SAFT GROUPE S.A. REPORT OF THE MANAGEMENT BOARD to

SAFT GROUPE S.A.
A French joint-stock corporation (société anonyme) with a Management Board
and a Supervisory Board
Share capital: €18,514,086
Registered office: 12, rue Sadi Carnot, 93170 Bagnolet, France
Registered with the Bobigny Companies Registry under number B 481 480 465
(hereinafter referred to as the “Company”)
REPORT OF THE MANAGEMENT BOARD
to the June 16, 2008 Ordinary and Extraordinary Shareholders’ Meeting
To the shareholders,
In accordance with the law and the Company’s bylaws you have been called
to this Ordinary and Extraordinary Shareholders’ Meeting to vote on
seventeen resolutions. The purpose of these resolutions is described below.
As you are aware, Saft Groupe SA is the parent company of the Saft Group
and provides services to Group companies. The report set out below only
concerns Saft Groupe SA as details relating to the Group as a whole are
provided in the Group Management Report.
Both this report and the above-mentioned Management Report have been
reviewed by the Supervisory Board. The reports of the Management Board,
the Supervisory Board and the Statutory Auditors were made available to you
prior to this Meeting.
EMPLOYEES
Saft Groupe SA had no employees at December 31, 2007.
2007 RESULTS
The Company ended 2007 with a turn over of €6,359,932 compared with
€6,156,200 in 2006.
Operating profit came to €1,504,840 versus €1,216,701 in 2006.
The Company ended 2007 with pre-tax profit of €1,084,488 compared with
€1,039,958 for the previous year.
After tax, the Company’s profit for the year was €1,084,488.
EQUITY
The Company’s equity amounted to €197,615,242 at December 31, 2007
compared with €209,097,688 at the previous year-end.
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OWNERSHIP STRUCTURE
At December 31, 2007, the Company had 18,514,086 outstanding shares,
unchanged from December 31, 2006.
The Company’s ownership structure was as follows at the year-end:
• Management and employees
3.9%
• Free float
96.1 %, of which:
o Schroder Investment Management Ltd (SIM) 19.24%
o Fortis Investment Management France
5.16%
o Oppenheimer Funds Inc
5.01%
o Bestinver Gestion S.G.I.I.C. SA
5.00%
SHARE BUYBACK PROGRAM AND LIQUIDITY AGREEMENT
The Company used the authorizations granted by the Shareholders’ Meetings
of June 22, 2006 and June 6, 2007 to set up a liquidity agreement in order to
maintain a liquid market for the Company’s shares. At December 31, 2007,
the Company held 34,953 Saft Groupe SA shares in connection with this
agreement, representing 0.19% of the capital.
APPROPRIATION OF PROFIT
The Management Board is recommending that the entire €1,084,488.35 profit
for the period and €1,039,958.29 from the retained earnings account be
appropriated to the legal reserve.
RECOMMENDED DIVIDEND
Shareholders are invited to approve the payment of a dividend amounting to
€0.68 per share to be deducted from the share premium account which
amounts to €176,976,709.96. The dividend payment will be based on the
number of shares outstanding at the dividend payment date (excluding
treasury shares).
Dividends on any treasury shares held by the Company at the dividend
payment date in connection with the share buyback program will be allocated
to the retained earnings account.
The dividend will be payable from July 7, 2008.
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Dividends paid for the last two years were as follows:
2005
2006
€0.65
€0.68
As the Company was only incorporated in 2005, no dividend was paid for
2004.
OUTLOOK FOR 2008
The Company will continue to play the role of the Group’s holding company
and provide services to Group companies. It will receive dividends from its
subsidiaries in France and abroad.
PRESENTATION OF THE RESOLUTIONS
The Management Board is asking shareholders to approve the following
eleven ordinary resolutions:
FIRST RESOLUTION (Approval of the financial statements for the year
ended December 31, 2007 and appropriation of profit)
The purpose of the first resolution is to (i) approve the parent company financial
statements for the year ended December 31, 2007; (ii) appropriate profit for the year
and retained earnings to the legal reserve; and (iii) give discharge to the members
of the Management Board and Supervisory Board for the performance of their
duties in 2007.
SECOND RESOLUTION (Approval of the consolidated financial statements for
the year ended December 31, 2007)
The purpose of the second resolution is to approve the consolidated financial
statements for the year ended December 31, 2007.
