Annual Report - SES-imagotag€¦ · 33 A. 2018 ACTIVITY REPORT 4 B. FINANCIAL REPORT 32 I....
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Annual Report 2018
Transcript of Annual Report - SES-imagotag€¦ · 33 A. 2018 ACTIVITY REPORT 4 B. FINANCIAL REPORT 32 I....
Annual Report2018
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Annual report
FILING WITH THE FRENCH FINANCIAL MARKET AUTHORITY (AMF)This annual report contains the annual financial report filed with the French Financial Market Authority (AMF) on May 3, 2019.
This document was prepared by the issuer and is binding on its signatories.
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A. 2018 ACTIVITY REPORT 4
B. FINANCIAL REPORT 32
I. Management Report 34
II. Special Report 70
III. Corporate Governance Report 86
IV. General Meeting of May 24, 2019 114
V. Accounts 140
VI. Reports and Certification 184
Contents
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Annual report
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5
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Profile 7
Chairman's Message 8
More than 250 Retailers in 61 Countries 10
Global Leader 11
History 12
Shareholding Structure 14
Stock Information 15
Key Figures 16
2018 in Brief 20
Innovations 22
ACTIVITYREPORT 2018
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ProfileGlobal #1 in digital solutions for physical commerce
Our mission is to guide retailers through their digital transformation, helping them:
a Build connected, ultra-efficient stores.
a Deliver a true omnichannel experience to shoppers.
17,000stores
61countries
170million smart labels
€188 MSales
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Chairman’s Message
Cré
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hoto
Jennifer D
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Physical stores will stay at the heart of tomorrow’s omnichannel retail
Photo
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Delh
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Chairman’s Message
product and get advice from staff members who have been freed up from all automatable tasks. The store will also be a local tool that can deliver local orders in 30 mi-nutes. The era of "physical e-com-merce" is near, and it's going to change the industry. Lastly, thanks to the increased investment allowed by much better economic perfor-mance, it will be a space for expe-rience and sociability, dedicated to innovation, fresh products, and pleasure purchases.
It is toward this new golden age of physical commerce, solidly camped at the center of tomorrow’s omni-channel commerce, that all our R&D efforts in service of our clients are aimed.
Around this vision, and through to our global strategy, we have brought together top-tier partners (BOE, Mi-crosoft, SAP, Cisco, Aruba, Pana-sonic, Wirecard, and others). This powerful technological and com-mercial ecosystem, built in just two years thanks to the development of VUSION, will carry us in the years to come.
The current year should see growth accelerate and a return to profitabi-lity. Now, more than ever, the aims of our VUSION 2022 plan are the aim of all SES-imagotag teams, united in service of our clients.
Thierry GADOUChairman and Chief Executive Offi-cer, SES-imagotag
For SES-imagotag, 2018 was a pivotal year. We consolidated the foundations of our future global growth through our industrial, tech-nological, and financial partnership with BOE and the launch of our new VUSION 2022 strategic plan.
Despite a slow first half, due to the finalization of the ramp-up of our industrial facilities, we met our stated growth targets early in the year, ending above our average an-nual growth rate of 20% since the start of the decade.
VUSION, our new Retail IoT platform, has been welcomed by the market, and its technological and functio-nal advantage is widely recognized. Many leaders in their respective sectors and geographies have chosen us to guide them through their digital transformation toward more efficient omnichannel com-merce.
Beyond the growth in sales and order intake, SES-imagotag has posted strong growth in the number of new pilots, and an increasingly even distribution of those pilots across different continents, inclu-ding Asia and North America. These are all signs that announce the ap-proach of a worldwide adoption of smart labels in retail.
The store of tomorrow will be smar-ter. It will be enhanced by the Inter-net of Things (screens, sensors, and cameras) and artificial intelligence. It will be collaborative, thanks to the Cloud. It will be an extremely pro-ductive and optimized tool - more automated and data-driven. For shoppers, irritants will have disap-peared (stock-outs, checkout lines, etc.), and it will be easy to find a
The Retail IoT Revolution has begun
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More than 250RETAILERS
in 61 countries
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A GLOBAL LEADER
Group Headquarters
Europe: Paris
Logistics
Europe: France and Austria
Americas: United States and Mexico
Asia: Hong Kong
Subsidiaries and Sales Representatives
Europe: France, Austria, Germany, Denmark, Spain, Italy, Netherlands, United Kingdom
Americas: United States, Canada, Mexico
Asia: Singapore, Hong Kong, China, Taiwan PRC
R&D Centers
IoT: France, Austria,Germany, Taiwan PRC
Software: France, Germany, Ireland
For more than 25 years, SES-imagotag has supported the growth of its historic clients (Leclerc, Intermarché, Système U, Auchan, Monoprix, Carrefour, and more) as well as many international brands (Media Markt, Saturn, Jysk, Kiwi, Dansk, Fairprice, Muticedi, Spar, PAM, Rewe,
T-Mobile, Coop, and Euronics), totaling about 100 distributors around the world. Today, the Group has thirteen of its own subsidiaries and representatives along with more than 50 international partners.
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History2012• G-Tag +, NFC-Tag (LSA and
Equipmag awards), and new Jee-gy 2.0 software
• Geographic expansion
• (Sweden, United Kingdom, Aus-tralia, North America)
• More than 6,700 stores installed
• First connected store
2014• Strategic alliance with imagotag
GmbH (Austria)
• First digital mockup of the connec-ted store (3D store) in partnership with Atos
• Launch of award-winning PPS (product positioning systems) at Equipmag
• First store equipped with color labels
• More than 9,000 stores installed, of which more than 1,000 connected stores
2013• SES present in more than 52
countries
• 700 connected stores (NFC) installed
2016
2015• Largest electronic labeling contract
in history (€98 M, 1,000 stores)
• Over €110 M in revenue
• Top store with fully-connected path-to-purchase, honored with an LSA Innovation Award
• SES best "contactless" solution at World Smart Week Awards 2015
• Launch of Jeegy S
• More than 10,000 stores installed
• SES becomes SES-imagotag
• Over €175 M in revenue
• Casino Group chooses SES-imagotag to modernize its stores
• SES-imagotag signs an exclusive contract with JYSK Nordic Sephora chooses SES-imagotag for its stores in France
• Findbox GMBH and Pervasive Displays Inc. (PDi) acquired
• SES-imagotag recognized at the 2016 LSA Awards in the Merchandising category for its product geolocation solution
• 100% Cloud solution launched
1992• SES created
2011• New G-Tag and S-Tag + labels
2005• SES present in 10 countries
1993• First store equipped
2006• SES listed on the Paris stock exchange
2000• One million ESLs installed
2007• Present in Asia and Latin America
2002• First international contract
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• Alliance with BOE Technology Group
• VUSION Retail IoT platform launched
• Intermarché and Casino choose SES-imagotag as their electronic tag supplier
• Dixons Carphone Nordic chooses
• SES-imagotag for 100% Cloud de-ployment in its stores
• Partnership with Hussmann in Australia
• SES-imagotag recognized at the 2017 LSA Awards in the Merchan-dising category for its automatic stock-out detection solution
• SES-imagotag takes the prize for "Best Use of In-Store Technology" at the Seamless Asia trade show in Singapore
• SES-imagotag and EZ Workspace win 1st prize for Innovation at Workspace Expo 2017
• New VUSION 2022 strategic plan presented
• Strategic collaboration between E Ink and SES-imagotag
• Euronics chooses SES-imagotag to digitalize its stores
• Dixons Carphone Nordic continues its deployment in Scandinavia with
SES-imagotag
• Sharaf DG chooses SES-imagotag, the first deployment of electronic shelf labels in the Middle East
• SES-imagotag teams up with Hussmann in North America and Panasonic in Europe
• Partners with Bizerba
• Red Dot Awards recognize VUSION label design
• PERIFEM Awards honor SES-imagotag's ShelfWatch solution
2017
2018
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At 12/31/2018
BOE Smart Retail(Hong Kong) Co
74.39%
Yuen-Yu Investment Co. Ltd.(E-Ink Holdings)
5.98%
Others
19.63%
ShareholdingStructure
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Stock Information
Event Date
2018 Revenue February 13, 2019
2018 Performance March 13, 2019
First-Half 2019 Revenue April 25, 2019
Annual General Meeting May 24, 2019
First-Half 2019 Revenue July 25, 2019
First-Half 2019 Revenue September 10, 2019
Third Quarter 2019 Revenue October 25, 2019
2019 Financial Calendar
Financial Reporting
Dividend Distribution Policy
SES-imagotag and BOE Technology Group
On December 21, 2017, BOE Technology Group and SES-imagotag announced the acquisition of a majority block of 6,669,176 SES-imagotag shares at a price of 30 euros, through a company created for that purpose, BOE Smart Retail (Hong Kong) Co. Limited ("BOE Smart Retail"). This company is held indirectly by BOE Techno-logy Group (about 80%), and (about 20%) by a company controlled by the SES-imagotag management that asso-ciated with this operation.
Prior to the acquisition of the block of shares mentioned above, the managers in question contributed 537,520 SES-imagotag shares to BOE Smart Retail and partici-pated in a capital increase by BOE Smart Retail, which they subscribed to in cash.
Moreover, a shareholders' agreement was entered into governing BOE Smart Retail shareholder relations and constituting an action in concert with regard to SES-ima-gotag. Under the terms of the agreement, the managers agreed to retain their BOE Smart Retail shares for five years, demonstrating their continued commitment to and involvement in SES-imagotag.
Through the majority stake of BOE Technology Group, SES-imagotag has a long-term shareholder who is an in-dustry expert, and an industrial partner who is capable of guiding its international growth, particularly across Asia.
In this way, BOE Technology Group plans to bring its full expertise to aid the development of a line of increasingly connected products, and support the international sales of SES-imagotag's products and services in the most dynamic areas (North America and Asia).
Capital increase reserved for E-Ink
As part of the Company's strategic partnership project with the E-Ink group, and further to the approval by the General Shareholders' Meeting held on June 22, 2018 of the 15th resolution submitted to them, SES-imago-tag carried out an increase of the Company's capital on June 28, 2018 without preferential subscription rights, in the amount of 25,999,980 euros (premium included) for Yuen-Yu Investment Co. Ltd., a subsidiary of E-Ink Hol-dings Inc.
The total nominal amount of said capital increase was one million, seven hundred thirty-three thousand, three hundred and thirty-two euros (€1,733,332) by issuing eight hundred sixty-six thousand, one hundred and sixty-six (866,666) new shares with a par value of two (2) euros each;
The new shares, with a par value of two euros, were is-sued at the unit price of thirty euros (€30), with a pre-mium of twenty-eight euros (€28) per share. These new shares made up 5.98% of the capital of SES-imagotag at December 31, 2018.
The goal of this industrial and commercial partnership is to accelerate the growth of both companies in "smart paper" and in applications dedicated to physical com-merce, the focus of their expertise. E-Ink will capita-lize on its e-Paper film technology for IoT applications, and SES-imagotag will accelerate the development of that technology by industrializing and marketing high-added-value solutions dedicated to digitalizing physical commerce.
The company does not plan to distribute dividends for the 2018 fiscal year.
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Annual report
61countries
375employees
170million ESLs
installed in more than
17,000stores
More than
25 yearsof history
Global leader with
188€million in
sales
Key
Figures
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Key
Figures
39.6
81.2
68.2
111.2
44.5
82.3
22.9
63.0
109.1 83.9 128.4
41.6
43.0
37.8
40.1
67.8
69.1
59.5
176.9 153.0
SALES in €M
InternationalFrance
2012 2013 2014 2015 2016 2017 2018
187.9
1919
132.1
55.8
New installationsInstalled Base
SALES in €M
98.6
54.4
81.2 111.282.363.0 176.9 153.0 187.9
2012 2013 2014 2015 2016 2017 2018
37.8
25.2
52.9
29.4
46.0
35.2
75.2
36.0
135.2
41.7
(Revenue by activity, €M)
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JanuarySES-imagotag at NRF in New York City
Partners with Hussmann in North America
FebruaryPartners with Panasonic in Europe
SES-imagotag at EuroCIS in Düsseldorf
MarchSES-imagotag presents its solutions at Retail Tech and SMTS in Tokyo
Partners with Bizerba
Conference by Thierry Gadou at the Wine & Business Club in Paris on the future of commerce
AprilNew VUSION label honored at Red Dot Awards
Euronics chooses SES-imagotag
SES-imagotag partner of TCG Summit in Berlin
SES-imagotag at World Retail Congress in Madrid SES-imagotag at Seamless Asia trade show in Singapore
MaySES-imagotag and E-Ink announce strategic cooperation
SES-imagotag at VivaTech trade show in Paris
New VUSION 22 strategic plan presented
SES-imagotag takes the prize for "Best Use of In-Store Technology" at the Seamless Asia trade show in Singapore
SES-imagotag in London for RBTE trade show
SES-imagotag at Seamless in Dubai
2018 in Brief
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JuneDixons Carphone Nordic chooses SES-imagotag
SES-imagotag in Hong Kong for Retail Asia Expo
JulySharaf DG chooses SES-imagotag, the first deployment of electronic shelf labels in the Middle East
SeptemberSES-imagotag wins a deployment contract with Colruyt in Belgium
Conference on the future of physical commerce with Thierry Gadou at Paris Retail Week
OctoberFirst store in Japan
SES-imagotag at Casino Proximité trade show in Lyon
SES-imagotag at GALEC Leclerc trade show
NovemberSES-imagotag present in Beijing for the BOE Group's partner event (IPC) and a conference by Thierry Gadou
Microsoft displays the SES-imagotag solution at its Microsoft Experiences trade show
DecemberPERIFEM Awards honor SES-imagotag's ShelfWatch solution in Paris
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Building the
digital platformof PHYSICAL RETAIL
SES-imagotag's new five-year strategic plan, named VUSION 2022 and developed in partnership with its main shareholder BOE Technology Group, is aimed at developing the first global "Retail IoT" platform and accelera-ting the digitalization of physical commerce by enhancing the added value, competitiveness, and ROI of smart labels.
Physical stores must become more connected, interactive, measurable, remote-activatable, and collaborative with brands as well as partners, with the goal of considerably increasing the efficiency, accuracy, and value of distribution processes.
The goal of the VUSION platform, developed by SES-imagotag, is to enable these break-throughs and give merchants the means to a successful digital transformation. Both hard-ware and software, this platform pairs the most advanced e-labeling technology with ultra-low-power radio infrastructure, high-resolution e-Paper and TFT color screens, sensors, LED flash, and image recognition.
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The Largest
Retail IoT EcosystemIn the World
With more than 40 million cloud-connected digital labels, SES-imagotag is building the first global Retail IoT platform, and is also developing the market's #1 ecosystem through global alliances.
The VUSION platform is hosted on Microsoft's Azure cloud, which gives retailers all over the world, on every continent, guaranteed ac-cess to the services and software offered by SES-imagotag.
The Group has also developed several alliances with world leaders in networks, like Cisco and Aruba, to make the infrastructure lighter and let stores easily procure e-labels and access the VUSION platform’s solutions.
This powerful and global technological and commercial ecosystem, developed through VUSION and its collaborative connected store concept, is one of the pillars of SES-imagotag's strategy.
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ShelfWatch, the stock-out detection solution developed by SES-imagotag, gives the exact location of each pro-duct using geolocated labels which, when matched with store cameras, can detect stock-outs and display shelf anomalies in real time.
By identifying each shelf, each la-bel, and its associated product, ShelfWatch can detect and identify any stock-outs and any merchan-dising anomalies. These data are available on the tablet, with the lo-cation of the corrective measures to be taken. This helps staff members focus on keeping shelves organized and avoiding stock-outs and reve-nue loss, while being more available to customers.
Thanks to ShelfWatch, stores can meet their first operating priority: having accurate stock and shelf sta-tusat all times.
On-Shelf Availability
Optimization
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Storefront lets you display the products available on shelves and at store prices. So consumers can access the store map, current promotional of-fers, and the list of new items avai-lable in-store. A search bar also gi-ves consumers quick access to their favorite products.
Storefront was developed as a web app to facilitate consumers' experience, due to these advantages:
• No app store
• No download times
• No account creation
• No password
With product geolocation by label, the platform also includes automated planogram management to improve product availability and click & collect productivity.
