RA GB 2008

2008 ANNUAL REPORT

2008

AN

NUA

L RE

PORT

SPERIAN PROTECTIONImmeuble Edison - ZI Paris Nord 233, rue des VanessesBP 55 288 Villepinte95 958 Roissy CDG Cedex - FranceTel.: +33(0)1 49 90 79 79

www.sperianprotection.com

CONTENTS

OUR MISSION, OUR STRATEGY

MESSAGE FROM THE CHAIRMAN 022008: Sperian remains sound in an unsettled economic climate The board of directors

MESSAGE FROM THE CEO 042009 priorities: adjust costs and differentiate our offer to customers The Executive Committee

MAIN STRATEGIC dIRECTIONS 06Staying close to our customers fosters innovationPowerful brands for a global market

INNOVATIONS ANd PEOPLE

SPERIAN’S SPIRIT 10Our organization is about people

INNOVATIVE SOLUTIONS 12Head protection Body protection

KEY FIGURES 16

SHAREHOLdER INFORMATION 18

REFERENCE dOCUMENT 20

design & productionHarrison & Wolf

CopyrightsPhotographies:

Jack Burlot/Corporate Images

With special thanks to Orcières Merlette resort, France

Steve Murez

Sperian Protection

For additional information: Corporate communications department

Tel.: 33 (0)1 49 90 79 72

Fax: 33 (0)1 49 90 79 78

Document printed on recycled paper

1

2008 ANNUAL REPORTSPERIAN PROTECTION

OUR MISSIONSperian Protection’s mission is to contribute to building a safer and therefore more productive working environment everywhere in the world. Our aim is to create innovative products adapted to the needs of each type of job, and to provide appropriate services for protecting men and women in their workplace, whatever risks they are exposed to; our customers are from various industry sectors; construction and public works, public safety, energy, telecommunications and utilities.

OUR STRATEGYClose proximity to the end user and the service rate we offer, the power of the Group’s brands and the trust they inspire, and an ambitious policy of innovation form the basis of our robust differentiation strategy. This is the way we have forged our identity, our expertise and our recognized leadership position in our business lines. Holding this leading position requires that we remain the reference in our main markets and innovate continuously.

SpErian protEction,protEction you can truSt

Message from the Chairman of the Board Henri-Dominique Petit

as i announced in the middle of last year, the functions of chairman of the Board and chief Executive officer of the Group are now separated, and a new cEo, Brice de La Morandière, has been appointed to head Sperian.

Because he has the trust of our teams and experience in the many positions he has held in various Group business lines, Brice was able to take over our operations smoothly, with absolutely no disruptions. He is now completely responsible for general management. i am particularly pleased that this evolutionary step forward in the life of the company was made so seamlessly and efficiently. Since mid 2008, the entire world economy has been suffering a completely unprecedented crisis - unprecedented in scale, unprecedented in its global reach, unprecedented in the speed of its transition to all economic sectors and businesses. in this troubled climate, Sperian relied for the whole of 2008 on the soundness of its business model to support implementation of our strategic development plan. the Group was able to continue strategic development, above all through targeted acquisitions, to strengthen our technical capabilities, our presence in developing markets and our positions with new customers.

the acquisition at the end of 2008 of Musitani, the leader in fall protection in argentina, complements our manufacturing and distribution facilities already operating in Mexico and Brazil, and significantly boosts our presence in the rapidly-expanding Latin-american market. in addition, acquisition of combisafe, one of the major developer and suppliers of safety systems for working at height, complements our fall protection offer, enabling us to supply globally collective and individual protective solutions, with a range of products positioned at the high end of the market. What’s more, this development strategy has helped to strengthen our positions, especially in the Middle East.

a third acquisition was doseBusters™, one of the pioneers of the technology for individual noise dosimetry, which means Sperian can now supply customers with a complete offer of intelligent hearing protection solutions. So this final acquisition also fulfils another objective of our long-term strategy to pursue a vigorous policy of technological innovation.

throughout 2008 Sperian continued to launch particularly innovative products in its various market segments, such as the fall protection system that resists severing on sharp corners, or high-visibility disposable masks for respiratory protection; these products match users’ needs perfectly. Finally, the Group has

2008SpErian rEMainS Sound in an unSEttLEd EconoMic cLiMatE

2 2008 ANNUAL REPORTSPERIAN PROTECTION

MES

SAGE

FRO

M T

HE C

HAIR

MAN

satisfactory until october, was also affected but remains at a completely acceptable level of 13.5% of sales. in this context, our fundamentals are still very healthy, with a diversified customer base, strong brands recognized for their innovative qualities, expert customer service teams and a solid financial structure. i have every confidence in the ability of Brice de La Morandière and the Sperian teams to continue our development and to reinforce the Group’s position as a reference leader in our markets.

continued to capitalize on the Sperian brand, a symbol of trustworthiness for our workforce and for our customers; we also continued our worldwide investment in communication.

However, although our business activity was totally in line with our goals until october, it slowed in the last few months of 2008 – the earliest sign that the crisis was impacting our Group. Even so, over the whole year, sales were satisfactory at €751m or total growth of 3.3%. income of operating activities, which was

With Brice as our new CEO, we can be confident that respect for our values and principles of action are well safeguarded. These values help to make Sperian a reference leader in our business area. I have total confidence that Brice can adapt the Group to the current environment while still preserving our ability to reinvent ourselves to differentiate our offer and to open new channels to meet all our customers’ needs.

BOARd OF dIRECTORS

Chairman of the Board • Henri-Dominique Petit

Board members • Philippe Alfroid, Philippe Bacou (Co-Executive officer), patrick Boissier, Ginette dalloz, François de Lisle, patrice Hoppenot, Gunther Mauerhofer, philippe rollier, andré talmon

Corporate Secretary • Emmanuelle Camus-Nikitine

the nomination of Brice de La Morandière as Board member will be submitted to the shareholders approval at the annual General Meeting held on May 6, 2009.

3


MES

SAGE

FRO

M T

HE C

HAIR

MAN

the world. and finally, we have given priority to generating a high cash-flow level, especially through optimization of our stocks management.

over and above these internal adjustment measures, our strategy is based on strengthening our differentiation for our customers by concentrating on four main strategic directions that involve the whole company.

at a time of crisis, first, we need to get as close as possible to our customers. in particular, we have to strengthen our proximity to our end users, provide them with advanced expertise, respond instantly both to changes in their needs and in the environment in which they operate, while making sure they receive top-quality service; this fosters innovation - our second strategic direction. the crisis will generate new needs for products and services. the Group depends not only on internal resources but also on external partners to adapt the cutting edge technologies that exist in other industries to the area of personal protection. the third part of our strategy is to differentiate our offer through well-established brands, whose quality and durability is recognized by customers. changing our name at the end of 2007 combined with simplifying our brand portfolio has speeded up recognition of Sperian protection and of our uvex, Miller and Howard-Leight brands.

Sperian’s men and women have made rigorous efforts for several months to actively withstand a particularly difficult economic climate and an unprecedented crisis.

Since the end of 2008 we have launched adaptation plans which we shall adjust throughout 2009 to address specific circumstances in each continent and each industry. We have also stepped up our relationship with customers to give them the added value they need; this is how Sperian will differentiate its offer and win market share.

First of all, our teams are focused on action plans that aim to preserve the Group’s competitiveness. these plans rest on a limited number of simple priorities and budgetary objectives, applicable to our entire organization. these can be adapted to various possible macroeconomic scenarios. these plans include four measures for improvement: first, cut our operating costs significantly for all units, then implement measures for optimizing purchases through economies of scale and renegotiation of contracts; organizing ourselves to get though the crisis also means adjusting every component of the organization itself. Sperian has accordingly modified production capacity and taken steps to reduce the workforce across

Message from the Chief Executive Officer Brice de La Morandière

2009prioritiES: adjuSt coStS and diFFErEntiatE our oFFEr to cuStoMErS


MES

SAGE

FRO

M T

HE C

EO

THE ExECUTIvE COMMITTEE

Standing, left to rightMike Moorefield, Senior Vice President – AmericasJérôme Ronze, Chief Financial OfficerPhilippe Suhas, Senior Vice President – Eye & Face ProtectionMarc Beaufils, Senior Vice President – Europe, Middle East, AfricaBrice de La Morandière, Chief Executive OfficerJoe Reimer, Senior Vice President – Fall Protection

Seated, left to rightFrancis Allirot, Senior Vice President – Asia PacificMark Hampton, Senior Vice President – Head ProtectionJanet dekker, Senior Vice President – Human ResourcesChristophe Lamoine, Senior Vice President – Body Protection

Finally, the fourth strategic direction focuses on strengthening market share in specific developing countries. they represent a rich pool for future growth owing to their demography and their growing awareness of personal protection.

i have full confidence in our teams’ ability to implement these action plans which we will continuously adjust throughout the year. along with the whole executive committee, we will remain alert to market changes and will make sure we seize all development opportunities that arise for Sperian.

We have taken stock of the prevailing situation and demonstrated reactivity and adaptability. I am convinced that with these plans to preserve our competitiveness and further differentiate our offer for our customers, Sperian is in a good position for getting through this troubled period and for strengthening our position as the established leader for our customers, while preparing for the future.

5


MES

SAGE

FRO

M T

HE C

EO

the Group is getting into position in segments with the highest growth potential by allocating its resources, especially to sectors that will benefit from government stimulus plans such as the public works, automobile and renewable energy sectors.

Encouraging close proximity to customers deepens our exact understanding of their business and environment. drawing on this expertise enables Sperian protection to design innovative products and also to offer complete solutions that can meet the global needs of users.

SOLUTIONS THAT MEET CUSTOMER NEEdSUnderstanding customers’ expectations in the safety area is a key factor for Sperian protection. the Group’s development is founded on close proximity to end users and depends on our efficient sales teams in every world region. With three logistic platforms located in three continents, we can guarantee a reliable rate of service to our network of distributor-partners. Sperian protection has an adaptable, reactive organization for responding to the changing needs of our markets.

in 2008 Sperian decided to bring together all our skills in the public safety protection market as a single organization to increase our efficiency and highlight our expertise. in addition,

StayinG cLoSE to our cuStoMErS FoStErS innoVation

Sperian Fire and Respiratory is being positioned to become a growth vehicle by fully integrating our core product offerings in Respiratory Protection, Fire Products and Nuclear Protective Apparel into a unified business unit with a shared sense of mission of providing our customers with the best sales, service and expert support experience possible.

Mark Hampton, Senior Vice President Head Protection

Main strategic directions


MAI

N S

TRAT

EGIC

dIR

ECTI

ONS

> > FOCUS

Repositioning the gloves business

During 2008 Sperian repositioned its gloves business. First, with the acquisition of a factory in China that specializes in dipped gloves manufacture, the Group now has production capacities in this fast-growing market sector. Second, Sperian set up a laboratory specially for gloves development. This is located in France and has already applied for patents and worked on very innovative gloves concepts that will differentiate Sperian in our markets.

a personal approach to Hearing conservation, Howard Leight’s

new Veripro™ field verification technology makes it easy to get an

accurate, real-world picture of employees’ attenuation.

overall, the Group aims to increase added value for customers by offering complete solutions that include complementary services such as audits, seminars or training. in Hearing protection, particularly, Sperian has now built up a global offer in hearing conservation with, besides earplugs and earmuffs, systems for hearing protection measurement and protection recommendations.

For a genuinely personalized approach to hearing conservation, the new Veripro® testing technology from Howard Leight makes it possible to accurately measure actual noise attenuation.

INNOvATION, THE vITAL ELEMENT IN dIFFERENTIATIONBecause trusting your equipment is essential for working efficiently, the Group innovates day after day to develop better protection solutions. For Sperian protection, innovation involves the entire offer and processes. it draws on the Group’s expertise regarding risk appraisal, conditions for use and in-depth knowledge of the technical aspects of products. in 2008, the Group launched innovations in all product ranges: we have also moved forward in repositioning our gloves business by emphasizing innovation. Setting up a research laboratory

in France specifically for this business line and acquisition of a production plant in china enabled us to acquire dipped glove manufacturing techniques - an essential sector in the glove market. We also strengthened our competence in noise dosimetry in 2008 by acquiring doseBusters’ technologies and patents. Finally, to speed up our innovation program, Sperian has formed partnerships with universities or research laboratories in order to pool expertise in highly targeted areas.

7


MAI

N S

TRAT

EGIC

dIR

ECTI

ONS

to support our differentiation strategy, Sperian protection invests in strengthening the power of its brands. these are critical for achieving awareness and loyalty not only in countries where the Group is already well established, but also in those where we aim to develop market share.

STRONG BRANdS FOR A LEAdERSHIP POSITIONThe Group’s four leading brands represent a promise of trustworthiness and quality from Sperian to our product users and to our different publics and partners. the name “Sperian”, created in 2007, has established a unifying identity for all the Group’s business arms. the simplification of our brand portfolio that followed has enabled us to rally around, and concentrate our efforts on, Sperian and the three leading brands, uvex*, Miller, and Howard Leight, which, supported by the endorsement

“By Sperian”, help to expand the Group’s visibility. now this new, more coherent and consistent identity is a means of achieving recognition which places Sperian as the ppE reference leader. the positioning of the Sperian brand and our values was explained in a 2008 media campaign in all parts of the world.

the publicity concept was based on images of men and women with confident facial expressions at work in four different industrial settings - construction, petrochemicals, work at height, and manufacturing. the reliability, design and comfort of our equipment were made clear by a statement from each worker in support of the central message “protection you can trust”, the Group’s brand signature. in addition, to strengthen recognition and serve as a benchmark in the ppE industry, Sperian protection is working on coordinating all its internet sites under the same Group banner. this will mean we can showcase the knowledge, expertise, technologies and solutions we offer in answer to the safety problems posed by different customer environments.

Main strategic directions

poWErFuL BrandS For a GLoBaL MarKEt

*

* in americas only


MAI

N S

TRAT

EGIC

dIR

ECTI

ONS

> > FOCUS

Expansion in the Mercosur market

With the acquisition of Musitani in December 2008, Sperian Protection has strengthened its presence in the Mercosur market. In fact the Group was already operating in this region through its manufacturing and distribution business in Mexico and Brazil, but with Musitani it has secured a foothold in Argentina and boosted its position in Brazil.

Musitani is one of South America’s leaders in the manufacture and sales of fall protection products, including harnesses, life lines, retractable solutions, and access to height systems as well as lifting equipment.

Besides this, in 2008 the Group strengthened our offer in the Mercosur market by inaugurating its new Brazilian factory which produces respiratory masks, protective eyewear and hearing protection.

TARGETEd dEvELOPMENTS IN EMERGING COUNTRIESdeveloping countries have a double attraction for groups like Sperian; their rate of economic growth tends to be higher than that of oEcd countries by several points. Further, these are countries that are waking up to safety problems. as their economies gradually develop, their safety standards get closer to those practiced in Western Europe and north america. this is why Sperian is rolling out a targeted investment strategy in the most attractive countries.

in 2008 Latin america was the focus of this development with acquisition of Mustani, the argentinian leader in fall protection. this operation completes a major presence in Mexico and Brazil, two indispensable countries for tapping into the expansion of the Latin-american market. on the other hand, the Group continued to strengthen our presence with end users in china, eastern Europe and in Middle Eastern countries, where acquisition of combisafe, the fall protection leader already established in dubai, enabled us to consolidate our presence with the big players in this region.

9


MAI

N S

TRAT

EGIC

dIR

ECTI

ONS

our recycling policy is one of the priorities in our ecological commitment and as a general rule, all our industrial waste is dealt with by accredited recycling specialists. the Group’s employees at our sales offices also actively contribute to preserving the environment in many ways, such as paper recycling and computerised information systems which reduce

the Sperian protection group’s mission is to protect people in the workplace. this supports quite naturally our vision for development that puts people right at the centre of our thinking, within our organization and externally.

Sperian protection believes that its long term future depends on our capacity to shoulder our responsibilities towards all our stakeholders – customers, shareholders, employees, partners and suppliers and also towards the government bodies and communities where the Group operates locally.

A RESPONSIBLE ORGANIZATIONas a socially responsible company, Sperian protection is committed to growth that respects the ethical principles set out in our internal guidelines. these apply right across the Group and provide a code of conduct for all our employees, regardless of their nationality and culture. our production processes have low impact on surrounding ecosystems and consume little energy. Even so, the Group keeps a watchful eye on minimizing our environmental footprint and rationalizing our use of water, energy and raw materials.

our orGaniZation iS aBout pEopLE

For us, personal protection is more than just equipment: this is why Sperian launched an initiative in 2008 to coordinate and develop all local efforts in the areas of environmental protection, participation in local life and personal development of employees. We are also working on long-term sustainable development planning for the entire Sperian Protection group.

Philippe Suhas, Senior Vice President Eye & Face Protection

Sperian’s spirit

Sperian first anniversary, Slovakia


SPER

IAN

’S S

PIRI

T

printing. Finally, Sperian makes a point of being part of the life of communities where we are active or where we have established sites; we recruit from local labour pools.

Both the company and workers get involved in local life. Employees are encouraged to take action to support their surrounding environment; they often take part in environmental, solidarity and sponsorship programs, for example. Sperian protection also contributes to important national and international causes and reacted swiftly throughout the year, by providing personal protection equipment following major natural disasters such as the earthquake in china, or the raging fires on the west coast of the uS.

SAFETY TRAINING ANd AUdITSSince Sperian’s goal is to help to build a safer workplace, the health and safety of our workforce are naturally central concerns. the Group never forgets that safety at work is a major productivity factor at our sites; for this reason, too, working and safety conditions at all our production sites are subject to ongoing improvement measures, specifically in the form of health and safety audits, and training aimed at raising employee awareness and identifying ways to improve. dEvELOPING SPERIAN’S SPIRITour long term development vision is rooted in the belief that the true worth of a company lies in a relationship of mutual trust with the men and women who work for it every day. this is why Sperian’s culture is based on performance, employee development, ongoing dialogue and free exchange of ideas and information. our organization’s four values: respect for people, team performance, innovation, and customer focus, serve both

as reference points and simple behavioural guidelines which help Sperian to strengthen our world leadership position and promote a culture of excellence. this commitment shapes our human resources management in the combined interests of our workers and our organization. it’s working in an environment where they know that individual competence is recognized, that motivates employees to act in the interests of collective productivity. to this end tailored training programs are offered to employees at all levels and in all positions, within all Sperian protection’s different sites. our concern for industrial relations is ongoing and particularly strong during these periods when the company is adjusting to a difficult economic climate. the Group systematically implements measures to support every worker seeking external reclassification.

BREAKdOWN OF WORKFORCE BY REGION

Europe36%

Rest of world 7%Asia Pacific

5%

Americas52%

Sperian cares about employees’ professional development, especially during these economically difficult times. For the Group, it is essential to support each worker individually by offering customized assistance, directional guidance or training according to their situation and the local context.

Janet Dekker, Senior Vice President Human Resources

11


SPER

IAN

’S S

PIRI

T

HEAd PROTECTION

52% of Sperian Protectionsales

HEad protEction

construction to glassmaking and metallurgy, and uses from chemicals handling to welding or electrical work. the Group is also number one in the uS for portable emergency eyewash stations.

CONSERvING HEARING LONG TERMto make sure that hearing in the workplace is protected, the group designs, manufactures and sells disposable and reusable ear plugs to attenuate noise, and passive or communication-enabled earmuffs under the Howard Leight by Sperian brand - a benchmark brand in its market. this complete product line offers different materials, shapes, sizes and noise-attenuation levels, providing a solution for every user and working environment. Sperian protection is also the recognized premier brand in intelligent hearing protection solutions. World leader in intelligent earplugs, the Group markets the Quietpro®, a system that combines internal electronic hearing protection, adjustable and passive, with a natural voice and radio communication process designed for environments with varying noise levels. in addition, following acquisition of doseBusters, the Group also offers a complete solution for personal noise dosimetry, which makes it possible to control, measure and define in real time a person’s actual exposure to noise in their workplace.

Vision, breathing, hearing: Sperian protects these vital functions for men and women at work. Everywhere in the world, every day, they trust our products and recognize their superior quality.

number one in the global eye protection market and number two in hearing protection, Sperian protection is also among the leaders in the manufacture of respiratory protection.

SAFEGUARdING THE APPLE OF YOUR EYEthe fragile and vulnerable human eye is particularly prone to accidents owing to three main types of hazard found in working environments: mechanical and chemical threats and those associated with radiation. Sperian’s huge range of products that includes glasses, goggles, face screens and welding masks is specifically designed to protect users against these risks.comfort is a key feature of this range: users today are looking for more comfortable, lighter products. Style is another determining factor, because someone at work is more willing to wear/eye protection that’s aesthetically pleasing. the Sperian range is suitable for a wide range of industries, ranging from

In all the markets where we do business, Sperian Protection aims to increase safety and productivity through innovative products. The Group works in direct cooperation with industry experts in order to design and develop innovative solutions for many sectors.

Innovative solutions


INN

OvAT

IvE

SOLU

TION

S

BREAKdOWN OF 2008 SALES

eye & face17%

hearing15%

respiratory20%

HEAD PROTECTION

BODY PROTECTION

48%

> > INNOvATIONS

High visibility brings users out of the shadows “High Visibility” masks are designed to make sure the user can be seen in poorly lit environments or foggy weather. they also make it possible to check quickly that workers are wearing suitable protective equipment in emergency situations.

duraMaxx: seeing better for longerthe dura-streme technology used for the eyepiece of the new duraMaxx mask combines two coatings, with scratch-proofing on the outside and demisting on the internal surface, so that it’s more comfortable to wear and lasts three times longer than standard equipment.

Bilsom 303 for greater inner-ear comfort the Bilsom 303 earplug is an established leader in the European hearing protection market. now developed under the Howard Leight® by Sperian brand, the dynamised Bilsom 303 offers improved user comfort: it slides easily into the auditory canal and can be worn for long periods.

> > FOCUS

Quietdose, customized noise level dosimetry

In September 2008, Sperian Protection finalized acquisition of doseBusters™, one of the pioneers of individual noise dosimetry technology. This company designed and marketed QuietDose, a complete individual noise dosimetry solution. It links a classic hearing protection device, either earplugs or earmuffs, with an individual noise monitoring system. This combination makes it possible to control, measure and qualify in real time a person’s actual exposure to noise in the workplace. According to the data collected, safety managers can make specific decisions designed to reduce workplace induced hearing loss and select the protective solution best suited to each person, depending on their type of workstation.

BREATHING IS LIFEthere are numerous respiratory hazards : dust, poisonous gases and vapors, breathing in confined spaces... the Sperian protection group’s offer covers all needs of professions at risk, particularly the following sectors: petrochemicals, pharmaceuticals, construction, shipyards, public safety and fire-fighting. disposable masks, half masks, and full masks with filters and cartridges, filtering elements, open and closed circuit apparatus, gas detection and systems for collective protection. all Sperian’s equipment offers unrivalled levels of safety, comfort, and lightness in weight.

13


INN

OvAT

IvE

SOLU

TION

S

BOdY PROTECTION

48% of Sperian Protectionsales

Body protEction

PROTECTION IN SURE HANdSSperian is active in the disposable gloves market, with products designed to protect against chemical, biological, thermal, and electrical hazards, abrasion and cuts. always mindful of user needs, Sperian’s research and development teams continuously study possible improvements in order to make gloves even more suitable for different working conditions in all types of job. to this end the group has reinforced r&d teams and invested in additional industrial facilities, especially in dipped glove technology through acquisition of a factory in nantong, china.

Body protection is an essential component of men and women’s safety at work. Sperian provides solutions for hand protection, fall arrest and also designs clothing and shoes.

HIGHER ANd HIGHER IN COMPLETE SAFETYFor fifty years Miller® by Sperian, the world leader in fall protection, has been perfecting equipment and solutions for working safety at height. today Miller’s range of fall arrest equipment is the most innovative on the market. comfortable and pleasant to wear these products can be worn continuously and make for greater productivity. they are designed and tested by qualified engineers and technicians; cutting edge control devices check that the manufactured products do not merely meet, but exceed current standards. Sperian protection’s solutions offer exceptional safety performance.the acquisition of combisafe in august 2008 has positioned Sperian in the segment of collective protection at height. combisafe products are benchmarks for the industry and for the sectors that requiring work at height: they include steel mesh barriers, safety nets, slab clamps, etc.

BREAKdOWN OF 2008 SALES

footwear8,5%

clothing8,5%

gloves 9,5%

HEAD PROTECTION52%

BODY PROTECTION

fall protection21,5%

Innovative solutions


INN

OvAT

IvE

SOLU

TION

S

BOdY PROTECTION MEANS PEACE OF MINdSperian’s protective clothing, disposable or reusable, combines ergonomic features, advanced technology and esthetic appeal. Made to standard or not, these products meet the demands of the pharmaceutical, nuclear, petrochemical and food processing industries, and the firefighting services. the Group also makes image wear for large employee groups, such as in the transport industry.

SAFETY FOOTWEAR KEEPS FEET ON THE GROUNdin Europe and china, Sperian sells more than two million pairs of safety shoes every year. innovation and quality are the most outstanding attributes of the wide range of supremely comfortable shoes the Group offers. completely updated in two ways over the past few years, it is now segmented by job type and reflects the latest fashion trends. all the different models combine improved design with comfort, capitalizing on the latest r&d findings. Features include ultra-light, antimagnetic toe-caps, anti-perforation inserts, hardwearing, extremely supple and tough soles, and top quality leathers and other materials for uppers and linings.

> > INNOvATIONS

A much-needed new range of safety linesthe risk of safety lines breaking on sharp corners is very common, but is often not recognized. now Miller® by Sperian has developed and Miller Manyard Edge tested, a line using twisted-thread technology from the textile industry that combines two strands, one shock absorbent, the other resistant to cutting.

Polytril™ Air Comfort Glovesin 2008 Sperian launched the polytril™ air comfort glove made of a knitted, polyamide-coton-lycra® material which offers exceptional advantages; cotton absorbs perspiration for improved comfort, lycra gives greater elasticity and nitrile induction provides maximum resistance to abrasions and oils.

I-Tech safeguards freedom of movementto provide fire fighters with thermal and anti-shock protection, Sperian has developed i-tech, a system worn on the knee. this product, which is designed exclusively to fit the patented inner pocket of Sperian’s protective wear for north american fire fighters, gives protection while allowing complete freedom of movement.

Temptation® Elite: stylish protection temptation® Elite shoes ally design based on the latest trends with discrete protection to give women feel-good comfort and fluid, stylish lines, abrasion resistance, optimal grip and lining that resists perspiration, bacteria and regulates temperature.

We were pleased to welcome Combisafe, which has built a strong platform based on decades of experience and product competence. The addition of Combisafe’s product offering to Miller by Sperian's existing fall protection product range has created the worldwide Safety at Height leader. Fall arrest, safe access to height, rescue from height are now offered in both personal (individual) and collective (group) systems.

Joe Reimer, Senior Vice President Fall Protection

15


INN

OvAT

IvE

SOLU

TION

S

SALES(in euro million)

2008 751

2007 754

2006 737

NET INCOME(in euro million)

2008 48

2007 59

2006 41

Leverage

NET dEBT(in euro million)

2008 303

2007 236

2006 217

A firm stand in 2008: in a difficult global economic climate, Sperian protection demonstrated the resilience of its economic model throughout the year. the Group recorded sales growth, excluding exchange rate impacts, of 3.3% and an operating margin of 13.5% of sales, giving an operational cash-flow of 69 million euros. the Group also continued with its development

strategy; in particular we went ahead with acquisitions totalling 71 million euros, and investments in technical and industrial capacities. nonetheless, momentum slowed in the last few months of 2008, and the first signs of the impact of the crisis on the Group were visible. this prompted Sperian to implement restructuring and cost cutting measures from the end of 2008.

KEy FiGurES 2008

NET CASH FROM OPERATING ACTIvITIES*(in euro million)

2008 69

2007 88

2006 81

* before capital expenditure

INCOME OF OPERATING ACTIvITIES(in euro million)

2008 101

2007 111

2006 103

Operating margin in % of sales

13.5%

14.7%

14%

2.49%

1.84%

1.79%


KEY

FIGU

RES

2008

Total Sales: 751 million euros

Breakdown of sales by geographical areas:

50% EMEA43% Americas 7% Asia Pacific

29 million euros of capital expenditures

30 production sites on 5 continents

22% innovation rate

17


SHAR

EHOL

dER

INFO

RMAT

ION

SHARE PRICE ANd CAC MId100 INdICE PERFORMANCE IN 2008

Listing informationNYSE Euronext (compartiment B)ISIN Code: FR 0000060899Ticker: SPRIndices: SBF120, CAC Mid100,CAC Mid & Small 190

SHarEHoLdEr inForMation


SHAR

EHOL

dER

INFO

RMAT

ION

Capitalas at 31 december 2008 the capital stood at 7,655,023 shares with a face value of 2 euros, corresponding to 9,831,301 theoretical voting rights (calculated on the basis of total shares which carry voting rights, including those shares for which voting rights are withheld) and 9,716,992 exercisable voting rights (calculated excluding shares for which voting rights are withheld) taking into account allocation of double voting rights to shares

Mrs. dalloz13%

Essilor 15%

Free float72%

Shareholding

Mrs. dalloz21%

Essilor 24%

Free float55%

voting right

held in the registered form for more than two years; the composition of our shareholder base is relatively stable; apart from our two keynote shareholders, Essilor and Ms dalloz, who together hold 28%, corporate French investors hold about 14% of capital, overseas corporate investors 51%, with the rest held by individual shareholders. dividends will be paid on 9 july 2009. the record date in terms of ESES regulations is 8 july and the ex-date is 6 july.

Contacts• MailSperian Protection - Paris Nord IIImmeuble Edison33, rue des VanessesBP 55288 VillepinteF-95958 Roissy CDG Cedex

• Internetwww.sperianprotection.cominvestorrelations@sperianprotection.com

• Telephone • Fax+ 33 (0)1 49 90 79 74 + 33 (0)1 49 90 79 78

• RegistrarCACEI Corporate Trust14, rue Rouget-de-Lisle F-92862 Issy-les-moulineaux Cedex 9Tel. + 33 1 57 78 34 44 Fax + 33 1 49 08 05 08

OWNERSHIP STRUCTURE ON 31 dECEMBER 2008

19%

19.4%

17.7%

GENERAL INFORMATION

Sperian makes complete financial information available to shareholders, which reflects our desire to develop long-term relationships with them. This information can be found at www.sperianprotection.com, finance section, which is a comprehensive data base for financial communication.

The Group also informs financial markets about its strategy and financial situation at regular meetings throughout the year, or when annual or half-year results, or quarterly sales figures are published.

For 2009 dates of main meetings are as follows:

6 May 2009: Annual General Meeting of shareholders17 July 2009: Sales for the second quarter 200926 August 2009: Half-year results 200921 October 2009: Sales for the third quarter 2009

dIvIdENd PER SHARE (in e)

2008 1.20*

2007 1.50

2006 1.05

Pay-out

* dividends will be paid on 9 july 2009. the record date in terms of ESES regulations is 8 july and the ex-date is 6 july.

19


SHAR

EHOL

dER

INFO

RMAT

ION

2008 reference document

This is a free translation* of the Reference Document (“Document de Référence”) filed with the French Market Authority (AMF) on april 15, 2009, in accordance with articles 212-13 of its general regulations.

*Statutory financial statements are available only in French.

copies of this document are available on request, at no charge, from the investor relations department of Sperian protection at the following address: Zi paris nord ii, immeuble Edison, 33 rue des Vanesses, Bp 55288 Villepinte, 95958 roissy cdG cedex, France; - tel: at +33 (0)1 49 90 79 74; - fax: +33 (0)1 49 90 79 78; - email: [email protected].

20 RAPPORT ANNUEL 2008SPERIAN PROTECTION

FINANCIAL REPORT 221.1. 2008 Management Report 241.2. Risk Management 281.3. Recent events and outlook 301.4. Key figures 311.5. Consolidated financial statements 32 BUSINESS REVIEW 76

2.1. History 782.2. The Personal Protective Equipment (PPE) Market 782.3. Business Segments 812.4. Strategy 842.5. Development and capital expenditure 86

SOCIAL AND ENVIRONMENTAL REPORT 88

3.1. The Sperian Spirit 903.2. Human Resources Policies 903.3. Corporate Citizenship 923.4. Workforce and Production Plants 933.5. Environnemental Policies 94

CORPORATE GOVERNANCE 964.1. Board of Directors 984.2. Directors’ interests 1044.3. Directors’ compensation 1064.4. Other information about the directors 1084.5. Organization structure 1134.6. Chairman’s Report 116

INVESTOR INFORMATION 1265.1. Information about the Company 1285.2. Information about the Company’s capital 1305.3. Authorized, unissued capital 1335.4. Ownership structure 1345.5. Market for the Company’s shares 1375.6. Divident policy 1395.7. Information policy 139

OTHER INFORMATION 1406.1. Person Responsible for the Reference Document 1426.2. Statement of Person Responsible

for the Reference Document 1426.3. Persons Responsible for Auditing

the Financial Statements 1426.4. Auditors' Fees 143

REFERENCE DOCUMENT

21


1 -

FIN

ANCI

AL R

EPOR

T


FINANCIAL REPORT 1.1. 2008 Management Report 241.1.1. Consolidated revenue 241.1.2. Consolidated results 251.1.3. Consolidated financial position 26 1.2. Risk Management 281.2.1. Financial and market risks 281.2.2. Legal risks 281.2.3. Insurance 29 1.3. Recent events and outlook 301.3.1. Recent events 301.3.2. Outlook 30 1.4. Key figures 311.4.1. Five-year financial key figures 311.4.2. Revenue contribution by business segment 311.4.3. Revenue contribution by geographical zone 311.4.4. 2008 quarterly revenue 31 1.5. Consolidated financial statements 321.5.1. Consolidated balance sheet at December 31 321.5.2. Consolidated income statement 331.5.3. Consolidated statement of cash flows 341.5.4. Consolidated statement of changes in equity 351.5.5. Notes to the consolidated financial statements at December 31, 2008 351.5.6. Statutory Auditor’s Report on the consolidated financial statements 74

1 -

FIN

ANCI

AL R

EPOR

T

23


1.1. 2008 Management Report

Despite the difficult world economic environment, Sperian Protection continued to deploy its expansion strategy throughout 2008, backed by a solid business model. The Group made several targeted acquisitions to strengthen its technological capabilities, its presence in developing markets and its positions in new end-user segments.

However, the crisis began to bite in the last few months of 2008, leading to a slowdown in business. This slowdown in sales has worsened since the beginning of this year. Sperian is therefore expecting the first quarter to be down sharply compared with 2008, when first-quarter sales were particularly strong.

The measures already initiated in late 2008 or decided in early 2009 will lead to a reduction in headcounts of approximately 760 Group employees. In addition, the Group is continuing efforts to optimize purchasing costs and to cut costs that will produce savings excluding inflation of about €23 million on a full year basis.

Because of the uncertain outlook, the Group is not providing any guidance for 2009. However, Sperian is disclosing the following two simulations: if Group’s organic growth is around -5% for the year, operating margin will be roughly between 11% and 13% of sales and net debt between 2.5x and 3x EBITDA. If Group’s organic growth is around -15% for the year, operating margin will be between 7% and 9% of sales and net debt between 3x and 4x EBITDA. Changes in the product mix, geographic composition of sales, and exchange rates will have a significant influence on these simulations.

1.1.1. Consolidated revenue

Consolidated revenue amounted to €750.9 million versus €754.4 million in 2007. Although down on a reported basis, this represents an increase of 3.3% at constant exchange rates. All geographical and business segments contributed to the growth.

The dollar's depreciation against the euro trimmed revenue by 3.8%.

(in € million) 2008 2007 % change at cst exchange rate

% organic change

Sales from continuing operations 750.9 754.4 3.3 -0.6

Head protection

Body protection

390.7

360.1

403.2

351.2

1.3

5.7

-3.4

2.5

Americas

Europe, Middle East, Africa

Asia-Pacific

325.2

373.8

51.9

346.2

360.3

47.9

0.2

5.4

10.3

-5.1

2.3

10.3

New acquisitions contributed almost €30 million to full-year revenue, representing 4% of the total. Nacre's first-half revenue bolstered the head protection segment while Combisafe, acquired in September 2008, was consolidated in the body protection segment for four months.

The negative organic growth in head protection stemmed mainly from Nacre's low second-half contribution compared with the previous year. Its business addresses the military market which is extremely cyclical and therefore unpredictable over time. Excluding this effect, revenue would have been similar to the 2007 level, with growth in hearing and respiratory protection and a slight decline in eye and face protection.

Body protection posted satisfactory organic growth of 2.5%, after a deliberate policy of reducing sales of low-margin products, mainly gloves and footwear. Fall protection had a good year, reaping the benefits of a positioning closely geared to the needs of end-users. Safety footwear, as expected, was stable compared with the previous year, with price increases, particularly in Asia, putting a brake on sales. The protective gloves business is currently being refocused, which led to a slowdown in sales during the year. Sperian has set up a new research laboratory devoted specifically to safety gloves and has also invested in a dipped gloves manufacturing facility in China. Protective clothing posted a broadly positive performance, with a continued recovery in sales of firefighting apparel in North America, strong sales of the Timberland PRO® ranges and renewed momentum in image wear.

1 -

FIN

ANCI

AL R

EPOR

T


1.1.2. Consolidated results

• Income of operating activities

Income of operating activities amounted to €101.5 million and €105.7 million at constant exchange rates, a decrease of 4.8% compared with 2007.

(in € million) 2008 2008 at constant exchange rate

2007 % change at constant exchange rates

Revenue

Gross profit

in % of sales Sales & marketing expenses

General & administrative expenses

R&D expenses

750.9

292.3

38.9%98.5

78.4

13.9

779.6

303.0

38.9%102.2

80.6

14.5

754.4

297.5

39.4%93.1

78.7

14.6

3.3

1.9

9.7

2.4

-0.6

Income of operating activitiesin % of sales

101.513.5%

105.713.6%

111.014.7%

-4.7

At constant exchange rates, the income statement items can be analyzed as follows:

• Gross margin was 38.9%, down from 39.4% in 2007, but still up on the 2006 level of 38.5%. The contraction in margin stemmed mainly from under-utilization of some facilities towards the year end and the scale-up of the new Brazilian facility during the year. By contrast, salary inflation and a rise in some raw material costs were offset by increases in selling prices and purchasing improvement plans.

• The increase in sales & marketing expenses was partly due to the Group's strategy of substantially scaling up its Brazilian sales opera-tions following the inauguration of a new manufacturing facility, and partly to the acquisition of Combisafe.

• The increase in general & administrative expenses was in line with revenue growth.

• Research & development expenses were similar to the previous-year level, representing 1.86% of revenue versus 1.95% in 2007.

• Net income

Net income came to €48.0 million versus €59.1 million in 2007.

(in € million) 2008 2007 % change

Income of operating activities

Restructuring costs

Amortization and impairment of revalued intangible assets

Other income

101.5

(2.8)

(4.8)

(4.9)

111.0

1.0

(7.5)

(16.3)

-8.6

Operating income from continuing operationsNet finance costs

Income tax

89.0(22.6)

(18.3)

88.1(17.0)

(12.0)

0.9

Net income 48.0 59.1 -18.8

1 -

FIN

ANCI

AL R

EPOR

T

25


The income statement can be analyzed as follows:

• Restructuring costs amounted to €2.8 million including €2.3 million in provisions for a cost-cutting plan initiated by the Group at the end of 2008 to counter the initial impacts of economic crisis.

• Amortization of revalued intangible assets amounted to €4.8 million, including 2.2 million related to the Nacre acquisition, compared with €7.5 million in 2007, including €3.3 million related to the Nacre acquisition and €2 million relating to the partial write-down of certain brands.

• Other income represented a net expense of €4.9 million, mainly comprising the cost of the Group's name change and brand rationaliza-tion plan (€4.2 million). In 2007, other income represented a net expense of €14.4 million, comprising provision for litigation pending in the United States involving a respiratory system for firefighters. This sum represents the best estimate of the maximum probable risk.

