR

SFR actively combats piracy of its music downloading services. The protection of the titles and traceability of corresponding rights are important issues for SFR. Digital rights management (DRM) systems have been developed by the Open Mobile Alliance (OMA), the organization which brings together the entire chain of mobile communications operators (operators, producers, manufacturers, etc.) and of which SFR is a member. SFR currently uses digital rights management systems using the OMA 1.0 standard. A new protection standard (DRM OMA 2.0) should be available in mid-2006.

6 Competition

6.1. Universal Music Group

The profitability of a recorded music business depends on its ability to attract, develop and promote recording artists, the public acceptance of those artists and the recordings released in a particular period. UMG competes for creative talent both for new artists and those artists who have already established themselves through another label with the following major record companies: EMI, Sony BMG Entertainment and Warner Music Group. UMG also faces competition from independent labels that are frequently distributed by other major record companies. Although independent labels have a significant combined market share, no label on its own has influence over the market. Changes in market share are essentially a function of a company’s artist roster and release schedules.

The music industry also competes for consumer discretionary spending with other entertainment products such as video games and motion pictures. UMG is also facing intensified competition for shelf space in recent years due to the success of DVD videos and further consolidation in the retail sector in the US and in Europe.

Finally, the recorded music business continues to be adversely affected by pressed disc and CD-R piracy, home CD burning and illegal downloading from the Internet (see Section “Piracy” of this Chapter 2).

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Competition

6.2. Vivendi Universal Games

The worldwide leader in interactive games is Electronic Arts (EA) with a 19.1% market share in 2005. VU Games’ market share in 2005 was 5.1%⁽⁵⁾.

VU Games holds the number one position in the subscription-based MMORPG games market with Blizzard’s World of Warcraft. World of Warcraft is the only MMORPG that plays in all key markets, including North America, Europe, Australia, South Korea, China and Taiwan. The title is distributed by China The 9 Interactive in China and Soft-World International Corporation in Taiwan.

VU Games had the second largest share of the PC games market in 2005 at 10.3%, including World of Warcraft retail sales ⁽⁵⁾. The company had the eighth largest share of the PC and console games market combined in 2005, at 5.1 % ⁽⁵⁾.

Competitors in the MMORPG category include NC Soft and Sony Online Entertainment. Competitors in console and PC games include EA, Activision, Take 2, THQ and Ubisoft. In the mobile category, VU Games competes with Gameloft, EA, THQ, Glu, and Mforma.

6.3. Canal+ Group

Within the pay-TV sector in France, the main competitors of the Canal+ Group in the distribution of channels are TPS, for satellite TV (see Section “Description of the Businesses” of this Chapter 2), and cable operators. The increase in the number of digital distribution channels resulting from technological developments (such as digital terrestrial television and the standards for mobile phone TV) favors the entry of newcomers in the pay-TV sector. Since 2004, telecommunications operators have developed “triple play” offers combining telephone, Internet and television access.

Digitization of content on physical media (DVD) or electronic media, favored by the emergence of high-tech equipment such as home cinema equipment and new generations of personal multimedia players, also represent competition for a premium channel such as Canal+.

In the world of theme channels, competition is more international than it is for standard pay-TV. Labels are now being developed at the international level, at the instigation of communications companies and American film studios such as Discovery, MTV, Fox Kids and the Disney Channel.

In the film sector, StudioCanal is in competition with American, European and French film production companies.

6.4. SFR

SFR faces strong competition within the mobile phone market in France which remained dynamic in 2005, with a penetration rate growth of 5.8 points, from 73.9% at the end of 2004 to 79.7% at the end of 2005.

SFR’s mobile network competitors are Orange France and Bouygues Telecom, while its MVNO competitors are companies such as Debitel, Tele 2, NRJ Mobile and Futur Telecom⁽⁶⁾.

The market share held by SFR’s competitors amounted to 46.7 % for Orange France, 16.9% for Bouygues Telecom and 0.6% for MVNOs at year-end 2005, compared to 35.8% for SFR. The arrival of MVNOs on the French market, six of which have signed agreements with SFR and two with Orange, has intensified competition within the mobile phone market, bringing diversity and complementarities to the existing offers.

6.5. Maroc Telecom

Fifteen telecommunications operator licenses have been allocated in Morocco, including three public fixed telecommunications network operator licenses (Maroc Telecom, Médi telecom and Maroc Connect), two GSM operator licenses (Maroc Telecom and Médi Télécom (Méditel)), five licenses for GMPCS-type satellite telecommunications networks, three licenses for operators of VSAT type satellite-based telecommunications networks and two licenses for operators of shared resources radio electric networks.

In 2005, the fixed-line market was opened up to further competition and two fixed-line telephony licenses were granted:


(5)		France, UK, Germany and the US combined, from January to November 2005, except for the UK, until December 2005. Source: VU Games analysis based on GFK, Chart Track and NPD.

(6)		SFR has a 40% stake in CID, the parent company of Futur Telecom

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Raw materials

•		in July 2005, Méditel was granted a fixed-line license including local loop (without mobility restriction) for national and international traffic,

•		in September 2005, Maroc Connect was granted a fixed-line license including local loop (with mobility restriction) for national and international traffic.

An auction for the granting of third generation mobile licenses (UMTS) will be launched on May 2, 2006, and a third GSM mobile license could be granted in 2007.

6.5.1. Fixed-Line Telephony

As at December 31,2005, the two operators holding the new fixed-line licenses had not launched their services; they are expected to start operating in 2006.

However, there was already competition in the public telephony market sector and the professional sector before these new license grants.

In the public telephony market, competition started in 2004 with two new entrants to the market. In the spring of 2004, Méditel opened phone shops using GSM technology and Globalstar opened phone shops using satellite technology. At year-end 2005, Maroc Telecom’s market share in the public telephony market was estimated at approximately 93% of the number of lines.

Méditel through the installation of GSM gateways known as “Link Optimization Boxes” (LO Boxes), entered the professional fixed-line market. The installation of this equipment for outgoing PABX lines facilitates the transformation of fixed-to-mobile traffic into mobile-to-mobile traffic, without using Maroc Telecom’s fixed-line network.

Competition in data transmission services is relatively limited. Maroc Telecom’s main competitors include Internet service providers (ISPs), satellite operators and Equant, an international operator.

6.5.2. Mobile

Maroc Telecom’s competitor in this sector is Méditel, a mobile license holder since August 1999. The majority shareholders of Méditel are Telefonica and Portugal Telecom, each with 32.18% of the share capital and a group of Moroccan investors led by Banque Marocaine du Commerce Extérieur.

As at December 31,2005, Maroc Telecom held 66.7% of the mobile market (source: ANRT).

6.5.3. Internet

Maroc Telecom holds more than 96% of the Internet market, excluding subscription-free services (source: ANRT). Its main competitors include Maroc Connect, distributor of the Wanadoo brand, with an estimated market share of less than 4%, as well as other ISPs.

Maroc Telecom has a very strong position in the high-growth ADSL market with a market share of more than 97% (source: ANRT).

7 Raw Materials

The main raw materials used by Vivendi Universal’s businesses are polycarbonate for CD and DVD production, paper for packaging and celluloid for films. There are no price variations for these raw materials that have a significant impact on the activities of Vivendi Universal.

Moreover, the activities of Vivendi Universal do not present any significant dependency on suppliers of raw materials (see Section “Statutory Environment and Possible Dependencies” of this Chapter 2).

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Research and Development

8 Research and Development

8.1. Universal Music Group

UMG aims to pursue digital distribution opportunities and to protect its copyrights and the rights of its contracted artists from unauthorized digital or physical distribution. UMG has established eLabs, a business strategy and technology division, which supervises UMG’s digitization and online distribution of content and negotiates agreements for selling that content through third parties. eLabs is actively engaged in various projects intended to open new distribution channels and improve existing ones. In addition, eLabs reviews and considers emerging technologies for application in UMG businesses, such as technological defences against piracy and new physical formats. Research and development costs incurred by UMG are immaterial.

8.2. Vivendi Universal Games

Research and development costs include internal development expenses as well as capitalized advances to external developers and license owners. Research and development costs were €186 million in 2005 (excluding the impact of writedowns and reserves on cancelled titles, and also excluding net amortization of capitalized software development costs), compared with €158 million in 2004 and €112 million in 2003.

8.3. Canal+ Group

As in 2003 and 2004, the Canal+ Group did not incur significant research and development expenses in 2005.

8.4. SFR

In 2005, SFR’s investments in research and development mainly focused on three main areas which include the quality of customer services, service platforms, and the study of new telecommunications technologies in the fields of radio (HSDPA/WiMax), core network (IMS/IPV6) and terminals, generally through experiments conducted on pilot platforms.

In view of its structure and size, SFR adopted a strategy for academic and industrial network research by means of national or European projects. This helps to optimize investments and ensure that project results are properly shared. These multi-party projects have led to patents being taken out, mainly in the fields of mobile Internet, security and multimedia services.

SFR’s research and development expenses amounted to more than €43 million in 2005, compared to €37 million in 2004 and €58 million in 2003.

8.5. Maroc Telecom

Maroc Telecom’s research and development activities focus on the introduction of new Maroc Telecom products and/or services and transformation or improvement to existing Maroc Telecom products. These research activities cannot, however, be considered as inventions or patentable processes.

Maroc Telecom’s research and development expenses were immaterial in 2005 and 2004, and were approximately €2 million in 2003.

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Litigation

9 Litigation

To the Company’s knowledge, there are no legal or arbitration proceedings or any fact of an exceptional nature which may have or have had in the recent past, a significant effect on the Company and on its group’s financial position, profit, business and property.

Vivendi Universal or companies within its Group are defendants in the following litigation, in particular:

COB/AMF INVESTIGATION OPENED IN JULY 2002

On September 12, 2003, following the investigation opened by “Autorité des marchés financiers” (AMF) (formerly the Commission des Opérations de Bourse (COB)), on July 4, 2002, the AMF notified Vivendi Universal of facts which, in its view, could result in an administrative penalty for non-compliance with sections 1,2,3 and 4 of Regulation 98-07.

The facts complained of, which took place prior to the changes made in the management of Vivendi Universal in July 2002, related first to the financial information resulting from the methods of consolidation of the companies Cegetel, Maroc Telecom and Elektrim Telekomunikacja, in terms of French accounting standards, and secondly, to other items of financial information.

Vivendi Universal challenged these allegations, taking the view shared by its auditors that the methods of consolidation of these companies applied over the period subject to the COB’s investigation, were in accordance with the applicable accounting regulations.

The AMF Sanction Commission notified Vivendi Universal of its decision on December 7, 2004. Vivendi Universal was ordered to pay a financial penalty of €1 million. The equity method of consolidation of Elektrim Telekomunikacja, for the fiscal year 2001 only, was challenged by the AMF which considered that Elektrim Telekomunikacja should have been consolidated by way of proportionate consolidation.

On February 4, 2005, Vivendi Universal appealed against the decision in the Paris Court of Appeal. Vivendi Universal took the view, shared by its auditors, that the method of consolidation of Elektrim Telekomunikacja, applied over the period subject to the COB’s investigation, was in accordance with the applicable accounting regulations.

On June 28, 2005, the Paris Court of Appeal partially overturned the decision of the AMF Sanction Commission and reduced the amount of the penalty against Vivendi Universal from €1 million to €300,000. In this decision, the Paris Court of Appeal validated Vivendi Universal’s accounting treatment.

On August 25,2005, the AMF appealed against this decision before the French Supreme Court (Cour de cassation).

On February 3, 2006, Vivendi Universal submitted its briefs in response.

AMF INVESTIGATION OF THE COMPANY’S SHARE REPURCHASES OPENED IN MAY 2002

On May 4, 2004, the AMF commenced an investigation into Vivendi Universal’s purchase of its own shares between September 1, 2001 and December 31, 2001. The inquiry report has not been submitted to the Sanctions Committee but on June 6, 2005 the AMF transmitted this report to the Public prosecutor’s office that led to additional prosecution’s charges joined to the investigation initiated by the financial department of the Parquet de Paris (see below).

AMF INVESTIGATION IN CONNECTION WITH THE ISSUANCE OF MANDATORILY REDEEMABLE NOTES (ORA) IN NOVEMBER 2002

On January 18, 2005, Vivendi Universal and two of its senior executives, Jean-René Fourtou and Jean-Bernard Lévy, were served with a notice of complaint issued by the AMF following the inquiry made into observed movements in the Vivendi Universal share price at the time of the issuance of notes mandatorily redeemable for new shares of Vivendi Universal in November 2002. Vivendi Universal intends to challenge these complaints before the AMF Sanctions Commission. These two senior executives have filed their memorandum in response on January 19, 2006.

The AMF complaint against Vivendi Universal is that Deutsche Bank sold to institutional investors a product comprising of both notes mandatorily redeemable for new shares of Vivendi Universal and hedging in respect of the Vivendi Universal shares, the description of which was not sufficiently detailed in the prospectus. Vivendi Universal takes the view that it fully complied with its obligations as an issuer to provide information.

INVESTIGATION BY THE FINANCIAL DEPARTMENT OF THE “PARQUET DE PARIS”

The investigation initiated by the financial department of the Parquet de Paris for the publication of false or misleading information regarding the financial situation or forecasts of the Company, as well as the publication of untrue or inaccurate financial statements (for fiscal years 2000 and 2001) is ongoing. The application for Vivendi Universal to be joined as a civil party was definitively granted by an order of the Paris Court of Appeal, dated June 25, 2003.

It is too early to predict with certainty the precise outcome of the disputes set out below, to determine their duration or to quantify any potential damages. In the opinion of Vivendi Universal, the claimants’ complaints are without legal or factual cause of action. Vivendi Universal plans to defend vigorously against them and will assert all its rights.

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Litigation

SECURITIES CLASS ACTION IN THE UNITED STATES

Since July 18,2002, sixteen claims have been filed against Vivendi Universal, Jean-Marie Messier and Guillaume Hannezo in the United States District Court for the Southern District of New York and in the United States District Court for the Central District of California. On September 30,2002, the New York court decided to consolidate these claims in a single action under its jurisdiction entitled In re Vivendi Universal S.A. Securities Litigation.

The plaintiffs allege that, between October 30, 2000 and August 14, 2002, the defendants violated certain provisions of the US Securities Act of 1933 and the US Securities Exchange Act of 1934. On January 7, 2003, they filed a consolidated class action suit that may benefit potential groups of shareholders. Damages of unspecified amount are claimed. Vivendi Universal contests these allegations.

The proceedings are currently in the stage of discovery in which the plaintiffs have to prove a violation that caused a loss to the shareholders.

In parallel with these proceedings, the procedure for certification of the potential claimants as a class with standing to act on behalf of all shareholders (“class certification”) is ongoing. The judgment on the class certification is expected in the course of 2006.

ELEKTRIM TELEKOMUNIKACJA

Since the purchase on December 12, 2005 of the 2% of the companies Elektrim Telekomunikacja Sp. Z.o.o (Telco) and Carcom Warszawa (Carcom) held by Ymer, Vivendi Universal has been a 51% shareholder in Telco and Carcom, companies organized and existing under the laws of Poland which own, either directly or indirectly 51% of the capital of Polska Telefonica Cyfrowa (PTC), the primary mobile telephone operator in Poland (see organization chart note 2.3. of the notes to the consolidated financial statements). These shareholdings are the subject of several litigations, the most important of which are described below.

Arbitral Award Rendered in Vienna on November 26, 2004 (the “Vienna Award”)

In December 2000, Deutsche Telekom (DT) initiated arbitration proceedings in Vienna against Elektrim and Telco in order to challenge the validity of the contribution of 48% of the capital of PTC made in 1999 by Elektrim to Telco.

In the Award notified to the parties on December 13, 2004, it was ruled that:

•		the Telco transfer is ineffective and the PTC shares which were the subject of this transfer remained Elektrim’s property at all material times,

•		the transfer of the PTC shares to Telco by Elektrim does not as such qualify as a Material Breach under Article 16.1 of the Shareholders Agreement but it would do so in case Elektrim would not recover the shares from Telco within two months as the latest from the notification of the award,

•		DT’s Economic Impairment Claim is dismissed,

•		it has no jurisdiction over Telco and DT’s claims against Telco cannot be entertained in this arbitration.

The arbitral tribunal having ruled that it had no jurisdiction with respect to Telco, Vivendi Universal considers that the Vienna Award is not binding over Telco and does not affect Telco’s ownership rights with respect to the PTC shares.

On August 3, 2005, the Vienna arbitral tribunal rendered its final award with respect to costs, thereby concluding these proceedings. Telco was granted reimbursement of its costs.

On December 20, 2005, the commercial tribunal of Vienna partly voided the award (refer below).

Exequatur Proceedings of the Vienna Award Before Polish Courts

On February 2, 2005, Elektrim and DT obtained a partial exequatur of the Vienna Award, the Warsaw Court (Regional Court — Civil Division) having recognized only the first three points of the award’s provisions. In 2005, Telco appealed this partial exequatur decision for having violated the terms of the New York Convention of June 10, 1958, on the recognition and execution of foreign arbitral awards and its right to a fair hearing. On February 23, 2005, the General Prosecutor of Warsaw also lodged an appeal against this decision. A hearing before the Appeal Court of Warsaw has been scheduled for March 29, 2006.

Declaratory Proceedings Before the Polish Courts

Following the Vienna Award in December 2004, Telco initiated proceedings on the merits with the intention of obtaining a declaratory judgment confirming that it is the rightful owner of the PTC shares. At Telco’s request, the Warsaw Court (Regional Court -Commercial Division), by a protective injunction dated December 30, 2004, prohibited any changes to the shareholders’ registry kept by PTC in which Telco is registered. DTand Elektrim have appealed this injunction.

Proceedings Before the Trade and Companies Registry of Warsaw

On February 25, 2005, despite the injunction of December 30, 2004, the Warsaw court responsible for the Trade and Companies Registry, registered Elektrim on the said Registry as a shareholder of PTC in place of Telco, on the basis of a list of PTC’s shareholders and deliberations of the company governing bodies prepared and provided by DT and Elektrim under circumstances which Telco and PTC consider to constitute fraud. Telco appealed this registration decision and lodged a complaint with the Warsaw Prosecutor.

On August 26, 2005, the Warsaw Court of Appeal quashed the decision of February 25, 2005. Consequently, on November 15th,

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Litigation

the Trade and Companies Registry re-registered Telco as a shareholder of PTC and its representatives as members of the Management Board of PTC. However, the current management of PTC, appointed by DT and Elektrim, is still, to date, refusing the Telco representatives access to PTC’s premises.

Proceedings Concerning the “Mega” Operation Before Polish Courts

In October 2005, following searches of the Trade and Companies Registry, Telco discovered that Elektrim had, on January 31, 2005, supposedly contributed the 48% of the PTC capital which belonged to Telco to one of its subsidiaries, the company Mega, at a value which was considerably less than their market value. The searches carried out by Telco have also shown that on June 15, 2005, Elektrim pledged the shares it held in Mega’s capital to the company PAI Media, as a guarantee for a loan of €90 million granted by PAI Media to ZE PAK, another Elektrim subsidiary. Telco has initiated all the proceedings in Poland which are necessary to have invalidated these fictive transactions which relate to its shareholding in PTC. Civil liability proceedings against the directors of Mega, PAI Media and Elektrim have also been initiated. In addition, Telco has lodged a complaint with the Warsaw Prosecutor.

Proceedings for the Annulment of the Vienna Award Before the Austrian Courts

On December 20, 2005, the Vienna Commercial Court annulled at Telco’s request the first sub-paragraph of the Vienna award which deemed that the contribution of the PTC shares made by Elektrim to Telco in 1999 had been ineffective and that the PTC shares which are the subject of the said transfer had never left Elektrim’s ownership. All the other rulings of the Vienna Award were left unchanged, including the ruling which referred to the absence of jurisdiction of the arbitral tribunal with respect to Telco. The Vienna Commercial Court in particular considered that the arbitral tribunal, after having declared non-jurisdiction with respect to Telco, had contradicted itself by rendering a decision which was likely to affect Telco’s rights. On February 3, 2006, DT and Elektrim have appealed this decision.

Vivendi Universal’s Case Against the Polish State

On February 28, 2005, Vivendi Universal, in the context of the amicable recovery proceedings provided in the treaty, commenced proceedings to seek the Republic of Poland to comply with its commitments in terms of the protection and fair treatment of investors pursuant to the “Agreement Between the Government of the Republic of France and the Government of the Republic of Poland on the Reciprocal Encouragement and Protection of Investments” signed on February 14, 1989.

Arbitration Proceedings before the London Court of International Arbitration (LCIA)

On August 22, 2003, Vivendi Universal and Vivendi Telecom International S.A. (VTI) lodged an arbitration claim with an arbitration court under the auspices of the London Court of International Arbitration (LCIA) against Elektrim, Telco and Carcom Warszawa.

This request for arbitration takes place in relation with the Third Amended and Restated Investment Agreement dated as of September 3, 2001, entered into by and among Elektrim, Telco, Carcom, Vivendi Universal and VTI. The purpose of this agreement, amongst other things, is to govern relations between Vivendi Universal and Elektrim within Telco. The initial subject matter of the dispute related to the entry into force of certain provisions of this agreement, but has been extended since by Elektrim to its global validity. Vivendi Universal additionally requested the LCIA to rule on Elektrim’s contractual liability resulting from its breach of this agreement.

On March 24, 2005, the LCIA took preventive action against Elektrim prohibiting it from transferring the PTC shares and enjoining it to exercise all the rights attached to the shareholding in PTC in accordance with Telco’s instructions. The interim measure was confirmed on April 28, 2005. From the 23rd to the 27th of January 2006, hearings took place in London as to the validity of this agreement.

Proceedings Before the Polish Competition and Consumer Protection Office

On April 7, 2005, the Polish Competition and Consumer Protection Office opened an enquiry in order to determine whether Vivendi Universal controlled Ymer (owner of 2% of Telco’s capital until December 2005) and whether it consequently violated the provisions of the national law of December 15, 2000, on the protection of competition by omitting to declare its taking control of Telco.

Proceedings Against DT Before the Paris Commercial Court

In April 7, 2005, Vivendi summoned DT before the Paris Commercial Court for criminal responsibility for having wrongfully terminated negotiations. In September 2004, DT ended, without prior notice and without justifying it by legitimate reasons, tripartite negotiations with Elektrim which had begun one year earlier in relation to the transfer of 51% of PTC to DT. Vivendi Universal considers that this abrupt withdrawal was motivated by DT’s wish to appropriate the PTC shareholding at a lower cost by maneuvers which Vivendi Universal considers to be illegal. Vivendi Universal is claiming compensation from DT which is today estimated at €2.2 billion, corresponding to the harm suffered as a result of DT’s behaviour.

DUPONT TAX LITIGATION

Seagram, then Vivendi Universal as successor to Seagram’s rights, had been in discussion with the US Internal Revenue Service (IRS) since 1998 when, on August 21, 2003, Vivendi Universal received notice from the IRS challenging the tax treatment submitted by Seagram in its Form 10-K in the context of the redemption by DuPont in April 1995, of 156 million of its own shares held by Seagram.

The IRS claims tax of $1.5 billion plus interest. On October 31, 2003, Vivendi Universal challenged this demand in the US Tax Court.

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Risk Factors

Vivendi Universal and the IRS filed their respective submissions before the US Tax Court and the discovery of documents is ongoing.

Vivendi Universal continues to believe that the tax treatment adopted in 1995 is fully compliant with US tax laws at the time. While the outcome of any controversy cannot be predicted with complete certainty, Vivendi Universal considers that this dispute with the IRS, if decided against Vivendi Universal, would not have a significant effect on its overall financial situation. Furthermore, Vivendi Universal considers that it has made the appropriate provisions in its accounts regarding this litigation.

FRENCH COMPETITION COUNCIL – MOBILE TELEPHONE MARKET

On December 1, 2005, the French Competition Council issued an order against French mobile telephone operators in respect of the operation of the mobile telephone market, principally during the period 2000-2002. The resulting fine paid by SFR, which amounted to €220 million, has been entered in the accounts as an expense and was paid during the 2005 fiscal year. However, SFR considers the fine to be unjustified and unrelated to the facts of the case, and it has therefore appealed the order. SFR is involved in contentious proceedings brought by customers and consumer associations connected with this order, but since it is challenging the order and is not in a position to determine the potential impact of the outcome of these proceedings, has not made any provision in its accounts in this respect.

Furthermore, SFR is involved in other contentious proceedings commenced in relation to competition law, frequently in common with other telephone operators. To the extent SFR is not in a position to determine the potential impact of the outcome of these proceedings, SFR has not made any provision in its accounts in this respect.

INVESTIGATION IN MUSIC IN THE UNITED STATES

In September 2004, UMG has been served with an inquiry opened by the Attorney General of the State of New York, concerning the four music majors’ commercial relations with the New York radio stations and the promoters of independent radios of New York State. UMG cooperates in the ongoing inquiry.

Sony BMG Entertainment and Warner Music Group have signed an agreement with the Attorney General, both Groups having accepted to modify their practices and to pay fines of $10 million and $5 million, respectively.

In December 2005, the Attorney General of the State of New York has opened an inquiry on the commercial agreements binding the four majors to Apple and on the policy of downloads’ prices for online music. In connection with this investigation, the Prosecutor requested further information from the four music majors. In March 2006, the Department of Justice (DoJ) has opened an investigation on the majors and on the price for online music. UMG cooperates in both investigations.

10 Risk Factors

Vivendi Universal is party to various lawsuits and is the subject of various investigations that could have a material adverse effect. For further information on this matter, see section “Litigation” of this Chapter 2.

Vivendi Universal has a number of contingent liabilities, described in Note 29 of the Notes to the Consolidated Financial Statements, for the fiscal year ended on December 31, 2005. If Vivendi Universal were forced to make a payment in respect of one or more of these contingent liabilities, this could have an adverse effect on its financial position.

Regarding the risk of exposure to interest rates, currency risk and equity market risk, see Note 26 of the Notes to the Consolidated Financial Statements.

