The directors present their Annual Report and the audited financial statements of Oriflame Cosmetics S.A. (“the Company”) and its subsidiaries (together “the Group”) for the year ended 31 December 2010.
The Chairman’s letter, the CEO statement and the Corporate Governance report as well as the report on internal control and monitoring on pages 50, 8, and 57–63 all form part of this report.
Business review
The Chairman’s letter, the CEO statement on pages 50 and 8 includes a fair review of the development of the activities of the Company and its subsidiaries over the year and likely future development of the activities.
Key performance indicators
The key figures of the performance of the Group can be found on page 52 of this Annual Report.
Activities in the field of research & development
In 2010, the Group increased its R&D expenses by 5.2 percent to €11.3 million compared to €10.8 million in 2009.
Capital structure and shareholding
Details of the capital structure of the Company can be found in note 19 and on page 54–55 of this Annual Report.
Restrictions on the transfer of securities or on voting rights
Oriflame Cosmetics was introduced on the NASDAQ OMX Nordic Exchange on 24 March 2004 through an initial public offering of Swedish Depositary Receipts (SDRs). Each SDR represents one share and each share represents one vote.
As per the Articles of Association of Oriflame Cosmetics S.A. there are no restrictions in regards to transfer of shares or SDRs.
Agreements between shareholders
As of 31 December 2010, Oriflame Cosmetics S.A. was not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and/or affect their voting rights.
Related parties
Information about related parties can be found in note 24 of this Annual Report.
Significant direct and indirect shareholdings
During 2010, the Company held none of its own shares.
Employee share scheme
Details of the long-term incentive plans for the Group’s key management can be found in note 23 – “Equity compensation plans” of the consolidated financial statements.
Board matters
Details of rules governing the appointment and replacement of Board members and the amendment of the Articles of Association as well as the power of the Board members can be found in the section Corporate Governance report on pages 57–59.
The Board has, by resolutions passed at the 2005, 2008 and the 2010 AGM/EGMs, been authorised by the shareholders to issue up to 4,350,000 shares under the outstanding share incentive plans as follows: By the issue of up to 2,250,000 shares to persons exercising their rights under the 2005 share incentive plan for a period ending one year after 19 May 2010, and by the issue of up to 2,100,000 shares to persons exercising their rights under the 2008 share incentive plan for a period ending five years after 19 May 2008.
During 2010, the Board has issued a total of 165,569 shares under the outstanding share incentive plans and since 2005 a total of 1,452,102 shares. Further details about share issuance under the Company’s share incentive plans are found in note 23 – “Equity compensation plans” of the consolidated financial statements.
Employment agreements
Under current contract terms, no compensation is provided for employees of the Group who resign except as follows: In connection with the 2007 restructuring, employees who chose to accept to relocate to other offices within the Group were offered a redundancy package that would be partly payable also if the employee themselves chose to resign during the five years following the restructuring.
In terms of dismissal by the employer, no contract stipulates any severance except as follows:
- Executive Vice Presidents and up are entitled to additional severance if they have been employed in the Group for more than 10 years and/or are above 45 years of age;
- As part of the 2007 restructuring and limited to the five years following the restructuring;
- As part of a non-competition obligation, such non-competition obligation and related severance being exercisable in the sole discretion of the employer.
- Executive Vice Presidents and up are entitled to additional severance if they have been employed in the Group for more than 10 years and/or are above 45 years of age;
- As part of the 2007 restructuring and limited to the five years following the restructuring;
- As part of a non-competition obligation, such non-competition obligation and related severance being exercisable in the sole discretion of the employer.
Contractually an employee is also entitled to their notice period. By law, the Group entities are normally also required to provide statutory payments depending on the length of service. If an employee is made redundant or dismissed without a valid reason, there is a risk that the individual can bring a legal claim against the company for damages. This is not stipulated in the employment contracts but is established by law. None of the Group’s contracts stipulate or provide for employment which has been terminated due to a takeover bid; local law will stipulate the requirements the employer must follow in such circumstances.
Principal risks and uncertainties
Details of principal risks and uncertainties can be found on page 61 in the Corporate Governance report, page 62 in the Internal Control Report and in note 28 – “Financial instruments and financial risk management” of the consolidated financial statements. In terms of going concern, the Group’s own cash flow should together with existing facilities secure the Company’s financing needs for the foreseeable future.
Subsequent events since the end of the financial year
No significant events have occurred since the end of the financial year.