• Net finance costs amounted to €22.6 million, including €13.7 million in financial expense, in line with 2007. The increase in average net debt from €228 million in 2007 to €256 million in 2008 to finance acquisitions was offset by an decrease in interest charges. By contrast, net foreign exchange losses increased by about €5 million compared to 2007, mainly due to a loss on the Swedish krona.

• Income tax expense amounted to €18.3 million, representing an effective tax rate of 27.6%. This compared with an exceptionally low rate of 16.9% in 2007, due to the deductibility of some provisions recognized by the Group.

1.1.3. Consolidated financial position

• Summary cash flow statement

(in € million) 2008 2007

Operating cash flow before change in working capital

Change in working capital

85.7

(17.2)

91.2

(3.4)

Net cash from operating activities 68.5 87.8

Capital expenditure

Other acquisitions/disposals

Increase/(decrease) in borrowings

Purchase of treasury shares

Dividends paid

Other

(29.0)

(70.9)

58.1

(8.5)

(11.4)

(6.6)

(21.2)

(86.5)

27.7

(6.9)

(8.2)

6.1

Change in cash and cash equivalents 0.2 (1.2)

Net cash from operating activities amounted to €68.5 million versus €87.8 million in 2007.

Capital expenditure totaled €29.0 million versus €21.2 million in 2007. It mainly comprised the purchase of a dipped gloves manufac-turing facility in China for €3.4 million, the construction of a new manufacturing facility in Brazil for €2.9 million, the relocation of some French respiratory protection activities for €2.3 million and the acquisition of doseBusters noise dosimetry technology for €1.5 million. Other outlays were devoted to innovation, particularly in hearing protection, industrial optimization (San Diego) and IT projects.

1 -

FIN

ANCI

AL R

EPOR

T


The Group made two acquisitions in 2008: Combisafe, leader in collective fall protection systems, in September, and Musitani, Argen-tina's leading fall protection company, in December. These acquisitions led to a €70.9 million increase in average debt for the year.

Lastly, under the share buyback program authorized by the Board of Directors in September 2007, the Group purchased treasury shares to a value of more than €8 million (including the amount allocated to the liquidity agreement).

• Summary balance sheet

(in € million) 2008 2007

ASSETS

Intangible assets

Property, plant & equipment

Other non-current assets

654

95

40

600

80

35

Total non-current assets 789 715

Current assets 326 299

Total assets 1,115 1,014

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Minority interests

567

1

548

1

569 550

Long-term interest-bearing loans & borrowings

Provisions

Other non-current liabilities

253

57

37

147

53

31

Total non-current liabilities 347 230

Short-term loans & borrowings

Trade & other payables

Provisions

Other current liabilities

75

106

7

11

109

114

8

4

Total current liabilities 199 234

Total equity and liabilities 1,115 1,014

The increase in assets during the year was mainly due to the recognition of goodwill on the Combisafe acquisition, in the amount of €43 million.

Working capital represented 84 days of revenue versus 77 days in 2007.(1)(2)

Net debt stood at €303 million at the year end versus €236 million at end-2007, including €77 million for the Combisafe and Musitani acquisitions.

The Group's financial structure was solid, with net debt to EBITDA standing at 2.49(3) versus 1.84 at end-2007 and net debt to equity at 53% versus 43%.

(1) Excluding the receivable from an insurance company under a lawsuit (recognized under trade receivables) and in 2007 excluding the earn-out potentially payable to the former Nacre shareholders based on future performance (recognized under trade payables).

(2) Excluding Combisafe(3) Pro forma for Combisafe/Musitani.

1 -

FIN

ANCI

AL R

EPOR

T

27


1.2. Risk Management

1.2.1. Financial and market risks

Market risk is the risk of adverse fluctuations in the value of finan-cial instruments caused by changes in exchange rates, interest rates or stock market prices. The Group is exposed to exchange rate and interest rate risk. The Group does not believe it is exposed to liquidity risk. Detailed information on the management of these risks is provided in note 4.14 to the consolidated financial statements.

1.2.2. Legal risks

The Company exercises the manufacturing and/or distribution of personal protective equipment throughout the world either through its subsidiaries or through contractual relationships with third parties. In that respect, it is subject to a complex regulatory environment associated with the types of businesses and / or the business location (see chapter 2 of this document). The risks to which it is exposed are the typical risks for identical companies given the domain covered: defective products, product sales methods, sub-contractor relationships, suppliers and / or distribu-tion networks and intellectual property.

• LitigationIn the course of normal business, the Company can find itself confronted with litigation. The Sperian Protection group believes that it has subscribed to an appropriate level of liability insurance (except for applicable insurance loss retentions) which provides coverage against any material financial loss which could result should its legal responsibility be put in question. With the excep-tion of the actions described in the paragraph on responsibilities related to defective products, to the knowledge of the Company, at this day, no litigation or arbitration exists which could have a significant impact on the business, financial structure, the Company value or those of its subsidiaries either in the past or within the foreseeable future.

• Protection of Sperian Protection Intellectual Property rightsSperian Protection policy is to protect its intellectual property rights through the filing of patents, trademarks and through confi-

dentiality agreements. Nonetheless, there can be no assurance that this policy will be adequate for the protection of its technology or the prevention of fraudulent copies or imitations. In addition, although the Company believes that its products do not infringe upon the proprietary rights of third parties, there can be no assur-ance that infringement or invalidity claims will not be asserted against it in the future. The costs of defending such claims or the costs and interest associated with any unfavorable judgment resulting from such litigation could have a material negative impact upon the Company’s financial position and business.

• Liability for defective productsIn general, given the nature of the business, the Group can be confronted with product liability claims if it is alleged that the use of its products results in, or such products fail to protect from, personal injury. As far as PPE products are concerned, legal actions related to defective products are generally claims based upon negligence, product design defects or safety requirements, or inadequate warnings, sometimes without the possibility of establishing a link between the damages and the cause of the source event.

Similarly, in the event that any of its products is shown to be defec-tive, Sperian Protection may be required to recall or redesign such product. The Company maintains insurance against product liability claims; however, there can be no assurance that such coverage will be adequate to cover liabilities which the Company may incur or that such insurance will continue to be available on reasonable terms. Certain of the Company’s American subsidiaries are currently the subject of mass tort suits for respiratory product liability in several states. The plaintiffs, who claim to have contracted respiratory illnesses (silicosis, asbestos or other respi-ratory illnesses) at their workplace, have challenged the quality of the masks used and the nature of warnings on the masks and, consequently seek damages against many defendants, including the manufacturers of respiratory products. In 2003 and 2004, the number of legal claims increased significantly as a result of changes in Mississippi and Texas law, which led plaintiffs’ attor-neys to file proceedings prior to the effective date of those changes. During 2006 through 2008, the number of such claims declined significantly. Although, so far, the risk per case has been relatively small, the legal expense for the American subsidiaries concerned is significant due to the large number of cases in process. The

1 -

FIN

ANCI

AL R

EPOR

T


Group has taken the necessary measures to reduce the risks related to this litigation, and most notably has created adequate provisions based upon actuarial estimates (see note 4.10 of the consolidated financial statements). While insurance is in place and can be obtained, it is often unavailing because of policy exclusions and high retention levels. The Group does not expect these legal proceedings to have a significant impact upon its financial position and business. In September 2007, as part of a lawsuit related to the death of a firefighter in 2002, the jury in a St Louis, Missouri, court decided against the company's US respiratory manufacturing subsidiary. If the verdict is confirmed, the financial impact for the Group would be $15 million plus interest. The company believes that the decision was contrary to the evidence presented and has filed an appeal. The appeal is expected to be concluded within 12-18 months. There are no other litigation or arbitration claims outstanding which may have, or may have had, in the recent past, a significant impact on the Company’s financial statements, its business or its profitability and as a consequence, on the Group.

1.2.3. Insurance

The Sperian Protection Group has renewed the global insurance policies for 2009 that provide diverse categories of insurance coverage for subsidiaries worldwide on either a primary or DIC (Difference In Conditions) basis. Additionally, various local policies are still in place in those countries where mandated by local laws. Civil (general) liability policies are in place to cover all entities for exposures stemming from the daily operations of its manufac-turing facilities. Additionally, product liability coverage is in force to provide protection for the Company for potential claims emanating from the use of Sperian Protection products. Of partic-ular relevance, any claims related to exposure in 2009 to asbestos and silica are excluded from coverage. The global property policy provides coverage for property damage resulting from the perils of fire, explosion, lighting, windstorm, vandalism, riot or civil commotion, and other miscellaneous extensions of coverage iden-tified in the policy. Coverage for business interruption losses is provided for all entities in the United States and for Sperian Protec-tion companies outside the US as well. Limited coverage for earth-quakes and floods is provided up to certain limits dependent upon location. Workers compensation coverage is provided for all Sperian Protection companies in the United States as required by applicable law. Employer’s liability coverage is provided on a

worldwide basis. This global program provides a level of coverage deemed to be suitable by the Company. Globalization of the company’s insurance program provides for consistency of coverage across all operating companies, efficiencies of administration and premium savings due to the economies of scale associated with a worldwide program. For 2009, Sperian Protection has purchased a global cargo policy.

• Europe & Rest of the WorldEach Sperian Protection company benefits from, at a minimum, a liability insurance policy as well as a “property damage” policy on either a primary or DIC basis. Liability coverage is provided within the framework of a European program, with local policies meeting the legal specifications resulting from local legal environments, and supplemented by additional insurance coverage provided within the framework of the Group policy subscribed to by the parent company. The insurance coverage includes “Completed Operations” and “Product” risks for all operating entities.

With respect to “Property Damage”, an insurance program has been implemented which provides coverage in line with the capacity of the insurance market and for coverage amounts which are sufficient given the property values which are regularly reassessed.

The retention levels are at levels commensurate with the Compa-ny’s size and risk exposure and is reflective that recent claims have been low in frequency as well as in total amounts. In the current state, insurance has been taken against losses related to business interruption.

For companies which benefit from coverage outside of the program, the amount of their coverage corresponds to reported values existing and should insurance related to losses as a result of business interruption have been subscribed, that coverage amount is based upon the gross margin amounts as recorded in accounting records.

The total amount of the premium in 2008 for the Eastern Hemi-sphere amounted to USD1.6 million, an amount which is subject to controlled changes with respect to the generally observed price demands of insurers.

1 -

FIN

ANCI

AL R

EPOR

T

29


• United StatesThe American companies benefit from their own insurance programs, which are subscribed locally. These programs cover risks such as: • liability, most notably product liability with significant coverage provided through the use of several “layers” of which the cumulative

amount is fixed for the financial year at 53 million US dollars; • property damage claims and losses related to Business Interruption, the combined amount of insurance coverage per incident is a

blanket limit of USD200 million;• employer liabilities as well as coverage for employees according to the local laws and regulations or local common proactive for

amounts required by those jurisdictions; • crime, fiduciary, and automotive according to the standards in force. The total cost of the premiums amounted to USD2.9 million in 2008 and is the subject of regular analysis and control. All insurance companies with which Sperian Protection has subscribed its policies are rated A or A+ by A.M. Best. In addition, the Company holds a worldwide insurance policy for Management Liability for a cumulative amount of USD25 million. In 2008, Sperian Protection purchased A-side DIC coverage for non-indemnifiable claims with a limit of USD5 million.

In 2003, the Company formed a captive insurance company chartered in Vermont, USA. At that time, the Company transferred the self-insured portion of its product liability related to Respiratory Protection Products to that Captive and, as a result, transferred all of the related damages. The captive insurer covers the Company for all of the self-insured indemnities with respect to claims covered by this program including rights, expenses and other related costs. At the end of 2007, the Company added liabilities for the self-insured posi-tion of its other product liability claims, as well as Workers Compensation claims, to the Captive.

1.3. Recent events and outlook

1.3.1. Recent events

No other events have occurred after the year end.

1.3.2. Outlook

The Group is unable to make forecasts for full year 2009 given the uncertain economic outlook.

1 -

FIN

ANCI

AL R

EPOR

T


1.4. Key figures

1.4.1. Five-year financial key figures

(in € million) 2008 2007 2006 2005 2004

Revenue


Net income from continuing operations

Net income attributable to equity holders of the parent

Net debt at December 31

Net cash from operating activities(1)

750.9

101.5

48.0

48.0

302.9

68.5

754.4

111.0

59.1

59.1

235.5

87.8

736.8

103.1

45.0

41.1

217.0

80.8

694.2

94.3

44.7

44.5

272.6

85.3

677.5

90.9

29.8

(13.8)

314.5

47.1

(1) Cash flows from operating activities before capital expenditure.

1.4.2. Revenue contribution by business segment

(in % of revenue) 2008 2007 2006 2005 2004

Eye and face protection

Respiratory protection

Hearing protection

17.0

20.0

15.0

19.0

20.0

14.5

20.0

21.0

12.0

22.0

19.0

12.5

23.0

19.0

12.5

Head protection 52.0 53.5 53.0 53.5 54.5

Fall protection

Protective gloves

Safety footwear

Protective clothing

21.5

9.5

8.5

8.5

19.0

10.5

8.5

8.5

18.0

11.0

8.0

10.0

17.0

12.0

7.5

10.0

16.0

12.0

6.5

11.0

Body protection 48.0 46.5 47.0 46.5 45.5

Total 100.0 100.0 100.0 100.0 100.0

1.4.3. Revenue contribution by geographical zone

(in % of revenue) 2008 2007 2006 2005 2004

Americas


Asia-Pacific

43.0

50.0

7.0

46.0

48.0

6.0

47.0

47.0

6.0

50.0

45.0

5.0

50.5

44.0

5.5

Total 100.0 100.0 100.0 100.0 100.0

1.4.4. 2008 quarterly revenue

(in € million) 2008 Q1 Q2 Q3 Q4

Total 750.9 186.7 191.7 174.8 197.8

Head protection

Body protection

390.7

360.1

100.6

86.1

99.2

92.5

87.5

87.3

103.5

94.3

Americas


Asia-Pacific

325.2

373.8

51.9

87.8

87.8

11.1

81.5

97.0

13.1

80.1

81.6

13.0

75.8

107.4

14.6

1 -

FIN

ANCI

AL R

EPOR

T

31


1.5. Consolidated financial statements

1.5.1. Consolidated balance sheet at December 31

(in thousands of euros) Note December 2008 December 2007

ASSETS

Non-current assets

Goodwill 4.1 554,869 516,570

Other intangible assets 4.2 98,213 83,673

Intangible assets 653,082 600,243

Property, plant & equipment 4.4 95,315 79,777

Deferred tax assets 4.21 35,698 29,850

Other financial assets 4.5 4,188 5,155

Total non-current assets 788,283 715,025

Current assets

Inventories and work in progress 4.6 140,047 116,138

Trade receivables 4.7 126,786 133,674

Other operating receivables 4.7 28,843 27,031

Derivative financial instruments 4.15 6,044 2,025

Cash and cash equivalents 4.8 24,629 19,772

Total current assets 326,349 298,640

Total assets 1,114,632 1,013,665

EQUITY AND LIABILITIES

Equity

Share capital 4.9 15,310 15,503

Share premium 436,533 442,138

Treasury shares 4.9 (69,382) (58,206)

Cumulative translation differences 4.9 (1,298) (858)

Net income for the period 47,776 58,833

Reserves and retained earnings 138,511 91,040

Total equity attributable to equity holders of the parent 567,450 548,450

Minority interests 1,289 1,116

Total equity 568,739 549,566

Non-current liabilities

Deferred tax liabilities 4.21 26,204 18,780

Long-term financial liabilities 4.13 252,668 146,573

Retirement benefit obligation 4.11 11,128 11,782

Provisions 4.10 57,481 52,919

Total non-current liabilities 347,481 230,054

Current liabilities

Trade payables 4.12 95,679 108,038

Current tax liabilities 10,462 5,965

Short-term financial liabilities 4.13 74,814 108,741

Derivative financial instruments 4.15 10,172 3,755

Provisions 4.10 7,285 7,546

Total current liabilities 198,412 234,045

Total liabilities 545,893 464,099

Total equity and liabilities 1,114,632 1,013,665

1 -

FIN

ANCI

AL R

EPOR

T


1.5.2. Consolidated income statement

(in thousands of euros) Note December 31, 2008 December 31, 2007

CONTINUING OPERATIONS

Sales 750,880 754,386

Cost of goods sold (458,568) (456,932)

Gross profit 292,312 297,454

Sales & marketing expenses (98,492) (93,145)

General & administrative expenses (78,448) (78,732)

R&D expenses (13,903) (14,599)

Income of operating activities 101,469 110,978

Restructuring costs 4.16 (2,833) 993

Amortization and impairment of revalued intangible assets 4.18 (4,805) (7,495)

Other income/expenses 4.16 (4,855) (16,342)

Operating income from continuing operations 88,976 88,134

Net finance costs 4.17 (22,580) (17,048)

Income before tax 66,396 71,086

Income tax 4.21 (18,348) (11,986)

NET INCOME 48,048 59,100

Attributable to:

Equity holders of the parent 47,776 58,833

Minority interests 272 267

48,048 59,100

Earnings per share 4.22

Basic earnings per share 6.32 7.65

Diluted earnings per share 6.30 7.59

Weighted average number of shares in issue 7,565,342 7,688,063

Weighted average number of shares, fully diluted 7,577,689 7,751,304

1 -

FIN

ANCI

AL R

EPOR

T

33


1.5.3. Consolidated statement of cash flows

(in thousands of euros) Note December 31, 2008 December 31, 2007

Operating activities

Income before income tax 66,124 70,819

Minority interests 272 267

Non-cash income and expenses

Share-based payment 4.20 2,590 1,614

Depreciation, amortization and impairment 4.18 23,487 25,816

Change in provisions (409) 11,539

Change in financial instruments 4,632 (699)

Other financial transactions 4.17 5,144

Gains or losses on divestment of non-current assets (32) (1,185)

Interest charges 4.17 12,629 12,948

Interest paid (13,019) (12,775)

Income taxes paid (15,708) (17,167)

Operating cash flow before change in working capital 85,710 91,177

(Increase)/decrease in inventory and work in process (15,242) (897)

(Increase)/decrease in trade and other receivables 12,129 (1,308)

Increase/(decrease) in trade and other payables (7,791) 1,737

Change in other operating assets/(liabilities) (6,275) (2,902)

Change in working capital (17,179) (3,370)

Net cash provided by operating activities 68,531 87,807

Investing activities

Acquisitions of property, plant & equipment, intangible and financial assets (28,951) (21,160)

Acquisition of investments in consolidated companies, net of cash acquired 2 (71,153) (87,492)

Disposal of investments in consolidated companies, net of cash sold 0 (1,483)

Divestment of property, plant & equipment and intangible assets 237 2,463

Net cash provided/(used) by investing activities (99,867) (107,672)

Financing activities

Increase/(decrease) in financial liabilities 90,471

Change in borrowings 58,098 (62,749)

Other financial transactions 4.17 (5,144)

Capital increase 4.9 86 6,711

Capital increase by minority shareholders in subsidiaries 80

Change in treasury shares 4.9 (8,474) (6,924)

Dividends paid to equity holders of the parent 4.23 (11,362) (8,062)

Dividends paid to minority shareholders of consolidated companies (79) (173)

Net cash provided/(used) by financing activities 33,125 19,355

Effect of exchange rate changes on cash and cash equivalents (1,580) (647)

Change in cash and cash equivalents 209 (1,157)

Opening cash and cash equivalents 4.8 (10,740) (9,583)

Closing cash and cash equivalents 4.8 (10,531) (10,740)

Movement in cash and cash equivalents 209 (1,157)

1 -

FIN

ANCI

AL R

EPOR

T


1.5.4. Consolidated statement of changes in equity

See Note 4.9 Attributable to equity holders of the parent Total Minority interests

Equity

(in thousands of euros) Share capital

Share premiums

Treasury shares

Reserves Cumulative translation differences

Net income for the period

At January 1, 2007 15,330 441,818 (597) 60,084 (16,956) 40,963 540,642 961 541,603

Allocation of 2006 net income 40,963 (40,963) 0 0

Dividends paid (8,062) (8,062) (172) (8,234)

Shares issued on exercise of stock options 173 6,538 6,711 6,711

Capital increases made by subsidiaries 0 78 78

Share-based payment 1,303 1,303 1,303

Purchase of treasury shares (6,924) (6,924) (6,924)

2007 net income 58,833 58,833 267 59,100

Gains/losses on hedging instruments (2,803) (2,803) (2,803)

Change in cumulative translation

differences (41,250) (41,250) (18) (41,268)

At December 31, 2007 15,503 449,659 (7,521) 90,182 (58,206) 58,833 548,450 1,116 549,566

Allocation of 2007 net income 58,833 (58,833) 0 0

Dividends paid (11,362) (11,362) (75) (11,437)

Shares issued on exercise of stock options 2 84 86 86

Share-based payment 2,590 2,590 2,590

Purchase of treasury shares (8,474) (8,474) (8,474)

Cancellation of treasury shares (195) (7,022) 7,217 0 0

2008 net income 47,776 47,776 272 48,048

Gains/losses on hedging instruments (440) (440) (440)

Gains/losses on hedges of net investments (8,729) (8,729) (8,729)

Change in cumulative translation

differences (2,447) (2,447) (24) (2,471)

At December 31, 2008 15,310 445,311 (8,778) 137,213 (69,382) 47,776 567,450 1,289 568,739

1.5.5. Notes to the consolidated financial statements at December 31, 2008

Introduction

On March 3, 2009, the Board of Directors approved the consolidated financial statements for the year ended December 31, 2008 and authorized their publication. Sperian Protection is a listed société anonyme registered in France.

Note 1: Accounting policies

1.1 Basis of preparation

As required by European Council regulation 1606/2002 of July 19, 2002, the Group's 2008 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and their interpretations as endorsed by the European Union on December 31, 2008.

1 -

FIN

ANCI

AL R

EPOR

T

35


The Group made the following elections on first-time adoption of the new standards: - not to restate business combinations prior to January 1, 2004; - to transfer cumulative translation adjustments at January 1, 2004

to reserves; - to apply IFRS 2 "Share-based Payment" to plans granted after

November 7, 2002 that had not vested at January 1, 2005. The Group elected not to recognize its unrecognized actuarial gains or losses at December 31, 2003 in equity as permitted by IFRS 1, as they were not material.

Accounting policies are consistent with those used to prepare the financial statements for the previous year, with the following exceptions. During the year, the Group adopted the following new standards, amendments or interpretations:- IFRIC 11: IFRS 2 – Group and Treasury Share Transactions

The adoption of these revised standards and interpretations had no impact on the Group's performance or financial position.

The Group has elected not to early adopt those standards and interpretations endorsed by the European Union whose applica-tion is not mandatory as of January 1, 2008:- Amendment to IAS 1: Presentation of financial statements

(revised)- Amendment to IAS 23: Borrowing Costs- IFRS 8: Operating Segments- IFRIC 13: Customer Loyalty Programmes- Amendment to IFRS 2 - Share-based Payment: Vesting Condi-

tions and Cancellations- IFRIC 14: IAS 19 - The Limit on a Defined Benefit Asset Minimum

Funding Requirements and their Interaction

Sperian Protection is currently analyzing the potential impacts of applying these new standards to the consolidated financial state-ments. At this stage, their impacts cannot be determined with sufficient precision.

The consolidated financial statements have been prepared using the historical cost convention, except for certain asset and liability classes which are measured at fair value as required by IFRS. The assets and liabilities concerned are described in the notes below.

1.2. Accounting policies 1.2.1. Consolidation principles and methodsEntities over which the Sperian Protection group has exclusive control, either directly or indirectly, are fully consolidated. Control is defined as the power to govern the financial and operating poli-cies of the subsidiary in order to derive economic benefits from its activities.Entities over which the Sperian Protection group exercises signifi-cant influence are accounted for using the equity method. Signifi-cant influence is the power to participate in the financial and operating policies of the subsidiary but is not control or joint control over those policies. Significant influence is generally presumed to exist if the reporting entity holds at least 20% of the voting rights.Subsidiaries are included in the financial statements from the date control commences until the date control ceases.

1.2.2. Elimination of intra-group transactionsTransactions between consolidated companies and any intra-group profits are eliminated.

1.2.3. Year endThe consolidated financial statements are based on the separate financial statements of Sperian Protection S.A. and its subsidiaries as of December 31 each year. All subsidiaries have the same year end as the parent company and use the same accounting methods.

1.2.4. Translation of financial statements of foreign entitiesThe consolidated financial statements are presented in euros, which is the functional currency of the Sperian Protection group. Each Group entity determines its own functional currency and the items included in their separate financial statements are meas-ured using that currency.The balance sheets of subsidiaries whose functional currency is not the euro are translated at the exchange rates ruling on the reporting date. Their income statements are translated at the average rate for the year. Any translation differences are recog-nized in consolidated reserves for the Group share and in minority interests for the non-Group share. Goodwill and fair value adjust-ments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity. Accordingly, they are expressed in that entity's functional currency and translated at the year-end rate.On disposal of a foreign entity, the cumulative translation differ-ences recognized in equity in respect of that entity are recycled to profit or loss.

1 -

FIN

ANCI

AL R

EPOR

T


The exchange rates of the main currencies used in consolidation are as follows:

Vs the euro Year-end rate Average rate

2008 2007 2008 2007

Australia AUD 2.0274 1.6757 1.7389 1.6356

Brazil BRL 3.2436 2.6018 2.6731 2.6635

Canada CAD 1.6998 1.4449 1.5570 1.4671

China CNY 9.4956 10.7524 10.2109 10.4186

United States USD 1.3917 1.4721 1.4688 1.3706

Hong Kong HKD 10.7858 11.4800 11.4393 10.6928

Morocco MAD 11.2585 11.3520 11.3466 11.2180

Mexico MXN 19.2333 16.0735 16.2799 14.9769

Norway NOK 9.7500 7.9580 8.2258 7.9004

United Kingdom GBP 0.9525 0.7334 0.7961 0.6913

Slovakia SKK 30.1260 33.5830 31.2602 33.7750

Sweden SEK 10.8700 9.4415 9.6158 9.2521

Switzerland CHF 1.4850 1.6547 1.5886 1.6427

1.2.5. Foreign currency transactionsForeign currency transactions are translated at the exchange rate ruling on the transaction date. Monetary assets and liabilities denomi-nated in foreign currencies are translated at the rate ruling on the reporting date. The resulting exchange differences are recognized in profit or loss.

1.2.6. Hedges of a net investment in a foreign operationHedges of a net investment in a foreign operation, including hedges of a monetary asset recognized as part of the net investment, are accounted for in the same way as cash flow hedges (Note 1.3.7). Gains or losses on the effective portion of the hedge are recognized directly in equity and gains or losses on the ineffective portion are recognized through profit or loss. When the foreign operation is sold, or the criteria for recognition as a hedge of a net investment in a foreign operation under IAS 21 are no longer met, the cumulative gains and losses recognized in equity are recycled to profit or loss.

1.2.7. Use of estimatesIn preparing the financial statements in accordance with IFRS, the Group is required to make certain estimates and assumptions that affect the amounts presented. The balance sheet items whose carrying amount is likely to be significantly affected by changes in esti-mates made by the Group are non-financial assets (Note 4.3), provisions and contingent liabilities (Note 4.10), pension and other post- employment benefits (Note 4.11), share-based payments (Note 4.20) and deferred tax assets (Note 4.21.3).

1.3. Significant accounting methods applied to balance sheet and income statement items

1.3.1. Intangible assetsGoodwillGoodwill is initially measured as the excess of the cost of the business combination over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity. On the acquisition date, goodwill is allocated to one or more cash-generating units (CGUs). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is not amortized but tested for impairment whenever there is an indication that it may be impaired and at least once a year on the reporting date. Impairment testing consists of comparing the carrying amount of a CGU with its value in use, which is the present value of the future cash flows expected to be derived from continuing use of the CGU and its ultimate disposal. If value in use is less than the carrying amount, an impairment loss is recognized in profit or loss and deducted to the extent possible from the goodwill allocated to that CGU. Goodwill impairment losses are not reversible.

1 -

FIN

ANCI

AL R

EPOR

T

37


Research & development expensesResearch expenditures are recognized as an expense when they are incurred. Development expenditures are only recognized as an intangible asset if they will generate individually probable future economic benefits. Most development costs are incurred before product certification. They are therefore expensed as incurred as there is no reasonable assurance before this stage that the prod-ucts will come to market.

Other intangible assetsOther intangible assets consist mainly of software, patents and trademarks acquired or created by the Group. At initial recogni-tion, they are measured at cost or at fair value as deemed cost where they have been acquired in a business combination. Fair value is determined by outside experts where necessary.They are subsequently measured at cost less accumulated amorti-zation and impairment losses. The Group determines whether an intangible asset has a finite or an indefinite life.Assets with a finite useful life, such as software and patents, are amortized over a period corresponding to their estimated useful lives. Leading brands are deemed to have an indefinite useful life. They are not amortized but reviewed annually to verify that they can continue to be used indefinitely. Other brands or product names are deemed to have a finite useful life and are amortized over their estimated useful lives.Amortization periods are as follows:

• Patents and similar rights: 5 to 15 years

• Software: 3 to 10 years

• Brands: Not amortized or 10 years

Assets with an indefinite useful life are tested for impairment at least once a year. Impairment testing consists of comparing their recoverable amount with their carrying amount. If the recoverable amount is lower than the carrying amount, an impairment loss is recognized in profit or loss. Assets with a finite useful life are also tested for impairment whenever there is objective evidence that they may be impaired. The discounted cash flow method is used to assess value in use.

1.3.2. Property, plant & equipmentProperty, plant & equipment are measured at cost, or fair value as deemed cost where they have been acquired in a business combi-nation, less accumulated depreciation and impairment losses. They are not revalued after initial recognition.Where applicable, the total cost of an asset is allocated to signifi-cant components that have a different useful life or rate of consumption of future economic benefits than the asset as a whole. Maintenance and repair costs are recognized as expenses when they are incurred, except for expenditures intended to increase the productivity or extend the estimated useful life of the asset.

The residual value of an asset is deducted from its depreciable amount if it can be measured reliably. Assets are depreciated over their estimated useful lives as follows:

Depreciation period

Buildings 20 to 40 years

Installations and fittings 10 years

Manufacturing equipment and materials 5 to 10 years

Tooling 3 to 5 years

Vehicles 3 to 5 years

Office furniture and equipment 3 to 10 years

These depreciation periods are reviewed regularly and any adjust-ments recognized prospectively. If there is objective evidence of impairment, the recoverable amount of the asset or the cash-generating unit to which it belongs is compared to its carrying amount. If the recoverable amount is lower than the carrying amount, an impairment loss is recognized in profit or loss.

Finance leasesAssets acquired under finance leases are recognized on the balance sheet when the lease transfers substantially all the risks and rewards incidental to ownership to the Group. At inception of the lease, the leased assets are measured at the lower of their market value and the net present value of future lease payments. They are recognized on the balance sheet as property, plant & equipment with a corresponding amount recognized as a financial liability. Leased assets are depreciated over the shorter of the lease term and the estimated useful life of the asset.In the income statement, lease payments are broken down into interest expense on the finance lease liability and depreciation of the asset. Lease contracts that do not transfer substantially all the risks and rewards incidental to ownership to the Group are classi-fied as operating leases. Lease payments are recognized in profit or loss on a straight- line basis over the term of the lease.

1.3.3. Inventories and work-in-progressInventories comprise raw materials, semi-finished and finished products and goods purchased for resale. They are measured at the lower of cost (including indirect production costs) and net realizable value. Cost is determined using the weighted average cost method.

1.3.4. ReceivablesReceivables are carried at their face value. An impairment charge is recognized if there is a risk of non-recovery. Receivables denom-inated in foreign currencies are translated at the year-end rate.

1 -

FIN

ANCI

AL R

EPOR

T


1.3.5. TaxesDeferred taxes are recognized on all temporary differences between the tax base and carrying amounts of assets and liabili-ties, and on consolidation adjustments made to align accounting methods used by various subsidiaries.Deferred tax assets arising from tax losses are recognized only if there is convincing evidence that sufficient taxable profit will be available in the future to offset the losses.Deferred taxes are calculated using the liability method, using the tax rates that have been enacted or substantively enacted at the balance sheet date.Deferred tax assets and liabilities are not discounted.

1.3.6. BorrowingsBank debt is measured at amortized cost using the effective interest method, which includes all directly attributable costs of arranging the loan.

1.3.7. Derivative financial instruments and hedgingThe Group uses derivative financial instruments to hedge its expo-sure to interest and exchange rate risks. It does not take specula-tive positions.These risks are monitored centrally and broad hedging guidelines have been set which apply throughout the Group.Hedges are purchased over-the-counter from first-class banks.

Exchange rate riskAs far as possible, Group companies invoice and are invoiced in their functional currency to minimize exchange rate risk. Other-wise, risk is hedged on a case by case basis.

Interest rate riskExposure to interest rate risk is managed through a Group-wide policy approved by management. Speculative positions are not permitted. Hedges are purchased over-the-counter from first-class banks.

Recognition and measurementDerivative financial instruments are used to hedge the Group's current or future exposure to fluctuations in exchange rates or interest rates. In line with IAS 32 and IAS 39, derivative financial instruments are recognized on the balance sheet and measured at their fair value.

Hedge accounting:- Changes in the fair value of instruments designated as fair value hedges of assets or liabilities are recognized in profit or loss symmetrically with the unrealized gains or losses on the hedged items. - Changes in the fair value of instruments designated as cash flow hedges, which protect against variations in future cash flows, are recognized in equity to the extent of the effective portion of the

gain or loss. Amounts accumulated in equity are reclassified into the income statement in the period in which the hedged item affects profit or loss. The ineffective portion is recognized in profit or loss.- Instruments that do not qualify for hedge accounting.- Changes in the fair value of financial instruments that do not satisfy the criteria for hedge accounting are recognized in profit or loss.

1.3.8. Cash and cash equivalentsCash and cash equivalents comprise cash at bank and in hand, together with short-term deposits with a maturity of less than three months.In the cash flow statement, net cash and cash equivalents are equal to cash and cash equivalents as defined above net of any short-term bank debt.

1.3.9. ProvisionsA provision is recognized when the Group has a present obligation (legal or constructive) and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. In the case of restructurings, a provision is recog-nized as soon as the restructuring has been announced and the Group has drawn up or started to implement a detailed restruc-turing plan approved by management.

1.3.10. Post-employment benefitsLump-sum retirement payments, supplementary pensions and similar commitments (medical expenses for retired employees and disability insurance) are recognized as and when the employees' rights vest. The obligation is measured on the reporting date based on the length of service of each employee and the probability of their being employed by the Group on retirement, in accordance with the legislation applicable in countries where the Group operates. The calculation is based on an actuarial model using assumptions on mortality rates, staff turnover, salary increases, long-term return on plan assets and economic condi-tions in each country. The obligation in respect of lump-sum retirement payments is determined using the projected unit credit method over the employee's total working life with the Group. Provisions recognized in the balance sheet are stated net of any payments to external organizations designed to fund the benefit obligation.

1 -

FIN

ANCI

AL R

EPOR

T

39


Defined contribution plansUnder defined contribution plans, the Group's only obligation is the payment of a contractually agreed contribution to an external fund, in exchange for services rendered by the employees. The contributions are recognized in profit or loss as and when the services are rendered by the employees.

Defined benefit plansThe net obligation under defined benefit pension and healthcare plans represents the post-employment benefit entitlement that employees have accumulated in exchange for services rendered during the current and past years. It is determined separately for each plan using the projected unit credit method, whereby each period of service gives rise to an additional unit of benefit entitle-ment and each unit is accounted for separately to build up the final obligation.The benefits are then discounted to determine the present value of the obligation net of the fair value of the plan assets, using a discount rate appropriate to each country concerned. Under this method, the amount in excess of 10% of the higher of the net obli-gation and the fair value of the plan assets is deferred over the remaining working lives of the employees participating in the plan. The obligation is calculated by independent actuaries.

1.3.11. Provisions for litigationProvisions for litigation are recognized on the reporting date to cover all known future liabilities and charges on that date.They are determined using best estimates on the reporting date in terms of the risks involved and the probability of their occurrence. Provisions are taken only for specifically identified risks and prin-cipally those that are not covered by insurance.The provision represents the total amount that Group companies may have to pay as a result of legal proceedings, net of any sums insured. The amount of the provision is measured on an actuarial basis according to known and potential risks or litigation on the reporting date.

1.3.12. Earnings per shareBasic earnings per share is determined on the basis of the weighted average number of shares in issue during the year.Diluted earnings per share is determined on the basis of the weighted average number of shares in issue during the year plus the total number of shares that would be issued if all existing stock options were exercised.

1.3.13. Revenue recognitionRevenue on the sale of goods is recognized when the significant risks and rewards of ownership of the goods are transferred to the buyer (usually on transfer of goods).Revenue is measured at the fair value of the consideration received or receivable, after deducting any rebates and discounts. Trans-portation and other costs billed to customers are included in revenue. Transportation costs borne by the Group are included in the cost of goods sold.

1.3.14. Other incomeThe Group uses income of operating activities as its main perform-ance indicator. Income of operating activities is defined as consoli-dated net income before:- Gains or losses on disposal of assets;- Restructuring costs;- Impairment losses (including on goodwill);- Amortization of revalued intangible assets;- Litigation costs and other losses, gains and changes in provisions arising from material events that are exceptional in nature;- Net finance cost;- Income tax;- Share of results of associates.

1.3.15. Net finance costNet finance cost comprises:- The net cost of debt, which corresponds to interest expense on bank loans and other financial liabilities (including finance leases), less interest income on cash and cash equivalents;- Dividends received from non-consolidated entities;- The impact of discounting provisions (except for retirement benefit obligations);- Change in fair value of financial instruments;- Exchange differences on financial transactions.

1.3.16. Share-based paymentsStock options granted to executive officers and some employees of the Group are recognized and measured in accordance with IFRS 2. The fair value of stock options is measured on the date of grant using the Black & Scholes and Monte Carlo methods.It is based on the expected life of the options, their exercise price, the current price of the underlying shares and expected volatility of the share price. The expense is deferred and released to profit or loss in personnel expenses over the vesting period, i.e. the period between the date of grant and the initial exercise date. A corresponding amount is recognized directly in equity (share premium).

1 -

FIN

ANCI

AL R

EPOR

T


Performance shares awarded to executive officers and some employees of the Group are recognized and measured in accord-ance with IFRS 2. The fair value of the performance shares is measured on the date of grant using the Monte Carlo method.The value depends mainly on the number of shares contingent upon the probability of achieving the market- related perform-ance, the lock-up period, the current price of the underlying shares and expected volatility of the share price. The expense is deferred and released to profit or loss in personnel expenses over the vesting period. A corresponding amount is recognized directly in equity (share premium).

IFRS 2 only applies to plans granted after November 7, 2002 that had not vested at January 1, 2005.

1.3.17. Non-current assets held for sale and discontinued operations Non-current assets held for sale and discontinued operations are measured at the lower of their carrying amount and the estimated selling price net of costs to sell. These assets or groups of assets are identified separately in the balance sheet.

Note 2 : Changes in scope of consolidation

In August 2008, the Group announced the acquisition of the entire share capital of Combisafe International AB, a leading designer and supplier of height safety and access systems. The acquisition has made Sperian world leader in fall protection, providing its customers with a range of both individual and collective fall protection systems. Combisafe International AB is a Swedish company with subsidiaries in the United Kingdom, Denmark, France, Germany, United Arab Emirates, Nether-lands and Norway.

The transaction was completed on September 16, 2008 and Combisafe has been consolidated as of September 1, 2008. During the period September 1 to December 31, 2008, Combisafe incurred a net loss of €0.6 million. Had the acquisi-tion taken place on January 1, 2008, it would have contributed revenue of €34.1 million and a net loss of €1.0 million, including amortization of intangible assets revalued on the acquisition date.

Fair value adjustments and goodwill were provisionally allo-cated on December 31, 2008.

