Syngenta AG (SYT)

The assumptions used by Syngenta may differ materially from actual results, and these differences may result in a significant impact on the amount of pension expense recorded in future periods. As allowed by IAS 19, Syngenta amortizes actuarial gains and losses which fall outside the 10% corridor over the average future service lives of employees. Under this method, major changes in assumptions, and variances between assumptions and actual results, may affect reported earnings over several future periods rather than one period, while more minor variances and assumption changes may be offset by other changes and have no direct effect on reported earnings. At December 31, 2005, unrecognized actuarial losses were US$763 million for pensions and US$54 million for other post-retirement benefits, and estimated amortization expense for 2006 is US$40 million (2004: unrecognized actuarial losses of US$610 million and US$59 million, and actual 2005 amortization expense of US$28 million; 2003: unrecognized actuarial losses of US$517 million and US$76 million, and actual 2004 amortization expense of US$32 million). Amortization periods are calculated for each plan, and range from 12 to 15 years.

In the opinion of Syngenta, the use of the corridor method is appropriate in view of the long-term nature of defined benefit pension provisions and the significant degree of estimation required to measure pension expense. However, Syngenta is studying public debate about pension accounting. In December 2004, the IASB amended IAS 19 to allow actuarial gains and losses to be recognized immediately outside net income. The amendment prohibits the recycling of actuarial gains and losses into net income subsequently; Syngenta has not adopted the amendment. If it does so in the future, the change would be implemented by adjusting prior years’ income statements retrospectively. Pre-tax income would increase, because amortization expense would be eliminated. In December 2005, the US Financial Accounting Standards Board (FASB) announced its intention to propose similar, but not identical, changes to US GAAP pension accounting rules. The FASB proposals would require, rather than allow, immediate recognition of actuarial gains and losses and past service costs outside net income. Recycling of gains and losses into net income would be required. If these proposals are implemented, unlike the IFRS changes, Syngenta’s pre-tax income would be unaffected. Syngenta would recognize significantly higher pension and post-retirement benefit liabilities in its balance sheet under both the optional IFRS and the proposed new US GAAP rules.

The following information illustrates the sensitivity to a change in certain assumptions for the three major defined benefit pension plans shown in Note 26 to the financial statements, as of December 31, 2005:

The above sensitivities reflect the total impact of changing the stated assumption as shown for all of the three major plans, leaving all other assumptions constant. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear.

Syngenta’s reported pension liabilities have increased in 2005, as they did in 2004 and 2003, as a result of falls in interest rates - specifically, the yields in AA rated corporate bonds used to select the discount rate. Syngenta decreased the nominal discount rate for its UK pension fund by 60 basis points to 4.8% (2004: 5.4%) . As limited price inflation indexation of pensions in payment and deferred pension rights is required by UK pension regulations, Syngenta’s UK pension fund rules require these to be increased by the lower of 5% or the actual price inflation as measured by the UK Retail Price index (RPI). Therefore, the change in real discount rates - the nominal discount rate less the expected long-term rate of price inflation - is a more relevant indictor than the nominal discount rate. The real discount rate for the UK fund reduced in 2005 by 60 basis points to 2.2% (2004: 2.8%) . For Syngenta’s Swiss and US pension funds, nominal discount rate is a more relevant indicator, because inflation linked increases to pensions are not legally required in either country, nor are they required by the rules of the funds. The discount rate for the Swiss pension liabilities reduced in 2005 by 75 basis points to 2.75% (2005: 3.5%) . The rate is based on 15 year AA Swiss corporate bond data. The discount rate for the US pension liabilities reduced in 2005 by 25 basis points to 5.5% (2004: 5.75%) . The rate is based on recognized US AA Corporate Bond indices.

Pension liabilities can also be significantly affected by the assumptions and actual experience related to mortality. In recent years, longevity has increased in all countries in which Syngenta operates defined benefit plans. Assumptions applied by Syngenta in respect of its UK pension liabilities in these financial statements are based on specific data for Syngenta fund members as at the most recent UK statutory valuation date, March 31, 2003. The next statutory valuation will be performed as at March 31, 2006. Younger members are assumed to live longer than older members, based on extrapolation of the recent trend of increasing longevity. The assumptions applied for the Swiss pension liabilities are based on published Swiss government tables, because insufficient historical data is available to calculate specific mortality rates for the Syngenta plan membership. The tables used were last updated in 2000. For its 2006 financial statements, Syngenta intends to apply more recent data which is expected to be available. Syngenta’s US pension plan gives members lump sum or annuity benefit

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