CERTAIN OF VIVENDI UNIVERSAL’S BUSINESS OPERATIONS IN SOME COUNTRIES ARE SUBJECT TO ADDITIONAL RISKS

Vivendi Universal conducts its business in various markets around the world. The main risks associated with conducting its business internationally are:

•		fluctuations in currency exchange rates (particularly the US dollar-euro exchange rate) and currency devaluations,

•		restrictions on the repatriation of capital,

•		unexpected changes made to the regulatory framework,

•		the various tax systems that may have an adverse effect on the results of Vivendi Universal’s activities or on its cash flows,

50 2005 Annual Report — Vivendi Universal

Description of the Group and its Businesses — Litigation — Risk Factors 2

Risk Factors

		including regulations relating to setting transfer costs and withholding tax on repatriation of funds and other payments made by joint ventures and subsidiaries,

•		tariff barriers, customs duty, export controls and other trade barriers,

•		insufficient coverage for pension liabilities.

Vivendi Universal may not be able to protect itself against these risks or pay for them and may not be able to guarantee its compliance with all applicable regulations without incurring additional costs.

UNFAVORABLE EXCHANGE RATE FLUCTUATIONS COULD ADVERSELY AFFECT THE RESULTS OF VIVENDI UNIVERSAL’S BUSINESS OPERATIONS

A portion of Vivendi Universal’s assets and liabilities, as well as part of its sales and costs, are denominated in foreign currencies. To prepare and close its consolidated financial statements, Vivendi Universal must translate them into euros at then-applicable exchange rates. Consequently, increases and decreases in the value of the euro versus other currencies will affect the amount of these items in its consolidated financial statements, even if their value has not changed in their original currency. These translations could result in significant changes to the results of operations of the Company.

Furthermore, since Vivendi Universal incurs expenses that are not always denominated in the same currency as that of the corresponding income, these expenses may represent a higher percentage of the sales figure as a result of exchange rate fluctuations, thus affecting its profitability and cash flows.

RISKS LINKED TO OBTAINING OR RENEWING PUBLIC OPERATING LICENSES OR TO SPECIFIC REGULATIONS

Certain of Vivendi Universal’s activities are dependent on obtaining or renewing licenses issued by the regulatory authorities. The process for obtaining or renewing these licenses or approvals is often lengthy, complex and costly. If Vivendi Universal is unable to retain or obtain in a timely manner the licenses required to conduct, continue or expand its activities, in particular licenses to provide telecommunications services and broadcasting licenses, its ability to achieve its strategic objectives could be impaired.

Furthermore, any adverse changes in the regulatory environment in which Vivendi Universal conducts its activities may result in costs for Vivendi Universal and limit its revenue.

RISKS LINKED TO INCREASED COMMERCIAL AND TECHNICAL COMPETITION

The industries in which Vivendi Universal operates are highly competitive. It may lose business if it is unable to match its competitors’ prices, or if it does not manage to develop new technologies and to launch new products and services.

In addition, these industries are subject to rapid and significant changes in technology and new products and services are frequently introduced. Substantial investments may be required to further these technological advances. Vivendi Universal may be too slow in identifying new opportunities.

Further, technological advances may render its products and services obsolete and force Vivendi Universal to write off previous investments and incur new ones.

IF THE PRODUCTION AND DISTRIBUTION OF FILMS, AUDIO RECORDINGS AND INTERACTIVE GAMES IS LESS COMMERCIALLY SUCCESSFUL THAN ANTICIPATED, THIS MAY HAVE A NEGATIVE IMPACT ON GROWTH PROSPECTS FOR THESE OPERATIONS

Content is of crucial importance for Vivendi Universal’s television, film, music and interactive game businesses and determines their success and distribution.

A large proportion of Vivendi Universal’s income comes from the production and distribution of films, audiovisual works and music, as well as from the production of interactive games. The commercial success of these content products is dependent upon the response of the public which cannot always be predicted.

The commercial success of a particular content product among a wide audience depends on the existence of other leisure activities, as well as on the general economic situation and a number of other factors. In addition, these businesses are based on third-party content. Given the increasingly competitive nature of the markets for these activities, there can be no certainty that third-parties will continue to transfer their rights under conditions that are commercially viable or that the cost of obtaining these rights will not increase.

VIVENDI UNIVERSAL MAY HAVE DIFFICULTY ENFORCING ITS INTELLECTUAL PROPERTY RIGHTS

The decreasing cost of electronic and computer equipment and related technology has made it easier to create unauthorized copies of works produced by Vivendi Universal, such as compact discs, videotapes and DVDs. Similarly, advances in Internet technology have increasingly made it possible for computer users to share works without the permission of the copyright owners and without paying the corresponding royalties. The results and financial position of Vivendi Universal may suffer if it is unable to protect its intellectual property rights effectively. Many of Vivendi Universal’s activities are heavily dependent on intellectual property rights that it owns or for which it holds a license.

THERE HAS BEEN A DECLINE IN THE AUDIO RECORDING MARKET THAT COULD HAVE FURTHER REPERCUSSIONS FOR UMG

The decline in the market for audio recordings is due to the combined effect of the economic recession, piracy, counterfeiting (both industrial and domestic, using recordable CD-ROMs or the

2005 Annual Report — Vivendi Universal 51

2 Description of the Group and its Businesses — Litigation — Risk Factors

Risk Factors

illegal downloading of music from the Internet made easier by the availability of works in digital formats) and increased competition for consumer spending on leisure. In 2004, according to the International Federation of the Phonographic Industry (IFPI), the global music market experienced a drop in value of 1.3% and of 0.4%, in terms of the number of copies sold. If this decline continues, it will have a negative impact on UMG’s sales and results.

According to the IFPI, pirate sales represented a market of about $4.6 billion in 2004 (the last year for which figures are currently available), compared with $4.5 billion in 2003 and $4.6 billion in 2002. This slight increase is due to the increase in the volume of pirate sales and a drop in the sale price of pirate copies. Sales of pirate CDs represented 34% of the global music market in 2004, compared to 15% in 2003. Pirate sales amounted to 1.2 billion copies in 2004 (+2% compared to the previous year). Vivendi

Universal believes that these amounts and percentages could continue to increase. Piracy has resulted in a drop in the volume and price of lawful sales which has had a negative impact on UMG and which may continue in coming years.

PIRACY AND COUNTERFEITING MAY CAUSE A DROP IN SALES FOR VIVENDI UNIVERSAL’S FILM OPERATIONS

The availability of films in digital formats, together with the expansion of broadband Internet coverage has made it easier to create, transmit and share unauthorized copies of films. The continued difficulty in passing and applying suitable laws and in enforcing court rulings in certain parts of the world where piracy is endemic, represents a threat for the film industry that is likely to have an adverse effect on Vivendi Universal’s film operations.

52 2005 Annual Report — Vivendi Universal

3 Information Concerning the Company — Corporate Governance


1 General Information Concerning the Company			p. 55

1.1. Corporate and Commercial Name			p. 55

1.2. Place of Registration and Registration Number			p. 55

1.3. Date of Incorporation and Term			p. 55

1.4. Registered Office, Legal Form and Legislation Applicable to the Business of Vivendi Universal			p. 55

1.5. Fiscal Year			p. 55

1.6. Access to Legal Documents			p. 55

2 Additional Information Concerning the Company			p. 56

2.1. Memorandum and By-laws			p. 56
2.1.1. Corporate Purpose			p. 56
2.1.2. Description of Rights, Preferences and Restrictions Attached, if Applicable, to the Shares and to Each Class of Existing Shares			p. 56
2.1.3. Description of Action Necessary to Change the Rights of Shareholders			p. 56
2.1.4. Shareholders’ Meetings			p. 56
2.1.5. Fixation, Allocation and Distribution of Net Earnings			p. 57
2.1.6. Description of Provisions Having an Effect of Delaying, Deferring or Preventing a Change in Control			p. 57
2.1.7. Provision Governing the Ownership Threshold Above Which Shareholder Ownership Must be Disclosed			p. 57
2.1.8. Description of the Conditions Governing Changes in the Share Capital, Where Such Conditions are More Stringent Than Required by Law			p. 58

2.2. Share Capital			p. 58
2.2.1. Amount of Issued Capital			p. 58
2.2.2. Shares not Representing Capital			p. 58
2.2.3. Amount of Non-issued Capital			p. 58
2.2.4. Shares Held by the Company			p. 59
2.2.5. Convertible, Exchangeable Securities or Securities with Warrants			p. 61
2.2.6. Stock Option Plans			p. 61
2.2.7. Acquisition Rights or Obligations Over Authorized but Non-issued Capital			p. 67
2.2.8. Conditional or Unconditional Options or Agreements on any Member of the Group			p. 67
2.2.9. Change in Share Capital over the Last Five Years			p. 68
2.2.10. Market Information			p. 70
2.2.11. Financial Securities Intermediary			p. 74

2.3. Major Shareholders			p. 75
2.3.1. Share Ownership and Voting Rights			p. 75
2.3.2. Pledge of Company Shares			p. 75
2.3.3. Control of the Company – Shareholders’ Agreements			p. 75
2.3.4. Changes in Share Ownership and Voting Rights Over the Last Three Years (as at December 31)			p. 76

3 Corporate Governance			p. 77

3.1. Directors, Senior Management and Supervisory Bodies			p. 77
3.1.1. The Supervisory Board			p. 77
3.1.2. The Management Board			p. 89

3.2. Compensation of Directors and Officers			p. 94
3.2.1. Individual Compensation			p. 94
3.2.2. Compensation of the Members of the Supervisory Board and Previous Members of the Board of Directors			p. 95
3.2.3. Compensation of the Chairman and Members of the Management Board			p. 96
3.2.4. Pension Plans			p. 97
3.2.5. Compensation of Senior Executives of the Group			p. 98

3.3. Stock Options			p. 98
3.3.1. Stock Option Grants in 2005			p. 98
3.3.2. Options Exercised by Directors in 2005			p. 98
3.3.3. Principal Stock Option Grants and Exercises in 2005			p. 99

3.4. Dealings in Company Securities			p. 99

3.5. Compliance Program			p. 99
3.5.1. Reasons			p. 99
3.5.2. Issues			p. 100

3.6. Financial Code of Ethics			p. 100

3.7. Disclosure Committee			p. 100
3.7.1. Composition			p. 100
3.7.2. Powers			p. 100
3.7.3. Missions			p. 100
3.7.4. Deliberations in 2005			p. 101

3.8. General Management			p. 101

3.9. Principal Accountant Fees and Services			p. 101

2005 Annual Report — Vivendi Universal 53

3 Information Concerning the Company — Corporate Governance


4 Report of the Chairman of the Supervisory Board of Vivendi Universal on the Conditions of Preparation and Organization of the Work of the Supervisory Board and Internal Audit Procedures – Fiscal Year 2005			p. 102

4.1. Conditions of Preparation and Organization of the Work of the Supervisory Board – Corporate Governance			p. 102
4.1.1. Information of the Supervisory Board			p. 102
4.1.2. Assessment of Functioning of the Supervisory Board			p. 103

4.2. Internal Control Procedures			p. 103
4.2.1. Definition and Objectives of Internal Control			p. 103
4.2.2. Scope of Internal Control			p. 103
4.2.3. Key Processes in the Company			p. 104
4.2.4. Management of Internal Control			p. 105
4.2.5. Actions Carried Out in 2005 and Action Plans for 2006			p. 106

5 Statutory Auditors’ Report Drawn up Pursuant to the Last Subsection of Article L. 225-235 of the French Commercial Code on the Report of the Chairman of the Supervisory Board on the Internal Audit Procedures Relating to the Financial and Accounting Information – Fiscal Year ended on December 31, 2005			p. 108

6 Statutory Auditors’ Report on Regulated Agreements Year Ended December 31, 2005			p. 109
6.1. Agreements authorized during the year			p. 109
6.1.1. Service contract with the firm Conseil DG			p. 109
6.1.2. Agreement on the additional pension plan			p. 109

6.2. Agreements approved during previous years that continued to be implemented during the year			p. 110
6.2.1. Agreement on the waiver of interest on current accounts			p. 110
6.2.2. Support agreement			p. 110
6.2.3. Agreements related to the restructuring of UGC			p. 110
6.2.4. Agreements with Veolia Environnement			p. 110
6.2.5. Agreement with Vinci			p. 111

54 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

General Information Concerning the Company

1 General Information Concerning the Company

From the date of incorporation until the Combined Ordinary and Extraordinary Shareholders’ Meeting held on April 28, 2005, the Company was a société anonyme à Conseil d’administration (a company with a single unified Board of Directors). Since the date of this Shareholders’ Meeting, during which the change of the corporate management structure and the new by-laws were approved, Vivendi Universal is a société anonyme à Directoire et Conseil de surveillance (a company with a Management Board and a Supervisory Board).

1.1. Corporate and Commercial Name

Pursuant to Article 1 of the by-laws, the corporate name of the Company is Vivendi Universal. A change of the corporate name from Vivendi Universal to “Vivendi” is submitted for approval by the shareholders at the meeting scheduled for April 20, 2006.

1.2. Place of Registration and Registration Number

The Company is registered with the Registre du Commerce et des Sociétés de Paris (Paris Commercial and Corporate Registry) under the reference 343 134 763. Its Siret number is 343 134 763 00048 and its APE code is 741J.

1.3. Date of Incorporation and Term

As set forth in Article 1 of the by-laws, the Company’s term is 99 years from the date of December 18, 1987. The Company’s term shall expire on December 17, 2086, except in the event of an early dissolution or unless extended.

1.4. Registered Office, Legal Form and Legislation Applicable to the Business of Vivendi Universal

Pursuant to the provisions of Article 3 of the by-laws, the registered office of the Company is located at 42, avenue de Friedland - 75380 Paris Cedex 08 - France.

Pursuant to the provisions of Article 1 of the by-laws, Vivendi Universal is a limited liability company (société anonyme) with a Management Board (Directoire) and a Supervisory Board (Conseil de surveillance). The Company is governed by the French legislative and regulatory provisions on corporations and, in particular, by the provisions of the French Commercial Code (Code de Commerce).

1.5. Fiscal Year

Pursuant to the provisions of Article 18 of the by-laws, the Company’s fiscal year shall commence on January 1^st and end on December 31^st.

1.6. Access to Legal Documents

The legal documents concerning the Company may be examined at the Company’s registered office.

2005 Annual Report — Vivendi Universal 55

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

2 Additional Information Concerning the Company

2.1. Memorandum and By-laws

2.1.1. Corporate Purpose

Pursuant to the provisions of Article 2 of the by-laws, the Company has the main following purposes, directly or indirectly, in France and in all countries:

•		to provide any direct or indirect telecommunications, including media and entertainment activities, and any interactive services, to individual, business or public-sector customers,

•		to market any products and services related to the foregoing,

•		to engage in any commercial, industrial, financial, stock, share and real-estate transactions, directly or indirectly, related to the aforementioned purpose or to any other similar or related purposes, or contributing to the fulfillment of these purposes,

and, more generally, the management and acquisition, either by subscription, purchase, contribution, exchange or through any other means, of shares, bonds and any other securities of companies already existing or to be formed and the right to sell such securities.

2.1.2.

Description of Rights, Preferences and Restrictions Attached, if Applicable, to the Shares and to Each Class of Existing Shares

Pursuant to the provisions of Articles 4 and 5 of the by-laws, the shares are all of the same class and take the form of registered shares or bearer shares, subject to applicable laws and regulations.

Pursuant to the provisions of Article 6 of the by-laws, each share carries a right of ownership of the Company’s assets and liquidation surplus, in a proportion equal to the fraction of the share capital it represents. Whenever the accumulation of several shares is necessary in order to exercise any rights, shareholders may only exercise such rights in the event they combine the necessary shares. The subscription right attached to shares belongs to the beneficial owner (“usufruitier”).

2.1.3. Description of Action Necessary to Change the Rights of Shareholders

In connection with any changes in the share capital or rights attached to shares, the Company’s by-laws do not contain any provisions more stringent than is required by law, unless otherwise provided by the Support Agreement for the preservation of the rights of the holders of exchangeables, issued by Exchange Co. (a wholly-owned Canadian subsidiary of Vivendi Universal), in favor of the Canadian shareholders, at the time of the merger of Vivendi, Canal+ and Seagram in December 2000.

2.1.4. Shareholders’ Meetings

Pursuant to the provisions of Articles 16 and 17 of the by-laws, Shareholders’ Meetings are convened and held in accordance with applicable law.

Shareholders’ Meetings are held at the Company’s registered office, or at any other place indicated in the notice of meeting. When convening the meetings, the Management Board may decide to publicly broadcast the Shareholders’ Meeting in full, via videoconference or tele-transmission. If applicable, this decision shall be published in the notice of meeting.

Two members of the Workers’ Committee, appointed by such Committee, may also attend the Shareholders’ Meetings. The Chairman of the Management Board or any other authorized person, provides notice, by any means, to the Workers’ Committee of the date and location of any Shareholders’ Meetings.

Each shareholder, without regard to the number of shares held, is entitled, upon proof of his/her identity and capacity, to attend Shareholders’ Meetings subject to:

•		for holders of registered shares: entry in the Company’s share register,

•		for holders of bearer shares: the filing of a certificate, at the place indicated in the notice of meeting, issued by an accredited financial intermediary and certifying that the shares held in their name are not transferable until the date of the Shareholders’ Meeting,

and, if applicable, the Company must be provided with any documents required to prove his/her identity, in accordance with applicable law.

These formalities must be fulfilled prior to 3:00 p.m. (Paris time) on the day before the Shareholders’ Meeting, unless the deadline is shortened by applicable law and regulations or the notice of meeting specifies a tighter deadline.

The shares’ registration or the certificate of non-transferability may only be revoked by the shareholder in accordance with applicable law and regulations.

56 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

In all Shareholders’ Meetings, the voting rights attached to shares belong to the beneficiary of the legal title to the shares (“nu-propriétaire”).

Subject to applicable law and regulations, shareholders may send their proxy and voting forms for any Shareholders’ Meeting by mail, either in paper form or where approved by the Management Board and published in the notice of meeting by tele-transmission.

The Management Board may decide that shareholders may participate and vote in any Shareholders’ Meetings by videoconference and/or tele-transmission, subject to applicable law and regulation. In such a case, shareholders participating in the Shareholders’ Meeting by videoconference or by any other means of telecommunication, in accordance with applicable law and regulation, shall be deemed present at the meeting for the purposes of calculating quorum and majority requirements.

Shareholders’ Meetings are chaired by the Chairman of the Supervisory Board.

Each shareholder is entitled a number of votes equal to the number of shares he/she owns or represents.

2.1.5. Fixation, Allocation and Distribution of Net Earnings

Pursuant to the provisions of Article 19 of the by-laws, the statement of income summarizes income and expenses for the fiscal year, showing statutory net income for the fiscal year as the difference between the two, after deduction of amortization, depreciation and provisions.

At least 5% of the fiscal year’s earnings, reduced where applicable by deferred losses, shall be withheld for allocation to the statutory reserve fund. This withholding ceases to be mandatory when the statutory reserve fund reaches an amount equal to 10% of the share capital. Such deductions shall be resumed if, for any reason, the legal reserve falls below one-tenth of the share capital.

The Shareholders’ Meeting may set apart such amounts as the Management Board shall see fit, for transfer to contingency funds, to ordinary or extraordinary revenue reserves, to retained earnings or for distribution.

Distributable earnings are equal to the net income for the fiscal year, less losses carried-forward and amounts allocated to reserves created, pursuant to applicable law or the Company’s by-laws, plus carry-forward earnings.

Dividends are paid out of earnings from the fiscal year.

Except in the event of a reduction in capital, no dividends shall be distributed to shareholders when shareholders’ equity is, or would become, as a result of such distribution, less than the amount of the capital plus reserves for which a distribution is not permitted by applicable law or by the Company’s by-laws.

Revaluation surpluses may not be distributed, but may be capitalized in full or in part.

The Shareholders’ Meeting may resolve to distribute sums from available reserves by specifically detailing the reserve line items from which the proceeds shall be distributed.

The terms of payment of dividends are determined by the Shareholders’ Meeting, or upon failing such determination, by the Management Board. Dividends must be paid in no event later than nine months following the end of the fiscal year, unless the period is extended by court order.

The General Shareholders’ Meeting has the right to grant each shareholder the option, with respect to all or part of the dividend or interim dividends distributed, to choose between the payment of dividends in cash, in shares or payment in kind.

Dividends remaining unclaimed for a period of five years after the declaration date are no longer distributable under applicable statutes of limitation.

2.1.6. Description of Provisions Having an Effect of Delaying, Deferring or Preventing a Change in Control

The by-laws do not contain any provision that would have the effect of delaying, deferring or preventing a change in control of the Company.

2.1.7. Provision Governing the Ownership Threshold Above Which Shareholder Ownership Must be Disclosed

Pursuant to the provisions of Article 5 of the by-laws, the Company at any time, in accordance with applicable law and regulations, may request from the relevant central depository for financial instruments, to provide information relating to shares of the Company conferring a voting right at Shareholders’ Meetings, whether or not immediately.

Failure by shareholders or intermediaries to comply with the above requirements may lead to the suspension or suppression of dividends and/or voting rights, as permitted by law.

Any person, acting alone or in concert, who directly or indirectly becomes the holder of a fraction of the capital, voting rights or securities giving access to the share capital of the Company, equivalent to or in excess of 0.5% or a multiple of this fraction, shall send a notice to the Company, by registered letter with acknowledgment of receipt, within fifteen days of exceeding any

2005 Annual Report — Vivendi Universal 57

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

of these thresholds, of the total number of shares, voting rights or securities giving access to the share capital of the Company, which such person directly or indirectly holds, whether alone or in concert.

Failure to comply with this notification requirement is subject to penalties in accordance with applicable law, upon the request, recorded in the minutes of the Shareholders’ Meeting, of one or more shareholders holding at least 0.5% of the Company’s share capital.

Any person, acting alone or in concert, shall inform the Company, within fifteen days, if the percentage of share capital or voting rights

which it holds falls below any of the above-mentioned thresholds in the sub-paragraph of this paragraph 3.

2.1.8.

Description of the Conditions Governing Changes in the Share Capital, Where Such Conditions are More Stringent Than Required by Law

None.

2.2. Share Capital

2.2.1. Amount of Issued Capital

As at December 31, 2005, the Company’s share capital was €6,344,125,265.50, divided into 1,153,477,321 shares, with a nominal value of €5.50.

All shares may be held in registered or bearer form and are freely negotiable. The shares are traded on the compartment A of Eurolist, Euronext Paris S.A. (ISIN Code: FR0000127771).

2.2.2. Shares not Representing Capital

None.

2.2.3. Amount of Non-issued Capital

List of delegated powers and authorizations approved by the Combined Shareholder’s Meeting held on April 28, 2005 and submitted for approval at the Combined Shareholder’s Meeting to be held on April 20, 2006:

Issue of securities with preferential subscription rights

Nature of transaction

Source (resolution

Term of the

Maximum amount

Maximum nominal

number)

authorization

of issue based on a

increase in the share

and expiry date

share price of € 24

capital (in euros)

1 billion (a) (c)

Share capital increase (ordinary shares

26 months

representing 16.5% of the current

and other securities giving rights to capital)

7^th-2005

(June 2007)

4.363 billion

share capital

Share capital increase by incorporation

26 months

of reserves

10^th-2005

(June 2007)

2.181 billion

500 million (b)

Issues of securities without preferential subscription rights

Nature of transaction

Source (resolution

Term of the

Maximum amount

Maximum nominal

number)

authorization

of issue

increase in the share

and expiry date

capital (in euros)

Capital increase (ordinary shares and

26 months

other securities giving rights to capital)

8^th-2005

(June 2007)

2.181 billion

500 million (b) (c)

58 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

Capital increase for the benefit of employees

Nature of transaction

Source

Term of the authorization

(resolution number)

and expiry date

Characteristics

Capital increase for employee members of the Group Savings Plan

11^th-2005

26 months

Maximum of 1.5%

(June 2007)

of the share capital on

the date of the Management

Board’s decision (b)(d)

Stock options (subscription options only)

12^th-2005

36 months

Maximum of 2.5%

Exercise price fixed without discount

(April 2008)

of the share capital on the

date of the Management

Board’s decision (b) (e)

Granting of existing or future free restricted stocks

13^th-2005

36 months

Maximum of 0.5%

(April 2008)

of the share capital on

the date of granting (f)

Share repurchase program

Concerned securities

Source (resolution

Term of the authorization

number)

and expiry date

Characteristics

18 months

Statutory limit

30^th-2005

(October 2006)

Maximum purchase price: €40 (g)

18 months

Statutory limit

Shares repurchases

10^th-2006

(October 2007)

Maximum purchase price: €35

24 months

14^th-2005

(April 2007)

10% of the share capital

24 months

Cancellation of shares

11^th-2006

(April 2008)

10% of the share capital


(a)		Global amount for capital increases, all transactions included.

(b)		This amount shall be counted against the maximum aggregate amount of €1 billion, as authorized in the seventh resolution.

(c)		Amount likely to be increased up to the limit of 15%, in the event of supplementary subscription requests (ninth resolution - 2005).

(d)		Implemented up to 0.22%.

(e)		Implemented up to 0.003%.

(f)		Not implemented.

(g)		Implemented up to 0.29%.

2.2.4. Shares Held by the Company

2.2.4.1. ASSESSMENT OF THE PREVIOUS SHARE REPURCHASE PROGRAM

The Ordinary Shareholders’ Meeting held on May 6, 2004 had authorized the Board of Directors by virtue of its sixteenth resolution to implement a share repurchase program. This authorization was implemented on January 24, 2005 pursuant to delegations of the Board of Directors dated June 29th and December 7, 2004. The share repurchase program prospectus established pursuant to this authorization received the approval or visa of the Autorité des Marchés Financiers (AMF) on January 21, 2005 under the reference number 05-032.

On December 31, 2004, Vivendi Universal held 561,968 of its own shares. From January until April 2005, Vivendi Universal repurchased 2,145,020 shares directly on the market at an average price of €23.95 in connection with the hedging of stock option plans. During the year 2005, no other repurchases (other than in connection with the liquidity agreement) were carried out. In 2005, Vivendi Universal transferred 721,047 shares at an average price of €15.85 pursuant to the exercise of stock options. The Company did not proceed to the cancellation of any shares acquired under this repurchase program.