The table below shows a breakdown of the cost of the business combination at August 31, 2008:

In thousands of euros

Acquisition price, paid in cash 53,186

Direct transaction costs 1,071

Total acquisition cost 54,257

Fair value of the net assets acquired (15,096)

Translation differences 1,368

Goodwill (note 4.1) 40,529

The goodwill arising on this acquisition is due to Combisafe's profitability and the expected synergies.

1 -

FIN

ANCI

AL R

EPOR

T

41


The assets and liabilities acquired at August 31, 2008 were as follows:

(in thousands of euros) Fair value Carrying amount in Combisafe's financial statements

Fair value of technology 2,335 1,281

Fair value of customer relationships 8,074 0

Fair value of Combisafe brand 7,607 0

Property, plant & equipment 5,335 5,335

Deferred tax assets 1 0

Inventories and work in progress 7,338 7,338

Trade receivables 7,066 7,066

Other operating receivables 1,146 1,146

Cash and cash equivalents (3,040) (3,040)

Deferred tax liabilities (5,391) (990)

Retirement benefit obligation (2) 0

Provisions (537) 0

Borrowings (5,753) (5,753)

Trade and other payables (9,083) (9,083)

Net assets acquired 15,096 3,300

In December 2008, Sperian Protection acquired Musitani SA, the leading fall protection company in Argentina. Musitani is based in Buenos Aires and currently employs about 140 people. It has been consolidated as of December 31, 2008. Goodwill at December 31, 2008 was provisionally estimated at €11.3 million (Note 4.1).

In 2007, the Group acquired Nacre for €92 million, generating €73 million of goodwill including an earn-out estimated at USD 10 million based on sales targets for full year 2008. At June 30, 2008, payment of the earn-out was no longer deemed probable given the postpone-ment of certain orders (Note 4.1).

Acquisition of investments in consolidated companies shown in the cash flow statementThe cost of the Combisafe acquisition shown in the cash flow statement is €59.8 million, which includes Combisafe's negative cash posi-tion and repayment of the seller's short-term advance. The acquisition cost of Musitani was €11.3 million, making a total of €71.2 million.

Note 3 : Segment reporting

Segment information is extracted from the consolidated financial statements of the Sperian Protection Group.

Segment reporting is based on the Group's internal organization structure and the structure of its markets. Business segment is the Group's primary reporting format and geographical segment its secondary reporting format.Business segments:- Head protection: respiratory protection products, ranging from disposable masks to self-contained breathing apparatus, eye & face and hearing protection equipment.- Body protection: fall protection products and systems, safety footwear, protective gloves, protective clothing and image wear.

There are three geographical segments, the two major ones being the Americas and EMEA (Europe, Middle East, Africa), together with Asia-Pacific.Intra-segment transactions are not material; corporate costs are allocated in proportion to external net sales.

1 -

FIN

ANCI

AL R

EPOR

T


3.1. Business segment information

(in thousands of euros) December 31, 2008 December 31, 2007

Bodyprotection

Headprotection

Corporate Total Body

protectionHead

protectionCorporate Total

External sales 360,144 390,736 750,880 351,223 403,163 754,386

Income of operating activities 26,766 74,703 101,469 24,903 86,075 110,978

Fixed assets 169,368 321,250 257,779 748,397 98,122 331,798 250,100 680,020

Working capital 108,699 90,709 (9,873) 189,535 89,116 90,366 (9,849) 169,633

Provisions and retirement

benefit obligation 5,415 57,678 1,673 64,766 9,342 56,476 2,776 68,594

Capital expenditure 84,254 14,423 5,260 103,937 5,286 99,804 5,374 110,464

Amortization, depreciation and

impairment 5,127 11,469 5,637 22,233 4,385 14,798 5,516 24,699

3.2. Geographical segment information


Americas EMEA* and Asia-Pacific

Total Americas EMEA* and Asia-Pacific

Total

External sales 325,202 425,678 750,880 346,200 408,186 754,386

Fixed assets 417,136 331,261 748,397 386,217 293,803 680,020

Working capital 58,169 131,366 189,535 50,237 119,396 169,633

Provisions and retirement benefit

obligation 57,177 7,589 64,766 52,038 16,556 68,594

Capital expenditure 23,755 80,182 103,937 9,221 101,243 110,464

Amortization, depreciation and

impairment 11,006 11,227 22,233 13,401 11,298 24,699

*EMEA: Europe, Middle East, Africa.

Note 4 : Notes to the balance sheet and income statement

4.1. Goodwill


Opening balance 516,570 475,105

Cumulative translation differences (7,192) (31,873)

Acquisitions (Combisafe and Musitani, see Note 2) 51,881 73,338

Decrease (Nacre) (6,390)

Net 554,869 516,570

Gross value 576,208 537,257

Cumulative impairment losses (21,339) (20,687)

1 -

FIN

ANCI

AL R

EPOR

T

43


Goodwill recognized in 2008 includes €40.5 million for Combisafe and €11.3 million for Musitani, estimated on a provisional basis at December 31, 2008.

2007 goodwill mainly comprised Nacre. The decrease in 2008 was due to an adjustment to the Nacre goodwill. At June 30, 2008, payment of the Nacre earn-out, based on full-year 2008 sales targets and recognized in the cost of the business combination, was no longer deemed probable given the postponement of certain orders.

The breakdown of goodwill as of December 31, 2008 is as follows:

(in thousands of euros) Year of acquisition Net

WGM 1988 22,342

Pulsafe 1996 12,832

Söll 2000 22,042

Fendall 2000 9,108

Bacou group 2001 362,768

Sécuritex 2003 8,126

SGP 2003 1,228

Epicon 2006 3,443

Nacre 2007 52,048

Combisafe 2008 34,896

Musitani 2008 11,303

Other* 14,733

Total 554,869

* Goodwill on acquisitions prior to 2002 where each separate item is less than €10 million

4.2. Other intangible assets

At December 31, 2008

(in thousands of euros) Brands Patents Technology Other TotalOpening gross value 43,361 26,888 13,207 30,647 114,103 Translation differences 1,501 1,449 (2,580) (301) 69

Acquisitions 0 1,552 0 3,469 5,021

Impairment losses 0 0 0 0 0

Reclassification 0 (42) 0 3,438 3,396

Disposals 0 0 0 (800) (800)

Changes in scope of consolidation 7,467 0 1,321 8,895 17,683

Gross value 52,329 29,847 11,948 45,348 139,472 Cumulative amortization (335) (14,042) (943) (15,110) (30,430)

Amortization for the year (629) (1,942) (1,855) (3,908) (8,334)

Cumulative translation differences (2) (741) 462 (481) (762)

Reclassification 0 42 0 (2,573) (2,531)

Disposals 0 0 0 798 798

Changes in scope of consolidation 0 0 0 0 0

Net 51,363 13,164 9,612 24,074 98,213 Cumulative impairment losses (3,162) 0 0 0 (3,162)

1 -

FIN

ANCI

AL R

EPOR

T


Brands and patents principally comprise Uvex (in the United States) and Howard Leight, together with the eye protection patents recognized on acquisition of the Bacou group.

Capital expenditure on patents mainly comprised the acquisition of doseBusters noise dosimetry technology for €1.5 million.

Other intangible assets consist mainly of software and customer relationships. Acquisitions in 2008 and 2007 comprise information systems developments.

Changes in scope of consolidation comprise the fair value of Combisafe's brand, technology and customer relationships.

Some brands have been assigned a finite useful life following the brand portfolio optimization and rationalization process initiated in 2007. They are amortized over a period estimated at ten years from the second half of 2007.


(in thousands of euros) Brands Patents Technology Other TotalOpening gross value 50,227 29,929 0 27,650 107,806 Cumulative translation differences (4,896) (3,041) (96) (1,984) (10,017)

Acquisitions 0 0 0 3,364 3,364

Impairment losses (1,970) 0 0 0 (1,970)

Reclassification 0 0 0 20 20

Disposals 0 0 0 (2,504) (2,504)

Changes in scope of consolidation 0 0 13,303 4,101 17,404

Gross value 43,361 26,888 13,207 30,647 114,103 Cumulative amortization (136) (13,318) 0 (13,303) (26,757)

Amortization for the year (212) (2,186) (950) (5,233) (8,581)

Cumulative translation differences 13 1,462 7 909 2,391

Reclassification 0 0 0 14 14

Disposals 0 0 0 2,503 2,503

Changes in scope of consolidation 0 0 0 0 0

Net 43,026 12,846 12,264 15,537 83,673 Cumulative impairment losses (2,989) 0 0 0 (2,989)

Changes in scope of consolidation in 2007 comprised the fair value of Nacre's technology, customer relationships and order book.

Rationalization of the brand portfolio in 2007 led to a change in the inputs used to value certain brands. This had the effect of reducing their recoverable amount based on value in use and led to the recognition of €2.0 million in impairment losses.

4.3. Impairment of goodwill, brands and patents

Intangible assets have been allocated to Cash-Generating Units (CGUs) or to groups of CGUs where they relate to the Group's organization methods and resulting synergies. These CGUs correspond to the main segments defined in the strategic plan.

The breakdown by group of CGUs is as follows:

(in thousands of euros) Body protection Head protection Shared Total

Carrying amount of goodwill 110,510 204,210 240,149 554,869

Carrying amount of brands, trademarks, patents and other 19,123 63,022 16,068 98,213

Total intangible assets 129,633 267,232 256,217 653,082

Impairment of goodwill recognized in 2008 0

Impairment of brands and trademarks, patents and other recognized in 2008 0

Total impairment losses recognized in 2008 0 0 0 0

1 -

FIN

ANCI

AL R

EPOR

T

45


• Goodwill Each of the CGUs and groups of CGU were tested for impairment on the reporting date. The procedure involves estimating their value in use based on discounted future cash flows.

The main assumptions used were as follows:- After-tax cash flows for the remaining four years of the strategic plan approved by the Board of Directors in October 2008;- Net of tax discount rate of 8%;- Terminal value based on a perpetual growth rate of 1.5%;- Standard tax rate of 36%.

A sensitivity test was carried out on the following inputs for each CGU:- Perpetual growth rate: change of +/- 0.5 points;- Net of tax discount rate: change of +/- 1 point;- Sales forecasts for the next four years: change of +/- 10%, with the other cash flow inputs remaining unchanged.

None of the changes individually would have caused recoverable amounts to fall below carrying amounts at December 31, 2008.

In addition, cash flows in the strategic plan used for impairment testing are based on future revenue growth rates similar to those used in previous years' tests. They correspond to management's best estimate of medium-term trends in the Group's business activities at end October 2008. Accordingly, they do not include the short-term impacts of the current crisis witnessed since then. Consequently, deterio-rations in the economic environment are a factor of uncertainty in drawing up the cash flow forecasts used and in the resulting valuations.

• Brands, patents and other intangible assetsImpairment tests on other intangible assets revealed that recoverable amounts are currently higher than carrying amounts.

Discount rates used in impairment testing range from 7.6% to 8.3% depending on the country.

4.4. Property, plant and equipment


(in thousands of euros)

At January 1, 2008

Changes in scope of consolidation

Acquisitions Decreases/ disposals

Transfers Translation differences

Depreciation and impairment

At Dec. 31, 2008

Land 4,209 (7) 130 4,332

Buildings 49,436 761 5,230 (154) 742 882 (5) 56,892

Plant &

equipment 121,371 4,544 18,817 (1,324) (4,138) 2,920 (182) 142,008

Gross value 175,016 5,305 24,047 (1,485) (3,396) 3,932 (187) 203,232

Buildings (20,256) 236 219 (384) (2,764) (22,949)

Plant &

equipment (74 983) 1 046 2 312 (2 395) (10 948) (84 968)

Net 79,777 5,305 24,047 (203) (865) 1,153 (13,899) 95,315

Capital expenditure mainly comprised the purchase of a dipped gloves manufacturing facility in China for €3.4 million, the construction of a new manufacturing facility in Brazil for €2.9 million and the relocation of some French respiratory protection activities for €2.3 million. Other outlays were devoted to innovation, particularly in hearing protection, industrial optimization (San Diego) and IT equipment.

1 -

FIN

ANCI

AL R

EPOR

T




At January 1, 2007

Changes in scope of consolidation

Acquisitions Decreases/ disposals

Transfers Translation differences

Depreciation and impairment

At Dec. 31, 2007

Land 4,024 193 (253) 514 (269) 4,209

Buildings 52,582 2,843 (5,764) 2,116 (2,341) 49,436

Plant &

equipment 122,399 296 13,026 (4,354) (2,650) (6,994) (352) 121,371

Gross value 179,005 296 16,062 (10,371) (20) (9,604) (352) 175,016

Buildings (23,273) 5,081 (435) 831 (2,460) (20,256)

Plant &

equipment (72,416) 4,014 421 4,334 (11,336) (74,983)

Net 83,316 296 16,062 (1,276) (34) (4,439) (14,148) 79,777

Europe accounted for 52% of 2007 capital expenditures, including €1.6 million on the new decontamination suit plant in the Rhone Alpes region of France and €1.0 million on information systems projects. The Americas accounted for 42% of total capital expenditures. Most of the outlays (€2.0 million) were devoted to developing Epicon's manufacturing and logistics base in Brazil. Disposals mainly reflect the centralization of US eye protection manufacturing operations at the Smithfield plant in Rhode Island (United States).

4.5. Financial assets


Pension plan assets (Note 4.11) 3,006 3,653

Other financial assets 1,182 1,502

Net 4,188 5,155

Other financial assets at December 31, 2008 principally comprised investments in non-consolidated entities for €150 thousand and various security deposits for €1.0 million.

4.6. Inventories and work in progress


Raw materials and supplies 52,992 45,245

Goods held for resale, finished products and work in progress 108,537 93,379

Gross value 161,529 138,624

Provisions (21,482) (22,486)

Net 140,047 116,138

The change in inventories and impairment charges and reversals are recognized in the cost of goods sold.

1 -

FIN

ANCI

AL R

EPOR

T

47


4.7. Trade and other receivables

• Trade receivables

(in thousands of euros) December 31, 2007 Exchange differences

Change in scope of consolidation

Other changes December 31, 2008

Gross value 137,877 (1,747) 7,260 (12,540) 130,850

Provisions (4,203) (33) (240) 412 (4,064)

Net 133,674 (1,780) 7,020 (12,128) 126,786

As in previous years, the risk on trade receivables is low. Provisions totaled €0.6 million in 2008 and €0.2 million in 2007.

• Other operating receivables


Income tax receivables 2,045 2,360

Insurance receivables 12,472 10,815

Other tax receivables 5,967 5,604

Prepaid expenses 4,195 4,397

Advances to suppliers 1,237 1,563

Other receivables 2,927 2,351

Provisions 0 (59)

Net 28,843 27,031

Insurance receivables represent an estimate of the amount of damages that will be recovered from insurance companies in respect of a fully provisioned lawsuit (see Note 4.10).All trade and other receivables except for insurance receivables are due in less than one year.

4.8. Net cash and cash equivalents


Cash and cash equivalents 22,059 17,370

Short and medium term money market investments 2,570 2,402

Total cash and cash equivalents 24,629 19,772

Short-term financing (Note 4.13) (35,160) (30,512)

Net cash and cash equivalents (10,531) (10,740)

1 -

FIN

ANCI

AL R

EPOR

T


4.9. Share capital and reserves

At December 31, 2008, the share capital was €15,310,046 divided into 7,655,023 fully paid shares with a par value of €2, all of the same class.

(number of shares) Shares

Number of shares in issue at January 1, 2007 7,665,169

Shares issued during 2007 on exercise of stock options 86,240

Number of shares in issue at December 31, 2007 7,751,409

Shares cancelled in 2008 (97,686)

Shares issued during 2008 on exercise of stock options 1,300

Number of shares in issue at December 31, 2008 7,655,023

Treasury shares held under the share buyback program 82,902

Treasury shares held under the liquidity agreement 31,445

During the year, the share capital was reduced by €192,772 following the cancelation of 97,686 treasury shares and the issuance of 1,300 new shares on exercise of stock options.

• Liquidity agreement:Sperian Protection has entered into a market making agreement for its shares with Exane BNP Paribas. The agreement complies with the A.F.E.I. Code of Conduct, which is recognized by the Autorité des Marchés Financiers.The sum of €1.7 million was credited to the liquidity account at inception of the agreement, a further €0.5 million in July 2007 and then €0.5 million in January 2008.Treasury shares purchased by the Group are deducted from equity. Gains and losses generated on purchases and sales of treasury shares are recognized in equity.

• Share buyback program:On September 20, 2007, the Board of Directors authorized the company to purchase shares under the share buyback program approved at the annual shareholders' meeting of May 10, 2007. The program is governed by articles L. 225-209 et seq. of the French Commercial Code (Code de Commerce) and was described in a document published on April 4, 2008. Under the program, the Company may trade in its own shares, within the limits set in the program, for a maximum period of eighteen months from the date of the Annual Meeting, approved by the annual Meeting held on May 19, 2008. The maximum authorized price is €140. The shares must be purchased in accordance with French stock market regulations and the provisions of the General Regulation of the Autorité des Marchés Financiers ("AMF"). More particularly, share purchases must not hamper fair trading in the market or be misleading to investors.On March 4, 2008, the Board of Directors decided to reduce the share capital by canceling 97,686 shares, using the authorization granted at the annual shareholders' meeting on May 10, 2007.

• Stock option and performance share plans:The company has granted stock options and performance shares to certain key managers and executive officers (Note 4.20).

• Net gain or loss on cash flow hedges:This item comprises the effective portion of gains or losses on financial instruments designated as cash flow hedges (Note 4.15).

• Hedges of net investments in foreign operations:Two intragroup loans are classified as hedges of net investments in subsidiaries, one for SEK 539 million (€49.6 million) and the other for £4.6 million (€4.9 million). Translation differences on the loans are recognized through equity to offset the translation differences of the equivalent loans recognized by the subsidiaries. At December 31, 2008, cumulative translation differences recognized in equity amounted to €(8.7) million taken entirely in 2008.

1 -

FIN

ANCI

AL R

EPOR

T

49


• Cumulative translation differences:This item comprises exchange differences arising on the translation of the financial statements of foreign entities. Changes in cumulative translation differences are principally due to fluctuations in the US dollar, Swedish krona and Norwegian kroner.

(in thousands of euros) December 31, 2008 December 31, 2007 Change

NOK (17,891) (8) (17,883)

SEK (7,448) (545) (6,903)

AUD (2,320) (55) (2,265)

CAD (581) 1,443 (2,024)

SKK 2,503 1,485 1,018

USD (41,904) (59,076) 17,172

Other currency (1,741) (1,451) (290)

Total (69,382) (58,206) (11,176)

4.10. Provisions and contingent liabilities


At January 1, 2008

Change in scope of

consolidation

Discounting Increases Reversals (used)

Reversals (not used)

Reclassifications Exchange differences

December 31, 2008

Litigation 51,396 0 1,800 2,913 (2,136) (1,051) 1 2,959 55,882

Warranties 2,003 52 (343) (1) (37) 1,674

Restructuring 3,430 2,456 (2,481) (263) 5 3,147

Other

provisions 3,636 528 1,068 (1,157) 0 (12) 4,063

Total 60,465 528 1,800 6,489 (5,774) (1,657) 0 2,915 64,766

Provisions for litigation cover all known and potential risks arising from the Group's liability as a safety equipment manufacturer. The amount covers legal costs and potential damages that either exceed sums insured or are not insured. These provisions are estimated annually on the basis of reviews carried out by independent actuaries.

In September 2007, the jury in the St. Louis, Missouri, Circuit Court in the United States returned a verdict against the Group's US respira-tory protection subsidiary in a lawsuit involving the death of a firefighter in 2002. If the verdict is upheld, the total cost would be USD 15 million plus interest in damages and USD 12 million plus interest as a punitive award. The total amount has been provisioned and the amounts recoverable under insurance policies have been recognized under other insurance receivables (Note 4.7). The Group believes that this verdict does not reflect the weight of evidence presented and has gone to appeal. The case could last six to twelve months.

Provisions for restructuring costs concern restructuring plans that had started but were not completed at the reporting date.Other provisions cover various identified risks for which individual amounts are not material.

The non-current portion (over one year) amounted to €57.5 million in 2008 against €52.9 million in 2007 and principally comprises provisions for litigation.

No material contingent liabilities were identified at the reporting date.

1 -

FIN

ANCI

AL R

EPOR

T


4.11. Retirement benefit obligationThe Group's main post-employment benefit obligations correspond to defined benefit plans. They comprise lump-sum retirement payments in France, a non-qualified plan in the United States and various other plans in North American and European companies.The assets of the non-qualified plan are identified separately (Note 4.5). The Group's obligation is measured by independent actuaries.

At December 31, 2008:

Net amount recognized in the income statement:

(in thousands of euros) Non-qualified US plan

Lump-sum payments,

France

Other plans Total

Europe Americas

Service cost for the year 397 221 155 773

Interest cost for the year 235 129 381 745

Expected return on plan assets (25) (429) (454)

Actuarial gains or losses recognized in the year (3) (42) (45)

Past service cost 82 82

Settlements and curtailments (140) (140)

Other 11 (39) (28)

Total cost 0 571 294 68 933

Plan assets (liabilities):


Lump-sum payments, France

Other plans Total

Europe Americas

Present value of obligation 3,006 4,830 3,596 7,197 18,629

Fair value of plan assets (540) (4,228) (4,768)

Net present value of obligation 3,006 4,830 3,056 2,969 13,861

Unrecognized actuarial gains or losses (31) 81 (2,783) (2,733)

Unrecognized past service cost

Liability recognized in the balance sheet 3,006 4,799 3,137 186 11,128

Change in present value of defined benefit plan obligation:



Other plans Total

Europe Americas

Obligation in respect of defined benefit

plans at December 31, 2007 3,653 4,431 3,357 341 11,782

Cost for the year 571 294 68 933

Benefits paid (187) (182) (227) (596)

Exchange differences on foreign plans 165 (312) 4 (143)

Changes in scope of consolidation 2 2

Other changes (812) (18) (20) (850)

Obligation in respect of defined benefit plans at December 31, 2008 3,006 4,799 3,137 186 11,128

1 -

FIN

ANCI

AL R

EPOR

T

51


The main assumptions used by the Group to determine its obligation are:

Non-qualified US plan Lump-sum payments, France Other plans

Europe Americas

Discount rate N/A 5.8% 5 to 7% 6.0%

Expected return on assets N/A N/A 5 to 6% 7.5%

Future salary increases N/A 3 to 3.5% 2.0% N/A

Expected long-term inflation rate N/A 2.0% 2.0% N/A

National Employment Agreement in France (Accord National Interprofessionnel – ANI):Article 11 of the National Employment Agreement (Accord National Interprofessionnel - ANI) of January 11, 2008 introduced a new minimum employment termination benefit amounting to one fifth of a month's salary for each year of service. There is a legal uncertainty as to whether Article 11 applies to retirement benefits. If the minimum benefit set out in the ANI had been applied to lump-sum retirement payments, the difference would have been recognized in past service costs and deferred over the employees' average remaining service lives, including five months for 2008 as the law was enacted in July 2008. The total impact would have been €76,000 for 2008.

At December 31, 2007:

Net amount recognized in the income statement:



Other plans Total

Europe Americas

Service cost for the year 359 209 91 659

Interest cost for the year 189 114 395 698

Expected return on plan assets (12) (430) (442) 13,861

Actuarial gains or losses recognized in the year 14 (10) 4

Past service cost (4) (4)

Other (4) 9

Total cost 0 562 293 69 924

Plan assets (liabilities):



Other plans Total

Europe Americas

Present value of obligation 3,653 4,643 3,589 6,649 18,534

Fair value of plan assets (497) (5,917) (6,414)

Net present value of obligation 3,653 4,643 3,092 732 12,120

Unrecognized actuarial gains or losses (212) 265 (391) (338)

Unrecognized past service cost

Liability recognized in the balance sheet 3,653 4,431 3,357 341 11,782

1 -

FIN

ANCI

AL R

EPOR

T


Change in present value of defined benefit plan obligation:



Other plans Total

Europe Americas

Obligation in respect of defined benefit plans at

December 31, 2006 4,198 4,345 3,274 1,131 12,948

Cost for the year 562 293 69 924

Benefits paid (253) (132) (776) (1,161)

Exchange differences on foreign plans (434) (95) (71) (600)

Changes in scope of consolidation (223) 24 (199)

Other changes (111) (7) (12) (130)

Obligation in respect of defined benefit plans at December 31, 2007 3,653 4,431 3,357 341 11,782

The main assumptions used by the Group to determine its obligation are:

Non-qualified US planUSA


Other plans

Europe Americas

Discount rate N/A 5.5% 5 to 6% 6.0%

Expected return on assets N/A N/A 5.0% 8.0%

Future salary increases N/A 3 to 3.5% 3 to 3.5% N/A

Expected long-term inflation rate N/A 2.0% 2.0% N/A

4.12. Trade and other payables


Trade payables 59,158 61,915

Nacre earn-out payment 0 6,793

Other payables 36,521 39,330

Total 95,679 108,038

1 -

FIN

ANCI

AL R

EPOR

T

53


4.13. Bank debt and financial liabilities


Maturity

One to two years 112,737 25,559

Two to three years 137,149 118,369

Three to four years 1,105 1,083

Over four years 1,677 1,562

Long and medium-term debt 252,668 146,573

Current portion of long-term debt 39,654 78,229

Short-term borrowings 35,160 30,512

Short-term financial liabilities 74,814 108,741

Total borrowings and financial liabilities 327,482 255,314

Net cash and cash equivalents (Note 4.8) (24,629) (19,772)

Total net debt 302,853 235,542

Short-term borrowings correspond to overdraft facilities. The current portion of long-term debt includes one to three month drawdowns on confirmed credit lines in euros or foreign currency.

• Breakdown by currency


Euro 204,589 137,516

US dollar 109,083 109,421

Other 13,810 8,377

Total 327,482 255,314

• Breakdown of debt and transaction costs

(in thousands of euros) Long and medium-term debt

Amortizable transaction costs

Net

Maturity:

Less than one year 40,719 (1,065) 39,654

One to two years 113,278 (541) 112,737

Two to three years 137,149 137,149

Three to four years 1,105 1,105

Over four years 1,677 1,677

Total debt 293,928 (1,606) 292,322

On July 7, 2005, a new five-year €280 million multicurrency revolving credit facility was obtained from a syndicate of nine French and foreign banks. Its purpose is to provide stability and diversify the Group's sources of financing. At December 31, 2008, the facility was only drawn down to the extent of €187.2 million, representing on average two-thirds of the authorized amount. The loan gives the Group a source of liquidity in case of need, for example to take advantage of an acquisition opportunity.

The syndicated facility contains a number of financial covenants, including ratios for net debt to equity, net debt to consolidated EBITDA and consolidated EBITDA to interest costs.1 In the event of default, the banks have the right to demand early repayment.

1 -

FIN

ANCI

AL R

EPOR

T


The ratios at December 31, 2008 were as follows:

Actual Contractual limits

Net debt to equity 53% < 120%

Net debt to EBITDA1 2.55 < 3.50

EBITDA1 to interest costs 5.26 > 4.00

(1) EBITDA: income of operating activities less depreciation and amortization.

The Group has further diversified its sources of financing by securing bilateral credit lines with several banks, most of which are confirmed for periods of several years. At December 31, 2008, these lines totaled €173 million. The Group also has various overdraft facilities. At December 31, 2008, the additional liquidity provided by these authorized, undrawn credit lines represented more than €200 million.

4.14. Financial risk and market risk management policiesMarket risk is the risk of adverse fluctuations in the value of financial instruments caused by changes in exchange rates, interest rates or stock market prices. The Group is exposed to exchange rate and interest rate risk.

4.14.1. Interest rate riskDebt is mainly at floating-rate and denominated in euros and US dollars. The Group's policy is to reduce its exposure to interest rate risk. Risk is monitored centrally and broad hedging guidelines have been set which apply throughout the Group. Hedges are purchased over-the-counter from first-class banks. Gains or losses on these instruments are recognized symmetrically with the gains or losses arising on the hedged items.

Although the Group's strategy is to hedge at least 50% of its debt on a twenty-four month rolling basis, there is no absolute guarantee that a change in interest rates will not have a negative impact on growth and earnings. Based on debt at the year-end, a 50 basis point increase/decrease in interest rates would have increased/decreased net finance costs by €1.1 million.

4.14.2. Exchange rate riskThe Group generates a significant proportion of its revenue in foreign currency, principally US dollars. The consolidated financial state-ments are presented in euros. Accordingly, all items denominated in a currency other than euros are translated at the prevailing exchange rates. Changes in exchange rates may therefore have an impact on the value of the items in the consolidated financial state-ments, even if the amounts have not changed in the original currency. A rise in the euro against other currencies may cause a decrease in revenue or asset values of subsidiaries whose functional currency is not the euro.

The following table shows a breakdown of the Group's balance sheet by currency.

(in %) 2008 2007

US dollar 49 48

Euros 37 34

Other 14 18

Total 100 100

Breakdown of 2007 and 2008 revenue by geographical segment:

(in %) 2008 2007

Americas 43 46

EMEA* 50 48

Other 7 6

Total 100 100

* Europe, Middle East, Africa.

1 -

FIN

ANCI

AL R

EPOR

T

55


Group companies are also exposed to exchange rate risk when transactions are denominated in a foreign currency. As far as possible, Group companies invoice and are invoiced in their functional currency to minimize this risk. Otherwise, exchange rate risk is hedged on a case-by-case basis. Risk is managed and monitored centrally and the Group's policy is to hedge at least 50% of exchange rate exposure over a twelve-month rolling period.

However, because exchange rates are volatile, the Group may be unable to manage its exchange rate exposure effectively. Although the operating companies can hedge their exposure on a case-by-case basis, there is no absolute guarantee that exchange rate fluctuations will not have a negative impact on revenue and earnings.

The following table illustrates the sensitivity of revenue and income of operating activities to exchange rate changes:

$/€ exchange rate Change in euro vs dollar Impact on revenue Impact on income of operating activities

$1.25 - €1 -15% 7% 11%

$1.32 - €1 -10% 4% 7%

$1.40 - €1 -5% 2% 3%

$1.47 - €1* 0% 0% 0%

$1.54 - €1 5% -2% -3%

$1.62 - €1 10% -3% -6%

$1.69 - €1 15% -5% -8%

* Average rate in 2008

The risk profile was similar in 2007.

4.14.3. Liquidity riskIn 2008, operating cash flow totaled €69 million. In 2009, the Group expects to generate positive operating cash flow but has decided to shelve its acquisition policy for the time being. Drawdowns on credit lines will therefore decrease significantly during the year. Since the beginning of 2009, the Group has taken steps to refinance its syndicated loan by mid-2010.

4.14.4. Capital managementThe Group's main objective in terms of managing capital is to ensure that it complies with the financial covenants set out in the syndi-cated loan agreement (Note 4.13).

Its objectives, policies and processes for managing capital remained unchanged in 2008 and 2007.

4.15. Financial instrumentsThe fair values of financial instruments were measured by an independent expert on the reporting date, based on market rates. Financial instruments comprise interest rate hedges of debt and exchange rate hedges of intra-group current accounts and future trading cash flows over the next twelve months.


Interest rate hedges

Exchange rate hedges

Total Interest rate hedges

Exchange rate hedges

Total

Financial instruments - assets 54 5,990 6,044 1,052 973 2,025

Financial instruments - liabilities 999 9,173 10,172 54 3,701 3,755

Unrealized gains or losses

recognized through equity (1,034) (264) (1,298) 826 (1,684) (858)

In accordance with the Group's strategy for hedging future cash flows, exchange rate hedging instruments comprise mostly forward currency purchases and sales and, to a lesser extent, option-type instruments. Most hedges have a maturity of less than one year and almost all unrealized gains and losses recognized in equity at December 31, 2007 were recycled to financial income in 2008.

Interest rate hedges have a maturities in line with the debt hedged. Gains recycled to financial income in respect of interest rate hedges amounted to €0.5 million in 2008.

1 -

FIN

ANCI

AL R

EPOR

T


• Interest rate hedges

(in thousands of euros) Euro US dollar Others currencies TOTAL

Debt 204,589 109,083 13,810 327,482

Percentage of year-end debt hedged (interest rate hedges) 27% 63% 0% 38%

Debt in euros and US dollars is hedged mainly by option- type instruments and fixed-rate payer swaps. The maximum average interest rate guaranteed by the hedges is about 3.10% in euros and 4.01% in US dollars.

At December 31, 2008, €55 million of euro debt and USD 95 million of US dollar debt was hedged.To date, the Group has primarily used derivatives such as interest rate caps, floors, collars or swaps.

Hedged positions at December 31, 2008 were as follows:

Euro caps: €45 million Euro swaps: €10 million

Dollar caps: USD 45 million Dollar swaps: USD 50 million

Sensitivity of derivatives to changes in interest rates:

A +100 bp change would have a positive impact of €116.7 thousand on net income and €492.2 thousand on equity.A -100 bp change would have a negative impact of €14.3 thousand on net income and €614.6 thousand on equity.

• Exchange rate hedgesExchange rate hedges mainly concern intra-group current accounts.

Sensitivity of derivatives to changes in exchange rates:

A +10% change in the closing rate would have a positive impact of €4,741.2 thousand on net income and a negative impact of €122.3 thousand on equity.A -10% change would have a negative impact of €4,920.4 thousand on net income and a positive impact of €480.5 thousand on equity.The impacts on the income statement are mainly due to hedges of intergroup loans and are offset symmetrically with the gain or loss on the hedged items.

4.16. Other income/expenses

• Restructuring costs Restructuring provisions have been taken to cover the cost of restructuring or closing down certain production plants in Europe and the United States. Some restructuring operations, which were announced and provided for in 2008, will not be carried out until 2009.

• Other income/expenses


Change in provision for litigation (Note 4.10)

Cost of name change to Sperian Protection

Gains/(losses) on asset disposals

(632)

(4,255)

32

(14,367)

(3,161)

1,186

TOTAL (4,855) (16,342)

The change in provision for litigation corresponds to the total change in potential damages payable as described in Note 4.10 less the recoverable amount recognized in other insurance receivables (Note 4.7).

1 -

FIN

ANCI

AL R

EPOR

T

57


4.17. Net finance costs


Interest expense on bank debt

Amortization of transaction costs

Investment income

Dividend income

Foreign exchange gains

Foreign exchange losses

Discounting of litigation provisions

Other

(12,629)

(1,054)

588

108

14,598

(22,417)

(1,574)

(200)

(12,948)

(1,117)

739

5,759

(8,233)

(1,248)

TOTAL (22,580) (17,048)

Net gains and losses on interest rate derivatives are included in interest expense on bank debt. Net gains and losses on currency derivatives are included in foreign exchange gains or foreign exchange losses. The ineffective portion of cash flow hedges recognized in net finance costs is not material.

On December 31, 2008, a €5.1 million foreign exchange loss on the Swedish krona was recognized in connection with financing the Combisafe acquisition. The loss is included under "Other financial transactions" in the cash flow statement.

4.18. Depreciation, amortization and impairment


Depreciation and

amortization

Impairment

losses

Total Depreciation and

amortization

Impairment

lossesTotal

Depreciation, amortization and

impairment losses included in

income of operating activities

Depreciation, amortization and

impairment losses not included in

income of operating activities

17,241

5,859

85

302

17,326

6,161

16,852

6,642

45

2,277

16,897

8,919

O/w restructuring costs

O/w amortization and impairment

of revalued intangible assets

O/w net finance costs

0

4,805

1,054

102

0

200

102

4,8051,254

0

5,525

1,117

307

1,970

0

307

7,4951,117

TOTAL 23,100 387 23,487 23,494 2,322 25,816

• EBITDA



Depreciation, amortization and impairment

101,469

17,326

110,978

16,897

EBITDA 118,795 127,875

1 -

FIN

ANCI

AL R

EPOR

T


• Depreciation, amortization and impairment recognized in the balance sheet


Depreciation and

amortization

Impairment

losses

Total Depreciation and

amortization

Impairment

lossesTotal

Goodwill

Other intangible assets

Property, plant & equipment

Financial assets

Amortizable transaction costs

0

8,334

13,712

0

1,054

0

0

187

200

0

0 8,334

13,899 200

1,054

0

8,581

13,796

0

1,117

0

1,970

352

0

0

0 10,551 14,148

0 1,117

TOTAL 23,100 387 23,487 23,494 2,322 25,816

4.19. Personnel costs and employees

• Personnel costs


Wages and salaries

Social security contributions

Pensions and other post-employment benefits (Note 4.11)

Share-based payment expense (Note 4.20)

147,685

44,803

933

2,590

147,819

40,430

924

1,614

TOTAL 196,011 190,787

• Employees

Zone December 31, 2008 December 31, 2007

France

Western Europe excl. France

Other European countries

United States and Canada

Asia-Pacific

Rest of world

1,194

459

606

1,699

308

2,016

1,267

360

723

1,751

313

1,776

TOTAL 6,282 6,190

1 -

FIN

ANCI

AL R

EPOR

T

59


4.20. Stock option and performance share plans

On May 10, 2007, the shareholders authorized the Board of Directors, under the terms and conditions set out in article L.225-177 et seq. of the French Commercial Code, to grant, on one or several occasions, certain employees or executive officers who own less than 10% of the share capital (i) performance shares and (ii) options to subscribe for new shares or to purchase existing shares held by the Company under its share buyback program as permitted under articles L.225-197-1 to L.225-197-5 of the French Commercial Code. The authority is valid for thirty-eight months from the date of the annual shareholders' meeting. Its key provisions are: • Shareholders expressly renounce their preemptive rights to any shares issued on exercise of the options or awarded under perform-ance share plans in favor of the holders; • The number of stock options or shares granted may not exceed 3% of the share capital;• The exercise price is to be set by the Board of Directors in accordance with the terms of the law on the date of grant of the options.

4.20.1. Stock option plans

Twenty-four stock option plans have been granted since December 14, 1992.

• Stock options granted in 2008 by the Board of Directors under the current authority

Number of options granted/shares subscribed or purchased

Weighted average price

Plan

Options granted during the year to the top ten optionees

excluding executive officers None N/A N/A

Options exercised during the year by the top ten optionees

excluding executive officers 1,300 66.6 17

• Information on plans that expired in 2008

Plan 15 16

Date of shareholders' meetingDate of Board meeting

Number of options granted at inception

Total share entitlement: - Executive officers- Top ten optionees Initial exercise date Expiration date

Adjusted exercise price Number of shares issued in 2008

Options canceled during the year

Options outstanding- o/w executive officers

As a percentage of diluted capital

Sept. 6, 2001Sept. 3, 2002

192,954

22,02274,283

Sept. 3, 2006Sept. 3, 2008

920

25,114

00

N/A

Sept. 6, 2001Nov. 14, 2002

73,227

073,227

Nov. 14, 2006Nov. 14, 2008

920

1,724

00

N/A

1 -

FIN

ANCI

AL R

EPOR

T


• Information on plans valid as of January 1, 2009

Plan 17 18 19 20 21 22 23 24

Date of shareholders' meeting

Date of Board meeting

Number of options granted at inception

Sept. 6, 2001

Oct. 31, 2003

38,000

Sept. 6, 2001

Sept. 7, 2004

46,500

Sept. 6, 2001

Nov. 5, 2004

4,500

Nov. 11, 2005

Dec. 7, 2005

111,650

May 11, 2005

Dec. 7, 2006

114,910

May 11, 2005

Jan. 23, 2007

2,400

May 10, 2007

Dec. 6, 2007

22,535

May 10, 2007

Dec. 6, 2007

8,000

Total share entitlement:

Executive officers

Top ten optionees

Initial exercise date

Expiration date

Adjusted exercise price

Terms of exercise

Number of sharesissued in 2008

Options canceled during the year

Options outstanding- o/w executive officers

As percentage of diluted capital(4)

0

15,000

Oct. 31, 2007

Oct. 31, 200966.6

(1)

1,300

0

17,0000

0.22

40,000

6,500

Sept. 7, 2008

Sept. 7, 2010

51.59

(1)

0

0

43,90040,000

0.57

0

4,500

Nov. 5, 2008

Nov. 5, 2010

59.08

(1)

0

0

4,5000

0

14,000

52,800

Dec. 7, 2009

Dec. 7, 2013

70.85

(1) (2)

0

3,950

85,55014,000

1.11

15,500

41,140

Dec. 7, 2010

Dec. 7, 2014

96.36

(1)(2)

0

6,350

107,91015,500

1.38

0

2,400

Jan. 23, 2011

Jan. 23, 2015

101.1

(1)(2)

0

1,000

1,4000

0.02

0

22,535

Dec. 6, 2011

Dec. 6, 2015

84.47

(1)(2)

0

0

22,5350

0.28

8,000

0

Dec. 6, 2011

Dec. 6, 2015

84.47

(1)(2)(3)

0

0

8,0008,000

0.10

(1) For plans established at subsequent Board meetings, non-residents may exercise one third of their options between the thirteenth month and the third year following the date of grant, and the entirety thereafter. Residents may exercise any or all of their options four years after the date of grant.(2) and (3) See below.(4) See section 4.20.3.