IN-StorE
Digital Services
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AdShelf is a media platform that lets brands and distributors design, manage, and deploy synchronized digital in-store advertising cam-paigns.
Now, you can relay an in-store ad campaign with just one click, thanks to our connected platform with di-gital labels, which have become genuine communications media for broadcasting brand content.
More than a media platform, AdShelf works like an advertising platform to let you manage coupons and pro-motional offers from the brands, in real time. The platform is fully Cloud-based, which gives brands the option of managing their product informa-tion and launching campaigns in coordination with the distributor, on large-format labels (4.2", 7.4", or 12"). These labels are smartphone-interac-tive (NFC, QR code). They let consu-mers find additional, high-added-value, contextualized information, which strengthens their brand enga-gement. Lastly, these interactions are measured, which gives the brand and the label a precise tool for analyzing the impact and engagement inspired by these advertisements.
AdvertisE at the Shelf
The brand, the store, and the label have 24/7/365 access to the plat-form to create the ads’ designs and manage them remotely. An in-store ad campaign can be created remo-tely, in just one click.
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B
I - MANAGEMENT REPORT 341. Group presentation 351.1 Description of the Group’s main business activities 351.2 Highlights of the year 351.3 Strengths and competitive advantages 371.4 Reasearch and development 381.5 Subsidiaries and holding 392. Risk factors and uncertainties 422.1 Risks associated with the business dector of the group 432.2 Risks associated with the activities of the group 442.3 Risks associated with the company 472.4 Market Risks 482.5 Legal and compliance Risks 482.6 Insurance and risks management 503. Management report on financial results 543.1 Key performance Indicators 553.2 Comments on financial results 553.3 Comments on cash and debt 583.4 Outlook 583.5 Corporate financial statements 594. Shareholding structure and information on the share capital 624.1 Change in the amount of share capital over the last five years 634.2 Structure of the Company’s share capital 644.3 Legal threshold crossing declarations and declarations of intentions 644.4 Share buyback program 654.5 Employee share ownership 68II – SPECIAL REPORTS 705. Special Report on Stock Options 706. Special Report on Bonus Shares allocation 767. Supplementary Board of Directors report 82III – GOVERNANCE REPORT 868.1 Composition and functioning of the Board of Directors 878.2 Composition and duties of the Audit committee 928.3 Membership of the appointment and compensation committee 948.4 Non voting directors 948.5 Shareholders meeting and shareholders participation 958.6 Table of delegations 968.7 Information about corporate officers 988.8 Auditors 1068.9 Injunctions for anticompetitive pratices 1068.10 Deposits, advances and guarantees 1068.11 Regulatory agreements 1068.12 Declaration on the Governance 1088.13 Information that may have an impact in the event of a public offering 108IV SHAREHOLDERS’ MEETING OF MAY 24 2019 114 9.1 The purview of the Ordinary General Meeting 1169.2 The purview of the Extraordinary General Meeting 1189.3 Report of the Board of Directors to the combined shareholders’ meeting of may 24, 2019 130V. FINANCIAL STATEMENTS 140 10.1 Consolidated financial statements 14110.2 Corporate financial statements 163VI. AUDITORS REPORTS AND CERTIFICATION 184 11. Reports by the statutory auditors and certifications 18412. Certifications from person in charge of the annual report 204
Financial ReportB
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Annual report
1 Presentation of the Group’s activities
I-MANAGEMENT REPORT
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For the past 25 years, SES-imagotag has been partnering with retailers who are using point-of-sale digital technologies. The global leader in smart labels and pricing automa-tion, SES-imagotag has developed a comprehensive digital & IoT (Internet of Things) platform that enables re-tailers to fully connect and digitise their points-of-sale, automate low added value processes, know, inform and serve their customers better, produce high-quality information to optimise shelf-maintenance, avoid stock-outs and waste and to create an omni-channel service that deve-lops loyalty and adapts to new cus-tomer expectations.
SES-imagotag is a group with no in-dustrial base, but rather focuses on innovation and R&D, as well as the distribution and installation of its solutions, either directly or through its partner network.
The solutions proposed by the Group are made up of hardware (electronic tags) and software, with the electro-nic tags connected to data mana-gement software via radio frequen-cies. The Group proposes software
1.1 Description of the Group’s main business activities
such as Jeegy and Core to its clients in local or Cloud mode and enables real-time information changes.
Our offering includes both hardware and software components with:
- electronic shelf labels – the Group is currently the only market player to propose all the available display technologies (E-paper, TFT and graphic LCD);
- a multi-channel communication platform that links together (i) the management centre, (ii) labels or screens and (iii) customers (via their smartphones) – on this point, SES-imagotag also stands out by the range of technologies that it offers; Bluetooth Low Energy (BLE), Near-Field Communication (NFC) and Wi-Fi solutions that can be integrated into all display tech-nologies;
- a software suite (Jeegy) that en-ables centralised and dynamic price management, stock mana-gement and product geolocation, the implementation of additional services for customers (self-scan
mobile, targeted offers, geoloca-tion, etc.) and the monitoring of the installed equipment for main-tenance purposes.
This offering thus enables the Group (i) not only to propose a centralised and dynamic price management system that offers direct and ra-pidly observable productivity gains, which is what clients are looking for above all, but also (ii) additio-nal store digitalisation services, fo-cused both on customer service and internal productivity gains, which can generate strong customer inte-rest in a second approach.
1.2 Highlights in 2018
Operational activity
2018 was a transitional period.
First of all, a period of commercial transition heralded by the interest of major European distributors in elec-tronic labelling solutions. This had two main effects:
(i) externally, it created fierce compe-tition to win major contracts, and,
(ii) internally, product transition was stepped up to launch practically a year ahead of schedule a new ge-neration of labels (VUSION range) which combine the best of techno-logies developed in-house and ac-quired from SES-imagotag GmbH, SES-imagotag Deutschland GmbH and PDi (Pervasive Displays Inc.) and is able to group together all our clients’ orders and thus cut down on unit production costs.
This was followed by capital transi-tion:
• With the disposal of the equity in-terests of shareholders who had held shares in the company for several years to a new Chinese controlling shareholder, BOE, whose aim is to support the Group in its industrial and commercial deployment, in particular on the international market. BOE had a
Management report
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Annual report
74.39% stake in SES-imagotag as at 31 décember 2018; BOE, the Group’s new partner and majority shareholder has completed the construction of an integrated digi-tal label plant in Chongqing, China. The plant was commissioned in close cooperation with SES-ima-gotag teams.
• The increase in the stake of a new shareholder, E Ink, to 5.98% as at 31 december 2018.
The product and commercial transi-tions were coupled with strong order performance with €200 million orders in 2017 compared with €145 million in 2016, and €251 million in 2018;
2018 was a successful transitio-nal year for SES-imagotag, ena-bling the Group to build the base it needed to step up its growth, in line with its VUSION 2022 strategic plan. Thanks to the ramp-up of new state-of-the-art production sites in Asia, deliveries of existing orders accelerated in the second half of the year. SES-imagotag recorded a 23% growth in full-year at €187.9 million.
Vusion 2022 strategic plan
On 23 May 2018, the Group pre-sented its five-year “VUSION 2022” strategic plan, aimed at consolida-ting its leadership on the physical retail digitalisation market (Retail IoT), by taking advantage of the in-creased global adoption of digital labels by retailers.
Equity
Simplified takeover bid process
On 20 December 2017, BOE Smart Re-tail (Hong Kong), jointly owned by BOE Technology and the management of SES-imagotag, acquired a controlling interest of 6,669,176 SES-imagotag shares at €30 per share. Prior to the acquisition of this block of shares, the Company controlled by the ma-nagement had contributed 537,520 SES-imagotag shares to BOE Smart
Retail and taken part in a cash capital increase of €17.9 million in BOE Smart Retail. The main executive managers undertook in particular to keep their BOE Smart Retail shares for at least five years. This huge reinvestment re-flects the strong commitment of the management to the Company’s long-term development.
In accordance with regulations, BOE Smart Retail filed an offering circular with the French market re-gulatory authority, AMF, in view of a simplified takeover bid for the remaining SES-imagotag shares at the same price of €30 per share. On 20 February 2018, the AMF appro-ved the offering circular under the number 18-050, and BOE Smart Re-tail’s offer was launched on 2 March and closed on 15 March 2018.
On 15 March 2018, Société Générale informed the AMF that under the sim-plified takeover bid for SES-imagotag’s shares, opened from 2 to 15 March 2018 inclusive, BOE Smart Retail had acquired 3,582,490 SES-imagotag shares on the market at a unit price of €30.
When the bid was closed on 15 March 2018, the initiator held 10,789,186 SES-imagotag shares.
Acquisition of SES-imagotag shares by E Ink
The SES-imagotag SA Work Council has been informed about this sim-plified take over bid, during a spe-cific meeting on January 24 2018, in compliance with articles L.2312-42 and L. 2312-52 of the Labour Law.
The Group and E Ink® Holdings (“E Ink”), the leader in electronic ink technology, have strengthened their strategic alliance to accelerate and expand their growth on the market of IoT solutions for physical retail, with the acquisition of a 6.01% stake in the Company by E Ink, now 5.98% as of December 31 2018, represen-ting an investment of €26 million, with a price per share of €30 as part
of a capital increase reserved for E Ink, which was approved by the Sharehol-ders’ Meeting of 22 June 2018.
As part of this strategic partnership and the acquisition of shares, the Company has undertaken to ap-point to the Board of Directors a non-voting director designated by E Ink. In line with this undertaking, at its meeting on 22 June 2018, the Board of Directors appointed Mr Johnson Lee, Chairman of E Ink and the candidate designated by E Ink, as a non-voting director of the Board for a three-year term.
E Ink also committed to a lock-up and standstill period of two years as from the completion of the capital increase, save for the usual exceptions.
Board membership
The composition of the Board of Di-rectors of SES-imagotag was there-fore changed to take into account the changes in shareholding structure ari-sing from the takeover of the Group by BOE and the acquisition of the Group’s shares by E Ink, which resulted in the resignation, on 21 December 2017, of Mr Kinas, a director, Mr Hainguer-lot, a non-voting director and Pechel Industries, represented by Ms Hélène Ploix, followed by the co-optation of Mr Xiangjun Yao and Ms Xiangshun Yin to the Board of Directors, followed by the appointment of Messrs Feng Bai and Mikael Jin (directors), John-son Lee (non-voting director) and Ms Fangqi Ye (director) and Ms Ploix (in-dependent director).
Post closing event
None.
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1.3 Strengths and competitive advantageThe Group’s international success is primarily due to its technological lead in a very specific field: electro-nic labelling for retailers. The main technological challenge of this field is striking the balance between re-liability (update error rate), per-formance (speed and flow rate of data transmissions) and energy consumption (battery life cycle).
The Group’s expertise is based on:
• Innovation, which consists in dis-play technologies, fixing systems and radio frequencies, which are critical for sending data to the la-bels. The Group’s substantial efforts when it comes to innovation have led it to rapidly identify a large nu-mber of start-ups that have deve-loped technologies complementary to SES-imagotag’s business and expertise. It has integrated these companies into the Group through acquisitions in recent years), and can now offer its clients a broad range of technological solutions that best meet their requirements.
• The Group is able to maintain the quality of the hardware, even for large volumes, by attentively se-lecting subcontractors and com-ponent suppliers and by seeing to it that they maintain the quality standards required during mass production phases. The recent alliance with BOE is an additio-nal advantage aimed at reducing production costs to improve the yield of digital labels and to boost their adoption by clients. The ob-jective is to democratise access to the VUSION range by best meeting the expectations of consumers, re-tailers and brands and by offering greater potential of use for marke-ting and advertising.
To achieve this objective, BOE has built an integrated digital la-bel plant of critical size, in close co-operation with SES-imagotag for its launch. Production is ex-pected to be ramped up in 2018, in order to continue to increase the
competitiveness of the products offered by the Group.
• The quality and depth of the range of services offered, thanks to the Group’s expertise in the deve-lopment and installation of criti-cal systems for its clients and the broad range of in-store manage-ment services and data analyses (software platform) proposed by the Group. The Group is also com-mitted to reducing the total cost of ownership (TCO) of equipment for its clients, in particular by using radio infrastructure that is as light and as plug-and-play as possible, by reducing IT costs thanks to the Cloud, by improving hardware quality to maximise the amortisa-tion period or by providing op-timised preventive maintenance services.
Industry overview
E-commerce accounts for 10% of to-tal sales made by physical retail and e-commerce. Although e-commerce is expected to grow steadily, the physical store should remain a key element of differentiation because it continues to be the personalised point of contact between consumers and in-store sales advisors.
Retail players have identified the leverage provided by their physical point-of-sale coupled with the on-line experiences that consumers va-lue. This complementarity, referred to as “omni-channel convergence”, can be developed in particular through electronic labels that enable the digital experiences to be imple-mented in the store.
Since its inception, the Group has made it possible for retailers to use an increasing number of digi-tal solutions in their point-of-sale networks. The Group has created a complete platform that enables the digitalisation of stores, the automa-tion of processes with lower added value, in order to better understand, inform and serve consumers, pro-
duce quality information to prevent stock-outs, waste and to create a seamless service between the phy-sical and digital experience.
Buyers have become consumers who use multiple channels, conside-ring merchant websites as a means of instantly finding the right product from among an extensive offering, within record time.
In this context, faced with e-commerce, the traditional retail sector must radi-cally transform its offering: the traditio-nal model has turned to digitalisation and now offers services such as “drive-in”, “click & collect” and home delivery.
Physical retail outlets have followed this transformation by becoming points of interaction where the consumer, brands and the retailer interact and communicate, where the consumer can obtain access to advisory services and specific in-formation about the product.
Figures and market trends
The electronic tag market has com-pleted a transitional phase, shifting from the segmented and mono-chrome label to the colour graphic label. Historic labels have limited display possibilities especially when they are used for promotional dis-play.
Europe is the main core of this mar-ket, in particular France, Scandina-via and Germany. The Iberian Pe-ninsula and Italy continue to grow, while Central Europe and Russia are rising steadily. In the UK, the limited margins of retail networks continue to curb the development of the digi-talisation of retail outlets.
In the United States, there is growing interest in the non-food retail sec-tor, in particular the retail of elec-tronic goods, home improvement and decoration retail products. This movement is due to competition from Amazon and retail websites: electronic labels are one of the only
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possible means of guaranteeing price agility in order to keep up with the competition. In the food distribu-tion sector in the US, a phenomenon similar to that observed in the UK is apparent: the margins of the sector do not yet make such investments possible, although the growth of the market should lead to lower the ave-rage prices for smart labelling de-vices, a potential vector of growth.
The forecasts for the period between 2017 and 2019 show that there are very significant opportu-nities in China and Asia: the mobile shopping culture is already strongly entrenched in these regions, as well as the culture of targeted promotio-nal offers and coupons, etc.
The Group thus intends to continue to develop its activities in Asia, in parti-cularly in China, to capitalise on this growth, in particular with the strate-gic partnerships with BOE, E Ink.
The significant capital expenditure amount to implement our solutions, which is the main obstacle for our customers, triggers a specific focus on prices and on short term return on investment ratio (mostly linked to time saving and flexibility in centra-lized price management). Less tan-gible benefits offered by additional features and state of the art techno-logies, come second in the customers cession process. In this competitve environment, market players who offer less sophisticated but cheaper
solution may suceed better in some cases. Moreover, new comers on the market may seek market share through very low price levels and fierce competition as described in paragraph 2.1.2 of this report.
1.4 Research and development
R&D: innovation, pillar of growth
Innovation is at the heart of the Group’s profitable growth strategy. It is based on a target: make elec-tronic shelf labelling a strategic weapon for retailers, by providing greater added value and advantages such as price flexibility, producti-vity gains, precision marketing and operational efficiency. The Group’s innovation strategy favours the adoption of electronic labelling so-lutions worldwide, and ensures their development in all segments of food and non-food sectors. The Group has several R&D centres specialised in several areas: display technology in Tainan (Taiwan), Radio Frequen-cy technologies in Graz (Austria) and Ettenheim (Germany), Fixtures and Software in Paris and Computer vision in Ettenheim. The Group has relied on its continual efforts towar-ds innovation to become the world leader in its sector with approxima-tely 50% of global market share, and the only French player in this high-tech speciality.