THIRD RESOLUTION (Dividend payment, to be deducted from the
share premium account)
The purpose of the third resolution is to approve a dividend of €0.68 per share, to be
deducted from the share premium account which amounts to €176,976,709.96. The
dividend will be payable from July 7, 2008.
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FOURTH RESOLUTION (Approval of a regulated agreement entered into
between Saft Acquisition SAS and John Searle)
In the fourth resolution shareholders are invited to approve a regulated agreement
entered into between the Company’s subsidiary Saft Acquisition SAS and
John Searle, Chairman of the Management Board of Saft Groupe SA, in accordance
with Article L.225-90-1 of the French Commercial Code as amended by French Act
2007-1223 of August 21, 2007.
The purpose of this agreement is to set the performance criteria that must be met
prior to payment of the severance benefits provided for in the employment contract
entered into on January 14, 2004 between Saft Acquisition SAS and
John Searle, Chairman of the Company’s Management Board. The applicable terms
and conditions are set out in the Statutory Auditors’ special report drawn up in
accordance with Article L.225-88 of the French Commercial Code concerning
agreements governed by Article L.225-86 of said Code.
At its March 11, 2007 meeting, the Company’s Supervisory Board authorized an
amendment to the above-mentioned employment contract providing that the
payment of John Searle’s contractual severance benefits will be subject to two
performance criteria based on individual and company-related objectives. In
accordance with this amendment said contractual severance benefits will only
therefore be payable if both of the following two criteria are met:
•
•
The beneficiary has received at least 20% of the maximum amount of his
annual performance-related bonus at least once in the previous three
years.
Saft Groupe SA has posted positive EBIT figures for the entire duration of
the beneficiary’s term(s) of office.
In accordance with Article L.225-88 of the French Commercial Code the abovedescribed regulated agreement is subject to the approval of this Shareholders’
Meeting.
FIFTH RESOLUTION (Approval of regulated agreements)
In the fifth resolution, shareholders are invited to approve a number of regulated
agreements governed by Article L.225-86 of the French Commercial Code.
The first three regulated agreements:
•
were duly authorized by the Company’s Supervisory Board in prior years;
•
were entered into in prior years and remained in force in 2007;
•
were approved by previous Shareholders’ Meetings.
The first and second of these agreements were approved at the Shareholders’
Meeting of June 22, 2006 and the third agreement was approved at the
June 29, 2005 Shareholders’ Meeting.
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1. Management Services Agreement dated October 1, 2005 entered into
between Saft Groupe SA and its operating subsidiaries
On October 1, 2005 the Company signed a Management Services Agreement
with its operating subsidiaries. Under this agreement:
•
Saft Groupe SA provides certain management services to its operating
subsidiaries; and
•
the operating subsidiaries pay a quarterly fee to the Company, representing 1.1% of
their external revenue.
The Management Services Agreement was entered into for a period of thirty-nine
months, expiring on December 31, 2008. It is subsequently automatically
renewable on an annual basis unless terminated with six months’ notice.
The Company’s Supervisory Board authorized the signature
Management Services Agreement at its meeting on June 29, 2005.
of
this
2. Services Agreement dated October 1, 2005 entered into between
Saft Groupe SA and Saft SA
On October 1, 2005 the Company signed a Services Agreement with Saft SA, its
main operating subsidiary in France. Under this agreement:
•
Saft SA provides certain services to the Company; and
•
the Company pays Saft SA for the services on an actual cost basis.
The Services Agreement was entered into for a period of thirty-nine months,
expiring on December 31, 2008. It is subsequently automatically renewable on an
annual basis unless terminated with three months’ notice.
The Company’s Supervisory Board authorized the signature of this Services
Agreement at its meeting on June 29, 2005.
3. Term and revolving facilities agreement entered into between
Saft Groupe SA and Mizuho Corporate Bank Ltd (“Mizuho”) on June 13,
2005
On July 5, 2005, a banking pool led by Mizuho extended new credit facilities to the
Company and a number of its subsidiaries, including (i) a non-renewable fixed-term
loan comprising two tranches of €167 million and US$270 million respectively; and
(ii) a revolving multi-currency facility representing €50 million (which was
subsequently reduced to €30 million at the request of the Company).
These new credit facilities were granted for a period of five years.
Under the terms of the credit agreement, each borrowing company
undertook to honor, at the lender’s request, the commitments of any other
borrowing company party to the agreement in the event of default.