• Restrictions on stock options

For options granted at Board meetings on or after December 7, 2005 (see note 2), the capital gain on exercise of the options is deemed to be equal to the difference between the previous day's closing price and the exercise price. It may not be more than 150% of the value of all options granted to the optionee by the Board (number of options x exercise price). If the options are exercised in several blocks, the gain on the first block will determine the maximum number of shares that may be exercised by the optionee the second time. The cumulative gain made on the first two blocks will determine the maximum number of options that may be exercised the third time, and so on until the cumulative gains have reached 150% of the total value of all options granted. Once that level has been reached, any outstanding unexercised options will be canceled immediately. This restriction on gains does not apply in the event of a change of control following a merger or partial asset transfer involving Sperian Protection and a non-Group company, or in the event of a public offer for Sperian Protection shares or a buyout procedure aimed at delisting Sperian Protection shares. In accordance with new legislation appli-cable to executive officers since December 31, 2006, the Board of Directors set the number of shares that Henri-Dominique Petit, an optionee under Plan 24, would be required to hold in registered form (see note 3), as described in section 4.20.2.d.

1 -

FIN

ANCI

AL R

EPOR

T

61


4.20.2. Performance share plans

For the second consecutive year, the Company awarded performance shares to employees and executive officers. As in 2007, for French residents, the minimum vesting period is two years and the minimum lock-up period is two years after the vesting date For non-French residents, the vesting period is four years and there is no lock-up-period after the vesting date. However, if the performance conditions are met, the award and the quantity will become irrevocable after two years. All employees will therefore have free use of their shares after a period of four years.The performance conditions are described below.

The Company has set up six performance share plans since December 6, 2007 (plans 25 to 30).

a) Performance shares awarded in 2008 by the Board of Directors under the current authority

Number of performance sharesawarded/vested

Plan

Performance shares awarded to the top ten participants

Vested shares held by the top ten participants

29,430

N/A

28/29

N/A

b) Performance share plans valid as of January 1, 2009

Plan 25 26 27 28 29 30

Date of shareholders' meetingDate of Board meeting

Number of performance shares awarded at inception

Total share entitlement:- Executive officers- Top ten participants

Start of vesting period

Expiration of vesting period for French tax residentsExpiration of lock-up period Terms of exercise

Number of shares vested in 2008Shares canceled in 2008

Unvested shares outstanding- o/w executive officers

As percentage of diluted capital (4)

May 10, 2007Dec. 6, 2007

11,349

011,349

Dec. 6, 2007

Dec. 6, 2009Dec. 6, 2011

(1)

00

11,3490

0.14

May 10, 2007Dec. 6, 2007

39,919

00

Dec. 6, 2007

Dec. 6, 2009Dec. 6, 2011

(1)

02,581

37,3380

0.47

May 10, 2007Dec. 6, 2007

3,726

3,7260

Dec. 6, 2007

Dec. 6, 2009 Dec. 6, 2011

(1) (2)

00

3,7263,726

0.05

May 10, 2007Dec. 12, 2008

35,919

07,965

Dec. 12, 2008

Dec. 12, 2010Dec. 12, 2011

(1)

00

35,9190

0.45

May 10, 2007Dec. 12, 2008

28,440

028,440

Dec. 12, 2008

Dec. 12, 2010Dec. 12, 2011

(1)

00

28,4400

0.35

May 10, 2007Dec. 12, 2008

7,452

7,4520

Dec. 12, 2008

Dec. 12, 2010Dec. 12, 2011

(1) (2)

00

7,4527,452

0.03

(1) and (2) See paragraphs c and d.

c) Restrictions: performance conditions

The awards are contingent upon certain conditions based on the performance of Sperian Protection shares relative to the CAC Mid100 index.

Stock market performance (Mkt) is calculated as follows: (closing price - initial price)/initial price.

Sperian Protection share performance relative to the CAC Mid100 (PRel) is calculated as follows: PRel = (1+Mkt Sperian)/(1+ Mkt CAC Mid100)

1 -

FIN

ANCI

AL R

EPOR

T


Sperian Protection's relative performance will be measured over a period of two years from the award date. The reference price will be the average of the twenty quoted Sperian Protection prices and CAC Mid100 index levels immediately preceding the award date or, as the case may be, the average of the 90 closing prices or index levels immediately preceding the vesting date.

The number of shares that will vest is based on the following scale (note 1):

Plan no. Performance target PRel % entitlement

25 and 27 PRel 102% PRel > 120%

102% < PRel <= 120%

PRel = 102%

100% <= PRel < 102%

PRel <100%

180

[100; 180]*

100

90

0

26 PRel 100% PRel > 120%

100% < PRel <= 120%

PRel = 100%

95% <= PRel < 100%

PRel < 95%

180

[100; 180]*

100

25

0

28 PRel 100% PRel > 120%

100%= < PRel <= 120%

PRel = 100%

95% <= PRel < 100%

PRel < 95%

180

[100; 180]*

100

25

0

29 and 30 PRel 100% PRel > 120%

100%= < PRel <= 120%

PRel = 100%

PRel < 100%

180

[100; 180]*

100

0

* Linear interpolation

The table above is a purely economic presentation of the performance share grants. The figure of 180% referred to above does not mean that the participant will receive an additional share award. It is equal to the entire performance share entitlement awarded by the Board of Directors.

d) Plans 27 and 30 (note 2): special case

In accordance with new legislation applicable to executive officers since December 31, 2006, the Board of Directors decided that Henri-Dominique Petit would be required to hold the following shares in registered form after the lock-up period: (i) 50% of any vested performance shares and (ii) 50% of the balance of shares arising on the exercise of stock options after the immediate sale of the shares required to pay for the shares purchased and the corresponding tax, until the sum of (i) and (ii) above reaches an amount equal to two years' compensation (excluding bonuses).

4.20.3. Maximum potential diluted capital As of January 1, 2009, if all outstanding stock options were exercised and all performance shares had vested, 415,019 new shares would be issued, representing potential dilution of 5.40%.

4.20.4. Impact of accounting for stock option and performance share plans in accordance with ifrs 2Stock option and share performance plans resulted in an expense of €2.6 million in 2008 compared with €1.6 million in 2007.

The fair value of stock options is estimated on the date of grant using the Black & Scholes and Monte Carlo methods, taking account of the attributes of the options granted.

1 -

FIN

ANCI

AL R

EPOR

T

63


Assumptions:

- Life of options: economic life- Dividend yield: 1% to 1.4%- Historical volatility: 26.6% to 50%- Risk-free interest rate: 3.01% to 4.10%

The fair value of performance shares is estimated on the date of award using the Monte Carlo method, taking account of the attributes of the shares awarded.

Assumptions:

- Plan with performance conditions: one performance share entitles the holder to between 1 and 1.8 shares- Dividend yield: 1.40%- Historical volatility of Sperian Protection shares: 26.6% to 31.3% (average observed over periods of one to five years)- Historical volatility of CAC Mid 100: 14.8% to 24.5%- Risk-free interest rate: 3% to 3.9% (zero coupon OAT France)

• Measurement of performance shares awarded at end 2008 based on IFRS 2

The total cost of the new end-2008 plans (nos. 28 to 30) under IFRS is €1.2 million deferred over the vesting period, which is two years. The unit value of the performance shares is between €35.89 and €37.72.

Assumptions:

- Monte Carlo model - Life of performance shares: two years based on performance requirements- Plan with performance conditions: one performance share entitles the holder to between 1 and 1.8 shares- Dividend yield: 1.40%- Historical volatility of Sperian Protection shares: 31.3% (average observed over periods of one to five years)- Historical volatility of CAC Mid 100: 24.5%- Risk-free interest rate: 3.0% (zero coupon OAT France)

4.21. Current and deferred income taxes

4.21.1. Breakdown of the tax charge


Current taxes

Deferred taxes

(21,518)

3,170

(18,977)

6,991

Income tax (18,348) (11,986)

1 -

FIN

ANCI

AL R

EPOR

T


4.21.2. Effective tax rateThe effective tax rate rose from 16.9% in 2007 to 27.6% in 2008. The rate primarily reflects the use of tax loss carryforwards in France, for which deferred tax assets were only partially recognized. In 2007, the Group had recognized €6.5 million of deferred tax assets arising on tax loss carryforwards in France.

The following table shows a reconciliation with the standard tax rate in France:

(in %) December 31, 2008 December 31, 2007

French statutory tax rate 33.33 33.33

Impact of different tax rates in foreign countries

Utilization of unrecognized tax loss carryforwards

Permanent differences

Unrecognized deferred tax assets

Tax reassessments

Other

0.32

(7.36)

(0.60)

1.06

1.85

(0.97)

1.03

(18.38)

(1.50)

0.76

1.73

(0.11)

Effective tax rate 27.63 16.86

4.21.3. Analysis of deferred taxesThe breakdown of deferred tax is as follows:


Assets Liabilities Assets Liabilities

Difference between tax base and carrying amounts

of non-current assets

Retirement benefit obligation

Other provisions

Temporary differences

Elimination of intra-group margins on inventory

Recognized tax losses*

Other sources of deferred taxes

130

3,304

12,713

3,475

988

14,998

90

24,715

116

1,041

332

245

2,652

9,528

3,492

944

12,916

73

17,284

186

897

413

Total 35,698 26,204 29,850 18,780

* Including France: 11,500 in 2008 and 2007

Differences between tax base and carrying amounts of non-current assets mainly concern intangible assets.

The Group has €99 million of tax losses in France that may be carried forward to offset future profits made by members of the French tax group. The resulting deferred tax asset has only been recognized to the extent of €11.5 million, corresponding to the estimated tax charge payable in the medium-term in France. Unrecognized deferred tax assets therefore amount to €21.5 million.

In 2007, the Group had €97 million of tax losses. The resulting deferred tax asset was only recognized to the extent of €11.5 million, corresponding to the estimated tax charge that would have been payable in France in 2008 and 2009 in the absence of any tax loss carryforwards. Unrecognized deferred tax assets therefore amounted to €20.8 million.

1 -

FIN

ANCI

AL R

EPOR

T

65


4.22. Earnings per shareBasic earnings per share is determined by dividing net income attributable to equity holders of the parent by the weighted average number of shares in issue during the year.Diluted earnings per share is determined by dividing net income attributable to equity holders of the parent by the weighted average number of shares in issue increased by the number of dilutive potential shares.The table below shows the data used to calculate basic and diluted earnings per share


Continuing operationsNet income used to calculate basic earnings per share

Weighted average number of shares in issue during the year

Impact of dilution (stock options)

Weighted average number of shares, diluted

Basic earnings per share (€)

Diluted earnings per share (€)

47,776

7,565,342

12,347

7,577,689

6.32

6.30

58,833

7,688,063

63,241

7,751,304

7.65

7.59

4.23. Dividends paid and proposed2007 dividends paid in 2008 amounted to €11.4 million or €1.50 per share. Payment was made on June 5, 2008.The Board of Directors is proposing a dividend of €1.20 per share for 2008, making a total payout of €9.2 million. Payment will be made on July 9, 2009. The proposed dividend has not been recognized as a liability at December 31, 2008.

4.24. Leases• At December 31, 2008Operating leases (Group as lessee):The following table shows minimum future payments on non-cancelable operating leases as of December 31, 2008:

Maturity(in thousands of euros)

Under 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years

More than 5 years

Total

Operating lease commitments 8,602 8,013 3,930 2,225 1,298 3,111 27,179

Finance leases:Leased assets mainly comprise the Group's premises in France.



More than 5 years

Total

Finance lease commitments 392 343 341 333 333 503 2,246

Carrying amount by asset class at December 31, 2008

Buildings

Plant & equipment

3,735

82

Carrying amount 3,817

1 -

FIN

ANCI

AL R

EPOR

T


• At December 31, 2007Operating leases (Group as lessee):The following table shows minimum future payments on non-cancelable operating leases as of December 31, 2007:



More than 5 years

Total

Operating lease commitments 7,839 7,639 5,643 2,991 1,938 2,063 28,114

Engagements sur contrats de location financement :Les investissements financés concernent la location de locaux principalement en France.



More than 5 years

Total

Finance lease commitments 447 401 398 398 398 864 2,906

Carrying amount by asset class at December 31, 2007

Buildings

Plant & equipment

3,990

100

Carrying amount 4,090

Note 5 : Other information

5.1. Contingent assets and liabilitiesContingent liabilities are not material in relation to the size of the Group.

5.2. Subsequent eventsNo events have occurred since the year end that might have a material impact on the Group's financial position.

5.3. Related partiesThere were no transactions with related companies during the year.

1 -

FIN

ANCI

AL R

EPOR

T

67


5.3.1. Directors' fees and executive officers' compensation2008

Director Fixed compensation

Variable compensation (1)

Directors' fees Benefits in kind TOTAL

In €

Philippe ALFROID 11,040 11,040

Philippe BACOU 30,000 12,757 42,757

Patrick BOISSIER 19,360 19,360

Ginette DALLOz 20,004 13,895 33,899

François DE LISLE 28,560 28,560

Patrice HOPPENOT 23,400 23,400

Gunther MAUERHOFER 27,240 27,240

Henri-Dominique PETIT 570,000 439,560 12,424 11,654 1,033,638

Philippe ROLLIER 27,040 27,040

André TALMON 26,560 26,560

TOTAL 620,004 439,560 202,276 11,654 1,273,494

(1) Variable compensation of €439,560 comprises performance-related bonuses paid in 2008 in respect of 2007.

2007

Director Fixed compensation

Variable compensation (1)

Directors' fees Benefits in kind TOTAL

In €

Philippe ALFROID 11,760 11,760

Philippe BACOU 30,000 12,284 42,284

Patrick BOISSIER 26,160 26,160

Gérard COTTET (2) 5,070 5,070

Ginette DALLOz 20,004 14,776 34,780

François DE LISLE 28,830 28,830

Patrice HOPPENOT 24,020 24,020

Gunther MAUERHOFER 26,160 26,160

Henri-Dominique PETIT 555,000 477,000 13,212 11,271 1,056,483

Philippe ROLLIER 21,620 21,620

André TALMON 26,160 26,160

TOTAL 605,004 477,000 210,052 11,271 1,303,327

(1) Variable compensation of €477,000 comprises performance-related bonuses paid in 2007 in respect of 2006.(2) Gerard Cottet has no longer been a Director since April 1, 2007.No specific supplementary pension plan is provided for the executive officers.

1 -

FIN

ANCI

AL R

EPOR

T


5.3.2. Stock options and performance sharesNo directors other than Henri-Dominique Petit held stock options as of December 31, 2008. No stock options or performance shares were granted to directors other than Henri-Dominique Petit during 2008.

Stock options and performance shares granted to each director and options exercised by them

Nomber of options and performance shares

granted/ options exercised

Exercise price

Expiration Plans*

Options granted in 2008 to Henri-Dominique Petit None N/A N/A N/A

Performance shares awarded in 2008 to Henri-Dominique Petit 7,452 N/A Dec. 7, 2012** 30

Options exercised by executive officers in 2008 0 0 0 0

* See note 4.20.1 for a history of stock option plans ** End of vesting period: December 7, 2010.

End of lock-up period: December 7, 2012.

The directors held 88,678 stock options and performance shares as of December 31, 2008.

Director Number of options or performance shares

Exercise price Plans Expiration

Henri-Dominique Petit 40,000 51.59 € September 7, 2004 September 7, 2010

Henri-Dominique Petit 14,000 70.85 € December 7, 2005 December 6, 2013



Henri-Dominique Petit 3,726 na* December 6, 2007 December 6, 2011

Henri-Dominique Petit 7,452 na* December 12, 2008 December 12, 2012

Total 88,678

* Performance share plans

5.3.3. Loans and guaranteesNo loans or guarantees have been granted to directors.

5.3.4. Agreements with directorsIn line with new legislation on commitments to executive officers with respect to compensation, indemnities or benefits payable on loss or change of office, the Board of Directors renewed the agreements described in this report in respect of the non- competition clause and loss of office compensation for 2008. No other agreements have been entered into directly with the directors other than ordinary business agreements on competitive terms, and more particularly no service contract has been entered into with the executive officers.

1 -

FIN

ANCI

AL R

EPOR

T

69


5.4. Auditors' fees

The table below shows fees paid to auditors and members of their network for audit work carried out in 2007 and 2008.

Ernst & Young ECA

Amount % Amount %

2008 2007 2008 2007 2008 2007 2008 2007

Audit Certification and review of Company and

Consolidated financial statements

Parent company 211 207 24 25 88 88 36 33

Fully-consolidated subsidiaries 604 550 69 67 158 160 64 61

Audit-related services

Parent company


Sub-total Audit 815 771 93 94 246 263 100 100

Other services provided by networks to fully integrated subsidiaries Legal, fiscal, payroll

Other

63 47 7 6 0 0 0

Total other services 63 47 7 6 0 0 0 0

TOTAL 878 818 100 100 246 263 100 100

5.5. List of fully-consolidated companies

Name Address Country % holding SIREN no. (French

companies)

Société Annic SAS La Mayounelle, 82 250 LA GUEPIE France 99.9 778 115 436

Sperian Fall Protection France SAS 35-37 Rue de la Bidauderie, 18 100 VIERzON France 100 338 833 577

Bacoudev 2 SARL Immeuble Edison, zI Paris Nord II,

33 rue des Vanesses, 93 420 VILLEPINTE France 100 440 337 814

Sperian Protection France SAS Immeuble Edison, zI Paris Nord II,


BD Project 3 Immeuble Edison, zI Paris Nord II,


BD Project 4 Immeuble Edison, zI Paris Nord II,


Sperian Protection Footwear Givors

SAS

zI du Gier, 69 700 GIVORS

France 100 351 044 607

Sperian Protection Logistique Systems

SNC

Parc d'Activités du Val de Bourgogne,

zAC Nord-Est, 71 100 SEVREY France 100 431 434 208

Combisafe France SAS 63 boulevard de Ménilmontant, 75 011 Paris France 100 499 319 218

Comoditex SAS zac de la Vallée,

rue de la chaussée Romaine,

02 100 SAINT QUENTIN France 100 585 580 301

Sperian Protection SA Immeuble Edison, zI Paris Nord II,


1 -

FIN

ANCI

AL R

EPOR

T


Sperian Protection Clothing SAS zone d'activité de Berret,

30 200 BAGNOL SUR CEzE France 100 309 047 454

Sperian Protection Europe SAS Immeuble Edison, zI Paris Nord II,


Sperian Respiratory Protection France

SAS

Immeuble Edison, zI Paris Nord II,


Sperian Protection Gloves Plancher

Bas SAS

Immeuble Edison, zI Paris Nord II,


Sperian Protection Armor SAS zI de la Gare, 22 940 PLAINTEL France 100 497 180 695

Sperian Protection Footwear Valence

SAS

zA Briffaut-Est,

30, avenue Maurice Simonet, 26 000 Valence France 100 417 781 013

JL Immobilier Sarl Immeuble Edison, zI Paris Nord II,

33 rue des Vanesses, 93 420 VILLEPINTE France 100, 398 195 982

Oxbridge SAS 42, rue de Paradis 75 010 Paris France 100 632 025 649

Sperian Protection Gloves Autun SAS Porte d'Autun, 71 400 Saint Forgeaot France 100 439 886 730

Sperian Protection Defense SAS Immeuble Edison, zI Paris Nord II,


Sperian Protection Gloves Franche

Comté SAS

"Le Mont", Plancher Bas,

70 290 CHAMPAGNE France 100 675 450 167

Combisafe Deutschland GmbH Rhenusplatz 3, 59 439 Holzwickede Germany 100

Sperian Protection Deutschland GmbH

& Co Kg

Kronsforder Allee 16,

D-23560 Luebeck Germany 100

Sperian Protection Verwaltungs GmbH Kronsforder Allee 16,

23560 Lübeck Germany 100

OPMA Arbeitsshutz GmbH Fabrikweg 3, 91448 Emskirchen Germany 100

Sperian Fall Protection Deutschland

Gmbh & Co KG

Seligenweg 10, D-95028 Hof

Germany 100

Sperian Protection Management GmbH Seligenweg 10, D-95028 Hof Germany 100

Musitani SA Erezcano 3675, City of Buenos Aires Argentina 100

Moxham Safety Pty Ltd 3 Walker Street Braeside, Victoria 3195, Australia Australia 100

Auralguard Pty Ltd 3 Walker Street Braeside, Victoria 3195, Australia Australia 100

Sperian Protection Australia Pty Ltd 3 Walker Street Braeside, Victoria 3195, Australia Australia 100

Sperian Fall Protection Australia Pty Ltd 3 Walker Street Braeside, Victoria 3195, Australia Australia 100

Dalloz Holding Pty Ltd 3 Walker Street Braeside, Victoria 3195, Australia Australia 100

CEP Rue du zoning Industriel 60B, B-4300 Waremme Belgium 100

Sperian Produtos de Seguranca Ltda.

(f/k/a Epicon Industria de Equipamentos

de Porteçao Individual Ltda.)

City of Diadema,

State of São Paulo at Rue Álvares Cabral

No. 1370, Vila Conceicão 09980-160 Brazil Brazil 100

Sperian Protective Apparel, Ltd. 4200 St-Laurent Blvd., 6th fl.,

Montreal, Quebec H2W 2R2 Canada Canada 100

Sperian Fall Protection Canada Ltd. Wooler Road, Hwy 401, PO Box 1200,

Trenton, Ontario, Canada K8V 6B4 Canada 100

Sperian Protection (China) Co., Ltd 312, Mei Neng Da Rd.,

Songjiang Industrial Park, Shanghai China 100

Sperian Protection (Shanghai) Trading

Co., Ltd

2ND Floor, Keyuan Workshop,

No. 11, Rying Road (South),

Waigaoqiao Free Trade zone, Shanghai 200131 China 100

Sperian Protection (Nantong) Co. Ltd South of Huanghe Road,Rudong Economic

Development zone,Jiangsu Province China,226400 China 100

Combisafe Denmark APS Sluseholmen 2-4, 2450 Copenhagen SV Denmark 100

1 -

FIN

ANCI

AL R

EPOR

T

71


Combisafe Gulf LLC Emirate of Dubai United Arab

Emirates 100

Sperian Protection Iberica SA Avenida de Castilla n° 1, San Fernando de

Henares, 28830 Madrid, Spain 100

Glendale Protective Technologies, Inc. 900 Douglas Pike, Smithfield, RI 02917 United States 100

BMP I, Inc. 900 Douglas Pike, Smithfield, RI 02917 United States 100

SP USA Finance, Inc. c/o Corporation Service Company,

Multifood Towers

33 South Sixth St., Minneapolis, MN 55402 United States 100

Sperian Protection USA, Inc. 900 Douglas Pike, Smithfield, RI 02917 United States 100

SP Assurance Vermont Co., Ltd. 100 Bank Street, Suite 610, Burlington, VT 05402-

0530 United States 100

Sperian Protection Instrumentation, LLC 651 South Main Street, Middletown, CT 06457 United States 100

Sperian Protection Investment, Inc. 900 Douglas Pike, Smithfield, RI 02917 United States 100

Sperian Fall Arrest Systems, Inc. 1345 15th Street, Franklin, PA 16323 United States 100

Sperian Protective Apparel USA, LLC 1345 15th Street, Franklin, PA 16323 United States 100

Sperian Hearing Protection, LLC 7828 Waterville Road, San Diego, CA 92154 United States 100

Sperian Fall Protection, Inc. 1345 15th Street, Franklin, PA 16323 United States 100

Bacou-Dalloz Safety, Inc 900 Douglas Pike, Smithfield, RI 02917 United States 100

Sperian Protection Americas, Inc. 900 Douglas Pike, Smithfield, RI 02917 United States 100

Nacre (US), Inc. 104 Bud Place, Aberdeen, NC 28375 United States 100

Sperian Protective Gloves USA, LLC 85 Innsbruck Frive, Buffalo, NY 14227 United States 100

Sperian Eye & Face Protection, Inc. 10 Thurber Blvd., Smithfield, RI 02917 United States 100

Sperian Respiratory Protection USA, LLC 3001 S. Susan St., Santa Ana, CA 92704 United States 100

Sperian Protection Optical, Inc. 10 Thurber Blvd., Smithfield, RI 02917 United States 100

Sperian Metal Mesh Protection USA, Inc. 200 John Dietsch Blvd., Attleboro Falls, MA 02763 United States 100

Sperian Protection Hong Kong Ltd Suite 602, 6/F., Chinachem Exchange Square,

1-7 Hoi Wan Street, Quarry Bay Hong Kong 100

Sperian Protection Hungaria Kft 1139 Budapest, FORGACH U. 9-B Hungary 60

Sperian Protection India Private Ltd Office No 513, 5th Floor Bezzola Complex,

Opp Suman Nagar, Sion-Trombay Road, Chembur,

Mumbai - 400071, Maharashtra India 100

Sperian Protection Workwear Dorno Srl Piazza IV Noviembre 4, Milano Italy 100

Sperian Protection Gloves Torino Srl Via E. Reycend 51, 10148 Torino Italy 100

Sperian Protection Italia Srl Piazza IV Noviembre 4, Milano Italy 100

Animac Route côtière 110 Km. 12, Bernoussi, Casablanca Morocco 70.0

El Beydaa Route côtière 111 Km. 11,500,

Aïn Sebâa, Casablanca Morocco 66.7

Fagunit Morocco zone Franche d’Exportation Boukhalef, Tanger Morocco 90

Sperian Protection Gloves Morocco Rue El Haouza Oukacha, Casablanca Morocco 54.5

Sperian Hearing Protection de Mexico,

S. de R.L. de C.V.

Blvd. Insurgentesd No. 20551-A,

Parque Industrial El Florido,

Delegaion La Presa, Tijuana, BC Mexico 22244 Mexico 100

Respiratory Protection de Sperian S. de

R.L. de C.V.

Blvd. Insurgentesd No. 20551-A,

Parque Industrial El Florido,

Delegacion La Presa, Tijuana,

BC Mexico 22244 Mexico 100

Combisafe Norge AS Nydalsveien 33, 0484 Oslo, Norway 100

1 -

FIN

ANCI

AL R

EPOR

T


Nacre AS Sluppenvegen 12E No-7037 Trondheim, Norway Norway 100

Sperian Protection New zealand Ltd 70 Kerrs Road, Manukau City,

Auckland, New zealand New zealand 100

Sperian Protection Netherlands BV Laan Copes van Cattenburch 52,

2585 GB The Hague Netherlands 100

Combisafe Nederland BV 1 Februariweg 13, 4794 SM Heijningen Netherlands 100

Sperian Protection Holding

Netherlands BV

Laan Copes van Cattenburch 52,

2585 GB The Hague Netherlands 99

Pulsafe Europe Holding BV Locatellikade 1, Parnassustoren,

1076 Az Amsterdam Netherlands 100

Sperian Protection Respiratory Polska ul. Jaroslawa Dabrowskiego n°247/249, 93231 Lodz Poland 98

Bacou UK Heathrow Business Centre,

65 High Street, Egham, Surrey, TW20 9EY

United

Kingdom 100

Sperian Protection Holding (UK) Ltd Heathrow Business Centre,


United

Kingdom 100

Advanced Scaffold Products Ltd Safety Centre, Unite 1, Cheaney Drive, Grange

Park, Northampton, Northamptonshire NN4 5FB

United

Kingdom 100

Combisafe International Ltd Safety Centre, Unite 1, Cheaney Drive, Grange

Park, Northampton, Northamptonshire NN4 5FB

United

Kingdom 100

Oldham - Dalloz Fall Protection Ltd Heathrow Business Centre,


United

Kingdom 100

Logandene Ltd Heathrow Business Centre,


United

Kingdom 100

Sperian Protection (UK) Ltd Heathrow Business Centre,


United

Kingdom 100

ITK Safety Ltd Heathrow Business Centre,


United

Kingdom 100

Pulsafe Safety Product Ltd Heathrow Business Centre,


United

Kingdom 100

Safety Eyewear Ltd Heathrow Business Centre,


United

Kingdom 100

Sperian Safety LLC Business center Sokol Digalta, Leningradsky,

Prospekt 80-5, office 202, 125190 Moscow Russia 100

Safety Technologies Ltd Business center Sokol Digalta, Leningradsky,

Prospekt 80-5, office 202, 125190 Moscow Russia 60

Sperian Protection Footwear Slovakia

Sro

Nitrianska cesta 503/60, 95801 Partizanske

Slovakia 100

Sperian Protection Slovakia Sro Nitrianska cesta 503/60, 95801 Partizanske Slovakia 100

Combisafe International AB Storsjöstråket 15, 831 34 ÖSTERSUND Sweden 100

Sperian Protection Sweden AB Strandbadsvagen 15, Helsingborg Sweden 100

Sperian Protection Nordic AB Strandbadsvagen 15, Helsingborg Sweden 100

Sperian Welding Protection AG Industriestrasse 2, 9630 Wattwil / SG Switzerland 100

Sperian Protection Tunisia zone industrielle de Dar Châabane El Féhri,

8011 Nabeul Tunisia 100

1 -

FIN

ANCI

AL R

EPOR

T

73


1.5.6. Statutory Auditor’s Report on the consolidated financial statements

This is a free translation into English of the statutory auditors’ report issued in French language and is provided solely for the convenience of English-speaking

readers. This report includes information specifically required by French law in such reports, whether qualified or not. This information is presented below the

opinion on the consolidated financial statements and includes explanatory paragraphs discussing the auditors’ assessments of certain significant accounting

and auditing matters. These assessments were made for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and

not to provide separate assurance on individual account captions or on information taken outside the consolidated financial statements.

This report should be read in conjunction with and is construed in accordance with French law and professional auditing standards applicable in France.

To the Shareholders,In compliance with the assignment entrusted to us by your annual general meetings, we hereby report to you, for the year ended December 31, 2008, on:

• the audit of the accompanying consolidated financial statements of Sperian Protection;

• the justification of our assessments;

• the specific verification required by French law.

These consolidated financial statements have been approved by the board of directors. Our role is to express an opinion on these finan-cial statements based on our audit.

I. Opinion on the consolidated financial statements

We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures, by audit sampling and other selective testing methods, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used, the significant estimates made by management and the overall financial statements presentation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements give a true and fair view of the assets, liabilities and of the financial position of the group as of December 31, 2008 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

II. Justification of assessments

In accordance with the requirements of article L. 823-9 of the French commercial code (Code de Commerce) relating to the justification of our assessments, we bring to your attention the following matters:

As disclosed in notes 1.3.1 and 4.3 to the consolidated financial statements, the group performs an impairment test on goodwill and intangible assets whenever there is an indication that long-term assets may be impaired, or systematically at each balance sheet date. As part of our assessment of the significant estimates used to prepare the financial statements, we assessed the assumptions used for the determination of the recoverable value of these assets so as to compare it with their carrying value. This recoverable value is assessed in particular on the basis of cash-flow forecasts prepared by the group’s management in october 2008. We verified the reasona-bleness of the information contained in the notes to the consolidated financial statements relating to the cash-flow forecasts used and to the other assumptions adopted for the determination of the recoverable value.

1 -

FIN

ANCI

AL R

EPOR

T


As disclosed in note 4.10 to the consolidated financial statements, at each balance sheet date, the group conducts a fresh estimation of the risks and expenses incurred and for which a provision must be recognized. Where possible, the group calls upon the services of outside lawyers and actuaries to evaluate these provisions. As part of our assessment of the significant estimates used to prepare the financial statements, we reviewed the reports and correspondence of these outside experts, in particular as regards the assessment of the risks relating to product warranties. In this respect, we verified the reasonableness of the information contained in the notes to the consolidated financial statements relating to the assumptions used for the determination of the provision. In addition, as indicated in note 4.10 to the consolidated financial statements, the group was ordered by an American court of first instance to pay damages following the death of a fire-fighter from Saint Louis. We verified the proper recognition of this liability and the related disclosure in the notes.

As disclosed in note 4.21.3 to the consolidated financial statements, the deferred tax assets relating to the losses previously generated in France are recognized insofar as it is probable that the group will have future taxable profits against which these tax losses may be used. As part of our assessment of the significant estimates used to prepare the consolidated financial statements, we reviewed the assumptions for the French tax group’s forecast results and we verified the reasonableness of these assumptions.These assessments were made as part of our audit of the consolidated financial statements taken as a whole and, therefore, contributed to our audit opinion expressed in the first part of this report.

III. Specific verification

We have also verified the information given in the group management report as required by French law.

We have no matters to report regarding its fair presentation and consistency with the consolidated financial statements.

Dijon and Paris-La Défense, April 14, 2009

The Statutory Auditors

EXPERTISE COMPTABLE ET AUDIT ERNST & YOUNG AuditClaude Cornuot Jean-François Ginies

1 -

FIN

ANCI

AL R

EPOR

T

75


2 -

Busi

nes

s Re

view

76 2008 AnnuAL RePORTsPeRiAn PROTeCTiOn

Business Review 2.1. History 782.1.1. Sperian Protection 782.1.2. The Christian Dalloz and Bacou Groups 78

2.2. The Personal Protective equipment (PPe) Market 782.2.1. Market segments 782.2.2. Market growth drivers 792.2.3. PPE market regulations 792.2.4. Competition 802.2.5. Main suppliers and customers 80

2.3. Business segments 812.3.1. Head protection 812.3.2. Body Protection 83

2.4. strategy 842.4.1. Differentiating the Sperian offering 852.4.2. Improving competitiveness 862.4.3. Developing human potential 86

2.5. Development and capital expenditure 862.5.1. Development 862.5.2. Capital expenditure 86

2 -

Busi

nes

s Re

view

77

2008 AnnuAL RePORTsPeRiAn PROTeCTiOn

The same year, it entered the North American market with eye protection products and, in 1989, acquired WGM Safety Corp., a manufacturer of fall protection and head protection equipment that also distributed eye protection equipment in the United States. After the death of its founder in 1991, the Group pursued its worldwide growth in the head protection industry through the acquisition of several companies: Bilsom (hearing) in Sweden in 1994, Pulsafe (eye and face) and Troll (fall protection) in the UK in 1996, Komet (fall protection) in France in 1997, Moxham (fall protection) in Australia in 1998, and Fendall (eye and face) in the US and Söll (fall protection) in Germany in 2000.

BacouThe Bacou Group was founded by Henri Bacou in 1974, initially as a manufacturer of safety footwear in France. In the years following its creation, the Group made a succession of acquisitions in France: Fernez (respiratory) in 1997, Comoditex and Commeinhes-Remco (clothing) in 1980, Sofraf (gloves) in 1984, Delta Protection and Mutexil (clothing) in 1986, Antec (fall protection) in 1989, Ox'bridge (clothing) in 1993, Fenzy (respiratory) in 1997 and Optrel (welding) in 1998. Over the same period, the Group gradually acquired distributors that were consolidated in 1999 under the name Bacou Development. In March 1993, the Group created the subsidiary Bacou USA, which acquired Uvex Safety Inc. (eye and face) in 1994. In 1996, Bacou USA was listed on the New York Stock Exchange, where it traded until the merger with Christian Dalloz in September 2001. After the death of its founder in 1996, the company continued its acqui-sitions strategy in the United States with the purchases of Survi-vair (respiratory) and Biosystems (gas detection equipment) in 1997, Howard Leight (hearing) in 1998, Perfect Fit (gloves) in 1999 and Whiting & Davis and Platinum (gloves) in 2000.

2.2. The Personal Protective Equipment (PPE) Market

The term PPE applies to any device or product worn, carried or held by a person with the intent of providing protection against a range of hazards capable of endangering his or her health or safety. The PPE industry supplies personal protective equipment and services designed to protect users from the risk of illness or injury in the workplace or in a hazardous environment.

2.2.1. Market segments

The PPE market can be divided into two main segments:• Body protection, which represents approximately two-thirds of

the market and includes fall protection, protective gloves, protective clothing and safety footwear.

2.1. History

2.1.1. sperian Protection

On August 20, 2007, Bacou-Dalloz changed its name to Sperian Protection. This new, more international identity underlines the Group's vision as the world reference leader in personal protective equipment, at work or in any hazardous environment. It symbol-izes the trust embodied in the Group’s name.

Since the September 2001 merger between the Bacou and Chris-tian Dalloz groups, which created a new world leader, the Group has successfully optimized its production, commercial and logis-tics organizations. It has also broadened and adapted its product portfolio to focus increasingly on personal protective equipment, through the following transactions:• Acquisition in 2003 of Securitex, a North American manufacturer

of protective garments for first responders, thus expanding its offering in the regional public safety market.

• Disposal in July 2004 of Abrium (former Bacou Développement), a French distribution company.

• Disposal in September 2006 of Sunoptics, a designer and manu-facturer of premium solar lenses for manufacturers of fashion and sports eyewear.

• Acquisition in December 2006 of Epicon, a Brazilian company that manufactures and distributes disposable respiratory masks, enabling the Group to establish a manufacturing base in South America.

• Acquisition in June 2007 of Nacre, which designs and makes intelligent earplugs, thereby expanding its hearing protection product line and improving its access to the military market.

In 2008, the Group made several acquisitions in line with its stra-tegic objectives:• Developing its product line and market share with the acquisi-

tion of Combisafe, a leading designer and supplier of fall protec-tion systems.

• Acquiring technologies with doseBusters™ (United States), a pioneer in personal noise dosimetry technology.

• Expanding in emerging markets with the acquisition of Musitani S.A., the fall protection leader in Argentina.

2.1.2. The Christian Dalloz and Bacou Groups

Christian DallozThe Christian Dalloz group was founded by Christian Dalloz in France in 1957 to manufacture industrial components produced using injection-molded plastics. By 1980, the Group had become a leading producer of polycarbonate injection-molded eyewear. Christian Dalloz S.A. was listed on the French stock market in 1986.

2 -

Busi

nes

s Re

view


2.2.3. PPe market regulations

The PPE market is subject to numerous regulations that vary by region.

North AmericaUS regulations require the use of personal protective equipment when performing certain jobs and in certain workplaces. The main regulatory authority is the Occupational Safety and Health Administration (OSHA), which is responsible for defining minimum workplace health and safety requirements for workers using PPE as well as PPE compliance standards. PPE must also comply with non-governmental standards issued by such bodies as the Amer-ican National Standards Institute (ANSI) and the Canadian Stand-ards Association (CSA). To ensure full compliance with US standards, all of the required tests are performed in the Group's certified laboratories.

EuropeThe minimum heath and safety requirements for PPE and the conditions under which PPE products may be sold are defined by two EU directives. The directives also provide the framework for free trade in PPE products within the European Union and the basic safety requirements that these products must fulfill. These requirements govern the design and manufacture of PPE and are intended to protect the health and safety of PPE users. These directives were transposed into French law by Act no. 91-1414 of December 31, 1991, which defines the principles of prevention. Decree no. 93-41 of January 11, 1993 specifies the minimum regu-latory requirements related to the use of PPE, especially in terms of training and inspection. The essential PPE safety requirements have been integrated into the harmonized EU standards prepared in collaboration with all PPE stakeholders under the aegis of the European Committee for Standardization and other standards organizations. In compliance with the applicable regulations, the Group ensures that its new PPE products meet the essential requirements necessary for regulatory approval prior to their market introduction.