Faced with international competi-tion, the Group’s main asset is its technological innovation ability,
bolstered by the many international patents and innovations that are re-gularly hailed by the profession.
VUSION 22 Plan: build the physical retail digital/IoT platform
VUSION is the culmination of five years of R&D and integration of the technological assets resulting from the acquisitions of SES-imagotag (Imagotag, Findbox, Pervasive Dis-plays Inc., MarketHub).
This hardware and software platforms combines the most advanced tech-nologies relating to digital label, ul-tra-low-consumption infrastructure, high-resolution e-Paper and TFT co-lour screens, sensors (NFC), high-speed communication, LED flash and image recognition.
The digital labels are connected to a range of cloud applications, developed by SES-imagotag or, later by other partners. They enable:
• the geolocation of products and the management of planograms;
• the optimisation order preparation and restocking;
• the automated monitoring of gon-dolas and the automatic detection of stock-outs;
• consumer interactivity and digital services in store;
• advertisements, promotions and digitalised coupons;
• data analysis and price optimisation.
Over and above these applications, the VUSION digital platform brings additional value by enabling
• the connection of other tools and sensors in stores to its open ra-dio infrastructure;
• a collaboration via the Cloud between retailers, their suppliers and partners based on the data collected on the shelves.
With more than 20 million digital la-bels already connected to the Cloud, out of a total of over 150 million cur-rently installed, SES-imagotag is in the process of building the first glo-bal “retail IoT” platform. This number should reach 50 million at the end of the year and over 500 million in five years.
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Main research and patent subjects:
The main research projects are re-lated to:
• energy consumption: the main objective is to obtain a complete system of electronic labels using “graphic” or “e-paper” techno-logies that will give an average
battery life of 5 to 10 years (wi-thout changing or charging the battery);
• display quality, with respect to contrast levels (higher by 20:1) or angle of view (higher than 70°);
• the speed and reliability of in-formation transmission;
• the development of software adapted to the change in the business models of retailers; and
• the Group’s patents (some 300) are defended by three law firms in France, Austria and Taiwan.
1.5 Subsidiaries and holdings
As at 31 December 2018, the Com-pany had thirteen subsidiaries (twelve of which are consolidated).
The subsidiaries are all entities that are directly or indirectly controlled by the Group. Control is characte-rised by the power to orientate the company’s financial and operational policies.
In 2011, SES-imagotag created its first two subsidiaries:
• STORE ELECTRONIC SYSTEMS ASIA PACIFIC PTE. Ltd. in Singapore, wholly-owned by the Company, and now renamed SES-imagotag PTE, Ltd;
• Store Electronic Systems Lati-noamerica S de RL de CV in Mexico City, 99% owned by the Company, and now renamed SES-imagotag Mexico.
In 2013, SES-imagotag created two new subsidiaries:
• Store Electronic Systems, Incor-porated in the United States in the State of Delaware, wholly-owned by the Company (non-consoli-dated in 2016) and now renamed SES-imagotag Inc. ;
• Store Electronic Systems Italia S.R.L. in the Milan province in Ita-ly, wholly-owned by the Company, and now named SES-imagotag Italia SRL.
In 2014, SES-imagotag created Sys-tèmes Eléctroniques Pour Magasins Ltée in Montreal in Canada, and now named SES-imagotag Digital Solu-tions Ltd.
Furthermore, pursuant to a final pro-tocol of 7 March 2014, SES-imagotag acquired all the shares of the Aus-trian company, imagotag GmbH, in two stages spread over a two-year period. This is because the Board of Directors at its meeting on 22 May 2014 noted the acquisition by SES-imagotag of 69.3% of the shares of Imagotag GmbH, which was the first stage of the acquisition of this company. At its meeting of 11 March 2016, the Board of Directors appro-ved the exercise of the purchase op-tion by SES-imagotag for the remai-ning Imagotag GmbH shares.
In 2016, SES-imagotag acquired the following:
• a 67% stake in Findbox GmbH in Germany; (consolidation li-mited to the balance sheet as at 31 December 2016), now called SES-imagotag Deutschland GmbH and wholly-owned since the se-cond half of 2017;
• a 27.95% stake in MarketHub.
In 2016, SES-imagotag also decided to acquire all the shares of Pervasive Displays Inc. in Taiwan. This acqui-sition was approved by the General Shareholders’ Meeting of 30 No-
vember 2016 and was subject to the fulfilment of conditions precedent that were lifted by the Board at the Meeting on 16 February 2017. This entity was consolidated only in 2017.
In 2017, SES-imagotag created four new subsidiaries:
• SES-imagotag Netherlands B.V. in the Netherlands, wholly-owned by SES-imagotag;
• SES-imagotag Danmark A.P.S. in Denmark, wholly-owned by SES-imagotag; and
• SES-imagotag HongKong Ltc in Hong Kong, wholly-owned by SES-imagotag;
• SES-imagotag Iberia S.L. in Madrid, wholly-owned by SES-imagotag;
• SES-imagotag increased its interest in MarketHub to 60%, with the un-derstanding that the remaining shares could be acquired in 2019.
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Summary of subsidiaries and equity investments
% Of shares held as at December 31 2018
Austria
ses-Imagotag GmbH 100%
Canada
ses-Imagotag digital solutions ltd 100%
DenMARK
SES-imagotag Danmark APS 100%
Germany
ses-Imagotag deutschland GmbH 100%
Hong kong
SES-imagotag Hong Kong LTc 100%
Ireland
MARKET HUB TECHNOLOGIES LTD 60%
Italy
ses-Imagotag ITALIA S.R.L 100%
Mexico
ses-Imagotag mexico Srl de cv 99%
Netherlands
SES-imagotag Netherlands B.V 100%
Singapore
ses-Imagotag PTE. LTD 100%
SPAIN
SES-imagotag Iberia S.L. 100%
TAIWAN
Pervasive Displays Inc 100%
United States
ses-Imagotag. inc. 100%
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2 Risk factors and uncertainties
I-MANAGEMENT REPORT
43
Before proceeding with acquiring shares of the Company, investors are invited to examine all the infor-mation contained in this registration document, including the risk factors described below. As of the filing date of this registration document, these risks are those that the Com-pany believes may have a material
2.1.1 Risks associated with economic conditions and their developments
Changes in demand for products of-fered by the Group are generally lin-ked to changes in macroeconomic conditions, in particular changes in gross domestic product in the countries where the Group markets its products and services. In gene-ral, periods of recession or deflation are likely to have a negative impact on consumer demand and spen-ding. As of the filing date of this re-gistration document, growth in the European Union remains limited and the International Monetary Fund’s forecasts for the coming year are cautious (1.9% in the European Union for 2019 (source: IMF, World Economic Outlook, July 2018).
Moreover, the introduction or in-crease of customs barriers and other trade restrictions by certain countries, such as the measures announced by the United States government in the spring of 2018, could trigger a slowdown in world trade, which could have a negative impact on the growth of the world economy, and thus have an adverse effect on the Group’s business. Mo-reover, to the extent that [a signi-ficant portion] [substantially all] of the Group’s products are assem-bled by ESMs located in China, the increase in customs barriers refer-red to above is liable to affect the Group’s exports of these products
2.1 Risks associated with the business sector of the Group
adverse effect on the Group, its bu-siness, financial position, results or outlook, and that are important for its investment decision-making. Inves-tors’ attention is nonetheless drawn to the fact that the overview of risks presented below is not exhaustive and that other risks, unknown or not considered here, as of the registra-
to the United States, even though they represent, at the date of this registration document, a minor part of the Group’s business. To limit its impact, the Group intends to have products intended for export to the United States assembled by an EMS located in Vietnam.
In addition, during periods of eco-nomic recession, some of the Group’s customers may experience financial hardship that may result in late payments or even unpaid bills.
If the current economic situation were to deteriorate, this could have a significant negative impact on the Group, its business, financial posi-tion, results and outlook.
2.1.2 Competition risks
The Group faces fierce competition from various players.
The Group faces internationalisation by players from emerging coun-tries, particularly new Asian entrants, seeking to acquire market share ra-pidly, and the entry of major bu-sinesses that previously specialised in the production of electronic goods and wish to penetrate the digital si-gnage value chain (see paragraph 1.6 “Markets and competitive position” of this registration document).
The competition the Group faces re-quires it to make continuous efforts,
tion date of this registration docu-ment, as likely to have a material adverse effect on the Group, its bu-siness, financial position, results or outlook, may or could exist or arise.
including financial, to ensure the continuation of its external growth policy, to acquire new technologies to accelerate the development of its growth strategy and to drive the ne-cessary technological developments. These efforts may in particular re-quire significant investments in new technologies and new products.
The group has activated €4 458K R&D expenses booked as intangible asset in progress, in 2018.
Despite these research and develop-ment efforts by the Group, competi-tive intensity on the market has in-creased in recent years, with a strong pressure on prices, due in particular to the increasing size of Requests for offers (they can now exceed €200 million, whereas until recently they were systematically under €100 mil-lion). In that context, players that of-fer fewer technological products than the Group but that are more finan-cially competitive may in some cases prove to be better positioned than the Group. In addition, new players seeking to enter the market with very low-cost offers may be a source of increased competition for the Group.
Therefore, despite these efforts, if the Group did not have sufficient finan-cial resources or the necessary skills, particularly in a context of technolo-gical change, to preserve the quality and added value of its products, or if the Group’s customers did not ap-
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2.2 Risks associated with the activities of the Group
preciate the quality and added value of its products, especially if com-pared to those of its competitors, or if these products did not meet their expectations, the Group’s business and financial results could be signi-ficantly affected.
Such competitive pressures could result in a decline of demand for the products supplied by the Group, and force it to reduce its sales prices or make major investments, particularly in innovation and research and de-velopment, in order to maintain the level of product quality and perfor-mance expected by its customers, which could have a significant nega-tive impact on its business, financial position, results or outlook.
2.2.1 Risks associated with the development strategy of the Group
The Group’s financial performance and the success of its strategy will depend on several factors, in parti-cular its ability to:
• grow sales of the traditional elec-tronic labelling solutions business, both in mature markets and on international markets where solu-tions offered by the Group are cur-rently being adopted;
• grow sales of services, in parti-cular through the development of rental contracts for solutions offe-red by the Group and the marke-ting of the product range of these value-added services;
• grow sales associated with the development of new verticals and new non-food markets;
• control the Group’s operating and development costs during periods of very strong commercial growth;
• increase benefits and synergies ex-pected from its various partnerships (see paragraph 2.2.5 below);
In addition, a consolidation by the by the various market players in which the Group operates, in parti-cular its customers in the mass retail sector, whether international, natio-nal, regional or local, could change the competitive landscape of the electronic labelling industry and lead to price pressure, loss of mar-ket share, a decrease in the Group’s sales and/or a decline in its profita-bility, which could have a significant negative impact on its business, fi-nancial position, results or outlook.
2.1.3 Risks associated with changes in technologies and industry standards
The Group must maintain the ability of its organisation to evolve rapidly,
• enter into distribution agreements with distributors based locally in the United States in order to conti-nue its development in this market.
If the Group is not able to achieve these business development ob-jectives, this could have a material adverse effect on the Group, its bu-siness, financial position, results or outlook.
In addition, the Group’s business, results and financial position or out-look could be significantly affected:
• if the Group did not achieve all or part of the objectives set in terms of commercial growth and indus-trial cost savings;
• if market prices for electronic la-bels were to fall significantly and continuously;
• if the growth of the demand for the Group’s solutions were to slow significantly due in particular to an unfavourable economic trend that could result in a significant drop in consumption (some cus-tomers and prospects have to re-gularly abandon or postpone their
in order to adapt to technological developments and customer de-mand. The Group might not invest in products and services adapted to the demand at competitive prices and might not be able to adapt its products and services, costs and organisation in a timely manner, or it might encounter difficulties in carrying out certain critical pro-jects. The occurrence of one or more of these risks may have a ma-terial adverse effect on the Group’s business, financial position, results or outlook.
SES-imagotag solution equipment projects due to limited investment budgets).
2.2.2 Risks associated with doing business in different countries
The Group does business in over 50 countries around the world, with the intention to continue growing its operations in China, Russia, the Middle East and in the countries of Southeast Asia.
The primary risks associated with doing business internationally are:
• the local economic and political si-tuation;
• exchange rate fluctuations;
• restrictions on capital repatriation;
• unexpected changes in the regula-tory environment;
• the various tax systems, especial-ly regulations on the determina-tion of transfer prices, withholding taxes on remittances and other transfers made by holding compa-nies and subsidiaries;
45
• import restrictions;
• customs duties, inspections of ex-ported products and services and other trade barriers.
The Group may not be able to pro-tect itself or hedge against these risks and may encounter difficulties in carrying out its activities in these countries, which could have a ma-terial adverse effect on the Group’s business, financial position, results or outlook.
2.2.3 Risks associated with the dependence on suppliers and the supply and cost of components
The Group outsourced all of the pro-duction of its hardware (electronic labels) to top-tier industrial partners that specialise in electronic product assembly (external manufacturing services, or EMS), including in par-ticular BOE, its main shareholder. In the event of an increase in demand or if the Group needs to replace an existing EMS, it may not be certain that additional production capacity exists or is available on acceptable terms. In addition, the use of new production units may result in pro-duction delays and additional costs for the Group due to the time it will have taken to train new EMSs in the Group’s methods, products, and standards regarding quality control, work, environmental footprint, health and safety. Moreover, pro-duction at one or more EMSs could be interrupted or delayed, tempora-rily or permanently, due to econo-mic, social or technical problems, in particular the insolvency of an EMS, the failure of production sites or an interruption of the production process due to social movements beyond the Group’s control (see also paragraph 2.2.4 below “Risks related to production delays in the new Vusion product range”). Any delay or interruption in the produc-tion of the Group’s products could have a material adverse effect on its business, results, financial position or ability to achieve its objectives.
The Group also depends on the pro-per supply of electronic components
in order to carry out industrial sche-duling with these EMSs. The failure of one or more component suppliers, including as a result of social unrest, unexpected stockouts, quality de-fects, export restrictions or sanc-tions and, more generally, any dis-ruption in supply, in particular due to pressure on the supply of electronic components as a result of the strong growth experienced by the electro-nic goods sector in general, could alter the Group’s production capaci-ties or lead to additional costs that could have an adverse impact on its business, results, financial position or outlook.
Finally, most of the contracts concluded by the Group with its customers do not provide for an automatic price adjustment mecha-nism in the event of an increase in the cost of components. In the absence of any contractual price adjustment mechanism, the Group then seeks to renegotiate its selling prices with its customers when pla-cing orders or renewing contracts in order to pass on, in whole or in part, the increase in component costs, with the result that there is a more or less long-time lag. Any significant upward change in com-ponent costs, due in particular to supply constraints or a concentra-tion of the Group’s suppliers, could therefore, if the Group were not able to pass it on to its customers within a reasonable period of time, have a material adverse effect on the Group’s business, financial po-sition, results and outlook.
2.2.4 Risks related to production delays in the new Vusion product range
Part of the production of the Group’s new Vusion range is subcontracted to the new industrial partner and majority shareholder of the Group, BOE, at the BOE industrial site lo-cated in Chongqing. As a result of delays in the commissioning of the production lines at this site, the Group delayed deliveries of its new Vusion range to its customers du-ring the first half of 2018, resulting in a significant drop in its revenue
compared to the first half of 2017. The Chongqing industrial site is now operational, and the Group has also outsourced part of the produc-tion of the Vusion range to a se-cond player to be able to meet pro-duction needs from 2019 onwards. However, it cannot be ruled out that the Group may once again encoun-ter difficulties in supplying products in the Vusion range due to produc-tion difficulties encountered by the above-mentioned subcontractors. This could delay deliveries to its customers, resulting in a decrease in the Group’s revenue, which could have a significant negative impact on its business, results, financial position and ability to achieve its objectives.
2.2.5 Risks associated with partnerships
As part of its activities, the Group has entered into a number of strate-gic partnerships, particularly in China with BOE Smart Retail (Hong Kong) Co. Limited, a shareholder holding 74,39% in the Company as of 12.31.18, Yuen-Yu Investment Co. Ltd, a subsidiary of the E-Ink Hol-dings Inc. Group, a shareholder hol-ding 5.98% as of 12.31.18.