2.2.4.2. CURRENT SHARE REPURCHASE PROGRAM

A share repurchase program was implemented on December 21, 2005 pursuant to a delegation of the Management Board, dated

2005 Annual Report — Vivendi Universal 59

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

October 5, 2005, by virtue of the thirtieth resolution of the Combined Shareholders’ Meeting, dated April 28, 2005.

A description of this share repurchase program was posted on the AMF’s website (www.amf-france.org) and on the Company’s website (www.vivendiuniversal.com) on December 20, 2005. A summary of this program was published in the French daily newspaper La Tribune on December 21, 2005.

The Combined Shareholders’ Meeting held on April 28, 2005 authorized the Company to purchase its own shares in an amount of up to 10% of its share capital, with a maximum repurchase price per share of €40. On October 5, 2005, the Management Board resolved to reduce this percentage to 0.14%, representing 1.6 million shares, for direct repurchases (other than repurchases in connection with the liquidity agreement) and to reduce the maximum repurchase price per share to €32.

The purposes of this share purchase program are presented below, in descending order: the retention and delivery of shares for payment or exchange in relations to external growth transactions, the hedging of stock option plans and the market making of the shares in the secondary market pursuant to a liquidity agreement established in conformity with the professional code of ethics of the AFEI, the French Association of Investment Firms. The duration of this program is 18 months from the Combined Shareholders’ Meeting of April 28, 2005 and it will expire on October 27, 2006.

As at December 20, 2005, Vivendi Universal held 2,000,941 of its own shares, of which 1,983,500 were for hedging stock option plans, 2,441 shares were recorded as other investment securities and the remaining 15,000 shares were recorded in the liquidity account for the liquidity agreement.

Between December 21^st and December 23, 2005, Vivendi Universal repurchased 1,200,000 of its own shares on the open market at an average price per share of €26.38. These shares were repurchased in order to be delivered subsequently in relations to external growth transactions. As at the date of this document, no other direct purchases have been made on the stock market since December 23, 2005.

On December 28, 2005, Vivendi Universal sold 903,499 of its own shares to its subsidiary VUG Acquisition Corp. by means of an investment service agreement entered into with BNP Paribas, for a share price of €26.70 equal to the closing price of December 27, 2005. This sale was made in connection with the acquisition by VUG Acquisition Corp. of a 100% stake in RPO Acquisition Co., which owns High Moon, a studio developing video games.

In addition, between December 20, 2005 and December 31, 2005, Vivendi Universal did not transfer or sell any other shares.

The Company did not proceed to the cancellation of any shares acquired under this repurchase program.

2.2.4.3.

TOTAL GROSS FLOWS OF PURCHASES AND SALES/ TRANSFERS FROM JANUARY 1, 2005 TO DECEMBER 31, 2005 (EXCLUDING THE LIQUIDITY AGREEMENT)


	Purchases		Transfers/Sales

Number of securities		3,345,020		1,624,546
Average price per share (in euros)		24.82		21.89
Total value (in euros)		83,038,987		35,554,678

2.2.4.4. LIQUIDITY AGREEMENT

On January 3, 2005, Vivendi Universal entered into a liquidity agreement with Rothschild & Cie Banque, established in conformity with the professional code of ethics of the AFEI. The term of this agreement is one year renewable by tacit agreement. Vivendi Universal allocated €76 million to implement this agreement.

In 2005, 8,342,326 shares were repurchased for a value of €211,532,441.70, and a total number of 8,142,326 shares were sold for a value of €208,367,823.60 pursuant to the implementation of this liquidity agreement.

In connection with this liquidity agreement, as at December 31, 2005, the following resources were held in the liquidity account of the Company: 200,000 shares and €74,130,756. In 2005, the Company recognized capital gains in the amount of €2,129,381.90 pursuant to this liquidity agreement.

2.2.4.5. TREASURY SHARES

Position as at December 31, 2005

As at December 31, 2005, Vivendi Universal held 2,482,442 of its own shares having each a nominal value of €5.50, representing 0.22 % of the share capital of the Company, including 1,983,500 shares for the hedging of stock option plans, 296,501 shares for external growth transactions and 2,441 shares which were recorded as other investment securities. Vivendi Universal has allocated the remaining 200,000 shares to the liquidity agreement. As at December 31, 2005, the book value of shares held by the Company amounted to €60,639,950.61, representing a market value of €65,685,415.32.

For the year 2005, the Company incurred costs relating to the purchase and transfer/sale transactions as well as the management fee for the liquidity agreement in the amount of €771,272.80.

2.2.4.6. CROSS-SHAREHOLDING

As at December 31, 2005, the subsidiaries of Vivendi Universal held 16,506 shares representing less than 0.001% of the share capital of the Company.

60 2005 Annual Report — Vivendi Universal

Information Concerning the Company – Corporate Governance 3

Additional Information Concerning the Company

2.2.4.7. OPEN POSITIONS ON DERIVATIVE FINANCIAL INSTRUMENTS (AS OF DECEMBER 31, 2005)

The following table is a summary of the call options purchased by the Company in order to hedge the stock option plans allocated to employees of the Group. These options have characteristics identical to those of these plans.


	Name of
Transaction	the inter-	Number of		Expiry		Exercise
date	mediary	options		date		price		Premium

	BNP
06/28/2001	Paribas		926,853		05/23/2008	€	111.44	€	2.00
	BNP
06/28/2001	Paribas		926,853		05/23/2008	€	111.44	€	2.00
	BNP
06/28/2001	Paribas		926,854		05/23/2008	€	111.44	€	4.69
	BNP
06/28/2001	Paribas		1,038,000		11/23/2008	€	83.74	€	7.40
	BNP
06/28/2001	Paribas		1,038,000		11/23/2008	€	83.74	€	7.40
	BNP
06/28/2001	Paribas		1,038,000		11/23/2008	€	83.74	€	11.49
	BNP
06/28/2001	Paribas		1,834,867		12/11/2008	€	78.64	€	9.00
	BNP
06/28/2001	Paribas		1,834,867		12/11/2008	€	78.64	€	9.00
	BNP
06/28/2001	Paribas		1,834,867		12/11/2008	€	78.64	€	13.17
	BNP
06/28/2001	Paribas		3,700,000		12/11/2008	€	78.64	€	13.17
	BNP
06/28/2001	Paribas		1,791,659		12/11/2008	US$	67.85	€	9.96
	BNP
06/28/2001	Paribas		1,791,659		12/11/2008	US$	67.85	€	9.96
	BNP
06/28/2001	Paribas		1,791,660		12/11/2008	US$	67,85	€	14.76
	BNP
06/28/2001	Paribas		1,500,000		12/11/2008	US$	67.85	€	14.76
	Société
12/18/2002	Générale		2,182,107		07/03/2006	€	49.13	€	2.34
	Société
12/18/2002	Générale		43,881		01/22/2007	€	59.64	€	2.33
	Société
12/18/2002	Générale		3,317,639		04/08/2007	€	63.21	€	2.23
	Société
12/18/2002	Générale		15,424		09/10/2007	€	60.10	€	2.83
	Société
12/18/2002	Générale		2,274,293		11/25/2007	€	60.88	€	3.08
	Société
12/18/2002	Générale		3,426		03/10/2008	€	103.42	€	1.94
	Société
12/18/2002	Générale		13,710		11/23/2008	€	81.43	€	9.35

2.2.5. Convertible, Exchangeable Securities or Securities with Warrants

2.2.5.1. CONVERTIBLE BONDS INTO NEW SHARES OR EXCHANGEABLE INTO EXISTING SHARES (OCEANEs)

There are no outstanding OCEANEs.

2.2.5.2. BONDS MANDATORILY REDEEMABLE IN SHARES (ORAs)

On November 19, 2002, bonds mandatorily redeemable in shares (ORAs) were issued for a nominal amount of €999.99 million, bearing interest at the annual rate of 8.25%, for a three-year term, from the date of clearance or settlement, or November 25, 2005. This bond issue is comprised of 78,678,206 ORAs, having a nominal value of €12.71 per unit.

These ORAs are listed on the Compartment A, Eurolist, Euronext Paris SA (ISIN Code: FR0000188831).

On the final maturity date of November 25, 2005, 78,669,500 ORAs remained outstanding, which resulted in the issuance of 78,669,500 new shares.

2.2.5.3. WARRANTS (BSAs)

There are no outstanding BSAs.

2.2.6. Stock Option Plans

2.2.6.1. GRANTING CRITERIA

The granting of purchase and subscription options depends on three factors, including the degree of responsibility, performance and the identification of the executives with great potential or having performed significant operations.

Stock Subscription Plans

The plans granted in 2002 and January 2003 have an eight-year term. Each of the plans granted in May 2003, December 2003, May 2004, April 2005 and June 2005 have a ten-year term. The ex-Pathé 1997 plan expired in 2005.

Since its creation in December 2000, Vivendi Universal has set up seven stock option plans (subscription options) in 2002, 2003, 2004 and 2005, under which a total of 35,982,900 options have been granted since 2000, representing 3.12% of Vivendi Universal share capital as at December 31, 2005:

•

3,619,300 options, representing 0.33% of the share capital, were granted on October 10, 2002 to 51 beneficiaries at an exercise price of €12.10 for Vivendi Universal shares or $11.79 for ADSs,

•

1,660,000 options, representing 0.16% of the share capital, were granted on January 29, 2003 to 35 beneficiaries at an exercise price of €15.90 for Vivendi Universal shares or $16.85 for ADSs,

2005 Annual Report — Vivendi Universal 61

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

•

11,299,000 options, representing 1.06% of the share capital, were granted on May 28, 2003 to 489 beneficiaries at an exercise price, without discount, of €14.40 for Vivendi Universal shares or $16.44 for ADSs,

•

1,015,000 options, representing 0.09% of the share capital, were granted on December 9, 2003 to 80 beneficiaries at an exercise price, without discount, of €19.07 for Vivendi Universal shares or $22.59 for ADSs,

•

9,279,600 options, representing 0.87% of the share capital, were granted on May 21, 2004 to 563 beneficiaries at an exercise price, without discount, of €20.67 for Vivendi Universal shares or $24.61 for ADSs,

•

9,071,000 options, representing 0.85% of the share capital, were granted on April 26, 2005 to 656 beneficiaries at an exercise price, without discount, of €23.64 for Vivendi Universal shares or $30.63 for ADSs,

•

39,000 options, representing 0.004% of the share capital, were granted on, June 28, 2005 to four beneficiaries at an exercise price, without discount, of $30.63 for ADSs.

As at December 31, 2005, under all the stock option plans adopted since 1998, a total of 33,684,358 options were outstanding (after deduction of the numbers of stock options exercised or cancelled pursuant to the expiration of certain plans and the departure of certain beneficiaries holding them), representing a maximum nominal increase in the share capital of 185,263,969, representing a potential dilution percentage of 2.92%.

Stock Purchase Plans

The September 1997 plan, the ex-Canal+ plans of June 1999 and September 1999 expired in 2005.

Since its incorporation in December 2000, Vivendi Universal has set up three stock purchase plans, each having an eight-year term:

•

10,886,898 options, representing 1% of the share capital, were granted on December 11, 2000 to 3,681 beneficiaries at an exercise price, without discount, of €78.64 for Vivendi Universal shares or $67.85 for ADSs,

•

5,200,000 options (SO IV plan), representing 0.48% of the share capital, were granted on December 11, 2000 to 91 beneficiaries at an exercise price of €76.47 for Vivendi Universal shares or $65.74 for ADSs and subject to the over-performance of Vivendi Universal’s stock price vis-à-vis the combined index, comprised of 60% MSCI and 40% Stoxx Media,

•

13,333,627 options, representing 1.23% of the share capital, were granted on October 10, 2001 to 2,816 beneficiaries at an exercise price, without discount of €48.20 for Vivendi Universal shares or $44.25 for ADSs.

2.2.6.2. PLAN CHARACTERISTICS

Except for the SO 10 and SO 100 plans, each dated November 25, 1999 and for plans assumed in connection with the combined transactions (refer below), the main characteristics of the option plans are as follows:

Standard Option Plans

The options shall vest annually in 1/3 parts over three-year periods. The options are exercisable, in one or more phases, two years after the grant in the proportion of 2/3 of the total grant and up to 100% three years after the grant. Shares obtained upon exercise of the options are freely tradeable upon the expiration of the beneficial holding period applicable to beneficiaries who are French tax residents (currently a four-year period).

SO III (over-performance options)

The options granted under SO III vest and become exercisable after a five-year period beginning May 11, 1999 and remain exercisable until the expiration of the eight-year term of the plan. The number of options that can be exercised will be determined upon the performance of Vivendi Universal’s stock price vis-à-vis a benchmark price index composed of a basket of indexes, which includes 55% Media, 35% Telecoms and 10% Utilities.

SO IV (over-performance options)

The options granted under SO IV vest and become exercisable after a six-year period following the date of grant (December 11, 2000) and remain exercisable until the expiration of the eight-year term of the plan; provided, however, that the vesting of such options will be accelerated based on the performance of Vivendi Universal’s stock price vis-à-vis the movement of the combined index, comprised of 60% MSCI and 40% Stoxx Media, as follows:

•		if, after a three-year period, the performance of Vivendi Universal’s stock price exceeds the index performance by 9% or more,

•		if, after a four-year period, the performance of Vivendi Universal’s stock price exceeds the index performance by 12% or more, or

•		if, after a five-year period, the performance of Vivendi Universal’s stock price exceeds the index performance by 15% or more.

In addition, following each of the third, fourth and fifth anniversaries of the date of grant, the vesting of such options will be accelerated after each quarter if the performance of Vivendi Universal’s stock price exceeds the index performance by the percentage required for the period examined, increased by 0.75% per quarter (x% + 0.75% per quarter).

In the event of a tender offer, the options will vest and become immediately exercisable. In addition, the underlying shares will be freely transferable.

62 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

2.2.6.3. DETAILED INFORMATION ON STOCK OPTION PLANS

Stock Purchase Plans


Date of the		Date of		Grant		Number of options granted								Vesting		Expiration		Exercise		Number of options
Shareholders’ Meeting		meetings		date		Total number				of which: number				date for		date		price		Exercised	Cancelled		Outs-
		of the								of options granted				exercise of				adjusted		in 2005	in 2005		tanding as
		Board of								to members of				options				(a)		(adjusted	(adjusted		at December
		Directors								governing bodies										number)	number)		31, 2005
																				(a)	(a)		(adjusted
						of bene-		of		Number		Number											number)
						ficiaries		options		of bene-		of											(a)
										ficiaries		options

SO II	06/11/1997		09/17/1997		09/17/1997		290		1,260,960		20		494,480		09/18/1999		09/17/2005	€	30.06			966,384		0
	05/15/1998		07/03/1998		07/03/1998		648		2,192,760		13		598,857		07/04/2000		07/03/2006	€	49.13			21,946		2,158,111
	05/15/1998		01/22/1999		01/22/1999		13		42,672						01/23/2001		01/22/2007	€	59.64					43,887
	05/15/1998		04/08/1999		04/08/1999		818		3,302,569		11		1,068,015		04/09/2001		04/08/2007	€	63.21			17,877		3,296,676
SO III	05/15/1998		05/11/1999		05/11/1999		53		5,729,237		10		2,392,259		05/12/2004		05/11/2007	€	71.00			62,676		5,734,782
	05/15/1998		09/10/1999		09/10/1999		2		15,000						09/11/2001		09/10/2007	€	60.10					15,425
	05/15/1998		11/25/1999		11/25/1999		3		9,000						11/26/2001		11/25/2007	€	60.88					9,256
SO 10	05/15/1998		11/25/1999		11/25/1999		189,207		1,919,520		10		1,100		11/26/2002		11/25/2007	€	60.88					2,108,963
et 100	05/15/1998		11/25/1999		11/25/1999		28,362		283,620						11/26/2002		11/25/2007	$	61.83					311,982
ex Canal+	05/28/1998		06/08/1999		06/08/1999		3		27,600						06/08/2000		06/08/2005	€	60.68			26,327		0
	05/28/1998		09/22/1999		09/22/1999		2		47,000						09/23/2000		09/22/2005	€	60.88			48,328		0
	05/15/1998		03/10/2000		03/10/2000		2		5,000						03/11/2002		03/10/2008	€	103.42					5,142
	05/15/1998		05/23/2000		05/23/2000		1,047		2,783,560		12		914,000		05/24/2002		05/23/2008	€	108.37			3,431		2,624,142
	09/21/2000		11/23/2000		11/23/2000		1		20,000						11/24/2002		11/23/2008	€	81.43					20,568
	09/21/2000		11/23/2000		11/23/2000		511		3,114,000						11/24/2002		11/23/2008	€	81.43			14,399		2,726,474
	09/21/2000		12/11/2000		12/11/2000		1,988		5,508,201		12		1,489,771		12/12/2002		12/11/2008	€	76.47			30,875		4,456,547
	09/21/2000		12/11/2000		12/11/2000		1,693		5,378,697		2		1,605,400		12/12/2002		12/11/2008	$	65.74			10,399		4,584,544
SO IV	09/21/2000		12/11/2000		12/11/2000		65		3,700,000		12		1,925,000		12/12/2006		12/11/2008	€	76.47			25,710		2,416,713
	09/21/2000		12/11/2000		12/11/2000		26		1,500,000		3		700,000		12/12/2006		12/11/2008	$	65.74					1,264,329
	09/21/2000		03/09/2001		03/09/2001		1		2,000						03/10/2003		03/09/2009	€	67.83					1,368
	09/21/2000		03/09/2001		03/09/2001		2		127,500						03/10/2003		03/09/2009	$	63.75					7,740
	09/21/2000		04/24/2001		04/24/2001		2		11,000						04/25/2003		04/24/2009	€	73.42					11,312
	09/21/2000		09/25/2001		10/10/2001		1,545		6,999,322		14		1,553,157		10/11/2003		10/10/2009	€	46.87			65,479		6,020,617
	09/21/2000		09/25/2001		10/10/2001		1,271		6,334,305		6		1,653,265		10/11/2003		10/10/2009	$	42.88			14,811		4,601,552
	11/13/2000		09/25/2001		10/10/2001		41		304,959		3		62,254		10/11/2003		10/10/2009	€	46.87					295,061
	04/17/2000		09/25/2001		10/10/2001		361		917,995		2		32,080		10/11/2003		10/10/2009	€	46.87			37,417		694,605
	04/17/2000		09/25/2001		10/10/2001		15		75,712						10/11/2003		10/10/2009	$	42.88					58,576
	04/17/2000		09/25/2001		10/10/2001		33		586,950		2		54,180		10/11/2003		10/10/2009	€	57.18					485,947
	04/17/2000		09/25/2001		10/10/2001		4		78,260						10/11/2003		10/10/2009	$	52.31					59,029
	09/21/2000		01/24/2002		01/24/2002		46		56,392						01/25/2004		01/24/2010	€	53.38					36,424
	09/21/2000		01/24/2002		01/24/2002		1		200,000						01/01/2007		01/24/2010	€	53.38					205,668
	09/21/2000		01/24/2002		01/24/2002		4		1,200,000		1		150,000		01/25/2003		01/24/2010	$	45.64					1,186,789
	09/21/2000		03/05/2002		03/20/2002		1		200,000						03/21/2004		03/20/2010	$	37.98					206,424
	09/21/2000		04/24/2002		04/24/2002		2		404,000						04/25/2003		04/24/2010	€	37.83					4,114
	09/21/2000		04/24/2002		04/24/2002		2		200,000						04/25/2004		04/24/2010	$	33.26					206,435
	09/21/2000		05/29/2002		05/29/2002		1		75,000						05/30/2004		05/29/2010	€	33.75					75,000
	09/21/2000		05/29/2002		05/29/2002		1		20,000						05/30/2004		05/29/2010	$	31.62					20,000
																		Total				1,346,059		45,954,202


(a)		Adjustment subsequent to the payment of the 2001 fiscal year dividend taken from available reserves.

2005 Annual Report — Vivendi Universal 63

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

Stock Subscription Plans


Date of													Vesting		Expiration		Exercise
the meeting	Date of the		Grant date		Number of options granted								date for		date		price			Number of options
	meeting of				Total number				of which: number of options				exercise of							Exercised		Cancelled		Outstanding
	the Board								granted to members				options							in 2005		in 2005		as at
	of Directors								of governing bodies															December 31,
	or of the				of		of		Number		Number													2005
	Management				benefi-		options		of benefi-		of options
	Board				ciaries				ciaries

06/21/1996(a)		09/10/1997		09/10/1997		13		111,150						09/11/1999		09/10/2005	€	36.63	(b)				114,312		0
04/28/1998(a)		12/10/1998		12/10/1998		45		285,840						12/11/2000		12/10/2006	€	36.37	(b)						289,610	(b)
09/21/2000		09/25/2002		10/10/2002		13		2,451,000		6		1,800,000		10/11/2004		10/10/2010	€	12.10			149,000				2,302,000
09/21/2000		09/25/2002		10/10/2002		38		1,168,300		1		100,000		10/11/2004		10/10/2010	$	11.79			176,667				675,201
09/21/2000		01/29/2003		01/29/2003		34		1,610,000		8		1,175,000		01/30/2005		01/29/2011	€	15.90			10,000				1,583,333
09/21/2000		01/29/2003		01/29/2003		1		50,000		1		50,000		01/30/2005		01/29/2011	$	16.85							50,000
04/29/2003		05/28/2003		05/28/2003		414		10,547,000		9		3,000,000		05/29/2005		05/28/2013	€	14.40			306,656		295,516		9,800,325
04/29/2003		05/28/2003		05/28/2003		75		752,000		1		180,000		05/29/2005		05/28/2013	$	16.44			53,832		10,168		662,000
04/29/2003		12/09/2003		12/09/2003		29		310,000		0		0		12/10/2005		12/09/2013	€	19.07					53,334		256,666
04/29/2003		12/09/2003		12/09/2003		51		705,000		0		0		12/10/2005		12/09/2013	$	22.59			13,531		133,336		443,133
04/29/2003		05/06/2004		05/21/2004		425		8,267,200		8		2,320,000		05/22/2006		05/21/2014	€	20.67					330,841		7,851,159
04/29/2003		05/06/2004		05/21/2004		138		1,012,400		0		0		05/22/2006		05/21/2014	$	24.61					109,469		835,431
04/29/2003		03/09/2005		04/26/2005		472		7,284,600		11		2,595,000		04/27/2007		04/26/2015	€	23.64					116,500		7,168,100
04/29/2003		03/09/2005		04/26/2005		184		1,786,400		1		125,000		04/27/2007		04/26/2015	$	30.63					58,000		1,728,400
04/28/2005		06/28/2005		06/28/2005		4		39,000		0		0		06/29/2007		06/28/2015	$	30.63							39,000
																	Total				709,686		1,221,476		33,684,358


(a)		Formerly Pathé.

(b)		Adjustment subsequent to the payment of the 2001 fiscal year dividend taken from available reserves.

64 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

Stock Subscription Plans — ADS (ex-Seagram)


Date of	Number of options granted								Vesting		Expiration		Exercise		Number of options
the opening	Total number				Of which: number of options				date for		date		price		Exercised	Cancelled		Outstanding
of the plan					granted to members				exercise				(in US $)		in 2005	in 2005		as at
					of governing bodies.				of options				Adjusted		(adjusted	(adjusted		December 31,
													price (a)		number) (a)	number)		2005
	of bene-		of options		Number of		Number of									(a)		(adjusted
	ficiaries				beneficiaries		options											number)
																		(a)

03/15/1995		3,434		1,241,588		1		64,000		03/16/1996		03/15/2005		36.41			1,169,697		0
05/01/1995		2		77,840		1		77,840		05/02/1996		05/01/2005		32.62			69,921		0
05/31/1995		2		280,000						06/01/1996		05/31/2005		35.96			288,955		0
08/01/1995		1		800,000						08/02/1996		08/01/2005		43.45			825,592		0
02/14/1996		4		632,000		1		600,000		02/15/1997		02/14/2006		44.59					644,013
02/14/1996		1		200,000		1		200,000		02/15/1997		02/14/2006		59.30					206,408
03/04/1996		1		12,000						03/05/1997		03/04/2006		42.31					12,386
03/14/1996		134		537,712		2		104,000		03/15/1997		03/14/2006		40.42			12,635		473,242
09/10/1996		89		138,604						09/11/1997		09/10/2006		41.34			22,720		76,863
05/05/1997		32		112,040						05/06/1998		05/05/2007		47.85			8,009		46,967
02/09/1998		5		52,747						02/10/1999		02/09/2008		45.23					54,440
02/06/1995		4		19,219						02/07/1996		02/06/2005		32.50			13,436		0
03/14/1996		423		1,038,746						03/15/1997		03/14/2006		40.42			5,864		971,063
05/05/1997		756		2,611,606		3		144,000		05/06/1998		05/05/2007		47.85			46,333		2,164,112
06/25/1997		3		13,333						06/26/1998		06/25/2007		48.84					8,258
08/18/1997		20		12,106						08/19/1998		08/18/2007		42.28					6,263
01/19/1998		18		53,195						01/20/1999		01/19/2008		37.28			46,591		640
02/09/1998		1		1,860						02/10/1999		02/09/2008		37.28					1,920
02/09/1998		850		3,748,655		3		224,000		02/10/1999		02/09/2008		45.23			61,340		2,420,012
07/01/1998		2		80,000						07/02/1999		07/01/2008		49.62					41,282
08/12/1998		1		16,000						08/13/1999		08/12/2008		40.50					8,257
10/01/1998		1		80,000						10/02/1999		10/01/2008		33.84					82,553
11/09/1998		3		2,200,000		2		2,000,000		11/10/1999		11/09/2008		43.45					2,229,099
11/16/1998		1		80,000						11/17/1999		11/16/2008		41.75					82,568
12/07/1998		1		2,000						12/08/1999		12/07/2008		44.10					826
02/17/1999		819		3,520,994		2		124,000		02/18/2000		02/17/2009		58.02			61,494		2,711,992
04/05/1999		1		56,000						04/06/2000		04/05/2009		63.70					57,794
05/11/1999		421		1,441,553		1		80,000		05/12/2000		05/11/2009		71.88			66,429		927,963
06/18/1999		2		72,000						06/19/2000		06/18/2009		61.01					33,030
11/03/1999		1		428,000						11/04/2000		11/03/2009		57.04					28,899
01/04/2000		1		120,000						01/05/2001		01/04/2010		54.88					123,849
02/15/2000		1		1,600						02/16/2001		02/15/2010		67.45					1,652
02/15/2000		1,490		5,979,780		3		780,000		02/16/2001		02/15/2010		74.41			174,908		4,797,814
03/27/2000		1		6,400						03/28/2001		03/27/2010		74.04					6,605
04/03/2000		1		8,000						04/04/2001		04/03/2010		72.29					8,257
04/05/2000		1		48,000						04/06/2001		04/05/2010		68.54					49,541
05/02/2000		1		225,200						05/03/2001		05/02/2010		65.03					146,956
06/22/2000		2		380,000						06/23/2001		06/22/2010		71.92					61,919
08/16/2000		12		491,360						08/17/2001		08/16/2010		68.66					505,044
													Total				2,873,924		18,992,487


(a)		Adjustment subsequent to the payment of the 2001 fiscal year dividend taken from available reserves.

