Structure, shareholders, and capital

2. Capital structure

2.1 Share capital

As of December 31, 2010, Adecco S.A.’s share capital registered with the Commercial Register amounted to CHF 189,263,506 divided into 189,263,506 fully paid up registered shares with a nominal value of CHF 1 each.

2.2 Authorised and conditional capital

Adecco S.A. has no authorised capital in the sense of the Swiss Code of Obligations.

The conditional capital of up to CHF 4,166,804 divided into 4,166,804 registered shares with a nominal value of CHF 1 each is reserved for further exercise of option rights granted to employees and members of the Board of Directors of Adecco S.A. or of its affiliated companies. The subscription rights of shareholders as well as the preferential option subscription rights of the shareholders are excluded. The exercise conditions depend on the respective underlying stock option plan; the share capital will only be increased if and when the holder of the option exercises such stock option, unless treasury shares are used.

The conditional capital of up to CHF 15,400,000 divided into 15,400,000 registered shares with a nominal value of CHF 1 each is reserved for the exercise of option or conversion rights granted in relation to financial instruments such as bonds or similar debt instruments of Adecco S.A. or its affiliates. The subscription rights of the shareholders regarding the subscription of the shares are excluded. The shareholders’ preferential bond subscription rights in the issue of the bonds or similar debt instruments may be limited or excluded by the Board of Directors. The conditional capital is available for share issuance upon conversion of financial instruments issued or to be issued in the future (refer to section 2.7 “Convertible notes and options”).

For details on the terms and conditions of the issuance/creation of shares under conditional capital, refer to Art. 3ter and 3quater of the Articles of Incorporation (Internet: www.aoi.adecco.com).

2.3 Changes in capital

Adecco S.A.’s capital structure as of the dates indicated below was as follows:

 

Issued shares

Conditional capital

Reserves [1]

Retained earnings

in CHF millions, except shares

Shares

Amount

Shares

Amount

Amount

Amount

 

 

 

 

 

 

 

January 1, 2008

189,263,506

189.3

19,566,804

19.5

2,552

4,136

Changes

 

 

 

 

459

(602)

December 31, 2008

189,263,506

189.3

19,566,804

19.5

3,011

3,534

Changes

 

 

 

 

4

306

December 31, 2009

189,263,506

189.3

19,566,804

19.5

3,015

3,840

Changes

 

 

 

 

(38)

(27)

December 31, 2010

189,263,506

189.3

19,566,804

19.5

2,977

3,813

[1]Reserves include both the general reserves and the reserve for treasury shares.

Details of Adecco S.A.’s general reserves and retained earnings are included in Note 4 to Adecco S.A. (Holding Company) financial statements.

2.4 Shares and participation certificates

Adecco S.A.’s shares have a par value of CHF 1 each. All shares are fully paid registered shares and bear the same dividend and voting rights. Pursuant to Art. 7 of the Articles of Incorporation (Internet: www.aoi.adecco.com), the right to vote and all other rights associated with a registered share may only be exercised by a shareholder, usufructuary, or nominee who is registered in the share register as the shareholder, usufructuary, or nominee with right to vote.

As of December 31, 2010, there were no outstanding participation certificates.

2.5 Bonus certificates

Adecco S.A. has not issued bonus certificates (“Genussscheine”).

2.6 Limitations on registration, nominee registration, and transferability

Each Adecco S.A. share represents one vote.

Acquirers of registered shares are recorded in the share register as shareholders with the right to vote upon request, provided that they declare explicitly to have acquired the registered shares in their own name and for their own account (Art. 4 sec. 2 of the Articles of Incorporation; Internet: www.aoi.adecco.com). Upon such declaration, any person or entity will be registered with the right to vote.

The Board of Directors may register nominees with the right to vote in the share register to the extent of up to 5% of the registered share capital as set forth in the Commercial Register. Registered shares held by a nominee that exceed this limit may be registered in the share register if the nominee discloses the names, addresses, and the number of shares of the persons for whose account it holds 0.5% or more of the registered share capital as set forth in the Commercial Register. Nominees within the meaning of this provision are persons who do not explicitly declare in the request for registration to hold the shares for their own account or with whom the Board of Directors has entered into a corresponding agreement (refer to Art. 4 sec. 3 of the Articles of Incorporation; Internet: www.aoi.adecco.com). The Board of Directors may grant exemptions to this registration restriction (refer to Art. 4 sec. 6 of the Articles of Incorporation; Internet: www.aoi.adecco.com). In 2010, there were no such exemptions granted.