In taking certain decisions, the Group may be required to seek the agreement of its partners, whose in-terests may not be aligned with its own.
In addition, if one of the Group’s partners encountered financial dif-ficulties, modified its strategy or wished to terminate these strategic partnerships, or, more generally, in the event of a disagreement on the terms of the partnership, this could have a material adverse effect on its business, its financial position, re-sults and outlook.
2.2.6 Acquisition risks
As part of its development policy, the Group has carried out exter-nal growth operations (in parti-cular through acquisitions of bu-sinesses or companies). Although the Group examines and appraises
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all investment projects following a very strict procedure, it cannot guarantee that the assumptions underlying the profitability of in-vestment projects will materialise or that it will successfully integrate acquired or merged companies. Indeed, the integration of acqui-sitions, particularly if they are of a significant size, may require a complex, time-consuming and costly process and involve a num-ber of risks, including bearing the costs and expenses to deal with unforeseen events, management’s distraction from day-to-day ope-rations, increased mobilisation of management teams due to the increase in business volume and scope as a result of the acquisi-tion. Furthermore, the Group can-not guarantee that an acquisition will generate the expected syner-gies, the expected cost savings, an increase in earnings and cash flow, improved operational efficiency and, more generally, any benefits that the Group would expect. If the Group fails to effectively integrate a new acquisition, it may have an adverse effect on its business, fi-nancial position, results, develop-ment and outlook.
2.2.7 Risks associated with dependence on customers
While the Group’s revenue is broadly distributed among a large number of customers, some of them account for a significant share of its total sales. For the twelve months ending 31 December 2018, the Group’s ten largest customers accounted for nearly 54% of the Group’s conso-lidated revenue, and the Group’s largest customer accounted for approximately 9% of the Group’s consolidated revenue. The loss of or reduction in business activity from one or more of these customers, a concentration of the players in the industry in which they operate or the failure of one of these customers could cause the Group’s revenue to decrease proportionally, which may have a material adverse effect on the Group’s business, financial po-sition, results or outlook.
2.2.8 Risks associated with defective products
The Group may occasionally be confronted with a manufacturing defect, a malfunction or an assem-bly of defective components in any of the Group’s products and sys-tems, which could lead to liability claims of varying importance that could damage the Group’s reputa-tion and have significant financial consequences. In this context, the Group has seen, or may or will see a recall of some of its products, or may have to adapt or replace the re-levant equipment.
Such complaints can damage the reputation and quality image of the products involved and therefore damage the image and reputation of the Group. In addition, the costs and financial consequences asso-ciated with these claims are likely to have a material adverse impact on the Group’s business, results, finan-cial position and ability to achieve its objectives.
2.2.9 Risks associated with technologies and data security
The Group can be a victim of com-puter attacks (viruses, denial of ser-vice, etc.), technical failures resul-ting in the unavailability of computer tools, or data theft. The occurrence of any of these events could have a negative impact on the business and performance of the Group.
The introduction of new technolo-gies (Cloud Computing), the deve-lopment of industrial control sys-tems and the development of new uses, including social networks, expose the Group to new threats. Computer attacks and attempts to gain unauthorised access are in-creasingly targeted and carried out by true specialists who can target the Company as well as its private or public customers and partners. More generally, systems’ failures could lead to loss or leakage of information, delays or additional costs that could harm the Group’s strategy or image.
Despite the procedures put in place by the Group, it cannot guarantee coverage of these technological and IT risks and could encounter diffi-culties in carrying out its activities in the event of the occurrence of one of them, which could have an adverse impact on the Group’s bu-siness, results, financial position and ability to achieve its objectives.
2.2.10 Risks associated with corruption and ethics
In the course of its activities, the Group may face risks associated with corruption, particularly in some of the emerging countries in which it operates. The Group ensures that all its employees act in compliance with applicable laws and regula-tions and the values of integrity and respect for internal and external standards that form the basis of its culture.
However, it cannot guarantee that its employees, suppliers, subcontrac-tors or other business partners will comply with the strict requirements it imposes or with the regulations in effect. Any behaviour that contra-dicts these values or regulations, despite the Group’s efforts, could seriously engage the Group’s liabi-lity and have repercussions on its reputation, which could have a si-gnificant negative impact on its bu-siness, financial position, results or outlook.
2.2.11 Risks of new financing needs in euros and in foreign currencies
The Group cannot guarantee the availability of adequate financing at the appropriate time, which could have an adverse impact on its de-velopment capacities and thus have a material adverse effect on its bu-siness, financial position, results or outlook.
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2.3 Risks associated with the Company2.3.1 Risks associated with relations with the majority shareholder
BOE Smart Retail (Hong Kong) Co. Limited (a company ultima-tely controlled by BOE Technology Group Co, Ltd., a company incorpo-rated under Chinese law) (“BOE”), in its capacity as majority sharehol-der holding 74.39% of the share ca-pital and voting rights that can be exercised at the Company’s General Shareholders’ Meeting, exercises a significant influence on the Com-pany in that it alone possesses a sufficient number of voting rights to adopt all resolutions submitted to the Company’s Ordinary Gene-ral Shareholders’ Meeting (such as resolutions pertaining to the ap-pointment and removal of directors, distribution of dividends and the approval of the financial statements) and to the Company’s Extraordina-ry General Shareholders’ meeting (such as resolutions pertaining to a merger, partial contribution of ca-pital, capital increase or any other amendment to the Articles of As-sociation). In addition, 5 of the 9 members of the Board of Directors (excluding employee representa-tives) are appointed by BOE. Al-though this holding will decrease due to the capital increase an-nounced by the Company, BOE will retain control over decisions of the Company’s General Shareholders’ Meeting after the increase.
It is possible that BOE’s interests and objectives are not always aligned with those of the Company or its other shareholders.
Lastly, the BOE group or companies it controls are likely to acquire com-panies carrying on activities that are in direct competition with those of the Group or that maintain business relations with the Group.
2.3.2 Risks associated with human resources
SES-imagotag is a growing and di-
versifying Group, offering new ways for using display solutions, store management and the use of available price and product data. “Leapfrog”, the Group’s strategic plan for 2020, aims to make the Group a leader in omnichannel electronic display so-lutions. To this end, and against the backdrop of a competitive and evol-ving technology industry, it is criti-cal to attract, develop and retain the necessary skills.
The Group must therefore position itself to respond to a series of quali-tative and quantitative challenges in terms of talent management:
• reinforce its pool of the skills – especially technical (including in software engineering) – it needs to sustain growth and enable it to de-liver an array of new, value-added services at a global scale;
• identify, attract, train, retain and motivate qualified personnel;
• strengthen leadership capabilities at all levels to support its growth and ongoing transformation;
• effectively on-board new em-ployees, especially in the case of acquisitions.
For the Group, it is a matter of looking ahead and planning for the acquisition and development of the skills it will need for future success, with the risk being not to have them at the right time to drive its strate-gy. If the Group does not meet these human resources challenges, a key factor in its development, this could have a significant adverse effect on its business, financial position, re-sults or outlook.
2.3.3 Risks associated with major projects and comparability of results
Although a part of the Group’s reve-nue is generated by recurring activi-ties, such as maintenance operations
or the renewal of existing customer equipment, the Group may also sup-ply its products for the needs of major customer projects, such as the provision of electronic labels for the entire network of a customer’s stores. These major customer pro-jects may thus result in peaks in ac-tivity, causing a significant increase in revenue over a financial year, which would not be repeated in subsequent financial years, and may then imply significant variations in the Group’s consolidated revenue, either upward or downward. Reve-nue for the financial year ending 31 December 2016 benefited from the peak deployment of the contract with MSH, which was the largest electronic labelling contract signed in 2015 and whose deployment fo-cused on 2016. This peak activity, specific to the 2016 financial year, resulted in a 14% decrease in re-venue for the financial year ending 31 December 2017 compared to the previous financial year (see para-graph 3.3 “Analysis of results for the financial years ending 31 December 2017 and 31 December 2016 of this registration document). Conse-quently, comparisons of the Group’s results from one period to another are not necessarily representative of the trend of the Group’s future re-sults. In addition, these major pro-jects may be delayed or, in some cases, not be completed, which can have a material adverse effect on the Group’s business, results, finan-cial position and outlook.
2.3.4 Risks associated with management teams
The Group’s success depends to some extent on the continuity and skills of its management team, which is formed around Mr Thierry Gadou. In the event of an accident or the departure of one or more of these managers or other key personnel, their replacement could prove dif-ficult and could affect the Group’s operational performance. More ge-nerally, there is strong competition
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2.4 Market risk
2.4.1 Liquidity risk
Liquidity risk is the risk of not ha-ving the necessary funds to meet one’s commitments when they are due. It concerns, on the one hand, the risk that assets cannot be sold quickly under satisfactory condi-tions if necessary, and, on the other hand, the risk of early repayment of liabilities or non-access to credit under satisfactory conditions.
With regard to financial assets, all of the Group’s marketable securities consist of term accounts.
With regard to financial liabilities, most of the Group’s debt consists of a bond issue with a total nominal amount of €40 million, maturing in 2023, bearing interest at a fixed rate of 3.5% per annum. The bond issue provides that it will become due if the consolidated leverage ratio, which refers to the ratio between net financial debt and gross opera-ting surplus, becomes less than 3.5.
See also note 28 of the Notes to the consolidated financial statements of the Group.
2.4.2 Risks associated with the interest rate
As at the date of this registration document, most of the Group’s debt consists of a bond issue with a total nominal amount of €40 million ma-turing in 2023 and bearing interest at a fixed rate of 3.5% per annum. The Group’s exposure to interest rate fluctuations is therefore limited at the date of this registration do-cument.
2.4.3 Risks associated with the exchange rate
The Group is highly exposed to fluc-tuations in the EUR/USD exchange rate, with a large proportion of its sales denominated in euros and a majority (approximately 80%) of its component and production costs denominated in US dollars. Conse-quently, upward variations in the US dollar automatically result in an in-crease in the cost of sales in euros. Such changes could have a material adverse effect on the Group’s bu-siness, results, financial position or outlook.
2.4.4 Credit and counterparty risk
Credit and/or counterparty risk is the risk that a party to a contract with the Group will default on its contractual obligations resulting in a financial loss to the Group.
Financial assets that could expose the Group to credit and/or coun-terparty risks are mainly receivables from its customers (in particular in the event of non-payment or failure to meet payment deadlines) and financial investments. The occur-rence of one or more of these risks may have a material adverse effect on the Group’s business, financial position, results or outlook.
See also note 31 of the Notes to the consolidated financial statements of the Group.
for senior management, and the number of qualified candidates is limited. The Group may not be able to retain some of its executives or key personnel, or in the future not be able to attract and retain expe-rienced executives and key em-
ployees. In addition, if the Group’s managers or other key employees join a competitor or create a com-peting business, the Group could lose some of its know-how, and the risk of losing customers could in-crease. These circumstances could
have a material adverse effect on the Group’s business, financial po-sition, results and outlook.
2.5 Legal and compliance risks
2.5.1 Risks associated with litigation and ongoing investigations
In the normal course of doing bu-siness, the Group may be involved in a number of administrative or ju-dicial proceedings for which it may be held liable on different grounds.
Tax litigation
During the 2017 and previous finan-cial years, Group companies were subject to tax audits, and some-times to proposed corrections. The financial consequences of these tax charges are recognised by way of provisions for amounts notified and
accepted or considered likely to re-sult in an outflow of resources and which can be reliably determined.
The Group periodically reviews the estimate of this risk in the light of changes in controls and disputes and considers that no ongoing controls will have a significant im-
49
pact on its financial position or li-quidity.
Commercial and labour disputes
Disputes are regularly reviewed by the Group’s Legal Department and are co-vered by provisions when the Group considers that it is probable that an outflow of resources will be required to cover the risk incurred and that a reliable estimate of this amount can be made. Inapplicable reversals stem mainly from the resolution of these disputes, for which the Group has been successful or for which the ac-tual amount of the loss has been lower than its estimated amount.
As at 31 December 2018, the Group set aside provisions for commercial and labour disputes, as described in note 10 to the Group’s consolidated financial statements.
As of the date of this registration document, the Group is not aware of any other governmental, legal or arbitration proceedings (including any proceedings of which the Group is aware, which are ongoing or of which the Group is threatened) that may have or have had, during the last twelve months, material effects on the financial position or profita-bility of the Company or the Group.
2.5.2 Risks associated with compliance with regulations, particularly environmental regulations, and their developments
The Group’s activities are subject to various regulations, in particu-lar with regard to the compliance and compatibility of the products it sells with their own regulations, as well as industrial, safety, health and environmental standards. The envi-ronmental risks associated with the Group’s business are mainly due to increasingly stringent environmen-tal laws and regulations.
The provisions on the removal and treatment of end-of-life electrical and electronic equipment are in-creasingly stringent and their ap-plication is subject to ever more rigorous and frequent controls,
particularly in the context of the European Parliament’s Directive 2012/19/EU and of the Council of 4 July 2012 on waste electrical and electronic equipment (“WEEE”).
Despite the procedures imple-mented by the Group and the fact that the environmental risks are not limited to the Group’s business, it cannot guarantee environmental risk coverage and could encounter difficulties in carrying out its acti-vities in the event of the occurrence of any of them, which could have an adverse impact on the Group’s business, results, financial position and ability to achieve its objectives.
More generally, in the event of non-compliance with the laws and regulations applicable to it, the Group could be fined, and the au-thorities could even prohibit the placing of marketed products on the market. These standards are com-plex and subject to change and, although the Group pays particular attention to compliance with appli-cable regulations, it cannot exclude any risk of non-compliance. The Group could also incur significant costs in order to comply with re-gulatory changes and cannot gua-rantee that it will always be able to adapt its activities and organi-sation to these changes within the necessary time limits. In addition, changes in the application and/or interpretation of existing standards by administrations and/or courts are also likely to occur at any time.
The Group’s inability to comply with and adapt its activities to new na-tional, European and international regulations, recommendations and standards could have a material ad-verse effect on its business, results, financial position and outlook.
2.5.3 Risks associated with taxation and its developmentsThe Group is subject to complex and evolving tax legislation in the various countries in which it ope-rates. In particular, because of its international activity, it is subject to transfer pricing rules, which can be particularly complex and sub-
ject to divergent interpretations. Changes in tax legislation could have a material adverse effect on its tax position, its effective tax rate or the amount of taxes and other levies to which it is subject, as well as on its reporting obli-gations. In addition, the tax re-gulations of the various countries in which the Group operates are subject to very different interpre-tations. The Group is therefore not in a position to guarantee that the tax authorities involved will agree with its interpretation of the appli-cable legislation. Furthermore, tax laws and regulations or other com-pulsory levies may be changed and their interpretation and applica-tion by the jurisdictions or admi-nistrations involved may change, in particular in the context of joint initiatives taken at international or Community level (OECD, G20, Eu-ropean Union). Specifically, the ongoing incorporation into French tax legislation of (i) the principles set out by the OECD on base ero-sion and profit shifting (“BEPS”), (ii) the Multilateral Convention to Implement Tax Treaty Related Mea-sures to Prevent BEPS of 7 June 2017, (iii) the rules provided in the Council Directive (EU) of 12 July 2016 establishing rules against tax avoidance practices that directly affect the functioning of the in-ternal market (“ATAD”) and (iv) the provisions provided for in the pro-posal for a directive to establish a common consolidated corporate tax base (“CCCTB”) could increase the corporate income tax burden on the Group. A challenge to the Group’s tax position by the rele-vant authorities could result in the Group paying additional taxes, po-tentially significant reassessments and fines or increasing the costs of its products or services for the purpose of collecting such taxes, which could have a material ad-verse effect on its business, re-sults, financial position and out-look.
2.5.4 Risks associated with intellectual property
The intellectual property risk to which the Group is exposed is the
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risk of counterfeiting, whether suf-fered or active.
Infringement may be committed by third parties against patented pro-ducts or industrial processes. These actions are likely to have an imme-diate impact on the Group’s sales and earnings and may damage its reputation and, where applicable, the quality image of the products concerned.