2005 Annual Report — Vivendi Universal 65

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

Stock Purchase Plans – ADS (ex-MP3)


Date of the	Number of options granted				Vesting date		Expiration		Exercise price		Number of options
opening of	Total number				for exercise		date		(in US $)		Exercised in		Cancelled in		Outstanding as
the plan and	of bene-		of options		of options				Adjusted		2005 (adjusted		2005 (adjusted		at December 31,
date of the	ficiaries								price (a)		number) (a)		number) (a)		2005 (adjusted
Board of															number) (a)
Directors

03/26/1999		4		9,180		03/26/2000		03/26/2009		3.58		5,095				0
07/20/1999		23		22,021		07/20/2000		07/20/2009		150.06				420		5,598
07/20/1999		46		19,344		07/20/2000		07/20/2009		300.11				490		0
08/23/1999		13		1,501		08/23/2000		08/23/2009		333.61				14		0
09/06/1999		9		727		09/06/2000		09/16/2009		373.81				196		0
09/27/1999		9		1,082		09/27/2000		09/27/2009		477.64				186		0
10/18/1999		33		958		10/18/2000		10/18/2009		426.05				14		14
11/01/1999		34		11,105		11/01/2000		11/01/2009		519.84				140		0
12/20/1999		75		25,383		12/20/2000		12/20/2009		338.30				93		2,276
12/20/1999		28		47,526		12/20/2000		12/20/2009		338.30						2,388
01/03/2000		1		723		01/03/2001		01/03/2010		365.10				747		0
01/10/2000		1		90		01/10/2001		01/10/2010		326.91				93		0
03/13/2000		6		920		03/13/2001		03/13/2010		248.53				186		0
07/03/2000		200		32,229		07/03/2001		07/03/2010		145.37				601		266
07/03/2000		54		95,432		07/03/2001		07/03/2010		145.37						700
07/30/2000		1		1,550		07/30/2001		07/30/2010		145.37						1,600
07/31/2000		3		537		07/31/2001		07/31/2010		105.85				42		0
08/07/2000		5		5,915		08/07/2001		08/07/2010		95.8						2,799
09/25/2000		3		367		09/25/2001		09/25/2010		42.21						147
10/30/2000		309		363,562		10/30/2001		10/30/2010		37.85				2,448		11,263
11/13/2000		3		1,762		11/13/2001		11/13/2010		37.52						93
11/30/2000		1		6,780		11/30/2001		11/30/2010		64.31				6,998		0
12/26/2000		1		1,808		12/26/2001		12/26/2010		36.17				1,866		0
01/09/2001		2		3,267		01/09/2002		01/09/2011		36.17						3,373
01/09/2001		2		5,771		01/09/2002		01/09/2011		36.17						5,957
02/12/2001		2		13,560		02/12/002		02/12/2011		45.55				6,998		0
04/24/2000		6		2,981		04/24/2001		04/24/2010		113.21				1,167		0
05/01/2000		221		50,900		05/01/2001		05/01/2010		75.03				427		934
09/11/2000		1		1,808		09/11/2001		09/11/2010		60.63						1,866
10/30/2000		1		1,356		10/30/2001		10/30/2010		37.52						1,400
									Total					23,126		40,674


(a)		Adjustment subsequent to the payment of the 2001 fiscal year dividend taken from available reserves.

66 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

Stock Purchase Plans – ADS (ex-USA Networks)


Date of the	Total number		Vesting date for		Expiration		Exercise price
opening of the	of beneficiaries		exercise		date		(in US $)		Number of options
plan and date			of options				Adjusted price on		Exercised in 2005		Cancelled in 2005		Outstanding as
of the Board							05/13/2002 (a)		(adjusted number)		(adjusted number)		at December 31,
of Directors									(a)		(a)		2005 (adjusted
													number) (a)

12/18/2000		62		12/18/2001		12/18/2010		13.7960		8,102				21,942
12/18/2000		175		12/18/2001		12/18/2010		19.0205		177,220				320,597
03/12/2001		3		03/12/2002		03/12/2011		23.8713						55,081
05/30/2001		1		05/30/2002		05/30/2011		25.7248						24,481
07/16/2001		1		07/16/2002		07/16/2011		19.0460						10,000
07/16/2001		1		07/16/2002		07/16/2011		25.7963				19,585		0
07/26/2001		2		07/26/2002		07/26/2011		27.5220				1,958		0
08/06/2001		1		08/06/2002		08/06/2011		27.5732						19,585
09/24/2001		1		09/24/2002		09/24/2011		18.8928						14,689
01/25/2002		1		01/25/2003		01/25/2012		19.6293		295,318				1
01/25/2002		1		01/25/2003		01/25/2012		27.0626						489,605
03/12/2002		1		03/12/2003		03/12/2012		31.5969						97,921
12/15/1998		17		12/15/1999		12/15/2008		9.0589		10,789				52,090
12/15/1998		98		12/15/1999		12/15/2008		12.7654		27,914				66,026
02/12/1998		7		02/12/1999		02/12/2008		9.3534		7,258				42,375
09/28/1998		1		09/28/1999		09/28/2008		11.6485		1,714				0
07/27/1999		23		07/27/2000		07/27/2009		21.9884						13,220
12/20/1999		243		12/20/2000		12/20/2009		20.6710		54,306		1,080		131,208
12/20/1999		291		12/20/2000		12/20/2009		28.4988		75,212		18,382		240,444
03/29/2000		1		03/29/2001		03/29/2010		17.0830						10,125
03/29/2000		2		03/29/2001		03/29/2010		23.5521						7,345
05/10/2000		5		05/10/2001		05/10/2010		22.1479						22,034
05/18/2000		2		05/18/2001		05/18/2010		21.9565						47,738
08/28/2000		1		08/28/2001		08/28/2010		24.5734						11,017
03/12/2001		1		03/12/2002		03/12/2011		23.8713						3,673
04/25/2001		165		04/25/2002		04/25/2011		16.7033		34,968				122,488
04/25/2001		170		04/25/2002		04/25/2011		23.0288		23,151				106,200
							Total			715,952		41,005		1,929,885


(a)		Adjustment subsequent to the payment of the 2001 fiscal year dividend taken from available reserves.

2.2.7.

Acquisition Rights or Obligations Over Authorized but Non-issued Capital

None.

2.2.8.

Conditional or Unconditional Options or Agreements on any Member of the Group

None.

2005 Annual Report — Vivendi Universal 67

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

2.2.9. Change in Share Capital over the Last Five Years


Transaction	Amount										Successive amounts of share capital
	Meeting date		Nominal value		Share premium			Number of			Total number		in euros
			of shares		per share			shares issued			of shares
Merger of Vivendi-Seagram-Canal+		12/08/2000		€5.50		€30.50	(a)		1,029,666,247			1,080,025,747		5,940,141,608.50
ORAs redemption, warrants conversion, exercise of stock options		12/31/2000		€5.50					782,696			1,080,808,443		5,944,446,436.50
Group Savings Plan 3rd block 2000		01/18/2001		€5.50					343,127			1,081,151,570		5,946,333,635.00
ORAs redemption, warrants conversion, exercise of stock options		04/24/2001		€5.50					25,026,898			1,106,178,468		6,083,981,574.00
Group Savings Plan 1st block 2001		04/26/2001		€5.50		€61.82			350,392			1,106,528,860		6,085,908,730.00
ORAs redemption, warrants conversion, exercise of stock options		06/28/2001		€5.50					11,448,920			1,117,977,780		6,148,877,790.00
Cancellation — reallocation		06/28/2001		€5.50					(10,301,924	)		1,107,675,856		6,092,217,208.00
Cancellation — Treasury shares		06/28/2001		€5.50					(22,000,000	)		1,085,675,856		5,971,217,208.00
Group Savings Plan 2nd block 2001		07/25/2001		€5.50		€53.79			917,745			1,086,593,601		5,976,264,805.50
ORAs redemption, exercise of stock options		09/25/2001		€5.50					3,221,230			1,089,814,831		5,993,981,570.50
Cancellation — reallocation		09/25/2001		€5.50					(3,153,175	)		1,086,661,656		5,976,639,108.00
ORAs redemption, exercise of stock options		11/14/2001		€5.50					3,304,178			1,089,965,834		5,994,812,087.00
Cancellation — reallocation		11/14/2001		€5.50					(3,183,881	)		1,086,781,953		5,977,300,741.50
Cancellation — treasury shares		11/14/2001		€5.50					(1,484,560	)		1,085,297,393		5,969,135,661.50
ORAs redemption, exercise of stock options		12/31/2001		€5.50					530,126			1,085,827,519		5,972,051,354.50
Group Savings Plan 3rd block 2001		01/17/2002		€5.50		€35.56			1,337,609			1,087,165,128		5,979,408,204.00
ORAs redemption, exercise of stock options		01/24/2002		€5.50					737,593			1,087,902,721		5,983,464,965.50
Cancellation — reallocation		01/24/2002		€5.50					(203,560	)		1,087,699,161		5,982,345,385.50
ORAs redemption, exercise of stock options		04/24/2002		€5.50					961,530			1,088,660,691		5,987,633,800.50
Cancellation — reallocation		04/24/2002		€5.50					(351,988	)		1,088,308,703		5,985,697,866.50
ORAs redemption, exercise of stock options		06/25/2002		€5.50					3,455,065			1,091,763,768		6,004,700,724.00
Cancellation — reallocation		06/25/2002		€5.50					(3,450,553	)		1,088,313,215		5,985,722,682.50
ORAs redemption, exercise of stock options		08/13/2002		€5.50					7,195,874			1,095,509,089		6,025,299,989.50
Cancellation — reallocation		08/13/2002		€5.50					(6,890,538	)		1,088,618,551		5,987,402,030.50
Cancellation — treasury shares		12/20/2002		€5.50					(20,469,967	)		1,068,148,584		5,874,817,212.00
Group Savings Plan 2002		01/15/2003		€5.50		€ 4.96			2,402,142			1,070,550,726		5,888,028,993.00
ORAs redemption		01/29/2003		€5.50					455,510			1,071,006,236		5,890,534,298.00
Cancellation — reallocation		01/29/2003		€5.50					(451,562	)		1,070,554,674		5,888,050,707.00
ORAs redemption		07/01/2003		€5.50					209,557			1,070,764,231		5,889,203,270.50
Cancellation — reallocation		07/01/2003		€5.50					(213,505	)		1,070,550,726		5,888,028,993.00
Group Savings Plan 2003		07/24/2003		€5.50		€ 6.73			955,864			1,071,506,590		5,893,286,245.00
ORAs redemption		12/09/2003		€5.50					1,787,700			1,073,294,290		5,903,118,595.00
Redemption of 8.25% ORAs		12/09/2003		€5.50					1,920			1,073,296,210		5,903,129,155.00
Cancellation — reallocation		12/09/2003		€5.50					(1,787,700	)		1,071,508,510		5,893,296,805.00
ORAs redemption		02/03/2004		€5.50					111,300			1,071,619,810		5,893,908,955.00
Redemption of 8.25% ORAs		02/03/2004		€5.50					181			1,071,619,991		5,893,909,950.50
Cancellation — reallocation		02/03/2004		€5.50					(111,300	)		1,071,508,691		5,893,297,800.50
Redemption of 8.25% ORAs		02/29/2004		€5.50					135			1,071,508,826		5,893,298,543.00
ORAs redemption		02/29/2004		€5.50					1,500			1,071,510,326		5,893,306,793.00
ORAs redemption		03/31/2004		€5.50					228,800			1,071,739,126		5,894,565,193.00
ORAs redemption		04/30/2004		€5.50					76,800			1,071,815,926		5,894,987,593.00
ORAs redemption		05/31/2004		€5.50					275,140			1,072,091,066		5,896,500,863.00


(a)		Average bonus including the contribution and merger premiums and the number of shares issued.

68 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company


Transaction	Amount									Successive amounts of share capital
	Meeting date		Nominal value		Share premium		Number of			Total number		in euros
			of shares		per share		shares issued			of shares

Redemption of 8.25% ORAs		06/26/2004		€5.50				2,422			1,072,093,488		5,896,514,184.00
ORAs redemption		06/29/2004		€5.50				20,800			1,072,114,288		5,896,628,584.00
Cancellation — reallocation		06/29/2004		€5.50				(603,040	)		1,071,511,248		5,893,311,864.00
Group Savings Plan 2004		07/27/2004		€5.50		€12.70		831,171			1,072,342,419		5,897,883,304.50
ORAs redemption		07/30/2004		€5.50				216,740			1,072,559,159		5,899,075,374.50
Redemption of 8.25% ORAs		09/30/2004		€5.50				180			1,072,559,339		5,899,076,364.50
Stock options exercise		10/30/2004		€5.50		€6.29		225,764			1,072,785,103		5,900,318,066.50
ORAs redemption		10/30/2004		€5.50				25,560			1,072,810,663		5,900,458,646.50
ORAs redemption		11/30/2004		€5.50				61,100			1,072,871,763		5,900,794,696.50
Stock options exercise		12/30/2004		€5.50		€6.29		56,000			1,072,927,763		5,901,102,696.50
ORAs redemption		12/30/2004		€5.50				139,898			1,073,067,661		5,901,872,135.50
Cancellation — reallocation		12/31/2004		€5.50				(443,298	)		1,072,624,363		5,899,433,966.50
ORAs redemption — stock options exercises		04/28/2005		€5.50				462,582			1,073,086,945		5,901,978,197.50
Cancellation — reallocation		04/28/2005		€5.50				(367,812	)		1,072,719,133		5,899,955,231.50
Group Savings Plan		07/26/2005		€5.50		€13.96		1,399,097			1,074,214,762		5,908,181,191.00
Redemption of 8.25% ORAs		11/29/2005		€5.50				78,669,500			1,153,256,733		6,342,912,031.50
ORAs redemption — stock options exercises		12/05/2005		€5.50				553,252			1,153,340,982		6,343,375,401.00
Cancellation — reallocation		12/05/2005		€5.50				(116,520	)		1,153,224,462		6,342,734,541.00
ORAs redemption — stock options exercises		12/31/2005		€5.50				253,099			1,153,477,561		6,344,126,585.50
Cancellation — reallocation		12/31/2005		€5.50				(240	)		1,153,477,321		6,344,125,265.50

On December 31, 2005, considering:


•		the 23,798,938 December 2000 ORAs, which could result in the issuance of 18,992,487 shares, after the reallocation of 4,760,628 treasury shares, currently stripped and the cancellation of stock options due to the departure of certain beneficiaries,

•		33,684,358 outstanding stock options, which could result in the issuance of 33,684,358 shares,

		the potential share capital was €6,633,847,913 divided into 1,206,154,166 shares.

2005 Annual Report — Vivendi Universal 69

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

2.2.10. Market Information

2.2.10.1. PLACES OF LISTING – STOCK EXCHANGE QUOTATION

Sources: Euronext Paris SA and New York Stock Exchange (NYSE).

Stock Exchange Quotation of Ordinary Shares of Vivendi Universal


Compartment A – Eurolist, Euronext Paris SA
(code: FR0000127771) since December 11, 2000	Average		High		Low		Number of		Transaction
(In euros)	quotation						securities traded		(in euros)

2004
July		21.49		23.29		20.25		146,002,016		3,148,703,135
August		20.12		21.40		19.06		118,868,971		2,391,932,581
September		20.75		21.78		19.89		167,166,721		3,466,597,004
October		21.31		21.98		20.31		137,826,595		2,932,266,382
November		22.35		23.05		21.31		183,041,942		4,096,559,527
December		23.22		24.00		22.10		148,629,922		3,434,038,869
2005
January		24.00		24.62		23.23		109,019,143		2,615,133,424
February		24.47		25.21		23.42		109,402,606		2,671,427,117
March		23.64		24.50		22.78		122,107,385		2,876,368,747
April		23.59		24.50		22.50		169,716,891		4,008,489,008
May		24.29		25.05		23.25		133,912,011		3,241,071,317
June		25.27		26.48		24.46		121,616,371		3,078,676,711
July		26.34		26.90		24.66		95,988,911		2,519,659,761
August		25.91		26.63		24.93		93,472,620		2,419,913,427
September		26.20		27.56		25.12		124,174,649		3,249,618,152
October		26.20		27.50		25.04		126,363,148		3,313,969,031
November		25.58		26.77		24.39		163,284,705		4,160,249,477
December		26.01		26.90		24.71		141,987,662		3,675,242,684
2006
January		26.10		26.88		25.00		170,604,128		4,438,770,472
February		25.63		26.61		24.74		171,299,931		4,388,792,475

70 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

Stock Exchange Quotation of Vivendi Universal American Depositary Shares (ADSs)


New York Stock Exchange (symbol V)	Average		High		Low		Number of		Transaction
since December 11, 2000	quotation						securities traded		(in US dollars)
(In US dollars)

2004
July		26.32		28.27		24.74		8,856,800		235,503,467
August		24.54		25.22		23.57		4,032,300		98,574,299
September		25.39		26.50		24.51		4,284,000		108,443,720
October		26.63		27.43		25.94		4,954,100		131,436,710
November		29.02		29.97		27.53		7,863,900		227,791,898
December		31.15		32.28		29.88		5,148,900		159,111,748
2005
January		31.45		32.33		30.64		4,602,700		145,310,283
February		31.91		32.73		31.39		5,221,500		166,692,717
March		31.18		32.15		30.38		5,192,000		161,820,207
April		30.50		31.39		29.65		5,708,000		174,645,388
May		30.79		31.48		29.70		3,426,000		105,857,889
June		30.72		31.54		30.18		5,576,300		170,880,903
July		31.79		32.27		31.06		2,902,600		92,037,377
August		31.81		32.40		30.96		4,376,000		139,219,677
September		32.07		33.01		31.44		6,238,500		200,159,592
October		31.50		32.54		30.09		7,769,200		242,421,475
November		30.27		31.86		28.95		9,018,300		270,768,791
December		30.82		31.85		29.38		8,753,700		271,006,103
2006
January		31.60		32.34		30.48		10,402,000		328,469,128
February		30.58		31.93		29.83		7,219,900		220,728,196

In a press release dated January 17, 2006, the Company announced its intention to terminate its ADR program and its intention to delist its ADSs from the New York Stock Exchange.

This decision has been taken in furtherance of good management and cost reduction and considering the very low trading volume of the ADRs listed on the New York Stock Exchange which accounted for less than 5% of the total shares traded in both 2004 and 2005. As at December 31, 2005, there were 75,539,509 outstanding ADRs and 71,538,543 outstanding ADRs, as at February 28, 2006 (representing 6.20% of the share capital).

2005 Annual Report — Vivendi Universal 71

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

Stock Exchange Quotation of Vivendi Universal Bonds (Euronext Paris SA)


Bond 6.70% 1996	Average quotation		High		Low		Number of		Transaction
Value code FR0000197956	(% nominal value)		(% nominal value)		(% nominal value)		securities traded		(in euros)
Nominal value: €762.25

2004
July		105.67		107.18		105.16		39		31,572
August		104.82		106.23		104.21		16		12,960
September		104.78		105.80		104.02		64		52,065
October		104.31		105.00		103.55		42		34,114
November		104.53		105.37		103.30		169		138,567
December		104.60		105.04		104.01		21		17,285
2005
January		104.33		105.10		103.48		55		45,361
February		103.24		103.71		102.52		54		44,460
March		104.05		104.72		103.52		121		100,612
April		104.17		104.54		103.52		66		55,110
May		103.75		104.37		103.02		18		15,100
June		103.54		104.30		103.01		73		60,833
July		103.46		103.70		102.84		70		55,280
August		103.29		104.00		102.57		159		126,509
September		102.92		103.10		102.78		43		34,282
October		102.49		102.77		101.62		67		53,436
November		101.34		102.11		100.15		50		39,691
December		101.48		101.92		100.90		92		73,487
2006
January		100.23		101.55		99.17		57		45,056
February		99.40		99.61		99.23		67		53,008

72 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company


Bond 6.50% 1997	Average quotation		High		Low		Number of		Transaction
Value code: FR0000207581	(% nominal value)		(% nominal value)		(% nominal value)		securities traded		(in euros)
Nominal value: €762.25

2004
July		108.33		109.65		107.26		98		83,306
August		108.86		109.60		107.50		95		81,439
September		109.09		109.50		108.40		100		86,192
October		109.72		110.50		108.32		31		26,929
November		109.85		110.53		108.96		82		71,729
December		109.84		110.72		109.07		54		47,583
2005
January		110.90		111.65		109.27		45		40,033
February		110.99		111.30		110.41		77		65,444
March		110.38		110.80		109.82		131		110,814
April		110.40		110.98		109.25		90		76,551
May		110.96		111.39		109.92		240		206,364
June		111.38		112.00		110.62		54		46,649
July		111.06		112.32		110.16		40		34,771
August		110.49		110.95		109.72		18		15,559
September		110.92		111.32		110.12		25		21,863
October		109.27		110.42		108.30		38		33,149
November		108.09		109.00		107.02		137		118,488
December		108.60		109.12		108.07		7		6,099
2006
January		107.79		108.40		107.17		59		48,978
February		107.93		108.95		107.06		123		101,463


Bond 0% 1998	Average quotation		High		Low		Number of		Transaction
Value code: FR0000208985							securities traded		(in euros)
Nominal value: 1,193 French francs

2004
July		194.80		194.80		194.80		15		2,922
August		194.91		196.00		194.82		259		50,594
September		194.90		195.00		194.80		50		9,740
October		194.50		196.00		193.00		5		968
November		196.75		198.10		196.00		421		82,575
December		200.01		201.00		198.99		369		73,781
2005
January		199.02		199.02		199.02		53		10,548
February		203.01		205.00		201.01		602		122,404
March		204.63		206.00		204.56		237		48,731
April		0.00		0.00		0.00		0		0
May		205.75		206.00		205.50		8		1,645
June		0.00		0.00		0.00		0		0
July		203.60		203.60		203.60		7		1,425
August		0.00		0.00		0.00		0		0
September		207.60		207.60		205.60		2		413
October		205.62		205.62		205.62		20		4,112
November		0.00		0.00		0.00		0		0
December		206.51		207.05		205.00		176		36,163
2006
January		205.03		205.03		205.03		20		4,101
February		207.05		207.05		207.05		49		10,145

2005 Annual Report — Vivendi Universal 73

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

Stock Exchange Quotation of Bonds Mandatorily Redeemable for Shares (ORAs) — Euronext Paris SA


ORA 8.25% 2005 (a)	Average quotation		High		Low		Number of		Transaction
Value code: FR0000188831							securities traded		(in euros)

2004
July		21.00		22.49		20.10		12,048		255,602
August		19.32		20.80		18.70		5,826		115,485
September		20.02		20.94		19.02		4,957		100,265
October		21.10		21.84		19.68		3,208		66,776
November		21.93		22.50		20.52		156,762		3,492,443
December		22.77		23.50		21.62		28,693		662,432
2005
January		23.73		24.80		22.15		11,101		262,665
February		23.96		24.60		23.00		5,528		134,745
March		23.07		23.89		22.04		14,742		341,983
April		23.03		23.80		21.46		396,116		9,425,986
May		23.81		24.79		21.00		2,531		59,612
June		24.98		26.00		22.70		4,164		104,763
July		25.61		26.80		23.68		5,255		136,903
August		25.65		26.84		24.85		2,342		60,572
September		25.97		27.00		21.50		1,718		44,539
October		25.69		26.20		22.95		2,066		51,544
November		25.25		26.00		24.00		6,160		157,606


(a)		Cancelled on November 22, 2005.

2.2.11. Financial Securities Intermediary


Shares		ADSs

BNP Paribas		Bank of New York
Securities Services		101 Barclay Street
Immeuble Tolbiac – 75450 Paris Cedex 09 – Paris – France		New York – NY 10286 – USA

74 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Additional Information Concerning the Company

2.3. Major Shareholders

2.3.1. Share Ownership and Voting Rights

As at December 31, 2005, the Company’s share capital was €6,344,125,265.50, comprised of 1,153,477,321 shares. The number of corresponding voting rights, since there are no voting rights for treasury shares, amounted to 1,150,978,373.

To the Management Board’s knowledge, as at December 31, 2005, the principal shareholders holding shares in registered form or having sent a notice to the Company were as follows:


							Number of voting
Shareholders	% of capital		% of voting rights		Number of shares		rights

CDC – Caisse des Dépôts et Consignations		2.33		2.33		26,842,479		26,842,479
UBS		1.68		1.68		19,388,470		19,388,470
Société Générale		1.29		1.29		14,838,428		14,838,428
Group Savings Plan of Vivendi Universal		1.05		1.05		12,085,981		12,085,981
BNP – Paribas		0.96		0.96		11,036,918		11,036,918
Pension Reserve Fund (Fonds de réserve pour les retraités)		0.51		0.51		5,851,585		5,851,585
Crédit Suisse First Boston		0.47		0.47		5,430,352		5,430,352
Groupama Asset Management		0.47		0.47		5,420,967		5,420,967
Caisse Nationale des Caisses d’Epargne et de Prévoyance		0.41		0.41		4,766,562		4,766,562
Group Savings Plan of Veolia Environnement		0.37		0.37		4,323,490		4,323,490
Vivendi Universal treasury shares and shares held by controlled entities		0.22		0.00		2,498,948		0
Other shareholders		90.24		90.46		1,040,993,141		1,040,993,141
Total		100.00		100.00		1,153,477,321		1,150,978,373

2.3.2. Pledge of Company Shares

As at December 31, 2005, pledge on shares of the Company amounted to 37,231, representing 0.003% of the share capital of the Company, held in registered form by individual shareholders.