Other jurisdictions where the Group's products are manufac-tured and/or soldPPE products manufactured by the Group are subject to various regulations in each geographic market. Each Sperian Protection division is responsible for taking appropriate steps to ensure compliance with regulations applicable to its products.

• Head protection, which represents one-third of the market and includes eye and face protection, hearing protection and respi-ratory protection.

The equipment is primarily used in the following sectors:• Industry: chemical, oil, oil services, steel, automotive, aerospace,

shipyards, food processing and pharmaceutical.• Construction.• Mining.• Armed forces and public safety: fire fighting, governments, secu-

rity forces and law enforcement. • Energy, telecommunications and utilities.• Transportation.• Consumer.

2.2.2. Market growth drivers

The worldwide market for PPE is estimated by Sperian Protection to be worth approximately €11 billion.

After growing by about 3% in 2007, the Group believes the market expanded by 1% to 2% in 2008, in line with world GDP growth.

This slowdown was triggered by trends in the world economic environment, as the main sectors hit by the escalating recession in the final quarter of 2008 were the automobile, steel and chemicals industries, all of which are heavy consumers of personal protec-tive equipment. Market trends in the near term will depend mainly on how the world economy develops.

However, demand for personal protective equipment is and will continue to be driven by the following factors:• Employment level in main countries.• Regulations in force and changing regulations in developed

countries.• The introduction of regulations in some emerging economies,

such as China and Brazil.• The need for replacement equipment due to wear and tear or

obsolescence.• Government investment in building up stocks of protective

equipment as a precaution against the risk of pandemics and natural disasters.

• Government stimulus packages for a broad spectrum of sectors such as automobile, infrastructure and new energies.

• A change in attitudes, demands by insurance companies and growing concern for safety.

• Recognition by PPE manufacturers of the need for comfort, ergo-nomics and styling.

• Innovations offered by PPE manufacturers.

2 -

Busi

nes

s Re

view

79


As a result, it purchases a variety of raw materials, such as plas-tics (polyamide, polycarbonate, polypropylene, etc.) for eye and face protection, hearing protection and respiratory protection; steel and zinc for fall protection; latex for protective gloves; leather and rubber for safety footwear and protective gloves; and cotton for protective clothing and respiratory protection. In general, Sperian Protection uses a limited number of suppliers for each raw material, but does not consider itself dependent on any one supplier because all of these materials can be easily sourced from other companies. The Group also buys finished goods, primarily from Asian suppliers. A local team of purchasing and sub-contracting specialists has been set up to oversee and monitor these suppliers.

CustomersSperian Protection makes up to 90% of its sales through industrial distributors that buy products for resale to PPE end-user compa-nies. There are several types of distributor: • Specialized PPE distributors such as Intersafe/Abrium and Bunzl

in Europe.• Distributors specialized in vertical markets such as Point P (Saint

Gobain group) for the construction market in Europe and Fastenal in the United States.

• General distributors such as Grainger and Airgas in the United States and Descours et Cabaud in France.

Direct sales to end-users mainly concern the image wear clothing business, certain sales of fall protection equipment used in public services and in the telecommunications industry, and specific markets serving public safety organizations and governments.

In 2008, about 10% of revenue was derived from the top five customers and almost 14% from the top ten. On this basis, the Group does not consider this situation to be a major risk factor.

2.2.4. Competition

Historically, the PPE industry has consisted of small regional manufacturers specialized in specific products or market segments. In recent years, however, industry consolidation has created larger players offering a broader range of products to several market segments or regions.

Since 2007, there have been a number of major market deals:• In May 2007, Electra Private Equity Fund's sale of Capital Safety

(fall protection) to Candover Investments. • In June 2007, Sperian Protection's acquisition of Nacre, a Norwe-

gian manufacturer of intelligent earplugs.• In April 2008, 3M's acquisition of Aearo. 3M is the world leader

in disposable respiratory masks. Aearo operates mainly in the hearing and eye and face protection segments.

• In May 2008, Honeywell's acquisition of Norcross (United States), its first foray into in the PPE sector.

• In August 2008, Sperian Protection's acquisition of Combisafe, a leader in fall protection systems.

• In December 2008, Sperian Protection's expansion in Latin American markets with the acquisition of Musitani, the fall protection leader in Argentina.

2.2.5. Main suppliers and customers

PurchasingThe Group spends about €300 million a year in direct purchase, primarily raw materials (almost 30%), and finished or semi-finished goods (50%). Sperian Protection markets a wide range of products and manu-factures many different types of personal protective equipment.

2 -

Busi

nes

s Re

view


2.3.1. Head protection

Eye and Face protectionEye and Face protection equipment protects the eyes, eyesight and face against impact, splashes, specks, projectiles and ultra-violet and infrared radiation. Sperian Protection is the world leader in this sector with about 20% market share (Group data) and offers a comprehensive range of products from protective eyewear through to emergency eyewash stations. The largest segment comprises protective eyewear, goggles and face shields. These products compete with Aearo and Crews in the American market and with Uvex in Europe.

The Group also markets a line of protective eyewear in the United States under the Harley-Davidson brand, a legendary brand licensed to Sperian Protection for the sale of work safety products. Sperian Protection is also the US leader in prescription safety glasses.

In addition, it manufactures premium welding helmets, and more particularly helmets with self-darkening filter lenses. These prod-ucts compete worldwide with Hornell (3M group).

Body protection €360 million, ie 48%Head protection €391 million, ie 52%

Respiratory20%

eye and face17%

Hearing15%

Clothing8.5%

Footwear8.5%

Gloves9.5%

Fall protection21.5%

Asia-Pacific e 52 M

7%

eMeA*e 374 M

50%Americase 325 M

43%

The Group also manufactures and markets laser protection eyewear used in the defense, aerospace, health, dermatology and scientific research sectors.

Lastly, Sperian Protection is the US leader in emergency eyewash stations, used for cleaning eyes that have been exposed to harmful liquids or gases. These stations distribute saline solutions either in refillable bottles or throwaway cartridges.

Since mid-2007, most eye and face protection products have been sold under the Uvex by Sperian brand in the Americas and the Sperian brand in Europe and Asia-Pacific.

In 2008, Sperian Protection introduced a groundbreaking lens coating technology. Dura-stremeTM combines a premium anti-scratch and chemical-resistance coating with an anti-fog coating to meet the needs of people working in environments subject to temperature and humidity fluctuations. The new dual technology is available in select models such as XC, Millenia and Fitlogic safety spectacles and DuraMaxx goggles.

2.3. Business Segments

Revenue in 2008 amounted €751 million and can be analyzed by market segment and region as follows:

*Europe, Middle-East, Africa

2 -

Busi

nes

s Re

view

81


Respiratory protectionRespiratory protection products enable workers to breathe in all types of contaminated environment, either by filtering air or by providing a separate air supply:• Air purifying respirators are composed of sophisticated filters

that purify contaminated air before it is inhaled. The Group offers a range of products that includes disposable respiratory masks, filtering devices (full masks or half masks), and electrical devices that draw air mechanically through a filter. These devices filter or absorb particles or toxic gases present in the ambient air and are used in manufacturing, construction and the pharma-ceutical industry.

• Supplied air respirators are used when the ambient air cannot be purified. They are also used when the work environment presents a very high level of contamination or lack of oxygen and requires an independent source of clean air. Supplied air respi-rators include self-contained breathing apparatus (SCBA) which consist of a face-piece attached to an oxygen source, generally a cylinder of compressed air, and air line respirators, consisting of a face-piece and a fixed air supply hose which connects to an existing compressed air supply. They are mainly used by firefighters and in the petrochemical industry. Sperian Protec-tion operates accredited technical centers on both sides of the Atlantic to maintain this type of device.

The Group also manufactures portable and fixed gas detection and monitoring systems. Available in single-or multi-gas versions, these systems are used in confined spaces such as tunnels or gas pipelines and in hazardous sectors such as the oil industry. Most devices manufactured by Sperian Protection are fitted with a liquid crystal display that shows the user the concentration of gas in the air.

The Group's products compete worldwide with 3M, MSA, Scott Technologies (Tyco) and Draeger. Since mid-2007, they have been sold under the Sperian brand.

In early 2008, the Group obtained approval for and began marketing its new "Warrior" SCBA for firefighters in the United States. In Europe, the Group made further deliveries of disposable respiratory masks under its contract with the French government for the national avian flu prevention plan.

Hearing ProtectionEvery day, up to 275 million workers throughout the world are exposed to high noise levels that present a risk to their health. Hearing protection products, which protect users from hearing loss caused by exposure to loud noise, include earplugs (disposable, reusable and intelligent), banded earplugs and earmuffs (passive and communica-tion enabled): • Earplugs are small devices that fit into the outer ear canal and

reduce ambient noise. Approximately two-thirds of the plugs sold throughout the world are disposable and one-third are reusable. The reusable plugs are generally more costly and are considered less comfortable.

• Intelligent earplugs combine adaptive electronic and passive in-ear hearing protection with audio communication terminal capabilities designed for use in variable noise environments. This patented technology was developed by Nacre, which was acquired by Sperian Protection in June 2007. The range is initially intended for military use but will subsequently be extended to heavy industries exposed to high noise levels.

• Earmuffs are most often used when the wearer is required to communicate with ease (at airports, shooting ranges, etc.), and can be fitted with an integral radio or telephone. They can also be used with earplugs when there is exposure to extreme noise levels.

• Banded earplugs offer an alternative to earplugs and earmuffs in the form of a headband with foam that does not penetrate into the ear canal, and are generally worn by people who cannot tolerate earplugs. Banded earplugs are especially appropriate for low or medium noise level work environments.

According to Group estimates, Sperian Protection is the world's second-largest hearing protection products manufacturer, with about 27% of the market. Its main competitor in this segment is Aearo (3M group). Since mid-2007, hearing protection products have been sold worldwide under the Howard Leight by Sperian brand and in Asia under the Sperian brand.

In 2008, the Group continued to expand in intelligent hearing protec-tion solutions with the introduction of the VeriPro system, which measures and tracks the effectiveness of earplugs worn by employees. This was followed in November by the acquisition of doseBusters, a pioneer in personal noise dosimetry — a technology mainly designed for use in heavy industries such as oil, gas and petrochemicals, where people are exposed to high noise levels.

2 -

Busi

nes

s Re

view


2.3.2. Body protection

Fall protectionFalls represent the second-largest cause of serious or fatal acci-dents in the workplace, just after vehicle-related accidents. Personal fall arrest systems are designed to make working at height safer and to protect users from falls, and are primarily used in the construction industry, by public services (power, utilities), and in the logging industry. Personal fall protection systems include:• Harnesses that hold workers securely if they fall.• Anchoring systems that provide a reliable attachment point.• Connecting devices that attach the harness to the anchoring

point to limit the free-fall zone.• Collective protection systems such as barriers, nets, etc.

Sperian Protection is the worldwide leader in fall protection, with an estimated 22% of the market (Group data). The Group offers a comprehensive range of personal fall protection solutions and permanently installed height access systems.

Fall protection equipment is used in construction and manufac-turing, telecommunications, utilities and tree pruning, and rope access and rescue. Fall arrest systems are built around ladders, cables and rails that provide secured access when working at height, as well as horizontal lifelines that can be easily installed in any environment and adapted to any working configuration.The main competitor in this market is Capital Safety, which markets products under the Protecta brand in the United States and the Sala brand in Europe. Since mid-2007, Group fall protec-tion systems have been sold worldwide under the Miller by Sperian brand and in Asia under the Sperian brand.

In 2008, the Group strengthened its leadership position in fall protection with the successive acquisitions of Combisafe, a leading designer and supplier of fall protection systems, and, late in the year, Musitani, the market leader in Argentina.

Sperian Protection also continued its efforts to develop products that meet real market needs, introducing a range of Manyard® Miller® Edge Tested fall-arrest lanyards, which increase safety at height when working near sharp edges.

Protective glovesHand protection is a priority for workers who perform potentially hazardous tasks, as hand injuries can be severely disabling. Disposable or reusable protective gloves are used to protect against cuts and abrasions, chemical and biological agents, extreme temperatures and electrical burns or a combination of these risks. They are also used to protect against difficult weather conditions and risks associated with specific industries. Sperian Protection mainly serves the market for reusable gloves intended for industrial use to protect against exposure to:• Minor or serious surface abrasion due to friction, with growing

use of knitted palm coated gloves. • Medium to serious cuts, by using advanced synthetic fibers such

as Kevlar® or Dyneema® with or without coating. Metal mesh gloves still provide the best protection against cuts and perfora-tion in slaughterhouses and meat processing plants.

• Chemicals, using materials that are non-permeable and highly resistant to prevent contact with corrosive or hazardous prod-ucts. These gloves, supported (textile-lined) or non-supported, are fully dipped in a protective material that varies according to the chemicals used (e.g. PVC, natural or synthetic latex and polychloroprene).

• Electrical current, with a range of insulated dipped gloves used for high-voltage work (500 to 36,000 volts).

All of these products compete with Ansell, the worldwide market leader, as well as with Showa and Marigold (Comasec group) in Europe and Best, Memphis and Wells Lamont in the United States. Sperian Protection is the world leader in metal mesh gloves and the European leader in insulated dipped electrical-current gloves (Group estimates).

Since mid-2007, the entire range has been sold under the Sperian brand.

In 2008, the Group acquired a dipped glove manufacturing plant in Nantong, China, representing a major step in its turnaround plan for this business. The new plant provides Sperian Protection with production capacity in a fast-growing sector of the protective gloves market. The Group also strengthened its innovative capa-bility by setting up a research laboratory devoted specifically to protective gloves.

2 -

Busi

nes

s Re

view

83


Safety footwearSafety footwear protects users against shocks and the risks of skidding and falling by means of protective soles specifically designed to provide stability, absorb shocks and ensure good grip. Comfort and style are also important factors influencing the user's purchasing decision. The main markets for safety footwear are the manufacturing, metal, chemical, automotive, construction, trans-portation and food service industries, and the armed forces. Sperian Protection manufactures safety shoes and boots using both highly automated manufacturing processes (injected or vulcanized soles) and manual assembly methods (sewn soles and ankle shank production). These products are primarily marketed in Europe, where the Group believes that it is one of the market leaders, and in China. The main competitors in Europe are Jalatte-Almar and Cofra. Leveraging its long experience in this field, Sperian Protection has been renewing its safety footwear line-up in Europe since 2004, by introducing new ranges that fully meet user expectations and by developing its Timberland PRO® brand products. The new line of innovative, robust yet stylish footwear is specially designed for people who spend long hours on their feet, including logistics and transportation workers, messengers and tradesmen. It features the latest technological developments, such as non-metallic reinforced toecaps and nitrile soles, to give an exceptional level of comfort and maximum protection in all working environments.

Since mid-2007, the entire range has been sold under the Sperian brand.

In 2008, the Group continued to roll out its offering in the premium segment by carrying out in-depth user and market needs surveys and integrating the results into its R&D process. For example, the new Temptation® Elite women's range proved highly successful with its comfortable, light and stylish design.

Protective clothingCombining high technology and attractive styling, the clothing division offers hazardous work suits as well as practical, elegant workwear that enhance a company's corporate image. Customers choose standards-compliant protective clothing primarily based on an analysis of workplace risks and workstation characteristics, although comfort and ergonomics are also important criteria. Sperian Protection offers clothing designed to resist various aggressive environments, in particular:

• Anti-contamination suits for the nuclear and pharmaceutical industries.

• Protective garments for first responders, mainly used by munic-ipal, industrial and military firefighters and paramedics.

• Disposable suits, mainly for the chemical and pharmaceutical industries.

• Stylish, comfortable outdoor workwear that provides protection for people working in difficult weather conditions, and image wear, which includes uniforms or workwear designed to express the visual identity of airlines, railways, hospitality groups, service chains and other companies. The Group's uniforms and disposable and reusable workwear are marketed only in Europe, where their main competitors are Dupont (disposable workwear) and Kansas (uniforms and outdoor workwear). Protective garments for first responders are sold mainly in North America and compete with products made by Morning Pride, Globe and Lion Apparel. Since mid-2007, all Group products have been sold under the Sperian brand, except for the Timberland PRO® range which is licensed to Sperian Protection in Europe.

In 2008, the protective clothing business for firefighters continued to expand in the United States with a contract to equip the Albu-querque fire department. The image wear business enjoyed two major successes late in the year, winning contracts with the SNCF railway and Air France to supply uniforms for a part of their staff. The Group also made further deliveries under its contract with Vinci Construction France to supply a range of Timberland PRO® protective clothing and accessories for around 26,000 of its employees in France.

2.4. Strategy

Sperian Protection has devised a strategy that aims to make it the world reference leader in PPE. This entails building on the strengths that set the Group apart, including improved expertise through close relationships with end-users, reinforced innovative capability, a superior product offering based on strong brands, and an appropriate positioning in high-potential markets. The Group is also geared to remaining flexible and versatile in order to maintain its competitive edge. This strategy requires a high degree of commitment and enthusiasm across the entire organization.

2 -

Busi

nes

s Re

view


2.4.1. Differentiating the sperian offering

Strengthening our relationships with end-usersSperian Protection's strategy is built on an intimate knowledge of its markets, which allows it to focus on high-potential market segments, develop innovative solutions that closely meet user needs, and offer companies services to help manage and prevent risk in the workplace.

For several years now, the Group has focused on a few business sectors where it believes it has a real edge, such as construction and infrastructures, oil and gas services, government and military contracts, and the wind farm industry. Sperian Protection has built up close relationships with leading groups in these sectors, such as Vinci Construction France in the construction industry and Total in the oil industry, by developing product lines geared to their specific needs.

In the construction sector, the 2008 acquisition of Combisafe has provided the Group with a network of relations with major construction groups in Northern Europe and the United Kingdom.

Improving expertise and innovationThe Group is developing its offering through selected innovation, supported by the expertise it has acquired over time, especially through its intimate knowledge of end-users. Over the years, it has gained an in-depth understanding of the risks involved in each environment and how to prevent them, and advanced tech-nological knowledge of the different products. Sperian Protection is building on these strengths to provide appropriate, innovative solutions that provide comfort, ease of use and stylish design, that fit end-user needs and that help them to comply with safety guidelines.

To support these developments, Sperian Protection also works to enhance its expertise by developing partnerships or associations with various universities and research centers that have specific skills. For example, in France, the Group's decontamination suits division has financed a research program with the engineering school Les Mines d'Alès. In Germany, the University of Bremen shares its expertise with the Group's Swiss-based welding helmet business. In the United States, the Group has forged a partnership with the House Ear Institute in Los Angeles, an NGO dedicated to advanced hearing science.

In 2008, the Group set up a research laboratory specifically for the protective gloves business with the aim of differentiating its

offering in the buoyant dipped gloves market. In addition, the Group's recent acquisitions (Nacre in 2007 and doseBusters in 2008) will strengthen its technological expertise in key areas such as digital noise reduction and real-time noise dosimetry.

Improving Sperian's brand awarenessBrands are an important trust factor and a valuable means of promoting the Group's reputation for safe, stylish, comfortable and reliable PPE. Sperian Protection has capitalized on its name change to streamline its portfolio and refocus its offering around four flagship brands: Uvex by Sperian for eye and face protection in the United States, Howard Leight by Sperian for hearing protec-tion, Miller by Sperian for fall protection and Sperian for other product ranges. This forms the basis of a clearer, more effective marketing approach, leveraging both the reputation of the Group's existing brands and the reputation now being built up with the Sperian brand.

Expanding in the emerging marketsTo generate long-term expansion, the Group is developing its business in countries with high growth potential. The most appro-priate approach – business development, local partnership or industrial capacity – is taken in each country.

Two acquisitions strengthened the Group's positions in 2008. In Europe, the Middle East and Africa (EMEA), the acquisition of Combisafe has strengthened the Group's position in the Middle East, allowing it to capitalize on the growing oil and infrastructure sectors in this region.

In early December 2008, Sperian Protection also acquired Musi-tani, the leading fall protection company in Argentina. This move has substantially improved the Group's position in a booming market and consolidates on its existing manufacturing and distri-bution platform in Mexico and Brazil.

In the Asia-Pacific area, Sperian Protection has been operating in China for several years, with a production plant and logistics facility near Shanghai. The Group uses its local presence and tailored product range to develop relationships with local distrib-utors and end-users, such as the multinationals operating in the region. It also takes part in defining local safety regulations, drawing on its expertise in this sector. In 2008, Sperian Protection strengthened its operations in China with the acquisition of a dipped gloves manufacturing plant north of Shanghai, in Nantong.

2 -

Busi

nes

s Re

view

85


2.4.2 improving competitiveness

Optimizing manufacturing processesSperian Protection is continuing to optimize its operations and strengthen its competitiveness by rolling out various processes across the entire organization: • S&OP (Sales & Operations Planning), a planning and supply

chain management system based on forecasting customer demand.

• Worldwide coordination of product development and marketing, which guarantees optimal coordination at every stage, from R&D to the market launch.

• A sourcing policy, common methods and strategy specific to each purchasing segment. Other profitability improvement drivers include extracting synergies and making ongoing enhancements to the Group's panel of suppliers and purchased products.

Adapting the Group to market needsThe Group's industrial structure is based on three geographical segments. It has upstream design and automated production facilities in each segment (Americas, Europe and Asia), but most downstream manufacturing takes place in low-cost countries.

Sperian Protection will continue to optimize this structure in two ways. The first is to optimize its manufacturing base in segments as required, by combining some activities at a single plant or transferring others to countries where labor costs are lower. The second is to adapt locally production facilities to the economic environment.

2.4.3. Developing human potential

Sperian Protection is also pursuing its policy of developing and enhancing employee skills. This involves training programs tailored to each environment, sharing best practices through cross-functional projects and developing internal mobility. These cross-functional networks enable certain action plans to be imple-mented more easily and effectively.

The Group's human resources policy is described in chapter 3.

2.5. Development and capital expenditure

2.5.1. Development

As described in the section on strategy, innovation is a core driver of the Group's development. Dedicated to building customer loyalty, the Group's R&D commitment is based on careful attention to user expectations, in-depth knowledge of customer industries,

proficiency in leading-edge technologies and partnerships with outside experts. Each product division tracks the emergence of new technologies and materials, develops new products and improves existing ones, and develops new production processes, with emphasis on automation. Knowledge-sharing between divi-sions means that all the product ranges can leverage the advanced technologies used by Sperian Protection.

The Group also maintains the secrecy of production processes that are not protected by intellectual property rights, through the use of confidentiality agreements that require certain employees, consultants, suppliers, customers, agents and advisors to commit to maintaining the confidentiality of such information. In general, confidentiality agreements used by the Group stipulate that all confidential information developed by or communicated to the signer must remain confidential and cannot, with certain excep-tions, be disclosed to third parties.

Sperian Protection owns patents on certain PPE production proc-esses. The company believes that it is not dependent on third party patents for the manufacture of its products. In addition, it believes that the legal expiration of any of its patents will not have a mate-rial adverse impact on its business or results. Sperian Protection believes that its brands and patents are an important component of its marketing strategy. Consequently, it practices a policy of protecting its intellectual property rights and, where possible, registers its brands and patents in France, Europe, the United States and other countries (such as China), as well as within the framework of international and European treaties. In addition, Sperian Protection believes that obtaining licenses to use well-known brands is a complementary aspect of its marketing strategy and, as a consequence, it actively seeks licenses that are certain to add value to the manufacturing and distribution of its products.

2.5.2. Capital expenditure

Capital expenditure amounted to a particularly high €29 million in 2008, reflecting the implementation during the year of such major projects as the acquisition of a dipped glove plant in China (for €3.6 million), the acquisition of a new Brazilian factory manufac-turing several production lines (€3 million) and the acquisition of doseBusters noise exposure measurement patents and technology (€1.5 million). In all, the EMEA region accounted for 44% of capital spending, the Americas 42% and Asia-Pacific the remaining 14%. Research and development costs totaled €13.9 million, or 1.85% of revenue, versus 1.95% in 2007. Marketing expenditure – another key driver of growth alongside the innovation delivered by the R&D commit-ment – came to 3.8% of revenue, compared with 3.6% the year before.

2 -

Busi

nes

s Re

view


2 -

Busi

nes

s Re

view

87


3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT


SOCIAL AND ENVIRONMENTAL REPORT

3.1. The Sperian Spirit 903.1.1. Corporate mission 903.1.2. Corporate values 903.1.3. The social responsibility process 90

3.2. Human Resources Policies 903.2.1. Human resources organization 903.2.2. Putting people first 903.2.3. Fostering personal growth and motivation 913.2.4. Labor agreements concerning the French companies 92

3.3. Corporate Citizenship 92

3.4. Workforce and Production Plants 933.4.1. Employees by region at year-end 933.4.2. Employees by function at year-end 933.4.3. Employee profile at December 31, 2008 933.4.4. Production plants 94

3.5. Environnemental Policies 943.5.1. Challenges 943.5.2. Raising employee awareness 943.5.3. Resource use 94

3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT

89


3.2.2. Putting people first

A healthy workplaceSperian Protection is dedicated to offering employees a healthy, risk-free place to work. It therefore pays careful attention to regu-larly improving working and safety conditions in every facility worldwide, in accordance with host-country workplace safety legislation. For example, safety audits are regularly performed in the production plants to identity pathways to improvement.

The frequency and severity of workplace accidents involving employees are measured on the following basis: • Total recordable injury rate (TRIR) = Number of accidents

involving lost time per million hours worked.• Lost time injury rate (LTIR) = Number of days lost through tempo-

rary disability per thousand hours worked.

In 2008, the worldwide TRIR was 13.3, in line with the 2007 figure, while the LTIR was 0.30, down from the prior-year figure of 0.34. There were no fatal accidents in the Group in either 2008 or 2007.

Social dialogueIn France, working hours have been reduced and reorganized in accordance with legislation and various collective agreements. Overtime is managed according to French legislation and collec-tive agreements.

In 2008, a common wage negotiation framework was defined for all of the French sites, which is now helping to support fair treat-ment and enhance employee pride in working for Sperian.

In the rest of the world, working hours and overtime are managed according to local legislation and European Union legislation where applicable.

DiversitySperian Protection is an equal opportunity employer, committed to avoiding discrimination on the grounds of race, creed, national origin, ancestry, gender, age, health conditions or any other reason. In addition, we are committed to acting as a responsible corporate citizen wherever we operate. In particular, we support host communities by reinvesting in the local economy, both by creating direct and indirect jobs and by implementing corporate social responsibility programs.

These principles are expressed in our Code of Business Conduct, which has been widely distributed to employees around the world.

3.1. The Sperian Spirit

3.1.1. Corporate mission

Sperian Protection’s corporate mission is to contribute to ongoing improvements in workplace safety and productivity everywhere around the world. It is therefore deeply committed to deploying policies that effec-tively address social responsibility and environmental issues.

3.1.2. Corporate values

The Group’s corporate culture is based on four values that help to forge a mindset and common language around shared processes: teamwork and a commitment to team performance; mutual respect that encourages information and experience sharing; creativity, continuous improvement and risk taking for innovation; and a strong focus on customer satisfaction.

3.1.3. The social responsibility process

Around the world, Sperian Protection plants and offices have long been locally involved in measures to protect people and the envi-ronment and in outreach programs to support host communities.

In 2008, a new analysis and discussion phase was initiated to define a dedicated social responsibility process shared by every Group unit. A cross-functional working group was formed under the responsibility of the Executive Committee and tasked with defining a strategic vision that addresses the three key aspects of social responsibility: employee relations, corporate citizenship and environmental stewardship. The Group is defining the priority challenges, standards and Groupwide metrics will enable us to steer, coordinate and optimize the process in every plant, sales office and logistical platforms.

3.2. Human Resources Policies

3.2.1. Human resources organization

Sperian Protection has a global human resources organization backed by a local network of experts, based near our plants and local offices. This local presence means that policies and practices can be carefully aligned with the specific challenges of each region or business.Human resources policies have been designed around two funda-mental objectives: putting people first and fostering the personal growth of employees, which enhances efficiency and motivation.

3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT


Workers and employees also receive a negotiated general increase based on local pay surveys.

Total payroll amounted to €196 million in 2008.

Giving employees a stake in the Group’s successNon-discretionary profit-sharing plansA non-discretionary profit-sharing plan was signed in June 2006, covering all of the French companies except Annic S.A.S., which has had its own plan since March 1989. The sums set aside for the special profit-sharing reserve are calculated as follows:

(0.36 x payroll x taxable income)/value added

More than 1,299 people benefit from the plan.

Discretionary profit-sharing plansDiscretionary profit-sharing plans were signed in March 2005 with Annic S.A.S. and in June 2006 with Sperian Fall Protection France, Sperian Protection Armor and Sperian Respiratory Protection France. In 2005, Annic S.A.S. and Sperian Protection Gloves Autun were the only companies to benefit from discretionary profit- sharing plans. The total annual amounts paid under discretionary and non-discretionary profit-sharing plans over the past five years are as follows:

In thousands of euros 2008 2007 2006 2005 2004

Non-discretionary

profit-sharing plans

Discretionary

profit-sharing plans

1,562.2

781.7

2,038.7

765.3

1,680.0

822.2

852.6

82.7

902.5

55.4

Employee savings planIn 2007, an agreement was signed with employee representatives to set up a Group Savings Plan for French employees. Non-discretionary profit-shares are automatically paid into the plan, to which employees may also make voluntary contributions.

In 2008, these contributions were matched in amounts of up to €330 per employee.

The Plan is managed by Crédit Agricole Asset Management, which offers participating employees four possible investment formats, ranging from the most conservative (money-market fund) to the most growth-oriented (equity fund). The annual management fees are paid by Sperian Protection.

3.2.3. Fostering personal growth and motivation

Attracting the best talentAware that people are its most valuable asset, Sperian Protection has strengthened its organization and resources to attract the best candidates and offer them career plans, based in particular on personal and group performance, a project management culture, international mobility and the Sperian Spirit.

Training programsAssertive policies are being implemented to encourage personal growth and improve employee skills. These policies are reflected in a program of targeted training, known collectively as the “Sperian University,” and in the increasingly prevalent sharing of best practices. Since 2007, the emphasis has been on training programs for sales teams to enable them to recommend products aligned with user needs and on language acquisition courses to encourage cross-fertilization and greater integration across our teams.

In 2008, top managers attended the “Leadership You Can Trust” program, which uses team exercises and a shared vocabulary to foster the emergence of new ideas about what makes Sperian different.

Increasing job mobilityManagers are actively encouraged to devise individual career development plans, which play a critical role in motivating performance. Thanks to internal mobility between units and countries, employees can enrich their work and life experience through contact with different cultures and methods, and distill their best practices for future use.

Compensation policiesTo reward personal as well as team performance and the demon-stration of our corporate values, an attractive compensation policy has been put in place, comprising: • The People Performance First program, which aligns personal

career objectives with Group priorities, assesses personal performance, and ensures that all employees have a personal career development plan.

• A variable compensation policy that rewards both personal and team performance, based on performance metrics geared to each job type and country.

Management compensation is based on the principle that after around three years in a position, basic salaries should be about equal to the median reported in pay surveys in the country concerned. Pay rises are awarded individually on merit, based on personal performance.

3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT

91


Employee stock ownership plansOther than the stock option and performance share plans described in chapter 1, there are no other employee stock ownership plans currently in place. As part of the Group Savings Plan described above, employees can also elect to invest in a fund invested in Company shares.

Pension plansIn 2005, a supplementary defined contribution pension plan was introduced for French managers, with the employer and employee each contributing 2% of total salary.

Stock option plans and performance share grantsStock option plans and performance share grants are described in chapter 1, note 4.20.

3.2.4. Labor agreements concerning the French companies

Collective bargaining agreements French companies are subject to various collective bargaining agreements, depending on their business. These include: (i) National collective bargaining agreement for the wholesale industry, extended by decree on June 15, 1972, amended on September 27, 1984 and again extended by decree dated February 4, 1985; (ii) National collective bargaining agreement for the foot-wear industry, revised and recodified by agreement on March 7, 1990 and extended by decree on June 9, 1988; (iii) National collec-tive bargaining agreement for the textile industry, extended by decree on December 17, 1951, amended on May 29, 1979 and again extended by decree on October 23, 1979; (iv) National collective bargaining agreement for the apparel industry, extended by decree on July 23, 1959; (v) National collective bargaining agree-ment for the rubber industry dated March 6, 1953 and extended by decree on May 29, 1969; (vi) National collective bargaining agree-ment for engineers and executives in the metals industry, extended by decree on April; (vii) Regional collective bargaining agreement for the metals, mechanical engineering and associated industries in the Paris region, extended by decree on August 11, 1965, amended on July 13, 1973 and again extended by decree on December 10, 1979; (viii) Regional collective bargaining agree-ment for the metals industry in the Aisne region; (ix) Regional collective bargaining agreement for the metals industry in the Haute-Saône region; (x) National collective bargaining agreement for the chemical industry dated December 30, 1952 and extended by decree on November 13, 1956; and (xi) National collective bargaining agreement for the plastic industry, extended by decree on May 14, 1962.

Employee representatives and working hoursMost of the French subsidiaries have works councils. Agreements on the 35-hour working week are in place in all the companies concerned, and cover almost all employees in the French companies.

In the autumn of 2008, negotiations were initiated with employee representatives concerning a Human Resources Planning and Development Agreement.

Redundancy plans, outplacement, re-hiring and other support measuresIn the event of plant closures or redundancy plans, employees concerned are systematically supported with a wide range of programs. In particular, a placement unit is set up to help employees find jobs inside and outside the Group and to obtain government assistance for re-hiring, training or creating a company.

The downturn in the global economy and its impact on the Group since fourth-quarter 2008 has led to the implementation of a number of workforce adjustment and competitive differentiation plans that may lead to restructuring in certain units.

3.3. Corporate Citizenship

The very nature of our businesses and products, which are designed to protect people, means that they are a source of pride for employees, who have always been actively involved in their local communities and a variety of humanitarian aid programs.

In 2008, for example, Sperian Protection responded to the earth-quake in Sichuan, China by donating more than 170,000 respira-tory masks to the local Red Cross to protect people assisting victims.

An increasing number of local initiatives are demonstrating our employees’ commitment to serving others, including donations of safety glasses in Ecuador, respiratory masks to protect against smoke inhalation during the Southern California wildfires, and protective gloves and safety footwear for field workers in Benin.

3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT


3.4. Workforce and Production Plants

3.4.1. Employees by region at year-end

Sperian Protection is a global organization, with 6,282 employees in 25 countries at December 31, 2008. During the year, the Group acquired Combisafe, which had 129 employees at December 31. The figures do not include the employees of the new gloves plant in China or of Musitani, the Argentine company acquired in December.

December 31, 2008 December 31, 2007 Change

France

Western Europe, outside France

North America

Australia

1,194

459

1,699

71

1,267

360

1,751

65

- 73

+ 99

- 52

+ 6

Latin America

Eastern Europe

North Africa

Asia

3,4231,553

606

463

237

3,4431,275

723

501

248

- 20+ 278

- 117

- 08

- 11

2,859 2,747 + 112

TOTAL 6,282 6,190 + 92

The workforce adjustment and competitive differentiation plans implemented in late 2008 will reduce headcount in early 2009, particu-larly in the multi-product manufacturing plants in developing markets.

3.4.2. Employees by function at year-end

December 31, 2008 December 31, 2007 Change

Production

Marketing and Sales

Production/Management

Administration

Research & Development

Information Systems

Human Resources

3,445

1,316

847

367

157

92

58

3,487

1,206

838

376

131

93

59

- 42

+ 110

+ 9

+ 9

+ 26

- 1

- 1

TOTAL 6,282 6,190 + 92

3.4.3. Employee profile at December 31, 2008

Total Of

whom

women

% of

employees

Of whom

managers

% of

employees

Of whom

women

managers

% of

employees

Average

age

Average

length of

service

France

Western Europe, outside France

USA and Canada

Australia

Latin America

Eastern Europe

Africa

Asia

1,194

459

1,699

71

1,553

606

463

237

576

156

849

38

1,001

450

207

67

48.2

34.0

50.0

53.5

64.5

74.3

44.7

28.3

327

139

430

6

19

36

12

25

27.4

30.3

25.3

8.5

1.2

5.9

2.6

10.5

93

18

109

1

4

14

3

6

7.8

3.9

6.4

1.4

0.3

2.3

0.6

2.5

45.3

41.7

46.2

45.9

32.7

28.2

33.3

32.3

16.6

6.7

8.6

6.6

3.4

4.2

9.8

2.5

TOTAL 6,282 3,344 53.2 994 14.7 248 3.9 39.2 8.1

In France, the Group employs 28 disabled people and makes financial contributions to various organizations as required by law.

3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT

93


3.4.4. Production plants

Sperian Protection manufactures most of the products sold under its brand names. The following table shows the location of produc-tion plants by geography and business as of December 31, 2008. It does not include the body protection plants in Nantong, China and Buenos Aires, Argentina, which will be accounted for in 2009.

Head

protection

Body

protection

Multi-

productTotal

North America

Western Europe

Other

TOTAL

5

3

1

9

4

10

3

174

4

913830

As of December 31, 2008, sixteen of the thirty plants were owned outright, 11 were rented and three were leased.

The Group also sources products from other manufacturers, mainly in Eastern Europe and Southeast Asia. In 2003, an outsourcing team was set up in China to review opportunities for more extensive sourcing with producers of labor-intensive prod-ucts. The team is also responsible for quality control over these products. It is particularly strict about ethical standards when choosing subcontracting partners.

3.5. Environmental Policies

3.5.1. Challenges

Sperian Protection is committed to acting as a responsible corpo-rate citizen in all its dealings with financial and business partners, employees and host communities. By their very nature, our production processes have little impact on the surrounding ecosystems. As a responsible corporate citizen however, we plan and rationalize the use of all production resources, including water, energy and raw materials, before their transformation into finished products. Two manufacturing plants are ISO 14000 certi-fied – Höf in Germany (fall protection) and Autun in France (protec-tive gloves) – and five others are in the process of being certified. Policies for identifying, monitoring, measuring, controlling and reducing risks are based on best international practices and recognized standards. All production plants comply with national and local legislation.No accident involving air, water or soil pollution or contamination was reported in 2008. No provisions have been set aside for envi-ronmental risk.Expenditure on preventing environmental damage from our busi-ness activities amounted to €81,000 in 2008, versus €177,800 in 2007.

3.5.2. Raising employee awareness

A large number of local initiatives were undertaken in 2008 to raise employee aware of environmental stewardship issues, in particular energy savings. Two examples are a sorted waste collection program introduced in the Roissy, France offices and the site-wide program deployed at the Tijuana, Mexico plant to reduce water and electricity use in offices and on the production lines.

3.5.3. Resource use

In addition to complying with environmental legislation, we are committed to reducing the use of natural resources in our produc-tion processes.

The data presented below cover the manufacturing plants in Western Europe, North America and Mexico, or twenty-five of the total thirty plants worldwide.

Water and energyAs a responsible corporate citizen dedicated to environmental stewardship, Sperian Protection continuously strives to reduce the use of water, energy and other resources in its production proc-esses. In addition, a major proportion of the manufacturing oper-ations involve manual assembly, which uses few natural resources. Product manufacturing processes are analyzed on a qualitative and quantitative basis, particularly their use of resources and raw materials, to assess whether there is any potential for further improvement. Water and energy use data for 2007 and 2008 are as follows:

• Water (utilities and production): 2008: 84,352 cubic meters 2007: 93,876 cubic meters.

The decrease in water use was primarily attributable to the decline in output at several plants and, to a lesser extent, more efficient management of process water use.