The Company’s Supervisory Board authorized the signature of this term and
revolving facilities agreement at its meeting on June 10, 2005.
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Details of the above three agreements are provided in the Statutory Auditors’
special report on regulated agreements.
4. Non-competition clause included in the employment contract entered
into between John Searle (Chairman of the Management Board) and
Saft Acquisition SAS.
The employment contract signed on January 14, 2004 between the Chairman of the
Company’s Management Board and Saft Acquisition SAS – a company controlled
by Saft Groupe SA – includes a non-competition clause that meets the definition of a
regulated agreement in accordance with paragraph 6 of Article L.225-90-1 of the
French Commercial Code as amended by French Act 2007-1223 dated
August 21, 2007. Details of this regulated agreement are provided in the
Statutory Auditors’ special report drawn up in accordance with Article L.225-88
of said Code.
Shareholders are invited to approve this agreement which remained in force during
2007.
The following three regulated agreements (nos. 5, 6 and 7) were
duly authorized by the Supervisory Board at its December 18, 2007
meeting. The Company has set up a defined contribution
supplementary retirement plan which forms part of an Intercompany
Retirement Savings Plan (“Plan d’Epargne Retraite Inter
Entreprises”). This plan – which came into effect on January 1, 2007
– is open to all of the Company’s executives and managers. The
decisions made to allow members of the Management Board to
participate in this plan fall within the definition of a regulated
agreement governed by Article L.225-86 of the French Commercial
Code.
5. Entitlement to membership of a defined contribution supplementary
retirement plan for John Searle, Chairman of the Management Board
Under the terms of his employment contract dated January 14, 2004, the Chairman
of the Management Board was entitled to membership of a defined benefit
supplementary retirement plan. This entitlement was cancelled with retroactive
effect from January 1, 2007 and replaced by an entitlement to membership of a
defined contribution supplementary retirement plan as well as a compensatory
amount included in his annual salary.
This defined contribution supplementary retirement plan was set up on
January 1, 2007 and forms part of an Intercompany Retirement Savings Plan (“Plan
d'Epargne Retraite Inter Entreprises”).
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6. Entitlement to membership of a defined contribution supplementary
retirement plan for Elizabeth Ledger, member of the Management Board
Elizabeth Ledger’s entitlement to membership of a defined contribution
supplementary retirement plan that forms part of an Intercompany Retirement
Savings Plan (“Plan d'Epargne Retraite Inter Entreprises”) began on January 1, 2008.
7. Entitlement to membership of a defined contribution supplementary
retirement plan for Xavier Delacroix, member of the Management Board
Xavier Delacroix’s entitlement to membership of a defined contribution
supplementary retirement plan that forms part of an Intercompany Retirement
Savings Plan (“Plan d'Epargne Retraite Inter Entreprises”) began on January 1, 2008.
Details of the above three agreements, which are submitted to shareholders for
approval, are provided in the Statutory Auditors’ report on regulated agreements.
SIXTH, SEVENTH, EIGHTH AND NINTH RESOLUTIONS (renewal of the
terms of office of members of the Supervisory Board)
The purpose of these four resolutions is to renew the terms of office of members of
the Supervisory Board that are due to expire at the close of this Shareholders’
Meeting. The persons concerned are Yann Duchesne (Chairman), Jean-Marc
Daillance (Vice-Chairman), Bruno Angles and Ghislain Lescuyer. Shareholders are
invited to renew these Supervisory Board members’ terms of office for a three-year
period expiring at the close of the Shareholders' Meeting to be called to approve the
financial statements for the year ending December 31, 2010.
Yann Duchesne (51)
Yann Duchesne has been Chairman of the Company’s Supervisory Board since
May 12, 2005. He has held the position of Senior Principal at London-based Doughty
Hanson since January 2003. Earlier in his career he held various posts at the
consultants McKinsey & Company where he worked for twenty years, including a
long period managing the Corporate Finance and Private Equity department in
France before being appointed Managing Director of the firm’s Paris office in 1997.
Yann Duchesne is also a director of Ipsos and a member of the Supervisory Board of
Laurent Perrier. He is the author of a book on economic policy entitled “France S.A.”
and has been awarded the French Legion of Honor.
Yann Duchesne is a graduate of Ecole Polytechnique, Ecole des Mines de Paris and
Institut d’études politiques de Paris.