Corporate bodies and partnerships or other groups of persons or joint owners who are interrelated to one another through capital ownership, voting rights, uniform management, or otherwise linked as well as individuals or corporate bodies and partnerships who act together to circumvent the regulations concerning the nominees (especially as syndicates), are treated as one nominee respectively as one person within the meaning of paragraph 3 of this article (refer to Art. 4 sec. 4 of the Articles of Incorporation; Internet: www.aoi.adecco.com).

For further information regarding the procedure and conditions for cancelling statutory privileges and limitations on transferability of shares, refer to the Articles of Incorporation; Internet: www.aoi.adecco.com.

2.7 Convertible notes and options

On August 26, 2003, Adecco Financial Services (Bermuda) Ltd., a wholly-owned subsidiary of the Company, issued CHF 900 unsubordinated bonds guaranteed by and convertible into shares of Adecco S.A., due August 26, 2013. The bonds were structured as zero-coupon, 10-year premium redemption convertible bonds with a yield to maturity of 1.5% per annum.

At any time from October 6, 2003 to August 12, 2013, at the option of the bondholder, the bonds were convertible into shares of Adecco S.A. at a conversion price of CHF 94.50 per share. If all bonds had been converted, Adecco S.A. would have issued 9,523,810 additional shares (Art. 3quater of the Articles of Incorporation; Internet: www.aoi.adecco.com). In November 2007, the terms of the bond were amended. The amendment allowed the Company to deliver treasury shares held at the time of conversion instead of issuing shares of Adecco S.A. out of the approved conditional capital. Nevertheless, Adecco S.A. had to retain enough conditional capital to issue shares if required upon conversion.

Furthermore, bondholders had the option of putting the bonds on August 26, 2010, at the accreted principal amount. The Company had the possibility of calling the bonds at any time after the end of year seven (August 26, 2010) at the accreted principal amount or at any time after a substantial majority of the bonds had been redeemed, converted, or repurchased.

In 2010, the Company repurchased bonds with a nominal amount of EUR 106 (CHF 154), representing 1,624,339 shares. In August 2010, bonds with a nominal amount of EUR 287 (CHF 390), representing 4,127,196 shares were put by the bondholders. In November 2010, the Company called the remaining outstanding bonds with a nominal amount of EUR 19 (CHF 25), representing 269,630 shares.

In the second half of 2010 and in October 2009, Adecco Financial Services (Bermuda) Ltd. cancelled EUR 440 (CHF 600) and EUR 198 (CHF 300) nominal value of repurchased bonds, respectively. Thus, as of December 31, 2010 no bonds were outstanding. As of December 31, 2010 no conditional capital was retained in connection with this bond.

On November 26, 2009, Adecco Investment, a wholly-owned subsidiary of the Company which is not consolidated, issued CHF 900 Senior Secured Limited Recourse Mandatory Convertible Bonds (“MCB”) due on November 26, 2012. The bonds will convert at maturity into shares of Adecco S.A. or at the option of the holders or Adecco Investment, the bonds may be converted into shares of Adecco S.A. at any time 41 days after November 26, 2010 until the 30th dealing day prior to the maturity date. The number of shares to be delivered at maturity will be calculated based on the closing price of the shares of Adecco S.A. As of December 31, 2010, the minimum conversion price is CHF 49.87 per share (CHF 50.50 per share at issuance of the MCB), and the maximum conversion price is CHF 59.84 per share (CHF 60.60 per share at issuance of the MCB). The conversion prices will be adjusted for further dividend payments on the shares of Adecco S.A. during the lifetime of the MCB. As of December 31, 2010, the maximum number of shares to be delivered is 18,046,922 (17,821,782 shares at issuance of the MCB) and minimum number of shares to be delivered is 15,040,107 (14,851,485 shares at issuance of the MCB). If the holders or Adecco Investment exercise their conversion option prior to maturity, the conversion will occur at the maximum or the minimum conversion price, respectively. The bonds have an annual coupon of 6.5%, which can be deferred in case no dividend payment is made on the shares of Adecco S.A.