• Energy: In 2008, natural gas represented 93% of total energy used, electricity 6% and other sources of energy 1%. Natural gas: 2007: 620,554 cubic meters 2008: 564,380 cubic meters

The decrease in natural gas consumption primarily reflects the generally milder winter, which resulted in a shorter heating season. Improved insulation and greater employee awareness of the need to conserve energy also contributed to the decline.

3 -

SOCI

AL A

ND E

NVIR

ONM

ENTA

L RE

PORT


Waste managementIndustrial waste, both hazardous and non-hazardous, is collected and disposed of by accredited recycling specialists that provide suit-able processing and storage facilities. Waste volumes amounted to 2,864 tonnes in 2008, broken down as follows:• Hazardous waste: 283 tonnes, of which 82% was incinerated, 15% sent to landfill sites and 3% recycled.• Non-hazardous waste: 2,581 tonnes, of which 58% was recycled, 39% sent to landfill sites and 3% incinerated.

Noise and odorsThe Group's business activities generated minimal noise and odors in 2008. 3

- SO

CIAL

AND

ENV

IRON

MEN

TAL

REPO

RT

95


4 -

Corp

orat

e go

vern

anCe

96 2008 annUaL reportSperIan proteCtIon

Corporate governanCe

4.1. Board of Directors 984.1.1. Directors 984.1.2. Board management 1034.1.3. Board practices 1034.1.4. Prevention of insider trading 103

4.2. Directors’ interests 1044.2.1. Shareholdings 1044.2.2. Stock options held by members of the Board 1044.2.3. Stock options and performance shares held

by executive directors 105

4.3. Directors’ compensation 1064.3.1. Directors’ compensation in 2008 1064.3.2. Summary of compensation, stock options and

performance shares received by executive officers 1064.3.3. Summary of total compensation received

by executive directors 1074.3.4. Directors’ fees received by non-executive directors 107

4.4. other information about the directors 1084.4.1. Loans and guarantees 1084.4.2. Summary information 1084.4.3. Agreements with directors 1084.4.4. Statutory Auditors’ report on related-party agreements 109

4.5. organization structure 1134.5.1. A global organization structure 1134.5.2. Senior management 1134.5.3. Services provided by Sperian Protection S.A.

to its subsidiaries 1144.5.4. Simplified Group legal structure as of December 2008 115

4.6. Chairman’s report 1164.6.1. Corporate governance code 1164.6.2. Management of the Company 1164.6.3. Principles and rules for Executive Officers’ compensation 1164.6.4. Compensation and agreements between the company

and the executive officers 1164.6.5. Preparation and organization of the Board

of Directors’ work 1194.6.6. Report on the Board's work in 2008 1204.6.7. Restrictions on the Chief Executive Officer’s powers 1224.6.8. Attendance at shareholders’ meetings 1224.6.9. Internal control procedures 1224.6.10. Statutory Auditors’ report drawn up in accordance

with Article L. 225-235 of the French Commercial Code (Code de Commerce), on the report of the Chairman of the Board of Directors of Sperian Protection 125

4 -

Corp

orat

e go

vern

anCe

97

2008 annUaL reportSperIan proteCtIon

4.1. Board of Directors

On March 3, 2009, in accordance with the law and the provisions of Article 17 of the by-laws, the Board completed the management succession process announced in 2008. It elected to separate the offices of Chairman of the Board of Directors and Chief Executive Officer, reappointed Henri-Dominique Petit as Chairman of the Board of Directors and appointed Brice de La Morandière as Chief Executive Officer. These changes are effective as of April 14, 2009.

4.1.1. Directors

The following table shows the composition of the Board of Directors as of March 3, 2009:

name and age or corporate name

Date first elected Current term expires Main position in the Company

other positions outside the group

number of shares held in the Company

Philippe Alfroid, 63

Director:April 8, 1991

Annual meeting held to approve the 2008 financial statements

Director Chief Operating Officer, Essilor International*

7,056

Philippe Bacou, 51

Director:September 6, 2001Co-Executive Officer:since September 3, 2003 for the same term as the Chief Executive Officer


Director, Co-Executive Officer

2,196

Patrick Boissier,59

Director: May 10, 2007


Director Chairman of the Board of Directors, DCNS Group

200

Ginette Dalloz, 74

Director: April 13, 1983 Co-Executive Officer:from September 3, 2002 to April 14, 2009


Director Co-Executive Officer (until April 14, 2009)

387,224 directly and 624,144 via

S.C.F.D.

Patrice Hoppenot, 64



Director Chairman, Investisseur & Partenaire

200

François de Lisle, 62



Director 800

Gunther Mauerhofer, 70



Director 801

Henri-Dominique Petit, 60



Chairman andChief Executive Officer (until April 14, 2009)

201

Philippe Rollier, 66

Director:May 10, 2007


Director 200

André Talmon, 69

Director:May 16, 2002


Director Chairman, Carrières Degan S.A.

201

* Listed company

4 -

Corp

orat

e go

vern

anCe


other positions held by Henri-Dominique petit within the group:

Canada

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

USA

Sperian Protective Apparel Ltd.

Sperian Protection USA, Inc.

Sperian Respiratory Protection USA, LLC

Bacou-Dalloz Safety, Inc.

Sperian Eye & Face Protection, Inc.

Sperian Protection Instrumentation, LLC

Glendale Protective Technologies, Inc.

Sperian Protection Investment, Inc.

SP USA Finance, Inc.

Sperian Fall Protection, Inc.

Sperian Protective Apparel USA, LLC

BMP I, Inc.

Sperian Fall Arrest Systems, Inc.

Sperian Protective Gloves USA, LLC

Sperian Metal Mesh Protection USA, Inc.

Sperian Protection Americas, Inc.

Sperian Hearing Protection, LLC

Sperian Protection Optical, Inc.

Director

Chairman and Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

The other Directors do not hold any other positions or offices within the Group.

4 -

Corp

orat

e go

vern

anCe

99


Positions held by members of the Board outside the Group

names 2004 2005 2006 2007 2008

Philippe Alfroid

FranceDirector:Essilor International*Faiveley S.A*Faiveley Transport

InternationalChairman andDirector:Essilor Of AmericaInc. (USA),Omega OpticalHolding, Inc. (USA),

Director:Gentex OpticsInc. (USA),Visionweb Inc. (USA),EOA Holding CoInc. (USA),EOA InvestmentInc. (USA),Essilor CanadaLTEE/Ltd (Canada)Pro-Optic CanadaInc.(Canada)Shanghai EssilorOptical CompanyLtd (China)











InternationalDirector:Essilor Of AmericaInc. (USA),Gentex OpticsInc. (USA),EOA Holding CoInc. (USA),EOA InvestmentInc. (USA),Omega OpticalHolding, Inc. (USA),Essilor CanadaLTEE/Ltd (Canada)Pro-Optic CanadaInc.(Canada)Shanghai EssilorOptical CompanyLtd (China)

Philippe Bacou

FranceDirector:Holding Trophy S.A.

FranceDirector:Holding Trophy S.A.Dieau Edafim S.A.

France Director: Holding Trophy S.A.Dieau Edafim S.A.

France Director: Holding Trophy S.A.

None

Patrick Boissier

FranceVice Chairman of theSupervisory Board: Vallourec*

Member of the Supervisory Board: Steria Groupe*Director: Kit-Grimp

FranceVice Chairman of theSupervisory Board: Vallourec*

Member of the Supervisory Board: Steria Groupe*

France Vice Chairman of theSupervisory Board: Vallourec*

Member of the Supervisory Board: Steria Groupe*Director:Aker Yards SA*

France Chairman and CEO: Chantiers de l'Atlantique,Alstom Leroux Naval,AMR.

Vice Chairman of the Supervisory Board: Vallourec*Member of the Supervisory Board:Steria Groupe*

FranceCEO: Cegelec

Chairman and CEO: Chantiers de l'Atlantique

Vice Chairman of the Supervisory Board: Vallourec*Member of the Supervisory Board:Steria Groupe*

Ginette Dalloz

None None None None None

Patrice Hoppenot

France Member of the Supervisory Board:EliorKOS (Benedicta holding company)Director:Rolot Lemesson

FranceMember of the Supervisory Board:Elior

Director: Rolot LemessonBurelle (S.A.)

FranceMember of the Supervisory Board:Elior

Director:Burelle (S.A.)

FranceMember of the Supervisory Board:Ideal Connaissances S.A.

DirectorBurelle (S.A.)

FranceMember of the Supervisory Board:Ideal Connaissances S.A.

Director: Burelle (S.A.)

* Listed company

4 -

Corp

orat

e go

vern

anCe


names 2004 2005 2006 2007 2008

Françoisde Lisle

FrancePermanent Rep. of UEI: Dufour YachtsGroupe GascogneKappa 26Ortec Expansion

Permanent Rep.of IDIA:Rep Holding

InternationalPermanent Rep. of UI:International Sailing Boats spaFinancière TractelImmobilière Dumoulin

FrancePermanent Rep. of CAPE Holding:Groupe Gascogne

Director: Groupe SMP

FranceDirector: Groupe SMPS2M

FranceDirector:S2M

FranceDirector: S2M

Gunther Mauerhofer

InternationalDirector or member of the Supervisory Board:Backoma S.A.Danone GmbH(Germany)Danone Holding AG (Germany)

FranceDirector:Groupe Gascogne

International:Member of the Supervisory Board:Danone GmbH(Germany)Danone Holding AG (Germany)

FranceDirector:Groupe Gascogne

International:Member of the Supervisory Board:Danone GmbH(Germany)Danone Holding AG (Germany)

France Director:Groupe Gascogne

InternationalMember of the Supervisory Board:Danone GmbH(Germany)Danone Holding AG (Germany)

FranceDirector:Gascogne

InternationalMember of the Supervisory Board:Danone GmbH(Germany)Danone Holding AG (Germany)

Henri-Dominique Petit

InternationalDirector: Eastman Kodak subsidiaries (China) and Chesapeake Corp. (US)*

InternationalDirector: Chesapeake Corp. (USA)*


FranceDirector:Carbone Lorraine*


FranceDirector:Carbone Lorraine*


Philippe Rollier

FranceDirector: Moria SA

International President and CEO: Lafarge North America


InternationalPresident and CEO: Lafarge North America


InternationalPresident and CEO: Lafarge North America

France Director: Moria SA Carbone Lorraine*Monier SA

Member of the Supervisory Board:Financière Gregoire

InternationalDirector:Sonoco Products*

FranceDirector:Moria SA Carbone Lorraine*Monier SA

Member of the Supervisory Board:Financière Gregoire

InternationalDirector:Sonoco Products*

André Talmon

France Chairman: Carrières Degan Association IMA Director:ARD

FranceChairman: Carrières Degan Association IMA Director:ARD

FranceChairman: Carrières Degan Association IMA Director:ARD

FranceChairman: Degan S.A.

FranceChairman: Degan S.A.

* Listed company

4 -

Corp

orat

e go

vern

anCe

101


• Director information(1)

philippe alfroid is Chief Operating Officer of Essilor International, which he joined in 1972. He has been a Director of the Group since 1991 and was alternating Chairman with Philippe Bacou from the time of the Bacou/Christian Dalloz merger in September 2001 until January 11, 2005. Since that date he has been Chairman of the Nominations and Remuneration Committee. He is an engineering graduate from ENSEHRMA, Grenoble, and has a Master of Science degree from MIT.

philippe Bacou, an accountant by profession, joined the Bacou Group in 1985. He was Chairman of Bacou from 1996 until the merger with Christian Dalloz. He was then Chairman of the Bacou-Dalloz group from 2001 to 2003 and is now Co-Executive Officer and was Chairman of the Strategy Committee until December 31, 2006.

patrick Boissier was Chief Executive Officer of Cegelec until January 14, 2009, when he was appointed Chairman and Chief Executive Officer of DCNS and Chairman of the DCNS Group. From 1997 to 2007, he was Chairman of Alstom’s shipbuilding division and Chairman and Chief Executive Officer of Chantiers de l'Atlantique. He previously held various positions with Pechiney, Europa-Metalli and ELFI. Patrick Boissier is a graduate of the École Polytechnique and Harvard. He is also a Director of the École des Mines in Nantes and the Institut Français de la Mer.

ginette Dalloz began her career with the Rhône-Poulenc group before founding the Christian Dalloz group with her husband. After his death in 1991, she became Chief Executive Officer and was Co-Executive Officer of the Sperian Protection group until April 14, 2009. She is a graduate of the École des Hautes Études Commerciales Jeunes Filles.

patrice Hoppenot worked mainly in finance positions in the food and pharmaceuticals industries from 1971 to 1985, when he was appointed Chairman of Géladour, a frozen foods retailer. In 1988, he was one of four founders of BC Partners, an independent Euro-pean financial investor specializing in LMBOs. In 2001, he left BC Partners to found and become Chairman of Investisseur & Parte-naire pour le Developpement, a Mauritius-based company that finances business investments in developing countries. He is a civil engineering graduate of the École Nationale des Mines, Paris, and has an MBA from the University of Chicago.

François de Lisle spent his entire career with the Crédit Agricole group, which he joined in 1973. In 1988, he became Investment Director at CAPE Holding (formerly Union d'Études et d'Investissement), the parent company of Crédit Agricole Capital Investissement (formerly Idia Participations). In this capacity, he was permanent representative of Crédit Agricole Capital Inves-tissement on the Board of Bacou-Dalloz from March 18, 2003 until

his departure from the Crédit Agricole group at the end of January 2006. He is a graduate of the École des Hautes Études Commerciales.

gunther Mauerhofer began his career with Kimberly-Clark in 1963. In 1984, he joined the Danone group as Head of Business Development for all divisions, subsequently becoming Head of International Operations for the biscuits division. When he left in February 2002, he was Vice-President, Central and Eastern Europe for the dairy products division. He is a graduate of the University of Vienna, the Johns Hopkins School of Advanced International Studies (SAIS) and the University of Bologna, Italy. He also has an MBA from INSEAD, France.

Henri-Dominique petit joined Kodak in 1975 where he held several operational and management positions in France, the United States and England. In February 2001, he became Chairman & President, Asia-Pacific region, based in Shanghai. He was appointed Chief Executive Officer of the Bacou-Dalloz group for a term from May 2004 through April 14, 2009 and has been Chairman of the Board of Directors since January 11, 2005. He is an engi-neering graduate of the École Supérieure de Physique et Chimie, Paris, and has a post-graduate degree in nuclear physics and a doctorate in molecular electronics. He has also completed the Advanced Management Program at INSEAD, France.

philippe rollier spent his entire career with Lafarge, where, until he left in late 2006, he served as President and Chief Executive Officer of Lafarge North America and as Chief Operating Officer of Lafarge since January 2001. Between 2003 and 2006, he was also a director of the Wolf Trap Foundation for the Performing Arts and the National Building Museum in the United States. He is a grad-uate of INA Paris-Grignon and Institut de Sciences Politiques de Paris.

andré talmon began his career with Exxon Chemicals before moving into management with the Rio Tinto group, where he remained until 2001. He is a graduate of the École Polytechnique Fédérale, Zurich, and has an MBA from INSEAD, France.

(1) Independent directors: see Chairman's report in section 4.4.

• Information on candidates nominated for election as director at the annual shareholders' meeting scheduled for May 6, 2009

At the annual shareholders' meeting scheduled for May 6, 2009, the Board will propose the election of Brice de La Morandière as director for a term of three years ending at the annual share-holders' meeting held to approve the 2011 financial statements.

4 -

Corp

orat

e go

vern

anCe


Brice de La Morandière has been Chief Operating Officer since August 2008, Executive Vice-President of the Body Protection SBU since June 2006 and Chief Financial Officer of Sperian Protection since the merger of the Christian Dalloz and Bacou groups in 2001. He joined the Christian Dalloz group as Chief Financial Officer in 1997 following ten years with CarnaudMetalbox where he held various positions in manufacturing plants. Aged 43, he has a law degree, a post-graduate degree in strategic management and is a graduate of the Institut d’Études Politiques, Paris.

The Board will also propose the re-election of Philippe Alfroid, Patrice Hoppenot and Gunther Mauerhofer, directors due to retire by rotation, at the annual shareholders meeting scheduled for May 6, 2009.

• Statements regarding the directors and executive officers

To the Company's knowledge:1) None of the directors or executive officers has been convicted of

fraud in the past five years.2) None of the directors or executive officers has been implicated

in a bankruptcy, receivership or liquidation as a director, senior executive, supervisory board member or company officer in the past five years.

3) None of the directors or executive officers has been barred from acting as a director, senior executive or supervisory board member or from participating in the management of a listed company in the past five years.

4) None of the directors or executive officers has been charged with any other offence or had any official public disciplinary action taken against them by the legal or regulatory authorities (including any professional bodies) in the past five years.

5) There are no potential conflicts of interest between the direc-tors' duties towards the company and their own personal interests or other duties.

4.1.2. Board management

On March 3, 2009, in accordance with the law and the provisions of Article 17 of the by-laws, the Board elected to separate the offices of Chairman of the Board and Chief Executive Officer. The Board also reappointed Henri-Dominique Petit as Chairman of the Board of Directors and appointed Brice de La Morandière as Chief Execu-tive Officer. These changes are effective as of April 14, 2009.

In accordance with the provisions of Article 17 of the by-laws, the Board of Directors may, on the recommendation of the Chief Exec-utive Officer, appoint one or more persons as Co-Executive Officer(s) to assist the Chief Executive Officer in his duties. They do not need to be directors. On March 3, 2009, the Board confirmed the appointment of Philippe Bacou as Co-Executive Officer. His term of office runs concurrently with his term of office as director.

The main role of the Co-Executive Officer is to support the Chief Executive Officer in his duties by carrying out assignments dele-gated to him. He also provides continuity of management in the event the Chief Executive Officer is unable to fulfill his duties. He therefore has the same powers as the Chief Executive Officer and, unless otherwise decided by the Board of Directors, he remains in office with full powers until a new Chief Executive Officer is appointed.

4.1.3. Board practices

As required by article L. 225-37 of the French Commercial Code (Code de Commerce), the Chairman will report to shareholders on corporate governance and internal control at the annual meeting scheduled for May 6, 2009, and on any restrictions on the Chief Executive Officer's powers. Detailed information on Board prac-tices is provided in section 4.6. of this report. The restrictions on the Chief Executive Officer's powers are described in section 4.6.7.

4.1.4. prevention of insider trading

In 2002, the Board introduced an internal procedure to reduce the risk of insider trading, which applies to directors and employees alike. This procedure was updated in 2007 to comply with new European Union regulations, particularly the Market Abuse Directive. The company maintains an updated list of permanent insiders, which includes the Chairman of the Board, Directors, members of the Executive Committee and certain employees working in the finance, legal and communication departments. They are prohib-ited from dealing in the company's shares for a period of two weeks before the Group announces its annual and half-yearly earnings and its quarterly revenues. The Finance Department publishes the dates of these blackout periods on the Group intranet. In addition, any permanent insider or employee who becomes aware of inside information may not deal in the compa-ny's shares until the first trading day after the publication of a press release disclosing the information. In this case, the Group draws up a list of employees classified as temporary insiders.

4 -

Corp

orat

e go

vern

anCe

103


4.2. Directors' interests

4.2.1. Shareholdings

The table below shows directors' shareholdings in the company as of March 3, 2009:

Director number of shares percentage capital percentage voting rights

Philippe Alfroid

Philippe Bacou

Patrick Boissier

Ginette Dalloz *

Patrice Hoppenot

François de Lisle

Gunther Mauerhofer


Philippe Rollier

André Talmon

7,056

2,196

200

387,224

200

800

801

201

200

201

0.1

nm

nm

5.1

nm

nm

nm

nm

nm

nm

0.1

nm

nm

8.0

nm

nm

nm

nm

nm

nm

totaL 399,079 5.2 8.1

* Shares held directly by Ginette Dalloz. See chapter 5 for shares held indirectly.

As of December 31, 2008, none of the directors had any significant holdings in Sperian Protection subsidiaries.

4.2.2. Stock options held by members of the Board

No directors other than Henri-Dominique Petit held stock options or performance shares as of December 31, 2008.

No stock options or performance shares were granted to directors other than Henri-Dominique Petit during 2008:

Stock options or performance shares granted to directors and stock options exercised

number of options/performance shares

granted/options exercised

exercise price

(€)

expiration plan*

Options granted in 2008 to Henri-Dominique Petit none n/a n/a n/a

Performance shares granted in 2008 to Henri-Dominique Petit 7,452 n/a Dec. 12, 2012(**) 30

Options exercised by directors in 2008 0 0 0 0

* See Note 4.20 of the notes to the consolidated financial statements in section 1 of this report for details of stock option and performance share plans.** Expiration of the vesting period: December 12, 2010;

Expiration of the lock-up period: December 12, 2012.

The directors held 88,678 stock options and performance shares as of December 31, 2008.

Director number of options or performance shares

exercise price(€)

plan expiration







40,00014,00015,5008,0003,7267,452

51.5970.8596.3684.47

Na*Na*

September 7, 2004December 7, 2005December 7, 2006December 6, 2007December 6, 2007

December 12, 2008

September 7, 2010December 7, 2013December 7, 2014December 6, 2015December 6, 2011

December 12, 2012

total 88,678

* Performance share plan

4 -

Corp

orat

e go

vern

anCe


4.2.3. Stock options and performance shares held by executive directors

options granted to executive officers in 2008.

name no. and date of plan

type of option (on new or

existing shares)

valuation of stock options based on method used in the consolidated financial

statements

number of options granted

in the year

exercise price

exercise period

Henri-Dominique Petit - - - - - -

Ginette Dalloz - - - - - -

Philippe Bacou - - - - - -

options exercised by executive officers in 2008.

name no. and date of plan number of options exercised in the year exercise price

Henri-Dominique Petit - - -

Ginette Dalloz - - -

Philippe Bacou - - -

performance shares granted to executive officers in 2008.


number of performance shares granted in the year

valuation of performance shares based on method used in the

consolidated financial statements

vesting date

end of lock-up period

performance conditions

Henri-Dominique Petit Plan 30, Dec. 12, 2008

7,452 152,842Dec. 12,

2010Dec. 12,

2012Chap 1, note

4.20.1

Ginette Dalloz - - - - - -

Philippe Bacou - - - - - -

performance shares that vested in 2008.


number of performance shares that vested in 2008

vesting conditions

Henri-Dominique Petit - - -

Ginette Dalloz - - -

Philippe Bacou - - -4

- Co

rpor

ate

gove

rnan

Ce

105


4.3. Directors' compensation

4.3.1. Directors' compensation in 2008

During 2008, the total amount of direct and indirect compensation and benefits received by the directors was €1,273,494, including €202,276 in directors' fees. Details per director are provided in note 5 of the notes to the financial statements in chapter 1.

The rules governing the allocation of directors' fees adopted by the Board for 2008 are described in section 4.6.5. In 2008, the Chairman and Chief Executive Officer and the two Co-Executive Officers received a salary. Details are given in the Chairman's report in section 4.6.4.

The total provision for post-employment benefits due to executive officers was not material.

4.3.2. Summary of compensation, stock options and performance shares received by executive officers

Henri-Dominique petitIn €

2007 2008

Compensation due for the year 1,019,043 594,078

Valuation of options granted in the year 151,122 0

Valuation of performance shares granted in the year 146,784 152,842

ginette DallozIn €

2007 2008

Compensation due for the year 34,780 33,899

Valuation of options granted in the year - -

Valuation of performance shares granted in the year - -

philippe Bacou In €

2007 2008

Compensation due for the year 42,284 42,757

Valuation of options granted in the year - -

Valuation of performance shares granted in the year - -

4 -

Corp

orat

e go

vern

anCe


4.3.3. Summary of total compensation received by executive directors

Henri-Dominique petit

In €

2007 2008

Amount due(3) Amount paid(4) Amount due(3) Amount paid(4)

Fixed salary 555,000 555,000 570,000 570,000

Performance-related compensation(1) 439,560 477,000 0 439,560

Exceptional bonus - - - -

Directors' fees 13,212 13,212 12,424 12,424

Benefits(2) 11,271 11,271 11,654 11,654

total 1,019,043 1,056,483 594,078 1,033,638

ginette Dalloz

In €

2007 2008


Fixed salary 20,004 20,004 20,004 20,004

Performance-related compensation(1) - - - -


Directors' fees 14,776 14,776 13,895 13,895

Benefits(2) - - - -

total 34,780 34,780 33,899 33,899

philippe Bacou

In €

2007 2008


Fixed salary 30,000 30,000 30,000 30,000

Performance-related compensation(1) - - - -


Directors' fees 12,284 12,284 12,757 12,757

Benefits(2) - - - -

total 42,284 42,284 42,757 42,757

(1) The method of calculation is described in section 4.6.3. (2) Benefits include contributions to the unemployment insurance scheme (3) Compensation determined by the Board, due regardless of the actual date of payment.(4) Total compensation actually paid in the year.

4.3.4. Directors' fees received by non-executive directors(1)

DirectorIn €

Directors' fees paid in 2007 Directors' fees paid in 2008

Philippe Alfroid 11,760 11,040

Patrick Boissier 26,160 19,360

Gérard Cottet (2) 5,070 N/A

François de Lisle 28,830 28,560

Patrice Hoppenot 24,020 23,400

Gunther Mauerhofer 26,160 27,240

Philippe Rollier 21,620 27,040

André Talmon 26,160 26,560

total 169,780 163,200

(1) Non-executive directors do not receive any compensation other than directors' fees(2) Gérard Cottet has no longer been a director since April 1, 2007

4 -

Corp

orat

e go

vern

anCe

107


4.4. Other information about the directors

4.4.1. Loans and guarantees

No loans or guarantees were granted to directors.

4.4.2. Summary information

executive officers employment contract

Supplementary pension plan

Loss of office benefits non-competition benefits

Yes no Yes no Yes no Yes no


Chairman and Chief Executive Officer

Elected: May 18, 2004

Term expires:

Annual meeting held to approve the 2009

financial statements

* * § 4.6.4. § 4.6.4.

Ginette Dalloz

Co-Executive Officer

Elected: April 13, 1983

Term ended: April 14, 2009

* * * *

Philippe Bacou

Co-Executive Officer

Elected: September 6, 2001

Term expires: at the same time as the new

CEO's mandate as decided by the Board on

March 3, 2009

* * * *

4.4.3. agreements with directors

In line with new legislation on commitments to executive officers with respect to compensation, indemnities or benefits payable on loss or change of office, the Board of Directors renewed for 2008 the agreements described in section 4.6.4. of this report in respect of the non-competition clause and loss of office compensation.

No other agreements have been entered into directly with the directors other than ordinary business agreements on competitive terms, and more particularly no service contract has been entered into with the executive officers.

4 -

Corp

orat

e go

vern

anCe


4.4.4. Statutory auditors’ report on related-party agreements

This is a free translation into English of a report issued in French language and is provided solely for the convenience of English-speaking readers. This report

should be read in conjunction with, and construed in accordance with French law and professional standards applicable in France.

To the Shareholders,

In our capacity as statutory auditors of your company, we hereby report on certain related party agreements and commitments.

We are not required to ascertain the existence of any other agreements and commitments but to inform you, on the basis of the informa-tion provided to us, of the terms and conditions of those agreements and commitments indicated to us. We are not required to comment as to whether they are beneficial or appropriate. It is your responsibility, in accordance with article R. 225-31 of the French commercial code (Code de Commerce), to evaluate the benefits resulting from these agreements and commitments prior to their approval.

We performed those procedures which we considered necessary to comply with professional guidance issued by the national auditing body (Compagnie Nationale des Commissaires aux Comptes) relating to this type of engagement. These procedures consisted in verifying that the information provided to us is consistent with the documentation from which it has been extracted.

• Authorized agreements and commitments concluded during 2008 financial yearIn accordance with article L. 225-38 of the French commercial code (Code de Commerce), we have been advised of certain related party agreements and commitments which were authorized by your board of directors.

With Mr. Henri-Dominique petit

In its meeting on March 4, 2008, your board of directors modified the items of Mr. Henri-Dominique Petit’s remuneration. In accordance with the provisions of law 2007-1223 of August 21, 2007, also known as the TEPA Act (French law for work, employment and purchasing power), these modifications consisted in making the payment of the termination indemnity subject to performance conditions, such that the undertakings made by your company with respect to Mr. Henri-Dominique Petit concerning the items of remuneration, indemnities or benefits due or that could become due firstly by reason of the termination or change of his functions and secondly in respect of the non-competition clause and the termination indemnity are as follows:

a) Non-competition clause

In the event of the termination of his term of office as CEO, and in consideration of the non-competition commitment undertaken by Mr. Henri-Dominique Petit, the latter shall, for a period of one year, receive a monthly indemnity equal to 50% of the fixed monthly remu-neration that he has received immediately before the termination of his corporate office. The company may waive this non-competition clause and release itself from its obligation to pay the monthly indemnity by informing Mr. Henri-Dominique Petit of its decision within two months as from the termination of the corporate office.

b) Termination indemnity

In the event that your company was to terminate, in any manner and for any reason whatsoever (except gross or willful misconduct, voluntary or involuntary retirement), Mr. Henri-Dominique Petit’s term as chairman and CEO (notably by means of removal from office, non-renewal of the term of office for any cause whatsoever or elimination of the job functions following a transformation or merger), a fixed indemnity shall be paid to Mr. Henri-Dominique Petit, corresponding to one and a half times the total remuneration that he has been paid in respect of the twelve months preceding the termination.

4 -

Corp

orat

e go

vern

anCe

109


Moreover, a voluntary departure indemnity, corresponding to one and a half times the amount of the fixed annual remuneration and the bonus for objectives achieved (60% of the fixed gross annual remuneration) shall be paid to Mr. Henri-Dominique Petit in the event that he resigns within six months as from:

• a takeover, in the next three financial years, giving a group of shareholders, other than those that comprise the current shareholder structure, over one-third of the company’s capital or voting rights by means of purchase or merger, or

• the placing of the company in liquidation.In its meeting on March 4, 2008, in accordance with the TEPA Act (law of August 21, 2007), your board of directors decided to make Mr. Henri-Dominique Petit’s termination indemnity subject to the following performance conditions:

• Performance measurement: corresponds to the average performance of Mr. Henri-Dominique Petit during the three calendar years prior to his departure. Performance shall be measured by the rate of achievement of the annual objectives fixed by your board of directors, which serve as the basis for calculation of the variable annual remuneration.

• Performance conditions:

- For an average performance rate confirmed by your board of directors that is equal to or greater than 100%, 100% of the amount of the indemnity shall be paid.

- For an average performance rate confirmed by your board of directors that is equal to or greater than 90% and lower than 100%, 80% of the amount of the indemnity shall be paid.



- For an average performance rate confirmed by your board of directors that is lower than 50%, no indemnity shall be paid.

• Agreements and commitments authorized and concluded after the end of the financial yearIn accordance with article L. 225-38 of the French commercial code (Code de Commerce), we have been advised of certain related party agreements and commitments which were authorized by your board of directors.

Provisions defining the new status of Mr. Henri-Dominique Petit and Mr. Brice de La Morandière, following the restructuring of the executive management of your company, authorized by your board of directors in its meeting on March 3, 2009 (separation of the func-tions of chairman of the board of directors and of chief executive officer, retention of Mr. Henri-Dominique Petit in his role as chairman of the board of directors, nomination of Mr. Brice de La Morandière as chief executive officer as from April 14, 2009).In accordance with article L. 225-42 of the French commercial code (Code de Commerce), the board of directors has authorized the provi-sions defining the new status of Mr. Henri-Dominique Petit and Mr. Brice de La Morandière, which provide for the following:

4 -

Corp

orat

e go

vern

anCe


With Mr. Henri-Dominique petit

In its meeting of March 3, 2009, your board of directors authorized the items of remuneration for Mr. Henri-Dominique Petit. Thus, the undertakings made with the chairman of the board of directors concerning the items of remuneration, indemnities or benefits due or that could become due firstly by reason of the termination of his functions, or secondly in respect of the termination indemnity, are as follows:

• The company may terminate this term of office, under the conditions stipulated by law. Mr. Henri-Dominique Petit shall have the right to a contractual termination indemnity, if the company terminates his term of office due to a change of control or strategy within twelve months after the occurrence of the event. In this event, Mr. Henri-Dominique Petit shall receive, by way of indemnity, a fixed amount equal to twelve months of the remuneration he is paid in respect of his functions as chairman of the board of directors.

• No indemnity shall be due to Mr. Henri-Dominique Petit from Sperian Protection in the event of serious or willful misconduct, resigna-tion, or departure to claim a pension.

• In all events, the contractual indemnity shall be subject to the following performance conditions:

- Performance measurement: corresponds to the average performance of Mr. Henri-Dominique Petit during the three calendar years preceding his departure. Performance shall be measured by the rate of achievement of the annual objectives fixed by your board of directors which have been used for the calculation of the variable annual remuneration of Mr. Henri-Dominique Petit during the performance of his term as chairman and chief executive officer, and for the subsequent years performance shall be measured by the rate of achievement of the annual objectives fixed by your board of directors which shall be used for the calculation of the annual vari-able remuneration of the chief executive officer. Your board of directors shall decide, by explicit decision, on whether or not these performance objectives have been achieved, within two months of the date of the termination of Mr. Henri-Dominique Petit’s functions as chairman of the board of directors.

- The performance conditions are as follows: for an average performance rate that ranges from 50% to 100% and over, the indemnity shall be paid strictly proportionally to its amount. For a performance rate below 50%, no indemnity shall be paid.

This agreement, applicable as from March 3, 2009, replaces the agreement in force until this date and detailed hereabove.

With Mr. Brice de La Morandière

In its meeting of March 3, 2009, your board of directors authorized the items of remuneration of Mr. Brice de La Morandière. Thus, the undertakings made with the chief executive officer concerning the items of remuneration, indemnities or benefits due or that could become due firstly by reason of the termination or change of his functions and secondly in respect of the non-competition clause and the termination indemnity are as follows:

a) Performance-based termination indemnities or severance payments

• Mr. Brice de La Morandière shall have the right to a contractual termination indemnity or severance payment, if the company termi-nates his term of office due to a change of control or strategy within twelve months after the occurrence of the event. In this case, Mr. Brice de La Morandière shall receive, by way of indemnity, a fixed amount equal to fifteen months of his total remuneration (fixed and variable based on objectives achieved).

• No indemnity shall be due to Mr. Brice de La Morandière from Sperian Protection in the event of serious or willful misconduct, resignation, or departure to claim a pension.

4 -

Corp

orat

e go

vern

anCe

111


• In all events, the contractual indemnity shall be subject to the following performance conditions:

- Performance measurement: corresponds to the average performance of Mr. Brice de La Morandière in the three calendar years for which the results have been published preceding his departure. If this clause should be applied in the three years following the appointment of Mr. Brice de La Morandière to the position of chief executive officer, the three years for which the results have been published preceding his appointment shall serve as reference years for the calculation of this average. Performance shall be measured by the rate of achievement of the annual objectives fixed by your board of directors, which have been used to calculate the variable annual remuneration. Your board of directors shall rule, by explicit decision, on whether or not these performance objectives have been achieved, within two months of the date of the termination of Mr. Brice de La Morandière’s functions.

- The performance objectives are as follows: for an average performance rate ranging from 50% to 100% and over, the indemnity shall be paid strictly proportionally to its amount. For a performance rate below 50%, no indemnity shall be paid.

b) Non-competition clause

In the event of the termination of his term as chief executive officer, and in consideration of the non-competition commitment undertaken by Mr. Brice de La Morandière (undertaking made for a period of eighteen months), the latter shall receive an indemnity (paid monthly) equal to nine months of his total annual remuneration (fixed and variable based on the objectives achieved). In the event of the termina-tion of this term of office upon the initiative of Mr. Brice de La Morandière or in the event of Mr. Brice de La Morandière’s departure for retirement, the company may waive this non-competition clause and release itself from its obligation to pay the monthly indemnity by informing Mr. Brice de La Morandière of its decision within two months as from the termination of the corporate office.

Dijon and Paris-La Défense, April 14, 2009


EXPERTISE COMPTABLE ET AUDIT ERNST & YOUNG AuditClaude Cornuot Jean-François ginies

4 -

Corp

orat

e go

vern

anCe


4.5. Organization structure

4.5.1. a global organization structure

The Group's world operations are organized into Strategic Business Units (SBUs), which correspond to its key product groups and respond directly to the requirements of globalization, together with Market Business Units (MBUs), which are organized on a geograph-ical basis to provide a local response to customer needs. The SBUs are Head Protection (eye, respiratory and hearing) and Body Protec-tion (gloves, clothing, footwear and fall protection). They are responsible for strategic marketing, product range management, research & development and manufacturing. There are three MBUs based in the main host regions: Americas (North and South), EMEA (Europe, Middle East and Africa) and Asia-Pacific. Their responsibilities include operational marketing, sales, and logistics. These units book most of the revenue for the various product lines.

4.5.2. Senior management

The senior managers other than Brice de La Morandière, Chief Executive Officer, are:

Francis allirot, a French national, joined the Group in 2003 as Senior Vice President, Asia-Pacific, based in Shanghai (China). He began his career with Hewlett-Packard before joining Schneider Electric where he held various management positions, including chief executive officer of a joint venture between Schneider Electric and Chinese partners. He is a graduate of the Ecole Nationale Supérieure des Arts and Métiers in Paris, holds a Master of Science degree from the Institut National Polytechnique in Grenoble and an MBA from the Institut Supérieur de Gestion in Paris.

Marc Beaufils, a French national, joined Sperian Protection in March 2007 as Senior Vice-President, Europe, Middle East and Africa (sales, logistics and marketing). He was previously based in Switzerland as Vice-President Europe for the Savory Food Flavor division of Firmenich S.A. He formerly held global operational management positions with SICPA, and marketing and sales positions for International Paper. Marc Beaufils is a graduate of the Ecole des Hautes Etudes Commerciales and the Institut d'Etudes Politiques, Paris.

Janet Dekker, a Dutch national, joined Sperian Protection in May 2004 as Senior Vice-President, Human Resources. She previously worked in human resources for Honeywell and Sodexho Alliance in both Europe and the United States. She has a degree in psychology from the University of Amsterdam.

Mark Hampton, an American national, joined Sperian Protection in July 2002 as Senior Vice-President, Hearing Protection, following an international career with the Nike group where he was Chairman of Nike Team Sports, Inc. In November 2004, he assumed responsibility for all Head Protection businesses. In early 2008, he also assumed responsibility for the teams dedicated to the public safety market. Mark Hampton has a degree in mathematics and economics from the University of Wisconsin – Oshkosh, USA.

Christophe Lamoine, a French national, joined the Group in February 2007 as Senior Vice-President in charge of the Gloves business for Europe, the Middle-East, Africa and Asia. In September 2008, his responsibilities were extended to the Gloves and Footwear businesses worldwide. He previously held positions in Sales and Marketing and then General Management with the Xerox and Bolloré Groups. He is a graduate of the École des Mines d'Alès and has completed management programs at INSEAD and Cranfield.

Mike Moorefield, an American national, joined Sperian Protection in June 2002 as Senior Vice-President Americas (sales, logistics and marketing). He was previously Chairman of the Commercial Products Division with Rubbermaid, after a career in sales. He has a degree from Virginia Tech and an MBA from Nova-Southeastern University, Florida.

Joe reimer, an American national, joined the Christian Dalloz group in January 1981. In the past twenty six years, he has notably been in charge of sales and marketing for the US head protection business, and is currently Senior Vice- President, Fall Protection, the same position he held for five years within the Christian Dalloz group. Joe Reimer has a Bachelor of Science in Marketing from State University of New York at Oswego.

4 -

Corp

orat

e go

vern

anCe

113


Jérôme ronze, a French national, joined Sperian Protection in May 2007 as Chief Financial Officer. He is now Chief Administrative and Financial Officer. He was previously financial controller for Gemalto, the world leader in smart cards. Before that, he had an international career with the Schlumberger group, where he held various finance positions in South America, the United States and China. Jérôme Roze is a graduate of the Ecole Supérieure de Commerce in Paris.

philippe Suhas, a French national, joined Sperian Protection in March 2002 as Senior Vice-President for Europe, Middle-East and Africa (sales, logistics, marketing). In the first half of 2007, he took over responsibility for the Eye Protection business. Philippe Suhas earlier held various management positions with Valeo. He is a graduate of the Institut National Polytechnique, Grenoble, and the École des Hautes Études Commerciales.