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Jean-Marc Daillance (50)
Jean-Marc Daillance has been a member of the Company’s Supervisory Board since
May 12, 2005 and Vice-Chairman since May 14, 2007. Following different positions
within the Zodiac Group since 1984; he has been Managing Director of the Marine
branch of Zodiac and also a member of the Zodiac Group’s Executive Committee
from 2002 to 2007, and then Chairman of the Management Board of Zodiac Marine
Holding until January 2008. Previously he held various posts at SAT (Paris) as well
as an engineer’s position at IBM Corporation in Raleigh (USA). Jean-Marc Daillance
graduated from Ecole Polytechnique and holds an MBA from Harvard Business
School. He is Immediate Past Vice-President of the Harvard Business School Alumni
Association (Boston) and a Director of Harvard Business School in France, as well as
a Director of the Ecole Polytechnique Alumni and Friends Society. He is also a
member of the Grand Council of the Cercle de l’Union Interalliée and a member of its
executive committee and financial committee.
Bruno Angles (43)
Bruno Angles has been a member of the Company’s Supervisory Board since
May 12, 2005. He has held the position of Senior Vice-President, Head of France
with the Macquarie European Infrastructure Fund since 2007, having served as
Senior Partner at Mercer Delta from 2006 to 2007 and Chief Executive Officer of
Vinci Energies from 2004 to 2005. He held various positions at McKinsey & Company
between 1996 and 2004 and was appointed an Associate Director of the firm in 2000.
Between 1994 and 1996 he was Chief Executive Officer of La Société du Tunnel du
Mont Blanc (SMTB). From 1993 to 1994 he served as a Technical Consultant for
Bernard Bosson, and between 1990 and 1993 he worked as Head of the Major
Works Department of the Ile et Vilaine Regional Infrastructure Department (DDE).
Bruno Angles graduated from Ecole Polytechnique and holds an Engineering degree
from Ponts et Chaussées as well as a post-graduate diploma from Collège des
Ingénieurs. He is Chairman of La Fondation de l’Ecole Nationale des Ponts et
Chaussées.
Ghislain Lescuyer (50)
Ghislain Lescuyer has been a member of the Company’s Supervisory Board since
May 12, 2005. He has served as Executive Vice-President of Areva-TD since 2007,
having worked for Thomson between 2003 and 2007 as Executive Vice-President
and subsequently Senior Executive Vice-President. Prior to joining Thomson he held
a number of management positions including at Europ@web (where he was Chief
Executive Officer from 2000 to 2003), and Bull, which he joined in 1994 and where
he was appointed Co-Chairman of Bull in Services in 1999. Between 1989 and 1993
he was a Managing Consultant at McKinsey & Company and from 1986 to 1987 held
the position of Sales Director at Hewlett-Packard. Ghislain Lescuyer is a graduate in
Civil Engineering and Telecommunications and also holds an MBA.
TENTH RESOLUTION (Authorization for the Management Board to trade in
the Company’s shares)
In the tenth resolution the Management Board is seeking an eighteen-month
authorization to trade in the Company’s shares, notably in connection with the
liquidity agreement entered into with an investment services firm which expires on
December 6, 2008.
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Characteristics of the new authorization
The tenth resolution sets the maximum purchase price under the new share
buyback program at €40 per share.
Shareholders are also invited to approve the following extraordinary
resolutions:
ELEVENTH RESOLUTION (Attendance fees to be allocated to the members of
the Supervisory Board for 2008)
In the eleventh resolution, shareholders are invited to approve the maximum
aggregate amount of attendance fees to be allocated to members of the Supervisory
Board for 2008. The recommended amount of €200,000 is unchanged from the sum
approved by the June 6, 2007 Shareholders' Meeting and will be allocated among
the members of the Supervisory Board at the Board’s discretion.
TWELFTH RESOLUTION (Authorization for the Management Board to
grant stock options to employees and officers)
To date the Company has granted a total of 1,256,400 stock options, breaking
down as follows:
Grant date
June 29, 2005
Number of options
Exercise price (€)
421,900
26.00
September 28, 2005
34,500
30.50
November 27, 2006
400,000
26.00
January 22, 2008
400,000
27.00
TOTAL
1,256,400
The exercise period of all of these stock options is four years from the grant date.
The options have a life of ten years and the first set of options may be exercised
from June 2009.