Infringement could also be an invo-luntary act of the Group, particularly given the risk associated with the length of time during which patent applications are not made public. Patent applications filed by third parties and known only at the time of their publication could affect on-going developments or even pro-ducts recently launched on the mar-ket due to the continuous shortening of development times. This situation would force the Group to modify the product and thus increase the research and development costs of the project, or to negotiate rights to use the patented element. In either case, the margin of the project would be affected. The Group may also be subject to claims from pa-tent trolls, particularly in the United States and Russia and in the field of new technologies.
The occurrence of an act of coun-terfeiting of which the Group is a victim or which is attributable to it could have a significant negative impact on its reputation, business, financial position, results and out-look.
From a financial perspective, based on the risk analysis carried out at
the filing date of this registration document and in accordance with applicable accounting standards, no provision has been recorded in the consolidated financial statements as at 31 December 2018.
2.5.5 Risks associated with changes in IFRS accounting standards
The Group’s consolidated finan-cial statements are prepared and presented in accordance with IFRS (International Financial Reporting Standards) international accoun-ting standards. Any change in these accounting standards could have a material impact on the presentation of the Group’s results and finan-cial position. Some IFRS standards have recently been revised by the International Accounting Standards Board (“IASB”).
Implementation of the IFRS 16 stan-dard will trigger the following im-pacts:
• in the P&L, cancellation of the ren-tal expenses and booking of both amortization and financial ex-penses,
• in the balance sheet: booking of a tangible asset (usage right) as well as a financial liability regarding fu-ture rental expenses.
Both asset and liability relating to this IFRS 16 standard are booked in a specific account of the balance sheet.
The SES-imagotag group has elec-ted to go for a simplified retroactive transition methodology, consisting in booking the cumulative effect of
the IFRS 16 standard back to its ef-fective date, and booking the rental liability through discounted future costs of renting as of the effective date, using the marginal debt rate on that date of first implementation (January 2019).
The group has elected to value the tangible asset through the fu-ture costs of renting, adjusted with already paid-for rentals/ rentals already booked for as accounts payables the day of first implemen-tation.
The global impact of this standard implementation is in progress : col-lecting each and every rental agree-ment within the group (for offices, warehouses as well as vehicles) is almost finalized.
The appreciation of the non can-cellable leasing period or term can vary depending on local regulation and habits, as well as the nature of the underlying asset. Discount rate to be used is also being finalized to make sure impact on the first date of implementation is acurate.
Thus impacts displayed in note 25 of the consolidated statements ap-pendixes as of December 31 2018 are not final.
Other than these new standards, the IASB may adopt new changes or supplements to IFRS in the future, which the Group must then adopt, and which could have a significant impact on the presentation of its re-sults and financial position.
2.6 Insurance and risk management2.6.1 Insurance policy
The Group implements a policy aimed at obtaining external insurance cove-rage to cover the risks of the company and its employees that can be insured at reasonable rates. It considers that the nature of the risks covered and the guarantees offered by these in-surances are in line with the practice adopted in its business sector.
The Group’s insurance programme in-cludes the following insurances:
• General and product liability;
• Cyber risk;
• Property Damages Busines In-teruption;
• Cargo policy;
• Civil liability for the company’s of-ficers.
2.6.2 Risk management policy
The company, regarding risk ma-nagement policy, is referring to the AMF framework dedicated to the small and medium sized listed com-panies (VaMP’s) published in 2008.
This global objective is met through the financial dept. reportings and processes, the auditing companies audit missions as well as the audit committee meetings.
51
Among the aims can be found the proper independance of directors and a convenient CEO remunera-tion, consistent with the company’s strategy: those are carefully looked at during the remuneration and ap-pointment committee meetings, taking place generally speaking, twice a year, to appraise the CEO performance and come up with his variable remuneration.
In general terms, one of the objec-tives of the internal control system is to prevent and control risks resul-ting from the Group’s activity and the risk of errors or fraud, particu-larly in accounting areas.
For example, internal action plans and policies implemented to ma-nage the risks identified by the Group include:
• Risks associated with economic conditions and their development. In order to limit the negative im-pact of adverse economic condi-tions on its activities, the Group is implementing a growth strate-gy aimed at benefiting from the trend towards the increasing di-gitalisation of stores, by offering its customers the most innovative products at high quality standards, while offering a wide range of ser-vices aimed at reducing the total cost of ownership of equipment for its customers.
• Risk of not achieving the planned objectives. To limit this risk, the Finance Department prepares monthly performance analyses and periodic forecasts, and regularly informs the Board of Directors of performance and possible devia-tions.
• Risks associated with doing bu-siness in different countries. To limit this risk, the Group is vigi-lant regarding export incoterms and payment terms, particularly in African countries, the Middle East, Southeast Asia and Eastern Eu-rope. The Group further manages this risk by geographically diver-sifying its activities in developed as well as in emerging markets, thus blending exposure to poten-tial risks in a given country.
• Risks associated with dependence on suppliers and component pro-
curement. The Group currently works with some of the world’s leading subcontractors of electro-nic sub-assemblies, which account for the vast majority of production at sites around the world. If neces-sary, this global system makes it possible to switch production from one EMS to another in the event of the failure of one of them. As the risk of a shortage of electronic components is a clearly identified risk in the electronics industry, the Group is particularly vigilant in monitoring its industrial forecasts, and regularly ensures their consis-tency during “Pipe Reviews” by reconciling them with commercial forecasts, thus preventing any risk of component shortages. In order to best anticipate the risks of sup-ply disruptions due to shortages, supplier failures or natural hazards, a multi-sourcing policy for com-ponents is systematically applied whenever possible, and in some cases safety stocks are built up for critical components. In addi-tion, some strategic suppliers are required to have two production sites for sensitive components.
• Risks related to production de-lays in the new Vusion product range. In 2018, the Group signed a subcontracting contract with a second player in order to limit the risk of production delays from 2019, with volumes to be treated equally between BOE and this se-cond subcontractor.
• Risks associated with dependence on customers. To limit this risk, the Group seeks to maintain a diversi-fied portfolio of customers and to have a significant basis of equip-ment installed with its existing customers, thus making it possible to derive part of its revenue from the renewal and maintenance of electronic labels carried out by its customers, characterised by re-curring revenues.
• Risks associated with technologies and data security. The IT Depart-ment is responsible for securing networks and systems, on the one hand, and the applications ne-cessary for the continuity of the Group’s business, on the other hand, and regularly performs in-trusion tests or backups. In addi-tion, the Group implements secu-
rity measures for its information systems adapted to the identified risks. Together with the internal control and safety policy, these organisational, functional, techni-cal and legal security measures are subject to annual controls.
• Risks associated with corruption and ethics. An employee awareness and training programme dedicated to ethical/anti-corruption themes was developed by the Group du-ring the last quarter of 2017 on its e-learning platform.
• Risks associated with the trans-formation of the Group in terms of human resources. A number of programmes and initiatives are being implemented to prevent this risk, including the following di-mensions:
- a “people review”, to precisely de-fine the needs for new skills in re-lation to the current pool of skills;
- the development of an employer brand and the strengthening of its strike force in terms of recruitment (with, for example, increased use of social networks);
- the training of all employees, with investments in an e-learning plat-form in particular; employee en-gagement through appropriate internal communication, and the development of internal com-munication and information and knowledge sharing tools; this plat-form was put online in September 2016 and has 6 programmes and 144 modules offered in English and in French. All programmes were built by internal employees who are experts on the subject, assisted by the Human Resources Department, which supervised the entire project. The six training programmes are focused on the integration of new employees, the product programs – Software and Hardware, the commercial phase, as well as on the techniques dedi-cated to High Frequency and Low Frequency Installation;
- loyalty and recognition of per-formance, in the form of long-term Group compensation plans or specific plans in the event of acquisitions, among other things.
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The Group thus has a proactive and multifaceted approach in order to position itself to have the neces-sary talents and skills for its future success, although there is still un-certainty about the level of impact of the actions taken to secure the necessary resources for its deve-lopment in due time or under favou-rable conditions.
• Risk associated with exchange rates. Several actions are being implemented parallel to currency hedging policies in order to re-duce this exposure in the coming years, notably: price adjustment clauses in customer contracts in euros, development of sales in the dollar area (international ex-pansion plan, cash pooling in US dollars). In order to anticipate and manage variations in cash flow, regular forecasts are drafted and a cash-pooling system for euros and US dollars has been finalised for the main European subsidiaries; an expansion of the scope of this cash pooling is planned for 2018.
• Risks associated with global war-ming and compliance with envi-ronmental regulations:
- Risks associated with produc-tion methods
For its direct supply of strategic components, the Group relies on an ecosystem of world-class companies that are leaders in their respective specialties (special electronic chips, cus-tom TFT-LCD or e-paper, etc.), most of which dedicate parti-cular attention to social and en-vironmental responsibility ini-tiatives. Two of the five largest suppliers for the Group have signed the United Nations Glo-bal Compact.
Four of the seven most important suppliers for the Group are ISO 14001 certified, and two are OHSAS 18001 certified. In addition to ISO certification, one of the suppliers has been recognized as a “Sony Green Partner”. This standard encourages the responsible pro-
duction and use of electronic pro-ducts and components going into Sony products.
- Risks associated with electrical and electronic waste treatment methods
In order to limit the risks of un-controlled pollution, the Group ensures that collection and re-cycling programmes for end-of-life products are set up and offered to its customers in Eu-rope, in accordance with the WEEE directive, and in other countries outside the European Union. In countries where regu-lations require this, the quanti-ties of products placed on the market, collected and recycled are periodically reported to the national registers of producers.
The Group also informs users of these provisions through specific product markings and provides dis-mantling instructions to recyclers.
• Recycling of batteries in our labels Electronic labels manufactured
and sold by the Group require bat-teries in order to operate.
The enforcement of Article R. 543-130 of the French Environment Code requires producers of industrial batteries and accumulators to or-ganize the free collection of the items producers have sold on the French market after their use.
In Europe, the Group has chosen:
• co-organisation COREPILE to col-lect and recycle all its spent batte-ries in France;
• in Austria, the collection and re-cycling activities are entrusted to Elektro Recycling Austria, a subsi-diary of the Altstoff Recycling Aus-tria AG group, which has specia-lised in electronic waste recycling since 2005;
• in Italy, the recycling is entrusted to the CONAI organisation.
- Recycling of labels and hard-ware equipment
In order to be part of a circular eco-nomy approach, the Group has been committed since 2014 to implemen-ting an action plan to ensure the complete recyclability and reuse of its equipment.
To this end, the Group sought the services of the ecological organi-sation Ecologic, which collects ob-solete or damaged labels, modems and routers from each customer and transports them directly to a recy-cling centre of ANOVO, one of the leading players in the sustainable management of electronic product life cycles.
Each year, this company brings new life to more than 20 million products throughout the world.
The organisation then sorts the components of the used equipment, makes cosmetic repairs or sends off those components that are to return to the production chain.
All products delivered by the Group comply with international directives related to the use and transport of hazardous substances in electrical and electronic equipment (Direc-tive 2011/65/EU of the European Parliament and of the Council of 8 June 2011 on the restriction of the use of certain hazardous substances in electrical and electronic equip-ment).
• Risks associated with intellectual property. The Company ensures that the rights of third parties are respected by carrying out prior art searches and monitoring its port-folio when necessary. It monitors, together with specialist counsels, any claims and litigation actions that would result from these ac-tions.
This general objective is achieved through the work of the finance de-partment, audit firms and the ac-counts committee.
53
One of the general objectives is also to ensure the independence of the directors and the compensation of the General Manager in line with the company’s strategic objectives. This objective is achieved through the Compensation Committee, which meets twice a year to assess the performance of the executive and establish the calculation of his variable compensation.
2.6.3 Internal audit
The key players in the Company’s internal audits are:
The Executive Committee this Com-mittee meets quarterly to draw up the strategic guidelines, to report on global competition, as well as to define the R&D road map. This Com-mittee therefore analyses the risks inherent in the business sector and related to the level of competition, both in terms of price and techno-logy.
The Audit Committee ensures that the account statements are audited in accordance with the rules and free of interference; in particular, it en-sures that adequate provisions are being made for foreign exchange, liquidity and debt risks.
The Compensation Committee de-termines the remuneration policy implemented or to be implemented for the Chairman.
The Board of Directors meets seve-ral times a year to review manage-ment’s proposals concerning debt, currency hedges and any acquisi-tions. The budget forecasts are also presented to it, as well as their suc-cessive revisions during the year.
Management (sales, finance, sup-ply chain) meets weekly to analyse the portfolio of sales opportunities, their feasibility and the forecast scheduling for these opportunities to ensure that the supply of finished products and solutions matches the level of market demand. There is also a weekly review of significant contracts to maintain the profitabi-lity of these contracts and proposed
selling prices based on the produc-tion costs incurred by the Company. These management meetings are therefore instrumental in correctly anticipating business volumes and profitability levels.
The Finance and Legal Division en-sures, based on budget and debt forecasts, the anticipation of cash flows in euros and foreign curren-cies, compliance with key mana-gement indicators as per monthly reporting under IFRS standards. It provides direct internal quality control of the accounts, the Group’s profitability and the use of available cash.
The Company’s strategy is to hold a majority stake in its subsidiaries. The Company ensures that Board of Directors’ meetings take place, and it is active in the management bo-dies of its subsidiaries. Each of its subsidiaries give monthly manage-ment reports to the Company, which then determines the appropriate action to be taken. Newly acquired companies undergo an integra-tion process that is based partly on points of attention identified during due diligence and partly on stan-dard processes (IT audit, delegation of authority, chart of accounts map-ping with the Group chart, etc.).
In addition, the bank accounts of all subsidiaries are currently being consolidated in a single telematics gateway, which enables the Group’s Finance Department to manage cash flow.
A Code of Ethics and Business Conduct was implemented in 2017; it sets out and formalises the rules of conduct expected within the Group of all employees, suppliers and subcontractors. This support is an important tool for maintaining the quality of the control environ-ment within the Group and is easily accessible on the e-learning plat-form for our employees.
Delegations of power are imple-mented for subsidiary directors.
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3 Management report on financial results
I-MANAGEMENT REPORT
5555
Pursuant to European Regulation 1606/2002 of July 19, 2002 on inter-national accounting standards, the consolidated financial statements of the SES-imagotag Group for the period ended December 30th, 2018
One of the group major criteria to ma-nage performance measurement is EBITDA.
EBITDA is the sum of the operating income, the IFR2 expenses (relating to free shares), goodwill amortizations, fees on specific extraordinary opera-tions realting to debt and/ or equity,
3.1 KPIs
3.2 Comments on Financial Results
onerous contracts expenses, seve-rance pay, other expenses (such as claims and litigations) as well as fixed and intangible assets depreciation ex-penses.
EBITDA is not a standard criteria whith a unique and generally accepted de-finition : it cannot be considered as
a substitute for operating result, net result, cash flows from operating ac-tivities nor a liquidity measure. Other companies could use a different defi-nition for EBITDA.
A bridge between operating result and EBITDA is broken down below:
2018 2017
€M S1 S2 12 month S1 S2 12 month
Revenues 81.1 106.8 187.9 95.4 57.6 153.0
Variable Costs Margin
% of revenues
21.1 27.6 48.7 24.9 15.4 40.3
26.0% 25.8% 26.0% 26.1% 26.7% 26.3%
Opex
EBITDA
% of revenues
(21.0) (21.4) (42.2) (17.6) (16.6) (34.2)
0.1 6.4 6.5 7.3 (1.2) 6.1
0.1% 6.0% 3.4% 7.7% -2.1% 4.0%
Depreciation
Non-recurring / non-cash items
(5.1) (5.3) (10.4) (3.9) (4.4) (8.3)
(1.5) (3.0) (4.5) (2.4) (16.4) (18.8)
EBIT
% of revenues
(6.5) (1.9) (8.5) 1.0 (22.0) (21.0)
-8.0% -2.0% -4.4% 1.0% -38.2% -13.7%
Financial Income / (Loss)
Tax
(0.0) (0.2) (0.2) 0.5 (5.0) (4.5)
1.9 0.8 2.7 (0.8) 5.2 4.4
Net Income / (Loss)
% of revenues
(4.7) (1.3) (5.9) 0.7 (21.8) (21.1)
-5.8% -1.0% -3.1% 0.7% -37.8% -13.8%
Management report
have been prepared in accordance with the International Financial Re-porting Standards (“IFRS”) applicable on this date as approved by the Euro-pean Union, as of the closing date of these financial statements.