4.5.3. Services provided by Sperian protection S.a. to its subsidiaries

Sperian Protection S.A. provides various services to other group companies. They are billed on the basis of cost plus 6% on an arm's length principle basis. The total amount of intragroup billings amounted to €30.5 million in 2008. These services mainly cover the following areas:• Management: general strategy in terms of products, business and geographical expansion. • Administration and finance: finance and cash management, shared service centers.• Legal affairs.• Business development: analyzing and setting up operations in new countries or expansion in existing countries, negotiating and

closing acquisition and partnership deals, and technical, commercial and financial feasibility studies prior to the deals. • Information systems: cost of data centers and general information systems services, cost of implementing ERP.

4 -

Corp

orat

e go

vern

anCe


4.5.4. Simplified group legal structure as of December 2008

4 -

Corp

orat

e go

vern

anCe

115


4.6. Chairman's Report

4.6.1. Corporate governance code

On December 12, 2008, the Board of Directors adopted the Corpo-rate Governance Code published by the AFEP-MEDEF in December 2008 as its reference code, in accordance with law no. 2008-649 of July 3, 2008 amending article L.225-37 of the French Commercial Code (Code de Commerce) to bring it into line with new European legislation. The code is available at www.medef.fr.

The information contained in this report was approved by the Board of Directors on March 3, 2009. The Board concluded that it was in line with current practices and arrangements.

4.6.2. Management of the Company

On May 18, 2004, the Board elected to combine the offices of Chairman of the Board and Chief Executive Officer upon the appointment of Henri-Dominique Petit. This decision was renewed on May 10, 2007. Henri-Dominique Petit was Chairman and Chief Executive Officer throughout 2008. On March 3, 2009, the Board of Directors elected to separate the offices of Chairman of the Board of Directors and Chief Executive Officer and appointed Brice de La Morandière as Chief Executive Officer effective April 14, 2009. This appointment concluded the transition phase announced in August 2008 to prepare for Henri-Dominique Petit's succession as Chief Executive Officer. Henri-Do-minique Petit remains Chairman of the Board of Directors.

4.6.3. principles and rules for executive officers' compen-sation

First recommendation: termination of employment contract on appointment to executive office.

The Company has applied this principle since May 18, 2004, when Henri-Dominique Petit was appointed Chairman and Chief Execu-tive Officer. He does not have an employment contract with the company. The same principle was applied when Brice de La Morandière was appointed Chief Executive Officer on March 3, 2009.

Second recommendation: compensation policy

The Board applies the principle of granting measured, balanced, fair compensation for the level of responsibility attached to the executive office. The Nominations and Remuneration Committee is responsible for carrying out a clear, comprehensive analysis of all components of compensation and for recommending to the Board a level of compensation consistent with the executive officers' annual performance appraisal and with the company's medium-term strategy.

This policy is defined as follows:

- The variable component is related to the company's performance and represents a maximum percentage of the fixed component.

- Stock options and performance shares granted to executive officers are subject to performance conditions. No stock options or performance shares are granted to executive officers upon departure. Stock options and performance share plans are not open to all employees but employees are involved in the compa-ny's performance through the Group corporate savings plan. On March 3, 2009 the Board set the maximum amount of compensa-tion payable in stock options and performance shares at 60% of the total. It also decided that the executive officers may not receive more than 20% of the aggregate amount of stock options and performance shares approved by the shareholders.

- The Board has not yet taken a position on the AFEP-MEDEF corporate governance code recommendation that the award of “performance shares to executive officers should be conditional on the acquisition of a defined quantity of shares when the perform-ance shares vest”. The Board will review its application of this recommendation on each award of performance shares in light of market conditions and the requirement for executive officers to hold registered shares.

- There are no discounts or option hedging instruments on stock option awards. Their exercise is contingent on performance conditions.

The company has implemented a procedure to prevent the risk of insider trading (see section 4.1.4. of this report), which includes the definition of blackout periods. It also intends to implement a specific procedure for executive officers.

- The company has adopted the recommendation that termination benefits should be contingent on performance conditions and paid only in the event of a forced departure caused by a change of control or strategy. All termination benefits are capped at two years' fixed and variable compensation, including any benefits payable under a non-competition agreement.

- Executive officers do not benefit from any supplementary pension arrangements. The Board may permit executive officers to join the pension savings plan open to all managers of the company.

4.6.4. Compensation and agreements between the com-pany and the executive officers

For reasons of good governance, the Board of Directors has decided to submit the agreements authorized by the Board on March 3, 2009 relating to compensation and termination benefits payable to the Chairman and the Chief Executive Officer for share-holder approval at the annual meeting scheduled for May 6, 2009.

4 -

Corp

orat

e go

vern

anCe


agreement with Henri-Dominique petit

a - In respect of 2008

As Chairman and Chief Executive Officer, Henri-Dominique Petit received the following compensation and benefits in 2008: • Gross annual salary of €570,000, payable in twelve monthly installments.• Performance-related compensation due in respect of a given year, paid in one installment in the first quarter of the following year. The minimum entitlement if targets are met is 60% of gross annual salary and the maximum is 120% if targets are exceeded. The practical terms and conditions (particularly the targets) are determined annually by the Nominations and Remuneration Committee. As in the previous year, the two performance criteria underlying the 2007 entitlement payable in 2008 were organic growth and free cash flow. Actual performance was 132% of the target and the entitlement therefore amounted to €439,560. The same performance criteria were adopted for the 2008 entitlement payable in 2009. However, Henri-Dominique Petit offered to waive his performance-related compensation for 2008 given the compa-ny's exceptional situation. The Board of Directors accepted his offer on March 3, 2009. • Unemployment insurance paid for by the company, providing benefits for up to twenty-four months. • Reimbursement of business expenses incurred according to company rules.• Company car with driver for business travel. • Henri-Dominique Petit was granted a maximum of 7,452 perform-ance shares (see note 4.20. of the notes to the financial statements in section 1 of this reference document for the relevant perform-ance conditions).Under new regulations introduced on December 31, 2006, the Board of Directors is required to set the number of shares arising from performance share awards or exercise of stock options that must be held by the executive officers in registered form until the end of their term of office. Accordingly, on December 12, 2008, the Board of Directors agreed that, after expiration of the lock-up period provided for by law, Henri-Dominique Petit would be required to hold 50% of any vested performance share grants in registered form, until the aggregate sum from all plans reaches an amount equal to two years' gross fixed salary.

B- In respect of 2009

On January 21, 2009 and March 3, 2009, the Board took the following decisions for 2009 as a result of the major changes in the company's management structure as described above:

a) Direct and indirect compensation- For the first four months of 2009, Henri-Dominique Petit will

receive the same gross monthly salary as in 2008, plus perform-ance-related compensation on a pro rata basis, making a total compensation of €304,000 for the first four months.

- As of May 1, 2009, as Chairman of the Board of Directors, Henri-Dominique Petit will receive an annual fixed salary of €228,000, payable in twelve monthly installments, making a total of €152,000 for 2009. He will no longer receive any performance-related compensation.

- Company car with driver, for business travel only. This consti-tutes a benefit in kind liable to tax and social security contributions.

- Reimbursement of justifiable business expenses incurred upon presentation of invoices or other supporting documents according to company rules.

- No further stock options or performance shares will be award to Henri-Dominique Petit in his capacity as Chairman of the Board of Directors.

b) termination benefits:- Henri-Dominique Petit will be entitled to severance benefits if he

is removed from office due to a change of control or strategy, payable within twelve months of the triggering event. In this case he will receive a fixed sum equal to twelve months of his compensation as Chairman of the Board of Directors, subject to the following performance conditions:

- Performance measurement: average performance over the three calendar years preceding departure. Performance will be meas-ured by reference to the percentage achievement of the annual targets set by the Board of Directors for the purpose of calcu-lating annual performance-related compensation payable during his term as Chairman and Chief Executive Officer. Thereafter, performance will be measured by reference to the percentage achievement of the annual targets set by the Board of Directors for the purpose of calculating the Chief Executive Officer's annual performance-related compensation. The Board of Directors will be required to announce expressly whether or not these perform-ance conditions have been met no later than two months after Henri-Dominique Petit is removed from office as Chairman of the Board of Directors.

- Performance conditions The performance conditions are as follows: if performance is between 50% and 100% or more of target, the benefits payable are strictly proportional (e.g. for a 90% performance, the benefit will be 90% of the total). No benefits will be paid if performance is less than 50% of target. The benefits will be paid no later than sixty (60) days after the date of the Board meeting that duly noted achievement of the underlying performance conditions.

4 -

Corp

orat

e go

vern

anCe

117


agreement with Brice de La Morandière

Brice de La Morandière joined the Group in December 1997 as financial controller of the Christian Dalloz group. He played a major role in the merger with Bacou and was subsequently appointed Chief Financial Officer of the new group and then Senior Vice President in charge of the Body Protection SBUs. At the end of August 2008, he was appointed Chief Operating Officer. On March 3, 2009, the Board of Directors appointed him Chief Execu-tive Officer effective April 14, 2009 for a term ending at the annual meeting held to approve the 2011 financial statements. In accord-ance with the recommendations of the AFEP-MEDEF corporate governance code, Brice de La Morandière agreed to terminate his employment contract of more than 11 years when he accepted his appointment as Chief Executive Officer. At the proposal of the Nominations and Remuneration Committee, the Board of Directors approved the following compensation and benefits for Brice de La Morandière:

a) Direct and indirect compensation- Gross annual salary of €460,000 payable in twelve monthly

installments.- Performance-related compensation under the executive incen-

tive policy, paid in one installment in the first quarter of the following year. The minimum entitlement if targets are met is 60% of gross annual salary and the maximum is 120% if targets are exceeded. The practical terms and conditions (particularly the targets) are proposed annually by the Nominations and Remuneration Committee. For 2009 payable in 2010, the criteria are organic growth and free cash flow (75% of performance- related compensation for achievement of targets set for the entire Executive Committee), and service rate and innovation (25%).

- A company car in accordance with the company's rules. This constitutes a benefit in kind and is liable to tax and social secu-rity contributions.

- Unemployment insurance paid for by the company, providing benefits for up to twenty-four months. This constitutes a benefit in kind and is liable to tax and social security contributions.

- Membership of the so-called "article 83" Group pension savings plan open to all managers of the Company who are resident in France. Brice de La Morandière will continue to benefit from this plan in exactly the same way as before.

- Reimbursement of justifiable business expenses incurred upon presentation of invoices or other supporting documents according to company rules.

- Stock options and performance shares subject to performance conditions may be awarded in light of an analysis of all compo-nents of Brice de La Morandière's compensation. For plans set up after his appointment, the Board of Directors will determine the number of shares that Brice de La Morandière will be required to hold in registered form. The current principle, which may be revised according to circumstance, is (i) 50% of the balance of

shares arising on the exercise of stock options after the imme-diate sale of sufficient shares to cover the exercise price and pay the capital gains tax on the sale proceeds and (ii) 50% of any vested performance share grants, until such time as the aggre-gate sum of (i) and (ii) above reaches the equivalent of two years’ compensation (gross fixed salary only). Thereafter, the require-ment is reduced to 20%.

b) other benefits:- Termination benefits. Brice de La Morandière will be entitled to

severance benefits if he is removed from office due to a change of control or strategy, payable within twelve months of the trig-gering event. In this case, he will receive a fixed sum equal to fifteen months of his total compensation (annual salary and minimum performance-related compensation). No benefits will be due if he is dismissed for gross professional misconduct, resigns or retires. In any event, payment will be subject to the following performance conditions:

- Performance measurement: average performance over the three calendar years for which results have been published preceding his departure. Should the benefit become payable in the three years after Brice de La Morandière's appointment as Chief Execu-tive Officer, the three years for which results have been published prior to his appointment shall be used as the base for calcula-tion. Performance will be measured by reference to the percentage achievement of the annual targets set by the Board of Directors for the purpose of calculating annual performance-related compensation. The Board of Directors will be required to announce expressly whether or not these performance condi-tions have been met no later than two months after Brice de La Morandière is removed from office.

- Performance conditions The performance conditions are as follows: if performance is between 50% and 100% or more of target, the benefits payable are strictly proportional (e.g. for a 90% performance, the benefit will be 90% of the total). No benefits will be paid if performance is less than 50% of target. The benefits will be paid no later than sixty days after the date of the Board meeting that duly noted achievement of the underlying performance conditions.

- Non-competition agreement Brice de La Morandière has given the company an eighteen-month non competition undertaking in view of the importance of his position, the confidential information to which he has access and his long experience in the industry. He has agreed not to take part in or acquire or hold an interest in directly or directly, regardless of capacity or position (executive officer, director, shareholder, partner, investor, employee, consultant or other) any company that may compete with the Company or any of its related companies anywhere in the world, even if solicited to do so. In exchange, Brice de La Morandière will be entitled to a payment on termination of his office for whatever reason equal to nine

4 -

Corp

orat

e go

vern

anCe


months total compensation (fixed salary and minimum perform-ance-related compensation), payable monthly. Should Brice de La Morandière leave voluntarily or retire, the company can waive this non-competition commitment and release itself from its obligation to pay the monthly allowance by informing Brice de La Morandière of its decision within two months from the end of his corporate appointment.

agreement with the Co-executive officers.

Ginette Dalloz and Philippe Bacou received compensation of €20,004 and €30,000 respectively in 2008 as Co-Executive Officers. They are also reimbursed for all travel, entertainment and other business expenses incurred while working for the company.

On March 3, 2009, the Board reappointed Philippe Bacou as Co-Ex-ecutive Officer. He will receive annual compensation of €30,000 in 2009. He will also be reimbursed for all travel, entertainment and other business expenses incurred while working for the company.

4.6.5. preparation and organization of the Board of Directors' work

On March 4, 2008, the Board had ten directors, six of whom are classified as independent (Patrick Boissier, Patrice Hoppenot, François de Lisle, Gunther Mauerhofer, Philippe Rollier and André Talmon).

Definition of independent directors

Independent directors are defined as those directors who meet the following conditions:• They are not and have not in the last five financial years been an

employee of the Group or a director, executive officer or legal representative of a company related to the Group.

• They are not and have not in the last five financial years been a legal representative of a company in which the Group or a legal representative or employee of the Group is a director or execu-tive officer.

• They do not have a material business relationship with the company (e.g. supplier, customer or banker).

• They are not closely related to a director or executive officer. • They are not former auditors to, or partners or employees of a

firm that was auditor to the company in the last five financial years.

• They have not been a director of the company for more than twelve years.

• In the case of directors who own more than 10% of the capital, the Board of Directors determines whether their interest prevents them from being classified as an independent director.

Internal rules of procedure and Board Charter

As required by the Financial Security Act of August 1, 2003, the Board of Directors is formalizing rules of procedure for the Board and its special committees. The Audit Committee adopted its rules of procedure on March 11, 2004. They are currently being revised to take account of the Audit Committee's new responsibilities following the recent legislation transposing the 8th European Directive. The internal procedures of the Board were formalized on May 11, 2005. At its meeting of December 7, 2006, these proce-dures were revised following the Board's decision to devote certain of its meetings entirely to strategic issues in order to involve all directors.

The key provisions are:• The Directors represent the interests of all shareholders. They

undertake to respect the rights and obligations defined in the Board Charter and rules of procedure and to act at all times in the Company's interests.

• Directors must own at least 200 shares. • The function of the Board shall be to review, guide and oversee

the management of the company, which is assured by the Chief Executive Officer and his team.

• The Board meets regularly and at least four times a year. Direc-tors attending Board meetings and voting on resolutions by videoconferencing or electronic communications are deemed to be present for calculating the quorum and majority, except for resolutions concerning the appointment, dismissal and compen-sation of the Chairman, Chief Executive Officer and Co-Executive Officers, approval of the consolidated and separate financial statements and management report, and approval of the budget.

• Three special committees - Audit, Nominations and Remunera-tion, and Governance - have been created to deal with and report to the Board on specific issues. Other ad hoc committees may be created as needed.

• The Chief Executive Officer reports to the Board on the company's management.

• The Chief Executive Officer is a member of the Board.

4 -

Corp

orat

e go

vern

anCe

119


Board duties

The Board's key duties are:• Defining the company's medium and long-term strategy based

on recommendations made by the Chief Executive Officer, calling on internal or external resources where necessary.

• Approving the short-term and medium-term quantitative and qualitative targets presented by the Chief Executive Officer and ensuring their consistency with the Group's strategy as approved by the Board.

• Approving the annual budget resulting from those targets.• Approving decisions to acquire or divest companies or

businesses.• Approving all investments that exceed the amount delegated to

the Chief Executive Officer.• Assessing the performance of the Chief Executive Officer and his

direct team. The Nominations and Remuneration Committee, which is an integral part of the Board, sets the compensation paid to executive officers and senior management (Chief Execu-tive Officer, Chief Financial Officer, Senior Vice-Presidents, etc.)

• The Chief Executive and his team are responsible for day-to-day management of the Group in accordance with the Group's strategy as approved by the Board of Directors, its internal management procedures, code of business conduct and sustain-able development charter.

Directors' fees

At their annual meeting on May 19, 2008, the shareholders fixed the total amount of directors' fees for the year at €240,000. The sum of €202,276 was actually allocated. The rules governing the allocation of directors' fees are as follows:

1. Directors attending a meeting in person or by videoconferencing or conference call will receive a fee of €1,120 per meeting.

2. Independent directors and directors who are not major share-holders of the company receive an additional fee of €16,000. In 2008, this sum was paid to Patrick Boissier, Patrice Hoppenot, François de Lisle, Gunther Mauerhofer, Philippe Rollier and André Talmon.

3. Members of the Nominations and Remuneration and the Govern-ance committees receive a fee of €1,600 a year. The Chairman of the Audit Committee receives a fee of €3,600 a year and the other members of the Audit Committee receive a fee of €1,800 a year.

At the annual shareholders' meeting scheduled for May 6, 2009, the Board will recommend total Directors' fees of €240,000 for 2009, unchanged from 2008.

4.6.6. report on the Board's work in 2008

number of meetings and attendance rate

The Board met eight times in 2008. The attendance rate was 100% for one meeting, 90% for three meetings, 80% for three meetings and 70% for one meeting.

Issues addressed

The following issues were addressed at all meetings held in 2008:• Review and approval of the minutes of previous Board

Meetings.• Financial review (budget and results).• Business review (past and outlook).• Review and approval of recommendations made by Committees

that met between two Board Meetings.• Review of strategy.Following the assessment of the Board and its committees, the Strategy Committee was replaced by Board meetings devoted to strategic issues in order to involve all Directors. The Board meet-ings of July, October and November were therefore entirely or largely devoted to reviewing and approving strategy for the company as a whole and by business segment. Directors receive a review of the Group's progress and an update of its strategy at each Board meeting.

The following issues were addressed at one or more meetings: • Approval of annual financial statements.• Recording the capital increase arising from the exercise of stock

options.• Dividend payment.• Share buyback program.• Group refinancing.• Creation of new Group subsidiaries.• Acquisitions or disposals of assets.• Material capital expenditure.• Material commercial contracts.• Litigation.• Grant of guarantees and surety bonds.• Group human resources policy.• Corporate governance – adoption of the AFEP-MEDEF corporate

governance code, assessment of the Board and its committees.• Directors' and Chairman and Chief Executive Officer’s compensa-

tion and approval of related-party agreements.• General organization of the Group, Executive Committee compen-

sation policy.• Grant of stock options and performance shares.• Reorganization of the Company's management.• Preparation and calling of annual shareholders meeting in May

2008.

4 -

Corp

orat

e go

vern

anCe


preparatory work

Prior to Board meetings, directors receive a notice of meeting, the agenda, background documents on the issues to be addressed, and the minutes of the previous Board meeting. Other documents presented at Board meetings are distributed during the meeting. A compilation of press articles and financial analysts' reports is either made available at Board meetings or distributed afterwards.

No specific external training was offered to the directors (or arranged by them) on how to perform their duties, or on the specific nature of the company, its operations or industry. However, directors were provided with internal information about the Group's business activities during site visits (Lozanne in the Rhône valley in January 2008), trade shows and meetings with senior management personnel.

Board committees

audit CommitteeAs of March 3, 2009, members were François de Lisle (Committee Chairman), Patrice Hoppenot and Gunther Mauerhofer. The Committee's role is to give an opinion on the accounting policies used to prepare the financial statements and the organization of the internal audit function. In accordance with recent legislation transposing the provisions of the 8th European Directive of July 3, 2008 into French law, the Audit Committee will revise its rules of procedures to take account of its new responsibilities, which include monitoring the financial reporting process. It also reviews risks, commitments and contingent liabilities, as well as external audit fees. It determines and reviews the procedures for appointing and reappointing the Statutory Auditors. The Committee consults the Chief Financial Officer, the managers of internal audit, finan-cial control and treasury, and the Statutory Auditors.

In particular, it received the Statutory Auditors' reports on the annual and consolidated financial statements and ensured that the Statutory Auditors were provided with the information and resources required to fulfill their commitments. The committee met four times in 2008 to review the financial statements for 2007 (preliminary and final), the 2008 interim financial statements and the 2008 preliminary financial statements. The attendance rate was 100% for two meetings and 66% for two meetings. Other key issues addressed were the internal audit and control program, the Group’s financial policy and more specifically debt structure and improvements to the treasury department's procedures, policy as regards Statutory Auditors, the impact of major projects on the financial statements, litigation, recent acquisitions, a review of acquisition and disposal projects, information systems security and implementation of a system of delegated limits and authori-ties within the Group.

nominations and remuneration CommitteeAs of March 3, 2009, members were Philippe Alfroid (Committee Chairman), Philippe Rollier and Gunther Mauerhofer. The Commit-tee's main role is to nominate candidates for election as inde-pendent directors, to review and provide an opinion on the proposed executive compensation, the performance-related compensation policy for other employees, terms and conditions of stock option and share performance plans, long-term incentive plans for employees, senior management succession planning and, generally, to give an opinion on proposed significant organi-zational changes within the Group. The Committee met four times in 2008. The attendance rate was 100% for two meetings and 66% for two meetings.

The main issues addressed were the directors' and executive committee members' compensation, the Group's performance-related compensation policy and, especially, setting performance targets and conditions, senior management succession planning, terms and conditions of the new stock option and performance share plans, grant of stock options and performance shares in 2008, compensation policy for current and future executive officers, analysis of the AFEP-MEDEF's recommendations, election of new Directors and Directors' compensation.

governance CommitteeAs of March 3, 2009, members are André Talmon (Committee Chairman), Ginette Dalloz, Philippe Alfroid, Philippe Bacou, Philippe Rollier and, since his appointment as Chairman of the Board of Directors, Henri-Dominique Petit. The Committee’s role is to oversee the Group’s business operations in accordance with the Corporate Governance Charter in total transparency and coopera-tion with the Company’s senior management team. It assesses the performance of the Board and the Board Committees and recom-mends amendments or changes to existing rules. The Committee met three times in 2008. The attendance rate was 100% for two meetings and 66% for one meeting.

The main issues addressed were a review of corporate governance and the Group's sustainable development and corporate social responsibility policy, particularly with regard to safety issues (workplace accidents) and specific actions taken at certain Group facilities. The committee also did the background work to prepare for a full assessment of the Board and its committees scheduled for 2009.

assessment of Board performanceThe Committees systematically report to the Board on their work and resulting proposals. The performance of the Board and its committees was assessed in 2006. At its meeting on July 2, 2008, the Governance Committee reviewed the progress in the imple-mentation of recommendations made in 2006 and found it satis-factory. The Audit Committee carried out a self-assessment in 2007 and the Governance Committee prepared for a new full assess-ment of the Board and its committees scheduled for 2009.

4 -

Corp

orat

e go

vern

anCe

121


4.6.7. restrictions on the Chief executive officer's powersAt its meeting on January 11, 2005, the Board revised the restric-tions adopted on January 23, 2003 and amended on May 22, 2003. These restrictions concern the Chief Executive Officer's powers with respect to acquisitions, disposals, borrowings, loans, guar-antees, unusual spending commitments and recruitment of execu-tive personnel.

The Chief Executive Officer is required to obtain the Board's prior approval for the following:

• Strategic commitments (mergers, acquisitions or disposals) in excess of €1 million and any non-budgeted expenditure in excess of €500,000.• Borrowings in excess of €5,000,000.• Granting guarantees in excess of €4,000,000.• Entering into or terminating ordinary consultancy agreements with an annual financial commitment in excess of €500,000 per agreement.• Entering into or terminating ordinary business contracts in excess of €5,000,000 per contract.• Initiating legal proceedings committing the company to more than €1,000,000. Should an emergency arise that requires an immediate decision, these restrictions do not apply and the Chief Executive Officer is authorized to act in the Group's best interests. He is required to report any such decisions to the Chairman of the Board immedi-ately in writing.

4.6.8. attendance at shareholders' meetings

The rules are described in section 5.1.11 of the reference docu-ment, of which this report forms an integral part.

4.6.9. Internal control procedures

Since Group operations are conducted through subsidiaries, this report covers all controlled companies included in the scope of the consolidated financial statements.

Introduction

In the normal course of its business activities and strategy, the Sperian Protection Group is exposed to various risks and uncer-tainties from both internal and external sources. To help prevent these risks, the Group has put in place an appropriate organiza-tion, as well as procedures designed to identify and measure risks and to ensure that the Group has adequate means of prevention. The organization is also designed to help the company achieve its operational and strategic targets.

Internal control objectives

Internal control is an integral part of the Group's corporate govern-ance strategy and applies to all the subsidiaries. Internal control is

defined in line with the principles set out by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). To ensure that business risks are effectively identified and managed, a Group-level internal control framework has been established, with policies and procedures designed to:

• Ensure that management, operations and personal conduct comply with applicable legislation and regulations and with the company's own values, standards and internal rules.• Safeguard the Group's assets.• Guarantee reliable financial, accounting and management reporting to the Board of Directors, the supervisory or regulatory bodies, shareholders and the general public.

Nonetheless, no control system can provide absolute assurance that all risk of error or fraud has been eliminated or controlled.

Components of the internal control system

Internal control environment

The Group's internal control environment is based on: - A clear internal organization that is appropriate to the Group's

business model. The matrix structure reflects the way in which the Group is managed, that is, by product family (strategic busi-ness units) and by geographical market (marketing business units). The SBUs are Eye Protection, Respiratory Protection, Hearing Protection, Fall Protection, Clothing, Safety Footwear and Protective Gloves. The MBUs are Europe, Middle East and Africa (EMEA), Americas and Asia-Pacific. The production managers report directly to the SBUs, since they are responsible for strategic marketing and product development and manufac-turing. The MBUs are responsible for operational sales and marketing. Support functions (human resources, financial control, consolidation, internal audit, treasury and legal affairs) have the resources required to support and control all of the Group's operations.

- Information systems adapted to the Group's business activities and organization.

- Human resources management tools and processes to ensure that the Group has the skills required to conduct its business activities and meet its objectives, and to provide all employees with personal career development plans and training.

- A corporate culture based on mutual respect, teamwork, innova-tion and a customer focus.

- A set of internal standards including the Code of Business Conduct. This code sets out responsible and civic practices appli-cable across the organization, and reflects the Group's commit-ment to international principles concerning human rights and business practices. It also helps nurture the corporate culture by encouraging ethical behavior at all times, as well as accounta-bility, transparency, exemplary leadership, and the integrity of information supplied and individual commitments. It has been distributed to every employee and provides guidance on appro-priate conduct regardless of nationality or culture.

4 -

Corp

orat

e go

vern

anCe


Communications and reporting

Communications and reporting policies are based on a clear organization and appropriate communications tools. Internal corporate communication aims to provide employees with rele-vant, reliable and timely information, through the network of local communications officers and the Group's intranet.

In addition, efficient information systems have been set up to plan and manage operations on a day-to-day basis. As in 2008, the Group will continue to roll out its strategic plan for upgrading and harmonizing ERP systems worldwide during 2009.

risk management

At the Chairman's initiative, all major risks at Group and division level were mapped during 2008. The process was carried out by the internal audit department and consisted of identifying and assessing the Group's risks through interviews with 100 executives and senior managers. A conceptual risk analysis framework was drawn up to document and summa-rize all identified risks including a classification by nature, descrip-tion of the risk, measurement of its potential impacts and its probability of occurrence. An analysis of the resulting risk matrix was presented to the Audit Committee on August 25, 2008. The Board of Directors therefore has a detailed analysis of the Group's risks as well as a prioritized overview of the main risk factors. Group senior management is tasked with defining and implementing key actions to prevent identified risks.

The key risks are described in chapter 1 of this report.

The SBU and MBU heads are also responsible for identifying key risks (market, manufacturing and environmental risk) during regular business reviews. Any change or incident that might have a significant impact on the achievement of targets is reported to the Executive Committee, which analyzes the information and decides on any action to be taken and/or change of strategy.

In addition, as part of its assignments, the Internal Audit depart-ment continuously identifies and assesses the control and risk management systems used by the audited units. The resulting audit reports are systematically sent to senior management.

Control activities

The Group's main internal control tools are:

- The internal control manual, which was completed in 2004 and presented to the Audit Committee and the Statutory Auditors. It has since been distributed to all business units by senior management and is now available through the Group's Intranet. The manual identifies the main risks inherent in the Group's key processes and describes the appropriate internal controls and

processes for managing them. It describes all the key underlying principles and internal control procedures in place to ensure the reliability of financial and accounting information and the smooth operation of the Group's business processes. The main processes covered are: • Capital expenditure.• Purchasing.• Inventory management.• Revenue.• Human resources and payroll.• Cash management.• Information systems.

- Clear, consistent rules for delegating signature authorities throughout the Group, structuring responsibility by setting out the level of authorization required for each type of transaction. Trans-actions covered include acquisitions and disposals, redevelop-ments, commercial commitments (purchasing, sales), production contracts and legal obligations.

- All the procedures and rules documented and implemented by most units as part of an ISO certification process. These conform with and complement the procedures in the internal control manual and cover operations such as production management and purchasing.

- Information systems controls developed by the IT department, concerning in particular:• The development, upgrading and maintenance of information systems, programs and applications. • The archiving and backup of programs and data.• The security of systems, databases and applications.

Internal control management

Senior management has a variety of tools available to oversee the Group's operations on an ongoing basis, including:- A monthly reporting system to track and analyze the perform-

ance of business units and make the necessary decisions. This system is described in more detail below.

- The various management indicators measuring the performance of the divisions or departments.

- Monthly reviews of business operations and financial perform-ance for each SBU and MBU involving the heads of each Business Unit, Co-Executive Officer, Chief Financial Officer and Financial Controller. These reviews are designed to analyze variances against budget and to determine short-term remedial actions.

- The Investment Committee set up in 2005, whose role is to ensure that resources are allocated in accordance with Group strategy.

Members of the committee are the Chief Executive Officer, Co-Ex-ecutive Officer, Chief Financial Officer and Financial Controller. Expenditure commitments (investments of more than €400,000, acquisitions, major disputes, purchase contracts, etc.) are reviewed in detail on the basis of profitability, risk analysis and strategic consistency.

4 -

Corp

orat

e go

vern

anCe

123


In addition, senior management periodically assesses perform-ance and the strict application of the internal control system in the operating units and support departments. Senior management and the Audit Committee have given the responsibility of carrying out these evaluations to the Internal Audit department, which plays a key role in this organization.

Internal audit organization and work in 2008

Created in 2004, the Internal Audit Department has three members. Its key roles are to:

• Ensure the organization is able to meet efficiently the objectives set by the Group.• Analyze the effectiveness of internal control procedures, ensure their strict application and define improvement plans.• More generally, identify risks inherent in the business and assess processes in place for providing solutions.

The Internal Audit Department has unlimited access to members of the Audit Committee and to all information sources within the Group. It is also responsible for training future finance and/or operating executives.

Each year, an Audit Plan is prepared and approved by senior management and the Audit Committee. The 2008 internal audit plan was approved by the Audit Committee on November 13, 2007. Seventeen internal audit assignments were carried out during the year, mainly covering operational and financial issues. The conclu-sions of these audits were presented to the Audit Committee. The Statutory Auditors are advised of the conclusions of all audits throughout the year. In general, the audit work carried out in 2008 has confirmed the effectiveness of the Group's internal control organization and the control activities of its subsidiaries.

Internal Audit also addresses certain specific issues at the request of Senior Management. In 2008, following exchange losses on the Swedish krona, a special audit assignment identified improve-ments that could be made to currency hedging procedures. Group Senior Management then initiated action plans to strengthen control procedures over these transactions.

Control of accounting and financial information

Controlling accounting and financial information is a critical aspect of the internal control system. Apart from the general tools described above, this control is based on:

- Group accounting rules

Financial Accounting Policies (FAPs) define the accounting treat-ment for each item of the income statement and balance sheet, including non-current assets, inventories, trade receivables,

trade payables, cash, taxes, provisions, equity, dividends, revenue, cost of goods sold, R&D expenses, marketing expenses, general & administrative expenses and human resources expenses. These policies are applied uniformly by the units and are in line with international financial reporting standards (IFRS).

- Organization of accounting departments

Given its international operation, the Group's accounting func-tion is organized on a combined local and regional basis. In addition to the units' own accounting departments, two shared service centers have been set up in Roissy (France) and Smith-field (USA) to process accounting data that can be handled on a centralized basis. In 2008, the Group continued to centralize the accounting function for its European and US business units within these two centers.

- Preparation of the consolidated financial statements

The consolidation manager reports to the Group Financial Controller. Consolidations take place twice a year for the half-yearly and annual financial statements.

The consolidated financial statements are prepared from consoli-dation packages completed by the Accounts department of each business unit in line with instructions issued by the Consolidation department. The packages are sent to the consolidation manager, who checks the data for consistency.

The consolidation procedure is designed to ensure:• Consistency with of financial information with legal requirements

(IFRS, Group chart of accounts and AMF instructions). • Reliability of financial information.• Data integrity.

The SBU and MBU management and their financial controllers check their unit's financial statements and sign a letter of compli-ance with the Group's accounting policies.

- Accounting and financial information management

Monthly reporting is the main tool for managing accounting and financial information. Results are compared to budget and prior year performance on a monthly basis.

The budget process begins when senior management sets budget assumptions for the year such as inflation and foreign exchange rates, sets targets and prepares sales budgets. In November, sessions are arranged to present the budgets by product family (SBU) and geographical market (MBU), as well as budgets for the support functions. Consolidation of budget information is finalized

4 -

Corp

orat

e go

vern

anCe


at the end of November for presentation to the Board in early December and revised quarterly during the year. Actual perform-ance is monitored and analyzed monthly through the reporting system.

The reporting process is based on a monthly comparison of sales and key balance sheet and income statement items against budget. Monthly reporting is based on the same accounting policies as the half-yearly and annual financial statements. The financial state-ments are produced by the financial controller of each business unit, who presents an analysis to the unit head. The Group's finan-cial results are presented monthly at the Executive Committee meeting. Every two months, senior management receives a report from each unit head and financial controller on major factors affecting business activity and on all major variances against budget.

4.6.10. Statutory auditors' report prepared in accordance with article L. 225-235 of the French commercial code (Code de Commerce) on the report prepared by the chairman of the board of directors of Sperian protection

This is a free translation into English of a report issued in French language

and is provided solely for the convenience of English-speaking readers. This

report should be read in conjunction with and construed in accordance with

French law and professional auditing standards applicable in France.

To the Shareholders,

In our capacity as statutory auditors of Sperian Protection and in accordance with article L. 225-235 of the French commercial code (Code de Commerce), we hereby report on the report prepared by the chairman of your company in accordance with article L. 225-37 of the French commercial code (Code de Commerce) for the year ended December 31, 2008.

It is the chairman’s responsibility to prepare and submit for the board of directors’ approval a report on the internal control and risk management procedures implemented by the company and to provide the other information required by article L. 225-37 of the French commercial code (Code de Commerce) relating to matters such as corporate governance.

Our role is to:

• report on the information contained in the chairman’s report in respect of the internal control procedures relating to the prepara-tion and processing of the accounting and financial information,

• confirm that the report also includes the other information required by article L. 225-37 of the French commercial code (Code de Commerce). It should be noted that our role is not to verify the fairness of this other information.

We conducted our work in accordance with professional standards applicable in France.

Information on internal control procedures relating to the prepa-ration and processing of accounting and financial information

The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the chairman’s report in respect of the internal control procedures relating to the preparation and processing of the accounting and financial information. These procedures consist mainly in:

• obtaining an understanding of the internal control procedures relating to the preparation and processing of the accounting and financial information on which the information presented in the chairman's report is based and of the existing documentation;

• obtaining an understanding of the work involved in the prepara-tion of this information and the existing documentation;

• determining if any material weaknesses in the internal control procedures relating to the preparation and processing of the accounting and financial information that we would have noted in the course of our work are properly disclosed in the chairman’s report.

On the basis of our work, we have nothing to report on the infor-mation in respect of the company's internal control procedures relating to the preparation and processing of the accounting and financial information contained in the report prepared by the chairman of the board of directors in accordance with article L. 225-37 of the French commercial code (Code de Commerce).

Other information

We confirm that the report prepared by the chairman of the board of directors also contains the other information required by article L. 225-37 of the French commercial code (Code de Commerce).Dijon and Paris-La Défense, April14, 2009


EXPERTISE COMPTABLE ET AUDIT ERNST & YOUNG AuditClaude Cornuot Jean-François ginies

4 -

Corp

orat

e go

vern

anCe

125


5 -

Inve

stor

Info

rmat

Ion

126 2008 annUaL rePortsPerIan ProteCtIon

Investor InformatIon

5.1. Information about the Company 1285.1.1. Name and registered office 1285.1.2. Legal form and governing law 1285.1.3. Date of incorporation and term 1285.1.4. Corporate purpose 1285.1.5. Trade Registry 1285.1.6. Consultation of corporate documents 1285.1.7. Fiscal year 1285.1.8. Appropriation of income 1285.1.9. Dividends 1295.1.10. Corporate governance 1295.1.11. Shareholders’ Meetings 129

5.2. Information about the Company’s capital 1305.2.1. Changes in capital stock or rights attache to shares 1305.2.2. Form and registration of shares 1305.2.3. Registrar 1305.2.4. Transfer of shares 1315.2.5. Disclosure thresholdds provided for in the Bylaws 1315.2.6. Changes in the Company’s capital over the last five years 1315.2.7. Share buyback program 131

5.3. authorized, unissued capital 133

5.4. ownership structure 1345.4.1. Current ownership structure 1345.4.2. Changes in ownership structure over the past three years 1365.4.3. Treasury stock 1375.4.4. Shareholders’ agreements 1375.4.5. Shareloders with a controlling interest 137

5.5. market for the Company’s shares 1375.5.1. Listing 1375.5.2. Share performance 138

5.6. Dividend policy 139

5.7. Information policy 1395.7.1. Person responsible for information 1395.7.2. Financial calendar 139

5 -

Inve

stor

Info

rmat

Ion

127

2008 annUaL rePortsPerIan ProteCtIon

5.1. Information about the Company

5.1.1. name and registered office

Company name: Sperian ProtectionRegistered office: ZI Paris Nord II, 33 rue des Vanesses93420 Villepinte, France

5.1.2. Legal form and governing law

The company is a société anonyme with a Board of Directors governed by French company law, notably Book II of the French Commercial Code, and prevailing stock market regulations, partic-ularly with regard to public disclosure requirements.

5.1.3. Date of incorporation and term

Incorporated on June 8, 1983 for a term of 99 years from the date of registration in the Trade and Companies Registry. To be dissolved on June 24, 2082 unless wound up early or the term is extended by resolution of an extraordinary shareholders’ meeting.