A certain number of options have been cancelled due to the beneficiaries either
reaching retirement age or leaving the Company. Taking into account these
cancelled options there are currently 1,124,900 options outstanding.
In the twelfth resolution, shareholders are invited to authorize the grant of a
further 400,000 stock options to between 100 and 120 employees and officers of
the Company, with a view to motivating the employees and officers concerned and
aligning their interests with those of shareholders. If approved, this plan would
increase the Company's potential total number of outstanding stock options to
1,524,900.
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Characteristics of the new authorization
Shareholders are invited to authorize the Management Board to grant stock options
exercisable for newly-issued shares to employees and officers of the Company and
its subsidiaries. The maximum number of Saft Groupe SA shares that could be
issued on exercise of options granted under this authorization would be set at
400,000. As a result, the aggregate maximum par value of shares issued on the
exercise of all currently outstanding options and any options issued under this
authorization would be €1,524,900.
Based on the Company’s 18,514,086 total ordinary shares outstanding if this
authorization were fully utilized the maximum dilutive impact on the Company’s capital
(including options granted under previous authorizations) would be approximately 7%.
None of the stock options granted under this authorization would have an exercise
price representing less than the market value of the Company’s shares at the grant
date.
In order to use this authorization the Management Board would require the prior
approval of the Supervisory Board.
In accordance with Articles L.225-177 and R.225-144 of the French Commercial
Code, the Statutory Auditors have issued a special report concerning this
authorization.
THIRTEENTH RESOLUTION (Authorization for the Management Board to
issue shares and/or securities carrying immediate or deferred rights to
shares of the Company, with pre-emptive subscription rights for existing
shareholders)
In the thirteenth resolution the Management Board is seeking an authorization to
increase the Company’s capital by issuing shares and/or securities carrying rights to
shares to be taken up in priority by existing shareholders. The aim of this resolution
is to enable the Company to obtain the necessary resources to develop its business
and refinance its debt.
The authorization would be given for a twenty-six month period and would replace
the authorization previously granted for the same purpose.
If approved, this authorization could not be used during a public tender or
exchange offer for the Company’s shares.
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FOURTEENTH RESOLUTION (Authorization for the Management Board to
issue shares and/or securities carrying rights to shares of the Company,
without pre-emptive subscription rights for existing shareholders)
The purpose of the fourteenth resolution is to enable the Company to diversify its
sources of refinancing in line with market conditions and opportunities.
The authorization is being sought for a twenty-six month period from the date of
this Meeting.
If approved, this authorization could not be used during a public tender or
exchange offer for the Company’s shares.
FIFTEENTH RESOLUTION (Authorization for the Management Board to reduce
the Company’s capital in accordance with Article L.225-209 of the French
Commercial Code, subject to adoption of the tenth resolution authorizing the
Management Board to trade in the Company’s shares)
The purpose of the fifteenth resolution is to authorize the Management Board to
cancel shares purchased by the Company under a share buyback program, and to
reduce the Company’s capital accordingly. Its adoption will be subject to approval
of the tenth resolution authorizing the Management Board to trade in the
Company's shares.
If approved, this authorization could not be used during a public tender or
exchange offer for the Company’s shares.
Characteristics of the new authorization
This new authorization would be granted for a period of eighteen months from the
date of this Meeting and would cancel and replace the authorization granted at the
Shareholders’ Meeting of June 6, 2007.
The total number of shares that may be cancelled in any given 24-month period under
this authorization would be set at the equivalent of 10% of the Company’s capital.
This authorization may only be used by the Management Board with the prior
approval of the Supervisory Board.
In accordance with Article L.225-204 of the French Commercial Code, the
Statutory Auditors have drawn up a special report concerning this authorization.
SIXTEENTH RESOLUTION (Authorization for the Management Board to carry
out rights issues for employees who are members of an employee stock
ownership plan on the basis described in Articles L.443-5 et seq. of the French
Labor Code, without pre-emptive subscription rights for existing shareholders)
The proposal of this resolution is compulsory pursuant to Article L.225-129-6 of the
French Commercial Code.
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Lastly, shareholders are invited to approve the following ordinary resolution:
SEVENTEENTH RESOLUTION (Powers to carry out formalities)
In the seventeenth resolution shareholders are asked to give full powers to
carry out all necessary formalities following this Shareholders’ Meeting.
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