€M 31/12/2018 31/12/2017
Operating Income (EBIT) (8.5) (21.0)
- IFRS2 expense relating to Free Share Plans 0 (12.9)
- Acquired technologies amortization (0.9) (0.9)
- Equity / debt / M&A related fees (0.7) (3.0)
- Onerous contracts 0 (1.1)
- Severance pay (0.4) (0.4)
- Others (1.3) (0.5)
- Provisions for litigation (suppliers) (1.8) 0
- Goodwill adjustment 0.5 0
= Current EBIT (3.9) (2.2)
- Fixed & Intangible Asset Depreciation Expense (10.4) (8.3)
= EBITDA 6.5 6.1
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Annual report
RevenuesSales rose +23% in 2018 to €187.9m, from €153m in 2017. This was a record performance and ahead of the guidance for 20% growth given earlier in the year.
This improvement is the result of the successful ramp up of new state-of-the-art production facilities in Asia in the Second Half, which enabled SES-imagotag to step up deliveries of existing orders. Sales jumped +85.2% to €106.7m in H2 compared with the same period in 2017, largely offsetting the fall in H1 2018.
As a reminder, two specific transac-tions, relating to the new supply chain organization, were booked for in the 2018 revenues: semi-finished goods and components were sold to BOE related entities as well as a technolo-gy consulting fee, for a €13.7m total.
The sales increase internationally was particularly encouraging. This is
a major objective for SES-imagotag, and an essential element of the BOE partnership and VUSION 2022 plan unveiled last year. Sales ex-France ju-mped +180% in H2 2018 to €73.3m. The sales increase internationally was particularly encouraging. This is a major objective for SES-imagotag, and an essential element of the BOE partnership and VUSION 2022 plan unveiled last year. Sales ex-France ju-mped +181% in H2 2018 to €73.4m.
For the year as a whole, international sales reached €128.4m, representing 68% of overall sales. Sales ex-Europe represented 15% of sales. The propor-tion of international sales is expected to increase over time, reflecting faster rates of growth in sales and the in-
creasing pace of adoption of digital solutions which are anticipated in the US and Asia, regions where SES-ima-gotag now has a strong footprint. This performance is in line with the objec-tives of the VUSION 2022 plan which is targeting 25% sales growth outside Europe by 2020 and 50% by 2022.
With a lower number of roll-outs in the course of the year, activity in France, which is the most mature market in the sector, fell from €69.1m to €59.5m. in spite of a return to growth in the Second Half which is expected to continue into 2019.
2018 2017
€M H1 H2 FY H1 H2 FY
France
N/N-1
26.2 33.3 59.5 37.6 31.5 69.1
-30% 6% -14%
International
N/N-1
55.0 73.4 128.4 57.8 26.1 83.9
-5% 181% 53%
Full Year Sales
N/N-1
81.2 106.7 187.9 95.4 57.6 153.0
-15% 85% 23%
57
Orders ENTRIES (€m) 2018 2017 N/N-1
H1 137.9 103.9 33%
Q3 47.5 37.3 27%
Q4 65.7 58.9 12%
H2 113.2 96.2 18%
Full Year 251.1 200.1 25%
The Order Book was at a record high with order intake up 25% on the year to €251.1m. Orders were up 18% in H2 to €113.2m. The majority of the increase was attributable to the growing adoption by customers of the VUSION Retail IoT (Internet of Things) cloud-based platform, reflecting its growing recognition among physical retailers seeking to digitalize their operations in the face of mounting cost pressure and increasingly severe competition from E-commerce platforms.
Variable cost margin was stable in 2018 at 26% compared with the prior year. This reflects the progress in reducing manufacturing costs which offsets the ongoing price competi-tion. Variable cost margin stood at approx. €49m, a 21% increase vs. 2017.
Operating costs have stabilized du-ring H2 at €21.4m (+2% vs. H1). In 2018, they rose by +23%, compared to 2017, mainly due to international expansion efforts, and the increased number of pilots underway in a growing number of countries. These require dedicated and substantial technical and commercial resources to transform such pilots in roll-outs.
In 2018, SES-imagotag won several strategically important contracts with a number of retailers with leadership positions in their markets, such as Colryut, the leading Belgian food re-tailer, Coop, the leading Swiss food re-tailer and a top ten global player in that space. Other notable wins in 2018 in-clude : an agreement with the leading Scandinavian consumer electronics retailer Elkjop to roll-out its platform in their stores ; an agreement with Sharaf DG, the number one consumer elec-tronics retail chain in the Middle East
Thanks to the full year growth and costs stabilization, EBITDA was up from €0.1m in H1 to €6.4m at the end of the year, representing 6% of sales and stood at €6.5m for the year, a +7% increase compared to 2017.
Amortization was at €10.4m in 2018, a €2.1m increase vs. 2017, due to the increased industrial and R&D investments. Non-recurring, non-cash items amounted to €4.5m. These comprised mainly amorti-zation of acquired technologies (€0.9m), advisors’ fees (€0.7m), litigation (€1.7m), and onerous contracts (1.2m).
After taking into account amortiza-
to equip their stores in the Gulf. In Ger-many, SES-imagotag was selected by Euronics for its sales outlets, while in China Xiaomi has also installed smart VUSION labels across its stores. There was a also a major contract win in Ja-pan, where one of the country’s lea-ding retailers has signed up to equip its stores with SES-imagotag techno-logy.
tion and other non-recurring costs, the Loss before Interest (EBIT) narrowed from -€21m in 2017 to -€8.4m in 2018, and improved in H2 at (€-1.9m) vs. H1 (€-6.5m).
Financial income was -€0.2m with gains on currency operations par-tially offsetting interest charges on Group debt.
There was a Net Loss of €-5.9m for the year to December 31, 2018 com-pared with a Net Loss of €-21.1m 2017, after taking into account a positive tax benefit of € 2.7m from estimated deferred tax losses.
Profitability
Management report
58
Annual report
Net debt as of December 31, 2018 stood at €17.4m, an increase of €4m on the previous year. Net cash stood at €29.5m, down by €9m from €38.5m the year before. Of that, €5m was used to pay down debt – which fell from €51.9m on December 31, 2017 to €46.9m on December 31, 2018 – with a further €4m being used to finance various Group operations.
The robust acceleration in sales in H2 as well as the solid new order en-tries and opportunities in the sales pipeline, have given SES-imagotag strong momentum going into 2019. Based on that healthy ongoing momentum, SES-imagotag conti-nues to expect revenue growth for FY2019 in the region of +30%.
Among factors that are expected to continue to support this more
Thanks to the €26m capital increase at the end of June, the Group was able offset the negative cash-flow impact of weaker first half activity, such that overall net debt in the first half was virtually unchanged (+€0.1m).
Cash consumption in H2 was around €4m, chiefly accounted for the additional working capital
rapid growth trajectory are the growing evidence of widespread adoption of the VUSION platform worldwide, the strong supportive and rapidly growing eco-system of partnerships, and the expanded suite of products and functionality at a time when physical retailers are under extreme pressure to improve their agility, cost structures and re-levance to an increasingly deman-ding customer base.
requirement to cover the cost of meeting the significant proportion of customer orders that needed to be fulfilled in Q4 for which payment was not due until 2019.
2019 should also see a return to fi-nancial health through the combi-nation of strong growth and opera-tional leverage with continued cost discipline.
3.3 Comments on Cash and debt
3.4 Outlook
€m 2018 2017
EBITDA 6.5 6.1
Capex (13.3) (12.1)
Change in Working Capital (17.4) (5.2)
Financial Investments (3.3) 2.2
Financial result (1.5) (2.4)
Tax
Capital Increase 26.0
Others (1.0) (8.3)
Including: BOE operation related fees (0.7) (3.0)
Free shares plans IFRS 2 impact 0 (2.9)
Onerous contratcs (1.1) (1.1)
Severance pay (0.4) (0.4)
Other 1.2 (0.9)
Change in Net Debt (4.0) (19.7)
Net Cash / (Debt) (17.4) (13.4)
Cash 29.5 38.5
Debt (46.9) (51.9)
change in Net Cash / (Debt) (4.0)
Cash-Flow Statement
59
Management report
3.5 Report on the corporate financial statements1. Review of the financial statements and results
2. Proposed allocation of the Company’s result
3. Non-deductible expenses
During the financial year ended on December 31, 2018, the Company’s net sales amounted to €112.4 mil-lion, versus €98.6 million in 2017, an increase of 14.1%.
Operating expenses for the fi-nancial year reached a total of €131.9m (including amortization and depreciation) and primarily consisted of the following items:
Raw materials -88.7 m
Other -21.9 m
Personnel -15.7 m
The operating result was therefore -10 m
The financial result (mainly foreign exchange gains) amounted to +0.5 m
Pre-tax profit before extraordinary items therefore stood at -9,4 m
In the end. the Company generated a net result of -8,9 m
We ask that you approve the annual financial statements (balance sheet, income state-ment, and notes) as presented to you, showing a net result of -€8,926,884, and allocate it as follows:
In accordance with the provisions of Article 223 quater of the French general tax code, we would like to inform you that the Company had expenses or charges referred to in Articles 39-4 and 54 quater of said code amounting to €191,796;
In accordance with the provisions of Article 243 bis of the French general tax code, we wish to remind you that no di-vidends have been distributed since 2012. In 2012, the Company paid out €5,491,011.50 in dividends.
Result for the financial year € -8,926,884
Result fully allocated to retained earnings € -8,926,884
Which, added to prior retained earnings, now stands at € 22,926,884
4. Payment terms: suppliers & customers
* Includes € 1,148K for a supplier litigation in 2018
Accounts payables aging balance
Accounts receivables aging balance
aging Value in K€ as of Dec 2018 Number of invoices Value in K€ as of Dec 2017 Number of invoices
current 12,839 570 3,791 334
Overdue < 60 days 5,444 490 7,032 770
Overdue > 60 Days* 4,768 130 5,414 344
Total 23,051 16,238
Total Purchases(No VAT included)
111,130 1190 86,466,159
21% - 19%
aging Value in K€ as of Dec 2018 Number of invoices Value in K€ as of Dec 2017 Number of invoices
current 24,763 2,396 12,659 2,426
Overdue < 60 Days 7,667 1,249 4,024 1,511
Overdue > 60 Days 9,581 1,437 7,187 1,381
Total 42,011 23,871
Sales (No VAT included) 112,437 5,082 98,557,486
37% - 24%
60
Annual report
5. Five-year financial summary
In accordance with the provisions of Article R. 225-102 of the French commercial code, the summary of the Company’s results for the last five financial years is attached to this management report.
Type of information / Period / € 2018 2017 2016 2015 2014
I- Year-end financial position
a) Capital 29,006,674 26,768,458 24,155,000 23,329,544 23,263,184
b) Number of shares (year end) 14,503,337 13,384,229 12,077,500 11,664,772 11,631,592
II- Overall result of operations completed
a) Sales 112,437,479 98,557,486 96,432,412 74,516,166 74,729,711
Profits -8,926,884 -8,885,912 -2,517,452 712,438 3,791,858
Allowances for depreciation and amortization 6,124,301 5,234,374 5,277,390 4,455,499 4,191,644
Release on depreciation and amortization
Allowances for provisions 4,306,319 3,272,039 2,335,063 3,411,497 1,705,087
Release on provisions -2,003,767 -2,406,594 -3,019,470 -1,577,715 -1,255,779
b) Earning before taxes, amortization -1,021,561 -3,280,103 1,497,325 7,245,992 9,811,038
c) Corporate tax -521,531 -494,010 -578,204 244,273 1,378,228
d) Earnings after tax and before amortization, depreciation, and provisions
-500,030 -2,786,093 2,075,529 7,001,719 8,432,810
e) Earnings after tax, amortization, depreciation,and provisions
-8,926,884 -8,885,912 -2,517,452 712,438 3,791,858
f) Amounts of distributed earnings 0 0 0 0 0
g) Employee profit sharing 0 0 0 0 0
III- Result of operations expressed per share
a) Earnings after tax and before amortization and depreciation per share
-0.03 -0.21 0.17 0.60 0.72
H/X
b) Earnings after tax, amortization, depreciation, and provisions per share
-0.62 -0.66 -0.21 0.06 0.33
A/X
c) Dividend paid to each share 0 0 0 0 0
IV - Personnel
a) Number of employees - average headcount 192 195 171 170 166
b) Total payroll 10,664,752 10,034,650 9,612,662 8,615,730 7,885,840
c) Total sums paid for corporate benefits 4,602,802 7,269,528 4,338,699 3,917,960 3,564,232
61
V-Depreciation Expense
Allowance for amortization of intangible assets 5,520,387 4,705,823 4,761,748 3,889,778 3,237,715
Allowance for depreciation of tangible assets 603,914 528,551 515,642 565,720 460,830
Exceptional allowance 493,099
Total allowances for amortization and depreciation 6,124,301 5,234,374 5,277,390 4,455,499 4,191,644
VI-Provisions
Allowance for provision 185,000 156,000 92,000 152,000 126,000
for operating risks and expenses 535,000 535,000 534,651 527,720 519,227
Allowance for provision 1,352,975 ,565,712 209,831 322,963 489,627
for impairment of tangible assets ,99,894 152,490 224,746 308,548 183,531
Allowance for provision 2,133,450 1,862,837 1,273,835 921,254 386,701
for impairment of inventories 1,179,012
Total allowances for provisionsfor impairment of bad debt
4,306,319 3,272,039 2,335,063 3,411,497 1,705,087
VII-Reversal of Provision
Releases on impairment and amortization
Allowance for provisionfor financial risks and expenses
6,000 310,051 40,000 126,000 44,442
Allowance for provisionfor extraordinary risks and expenses
580,402 ,371,798 881,483 584,885
Release on bad debt impairment allowance 134,930 242,306 625,457 183,531
Release on allowance for financial risksand expenses
1,862,837 1,273,835 921,255 386,701 527,616
Release on allowance for extraordinary risksand expenses
1,060,961 98,836
Total releases on allowances 2,003,767 2,406,594 3,019,470 1,577,715 1,255,779
VIII-Net Income Taxes
Income Tax - - -656 845,540 2,151,249
Withholding tax -21,701
Tax credit -521,531 -494,010 -577,548 -601,267 -751,320
Tax on net profits -521,531 -494,010 -578,204 244,273 1,378,228
Management report
62
Annual report
4 Shareholding structure and information on the share capital
I-MANAGEMENT REPORT
63
On December 31th, 2018, the company’s capital amounts to € 29,006,674 € split in 14,503,337 shares of € 2 nominal value.
Please find here after the capital history for the past 5 years
4.1 Change in the amount of share capital over the last five years
Year Change in capital Date of recognition New Shares Number of sharesSuccessive amountof capital in euros
Fiscal year
2013 None 11,025,023 22,050,046 31.12.2013
2014
Contribution in kind (iMAGOTAG GmbHacquisition)
21.05.2014 591,969 11,616,992 23,233,984 31.12.2014
Options exerciseds 17.03.2015 14,600 11,631,592 23,263,184 31.12.2015
2015 Options exercised 30.11.2015 33,180 11,664,772 23,329,544 31.12.2015
2016 Options exercised dec.2015 11.03.2016 23,900 11,688,672 23,377,344 31.12.2015
2016Contribution in kind (Findbox GmbH acquisition)
30.11.2016 265,114 11,953,786 23,907,572 31.12.2016
2017
Options exercised 16.02.2017 123,714 12,077,500 24,155,000 31.12.2016
Contribution in kind (pervasive Displays acquisition)
16.02.2017 790,684 12,868,184 25,736,368 31.12.2017
Bonus shares delivery 27.04.2017 110,014 12,978,198 25,956,396 31.12.2017
Options exercised 27.04.2017 32,044 13,010,242 26,020,484 31.12.2017
Options exercised 23.10.2017 33,577 13,043,819 26,087,638 31.12.2017
Options exercised 15.12.2017 8,700 13,052,519 26,105,038 31.12.2017
Bonus shares delivery 06.02.2018 226,000 13,278,519 26,557,038 31.12.2017
Options exercised 06.02.2018 105,710 13,384,229 26,768,458 31.12.2017
2018
Options exercised 05.03.2018 15,850 13,400,079 26,800,158 31.12.2018
Bonus shares delivery 05.03.2018 110,017 13,510,096 27,020,192 31.12.2018
Capital Increase 22.06.2018 866,666 14,376,762 28,753,524 31.12.2018
Options exercised 17.09.2018 37,275 14,414,037 28,828,074 31.12.2018
Bonus shares delivery 17.09.2018 2,000 14,416,037 28,832,074 31.12.2018
2019Options exercised 11.02.2019 17,800 14,433,837 28,867,674 31.12.2018
Bonus shares delivery 11.02.2019 69,500 14,503,337 29,006,674 31.12.2018
Management report
64
Annual report
Below you will find a summary of the identified major shareholders (i.e., those who hold at least 5% of the share capital at December 31, on at least one of the last three fiscal years) according to the information available to the Company.
