Annual Report 2010

Adecco Group –
Notes to consolidated financial statements
in millions, except share and per share information

Note 8 • Shareholders’ equity

The summary of the components of authorised shares as of December 31, 2010, December 31, 2009, and December 31, 2008 and changes during those years are as follows:

 

Outstanding
shares

Treasury
shares

Issued
shares [1]

Conditional
capital

Authorised
shares

 

 

 

 

 

 

Changes in components of authorised shares

 

 

 

 

 

January 1, 2008

182,647,293

6,616,213

189,263,506

19,566,804

208,830,310

Treasury shares transactions

(8,458,891)

8,458,891

 

 

 

December 31, 2008

174,188,402

15,075,104

189,263,506

19,566,804

208,830,310

Treasury shares transactions

(108,971)

108,971

 

 

 

December 31, 2009

174,079,431

15,184,075

189,263,506

19,566,804

208,830,310

Treasury shares transactions

622,595

(622,595)

 

 

 

December 31, 2010

174,702,026

14,561,480

189,263,506

19,566,804

208,830,310

[1]Shares at CHF 1 par value.

Authorised shares and appropriation of available earnings

Adecco S.A. had 4,166,804 shares of conditional capital reserved for issuance of common shares to employees and members of the Board of Directors upon the exercise of stock options as of December 31, 2010 and December 31, 2009. In addition, as of December 31, 2010 and December 31, 2009, Adecco S.A. was authorised by its shareholders to issue up to 15,400,000 shares of conditional capital in connection with the issuance of financial instruments, principally convertible bonds. The shares represent conditional capital authorised without time limitation and remain available for share issuance upon conversion of financial instruments issued or to be issued in the future.

Adecco S.A. may only pay dividends from unappropriated available earnings, the general reserve or other reserves distributable in accordance with art. 675 of the Swiss Code of Obligations.

Companies whose principal purpose consists of participations in other companies may freely use the general reserve to the extent it does exceed 20% of the paid-in share capital. Pursuant to art. 671 para. 1 of the Swiss Code of Obligations, 5% of the annual profits shall be allocated to the general reserve until it has reached 20% of the paid-in share capital. In addition, pursuant to art. 671 para. 2 and para. 4 of the Swiss Code of Obligations, companies whose principal purpose consists of participations in other companies shall allocate to the general reserve the following: (1) any surplus over par value upon the issue of new shares after deduction of the issue cost, to the extent such surplus is not used for depreciation or welfare purposes; (2) the excess of the amount which was paid-in on cancelled shares over any reduction on the issue price of replacement shares. The general reserves are CHF 2,103 as of December 31, 2010 and December 31, 2009, thereby exceeding 20% of the paid-in share capital in both years.

In 2010, cash dividends for 2009 of CHF 0.75 per share, totalling EUR 91, were paid from unappropriated available earnings. For 2010, the Board of Directors of Adecco S.A. will propose a dividend of CHF 1.10 per share outstanding for the approval of shareholders at the Annual General Meeting of Shareholders to be paid out of the reserve from capital contributions which is a sub-account of the general reserve.

Additional paid-in capital

During 2009, the Company sold a prepaid forward on Adecco S.A. shares for EUR 587 (CHF 887), net of costs and purchased a call spread option for EUR 108 (CHF 164) from its wholly-owned, non-consolidated subsidiary Adecco Investment as described in Note 1. The prepaid forward and the call spread option are indexed to and settled in the Company’s own shares and therefore are accounted for as equity instruments included in additional paid-in capital. The strike prices of both instruments are reduced whenever the Company makes a dividend distribution by a fraction determined as follows: (share price excluding dividend minus dividend per share) divided by (share price excluding dividend). In 2010, the strike prices of both instruments were reduced due to the dividend distribution made by the Company in the second quarter of 2010.

The initial and current terms of these contracts are as follows:

 

Sold prepaid forward

Purchased call spread option

 

Initial

31.12.2010

Initial

31.12.2010

Forward/Strike Price

CHF 50.50, received on
November 26, 2009

CHF 49.87

 Lower call price = CHF 50.50
 Upper call price = CHF 60.60

Lower call price = CHF 49.87
Upper call price = CHF 59.84

Number of shares
to which the contract
is indexed

17,821,782 initial
underlying shares

18,046,922 underlying
shares

 17,821,782 initial underlying
 shares

18,046,922 underlying
shares

Maximum number of
shares to be delivered

17,821,782 subject to
dividend and other anti-
dilution adjustments

18,046,922 subject to
dividend and other anti-
dilution adjustments

 2,970,297 subject to
 dividend and other anti-
 dilution adjustments

3,006,815 subject to
dividend and other anti-
dilution adjustments

Treasury shares

Under the completed share buyback programmes approved by the Board of Directors of Adecco S.A., the Company acquired 116,487 and 8,458,891 treasury shares for a total consideration of EUR 3 and EUR 279 in 2009 and 2008, respectively. The Company intends to acquire up to an additional 2% of issued shares of Adecco S.A., if and when opportune.

As of December 31, 2010, the treasury shares are intended to be used for the settlement of the prepaid forward and the Company’s outstanding employees stock option plans and long-term incentive plans (for further details refer to Note 9) as well as to minimise potential dilution related to the issuance of future financial instruments.

In December 2010, 580,624 treasury shares were used upon the exercise of call options on Adecco S.A. shares which were entered into in connection with employee tradable stock option programme. In 2010 and 2009, the Company awarded 5,356 and 7,516 treasury shares, respectively to the Chairman of the Board of Directors as part of his compensation package (refer to section 3.1.1 “Board of Directors compensation” within the Remuneration Report). In addition, in 2010, 33,529 shares were used to settle stock option exercises and 3,086 treasury shares were sold.

Under Swiss law, treasury shares are not entitled to dividend distribution.

Accumulated other comprehensive income/(loss), net

The components of accumulated other comprehensive income/(loss), net of tax, are as follows:

in EUR

31.12.2010

31.12.2009

 

 

 

Currency translation adjustment

(166)

(260)

Unrealised gain on cash flow hedging activities

 

1

Pension related adjustments

(18)

(12)

Accumulated other comprehensive income/(loss), net

(184)

(271)