Adecco Investment entered into a prepaid forward contract (“prepaid forward”) with the Company, where it originally acquired 17,821,782 shares of the Company for EUR 587 (CHF 887), net of costs. The strike price of the prepaid forward is adjusted for dividend payments on the shares of Adecco S.A. and the number of shares deliverable under the prepaid forward amounts to 18,046,922 as of December, 2010. Adecco Investment will receive the shares of Adecco S.A. from the Company with the settlement of the prepaid forward. The shares can be delivered out of treasury shares or conditional capital at the discretion of the Company. Adecco Investment financed the coupon payments with EUR 108 (CHF 164) from the sale of a call spread option (“call spread option”) to Adecco Financial Services (Bermuda) Ltd., a wholly-owned subsidiary of the Company. The call spread option gives the Company the right to benefit from appreciation of the shares underlying the prepaid forward between floor and cap defined in the agreement. The call spread option is settled in shares, reducing the net number of shares the Company has to deliver in combination with the prepaid forward. In addition, in 2009 the Company made a payment of EUR 8 (CHF 12) to Adecco Investment, which was treated as a deemed capital contribution. The number of shares underlying the prepaid forward, the call spread option and the MCB are subject to anti-dilution provisions. The bondholders only have recourse against the prepaid forward. Subsequently, Adecco Investment granted a loan of EUR 116 (CHF 176) to the Company, of which EUR 21 (CHF 30) have been repaid by December 31, 2010.

The Company had issued in the past stock option plans whereby employees and members of the Board of Directors received options to purchase shares. No stock options under these plans were granted after 2004.

Certain options that were granted under the plans are tradable at the SIX Swiss Exchange. The options were granted to employees or members of the Board of Directors of the Company and give the optionee a choice of selling the option on the market or exercising the option to receive an Adecco S.A. share. If the option holder chooses to sell the option on the market, the options may be held by a non-employee or non-director of the Company. The trading and valuation of the tradable options are managed by a Swiss bank.

The purpose of the plans was to furnish incentives to selected employees and members of the Board of Directors, to encourage employees to continue employment with the Company, and to align the interests of selected employees and directors with those of the shareholders. Upon exercise of stock options, Adecco S.A. may deliver either shares from its conditional capital, of which up to 4,166,804 shares are reserved for this purpose, or from its treasury shares.

The Nomination & Compensation Committee was responsible for making proposals, based upon the recommendations of the Executive Committee, to the Board of Directors regarding the individuals to whom options were granted, the size of the option grant for each optionee, the conditions, the exercise price, and the grant date. The Board of Directors had to approve all the option grants as well as the conditions thereof. The exercise price for one share was generally fixed at or above the fair market value at the date of grant. Depending on the conditions of the plans, options vested with certain waiting periods of up to five years and are subsequently exercisable over a number of years. All options may be exercised and tradable options may be sold at any time within the exercise period except for limitations set forth in the Company Insider Trading Statement of Policy and by regulatory authorities. The Board of Directors may modify, amend, suspend, or discontinue the plans.

Summary of the status of the stock options held based on above-mentioned plans as of December 31, 2010:

 

Number
of shares

Weighted-
average
exercise price
per share
(in CHF)

Weighted-
average
remaining life
(in years)

Aggregate
intrinsic value
(in CHF
millions)

 

 

 

 

 

Summary of stock option plans

 

 

 

 

Options outstanding and vested as of January 1, 2010

1,762,719

68

1.2

 

Exercised

(614,153)

60

 

 

Forfeited

(22,582)

81

 

 

Expired

(686,425)

71

 

 

Options outstanding and vested as of December 31, 2010

439,559

76

1.1

 

The aggregate intrinsic value as of December 31, 2010 of the outstanding stock options in the table above is less than EUR 1.

For further details, refer to Note 9 to the consolidated financial statements.

For information pertaining to the share awards granted under the long-term incentive plans (LTIP), refer to Note 7 to Adecco S.A. (Holding Company) financial statements and the Remuneration Report.