In accordance with the provisions of Article L. 233-13 of the French com- mercial code, the Company was in- formed that the following thresholds were crossed during 2017 and 2018:
By Sycomore Asset Management:
On January 11, 2017, an upward threshold breach with 938,143
Below is a projection with a summary of the diluted capital at December 31, 2018:
4.2 Structure of the Company’s share capital
4.3 Legal threshold crossing declarations and declarations of intentions
December 31st 2018 December 31st 2017 December 31st 2016
ShareholdersNumber of
shares% capital
% voting rights
Number of shares
% capital% voting
rightsNumber of
shares% capital
% voting rights
BOE Smart Retail (Hong Kong) Co.
10,789,186 74.39% 74.39% 7,206,696 53.84% 53.84%
Yuen-Yu Investment Co. Ltd 866,666 5.98% 5.98%
Chequers 0 0 2,347,502 19.44% 19.44%
Pechel Industries III 0 0 782,498 6.48% 6.48%
Chequers / Pechel Industries III 0 0 3,130,000 25.92% 25.92%
Tikehau Capital Partners 0 0 1,823,411 15.00% 15.00%
Sycomore 0 300,451 2.24% 2.24% 944,643 7.82% 7.82%
Phison Capital 0 178,469 1.33% 1.33% 624,309 5.17% 5.17%
Diluted Capital 2018 % 2017 % 2016 % 2015 %
Shares 14,503,337 99.75% 13,384,229 97.90% 12,077,500 93.80% 11,664,772 95.40%
Stock-options allocated 36,000 0.25% 106,925 0.78% 281,956 2.20% 359,270 2.90%
Free Shares allocated on 31/12/15 0 0.00% 110,017 0.80% 220,031 1.70% 208,459 1.70%
Free shares allocated on 30/11/16 0 0.00% 69,500 0.51% 298,500 2.30%
Total dilution 14,539,337 100% 13,670,671 100% 12,877,987 100% 12,232,501 100%
shares, or approximately 8% of ca-pital.
On February 10, 2017, a downward threshold breach for 938,143 shares, or approximately 8% of capital.
On December 21, 2017, a downward threshold breach for 263,563 shares, or approximately 2% of capital.
On February 13th 2018, a downward threshold breach: no more shares held.
By Phison Capital:
On May 31, 2017 a downward threshold breach caused by the in- crease in the total number of shares in SES-imagotag, causing Phison Capital to drop from 5.17% to 4.98% of capital.
65
On December 21, 2017, a downward threshold breach for 445,840 shares, or approximately 3% of capital.
On March 16th 2018, a downward threshold breach: no more shares held.
By Pechel Industries Partenaires and Chequers Partenaires:
On December 21, 2017, a down- ward threshold breach for all of their shares, or approximately 25% of ca-pital.
By TikehauCapital:
On December 21, 2017, a downward threshold breach for all of their shares, or approximately 14% of capital.
By CACEIS (Crédit Agricole S.A.)
On April 13th 2018, a downward threshold breach of 2% by seling 181,959 shares
On June 25th 2018, a downward threshold breach of 1% by selling 104,008 shares
By SESIM:
On December 20, 2017, an upward threshold breach for 487,520 shares
On December 20, 2017, a downward threshold breach for the same num-ber of shares, or approximately 3% of capital.
By BOE Smart Retail (Hong Kong) Co:
On December 22, 2017, an upward threshold breach for 7,206,696 shares, or approximately 54% of ca-pital.
On March 19th 2018, an upward threshold breach for 3,582,490 shares, or approximately 26,5% of capital.
By Yuen-Yu Investment Co.Ltd :
On June 29th 2018, an upward threshold breach for 866,666 shares, about 6,01% of capital which turned to 5.98% as of December 31, 2018 when diluted during H2.
The Board of Directors was autho-rized by the Combined Sharehol-ders’ Meeting of June 22, 2012 (Re-solution 6) to put a share buyback program in place.
The Board of Directors used this au- thorization and the option to sub- delegate, in its meeting of June 22, 2012, and gave all powers to the Chairman & CEO for the purposes of implementing the objectives of the share buyback program and to pro- ceed with the signing of a liquidity contract with Gilbert Dupont in ac- cordance with (i) the provisions of European Regulation 2273-2003 of December 22, 2003, implementing Directive 2003/6/EC of January 28, 2003, with regard to the exemptions provided for buyback programs and the stabilization of financial instru- ments, (ii) the provisions of Articles L. 225-209 et seq. of the French commercial code, (iii) the provisions of the AMF General Regulation, and (iv) the AMF’s decision of March 21, 2011 to update accepted market practices, number 2011-07, relating to liquidity contracts.
4.4 Share buyback program - Number of shares and share of the capital held by the Company at December 31, 2018
The Liquidity Contract complies with the Code of Ethics drawn up by the French financial markets asso-ciation and approved by the AMF by a deci- sion dated March 21, 2008.
This liquidity contract was entered into on June 22, 2012, for an auto-matically renewable term of twelve months. An amendment to this contract was signed on December 20th 2018.
The company Gilbert Dupont is paid an annual lump-sum compensation of €26,000 excluding taxes.
Legal framework
Pursuant to the decisions of the Combined Shareholders’ Meetings of May 21, 2014 Resolution 8), June 30, 2015 (Resolution 8), November 30, 2016 and June 23, 2017 (Reso-lution 7), each year the Board of Di-rectors has renewed the authoriza-tion given to the Chairman & CEO to continue the Liquidity Contract with Gilbert Dupont.
The Combined Shareholders’ Mee-ting of November 30, 2016 (Resolu-tion 1) authorized the adaptation of the share buyback program as it re-sulted from the Shareholders’ Mee-ting of June 23, 2016 (Resolution 7) by setting the maximum overall amount of the program to ten (10) million euros instead of five (5) mil-lion euros previously.
SES-imagotag’s buyback program for its own shares, authorized by the Combined Shareholders’ Meeting of June, 22, 2018 has the following characteristics:
• securities concerned: shares;
• maximum authorized share buy- back percentage: 10% or 5% for shares acquired by the Company in order to retain them, deliver them for payment, or exchange them as part of a merger, demer-ger, or transfer;
• maximum overall amount of the program: ten (10) million euros;
Management report
66
Annual report
• maximum unit purchase price: 150% of the last market price of the Company’s shares on the day when the Board of Directors uses its authorization;
• duration: 18 months;
• goal of the program: to enable the Company to take opportunities to trade in its own shares as provided for by law, particularly for the fol- lowing purposes:
- stimulating the secondary mar- ket or share liquidity through an investment services provider, acting independently as part of a liquidity contract compliant with the code of ethics recog- nized by the AMF;
- distributing all or some of the acquired shares to employees and/or the Company’s corporate officers following the conditions and procedures described in the law, especially in terms of par-ticipation in the Company’s ex-pansion, distributing stock op-tions, freely distributing shares, or selling shares for their own profit or under the conditions described in Article L. 3332-1 et seq. of the French labor code;
- remitting shares while exerci-sing the rights attached to secu-rities with conversion, exercise, refund, or exchange rights, or any other Company share allo-cation mechanism within the bounds of stock market regula-tions;
- canceling purchased shares through capital reduction un-der the conditions described in the French commercial code, as long as Resolution 10 is appro-ved;
- keeping all or some of the ac-quired shares for later use in ex-change or as payment as part of a future external growth opera-tion or any other operation that may be authorized by current regulations.
The Company may use this resolu-tion and pursue its share buyback program if Company shares are of-fered publicly in line with the stipu-lations of Article 232-17 of the AMF General Regulation (or any other le-gal, regulatory, or other provisions that apply or may apply in the fu-ture).
It is important for the Company to be able to continue, even in an of-fer period, to meet its commitments towards the holders of instruments representing debt securities gran-ting access to the capital (3rd objec-tive).
The acquisition, disposal, transfer, or exchange of these shares may be undertaken and paid for by any means, particularly as part of a li- quidity contract entered into by the Company with an investment service provider, subject to the re-gulations in force, including over the counter and by block of shares, through the use of derivatives and the establishment of option-based strategies (purchase and sale of call and put options and all combi-nations thereof in accordance with the applicable regulations), and at such times as the Board of Directors deems fit.
In order to ensure the execution of this authorization, the Shareholders’ Meeting conferred all powers to the Board of Directors to:
• decide how to implement this au- thorization;
• place all stock market orders;
• enter into a liquidity contract with a financial services provider in line with the code of ethics re-cognized by the AMF;
• make any declarations or fulfill any formalities necessary with the AMF that may relate to the buyback program described above; and
• fulfill any other formalities or en- ter into any other agreements to this end and, more generally, to do whatever is necessary to imple-
ment the buyback program descri-bed above.
This authorization replaced the au-thorization given by the Combined Shareholders’ Meeting of June 23, 2017, which became null and void for the remainder of its duration.
The Shareholders’ Meeting is the-refore informed of the continuation of the share buyback program in ac- cordance with the provisions of Ar- ticle L. 225-209 paragraph 4 of the French commercial code, namely:
At December 31, 2018, the resources held by the Liquidity Contract are
• 11,406 shares; and
• €237,789 in the cash account.
Authorisation given to the Board of Directors to trade the Company’s shares is required under the perview of the combined shareholders mee-ting on May 24th 2019
The Shareholders’ Meeting, ru-ling under the quorum and majority conditions required for ordinary shareholders’ meetings and in accor-dance with applicable statutory and regulatory provisions and, in par-ticular, those of Articles L. 225-209 et seq. of the French Commercial Code, having reviewed the Board of Directors’ report, authorized the Board of Directors, with the option to sub-delegate under the condi-tions set out by law, to trade in the Company’s shares on the stock ex-change or otherwise in accordance with the terms and conditions set out below.
The Board of Directors is authorized pursuant to this authorization to ac-quire, on one or more occasions and by any means, a number of shares representing up to 5% of the number of shares comprising the Company’s share capital at any time.
The transactions carried out by the Board of Directors pursuant to this authorization may be carried out with a view to meeting the following objectives:
67
• Stimulating the secondary market or share liquidity through an in-vestment services provider, acting independently, as part of a liqui-dity contract compliant with the market practice admitted by the AMF on 2 July 2018.
• Distributing all or some of the ac-quired shares to employees and/or the corporate officers of the Com-pany or other entities of the Group, in particular within the context (i) of employee profit sharing, (ii) any stock option plan of the Com-pany, pursuant to Article L.225-177 et seq. of the French Commercial Code, or (iii) any savings plan in compliance with Article L.3331-1 et seq. of the French Labour Code or (iv) any allocation of bonus shares pursuant to the provisions of Article L.225-197-1 et seq. of the French Commercial Code, as well as per-form all hedging transactions re-lating to these transactions, under the conditions provided for by the market authorities, and at the times to be determined by the Board of Directors or the person acting by delegation there of remitting shares while exercising the rights attached to securities with conversion, exer-cise, refund, or exchange rights, or any other Company share alloca-tion mechanism in accordance with applicable regulations, as well as perform all hedging transactions relating to these transactions, un-der the conditions provided by the market authorities and at the times to be determined by the Board of Directors or the person acting by delegation of the Board of Direc-tors.
• Canceling purchased shares through capital reduction under the conditions provided for by the French Commercial Code, as long as Resolution 11 of this Sharehol-ders’ Meeting is approved.
• Keeping all or some of the acquired shares for later use in exchange or as payment as part of a future ex-ternal growth operation.
• Implement any market practice that may be authorised by the
French Financial Markets Autho-rity and, more generally, perform all operations in compliance with applicable regulations.
The Board of Directors may not, unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period.
The acquisition, disposal, transfer, or exchange of these shares may be undertaken and paid for by any means, particularly as part of a li-quidity contract entered into by the Company with an investment ser-vice provider, subject to the regu-lations in force, including over the counter and by block of shares, through the use of derivatives and the establishment of option-based strategies (purchase and sale of call and put options and all combi-nations thereof in accordance with the applicable regulations), and at such times as the Board of Directors deems fit.
The Meeting decides that the maxi-mum purchase price per share shall not exceed €50 per share, excluding expenses.
The acquisitions made by the Com-pany may, under no circumstances, lead it to hold more than 5% of the shares composing its share capital at any time.
The number of shares and the price indicated above shall be adjusted in the event of a change in the nominal value of the share, increase in share capital by incorporation of reserves, profits or premiums, allocation of free shares, division or consolida-tion of shares, capital redemption or reduction, distribution of re-serves or other assets and any other transactions affecting shareholders’ equity, so as to take account of the impact of such transactions on the value of the share.
This authorization is given for eighteen months starting on the
date of this Meeting. For the purpo-ses of implementing this resolution, the Board of Directors is granted full powers, with the option to subdele-gate under the conditions set out by law, in order, in particular, to:
• Decide how to implement this au-thorization
• Place stock market orders
• Make any declarations and carry out any formalities with respect to the AMF that may relate to the buyback program described above
• Fulfill any other formalities or en-ter into any other agreements to this end and, more generally, do whatever is necessary to imple-ment the buyback program descri-bed above
This authorization supersedes the authorization granted by the 8th re-solution of the Shareholders’ Mee-ting of June 22, 2018.
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4.5.1 Profit-sharing agreement
At its meeting of May 15, 2005, the Board of Directors of SES-ESL de-cided to introduce a profit-sharing agreement for Group employees and delegated all powers to the Chairman & CEO of SES-ESL for that purpose.
The agreement was signed on June 7, 2005, with the aim of defining the methods used to calculate the special reserve for sharing the pro-fits of the Group’s companies and determining how this reserve will be allocated between the beneficiaries, as well as the rules for managing employee rights, the procedure for resolving any conflicts between the Parties, and the rules for informing staff both individually and collec-tively.
On December 21, 2012, an amend-ment to this profit-sharing agree-ment was signed in order to incor-porate an employee savings plan created and managed in accordance with Articles L. 3332-1 et seq. of the French labor code. This agreement has been amended on October 5th, 2016, when the account holder was switched to BNPSS.
4.5.2 Exercise of stock options and capital increase in 2018
No new options were granted du-ring the 2018 financial year. As at 31
4.5 Employee share ownershipDecember 2017, two stock option plans, namely the 2009 plan dated 15 April 2010 and the 2010 plan dated 15 September 2010, expired on 15 April 2017 and 15 September 2017 respectively At December 31, 2018, six stock option allocation plans were in progress or expiring during 2018:
Within the framework of the autho-rization granted by the Extraordina-ry Shareholders’ Meeting on June 10, 2009:
• The 2011 plan dated October 21, 2011, expiring on October 21, 2018.
Within the framework of the autho-rization granted by the Extraordina-ry Shareholders’ Meeting on March 1, 2012:
• the 2012 plan dated August 31, 2012, expiring on August 31, 2019;
• the 2013 plan dated December 18, 2012, expiring on December 18, 2019;
• the 2013 plan dated May 28, 2013, expiring on May 28, 2020.
• The 2014 plan date April 3, 2014, expiring on April 3, 2021
Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on May 21, 2014:
• The 2014 plan dated October 23, 2014, expiring on October 23, 2021.