5.1.4. Corporate purpose (Article 3 of the Bylaws)

The Company's purpose in France and other countries is to:• Acquire by any method equity interests and investments in any

and all companies, consortia or other undertakings engaged in manufacturing, purchasing, selling and marketing personal protective equipment for professional, sports or leisure use including but not limited to eyewear, earplugs, fall arrest systems, clothing, footwear, gloves and respiratory protection devices, as well as the provision of all services, advice and recommendations in the field of personal protection.

• More generally, undertake any and all forms of commercial or financial transactions, including transactions involving securities and real property, that are directly or indirectly related to the above purpose or which may facilitate the fulfillment of said purpose.

The Company may act directly or indirectly, on its own behalf or on behalf of third parties, alone or with other persons or companies within a partnership, joint venture, consortium or other form of entity, specifically by means of creation of companies, subscrip-tion, partnership, merger or consolidation, advances, purchases or sale of shares and corporate rights, or the sale or lease of all or part of its real property, securities or rights.

5.1.5. trade registry

Registered with the Bobigny Trade and Companies Registry under number 327 359 345. Business Identification (NAF) code 7010 Z.

5.1.6. Consultation of corporate documents

Legal documents concerning the Company that, by law, must be available to shareholders, may be consulted at the registered office, ZI Paris Nord II, 33 rue des Vanesses, 93420 Villepinte, France.

5.1.7. fiscal year

January 1 to December 31.

5.1.8. appropriation of income

Revenues and expenses for the year are presented in the income statement. The difference between revenues and expenses, less any depreciation, amortization and provisions, constitutes net income for the year.

At least five percent of net income for the year, less any prior-year losses, is appropriated to the legal reserve. This appropriation ceases to be compulsory once the legal reserve represents one-tenth of the share capital. However, if for any reason, the legal reserve falls to below one-tenth of the share capital, it must be restored to the required level by the same method. The net income remaining, less any amounts to be credited to reserves pursuant to the law, plus any appropriated retained earnings brought forward from prior years, constitutes the year's distributable income. It is used to pay a first dividend on common shares, in an amount equal to five percent of the paid-in unredeemed portion of their par value. This first dividend is not cumulative and may not be carried forward to subsequent years. The Annual Meeting may resolve to appropriate any surplus to a discretionary, ordinary or special reserve account, or to retained earnings, in the proportions it deems appropriate. The remainder is then distributed to share-holders as an additional dividend.

The Annual Meeting may also decide to pay all or part of the divi-dend out of revenue reserves or to effect an exceptional distribu-tion of revenue reserves. In this case, the reserves against which the dividend is to be charged must be designated in the related resolution. However, no distributions of reserves may be decided if distributable income for the year has not been fully distributed. Except in the event of a capital reduction, no distribution may be decided if the Company's equity is or, as a result of the distribu-tion, would be lower than the amount of its capital stock plus any reserves that are not distributable by law. The revaluation reserve may not be distributed, but may be fully or partially incorporated in capital stock.

These clauses are valid provided that no non-voting preferred stock is issued.

5 -

Inve

stor

Info

rmat

Ion


5.1.9. Dividends

The Annual Meeting may offer shareholders the option to reinvest all or part of the interim or final dividend in new shares. Cash dividends may be paid by check, bank transfer or postal transfer, sent to the shareholder at the address indicated in the Company's records. If the Company has requested information about a share-holder's identity under the provisions of Articles L. 228-2 to L. 228-3-1 of the French Commercial Code, and the information has not been provided within the statutory time period or is incom-plete or inaccurate, payment of the dividend on the corresponding shares will be deferred until such time as the information has been properly received.

5.1.10. Corporate governance

On March 3, 2009, the Company announced that the Board of Directors had decided to separate the functions of Chairman of the Board and Chief Executive Officer and to appoint Brice de La Morandière as Chief Executive Officer, effective as from April 14, 2009. This appointment concluded the transition process announced in August 2008 to prepare for Henri-Dominique Petit’s succession as Chief Executive Officer. Henri-Dominique Petit will remain Chairman of the Company’s Board of Directors.

5.1.11. shareholders’ meetings

The shareholders take collective decisions by passing resolutions at meetings qualified either as ordinary, extraordinary or special depending on the nature of the decisions they are called to make. Special shareholders' meetings comprising all holders of a partic-ular class of shares are held to vote on any resolutions proposing to alter the rights of that class of shares. The quorum and voting conditions are the same as those required for extraordinary meetings.

Any properly convened and constituted meeting represents the entire body of shareholders. Any resolutions passed at such meet-ings are binding on all shareholders, including absent, dissenting or incapacitated shareholders.

• Notice of meeting Shareholders’ meetings are called and conduct their deliberations pursuant to applicable legislation. They are held on the day and at the time and venue indicated in the notice of meeting. They may be held at the registered office or at any other location specified in the notice of meeting.

• Attendance and representationIn accordance with the legislation introduced in France in 2007, all shareholders are entitled to attend or be represented at Annual Meetings regardless of the number of shares held, simply by providing proof of identity and ownership of their shares in the form of: • Registration in the Company's share register, or • A certificate of ownership from their custodian institution.

These requirements must be fulfilled no later than midnight (Paris time) on the third business day before the date of the meeting. However, the Board of Directors may reduce or eliminate this time period, provided that it applies to all shareholders alike.

Shareholders may give proxy only to their spouse or another shareholder.

• Meeting organizationMeetings are chaired by the Chairman of the Board of Directors or, in his absence, by the eldest Vice-Chairman of the Board, if the Board has appointed one or more Vice-Chairmen, or by the Director empowered to replace the Chairman. Failing that, the meeting elects its own chairman. The two shareholders holding the largest number of votes either personally or by proxy, who are present at the meeting and willing to act, are appointed scruti-neers. The officers of the meeting appoint a secretary, who need not be a shareholder. An attendance sheet is kept for each meeting containing the information required by law. Minutes of the meet-ings are kept and copies or excerpts thereof are issued and certi-fied in accordance with the provisions of the law.

• Quorum – VotingThe quorum for ordinary and extraordinary meetings is calculated on the basis of all the shares comprising the share capital. The quorum for special shareholders' meetings is calculated on the basis of all shares without voting rights pursuant to the provisions of the law. Shareholders attending the meeting by videoconfer-encing or other electronic means that permit their identification are counted as present for the purpose of calculating the quorum and majority. Shareholders may vote by mail in accordance with the provisions of the law.

• Ordinary meetingsThe shareholders meet at least once a year in ordinary meeting, in the form and within the time periods set out by law. In addition to the Annual Meeting, the Board of Directors may call other ordinary meetings in exceptional circumstances when it deems necessary. All shareholders are entitled to participate in ordinary meetings, regardless of the number of shares held.

5 -

Inve

stor

Info

rmat

Ion

129


• Extraordinary meetingsExtraordinary meetings are called to approve any proposed modi-fications to the Bylaws authorized by law. All shareholders with at least one voting right are entitled to participate in extraordinary meetings. The presence in person or by proxy of the holders of at least one-quarter of the shares eligible to vote constitutes a quorum, or of the holders of at least-one fifth of the shares eligible to vote in the case of an adjourned meeting. If a quorum is still not reached, the meeting may be adjourned a second time to a date no more than two months after the first adjournment. Extraordinary resolutions are passed by a two-thirds majority vote of those shareholders present in person or by proxy. An extraordinary meeting may, in accordance with the provisions of the law, decide to abolish double voting rights, subject to ratifi-cation by a special shareholders' meeting of all shareholders with double voting rights.

• Double voting rights((Article 25 of the Bylaws pursuant to a resolution passed at the Extraordinary Meeting of December 13, 1985) The voting rights of each shareholder are proportional to the amount of capital stock held, with no limitation. However, double voting rights are attached to: • All fully paid-up shares that have been registered in the name of

the same shareholder for at least two years.• Bonus shares paid up by capitalizing reserves, retained earnings

or share premiums that are issued in respect of shares entitled to double voting rights.

The double voting rights cease ipso jure if the shares are converted to bearer shares or transferred to another name, save in the case of inheritance, division of estate between divorcing spouses or gifts inter vivos to a spouse or other person of an eligible degree of relationship.

Shareholders who are not resident in France within the meaning of Article 102 of the French Civil Code may be represented for voting purposes by any intermediary that meets the requirements set out in paragraphs 7 and 8 of Article L. 228-1 of the French Commercial Code, provided that the intermediary transmits a list of all the non-resident shareholders represented to the Company or its agent on request, in accordance with the provisions of the law.

Any votes cast or proxies submitted by an intermediary that fails to announce that it is acting as a nominee in accordance with para-graph 8 of Article L. 228-1 or paragraph 2 of Article L. 228-3-2 of the French Commercial Code, or that has not disclosed the identity of the shareholders as required by Articles L. 228-2 or L.228-3 of the French Commercial Code, will not be counted.

On February 28, 2009, the total number of theoretical voting rights amounted to 9,831,501 and total exercisable voting rights came to 9,712,337, including 2,176,478 in respect of double voting rights. The number of exercisable voting rights is equal to the total number of theoretical voting rights less the number of voting rights attached to shares disqualified for voting purposes. As required under the AMF's General Regulations, the company makes a monthly disclosure of the number of shares comprising the share capital and the number of voting rights. This information is available on the Group's website at www.sperianprotection.com in the section on regulated information. • Shareholders' right to informationAll shareholders have the right to obtain the documents required for them to vote in full knowledge of the facts and to make an informed judgment of the Company's management and opera-tions. The nature of these documents and the terms under which they shall be made available are set out by law.

5.2. Information about the Company's capital

On April 15, 2009 when this Reference Document was filed with the Autorité des Marchés Financiers (AMF), the Company's capital stock amounted to €15,310,046 divided into 7,655,023 fully paid-up shares all of the same class, each with a par value of €2.00.

5.2.1. Changes in capital stock or rights attached to shares Changes in capital stock or rights attached to shares are governed by the provisions of the law, as the Bylaws do not contain any specific provisions in this respect.

5.2.2. form and registration of shares

Shares may be held in either registered or bearer form at the shareholder's option. Both of these categories are governed by the specific legal provisions applicable to them. All securities issued by the Company are in either registered or “identifiable bearer” form. All bearer shares are therefore "identifiable bearer" shares.

5.2.3. registrar

Securities services are provided by:CACEIS Corporate Trust92862 Issy-les-Moulineaux Cedex 9, FranceTelephone: + 33 1 57 78 34 44Fax: + 33 1 49 08 05 08E-mail: [email protected]

5 -

Inve

stor

Info

rmat

Ion


5.2.4. transfer of shares

Shares are freely transferable inter vivos or by inheritance. They are transferred to third parties or the Company from account to account by way of a stock transfer order. Shares that are not fully paid-up are not transferable.

5.2.5. Disclosure thresholds provided for in the Bylaws (Article 6 of the Bylaws)

In addition to legal disclosure thresholds, any natural person or company that holds or acquires a number of shares representing 2.5% of the capital stock or any multiple thereof, is required to disclose to the Company the number of shares and voting rights held directly or indirectly, no later than fifteen days after the disclosure threshold is crossed. This disclosure must be made under the conditions stipulated above, every time a new threshold is crossed. In the event of failure to comply with these disclosure rules, the shares exceeding the disclosure threshold will be stripped of voting rights for a period of three months from the date on which the omission is remedied.

5.2.6. Changes in the Company's capital over the last five years

Date transaction

Capital increase/decrease total number of shares in issue

total issued capital (in €)Par value share premium

2005 Exercise of stock options 17,160 386,350.91 7,627,387 15,254,774

2006 Exercise of stock options 61,286 2,214,472.58 7,658,030 15,316,060

2007 Exercise of stock options 184,538 7,008,597.70 7,750,299 15,500,598


2008 Cancellation of shares 195,372 7,021,857.66 7,653,723 15,307,446


5.2.7. share buyback program

At the Annual Meeting of May 19, 2008, shareholders authorized the Board of Directors to set up a share buyback program governed by Articles L. 225-209 et seq. of the French Commercial Code. The program was described in a document published on April 4, 2008. Under the program, the Company may trade in its own shares, within the limits set in the program, for a maximum period of eighteen months from the date of the Annual Meeting held on May 19, 2008. The maximum authorized purchase price is €140.

As of April 3, 2009, the Group held 118,709 treasury shares.

During 2008, the share buyback program was implemented as follows:• Between January 1, 2008 and April 3, 2009, Exane BNP Paribas, an independent provider of investment services authorized under a

liquidity agreement to make a market and ensure liquidity in Sperian Protection shares, purchased 159,859 shares and sold 145,223 shares under this agreement.

• On September 20, 2007 and January 22, 2008, the Board of Directors authorized the Company to buy back shares for the purpose of (i) allotting them to employees and executive officers authorized by the Company under stock option or performance share plans; (ii) canceling them to improve return on equity and earnings per share; or (iii) using them at a later date to pay for acquisitions. Between March 6, 2008 and April 3, 2009, the Group purchased 16,873 shares including 10,000 for cancellation and 6,873 that were allotted to employee stock option or performance share plans. The average purchase price for these shares was €67.20.

5 -

Inve

stor

Info

rmat

Ion

131


Breakdown of purchases, sales and transfers of treasury shares under the share buyback program from April 3, 2008 through April 3, 2009

Percentage of Sperian Protection shares held directly or indirectly by the Company 1.55%

Number of treasury shares cancelled in the past 24 months 97,686

Number of shares held in treasury 118,709

Carrying amount of shares held in treasury € 7,809,261

Market value of shares held in treasury € 2,767,107

aggregate transaction volumes

open positions at the filing date of this registration Document

Purchases sales /transfers

open buy positions

open sell positions

Number of shares 225,786 125,757 Call options

written

Forward

purchases

Call options

sold

Forward

sales

Average maximum maturity

Average transaction price (in €)

Average exercise price (in €) 67.54 63.28

Amount (in €) 15,249,008 7,957,422

At the Annual Meeting scheduled for May 6, 2009, shareholders will be asked to cancel the authorization for this buyback program and replace it with a new authorization, as described in the "Proposed Resolutions" document which should be read in conjunction with this Reference Document.

Under the proposed authorization, the maximum number of shares purchased by the Company may not exceed 10% of the capital stock as of March 3, 2009, i.e. 765,502 shares based on the capital stock as of that date, representing a maximum theoretical cost of €68,895,207. The maximum number of shares that may be purchased by the Company to pay for merger, spin-off or transfer transactions may not exceed 5% of the capital stock, in accordance with the provisions of the law. The maximum purchase price will be set at €90 per share. The authorization is sought for a period of 18 months, for the following purposes: granting stock to employees, implementing stock option plans, making a market in the shares using an independent investment services provider acting under the terms of a liquidity agreement, paying for acquisitions, allotting shares on exercise of rights attached to share equivalents, and canceling the shares to improve return on equity and earnings per share.

At the Annual Meeting on May 10, 2007, shareholders also authorized the Board of Directors to reduce the capital by canceling shares acquired by the Company under the buyback program. The Board of Directors used this authorization on March 4, 2008 to cancel 97,686 shares.

At the Annual Meeting scheduled for May 6, 2009, shareholders will also be asked to cancel this authorization and replace it with a new authorization, as described in the "Proposed Resolutions" document which should be read in conjunction with this Reference Document.

5 -

Inve

stor

Info

rmat

Ion


5.3. Authorized, unissued capital

At the Annual Meeting of May 10, 2007, shareholders granted the Board of Directors the following authorizations:

authorization

Maximum authorized par value of shares

issued (€)

Maximum authorized

value of share equivalents

issued (€)

Date of authorization

Expiry date Utilization in 2008

Authorization to issue shares

and share equivalents with

pre-emptive subscription rights

15,000,000 250,000,000 May 10, 2007 July 11, 2009 None


and share equivalents without

pre-emptive subscription rights

15,000,000 250,000,000 May 10, 2007 July 11, 2009 None


paid up by capitalizing reserves,

earnings or share premiums

May 10, 2007 July 11, 2009 None


representing a maximum of 10%

of the capital stock in payment

of contributed assets 10%

May 10, 2007 July 11, 2009 None

These authorizations superseded the authorizations granted at the Annual Meeting of May 10, 2005.

At the Combined General Meeting due to be held on May 6, 2009, shareholders will be asked to renew these delegations of powers and to replace them with new arrangements that will include the principal terms of the delegations granted previously, notably:

- the delegation of powers to the Board of Directors to increase the share capital through the issuance of any securities giving immediate or subsequent access to the share capital, with preferential subscription rights for shareholders (Fifteenth resolution). Delegation of powers to the Board for a period of 26 months to issue, on one or more occasions, in the proportions and at the times that it deems appropriate, both in and outside France, with preferential subscription rights for shareholders: ordinary shares combined or not with equity warrants in the Company; any other securities ultimately giving right, through subscription, conversion, exchange, redemption, presentation of a warrant, a combination of these means or in any other way, to the allocation at any time or on a fixed date of shares, which, for this purpose, are or shall be issued to represent a portion of the share capital of the Company. The nominal amount of the increase or increases in share capital may not exceed a maximum of fifteen million euros (€15,000,000). Securities giving right to the Company’s equity securities that may be issued pursuant to this delegation of powers may comprise debt securities or be combined with the issuance of such securities or permit issuance thereof as intermediate securities. They may notably take the form of dated or undated, subordinated or unsubordinated securities and be issued in euros or in foreign currencies or in any other currency units established by reference to several currencies.

The maximum nominal amount of duly issued securities may not exceed a maximum of two hundred and fifty million euros (€250,000,000). In the event of excess demand, the Board will be authorized to increase the maximum limit of the increase or increases in the share capital by up to 15% of the initial issue.

- the delegation of powers to the Board of Directors to increase the share capital through the issuance of any securities giving immediate or subsequent access to the share capital, without preferential subscription rights for shareholders (Sixteenth resolution). Delegation of powers to the Board for a period of 26 months to issue, on one or more occasions, in the proportions and at the times that it deems appropriate, both in and outside France, without preferential subscription rights for shareholders: ordinary shares combined or not with equity warrants in the Company; any other securities ultimately giving right, through subscription, conversion, exchange, redemp-tion, presentation of a warrant, a combination of these means or in any other way, to the allocation at any time or on a fixed date of shares, which, for this purpose, are or shall be issued to represent a portion of the share capital of the Company. These issues may be

5 -

Inve

stor

Info

rmat

Ion

133


5.4. Ownership structure

5.4.1. Current ownership structure

At December 31, 2008, the Euroclear survey of financial intermedi-aries holding at least 12,000 Sperian Protection shares identified approximately 5,720 bearer shareholders representing 98.3% of all bearer shares in issue. Based on the survey and the Company's Share Register, the Company's ownership structure is as follows:

carried out (i) in consideration for shares tendered to the Company in connection with a public exchange offer for the shares of a company, including for all the negotiable securities issued by the Company, (ii) following the issuance, by one of the companies in which the Company holds directly or indirectly over half the share capital, of securities giving right to the Company’s share capital. The nominal amount of the increase or increases in capital may not exceed a maximum amount of fifteen million euros (€15,000,000), with, in the event of excess demand, the possibility of increasing the maximum limit for the increase or increases in capital by no more than 15% of the initial issue. Securities giving right to the Company’s equity securities that may be issued pursuant to this delegation of powers may comprise debt securities or be combined with the issuance of such securities or permit issuance thereof as intermediate securities. They may notably take the form of dated or undated, subordinated or unsubordinated securities and be issued in euros or in foreign currencies or in any other currency units established by reference to several currencies. The maximum nominal amount of duly issued securities may not exceed a maximum of two hundred and fifty million euros (€250,000,000).The issue price for ordinary shares will be at least equal to the weighted average of the prices in the three previous stock market sessions on Euronext Paris, with a maximum discount, where appropriate, of 5%.

- delegation of powers to the Board of Directors to increase the Company’s share capital through the capitalization of reserves, earnings or premiums, where such capitalization is permitted (Seventeenth resolution). Delegation of powers to the Board of Directors for a period of 26 months to increase the Company’s share capital on one or more occasions, in the proportions and at the times it deems appropriate through the capitalization of all or part of the reserves, earnings and/or premiums or other amounts capitalization of which is permitted pursuant to law and under the Articles of Association, and through the grant of bonus new shares in the Company or an increase in the par value of the Company’s existing shares.

- delegation of powers to the Board to increase the share capital by 10% in consideration for contributions of equity securities or securi-ties giving right to the share capital of third-party companies (Eighteenth resolution). Delegation of powers for a period of 26 months, to carry out an increase or increases in the share capital, through the issuance of ordinary shares in the Company or of securities giving right by any means, directly or indirectly, immediately and/or subsequently, to existing or new shares in the Company to be issued in consideration for contributions in kind made to the Company comprising equity securities and securities giving right to the share capital, where the provisions of Article L.225-148 of the Commercial Code are not applicable. Shareholders are asked to cap the amount at 10% of the share capital and to resolve to remove for holders of the shares and negotiable securities being contributed, the prefer-ential subscription right of shareholders to the ordinary shares issued for such purpose. All these resolutions are presented in the “Text of the resolutions” document, which should be consulted together with this registration document.

essilor 15.0%

mrs. Dalloz 13.2%

Individuals and treasury shares

6.8%

Anglo-Saxon institutional

investors 33.4%

french institutional investors 14.2%

other institutional

investors 17.4%

5 -

Inve

stor

Info

rmat

Ion


To the best of the company’s knowledge, ownership of the capital and voting rights at March 3, 2009 were as follows:

main shareholdersnumber

of shares% capital single

voting rightsDouble

voting rightstotal

voting rights(2)

% voting rights

Essilor International 1,151,800 15.05 0 1,151,800 2,303,600 23.72

Ginette Dalloz (1) 1,011,368 13.21 0 1,011,368 2,022,736 20.83

Governance for owners LLP 727,890 9.51 727,890 0 727,890 7.49

Aviva PLC 376,775 4.92 376,775 0 376,775 3.88

Harris Associates 395,144 5.16 395,144 0 395,144 4.07

JP Morgan Chase and Co 333,361 4.35 333,361 0 333,361 3.43

Columbia Wanger 287,648 3.76 287,648 0 287,648 2.96

Tocqueville Finance 245,582 3.21 245,582 0 245,582 2.53

Caisse des Dépôts et Consignations 250,259 3.27 250,259 0 250,259 2.58

Other 2,756,032 36.00 2,742,922 13,110 2,769,142 28.51

Treasury shares 119,164 1.56 0 0 0 0.00

total 7,655,023 100.00 5,359,581 2,176,278 9,712,137 100.00

(1) Shares held directly (387,224) and through Société Familiale Civile Dalloz (624,144).(2) Exercisable voting rights, i.e. theoretical voting rights less voting rights attached to treasury shares. During 2008, the Company was informed of the following changes in shareholdings: • On January 10, 2008, Governance for Owners LLP, acting on behalf of funds it manages, disclosed that it had raised its interest to above

7.5% of the Company’s capital and that it held 589,611 shares.• On January 29, 2008, Tocqueville disclosed that it had reduced its interest to below 2.5% of the Company’s voting rights and that it held

245,582 shares.• On March 4, 2008, Caisse des Dépôts et Consignations disclosed that it had raised its interest to above 2.5% of the Company’s voting

rights and that it held 250,259 shares.• On October 13, 2008, Harris Associates L.P, acting on behalf of its clients and funds it manages, disclosed that on October 9, 2008 it had

reduced its interest to below 5% of the Company’s capital and that it held 374,400 shares on behalf of said clients and funds. • On November 18, 2008, Aviva Plc, acting on behalf of funds it manages, disclosed that following a share acquisition on November 12,

2008, its indirect interest had risen to above 5% of the Company’s capital and that it indirectly held 406,187 shares. • On December 18, 2008, Harris Associates L.P, acting on behalf of its clients and funds it manages, disclosed that on December 17, 2008

it had raised its interest to above 5% of the Company’s capital and that it held 395,144 shares on behalf of said clients and funds. • On December 22, 2008, Aviva Plc, acting on behalf of funds it manages, disclosed that following a share sale on December 18, 2008, its

indirect interest had decreased to below 5% of the Company’s capital and it holds 376,775 shares..

In 2009• On March 18, 2009 Bestinver Gestion S.A. SGIIC, acting on behalf of funds (including SICAV funds) that it manages, disclosed that on

March 11, 2009 it had increased its interest to more than 5% of the Company’s capital and that it held 389,688 shares on behalf of said funds.

To the best of the Company's knowledge, no other shareholders own 2.5% or more of the capital or voting rights, either directly, indi-rectly or in concert.

Information on Directors' interests as of March 9, 2009 is provided in Chapter 4.

5 -

Inve

stor

Info

rmat

Ion

135


5.4.2. Changes in ownership structure over the past three years

february 16, 2006 march 6, 2007

number of shares

% capital

% voting rights

number of shares

% capital

% voting rights

Essilor International 1,151,800 15.10 23.99 1,151,800 15.04 23.68

Ginette Dalloz 387,224 5.08 8.07 387,224 5.07 7.96

Société Familiale Dalloz 624,144 8.18 10.92 624,144 8.15 11.80

CDC (1) 192,363 2.52 2.00 192,363 2.51 1.98

Governance for owners LLP (2) 298,740 3.97 3.11 383,989 5.01 3.95

JP Morgan Chase and Co (3) 333,361 4.36 3.43

Tocqueville Finance (4) 247,379 3.23 2.54

Other 4,973,116 65.20 51.91 4,337,770 56.64 44.66

7,627,387 100.00 100.00 7,658,030 100.00 100.00

march 5, 2008

number of shares

% capital

% voting rights

Essilor International 1,151,800 15.05 23.65

Ginette Dalloz 387,224 5. 06 7.95

Société Familiale Dalloz 624,144 5.06 7.95

CDC (1) 250,259 3.27 2.57

Governance for owners LLP (2) 589,611 7.70 6.06

JP Morgan Chase and Co (3) 333,361 4.36 3.43

Tocqueville Finance (4) 245,582 3.20 2.52

Harris Associates (5) 385,738 5.04 3.96

Columbia Wanger (6) 287,648 3.76 2.95

Other 3,309,639 43.24 34.10

Treasury shares 88,717 1.16 0

7,653,723 100.00 100.00

(1) On March 4, 2008, Caisse des Dépôts et Consignations disclosed that it had raised its interest held in the Company through CDC Entreprises Valeurs to more than 2.5% of the voting rights and that it held 250,259 shares. (2) On January 24, 2006, Governance for owners LLP disclosed that it had raised its interest to over 2.5% of the Company's capital after purchasing 298,740 shares, and then on December 15, 2006, that its interest had risen to more than 5% and that it held 383,989 shares. On January 10, 2008, it disclosed that it had increased its interest to more than 7.5% of the capital and that it held 589,611 shares. (3) On July 18, 2006, JP Morgan Chase and Co, acting in its own name and on behalf of its subsidiaries, disclosed that it had raised its interest to more than 5% of the Company’s capital and that it held 389,119 shares; and then on September 20, 2006, it disclosed that its interest had fallen below 5% of the capital and that it held 333,361 shares.(4) On January 23, 2007, Tocqueville Finance SA disclosed that, as part of its mutual fund management business, it had raised its interest to more than 2.5% of the Company’s capital and that it held 247,379 shares. On January 29, 2008, it disclosed that its interest had fallen below 2.5% of the voting rights and that it held 245,582 shares. (5) On September 5, 2007, Harris Associates L.P. disclosed that it had purchased 196,200 shares on August 2, 2007. On December 20, 2007, it disclosed that its interest had risen to more than 5% of the Company’s capital on December 18, 2007 and that it held 385,738 shares. On October 13, 2008, Harris Associates L.P, acting on behalf of its clients and funds it manages, disclosed that on October 9, 2008 it had reduced its interest to below 5% of the Company’s capital and that it held 374,400 shares on behalf of said clients and funds. On December 18, 2008, it disclosed that on December 17, 2008 its interest had risen to more than 5% and that it held 395,144 shares on behalf of said clients and funds.

5 -

Inve

stor

Info

rmat

Ion


(6) On August 31, 2007, Wanger Columbia (Bank of America Corporation), acting in its own name and on behalf of its subsidiaries (Columbia Wanger Asset Management, L.P. and Columbia Management Advisors, LLC), disclosed that as of August 28, 2007, it held 287,648 shares on behalf of its clients.

Information on employee share ownership is provided in Chapter 3.

5.4.3. treasury stock

As of February 28, 2009, the Group held 119,164 treasury shares purchased under its liquidity agreement and under the share buyback program referred to in section 5.2.7.

5.4.4. shareholders’ agreements

The only agreement in force as of the date of this Reference Document is the Preemption Agreement ("Pacte de Préférence") entered into on September 6, 2001 for an initial term of three years and renewable automatically for further terms of two years. This agreement basically renews the reciprocal preemptive rights already existing between Essilor International and Ginette Dalloz over shares in Financière Christian Dalloz. Its key provisions are: • Termination as of its effective date of the existing memorandum of understanding providing for reciprocal preemptive rights.• Grant of reciprocal preemptive rights over any shares sold by one of the parties, save for shares transferred by Essilor International to

a controlled company within the meaning of Article L. 233-3 of the French Commercial Code, and shares donated by Ginette Dalloz to a foundation recognized as being in the public interest.

• Special conditions for exercising the preemptive rights in the event of a public offering for the Company's shares.• An undertaking by Ginette Dalloz, on her own behalf and on behalf of her heirs, to sell all the shares she may own in the company to

Essilor International or its assigns and successors, at Essilor International's discretion, in the event of her death during the term of the Preemption Agreement.

5.4.5. shareholders with a controlling interest

When this Reference Document was filed, there were no agreements in force providing for shareholders to act in concert.

In addition, neither the Company's Bylaws nor any of its contractual arrangements contain any clauses providing for preemptive rights in the event of a sale or transfer of shares, other than the reciprocal preemptive rights existing between Essilor International and Ginette Dalloz described in section 5.4.4 above.

5.5. Market for the Company’s shares

5.5.1. Listing

Sperian Protection shares are traded on NYSE-Euronext (compartment B).Name: Sperian ProtectionFTSE classification: 2727AFC code: 6089ISIN code: FR0000060899Symbol: SPR

Sperian Protection (formerly Bacou-Dalloz) shares joined the SBF120 index on March 7, 2003 and are eligible for the deferred settlement (SRD) system. On January 3, 2005, Euronext introduced a new range of indices as part of its commitment to creating a single regulated market. Since then, Sperian Protection has been part of the CAC Mid100 and CAC Mid & Small190 indices.

5 -

Inve

stor

Info

rmat

Ion

137


5.5.2. share performance

The table below shows trends in share price and trading volumes over the past 18 months:

Low (€) High (€) average closing price

(€)

minimum daily trading

volume

Maximum daily trading

volume

average daily trading

volume

Daily average value of shares

traded (€ millions)

2007 September 82.00 102.50 94.34 5,537 95,18 26,104 2,362.98

October 87.02 97.95 93.51 2,711 71,997 17,610 1,639.59

November 76.10 97.50 87.06 2,254 46,117 10,571 910.72

December 76.41 83.07 79.13 3,266 50,474 15,437 1,219.72

2008 January 58.36 79.80 67.83 1,416 63,406 27,192 1,793.56

February 58.50 66.48 61.65 3,919 34,131 13,044 810.24

March 61.77 73.40 67.31 6,724 150,966 31,525 2,106.62

April 73.20 82.40 79.51 6,186 35,967 15,252 1,205.67

May 79.49 86.10 82.40 1,445 16,490 7,663 631.74

June 73.60 82.75 79.46 3,445 318,511 31,714 2,588.35

July 69.00 78.86 74.93 2,931 51,596 13,091 988.43

August 72.65 82.99 78.645 1,360 33,670 11,110 888.18

September 70.16 84.00 78.888 1,855 32,447 9,412 745.11

October 42.55 73.48 58.622 2,577 68,228 22,680 1,333.77

November 47.95 53.65 50.213 2,817 27,054 9,565 477.86

December 41.00 53.37 48.007 491 29,054 10,286 482,324

2009 January 32.00 48.00 39.971 2,073 46,717 16,505 622.29

February 33.66 43.86 38.416 4,948 68,918 17,829 672.58

Sperian Protection shares shed 43.8% in 2008. The CAC Mid100 shed 41.9% over the same period.

5 -

Inve

stor

Info

rmat

Ion


5.6. Dividend policy

The table below shows the total dividend and revenue per share paid over the past five years.

(in e) Dividendtotal revenue

per share

2003 0.50 0.75

2004 0.60 -

2005 0.90 -

2006 1.05 -

2007 1.50 -

Under Article 93 of the French Finance Act of December 30, 2003, dividends are no longer entitled to a tax credit. However, indi-vidual shareholders are entitled to 40% tax relief on their dividend income. On March 3, 2009, the Board of Directors approved the financial statements for 2008 and agreed to recommend to share-holders at the Annual Meeting scheduled for May 6, 2009 to allo-cate net income for 2008 – i.e. €18,751,624.54, plus retained earnings brought forward from prior years amounting to €137,150,061.98, representing total distributable income of €155,901,686.52 – as follows:

- Payment of a dividend of €9,186,027.60 (plus any amount payable in relation to shares issued on exercise of stock options up to the dividend payment date).

- The balance of €146,715,658.92 to retained earnings.

The Board of Directors will therefore recommend a dividend of €1.20 per share, payable from July 9, 2009. Shareholders of record on Wednesday, July 8, 2009 will be entitled to receive the dividend. The ex-dividend date is July 6, 2009 (in accordance with ESES regulations). Dividends that have not been claimed within five years are statute-barred and paid to the Caisse des Dépôts et Consignations.

5.7. Information policy

Shareholders can obtain information on request or from the Company's website (Investors section). The main documents are Annual Reports and Reference Documents, presentations prepared for results announcements, press releases and information memo-randa filed with the AMF. Information qualified as "regulated" (as defined by the AMF) is available on the Group's website at www.sperianprotection.com under the Investors section. The Group also publishes an annual information document (in French only), as required by Article 221-1-1 of the AMF's General Regulations. This document is also available on the website.

5.7.1. Person responsible for information

Jérôme RonzeChief Financial OfficerImmeuble Édison, Paris Nord II,33, rue des Vanesses, BP 55288 Villepinte,95958 Roissy Charles-de-Gaulle Cedex, FranceTelephone: +33 1 49 90 79 74Fax: +33 1 49 90 79 78www.sperianprotection.com (Investors section)E-mail: [email protected]

5.7.2. financial calendar

The provisional calendar for 2009 is as follows:

Annual Shareholders’ Meeting May 6, 2009Second-quarter revenue July 17, 2009First-half earnings August 26, 2009Third-quarter revenue October 21, 2009

Revenue and earnings announcements are released after the close of trading.

5 -

Inve

stor

Info

rmat

Ion

139



6 -

OTHE

R IN

FORM

ATIO

N

OTHER INFORMATION

6.1. Person Responsible for the Reference Document 142

6.2. Statement of Person Responsible for the Reference Document 142

6.3. Persons Responsible for Auditing the Financial Statements 1426.3.1. Statutory joint auditors 142

6.3.2. Alternate joint auditors 143

6.4. Auditors' Fees 143

141


6 -

OTHE

R IN

FORM

ATIO

N

6.1. Person Responsible for the Reference Document

Brice de La Morandière, Chief Executive Officer of Sperian Protection (the “Company” or “Sperian Protection”).

6.2. Statement of Person Responsible for the Reference Document

“I hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in this document is, to the best of my knowledge, in accordance with the facts and contains no omission likely to affect its import. I hereby declare that, to the best of my knowledge and belief, the financial statements have been prepared in accordance with the applicable accounting standards and present fairly in all material respects the assets and liabilities, financial position and results of the company and the consolidated group, and that the information contained in the management report gives a true and fair view of trends in the business operations, results and the financial position of the company and the consolidated group, as well as a description of the main risks and uncertainties facing those companies. I have obtained a letter from the statutory auditors stating that they have audited the financial and accounting information provided in this Registration Document and that they have read the document as a whole.”

Brice de La Morandière Villepinte, April 15, 2009

6.3. Persons Responsible for Auditing the Financial Statements

6.3.1. Statutory joint auditors:

Expertise Comptable et AuditRepresented by: Claude Cornuot37 C, cours du Parc21000 Dijon, FranceFirst appointed: At the annual shareholders' meeting held on June 4, 1999Term of current appointment: Six years (from May 11, 2005)Current term ends: At the conclusion of the annual shareholders' meeting held to approve the financial statements for the year ended December 31, 2010Group: None

Ernst & Young AuditRepresented by: Jean-François GiniesFaubourg de l’Arche - 11, allée de l’Arche92037 Paris-La Défense Cedex, FranceFirst appointed: At the ordinary and extraordinary shareholders' meeting held on September 6, 2001Term of current appointment: Six years (from May 10, 2007)Current term ends: At the conclusion of the annual shareholders' meeting held to approve the financial statements for the year ended December 31, 2013Group: Ernst & Young


6 -

OTHE

R IN

FORM

ATIO

N

6.3.2. Alternate joint auditors:

Alternate to Expertise Comptable et AuditJérôme Burrier37 C, cours du Parc21000 Dijon, FranceFirst appointed: At the annual shareholders meeting held on June 28, 1993Term of current appointment: Six years (from May 11, 2005)Current term ends: At the conclusion of the annual shareholders' meeting held to approve the financial statements for the year ended December 31, 2010Group: Expertise Comptable et Audit

Alternate to Ernst & Young AuditCabinet AuditexFaubourg de l’Arche - 11, allée de l’Arche92037 Paris-La Défense Cedex, FranceFirst appointed: At the ordinary and extraordinary shareholders' meeting held on May 10, 2007Term of current appointment: Six years (from May 10, 2007)Current term ends: At the conclusion of the annual shareholders' meeting held to approve the financial statements for the year ended December 31, 2013Group: Ernst & Young

6.4. Auditors' Fees

Articles 221-1-2 of the General Regulations of the Autorité de Marchés Financiers.

The table below shows fees paid to auditors and members of their network in 2007 and 2008 for audit work carried out in respect of the financial statements for the years ended December 31, 2007 and 2006.

Ernst & Young ECA

Amount % Amount %

2008 2007 2008 2007 2008 2007 2008 2007

Audit Audit, certification and review of Company and

consolidated financial statements

Parent company 211 207 24 25 88 88 36 33


Audit-related services

Parent company


Sub-total Audit 815 771 93 94 246 263 100 100

Other services provided by networks to fully integrated subsidiariesLegal, fiscal, payroll

Other

63 47 7 6 0 0 0 0

Total other services 63 47 7 6 0 0 0 0

TOTAL 878 818 100 100 246 263 100 100

Other services mainly comprised fiscal services provided in the United States. These services were approved by the Group’s Audit Committee.

143


6 -

OTHE

R IN

FORM

ATIO

N

CONTENTS

OUR MISSION, OUR STRATEGY

MESSAGE FROM THE CHAIRMAN 022008: Sperian remains sound in an unsettled economic climate The board of directors

MESSAGE FROM THE CEO 042009 priorities: adjust costs and differentiate our offer to customers The Executive Committee

MAIN STRATEGIC dIRECTIONS 06Staying close to our customers fosters innovationPowerful brands for a global market

INNOVATIONS ANd PEOPLE

SPERIAN’S SPIRIT 10Our organization is about people

INNOVATIVE SOLUTIONS 12Head protection Body protection

KEY FIGURES 16

SHAREHOLdER INFORMATION 18

REFERENCE dOCUMENT 20

design & productionHarrison & Wolf

CopyrightsPhotographies:

Jack Burlot/Corporate Images

With special thanks to Orcières Merlette resort, France

Steve Murez

Sperian Protection

For additional information: Corporate communications department

Tel.: 33 (0)1 49 90 79 72

Fax: 33 (0)1 49 90 79 78

Document printed on recycled paper

2008 ANNUAL REPORT

2008

AN

NUA

L RE

PORT

SPERIAN PROTECTIONImmeuble Edison - ZI Paris Nord 233, rue des VanessesBP 55 288 Villepinte95 958 Roissy CDG Cedex - FranceTel.: +33(0)1 49 90 79 79

www.sperianprotection.com

Date post:	12-Apr-2017
Category:	Documents
Upload:	sophie-tricaud
View:	100 times
Download:	0 times