2.3.3. Control of the Company – Shareholders’ Agreements

To the Company’s knowledge, at the date of the establishment of this document, there is no shareholder holding more than 5% of the Company’s share capital or voting rights and there is no shareholders’ agreement, declared or not, covering Vivendi Universal’s securities.

2005 Annual Report — Vivendi Universal 75

3 Information Concerning the Company — Corporate Governance

Additional Information Concerning the Company

2.3.4. Changes in Share Ownership and Voting Rights Over the Last Three Years (as at December 31)


	2005						2004						2003
			% of		% of				% of		% of				% of		% of
	Number of		share		voting		Number of		share		voting		Number of		share		voting
	shares		capital		rights		shares		capital		rights (a)		shares		capital		rights (a)

CDC-Caisse des Dépôts et Consignations		26,842,479		2.33		2.33		21,598,674		2.01		2.01		19,037,901		1.78		1.78
UBS		19,388,470		1.68		1.68		16,009,405		1.49		1.49		10,960,728		1.02		1.02
Group Savings Plan – Vivendi Universal		12,085,981		1.05		1.05		12,121,968		1.13		1.13		17,952,039		1.68		1.68
BNP-Paribas		11,036,918		0.96		0.96		12,347,537		1.15		1.15		12,347,537		1.15		1.15
Société Générale		14,838,428		1.29		1.29		14,399,477		1.34		1.34		12,235,376		1.14		1.14
Crédit Suisse First Boston		5,430,352		0.47		0.47		—		—		—		—		—		—
Groupama Asset Management		5,420,967		0.47		0.47		—		—		—		—		—		—
Pension Reserve Fund (Fonds de réserve pour les retraités)		5,851,585		0.51		0.51		—		—		—		—		—		—
Caisse Nationale des Caisses d’Epargne et de Prévoyance		4,766,562		0.41		0.41		—		—		—		—		—		—
Group Savings Plan – Veolia Environnement		4,323,490		0.37		0.37		4,868,200		0.45		0.45		5,830,000		0.54		0.54
Canal+ Group		8,130		0.00		0		8,130		0.00		0		7,680		0.00		0
Philips		0		0		0		—		0		0		32,265,561		3.01		3.01
Citigroup Inc.		0		0		0		18,115,936		1.69		1.69		18,115,936		1.69		1.69
Bronfman family		0		0		0		5,027,166		0.47		0.47		15,447,154		1.44		1.44
Compagnie de Saint Gobain		0		0		0		0		0		0		5,314,927		0.50		0.50
Groupe Seydoux		0		0		0		0		0		0		3,486,960		0.33		0.33
Vivendi Universal treasury shares and shares held by controlled entities		2,482,442		0.22		0.00		561,968		0.05		0.00		80,136		0.01		0
Other shareholders		1,040,993,141		90.24		90.46		967,565,902		90.22		90.27		918,436,756		85.71		85.72
Total		1,153,477,321		100.00		100.00		1,072,624,363		100.00		100.00		1,071,518,691		100.00		100.00

(a)

Excluding the application of the adjustment rule of voting rights in the General Meeting for the percentage exceeding 2% (cancelled at the end of the Combined Ordinary and Extraordinary Shareholders’ Meeting held on April 28, 2005).

76 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Corporate Governance

3 Corporate Governance

At the Combined Annual Meeting held on April 28, 2005, the shareholders approved the change of the corporate structure and adopted the corporate form of Société Anonyme à Directoire et Conseil de surveillance (a limited liability company with a Management Board and a Supervisory Board).

As a result, the Supervisory Board took responsibility for the Committees, which were previously Committees of the Board of Directors, and which include the Strategy Committee (formerly the Strategy and Finance Committee), the Audit Committee, the Human Resources Committee and the Corporate Governance Committee. The composition, role and activity of these Committees are described below.

The Company endeavors to meet the highest international standards of corporate governance for its corporate bodies. A Financial Reporting and Procedures Committee, comprised of employees of the Company, has been set up to ensure implementation of new regulations and procedures imposed by the current legislation and regulatory changes within France, Europe and the United States.

In 2005, the Supervisory Board and the Management Board, and previously the Board of Directors, continued to implement corporate governance rules:

•		strengthening internal control procedures as described in the report by the Chairman of the Supervisory Board, prepared in accordance with Article L. 225-68 of the French Commercial Code and included at the end of this chapter 3,

•		adopting internal regulations establishing governance rules for the Management Board and the Supervisory Board (see below).

3.1. Directors, Senior Management and Supervisory Bodies

3.1.1. The Supervisory Board

3.1.1.1. GENERAL PROVISIONS

In accordance with the provisions of the Company’s by-laws (Articles 7 and 8), the Supervisory Board is comprised of a maximum of eighteen members. Each member of the Supervisory Board serves for a term of four years.

The mandatory retirement age for members of the Supervisory Board is 70 years of age. At the end of each annual shareholders’ meeting approving the accounts for the prior fiscal year, the number of members of the Supervisory Board over the age of 70 as at the closing date of the prior fiscal year, will not exceed one-third of the acting members in office. In the event this limit is exceeded, the oldest members are deemed to have resigned at the end of said Shareholders’ Meeting.

Each member of the Supervisory Board must hold at least 1,000 shares during his or her term of office (Article 7-2 of the by-laws).

The Supervisory Board undertakes to maintain a majority of independent members. A member is deemed independent when he/she has no direct or indirect relationship, other than a non-substantial shareholding of the Company, of any kind, with the Company, its group or its management which could compromise the exercise of his/her independent judgment (as such term is defined under the report of the AFEP – MEDEF working group, chaired by Mr. Daniel Bouton).

Pursuant to the Company’s by-laws (Article 10), each member of the Supervisory Board may attend meetings by videoconference or by any other means of telecommunication, in compliance with applicable law.

Each member of the Supervisory Board undertakes to regularly attend Supervisory Board meetings and annual Shareholders’ Meetings.

3.1.1.2. COMPOSITION OF THE SUPERVISORY BOARD

The Supervisory Board, formed on April 28, 2005, is currently comprised of twelve members, ten of them are independent Directors, according to the definition of the Bouton report. Five of its members are of a nationality other than French. These five members include three citizens of European Union member states (excluding France) and two American citizens (including a female Director).

Individual information for members of the Supervisory Board is included in the “Main Activities of Current Members of the Supervisory Board” section.

In 2005, the Supervisory Board met five times. The average attendance rate for the twelve members of the Supervisory Board was 92%. Previously, until April 28, 2005, the Board of Directors met three times with an average attendance rate of 72%.

2005 Annual Report — Vivendi Universal 77

3 Information Concerning the Company — Corporate Governance

Corporate Governance

List of Supervisory Board Members Showing their Position, Date of Appointment, Number of Shares Held

Position

Full Name

Age

Date of initial

Date of

Committee

Term of

Number

appointment

member

office

of shares

within the

to the

held as at

Company

Supervisory

12/31/2005

Board

Chairman of the Supervisory Board

Jean-René Fourtou

(BD)
07/03/2002

04/28/2005

—

AM 2008

500,000

Vice Chairman and Member of the Supervisory Board (a)

Henri Lachmann

12/05/2000

04/28/2005

AM 2008

4,000

Member of the Supervisory Board

Claude Bébéar

(BD)
07/03/2002

04/28/2005

A and D

AM 2008

2,000

Member of the Supervisory Board (a)

Gérard Brémond

(BD)
01/29/2003

04/28/2005

A and C

AM 2008

1,000

Member of the Supervisory Board (a, b) (c)

Fernández de Córdova

(BD)
09/25/2002

04/28/2005

C and D

AM 2006

1,500

Member of the Supervisory Board (a, b)

Sarah Frank

04/28/2005

AM 2009

1,000

Member of the Supervisory Board (a, b)

Paul Fribourg

(BD)
01/29/2003

04/28/2005

C and D

AM 2008

1,000

Member of the Supervisory Board (a) (c)

Gabriel Hawawini

(BD)
05/28/2002

04/28/2005

B and D

AM 2006

1,390

Member of the Supervisory Board (a)

Patrick Kron

04/28/2005

AM 2009

1,000

Member of the Supervisory Board (a, b)

Andrzej Olechowski

04/28/2005

A and D

AM 2009

1,000

Member of the Supervisory Board (a)

Pierre Rodocanachi

05/06/2004

04/28/2005

B and C

AM 2008

1,800

Member of the Supervisory Board (a, b)

Karel Van Miert

05/06/2004

04/28/2005

A and B

AM 2008

1,000

Total

516,690

(a)		Independent member.

(b)		Non-French citizen.

(c)		Renewal as member of the Supervisory Board proposed to the Shareholders’ Meeting to be held on April 20, 2006.

A: Strategy Committee; B: Audit Committee; C: Human Resources Committee; D: Corporate Governance Committee.

()*		of which 128,622 are held in usufruct.

()		representing 0.04% of the share capital.

78 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Corporate Governance

Main Activities of Current Members of the Supervisory Board

Jean-René Fourtou, Chairman of the Supervisory Board

66, French nationality.

Business address

Vivendi Universal – 42 avenue de Friedland, 75008 Paris, France.

Expertise and experience

Mr. Jean-René Fourtou was born in Libourne on June 20, 1939 and is a graduate of the École Polytechnique. In 1963, he joined Bossard & Michel as a consultant. In 1972, he became Chief Operating Officer of Bossard Consultants and Chairman and Chief Executive Officer of the Bossard Group in 1977. In 1986, he was appointed Chairman and Chief Executive Officer of the Rhône-Poulenc Group. From December 1999 to May 2002, he served as Vice Chairman and Chief Operating Officer of Aventis. He is the Honorary Chairman of the International Chamber of Commerce. Mr. Fourtou co-chairs the Franco-Moroccan Economic Impetus Group created in September 2005. The objective of this working group is to propose measures for the improvement of economic relations between the two countries.

Positions currently held

Vivendi Universal Group

Canal+ Group, Chairman of the Supervisory Board

Maroc Telecom, Member of the Supervisory Board

Axa Group

Axa, Vice Chairman of the Supervisory Board

Axa Millésimes SAS, Member of the Executive Committee

Other

NBC Universal (United States), Director

Cap Gemini, Director

Sanofi-Aventis, Director

Franco-Moroccan impetus group, Co-chairman

International Chamber of Commerce, Honorary Chairman

Directorships held over the last five years

Vivendi Universal, Chairman and Chief Executive Officer

Veolia Environnement, Chairman of the Supervisory Board

USI Entertainment Inc. (United States), Chief Operating Officer

Axa Assurances IARD Mutuelle, Vice Chairman of the Board of Directors and AXA’s Permanent representative on the Board

EADS (Netherlands), Director

Aventis, Vice-Chairman of the Management Board

Finaxa, Permanent Representative of Axa Assurances IARD Mutuelle

Rhône-Poulenc Pharma, Director

Rhône-Poulenc AGCO Ltd, Director

Schneider Electric, Director

Pernod Ricard, Director

La Poste, Director

Henri Lachmann, Vice-Chairman and member of the Supervisory Board

67, French nationality.

Business address

Schneider Electric - 43-45, bd Franklin Roosevelt, 92500 Rueil-Malmaison, France.

Expertise and experience

Mr. Henri Lachmann was born on September 13, 1938 and is a graduate of the École des Hautes Études Commerciales and holds an accounting degree. In 1963, he joined Arthur Andersen, the international auditing firm, where he served successively as auditor, then, as manager of the Accounting Review Department. In 1970, he joined the Strafor Facom Group where he held various management positions until June 1981, when he was appointed Group Chairman. Since 1999, after serving as Vice-Chairman of Schneider Electric, Mr. Lachmann became Chairman and Chief Executive Officer of the Group.

Positions currently held

Schneider Electric, Chairman and Chief Executive Officer

Axa Group

Axa, Member of the Supervisory Board

Axa Assurances Vie Mutuelle, Director

Axa Assurances IARD Mutuelle, Director

Axa Courtage Assurance Mutuelle, Director

Other

Norbert Dentressangle group, Member of the Supervisory Board

Fimalac, Censor (non-voting Board Director)

ANSA, Director

Marie Lannelongue Surgical Center, Chairman of the Board of Directors

Directorships held over the last five years

Finaxa, Director

CNRS, Director

Établissements De Dietrich, Director

Fimalac Investissements, Director

Daimler Benz, Member of the International Committee

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3 Information Concerning the Company — Corporate Governance

Corporate Governance

Claude Bébéar, Member of the Supervisory Board

70, French nationality.

Business address

Axa, 25, avenue Matignon — 75008 Paris, France.

Expertise and experience

Mr. Claude Bébéar was born on July 20, 1935 and is a graduate of the École Polytechnique. Since 1958, Mr. Bébéar has spent his entire career in the insurance sector. From 1975 to 2000, he headed a group of insurance companies which became Axa in 1984. Currently, Mr. Bébéar is Chairman of the Supervisory Board of the Axa Group and Chairman and Chief Executive Officer of Finaxa.

Mr. Bébéar established and chairs the Institut du mécénat de solidarité, a humanitarian and social welfare organization, as well as the Institut Montaigne, an independent political think tank.

Positions currently held

Axa Group

Axa, Chairman of the Supervisory Board

Axa Assurances IARD Mutuelle, Director

Axa Assurances Vie Mutuelle, Director

Axa Courtage Assurance Mutuelle, Director

Other

BNP Paribas, Director

Schneider Electric, Censor (non-voting Board Director)

Institut du mécénat de solidarité, Chairman

Institut Montaigne, Chairman

Directorships held over the last five years

Finaxa, Chairman and Chief Executive Officer

Axa Group, Director of various Axa companies

Schneider Electric, Director

Gérard Brémond, member of the Supervisory Board

68, French nationality.

Business address

Pierre et Vacances – L’Artois Pont de Flandre, 11 rue de Cambrai, 75947 Paris cedex 19, France.

Expertise and experience

Mr. Gérard Brémond was born on September 22, 1937 and is an economic sciences graduate and holder of a diploma from the
Institution d’administration des entreprises. At the age of 24, he joined a family construction business which builds homes, offices and warehouses. An architecture enthusiast, his meeting with Jean Vuarnet, the Olympic ski champion, led to the creation and development of the mountain resort of Avoriaz. Mr. Brémond developed other resorts, both in the mountains and on the coast and created the Pierre et Vacances Group. By successively acquiring Orion, Gran Dorado, Center Parcs and Maeva, the Pierre et Vacances Group has become one of leading tourism operators in Europe. Mr. Brémond also founded two communications companies (television and film production).

Positions currently held

Pierre et Vacances Group

Pierre et Vacances SA, Chairman and Chief Executive Officer

SA Pierre et Vacances Maeva Tourisme, Chairman

SA Pierre et Vacances Tourisme France, Chairman

SA Pierre et Vacances Conseil Immobilier, Chairman

SA Pierre et Vacances Développement, Chairman

Maeva Group

Groupe Maeva SAS, Director

SA Société d’Investissement Touristique et Immobilier

SA Société d’Investissement Touristique et Immobilier - SITI, Chairman and Chief Executive Officer

Peterhof, SERL, Lepeudry et Grimard and CFICA companies, Permanent Representative for SA Société d’Investissement Touristique et Immobilier - SITI

GB Développement S.A.

GB Développement SA, Chairman and Chief Executive Officer

Ciné B, Permanent Representative for GB Développement SA

Other

Holding Green BV (Netherlands), Director

Center Parcs Europe NV (Netherlands), Member of the Supervisory Board

Directorships held over the last five years

Med Pierre et Vacances SI (Spain), Director

80 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Corporate Governance

Fernando Falcó y Fernández de Córdova, member of the Supervisory Board

66, Spanish nationality.

Business address

FCC – Torre Picasso, Plaza Pablo Ruiz Picasso, 28020 Madrid, Spain.

Expertise and experience

Mr. Fernando Falcó y Fernández de Córdova was born in Seville on May 11, 1939. After his legal studies at the University of Desto, he obtained his masters degree from the University of Valladolid. Mr. Fernando Falcó served as Chairman of the Organization and Union of Riesgos del Tiétar and of Réal Automóvil Club de España for 27 years, Chairman of the Group Vins René Barbier, Conde de Caralt et Segura Viudas, Vice Chairman de Banco de Extremadura and served as a member of the Board of Directors of various companies. Mr. Falcó has established and managed various agricultural businesses, as well as family businesses involved in export of agricultural products. He contributed to the creation of services and safety measures for motorists with the implementation of technical assistance and travel assistance services in Spain, Europe and throughout the world. In this capacity, he represented Spain on the FIA (Internal Automobile Federation), as well as on the AIT (International Tourism Alliance). Mr. Falcó is a member of the Spanish Higher Council for Traffic and Road Safety (Ministry of the Interior) and is part of the Group for Urban Mobility (Madrid). Until 2002, he was Vice Chairman of the World Council for Tourism and Motoring of the FIA, which is headquartered in Paris. In June 1998, he was appointed Chairman of the AIT based in Geneva, a position he held until 2001. He is a member of the Regional Council of the ASEPEYO of Madrid.

Positions currently held

Sogecable (Spain), Director and Vice-Chairman

Cementos Portland Valderrivas (Spain), Director and Member of the Executive Committee

Fomento de Construcciónes y Contratas (FCC) (Spain), Director

FCC Construcción, Director

Realia, Director

Vinexco (Groupe Falcó) (Spain), Director

Digital+, Vice-Chairman

Directorships held over the last five years

Comité Organizador del Salón Internacional del Automóvil de Madrid, Chairman

Sarah Frank, member of the Supervisory Board

59, American nationality.

Business address

1 Lincoln Plaza, Second Floor, New York, NY 10023, USA.

Expertise and experience

Ms. Sarah Frank was born on June 25, 1946, and has been active in business for over thirty years in the international and US television sectors, but especially in the production and distribution of entertainment and educational programs. From 1990 to 1997, Ms. Frank was Chairman and Chief Executive Officer of BBC Worldwide Americas, a subsidiary of the British television channel, BBC, for North and South America. In 1993, the American magazine, USA Today, named her one of the 25 most influential people in American television. In 1994, she received the Matrix award presented by the New York Women in Communications association. Ms. Frank was Vice President and Director of Education at Thirteen/WNET New York, a flagship public television channel in New York City where she directed the station’s educational programs. In addition, she created a television series aimed at helping teenagers understand the consequences of the events on September 11, 2001, as well as a website for parents and teachers called Dealing with the Tragedy. Ms. Frank has contributed to the expansion of the National Teacher Training Institute, a nationwide program to promote the integration of new technology into classroom curricula. Most recently, she co-produced with WGBH, They Made America, a documentary series based on the book by Sir Harold Evans.

Positions currently held

Foundation of the New York Chapter of the National Academy of Television, Arts and Sciences, Director

Leadership Committee of the University of Michigan UROP program, Member

Branded Media Corporation, Inc., Director

New York Women’s Forum, Member

OQCM – Coalition for Quality Children’s Media, Director

Directorships held over the last five years

Eugene Lang College in New York University, Liberal Arts Faculty, Director

Paul Fribourg, member of the Supervisory Board

52, American nationality.

Business address

Conti Group Companies, Inc. – 277 Park Avenue, New York 10172, USA.

Expertise and experience

Mr. Paul Fribourg was born on February 22, 1954 and is Chairman and Chief Executive Officer of ContiGroup Companies Inc., (formerly Continental Grain Company), a private company with French and Belgian roots, that has diverse agribusiness activities. Since the age of 26, he has held several management positions in this company, both in Europe and the United States. Mr. Fribourg has a Business Administration degree from Amherst College and is a graduate of Harvard’s Advanced Management Program. He is Chairman of the Lauder Institute/Wharton Business School and a

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3 Information Concerning the Company — Corporate Governance

Corporate Governance

Director of the University of New York, Nightingale School and the Loews Corporation. He is a member of the Council on Foreign Relations and a Director of the Appeal of Conscience Foundation.

Positions currently held

ContiGroup Companies Inc., Chairman and Chief Executive Officer

Loews Corporation, Director

JP Morgan National Advisory Board, Member of the Advisory Board

Rabobank International North American Agribusiness, Member of the Advisory Board

Endeavor Global, Inc., Director

Other

Harvard Business School, Director on the Dean’s Advisors

The Browning School, Director

New York University, Director

Nightingale-Bamford School, Director

The Lauder Institute/Wharton Business School, Chairman

America-China Society, Director

Council on Foreign Relations, Member

Appeal of Conscience Foundation, Director

Park East Synagogue, Director

Directorships held over the last five years

Wyndham International, Director

Gabriel Hawawini, member of the Supervisory Board

58, French nationality.

Business address

INSEAD – Boulevard de Constance, 77305 Fontainebleau Cedex, France.

Expertise and experience

Mr. Gabriel Hawawini was born in Alexandria, Egypt on August 29, 1947. After obtaining a degree in Chemical Engineering from the University of Toulouse, he obtained his doctorate in Economics and Finance at New York University in 1977. Before joining INSEAD, he taught at New York and Columbia Universities from 1974 to 1982. Mr. Hawawini was Vice Chairman of the French Finance Association from 1984 to 1986 and served on editorial Committees for several university publications. Mr. Hawawini is the author of twelve books, and over seventy research publications about management based on value creation, risk appraisal, asset valuation, portfolio management and the structure of financial markets. Most notably, he is the author of Mergers and Acquisitions in the US Banking Industry, published by North Holland in 1991 and Finance for Executives: Managing for Value Creation (South Western Publishing, 2002), which is in its second edition. He has advised many private companies on the implementation of management systems based on value creation. Since 1982, he has organized, directed and participated in several programs to improve management methods worldwide.

Mr. Hawawini is currently Dean and a Professor of Investment Banking at INSEAD.

Positions currently held

Dean and a Professor of Investment Banking at INSEAD

Directorships held over the last five years

None.

Patrick Kron, member of the Supervisory Board

52, French nationality.

Business address

Alstom – 3 avenue André Malraux, 92309 Levallois Perret, France.

Expertise and experience

Mr. Patrick Kron was born on September 26, 1953 and is a graduate of the École Polytechnique, Corps des Mines. He began his career at the Ministry of Industry from 1979 to 1984 prior to joining the Péchiney group. From 1984 to 1988, Mr. Kron held operational responsibilities in one of the Péchiney’s most important factories in Greece prior to becoming Chief Operating Officer of the Péchiney’s subsidiary in Greece. Between 1988 and 1993, he held several senior operational and financial positions in the aluminum processing division within Péchiney and then became Chairman and Chief Executive Officer of Péchiney Electrométallurgie. In 1993, he became a member of the Executive Committee of Péchiney and Chairman of Carbone Lorraine from 1993 to 1997. From 1995 to 1997, he managed the Food, Health and Beauty Care Packaging Sector of Péchiney and held the position of Chief Operating Officer of the American National Can Company in Chicago (USA). From 1998 to 2002, Mr. Kron was Chairman of the Management Board of Imerys prior to joining Group Alstom, as Director on July 24, 2001 and Chief Operating Officer on January 1, 2003. He has been the Chairman and Chief Executive Officer of Alstom since March 11, 2003.

Positions currently held

Alstom, Chairman and Chief Executive Officer

Imerys, Director

Other

“Les Arts Florissants William Christie” Association, Director

Directorships held over the last five years

Imerys, Chairman of the Management Board

82 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Corporate Governance

Andrzej Olechowski, Member of the Supervisory Board

58, Polish nationality.

Business address

Ul. Traugutta 7/9, 00-067 Warsaw, Poland.

Expertise and experience

Mr. Andrzej Olechowski was born in Krakow on September 9, 1947 and holds a doctorate in economy from the Warsaw Business School. From 1989 to 1991, Mr. Olechowski was Deputy Governor of the National Bank of Poland. He held various functions in the Polish government. In 1991, he was appointed Secretary of State to the Trade Ministry, and in 1992, he became Minister of Finance, and from 1993 to 1995, he became the Minister of Foreign Affairs, a period during which he served as economic advisor to President Lech Walesa. From 1994 to 1998, Mr. Olechowski served as Chairman of the City Council of Wilanow. In 2000, he was a candidate in the Presidential elections in Poland. In 2001, he was one of the creators of the Civic Platform (a Polish centrist political party). From May 1998 to June 2000, Mr. Olechowski was Chairman of Bank Handlowy w Warszawie, of which he is currently a Member of the Supervisory Board. He sits on the boards of several public, charitable and educational organizations. Since 1995, Mr. Olechowski has served as a consultant for the Central Europe Trust Polska. He is a lecturer at the Jagiellonian University in Krakow and the Collegium Civitas in Warsaw. Mr. Olechowski is the author of a number of publications on international trade and foreign policy.

Positions currently held

Central Europe Trust Polska, Advisor

Euronet (United States), Director

Bank Handlowy w Warszawie (Poland), Member of the Supervisory Board

PKN Orlen (Poland), Vice-Chairman of the Supervisory Board

Textron (United States), Member of the International Advisory Board

Citigroup (United Kingdom), Member of the European Advisory Board

Conseil DG (Poland), Director

Directorships held over the last five years

Europejski Fundusz Hipoteczny (Poland), Chairman of the Supervisory Board

Pierre Rodocanachi, member of the Supervisory Board

67, French nationality.

Business address

MP Conseil – 40 rue La Pérouse, 75116 Paris, France.

Expertise and experience

Mr. Pierre Rodocanachi was born on October 2, 1938 and is a physics graduate of the University of Paris, science faculty. He is a Director of several non-for-profit organizations, including the American Chamber of Commerce in France, which he chaired from 1997 to 2000, the Aspen Institute and the Institut du mécénat de solidarité, where he serves as Treasurer.

Mr. Rodocanachi is Chairman of the Strategic Committee at Booz Allen Hamilton, an international strategy and management consultancy firm. He joined Booz Allen Hamilton in 1973 and became Chief Executive Officer of its French subsidiary in 1979. In 1987, Mr. Rodocanachi was appointed Senior Vice Chairman and became a member of the Strategic Committee and of the Operations Committee of Booz Allen Hamilton Inc. and manager of all its activities for Southern Europe. Prior to joining Booz Allen Hamilton, Mr. Rodocanachi began his career as a researcher in a solids physics laboratory at the Centre national de la recherche scientifique (CNRS). Then, for a period of five years, he managed the planning department of the French General Delegation for Scientific and Technical Research (DGRST). Between 1969 and 1971, he served as Technical Consultant on Scientific Matters for the French Minister of Industry and, from 1971 to 1973, was the Deputy Director of the National Agency for Research Valuation (ANVAR).

Mr. Rodocanachi is a Chevalier of the Légion d’honneur, a recipient of the National Order of Merit and is a member of the French Olympic Medalists Association.

Positions currently held

OBC (Odier-Bungener-Courvoisier) Bank, Director and Chairman of the Audit Committee

DMC (Dollfus Mieg & Cie), Director

La revue d’économie politique Commentaire, Director

Directorships held over the last five years

Carrefour, Director and Chairman of the Audit Committee

Karel Van Miert, member of the Supervisory Board

64, Belgian nationality.

Business address

Putte Straat 10, 1650 Beersel, Belgium.

Expertise and experience

Mr. Karel Van Miert was born in Oud-Turnhout, Belgium on January 17, 1942. He is a former Vice President of the European Commission and a former President of Nyenrode University. He graduated in diplomatic relations from the University of Ghent, prior to obtaining a doctorate at the Center for European Studies in Nancy. Between 1968 and 1970, he worked for the National Scientific Research Fund and then for several European Commissioners, including Sicco Mansholt in 1968, and as a member of the Private Office of

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3 Information Concerning the Company — Corporate Governance

Corporate Governance

Henri Simonet in 1973, as Vice President of the European Commission at that time. After starting his political career with the Belgian Socialist Party as International Secretary in 1976, Mr. Van Miert became Head of the Private Office of Willy Claes, Minister of Economic Affairs in 1977. He chaired the Socialist Party from 1978 to 1988 and became Vice Chairman of the Confederation of European Social Democratic Parties in 1978. From 1986 to 1992, Mr. Van Miert was Vice President of the International Socialist Party. He was a member of the European Parliament from 1979 to 1985 and then took a seat in the Belgian Chamber or Representatives. In 1989, Mr. Van Miert was appointed as a member of the European Commission responsible for transport, credit, investment and consumer policy. For six years, he served under President Jacques Delors. As Vice President of the European Commission, Mr. Van Miert was responsible for competition policy from 1993 to 1999. From April 2000 to March 2003, Mr. Van Miert chaired the University of Nyenrode in the Netherlands. He continues to lecture on European competition policy.

He is the author of several publications on European integration. In 2003, Mr. Van Miert chaired the European Union high level group on trans-European transport networks.

Positions currently held

Agfa-Gevaert NV (Mortsel), Director

Anglo American plc (London), Director

De Persgroep (Asse), Director

Royal Philips Electronics NV (Amsterdam), Director

Solvay S.A. (Brussels), Director

Münchener Rück (Munich), Director

RWE AG (Essen), Director

Sibelco N.V. (Antwerp), Director

Directorships held over the last five years

Fraport AG (Frankfurt), Director

Wolters Kluwer NV, Director

DHV Holding, Director

3.1.1.3.

FAMILY RELATIONS

There are no family relations between members of the Supervisory Board.

3.1.1.4.

ABSENCE OF CONFLICTS OF INTEREST

To our knowledge, there are no actual or potential conflicts of interest between Vivendi Universal and the members of the Supervisory Board with regard to their personal interests or other responsibilities.

3.1.1.5.

ABSENCE OF ANY SENTENCE FOR FRAUD, ASSOCIATION WITH A BUSINESS FAILURE OR PUBLIC INCRIMINATION AND/OR SANCTION

To the knowledge of the Company, over the last five years:

•		no conviction in relation to fraudulent offenses has been delivered against any member of the Supervisory Board,

•		none of the members of the Supervisory Board have been associated with a bankruptcy, receivership or liquidation while serving on an administrative, management or supervisory body,

•		no official public incrimination and/or sanction has been delivered against any members of the Supervisory Board by statutory or regulatory authorities. On December 20, 2004, Mr. Jean-René Fourtou received a notification of grievances served by the French Autorité des Marchés Financiers (AMF), concerning a purchase of bonds mandatorily redeemable in shares (ORAs) (please refer to Chapter 2, “Litigation”).

3.1.1.6.

AGREEMENT BETWEEN THE COMPANY AND A MEMBER OF THE SUPERVISORY BOARD – SERVICES CONTRACT

On June 7, 2005, in accordance with Article L. 225-86 of the French Commercial Code, the Supervisory Board authorized the conclusion of a one-year renewable services contract with Conseil DG, a company chaired by Mr. Andrzej Olechowski, a member of the Supervisory Board. This services contract relates to the defense and perpetuation of Vivendi Universal’s economic interests in the telecommunications and television businesses in Poland.

Under the terms of this contract, the following fees have been agreed to: a total fixed fee of €60,000 (excluding tax), payable in monthly installments of €5,000 (excluding tax) and a lump-sum result fee of €1,000,000, in the event of a definitive settlement of the lawsuits currently in progress in Poland occurring during the term of the contract. Amounts paid during the contract as a fixed fee will be deducted from the result fee. For the period from June 8^th until December 7, 2005, Vivendi Universal paid €30,000 (excluding tax) (refer to the Statutory Auditors’ special report on regulated related-party agreements).

3.1.1.7.

LOANS AND GUARANTEES GRANTED TO MEMBERS OF THE SUPERVISORY BOARD

The Company has not granted any loans or issued any guarantees in favor of any member of the Supervisory Board.

84 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Corporate Governance

3.1.1.8.

INTERNAL REGULATIONS AND JURISDICTION OF THE SUPERVISORY BOARD

Role and Powers of the Supervisory Board under Applicable Law and Company By-laws

The Supervisory Board shall continuously monitor the management of the Company by the Management Board, as required by law. It may proceed with any verification or control that it deems appropriate and shall be provided with all documents it deems useful to the fulfillment of its mission.

The Supervisory Board is granted, by law, the following powers:

•		review of annual and consolidated financial statements and the annual and half-year management reports prepared by the Management Board,

•		appointment of members of the Management Board and determination of their compensation,

•		appointment of the Chairman of the Management Board,

•		granting of powers of representation to one or more members of the Management Board, if permitted by the by-laws,

•		temporary appointment of members of the Supervisory Board,

•		authorization of related-party agreements in accordance with Article L.225-86 of the French Commercial Code,

•		creation of Committees of the Supervisory Board, determination of their powers, appointment and compensation of their members,

•		payment of Directors’ Fees.

Internal Regulations

The internal regulations of the Supervisory Board are an internal document, intended to supplement Company by-laws, by specifying the Supervisory Board’s operational procedures and the rights and duties of its members. The internal regulations are not enforceable against third parties who are not entitled to rely on them against members of the Supervisory Board.

Role and powers of the Supervisory Board under the Internal Regulations

The following transactions are subject to the authorization of the Supervisory Board, prior to their implementation:

•		disposal of real properties, sale of all or part of investments in companies, whenever any one transaction exceeds an amount of €300 million,

•		issues of securities giving direct or indirect access to the share capital and issues of convertible bonds in excess of €100 million,

•		issues of non convertible bonds in excess of €500 million, with the exception of any transactions to renew debentures under more favorable terms than those granted to the Company,

•		proposal of share repurchase programs at the Ordinary Shareholders’ Meeting,

•		financing transactions which are significant or likely to substantially alter the financial structure of the Company,

•		acquisition transactions in whatever form in excess of €300 million,

•		granting of securities, including endorsements and guarantees, by the Management Board, in favor of third parties subject to the dual limitation of an amount of €100 million per obligation and of €1 billion, in respect of all obligations. This authorization given to the Management Board is re-examined every year,

•		substantial internal restructuring operations, transactions falling outside the published strategy of the Company and strategic partnership agreements,

•		setting up stock option plans or any other mechanisms with similar purpose or effect,

•		proposals to the Extraordinary Shareholders’ Meeting to amend the by-laws, allocation of results and fixation of the dividend for the fiscal year ending, including its payment date.

3.1.1.9.

INFORMATION PROVIDED TO THE SUPERVISORY BOARD

Members of the Supervisory Board shall be provided with all the information necessary to the fulfillment of their mission. Prior to any meeting, they may request all the documents they consider useful. The right of members of the Supervisory Board to obtain information is subject to the practical terms and conditions set out below.

Information Provided Prior to Meetings of the Supervisory Board

The Chairman of the Supervisory Board, assisted by the Secretary of the Board, shall send the appropriate information to the other members of the Board, depending on the circumstances and the matters set on the agenda.

Information Provided to the Supervisory Board on a Regular Basis

The Supervisory Board is kept informed by the Management Board on a regular basis and by all means of the financial situation, cash flow and obligations of the Company, as well as of any significant events and transactions relating to the Company. The Management Board shall present a quarterly report to the Supervisory Board on its activities and the Group’s operations.

Requests for information from members of the Supervisory Board relating to specific matters are sent to the Chairman and to the Secretary of the Board, who, in liaison with the Chairman of the Management Board, is responsible for responding to such requests as soon as reasonably practicable.

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3 Information Concerning the Company — Corporate Governance

Corporate Governance

In order to supplement the information provided to them, members of the Supervisory Board are entitled to meet Board Members and the principal managers of the Company, including as the case may be, without the presence of any of the members of the Management Board, after proper notice is given to the Chairman of the Supervisory Board.

The Company’s press releases are sent to the members of the Supervisory Board.

Confidentiality of Information

The members of the Supervisory Board and any person attending meetings of the Supervisory Board are bound by obligations of confidentiality relating to the deliberations of the Board and of its Committees and relating to information of a confidential nature or identified as such by the Chairman of the Supervisory Board or of the Management Board.

If the Supervisory Board has received confidential information of a precise nature which is likely to have an effect, if published, on the share price of the Company or of the Companies under its control within the meaning of Article L. 233-3 of the Commercial Code, the members of the Board must then refrain from disclosing such information to any third party until such information has been made public.

3.1.1.10.

ACTIVITIES OF THE BOARD OF DIRECTORS IN 2005

Prior to April 28, 2005, the Board of Directors met three times. Its work was mainly related to:

•		the examination and approval of the financial statements for the financial year 2004 and the examination of the draft annual report,

•		the fixation of the dividend,

•		the convocation of the Combined Ordinary and Extraordinary Shareholders’ Meeting held on April 28, 2005 and the review of written questions from shareholders and answers thereto,

•		the establishment of the stock options allocation policy,

•		the review of the work performed by the Board’s Committees,

•		the review of the operational position of the Group’s main business units,

•		the monitoring and review of litigation in progress.

3.1.1.11. ACTIVITIES OF THE SUPERVISORY BOARD IN 2005

Since April 28, 2005, the Supervisory Board has met five times. Its work was mainly related to:

•		the composition and activities of the Committees of the Supervisory Board,

•		the appointment of the members and of the Chairman of the Management Board,

•		the review of the quarterly and half-year financial statements and the reports for the financial year 2005, prepared by the Management Board and the preliminary budget for 2006,

•		the change in the Company’s corporate name,

•		the analysis of strategic issues within the media and telecommunications sectors,

•		the review of the draft agreement between Canal+ Group and TPS in the pay-TV sector in France and the entry of Lagardère SCA as shareholder of Canal+ France,

•		the adoption of an additional pension plan for senior executives and officers,

•		the monitoring of the telecommunications position in Poland,

•		the review and approval of the services contract with Conseil DG, a company chaired by Mr. Andrzej Olechowski, a member of the Supervisory Board,

•		the review of the restructuring of agreements between Vivendi Universal, NBC Universal and InterActiveCorp (IAC),

•		the monitoring and review of the litigation in progress.

3.1.1.12.

SUPERVISORY BOARD PERFORMANCE ASSESSMENT

In 2004 and 2005, the Board of Directors devoted a substantial amount of time to discussing the opportunity of a change in the Company’s corporate governance structure. These discussions led to the approval of the establishment of the corporate structure of a Directoire (Management Board) and a Conseil de surveillance (Supervisory Board) at the Combined Annual Shareholders’ Meeting held on April 28, 2005.

Each year, and in accordance with its internal regulations, the Supervisory Board devotes an item of its agenda to discuss its performance. In addition, and on a regular basis, under the direction of the Corporate Governance Committee, the Supervisory Board performs a formal assessment of its performance.

This assessment was initiated with respect to the year 2005 and its responses were discussed during the Corporate Governance Committee meeting held on February 28, 2006 and presented to the Supervisory Board on the same day. This evaluation was conducted by means of a questionnaire adressed to each member of the Board. The answers were collected by the General Counsel of Vivendi Universal. All the members of the Supervisory Board replied to the questionnaire, which was organized around six major topics: the composition, missions and duties of the Supervisory Board, its performance and the information made available to it, organization and operation of the Committees and its relations with the Management Board.

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3.1.1.13. SUPERVISORY BOARD COMMITTEES

Organization and Operating Procedures of the Committees

The Supervisory Board has adopted four specialized Committees and has defined their composition and powers: the Audit Committee, the Strategy Committee, the Human Resources Committee and the Corporate Governance Committee.

The Committees’ missions can have for effect neither the delegation to a Committee of powers granted to the Supervisory Board by law or by the Company’s by-laws, nor the reduction or limitation of the powers of the Management Board. Within its area of competence, each Committee issues proposals, recommendations and/or advice.

The Supervisory Board has appointed a Chairman for each Committee. The four Committees of the Supervisory Board are comprised of Board Members, appointed by the Supervisory Board. These members are appointed on a personal basis and cannot be represented. Each Committee decides the frequency of its meetings. These are held at the registered office of the Company and in any other place decided by the Chairman of the Committee. Meetings of the Committees may be held by telephone conference or videoconference.

The Chairman of each Committee sets the agenda for the meetings, after consultation with the Chairman of the Supervisory Board. The minutes of each Committee meeting are drawn up by the Secretary of the Board, under the authority of the Chairman of the relevant Committee, and are transmitted to the members of said Committee. Said minutes are included within the papers of the Supervisory Board during which the Committees’ activities are presented. Information about the work of the Committees is included in this document.

Each Committee may request from the Management Board any document it deems useful for the fulfillment of its missions. The Committee may carry out or commission research to provide information for the Supervisory Board’s discussions and may request external consulting expertise as required.

The Chairman of each Committee may decide to invite all members of the Supervisory Board to attend a meeting of his Committee. Only the members of the Committee can take part in its deliberations. Each Committee may decide to invite any person of its choice to its meetings, as and when required.

In addition to the permanent Committees, the Supervisory Board may decide to establish ad hoc Committees, each for a limited term, with regard to certain exceptional transactions or assignments which are special by virtue of their importance or nature.

Strategy Committee

Composition

Prior to April 28, 2005, the Strategy and Finance Committee was comprised of four Directors, three of whom were independent. Its members were: Messrs. Claude Bébéar (Chairman), Gérard Brémond, Gerard Kleisterlee and Karel Van Miert.

Since April 28, 2005, this Committee, which has been renamed the “Strategy Committee”, has six members, five of whom are independent. Its current members are: Ms. Sarah Frank, Messrs. Claude Bébéar (Chairman), Gérard Brémond, Patrick Kron, Andrzej Olechowski and Karel Van Miert.

Missions and activities

The Strategy Committee intervenes in the following areas:

•		strategic direction of the Company,

•		major acquisitions or disposals,

•		granting of securities, including endorsement and guarantees in favor of third parties, the amount of which exceeds the delegated power granted to the Management Board,

•		substantial internal restructuring transactions,

•		major financing transactions or transactions likely to significantly affect the financial structure of the Company,

During 2005, the Strategy Committee met four times. Its work primarily focused on the following issues:

•		the Group’s priorities and strategic challenges,

•		the potential developments in telecommunications, games and the Internet,

•		the challenges of digital terrestrial television and developments in the pay-TV sector in France,

•		the change in the Company’s corporate name,

•		follow-up relating to the situation in telephony in Poland.

Audit Committee

Composition

Prior to April 28, 2005, the Audit Committee was comprised of four Directors, all of whom were independent and have either finance or accounting expertise. Its members were Messrs. Henri Lachmann (Chairman), Paul Fribourg, Gabriel Hawawini and Pierre Rodocanachi.

Since April 28, 2005, the Audit Committee has four members, all of whom are independent and have finance or accounting expertise. At least one of the members shall have an understanding of generally accepted accounting principles and experience in the preparation of financial statements and in the application of such accounting principles (a “financial expert,” as defined in the

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Sarbanes-Oxley Act of 2002). Current members of the Audit Committee are Messrs. Henri Lachmann (Chairman), Gabriel Hawawini, Pierre Rodocanachi and Karel Van Miert.

Missions and activities

The Audit Committee intervenes in the following areas:

•		review of the annual individual and consolidated financial statements, the half-year and quarterly consolidated financial statements prepared by the Management Board, prior to their presentation to the Supervisory Board,

•		consistency and effectiveness of the internal control procedures within the Company and the review of the report of the Chairman of the Supervisory Board to the Shareholders’ General Meeting on the conditions governing the preparation and organization of the Supervisory Board’s procedures and the internal control procedures implemented by the Company,

•		procedure for appointing statutory auditors, as well as the issuing of an opinion regarding remuneration for the performance of their legal audit functions and the supervision that the rules ensuring their independence are applied correctly,

•		monitoring of the programs of responsibilities of the external and internal auditors and the examination of the conclusions of their inspections,

•		accounting methods and principles, the scope of the Company’s consolidation and the risks and off-balance sheet commitments of the Company,

•		any matter which is likely to constitute a risk for the Company or serious procedural failures.

During 2005, the Audit Committee met five times in 2005. Its work primarily concerned:

•		review of the financial statements for the 2004 fiscal year and their reconciliation with the US GAAP standards, half-year and quarterly financial statements for 2005 and the statutory auditors’ reports,

•		review of the new IFRS accounting standards and analysis of their implementation within the Company,

•		review of internal audit results,

•		review and monitoring of internal control procedures within the Group,

•		renewal of the Statutory Auditors’ mandates,

•		control of the compliance procedures in force within each business unit.

At the time of their appointment, the members of the Committee receive information on the specific of accounting, financial and operational procedures which are specific to the Company and its group.

Human Resources Committee

Composition

Prior to April 28, 2005, the Human Resources Committee was composed of four Directors, all independent. Its members were Ms. Marie-Josée Kravis (Chairperson), Messrs. Bertrand Collomb, Fernando Falcó y Fernández de Córdova and Paul Fribourg.

Since April 28, 2005, the Human Resources Committee has four members, all independent. Its current members are Messrs. Paul Fribourg (Chairman), Gérard Brémond, Fernando Falcó y Fernández de Córdova and Pierre Rodocanachi.

Missions and activities

The Human Resources Committee intervenes in the following areas:

•		the compensation, representation and travel expenses of the Directors and principal officers,

•		the adoption of stock option plans, or any other mechanisms with similar purpose or effect,

•		the Company’s insurance covering Directors’ liability and additional pension plans adopted by the Company.

During 2005, the Human Resources Committee met four times. Its work primarily concerned:

•		the fix and variable compensation, representation and travel expenses of the Directors and stock option plans for 2005,

•		the review of an additional pension plan for senior executives,

•		the review of succession plans at the Company’s headquarters and at the business unit level.

Corporate Governance Committee

Composition

Prior to April 28, 2005, the Corporate Governance Committee was comprised of four Directors, three of whom were independent. Its members were Messrs. Claude Bébéar (Chairman), Bertrand Collomb, Fernando Falcó y Fernández de Córdova and Mrs. Marie-Josée Kravis.

Since April 28, 2005, the Corporate Governance Committee has five members, four of whom are independent. Its current members are Messrs. Claude Bébéar (Chairman), Gabriel Hawawini, Paul Fribourg, Fernando Falcó y Fernández de Córdova and Andrzej Olechowski.

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Missions and activities

The Corporate Governance Committee intervenes in the following areas:

•		appointment of members of the Supervisory Board, of the Supervisory Board’s Committees and of the Management Board,

•		determination and review of independence criteria for members of the Supervisory Board,

•		succession plans for certain members of the Management Board,

•		assessment of the organization and performance of the Supervisory Board.

During 2005, the Corporate Governance Committee met twice. Its work primarily concerned:

•		the review of plans relating to new Company by-laws, internal regulations of the Supervisory Board and Management Board, and principles for the organization and running of the Company,

•		the review of applications for new members of the Supervisory Board, the proposals for the appointment of its Chairman and Vice-Chairman, the composition of its Committees and the review and distribution of the amount of Director’s fees.

3.1.2. The Management Board

3.1.2.1. GENERAL PROVISIONS

In accordance with the provisions of the Company’s by-laws (Article 12), the Management Board shall consist of a minimum of two members and a maximum of seven members.

They are appointed for four-year terms by the Supervisory Board.

The mandatory retirement age for members of the Management Board is 68 years of age. However, when a member of the Management Board reaches the age of 68, the Supervisory Board may prolong his or her term on one or more occasions, for a total period which may not exceed two years (Article 12 of the by-laws).

3.1.2.2. COMPOSITION OF THE MANAGEMENT BOARD

The Management Board is currently comprised of seven members, including four French citizens, one German citizen, one American citizen and one Moroccan citizen. All the members of the Management Board and its Chairman were appointed for a four-year term, which shall expire on April 27, 2009, by the Supervisory Board during its meeting held on April 28, 2005.

The Management Board met a total of eight times since April 28, 2005. The attendance rate at Management Board meetings was 96%. In accordance with Article 14 of the Company’s by-laws, each member of the Management Board may attend meetings by videoconference, teleconference or by other means approved by the applicable legislation.

Information about individual members of the Management Board is included in the “Main activities of current members of the Management Board” section.

List of Current Members of the Management Board


Position	Full Name	Number of shares held directly and
		*via the PEG ()**

Chairman of the Management Board of Vivendi Universal	Jean-Bernard Lévy		57,615	(a)
Member of the Management Board of Vivendi Universal, Chairman of the Management Board of Maroc Telecom	Abdeslam Ahizoune		10,000
Member of the Management Board of Vivendi Universal, Chief Financial Officer of Vivendi Universal	Jacques Espinasse		77,475
Member of the Management Board of Vivendi Universal, Chief Executive Officer of SFR	Frank Esser		16,095
Member of the Management Board of Vivendi Universal, Chairman of the Management Board of the Canal+ Group	Bertrand Meheut		19,801
Member of the Management Board of Vivendi Universal, Chief Executive Officer of Universal Music Group	Doug Morris		10,000
Member of the Management Board of Vivendi Universal, Chairman of VU Games and Senior Executive Vice President, Human Resources of Vivendi Universal	René Pénisson		36,783


()*		shares held in the Group Saving’s Plan (PEG) have been valued on the basis of the Vivendi Universal share price of €26.46 at close of business on December 30, 2005.

(a)		including 1,000 shares held by his spouse and 197 shares held by each of his four children.

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Main Activities of Current Members of the Management Board

Jean-Bernard Lévy, Chairman of the Management Board

51, French nationality.

Business address

Vivendi Universal — 42 avenue de Friedland, 75008 Paris, France

Expertise and experience

Mr. Jean-Bernard Lévy was born on March 18, 1955 and is a graduate of the École Polytechnique and the École nationale supérieure des télécommunications. Mr. Lévy was appointed Chairman of the Management Board of Vivendi Universal on April 28, 2005. He previously served as Chief Operating Officer of Vivendi Universal since August 2002.

From 1998 to 2002, Mr. Lévy was Managing Partner, Corporate Finance, at Oddo Pinatton. He was also Chairman and Chief Executive Officer of Matra Communication from 1995 to 1998. From 1993 to 1994, Mr. Lévy was Chief of Staff to Mr. Gérard Longuet, the French Minister for Industry, Postal Services, Telecommunications and Foreign Trade. From 1988 to 1993, he was General Manager, Communication Satellites, of Matra Marconi Space. From 1986 to 1988, Mr. Lévy acted as Technical Adviser to Mr. Gérard Lonquet, the French Minister for Postal and Telecommunications services and from 1978 to 1986, he was an engineer with France Télécom.

Positions currently held

Maroc Telecom, Vice Chairman of the Supervisory Board

SFR, Director

Canal+ Group, Member of the Supervisory Board

Vivendi Universal Games, Inc. (United States), Director

NBC Universal Inc. (United States), Director

Directorships held over the last five years

VU Net, Chairman and Chief Executive Officer

VTI, Chairman and Chief Executive Officer

UGC, Director

Cegetel, Member of the Supervisory Board

Oddo Pinatton Group, Managing Partner

HCA, Director

Abdeslam Ahizoune, member of the Management Board

50, Moroccan nationality.

Business address

Maroc Telecom — Avenue Annakhil, Hay Riad, Rabat, Morocco

Expertise and experience

Mr. Abdeslam Ahizoune was born on April 20, 1955 and holds an engineering degree from the École Nationale Supérieure des Télécommunications in Paris, France (1977). He was appointed Chairman of the Management Board of Maroc Telecom in February 2001 and was appointed as a member of the Management Board of Vivendi Universal on April 28, 2005.

Mr. Ahizoune served as Chairman and Chief Executive Officer of Maroc Telecom from 1998 to 2001. He held the position of Minister of Telecommunications from 1997 to 1998 and Managing Director of the Office National des Postes et Télécommunications (ONPT) from February 1995 to August 1997, Minister of Postal and Telecommunications Services and Managing Director of the ONPT from August 1992 to February 1995 and Director of Telecommunications in the Ministry of Post and Telecommunications from 1983 to 1992. From 1982, Mr. Ahizoune held a number of positions in the Postal and Telecommunications Services and then in the ONPT. Mr. Ahizoune is a member of the Board of Directors of the following organizations: Mohammed V Solidarity Foundation (Fondation Mohamed V pour la Solidarité) since April 2004; Al Akhawayne University, since November 2003; the Mohammed VI Foundation for the Environment (Fondation Mohamed VI pour l’Environnement) since June 2001 and the Lalla Salma Association Against Cancer. Since 2001, Mr. Ahizoune is a member of the Support Committee (Comité de Soutien) of the Mohammed V Solidarity Foundation, and is a member of the Executive Committee of the International Chamber of Commerce, Paris, France since February 2004.

Positions currently held

Maroc Telecom, Chairman of the Management Board

Other

Mohammed V Foundation for Solidarity, Director and Member of the Support Committee

Mohammed VI Foundation for the Environment, Director

Al Akhawayne University, Director

International Chamber of Commerce, Paris, France, Member of the Executive Committee

Directorships held over the last five years

Maroc Telecom, Chairman and Chief Executive Officer

Jacques Espinasse, member of the Management Board

62, French nationality.

Business address

Vivendi Universal — 42 avenue de Friedland, 75008 Paris, France

Expertise and experience

Mr. Jacques Espinasse was born on May 12, 1943 and holds an
MBA from the University of Michigan. In July 2002, Mr. Espinasse

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was appointed Chief Financial Officer of Vivendi Universal and appointed to the Management Board of Vivendi Universal on April 28, 2005. He was formerly Chief Operating Officer of TPS, a French satellite television service, since 1999. He became a Member of the Board of Directors of TPS in 2001.

Previously, Mr. Espinasse held a variety of senior management positions in major French companies, including CEP Communication and Group Larousse Nathan, where he was appointed Senior Executive Vice President in 1984. In 1985, he became Chief Financial Officer of the Havas group. He was appointed Senior Executive Vice President of the group when it was privatized in May 1987 and held this position until 1994. He is a Director of SES Global.

Positions currently held

SFR, Director

Canal+ Group, Member of the Supervisory Board

Maroc Telecom (Morocco), Member of the Supervisory Board and of the Audit Committee

Vivendi Universal Games, Inc. (United States), Director

SES Global (Luxembourg), Member of the Supervisory Board

Veolia Environnement, Director

Vivendi Universal Net, Director

Directorships held over the last five years

UGC, Permanent Representative of Vivendi Universal

Sogecable (Spain), Permanent Representative of Vivendi Universal to the Board of Directors

Vivendi Universal Publishing, Director

Cegetel Group, Director

SFR, Permanent Representative of Saige to the Board of Directors

MultiThématiques SA, Director

Light France Acquisition SAS, Chairman

J.E.D., Chairman and Chief Executive Officer

TPS, Director

Frank Esser, member of the Management Board

47, German nationality.

Business address

SFR – Tour Séquoia, 1 place Carpeaux, 92915 Paris La Défense cedex, France.

Expertise and experience

Mr. Frank Esser was born on September 5, 1958 and holds a doctorate in economics from the University of Fribourg. Mr. Esser was appointed Chairman of SFR in December 2002 and has been with the group since September 2000, when he was appointed Chief Executive Officer. He was appointed as a member of the Management Board of Vivendi Universal on April 28, 2005. Mr. Esser is a member of the Board of Directors of the GSM Association since February 2003 and became Chairman of its Public Policy Committee in 2004. Prior to joining SFR, Mr. Esser was Executive Vice President at Mannesmann, in charge of international business and business development.

Positions currently held

SFR, Chairman and Chief Executive Officer

SHD, Chairman and Chief Executive Officer

Neuf Telecom, Director

Vivendi Telecom International, Director

Vizzavi France, Chairman of the Board of Directors

Maroc Telecom, Member of the Supervisory Board

Other

Vodafone D2, Member of the Supervisory Board

Faurecia, Director

GSM Association, Director

LTB-R, Permanent Representative of SFR to the Board of Directors

Directorships held over the last five years

Cegetel, Chairman and Chief Executive Officer

Cegetel Group, Chief Operating Officer

Cegetel Entreprises, Director

Cofira, Director

Omnitel, Director

Infostrada, Director

Bertrand Meheut, member of the Management Board

54, French nationality.

Business address

Canal+ Group – 1 place du spectacle, 92263 Issy Les Moulineaux cedex 9, France.

Expertise and experience

Mr. Bertrand Meheut was born on September 22, 1951 and graduated from l’École des Mines in France. He joined Canal+ Group in October 2002, as Vice Chairman and Chief Operating Officer. He was appointed Chairman of the Executive Board of Canal+ Group on February 7, 2003, and Chairman and Chief Executive Officer of Canal+ S.A. on February 20, 2003. Mr. Meheut was appointed to the Management Board of Vivendi Universal on April 28, 2005.

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Mr. Meheut has spent most of his career in various positions in the chemicals industry, primarily in the life sciences sector. He held a number of top posts at Rhône-Poulenc, which became Aventis after merging with Germany’s Hoechst. He served as Chairman and Chief Executive Officer of Aventis CropScience, an Aventis and Schering subsidiary, running agrichemicals and biotechnologies operations.

Positions currently held

Canal+ Group, Chairman of the Executive Board

Canal+, Chairman and Chief Executive Officer and Director of some of its subsidiaries

Cegetel, Director

SFR, Director

CanalSat, Chairman of the Board of Directors

Kiosque, Permanent Representative of Canal+ and Manager

NPA Production, Permanent Representative of Canal+ and Manager

MediaOverseas, Member of the Executive Board

Holding Sports & Evénements, Chairman of the Board of Directors

Paris Saint-Germain Football, Director

Sport+ (ex Pathé Sport), Permanent Representative of Groupe Canal+ on the Board of Directors

Directorships held over the last five years

Aventis CropScience, Chairman and Chief Executive Officer

StudioCanal, Chairman of the Board of Directors

Doug Morris, member of the Management Board

67, US nationality.

Business address

Universal Music Group – 1755 Broadway, New York, NY 10019, USA

Expertise and experience

Doug Morris was born on November 23, 1938. He has served as Chairman and Chief Executive Officer of Universal Music Group since November 1995 and was appointed to Vivendi Universal’s Management Board on April 28, 2005. A graduate of Columbia University, Mr. Morris began his music career as a songwriter for music publisher Robert Mellin, Inc. In 1965, Mr. Morris joined Laurie Records, as a writer and producer and was later promoted to Vice President and General Manager. Following this, Mr. Morris created his own label, Big Tree Records, which was distributed and eventually acquired by Atlantic Records in 1978. At this time, Mr. Morris was appointed President of ATCO Records, beginning his 17-year association with Warner Music. In 1980, Mr. Morris was appointed President of Atlantic Records and, in 1990, assumed the position of Co-Chairman and Co-CEO (with Ahmet Ertegun) of the Atlantic Recording Group. In 1994, Mr. Morris was promoted to President and Chief Operating Officer of Warner Music U.S. and was soon thereafter appointed Chairman. Mr. Morris began his association with the MCA Music Entertainment Group (now Universal Music Group) in July 1995, by forming a joint venture, New York City-based full service record label. Throughout his career, Mr. Morris has worked with some of the most popular and influential artists of the past four decades, including the Rolling Stones, Phil Collins, Pete Townsend, Led Zeppelin, Stevie Nicks, Bette Midler, Tori Amos, INXS, Erykah Badu and Mariah Carey. Mr. Morris serves on the Boards of the Robin Hood Foundation and the Cold Spring Harbor Laboratory. Mr. Morris is a Director of the Rock and Roll Hall of Fame. In 2003, the National Academy of Recording Arts and Sciences (NARAS) awarded Mr. Morris with the President’s Merit Award.

Positions currently held

Universal Music Group, Chairman and Chief Executive Officer

Universal Music Group, Director of various subsidiaries

Other

Robin Hood Foundation, Director

Cold Spring Harbor Laboratory, Director

Rock and Roll Hall of Fame, Director

Directorships held over the last five years

Universal Music Group, Director of various subsidiaries

René Pénisson, member of the Management Board

64, French nationality.

Business address

Vivendi Universal – 42 avenue de Friedland, 75008 Paris, France

Expertise and experience

Born on February 2, 1942, Mr. René Pénisson graduated from l’École Supérieure de Chimie in Lyon with an engineering degree. He holds a doctorate in engineering from the Université de Lyon and a degree from the French Management Institute. He was appointed Chairman of Vivendi Universal Games in January 2004 and Senior Executive Vice-President, Human Resources of Vivendi Universal in April 2004. He became a member of the Management Board of Vivendi Universal on April 28, 2005. Prior to these positions, Mr. Pénisson served as adviser to the Chairman and Chief Executive Officer, Social Relations and Organization of Vivendi Universal from September 2002.

From 1999 to 2002, he was a member of the Executive Committee of Aventis, Senior Executive Vice President, Human Resources of Aventis, Chairman of Aventis Animal Nutrition and Chairman of the RP Industrialisation company. From 1997 to 1999, he served as member of the Executive Committee of Rhône Poulenc S.A. From 1982 to 1997, Mr. Pénisson was successively Executive Vice President, Basic Chemicals Division of Rhône Poulenc, Chief Operating Officer of Rhône Poulenc Chimie, and Senior Executive Vice President, Human Resources of the Rhône Poulenc Group.

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Positions currently held

Vivendi Universal Games Inc. (United States), Chairman

Vivendi Universal Games International, Director

Directorships held over the last five years

Aventis, Member of the Executive Committee

Aventis Animal Nutrition, Chairman

RP Industrialisation, Chairman

3.1.2.3. FAMILY RELATIONS

There are no family relations among the members of the Management Board.

3.1.2.4. ABSENCE OF CONFLICTS OF INTEREST

Management is not aware of any current or potential conflict of interest between Vivendi Universal and the members of the Management Board and their personal interests or other obligations.

3.1.2.5.

ABSENCE OF ANY CONVICTION FOR FRAUD, ASSOCIATION WITH A BUSINESS FAILURE OR PUBLIC INCRIMINATION AND/OR SANCTION

Over the past five years, management is not aware of:

•		any conviction in relation to fraudulent offenses delivered against any member of the Management Board,

•		any members of the Management Board being associated with a bankruptcy, receivership or liquidation while serving on an administrative, management or supervisory body during the past five years,

•		any official public incrimination and/or sanction being delivered against any members of the Management Board by statutory or regulatory authorities. On December 20, 2004, Mr. Jean-Bernard Lévy received a notification of grievances served by the Autorité des Marchés Financiers (AMF), concerning a purchase of bonds mandatorily redeemable in shares (ORAs) (please refer to Chapter 2, “Litigation”).

3.1.2.6.

AGREEMENTS ENTERED INTO BETWEEN THE COMPANY AND ONE OF ITS MANAGEMENT BOARD MEMBERS – SERVICE CONTRACTS

The members of the Management Board, Senior Executives and Corporate Officers benefit from an employment contract with the Company, except for Mr. Jean-Bernard Lévy, Chairman of the Management Board, whose employment contract is suspended for the duration of his term of office.

No member of the Management Board is covered by a service contract with Vivendi Universal or any of its subsidiaries or do they expect that any benefits will be granted under the terms of such a contract.

3.1.2.7.

LOANS AND GUARANTEES GRANTED TO MEMBERS OF THE MANAGEMENT BOARD

The Company has extended no loans or granted any guarantee in favor of the members of the Management Board.

3.1.2.8. JURISDICTION AND INTERNAL REGULATIONS OF THE MANAGEMENT BOARD

Role and Powers of the Management Board under Applicable Law and Company By-laws

The Management Board is invested, with respect to third parties, with the broadest powers to act in all circumstances on behalf of the Company, subject to the powers expressly granted by law to the Supervisory Board and to the Shareholders’ Meetings and within the scope of the Company’s corporate purpose and the matters that require the prior authorization of the Supervisory Board.

In addition, the Management Board is invested by law with the following specific powers:

•		to draw up the annual, half-year and quarterly financial statements and management reports,

•		to convene Shareholders’ Meetings,

•		to decide whether to increase the share capital and/or to fix the terms and procedures for this increase, upon delegation by the Extraordinary Shareholders’ Meeting,

•		to reduce the share capital, upon delegation by the Extraordinary Shareholders’ Meeting,

•		to grant options to subscribe or purchase equity shares for the Company’s employees or to grant restricted stocks (actions gratuites), upon authorization by the Extraordinary Shareholders’ Meeting,

•		to issue bonds with the power to delegate to the Chairman of the Management Board or to another member of the Management Board,

•		to modify the share capital, following the conversion of convertible bonds at any time, or subscriptions derived from the exercise of rights detached from compound securities giving rights to shares, or the payment of dividends in the form of shares.

Internal Regulations

The internal regulations of the Management Board constitute an internal document intended to ensure that the management of the Company functions properly and adheres to the most recent rules adopted in furtherance of good corporate governance. The internal regulations are not enforceable against third parties who are not entitled to rely on them against members of the Management Board.

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Role and Powers of the Management Board under the Internal Regulations

The Management Board is responsible for the management of the Company and for the conduct of its business. It is involved in the following areas:

•		review and drawing up of the financial statements, forecasts, cash flow, debt obligations and Company liabilities,

•		sale, merger and acquisition transactions not exceeding the thresholds requiring approval of the Supervisory Board,

•		human resources policy and industrial relations,

•		communications policy,

•		compliance activities,

•		internal audit and internal control procedures,

•		litigation,

•		environmental affairs,

•		insurance.

In accordance with applicable law, the Company’s by-laws and internal regulations of the Supervisory Board, the Management Board must obtain the prior approval of the Supervisory Board under certain circumstances (please refer to the Internal Regulations of the Supervisory Board above).

3.1.2.9. ACTIVITIES OF THE MANAGEMENT BOARD IN 2005

The Management Board met eight times in 2005. Its work mainly involved the following:

•		the review of the half-year and quarterly financial statements for 2005 and drawing up the quarterly progress reports for the Supervisory Board,

•		the preliminary budget for 2006,

•		the analysis of the strategic issues in the areas of media and telecommunications,

•		the review of the Group’s principal business units, the oversight of any merger, acquisition and divestment transactions in progress,

•		the review of the draft agreement between Canal+ Group and TPS in the pay-TV sector in France and entry of Lagardère SCA as shareholder of Canal+ France,

•		the study on the proposed change of the Company’s corporate name,

•		the final redemption of the 8.25% bonds redeemable in shares issued in November 2002,

•		the implementation of a new share repurchase program,

•		the review of the plan to delist its American depositary shares from the New York Stock Exchange and to deregister with the SEC,

•		the oversight and review of litigation in progress.

3.2. Compensation of Directors and Officers

Compensation of corporate officers and of the Company’s principal executives is established by the Supervisory Board (and by the Board of Directors prior to April, 28, 2005) upon recommendation of the Human Resources Committee. The compensation is composed of a fixed and a variable portion.

The variable portion of compensation for 2005 was set by the Board of Directors at its meeting held on March 9, 2005, based upon the following criteria which were presented to the annual Shareholders’ Meeting on April 28, 2005: (1) for corporate officers and senior executives of the headquarters: (a) financial objectives (60%), linked to both adjusted net result attributable to equity holders of the parent (35%) and operational cash flow (25%) and (b) performance of the priority actions of the general management (40%), and (2) for corporate officers (including the subsidiaries’ chairmen or executives): (a) the Group’s financial objectives (15%), (b) the financial objectives of their entity (60%) and (c) priority actions for their entity (25%).

The variable portion of compensation for 2006 was set by the Supervisory Board at its meeting held on February 28, 2006, based on a proposal from the Human Resources Committee at its meeting held on February 27, 2006, based upon the following criteria: (1) for corporate officers and senior executives of the headquarters: (a) financial objectives (63%) linked to both the adjusted net result attributable to equity holders of the parent (42%) and the net operational cash flow (21%) and (b) performance of general management’s priority actions (37%), and (2) for corporate officers (including the subsidiaries’ chairmen or executives): (a) the Group’s financial objectives (15%), (b) the financial objectives of their entity (60%) and (c) priority actions for their entity (25%).

3.2.1. Individual Compensation

3.2.1.1. COMPENSATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Upon recommendation of the Human Resources Committee, the Board of Directors at its meeting held on March 9, 2005, established the following principles for the Chairman and Chief Executive Officer’s compensation for 2005. These principles are unchanged compared to 2003 and 2004 and were presented at the annual Shareholders’ Meeting held on April 28, 2005, which included for a full year, a gross annual fixed salary of €1 million, a target bonus of 150%; with a maximum of 250% and stock options (subscription options) without discount, as approved by the Board of Directors.

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Corporate Governance

On this basis, from January 1^st to April 28, 2005, and as indicated at the annual Shareholders’ Meeting on April 28, 2005, Mr. Jean-René Fourtou, in his capacity as Chairman and Chief Executive Officer, received a gross compensation amount (fixed and variable, and including benefits in kind) of €2,664,516, including a €2,320,000 bonus for 2004, paid in 2005. In addition, Mr. Fourtou received 400,000 undiscounted stock options, the benefit of each such option being valued, as at the allocation date, at €4.33⁽¹⁾, with an exercise price of €23.64. The details of the compensation paid to the Chairman and Chief Executive Officer for the previous two fiscal years are presented below:


	Paid in 2006		Paid in 2005			Paid in 2004
	pro rata		pro rata

Fixed salary		—	€	333,334		€	1,000,008
Bonus for 2005 paid in 2006	€	766,600		—			—
Bonus for 2004 paid in 2005		—	€	2,320,000			—
Bonus for 2003 paid in 2004		—		—		€	2,425,000
Benefits in kind and other		—	€	11,182	*	€	24,555	*
Total	€	766,600	€	2,664,516	**	€	3,449,563


()*		This amount takes into account employer’s pension contributions in excess of the legal tax-deductible threshold and which have been added to the taxable salary, as well as the benefit in kind for a company car.

()		This amount includes the compensation paid on a pro rata basis for services in his capacity as Chairman and Chief Executive Officer, to which a pro rata amount of €666,667 has been added for services in his capacity as Chairman of the Supervisory Board (see below).

3.2.1.2. COMPENSATION OF THE CHAIRMAN OF THE SUPERVISORY BOARD

The Supervisory Board, at its meeting held on April 28, 2005, pursuant to the recommendation of the Human Resources Committee, dated February 1, 2005, after discussion by the Board of Directors and its Governance Committee and in accordance with information presented to the annual Shareholders’ Meeting on April 28, 2005, formulated the principles applicable to the compensation of the Chairman of the Supervisory Board for 2005 (a gross fixed compensation of €1,000,000 calculated on an annual basis from May 1, 2005).

The Chairman of the Supervisory Board does not receive stock options, is not granted restricted stock and does not benefit from a severance payment of any kind. In addition, Mr. Fourtou has waived his right to the retirement pension paid by Vivendi Universal since he commenced service.

In 2005, the Chairman of the Supervisory Board received a pro rata gross amount of €666,667 for his service and benefits in kind of a company car and the availability of a chauffeur. His travel expenses and other expenditure incurred in connection with his duties are paid by the Company. He received no Directors’ fees from Vivendi Universal or any of its subsidiaries.


3.2.2.		Compensation of the Members of the Supervisory Board and Previous Members of the Board of Directors

Payment of Directors’ fees for members of the Supervisory Board and Committees is based on actual attendance at meetings and depends on the number of meetings held. The gross figure for Directors’ fees paid in 2005 was €960,789. Figures for Directors’ fees paid on an individual basis are shown below.

For services rendered during the period starting from January 1, 2005 until April 28, 2005, each Board Member received a pro rata Director’s fee calculated from a fixed portion of €25,000 and a variable portion of €25,000, on a full-year basis, and based upon actual attendance at Board Meetings. This amount was increased by €4,500 per meeting for current members of the Committees and doubled for the Chairman of each Committee.

From April 28, 2005, each member of the Supervisory Board is entitled to receive a fixed Director’s fee for one full year of service of €25,000 plus €5,500 per meeting, subject to attendance and €6,000 per meeting for members of the Audit Committee and €4,500 per meeting for members of the other Committees. Fees for Committee Chairmen are doubled.

(1) The valuation of the benefit arising from the option grants is given for information purposes only. It was calculated according to the “binomial” method used when applying the IFRS 2 standard for the valuation of share-based payments. This theoretical valuation does not necessarily correspond to the gain which might be realized when the shares are sold. The actual gain will depend on the difference between the share price, as at the date of exercise of the option and the share price, as at the date of the sale of the share subscribed, pursuant to the exercise of the option.

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Corporate Governance

The gross total amount of Directors’ fees of €960,789 paid in 2005, was distributed as follows:


Members of the Supervisory Board	(in euros - rounded)

Jean-René Fourtou (a)		0
Claude Bébéar		102,416
Gérard Brémond		76,791
Fernando Falcó y Fernandez de Córdova		75,500
Sarah Frank		43,500
Paul Fribourg		77,875
Gabriel Hawawini		79,000
Patrick Kron		43,500
Henri Lachmann		107,500
Andrzej Olechowski		43,500
Pierre Rodocanachi		92,500
Karel Van Miert		76,916
Directors up to April 28, 2005
Bertrand Collomb		54,083
Marie-Josée Kravis		61,333
Gerard Kleisterlee		26,375


(a)		Mr. Fourtou waived his rights to Directors’ fee payments allocated to members of the Board of Directors and Supervisory Board of the Company and its subsidiaries. .

3.2.3. Compensation of the Chairman and Members of the Management Board

3.2.3.1. COMPENSATION OF THE CHAIRMAN OF THE MANAGEMENT BOARD

Upon the recommendation of the Human Resources Committee, the Supervisory Board at its meeting held on April 28, 2005, formulated principles for the compensation of the Chairman of the Management Board, in accordance with the presentation made at the Shareholders’ Meeting held on April 28, 2005.

Mr. Jean-Bernard Lévy’s employment contract as Deputy Chief Executive Officer of the Company, effective from August 12, 2002, was suspended when he was appointed Chairman of the Company’s Management Board.

As presented to the Shareholders’ Meeting held on April 28, 2005, the compensation of the Chairman of the Management Board was set as follows: a gross annual fixed salary of €800,000, unchanged for 2006, a target bonus of 120% determined according to the criteria above: a maximum of 200%, a total cash target of €1,760,000, a total maximum cash of €2,400,000 and an allocation of 400,000 non-discounted stock options (subscription options) for 2005, the benefit for each of these options as of the allocation date being valued at €4.33⁽²⁾ at an exercise price of €23.64. His travel expenses and other expenditure incurred in connection with his duties are paid by the Company.

As presented to the Combined Shareholders’ Meeting held on April 28, 2005, the Chairman of the Management Board is eligible to the pension plans adopted by the Company (refer to section 3.2.4). In addition, he was recognized for seven years of seniority.

3.2.3.2. COMPENSATION OF THE MEMBERS OF THE MANAGEMENT BOARD

The Supervisory Board, at its meeting held on April 28, 2005, noted that the employment contracts for members of the Management Board, other than the Chairman, should be maintained by virtue of them performing different technical functions and resolved that no special compensation or allowance would be granted to them in relation to their corporate appointment within Vivendi Universal SA.

Details of compensation amounts and benefits in kind paid to members of the Management Board in 2005 (full year) or owed for 2005 (in euros) are described below:


			Variable portion:
	Fixed compensation		2005 bonus
Members of the Management Board	in 2005		paid in 2006			*Benefits in kind ()**			Total 2005

Jean-Bernard Levy		800,000		1,472,000			195,047	(**)		2,467,047
Abdeslam Ahizoune		512,757		346,958			—			859,715
Jacques Espinasse		460,000		846,400			10,164			1,316,564
Frank Esser		650,000		1,150,500			13,727			1,814,227
Bertrand Meheut		650,000		1,189,500			28,014	(a)		1,867,514
Doug Morris		4,453,144		9,881,733	(b)		127,525	(c)		14,462,402
René Pénisson		460,000		846,400			22,000	(a)		1,328,400


()*		This amount takes into account employer’s pension contributions in excess of the legal tax-deductible threshold and which have been added to the taxable salary, as well as the benefit in kind for a company car.

()		Including holiday pay for his previous salaried position (€181,595).

(a)		Including valuation of days of holiday transferred from the time saving account (compte épargne temps) to the pension savings plan.

(b)		Including the 2006 payment for a deferred long-term bonus under the Universal Music Group contract. The 2005 portion amount is €3,977,800.

(c)		Air travel and company car.

(2)		The valuation of the benefit arising from the option grants is given for information purposes only. It was calculated according to the “binomial” method used when applying the IFRS 2 standard for the valuation of share-based payments. This theoretical valuation does not necessarily correspond to the gain which might be realized when the shares are sold. The actual gain will depend on the difference between the share price, as at the date of exercise of the option and the share price, as at the date of the sale of the share subscribed, pursuant to the exercise of the option.

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Pursuant to their employment contracts, each member of the Management Board is entitled to a gross severance payment amount (except in the event of dismissal for serious misconduct), determined as follows:

•		Mr. Jean-Bernard Lévy (employment contract, dated August 9, 2002, suspended during his term of office as Chairman of the Management Board): six months fixed and variable salary, regardless of the unexpired term of his notice period,

•		Mr. Abdeslam Ahizoune (employment contract with Vivendi Universal Group, dated December 2000, as amended on July 8, 2004): 24 months fixed salary and target bonus paid by Vivendi Universal SA and Maroc Telecom, including the legal amount of indemnity payments,

•		Mr. Jacques Espinasse (employment contract, dated July 12, 2002): 12 months fixed salary and target bonus,

•		Mr. Frank Esser (employment contract, dated May 22, 2000, as amended on October 4, 2002): 24 months fixed salary and target bonus, in addition to the legal amount of indemnity payments,

•		Mr. Bertrand Meheut (employment contract, dated September 20, 2002): €2 million, including the legal amount of indemnity payments,

		In case of termination before the age of 60, Mr. Bertrand Meheut can opt for a payment equivalent to the sum funded in connection with the complementary pension plan adopted in 1985, with a seniority as at September 1, 1992 which then supersedes the benefit of the current pension plans presented in section 3.2.4 below,

•		Mr. Doug Morris (employment contract with Universal Music Group dated February 6, 2001, as amended on August 4, 2005 – until termination of his contract as Chairman and Chief Executive Officer of Universal Music Group: December 31, 2008): equal to the fixed salary and target bonus to be paid until the termination of the contract (December 31, 2008), in any case, may not be less than one year’s salary,

•		Mr. René Pénisson (employment contract, dated September 20, 2002): no contractual severance payment.

3.2.4. Pension Plans

A complementary pension plan applicable to the executives of Vivendi Universal SA was adopted in December 1985, by the Compagnie Générale des Eaux. Beneficiaries are guaranteed a pension equal to a percentage of their basic remuneration. This percentage is determined according to the age of the retirement (48.6% at the age of 60 and 60% at the age of 65), with a maximum amount of €300,000 (including pensions under the general regime).

To benefit from this regime, the following conditions must be satisfied, which include having a total of 15 years of service within the Company, ending his or her career within the Group, all compulsory and optional pension provisions must be paid at the time of retirement and the beneficiary must be 60 years old. A payment of 60% of the amount of the pension is paid to the spouse in the event of the beneficiary’s death. The benefits are lost in the event of a departure from the Company before the age of 60.

Members of the Management Board, holding an employment contract with Vivendi Universal SA are eligible to this regime, which they were entitled to before their appointment under the above described conditions.

At its meeting held on March 9, 2005 and as presented to the Shareholders’ Meeting held on April 28, 2005, the Board of Directors decided in principle to introduce an additional pension plan for senior executives, including members of the Management Board, holding an employment contract with Vivendi Universal SA and to recognize a seniority of the Chairman of the Management Board.

Pursuant to the recommendation of the Human Resources Committee, dated October 21, 2005, the Supervisory Board, at its meeting held on December 6, 2005, authorized the establishment of an additional pension plan in accordance with the following rules, which include a minimum of three years in office, the progressive acquisition of rights according to seniority (over a period of 20 years), a reference salary for the calculation of the pension equal to the average of the last three years with a dual upper limit (the reference salary and a maximum of 60 times the French Social Security upper limit (currently €1,864,000), acquisition of rights subject to an upper limit of 30% of the reference salary, application of the Fillon Act (maintenance of rights in the event of retirement at the initiative of the employer after the age of 55 years), and payment of 60% in the event of the beneficiary’s death. The benefits are lost in the event of a departure from the Company, for any cause, before the age of 55.

There is no possibility to cumulate the additional regime and the complementary pension plan. Only the most favorable will be retained upon retirement.

The grant of this additional pension regime to certain members of the Management Board holding a French employment contract constitutes a regulated related-party agreement, as described in the special report of the Statutory Auditors, and is submitted to the Combined Shareholders’ Meeting scheduled for April 20, 2006, in accordance with Article L. 225-88 of the French Commercial Code.

Mr. Doug Morris, a member of the Management Board and Chairman and Chief Executive Officer of Universal Music Group (UMG), who holds an American employment contract, is entitled to the Seagram pension plan for a part of his career within the Group, for which the Company has ceased to contribute. He benefits from UMG pension plans applicable to all UMG employees within the United States, for which UMG contributes up to a maximum amount of $16,260 each year, in addition to the employee’s contributions.

The total cost of the pension plans for members of the Management Board for 2005 was €2,194,155.

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Corporate Governance

3.2.5. Compensation of Senior Executives of the Group

The global aggregate amount of the top ten compensation packages paid by Vivendi Universal SA in 2005 was a gross amount of €14.35 million, including benefits in kind. In addition, in 2005, the global aggregate amount of the top ten compensation packages paid to senior executives within the Group (nine of them are American) was €45.99 million, including benefits in kind.

All senior executives have waived their right to receive Directors’ fees in their capacity as Board Members or permanent representatives within controlled subsidiaries within the meaning of Article L. 233-16 of the French Commercial Code.

3.3. Stock Options

At a meeting held on March 9, 2005, the Board of Directors approved the annual grant of 9,071,000 stock options to 656 beneficiaries (a number of options below the maximum number of 15,948 million, corresponding to the limit of 1.5% of the share capital per year, as announced at the Shareholders’ Meeting held on April 29, 2003).

3.3.1. Stock Option Grants in 2005

Grants of Stock Options to Directors


Date of the Shareholders’ Meeting authorizing the grant	Annual meeting of 4/29/2003
Date of the Board of Directors meeting		3/9/2005
Date of grant		4/26/2005
Maximum number of options that may be granted under the shareholders’ authorization		37,541,852	(a)
Maximum number of options that may be granted during the year after factoring in those already granted		15,948,252	(b)
Total number of options granted in April 2005		9,071,000
Number of options cancelled due to the beneficiaries’ departure		174,500
Total number of options that may be granted on December 31, 2005		6,877,252	(c)
Number of options granted to the Company officer: Mr. Jean-René Fourtou (d)		400,000
Number of options granted to members of the Management Board (e)
Mr. Jean-Bernard Lévy		400,000
Mr. Abdeslam Ahizoune		125,000
Mr. Jacques Espinasse		280,000
Mr. Frank Esser		250,000
Mr. Bertrand Meheut		250,000
Mr. Doug Morris		125,000
Mr. René Pénisson		250,000
Total		2,080,000
Unit exercise price (in euros)		23.64
Expiration date		4/26/2015


(a)		3.5% of the share capital, as of the date of grant (April 26, 2005).

(b)		1.5% of the share capital in accordance with the resolution adopted by the Combined Shareholders’ Meeting held on April 29, 2003.

(c)		Based on the share capital amount, as of December 31, 2005 and on the grants made but rendered invalid following the expiry of the authorization period

(d)		Chairman and Chief Executive Officer until April 28, 2005.

(e)		Appointed by the Supervisory Board on April 28, 2005, following the Combined Shareholders’ Meeting held on the same day.

3.3.2. Options Exercised by Directors in 2005

M. Jean-René Fourtou (a)


2002 subscription plan

Date of grant	10/10/2002
Exercise price	€14.10	(c)
Expiration date	10/10/2010
Number of options	100,000
Total amount of the exercise	€1,410,000

M. Jean-Bernard Lévy (b)


2002 subscription plan

Date of grant	10/10/2002
Exercise price	€14.10	(c)
Expiration date	10/10/2010
Number of options	49,000
Total amount of the exercise	€690,900

(a) Chairman and Chief Executive Officer until April 28, 2005.

(b) Chairman of the Management Board since April 28, 2005.

(c) €12.10 exercise price plus €2 (for a total overall subscription price of €14.10) for the commitment taken by Messrs. Jean-René Fourtou and Jean-Bernard Lévy, at the request of the French Minister of the Economy, Finance and Industry, at the time Vivendi Universal filed its application for the consolidated global profit tax system under French law.

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Corporate Governance

Commitment Made by Certain Directors and Officers with Respect to the Exercise of their Stock Options

At the request of the French Minister of the Economy, Finance and Industry regarding the application of Vivendi Universal for the Consolidated Global Profits tax system, Messrs. Jean-René Fourtou, Jean-Bernard Lévy and Jacques Espinasse agreed to unilaterally and personally renounce the €2 profit resulting from any eventual capital gain pursuant to the exercise of the stock options, which were granted to them by the Board of Directors, prior to December 23, 2003, the application date for the requested tax system, which has been obtained on August 22, 2004 effective on January 1, 2004.

3.3.3. Principal Stock Option Grants and Exercises in 2005

A total of 1,290,000 stock options, representing 14.16% of the total number of options granted in 2005 and 0.11% of the share capital, as at December 31, 2005, were granted to the ten senior executives and employees of the Group, excluding corporate officers, who received the largest number of options.

These options have an exercise price of €23.64 for those options conferring rights to shares listed on the Compartment A of Eurolist by Euronext™ and US$30.63 for those options conferring rights to American Depositary Shares listed on the New York Stock Exchange (NYSE).

A total of 252,994 stock options were exercised, at a weighted average price of €14.46 by the ten senior executives and employees of the Group, excluding corporate officers, who subscribed or purchased the largest number of shares.

3.4. Dealings in Company Securities

Certain transactions involving Company securities are forbidden during specific periods. These transactions include the sale and purchase of Company securities or derivative products, whether on the open market or by means of blocks of securities off the market, and whether directly or indirectly through their spouse, any intermediary, ascendants, descendants, legal person, fiduciary, trust or partnership, whose management responsibilities are exercised by members of the Supervisory Board or the Management Board, or which are controlled by them or is constituted for their benefit, or whose economic interests are substantially the same as theirs:

•		the period between the date on which the members of the Supervisory Board or of the Management Board become aware of information concerning the ongoing business activities of the Company, which if made public, could have a significant effect on the share price, and the date on which this information is made public,

•		the 15 day-period preceding the date on which the consolidated financial statements (annual and half-year) are made public.

3.5. Compliance Program

The purpose of the Compliance Program is to inform the Group’s employees and have them take responsibility for their activities to reduce the risks of liabilities incurred.

It establishes rules of conduct based on general principles of international law (OECD, ILO and European law) as well as prevailing legislation in the various countries (mainly France and the United States).

It sets forth the general ethical rules applicable within the Group. These general rules are implemented at the level of each business unit in order to ensure that these rules integrate the specificity of the subsidiaries’ businesses into the particularities of local laws.

The legal departments of the business units and corporate headquarters work to ensure overall consistency. The General Counsel of Vivendi Universal SA draws up an annual progress report addressed to the Audit Committee, which then reports to the Supervisory Board.

3.5.1. Reasons

The Compliance Program addresses three main concerns:

•		the new national and international standards under which companies must report on how they assume their economic and social responsibility,

•		the emergence of new rating criteria aimed at assessing the policies that companies have set up to assume this responsibility,

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•

the Group’s presence in the United States.

3.5.2. Issues

The compliance program has two major challenges:

•

one is to sensitize the Group’s employees and to provide them with a reference guide that sets a benchmark that can help them to determine their course of action,

•

the other is to reduce the risks of incurring civil and penal liabilities by the employees and the Group’s companies.

3.6. Financial Code of Ethics

At its meeting held on March 16, 2004, the Board of Directors of Vivendi Universal SA adopted a Financial Code of Ethics. The action was proposed by the Audit Committee in accordance with the rules of the Securities and Exchange Commission (SEC) and the Sarbanes-Oxley Act of 2002. This code was maintained following the Company’s change of organizational structure. It applies to the senior executives of Vivendi Universal SA who are responsible for communications and financial and accounting reports.

3.7. Disclosure Committee

This Disclosure Committee (within the meaning of the Sarbanes — Oxley Act of 2002) was created in 2002 and is responsible for regularly assessing the methods used to draw up and disclose the Company’s financial information.

3.7.1. Composition

The Committee Members are appointed by the Chairman of the Management Board. The Committee shall at least comprise those Vivendi Universal executives holding the following positions:

•		the General Counsel (Chairman of the Committee),

•		the Chief Financial Officer,

•		the Executive Vice President, Communications and Public Affairs,

•		the Deputy Chief Financial Officers,

•		the Senior Vice President, Audit and Special Projects,

•		the Executive Vice President, Investor Relations,

•		and the Senior Vice President, Head of Legal Department.

The Committee may have additional members who are employees from the aforementioned departments or their substitutes. The Committee is currently comprised of 15 members.

3.7.2. Powers

The Committee assists the Chairman of the Management Board and the Group’s Chief Financial Officer in their mission to ensure that Vivendi Universal fulfills its disclosure requirements with respect to investors, the public and the regulatory and market authorities, in particular the Autorité des Marchés Financiers (AMF), Euronext Paris SA in France, the Securities and Exchange Commission (SEC) and the New York Stock Exchange in the United States.

3.7.3. Missions

In carrying out its mission, the Committee:

•

ensures that Vivendi Universal has set up adequate controls and procedures so that:


	–		any information that must be disclosed to investors, the public or to the regulatory authorities is reported within the deadlines stipulated by applicable laws, regulations and forms,

–

all communications is subject to appropriate verifications in accordance with the procedures set up by the Committee,


	–		all information requiring a release to investors and/or appearing in the documents recorded or filed with any regulatory authority is communicated to the Company’s senior management beforehand, including the Chairman of the Management Board and the Group’s Chief Financial Officer, so that decisions concerning the information to be disclosed can be taken in a timely manner,

•		provides oversight of the regular assessments of Vivendi Universal’s procedures for controlling information and its internal control procedures under the supervision of the Chairman of the Management Board and of the Group’s Chief Financial Officer,

•		advises the Chairman of the Management Board and the Group’s Chief Financial Officer on any significant malfunction for which the Committee could be informed and which is likely to affect Vivendi Universal’s procedures for controlling information and its internal control procedures. The Committee issues recommendations, when necessary, for changes to be made to these controls and procedures. The Committee supervises the implementation of modifications approved by the Chairman of the Management Board and the Group’s Chief Financial Officer,

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•

and generally ensures that the Chairman of the Management Board and the Group’s Chief Financial Officer receive all of the information that they may request, in order to sign the certificates stipulated under the Sarbanes-Oxley Act and corresponding SEC rules.

3.7.4. Deliberations in 2005

The Committee meets at the initiative of the Chairman of the Management Board, the Chief Financial Officer, and its chairman or of one of its members. Meetings are held at least once each quarter and, at any rate, before each Audit Committee meeting and in keeping with the schedule for releasing financial information on the Group’s results.

The Committee met eight times in 2005. Its deliberations primarily concerned:

•		review of the financial information published on the annual, half-year and quarterly results and published in the Annual Report and the Form 20-F,

•		review of the annual and half-year certification letters, signed by the Chairman and Chief Financial Officer of each of the Group’s business units,

•		review of progress questionnaires for assessing internal controls pursuant to section 404 of the Sarbanes-Oxley Act of 2002,

•		review of the Group’s procedures.

The deliberations are not limited to matters listed in the agenda for the meeting.

The Committee reports to the Chairman of the Management Board and to Vivendi Universal’s Chief Financial Officer. It reports to the Audit Committee. These reports may be in the form of an oral report made by the Committee Chairman.

3.8. General Management


Chairman of the Management Board		Jean-Bernard Lévy
Member of the Management Board and Chief Financial Officer		Jacques Espinasse
Member of the Management Board, Chairman of VU Games and Senior Executive Vice President, Human Resources of Vivendi Universal		René Pénisson
Senior Executive Vice President, Strategy and Development		Robert de Metz
Executive Vice President, General Counsel and Secretary of the Management Board and of the Supervisory Board		Jean-François Dubos
Executive Vice President, Communications and Public Affairs		Michel Bourgeois
Executive Vice President, Mergers and Acquisitions		Régis Turrini

3.9. Principal Accountant Fees and Services

Fees Paid by the Company to its Statutory Auditors and Members of their Firms in 2005


	Salustro Reydel								Barbier Frinault & Autres
	(a member of KPMG International)								(a member of firm Ernst & Young International)
	Fee				%				Fee				%
(In millions of euros)	2005		2004		2005		2004		2005		2004		2005		2004

Audit Fees
Statutory audit, certification, and review of the statutory and consolidated financial statements		6.4		5.7		83		74		8.6		10.9		92		81
Audit-related fees		1.3		2.0		17		26		0.7		2.6		8		19
Sub-total		7.7		7.7		100		100		9.3		13.5		100		100
Other fees: legal, tax and corporate		—		—		—		—		0.05		—	NA			—
Sub-total		—		—				—		0.05		—	NA			—
Total		7.7		7.7		100		100		9.35		13.5		100		100

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       Report of the Chairman of the Supervisory Board of Vivendi Universal on the Conditions of Preparation
        and Organization of the Work of the Supervisory Board and Internal Audit Procedures – Fiscal Year 2005



4	Report of the Chairman of the Supervisory Board of Vivendi Universal on the Conditions of Preparation and Organization of the Work of the Supervisory Board and Internal Audit Procedures – Fiscal Year 2005

This report is presented to the Combined Ordinary and Extraordinary Shareholders’ meeting of Vivendi Universal to be held on April 20, 2006, pursuant to Article L. 225-68 of the French Commercial Code.

This report was examined by the Audit Committee prior to being presented to the Supervisory Board during its meeting held on February 28, 2006.

4.1. Conditions of Preparation and Organization of the Work of the Supervisory Board – Corporate Governance

The Supervisory Board currently comprises twelve members, ten of whom are independent within the meaning of the Bouton report. Five of its members are of a nationality other than French, including three citizens of the European Union Member States and two of American nationality.

In addition to the prerogatives set forth by law and regulations, the Supervisory Board examines and approves, prior to their implementation, the significant transactions and strategic orientations of the Company, acquisitions or divestitures of holdings and assets in which their amount is likely to affect the structure of the Company’s balance sheet and, in any case, any transaction of an amount which is equal to or exceeds €300 million, as well as any internal restructuring operations having an impact on the Group’s organizational activities.

The Supervisory Board met five times since April 28, 2005 (the date on which the Combined Shareholders’ Meeting approved the change of the Company’s corporate structure). Previously, between January 1^st and April 28, 2005, the Board of Directors met three times. The average attendance rate of the 12 members at meetings of the Supervisory Board was 92%.

The rules governing the functioning of the Supervisory Board are set forth in the internal regulations approved by the Supervisory Board at its meeting held on April 28, 2005.

The objective of the internal regulations is, notably, to set forth the rules governing the composition of the Supervisory Board, with the purpose of guaranteeing the independence of its decisions, its role and its powers, by supplementing the legal provisions and by-laws, as well as the rules governing its relations with the Management Board and its Chairman. These internal regulations supplement the most recent standards of corporate governance, thereby guaranteeing compliance with the fundamental principles applying in this matter. They are not binding on third parties.

The Supervisory Board has set up four Committees: the Audit Committee (five meetings in 2005), the Strategy Committee (four meetings in 2005), the Human Resources Committee (four meetings in 2005) and the Corporate Governance Committee (two meetings in 2005).

4.1.1. Information of the Supervisory Board

The members of the Supervisory Board receive all the information and documents necessary to accomplish their mission and adopt resolutions. Prior to any meeting, they may obtain any supplementary documents they consider useful.

In accordance with law, the Management Board presents a quarterly report to the Supervisory Board covering the following matters, including financial indicators, activities of the business units (financial results, cash flow sales, operating performance and significant events), sales, mergers and acquisitions, principal litigation concerning the Group and its business units, communications, investor relations and human resources.

In addition, the Supervisory Board is informed by the Management Board or its Chairman, on a regular basis, and by any useful means, of any significant events or transactions concerning the Company.

Company press releases are sent to the members of the Supervisory Board.

In order to supplement their information, members of the Supervisory Board may meet members of the Management Board, the principal managers of the Company, whether in the presence of members of the Management Board or not, after proper notice is given to the Chairmen of the Supervisory and Management Boards.

102 2005 Annual Report — Vivendi Universal

Information Concerning the Company — Corporate Governance 3

Report of the Chairman of the Supervisory Board of Vivendi Universal on the Conditions of Preparation
and Organization of the Work of the Supervisory Board and Internal Audit Procedures — Fiscal Year 2005

4.1.2. Assessment of Functioning of the Supervisory Board

Pursuant to its internal regulations, the Supervisory Board periodically devotes an item of its agenda to a discussion concerning its functioning. Furthermore, under the direction of the Corporate Governance Committee, the Supervisory Board conducts a formal assessment of its operations.

An assessment was conducted for 2005, the responses of which were discussed in the Corporate Governance Committee meeting held on February 28, 2006 and presented to the Supervisory Board on the same day. This assessment was conducted by means of a questionnaire completed by each member of the Board, which was collected by the General Counsel of Vivendi Universal. All the members of the Supervisory Board completed the questionnaire, which was organized around six major topics, including the composition, missions and duties of the Supervisory Board, its functioning and the information made available to it, the organization and operation of the Committees and, finally, its relations with the Management Board.

4.2. Internal Control Procedures

4.2.1. Definition and Objectives of Internal Control

The Company considers internal control as a set of procedures defined by the Management Board and implemented by Vivendi Universal employees, whose aim is to achieve the following objectives:

•		application of the instructions and objectives set by the Management Board,

•		compliance with laws and regulations,

•		prevention and control of operational risks, financial risks and risks relating to error and fraud,

•		quality and fairness of accounting, financial and management information.

In order to achieve each of these objectives, Vivendi Universal has defined and implemented general principles of internal control which rely to a large extent on the definitions of the COSO Report (Committee of Sponsoring Organizations of the Treadway Commission).

These principles are based on:

•		policy contributing to the development of the internal control culture and principles of integrity,

•		identification and analysis of risk factors likely to have a negative impact on the achievement of the Group’s objectives,

•		organizations and procedures which aim to ensure implementation of the objective set by the Management Board. In accounting, legal and financial matters more specifically, these policies and procedures are defined to provide reasonable assurance regarding the reliability of management information and financial statements drafted in accordance with generally accepted accounting principles,

•		periodic assessment of the quality of internal control making it possible to define and supervise control activities,

•		process of disseminating information relating to internal control.

Nevertheless, as for any control system, the principles adopted cannot provide absolute assurance that risks relating to error or fraud are totally confined or eliminated.

4.2.2. Scope of Internal Control

Vivendi Universal is organized in operational units. The major orientations and objectives of the Group and of its business units are defined by the Management Board, presented to the Strategy Committee and reviewed by the Supervisory Board. The management of each operational business unit is responsible for implementing strategies and for the internal control system, which encompasses compliance with Group procedures and designing and implementing procedures specific to the unit for which it is responsible.

The purpose of this internal control system is to increase the accountability of the operational business units’ management and ensure that internal controls are adequate in respect of the risks of each of the Group’s business units. As a holding company, Vivendi Universal SA oversees that internal control procedures are in place in its subsidiaries, in particular with regards relating to financial, tax and legal reporting.

Vivendi Universal is committed to establishing an adequate control environment by defining the Group’s values, which include, in particular, consumer orientation, creativity, ethics and social responsibility, and by adapting the Compliance Program, which defines the code of conduct applicable to each Group employee, irrespective of his or her functions or position in the management hierarchy. This code of conduct encompasses employee rights, fairness and protection of information, prevention of conflicts of interest, commercial ethics, use of goods and resources belonging to the Group, financial ethics and preservation of the environment. It covers procedures for monitoring its implementation within the business units, in view of the submission of an annual report to the Audit Committee. All Group employees can consult Vivendi Universal’s values and the content of the Compliance Program on the Group intranet site.

2005 Annual Report — Vivendi Universal 103

3 Information Concerning the Company — Corporate Governance

Report of the Chairman of the Supervisory Board of Vivendi Universal on the Conditions of Preparation

and Organization of the Work of the Supervisory Board and Internal Audit Procedures — Fiscal Year 2005

The different procedures presented hereafter contribute to reinforcing control within each of the functional departments of Vivendi Universal SA, and in particular, the financial department, the legal department and internal audit, in connection with the specific program launched in 2002, pursuant to the implementation of the US Sarbanes-Oxley Act of 2002 and continued thereafter pursuant to the French Financial Security Act (loi de sécurité financière) as of August 1, 2003.

4.2.3. Key Processes in the Company

Internal control within Vivendi Universal is based on a policy of strict accountability of the head office and the business units. The main processes regulating and guiding the activities of Vivendi Universal SA are described below:

•		Plan, budget and management control. Each operational unit must present its strategy, a three-year business plan and its annual budget to the Group’s senior management every year. After approval by the Management Board of Vivendi Universal, a summary statement is presented to the Supervisory Board. Quantitative and qualitative targets used as a basis to assess performance are then set for business unit management, in connection with the priority actions monitored on a monthly basis and assessed every year. These budgets are modified three times per year via a specific reporting process.

•		Investments/divestitures. All investment and divestiture transactions exceeding €15 million must receive prior authorization from the Investment Committee chaired by the Chairman of Vivendi Universal’s Management Board. This procedure applies to all capital transactions (acquisition of stakes and launch of new activities) as well as any financial commitment (acquisition of rights and real-estate contracts) that is not included in the annual budget. The Investment Committee meets as often as necessary. The preparation of documentation and production of reports are the responsibility of the Group, Strategy and Development department. The Chairman of the Investment Committee ensures satisfactory coordination with the respective business unit(s) concerned and ensures the presence of a representative of the finance department at every meeting. Furthermore, any transaction for an amount exceeding €100 million and €300 million must receive, respectively, prior approval of the Management Board and the Supervisory Board, pursuant to the provisions set forth in their internal regulations.

•		Monitoring of financial commitments. The business units produce an inventory of commitments given and received as part of the half-year and annual financial reporting process. These commitments are presented by the financial and legal teams of the business unit at meetings with Group senior management as part of the annual accounts closing process.

•		Sureties, endorsements and guarantees. Pursuant to the provisions of the by-laws and the internal regulations of the Supervisory Board, any sureties, endorsements or guarantees given by Vivendi Universal SA to its subsidiaries must receive prior approval in accordance with the following dual thresholds:

	–		any commitment under €100 million, within a cumulative limit of €1 billion in commitment, must receive the prior approval of the Management Board, which has the right to subdelegate,

	–		any commitment over €100 million having the effect of taking the cumulative limit to over €1 billion, must receive the prior approval of the Supervisory Board.

•		Treasury, financing and liquidity. Management of cash flows and hedging operations (exchange and interest rates) are centralized at Vivendi Universal’s head office. The monitoring of liquidity, interest and exchange rate positions is carried out twice a month by a Finance Committee. Short and long-term financing are performed primarily at the head office and require the prior approval of the Management Board and the Supervisory Board, in accordance with the provisions of their internal regulations.

•		Sundry taxes and duties. Validation of current tax, deferred tax, tax paid and calculation of the effective tax rate are carried out by the Group’s Tax Department, in collaboration with the Consolidation and Financial Reporting departments. To this extent, a centralized reporting tool is gradually implemented in each of the Group’s business units. In addition, within the framework of the Consolidated Global Tax System, a complete collection of statutory accounts has been performed with the assistance of specialized consultants to ensure the appropriate transition between net result under local accounting rules and the net result in accordance with French tax legislation. The calculation and recording of the profit generated by the Consolidated Global Tax System, as established by the Group’s Tax Department, is monitored on a quarterly basis and validated by the Consolidation Department and the Group’s Chief Financial Officer. The Tax Department acts as advisor to the subsidiaries and ensures the defense of these entities’ fiscal interests with respect to local tax administrations and tax tribunals.

•		Consolidation and financial reporting. The Group’s consolidated accounts and financial reporting process comply with International Financial Reporting Standards (IFRS) and include reconciliation with American accounting standards, based on accounting data produced under the responsibility of business unit management. There are specific procedures in respect of the main subjects concerning the financial report. They include, in particular, a regular impairment test on the assets held by the Company, d

VIVENDI UNIVERSAL 6-K