The Board resolved to increase the company capital after the exercise of stock options on the following dates in 2018, in compliance with article L.225-180 of the Code of Commerce:
• On February 6th, 2018, after stock options exercises during De-cember 2017, from Plans 2010, 2011, 2012 (1st wave), 2012 (2d wave) and 2013;
• On March 5th, 2018, after stock options exercises during January and February, from Plans 2012 (1st wave) and 2014 (1st wave)
• On September 17, 2018, after stock options exercises during the March 1st and August 31st period, from Plans 2011, 2012 (1st and 2d waves), 2013 et 2014 (1st and 2d waves)
• On February 11th, 2019, after stock options exercises during the Sep-tember 1st and December 31st pe-riod, from Plans 2011, 2012 (1st wave).
Plan number of notified options Outstanding Options
15/04/2010 14,000 0
15/09/2010 8,500 0
21/10/2011 58,500 0
31/08/2012 315,800 29,650
18/12/2012 19,000 2,000
30/05/2013 65,200 0
03/04/2014 43,000 750
23/10/2014 33,150 3,600
557,150 36,000
No other stock option plans in force were exercised over the 2018 financial year.
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4.5.3 Free shares program
4.5.5 Percentage of capital held by employees
4.5.4 Allocation of stock warrants
As at 31 December 2018, the 3% threshold for holding capital pur-suant to Article L. 225-102 of the French Commercial Code had not been reached.
The Extraordinary Shareholders’ Meeting of 23 June 2017 approved the resolution authorising the Board of Directors to carry out a capital increase reserved for employees participating in a company savings plan pursuant to Article L. 225-129-6 of the French Commercial Code.
The Shareholders’ Meeting thus decided to authorize the Board of Directors, within a maximum pe-riod of twenty-six months from the Shareholders’ Meeting, to carry out a capital increase of a maximum no-minal amount of €750,000 reserved for employees who are members of the company savings plan set up by the Company on 21 December 2012, and as amended on 5 October 2016, and carried out in accordance with the provisions of Articles L. 3332-18 et seq. of the Labour Code and L. 225-138-1 of the Commercial Code.
The Shareholders’ Meeting noted that these decisions would entail the waiver by shareholders of their preferential subscription rights in favour of the employees for whom the capital increase is reserved.
The Shareholders’ Meeting noted that the subscription price of the shares, taking into account the fact
The Shareholders’ meeting is informed about the free shares program transactions in a special report pursuant to the provisions of Articles L. 225-197-1 to L. 225-197-3 of the French Commercial Code.
The Shareholders’ Meeting is notified that no stock warrants were allocated over the 2018 financial year.
that the Company’s shares are ad-mitted to a regulated market, may not be higher than the average of the prices quoted during the twenty trading days preceding the day of the decision setting the opening date of the subscription, nor more than 20% lower than this average.
The Shareholders’ Meeting then granted full powers to the Board of Directors to determine the other terms and conditions of the capital increase, and in particular for the purpose of:
• set and determine the opening and closing dates for subscriptions;
• set the issue price of the shares under the conditions provided for by law and regulations in force, in particular by Articles L. 225-129 paragraph 2 and L. 225-129-2 paragraph 1 of the French Com-mercial Code, L. 225-138-1 of the French Commercial Code and Ar-ticles 3332-18 and following of the French Labour Code;
• determine the number of new shares to be issued;
• record the completion of the ca-pital increase, amend accordingly the Company’s Articles of As-sociation, and, in general, to do all that is necessary within the framework of the laws and regula-tions in force.
However, in order to comply with the legal obligations provided for in particular Articles L. 225-129-6 et seq. of the French Commercial Code, the Combined Shareholders’ Meeting of 22 June 2018 was asked to vote on a proposed delegation of authority to the Board of Directors to increase the share capital with can-cellation of preferential subscrip-tion rights by issuing shares of the Company reserved for members of a company savings plan, up to a no-minal amount of €860,000; resolu-tion which was rejected.
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5 Special report on stock Options
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SHARE SUBSCRIPTION AND PURCHASE OPTIONS
Dear Sir/Madam,
In accordance with the provisions of Article L. 225-184 of the French Commercial Code, we are pleased to report on the transactions car-ried out pursuant to the provisions of Articles L. 225-177 to
L. 225-186 of the French Com-mercial Code relating to stock and share subscription options.
Employee corporate officers in the company or in the controlled companies
No options have been granted to the Company’s corporate officers.
We hereby inform you that no subscription options have been granted by the Company to corporate officers due to the offices held and the duties performed in the Company and in its subsidiaries in accordance with the conditions provided for under Article L. 225-180 of the French Com-mercial Code.
We also hereby inform you that no op-tions have been granted to corporate officers for the duties they perfor-med or the offices they held through controlled companies within the mea-ning of Article L. 233-16 of the French Commercial Code.
Non-corporate officer employees
Please note that the Company did not grant any new subscription op-tions to non-corporate officers du-ring the 2016 financial year.
Please note that subscription op-tions have been exercised during the past year by non-corporate offi-cer employees.
The number of options thus exer-cised is shown in the table in Ap-pendix 1.
In a table contained in Appendix 1, we have re- ported all the op-
tions granted by the Company to non-executive beneficiary em-ployees, including the 10 employees who were granted the largest num-ber of options.
Allocation of subscription options
At December 31, 2018, the following six stock subscription option plans were in operation:
Under the authorization granted by the EGM of June 10, 2009,
• The 2011 Plan dated October 21, 2011 expiring on October 21, 2018
Under the authorization by the EGM of March 1, 2012,
• The 2012 Plan dated August 31, 2012 expiring on Au- gust 31, 2019
• The 2013 Plan dated December 18, 2012 expiring on December 18, 2019
• The 2013 Plan dated May 28, 2013 expiring on May 28, 2020
• The 2014 Plan dated April 3, 2014 expiring on April 3, 2021
Under the authorization granted by the EGM of May 21, 2014,
• The 2014 Plan dated October 23, 2014 expiring on October 23, 2021
Board of Directors’ special report on the transactions carried out pursuant to the provisions of Articles L. 225-177 to L. 225-186 of the French Commercial Code.
Financial year ended on December 31, 2018
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2009 Plan
In accordance with the authoriza-tion granted by the Stockholders’ General Meeting of June 10, 2009 (Resolution 7), of April 15, 2010 the Board of Directors decided to allo-cate 14,000 stock options to Com-pany employees under the following conditions:
• Formula for calculating the subscription price set in accor-dance with Article L. 225-177 of the French Commercial Code; 95% of the average price quoted in the 20 trading sessions preceding their allocation, or €10.96.
• Condition of presence
As a reminder, the number of op-tions thus granted by the Board on April 15, 2010 is shown in the table in Appendix 1.
2010 Plan
Under the authorization granted by the Shareholders’ Meeting of June 10, 2009 (Resolution 7), on Sep-tember 15, 2010 the Board of Direc-tors decided to grant 8,500 stock options to Company employees un-der the following conditions:
• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; 95% of the average of the quoted prices for the 20 trading sessions preceding their allocation, or €8.89.
• Condition of presence
As a reminder, the number of op-tions thus granted by the Board on September 15, 2010 is shown in the table in Appendix 1.
2011 Plan
Under the authorization granted by the Shareholders’ Meeting of June 10, 2009 (Resolution 7), on October 21, 2011 the Board of Directors de-cided to grant 58,500 stock options to Company employees under the fol-lowing conditions:
• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; 95% of the average of the quoted prices for the 20 trading sessions preceding their allocation, or €9.38.
• Condition of presence
As a reminder, the number of op-tions thus granted by the Board on October 21, 2011 is shown in the table in Appendix 1.
2012 Plan
Please note that the Board of Direc-tors meeting of August 31, 2012 de-cided to grant stock options under the following conditions (“1st Wave 2012 Plan”):
• Beneficiaries: an allocation to all Company employees in an amount equivalent to 3 months of gross base salary (calculated at the va-lue of the subscription price) as well as any additional allocation made on the Chairman and Chief Executive Officer’s initiative.
• Volume of options to be allocated: 400,000
• Allocation deadline: before June 30, 2013
• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commer-cial Code; average of the quoted prices for the 20 trading sessions preceding their allocation, less a 5% discount; or €9.34 for the op-tions allocated by the Board mee-ting of August 31, 2012
Regarding the stock option pricing formula, the Company is aware of the recommendations found in the AFEP- MEDEF Code, in which it is stipulated that no discount should be applied. However, the Company would point out that this recom-mendation applies only to managing corporate officers, whereas this is a stock option allocation made to non-corporate officer employees.
• Option exercise date: November 28, 2014
• Period of option validity: seven years as of their allocation date.
• Two cumulative conditions: a per-formance and a presence condi-tion
The Board of Directors has dele-gated to the Chairman and Chief Executive Officer the task of no-tifying each beneficiary by letter of the number of options granted to them and the conditions for exerci-sing them.
In accordance with the 1st Wave 2012 Plan and under the terms and condi-tions set by the Board of Directors meeting of August 31, 2012, 315,800 options were granted to Company non-corporate officers employees during the year ended December 31, 2012 of which 162,000 options for the 10 Company non-corporate of-ficer employees granted the highest number of options.
The number of options thus granted by the Board at the meeting of Au-gust 31, 2012 is shown in the table in Appendix 1.
In addition, we remind you that by decision of December 18, 2012 (“2nd Wave 2012 Plan”), the Board of Di-rectors decided to grant stock op-tions to certain employees who started working for the Company as of September 1, 2012, in accordance with the authorization granted by the Shareholders’ Meeting of March 1, 2012 (5th resolution) and under the terms and conditions set by the Board meeting of August 31, 2012.
Based on the calculation formu-la used by the Board of August 31, 2012 and in accordance with Article L. 225- 177 of the French Commer-cial Code, the subscription price shall be set at €9.02, or the average price quoted on the 20 trading days preceding the Board meeting allo-cating the stock options, less a 5% discount.
The Board of Directors has dele-
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gated to the Chairman and Chief Executive Officer the task of no-tifying each beneficiary by letter of the number of options granted to them and the conditions for exerci-sing them.
Given the delays in determining the beneficiaries and the number of op-tions granted, this notification was not given during the financial year ended on December 31, 2012 but rather at the beginning of 2013 for 19,000 options split between 6 em-ployees who started working for the Company as of September 1, 2012.
The number of options thus granted by the Board at the meeting of Tues-day, December 18, 2012 is shown in the table in Appendix 1.
2013 Plan
We remind you that by decision of May 28, 2013, the Board of Directors decided to grant stock options to 3 additional employees in accordance with the authorization granted by the Shareholders’ Meeting of March 01, 2012 (Resolution 5) and under the terms and conditions set by the Board on August 31, 2012.
Based on the calculation formula used by the Board on August 31, 2012 and in accordance with Article
L. 225-177 of the French Commer-cial Code, the subscription price shall be set at €10.44, or the ave-rage price quoted on the 20 trading days preceding the Board meeting allocating the stock options, less a 5% discount.
The Board of Directors has dele-gated to the Chairman and Chief Executive Officer the task of no-tifying each beneficiary by letter of the number of options granted to them and the conditions for exerci-sing them; the aforementioned no-tification concerned 65,200 options split between 3 employees.
The number of options thus granted by the Board at the meeting of May 28, 2013 is shown in the table in Ap-pendix 1.
2014 Plan
In accordance with the authorization granted to the Stockholders’ Gene-ral Meeting on March 1, 2012 (Re-solution 5), the Board of Directors meeting of April 3, 2014 decided to grant a new sub-delegation to the Chairman to allocate (before May 01, 2014) 43,000 subscription op-tions to Company employees under the following conditions (“1st Wave 2014 Plan”):
• Volume of options to be allocated: 43,000
• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; average of the quoted prices for the 20 trading sessions preceding their allocation, less a 5% discount; or €14.84 for the options allocated by the Board Meeting of April 3, 2014.
• Option exercise date: on the day of the Board meeting called to ap-prove the statements for the 2015 financial year Period of option va-lidity: seven years as of their allo-cation date
• Two cumulative conditions: a per-formance and a presence condi-tion
As a reminder, the number of op-tions thus granted by the Board of April 03, 2014 is shown in the table in Appendix 1.
Pursuant to the extension granted by the General Shareholders’ Mee-ting of May 21, 2014 (Resolution 17) for the delegation granted by the Stockholders’ General Mee-ting of March 01, 2012 (Resolution 5) on October 23, 2014, the Board of Directors decided to grant stock options to IMAGOTAG employees under the following conditions (“2nd Wave 2014 Plan”):
• Volume of options to be allocated: 33,150
• The formula for calculating the subscription price has been set in
accordance with Article L. 225-177 of the French Commercial Code; average of the quoted prices for the 20 trading sessions preceding their al-ocation, less a 5% dis-count; or €12.21 for the options allocated by the Board Meeting of October 23, 2014.
• Option exercise date: on the day of the Board meeting called to ap-prove the statements for the 2015 financial year
• Period of option validity: seven years as of their allocation date.
• Two cumulative conditions: a per-formance and a presence condi-tion
As a reminder, the number of op-tions thus granted by the Board on October 23, 2014 is shown in the table in Appendix 1.
Stock options exercised in 2018 :
Please find below the number of stock options exercised, in compli-cance with article L.225-180 of the French Code of Commerce:
• On February 6th, 2018, after stock options exercises during December 2017, from Plans 2010, 2011, 2012 (1st wave), 2012 (2d wave) and 2013;
• On March 5th, 2018, after stock op-tions exercises during January and February, from Plans 2012 (1st wave) and 2014 (1st wave)
• On September 17, 2018, after stock options exercises during the March 1st and August 31st period, from Plans 2011, 2012 (1st and 2d waves), 2013 et 2014 (1st and 2d waves)
• On February 11th, 2019, after stock options exercises during the Sep-tember 1st and December 31st period, from Plans 2011, 2012 (1st wave).
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Plan 2009 1 Plan 2010 Plan 2011 Plan 2012² 1ère wave
Plan 2012² 2nde wave
Plan 2013² Plan 20141ère wave
Plan 20142nde wave
Authorization date by EGMJune 10, 2009 7th resolution
38 months until August 10 2012March 1st, 2011 5th resolution26 months until May 1th 2014
May 21, 2014 17th
resolution EXTENSION until May 1th 2015
Maximum quantity 375,0004 551,2515
Allocation date 15.04.2010 15.09.2010 21.10.2011 31.08.2012 18.12.2012 28.05.20137 3.04.20148 23.10.20149
Exercise Price 10.96 € 8.89 € 9.38 € 9.34 € 9.02 € 10.44 € 14.84 € 12.21 €
Maturity date Expired on 15.04.2017 Expired on 15.09.2017 21.10.2018 31.08.2019 18.12.2019 28.05.2020 03.04.2021 23.10.2021
Number of Options notified 14,000 8,500 58,500 315,800 19,000 65,200 43,000 33,150
Group Employees(Non Directors)
9,000 8,500 32,000 130,000 10,000 60,000 20,000 6,150
Directors and officers (subsidiaries)
10 000
Number of Options exercised 14,000 8,500 56,500 254,050 17,000 35,200 12,750 29,550
Number of Options canceledOut of the 375,000 options authorized, only 81,000 options were allocated, and 296,000 null and void.
The 400,000 options authorized by the Board on 08.31.2012 were allocated. The balance of 151,251 options corresponding to the maximum volume authorized by the GM on March 1, 2012 ex-pired on May 1, 2014. 62,100 options have been voided ( 32,100 from the 1st wave and 30,000 options from 2013 plan).
Prior to May 1st 2014 the Board decided to use the remainder of 43,000 options. 29,500 options have been voided.
In accordance with the extension until May 1, 2015, the Board decided to use the remainder of 33,150 options. The 75,101 options left have been voided on May 1, 2015.
Outstanding Options 0 0 0 29,650 2,000 0 750 3,600
[1] The terms and conditions of the 2009 plan were set by the Board meeting dated 27.08.2009
[2] The terms and conditions of the 2012 and 2013 plans were set by the Board meeting on 31.08.2012
[3] The EGM dated 21.05.2014 decided to grant an extension until 01.05.2015 of the delegation given to the Board by the EGM dated 01.03.2012, which expired on 01.05.2014.
[4] 4 % of the capital stock at the options grant date.
[5] 5 % of the capital stock at the options grant date.
[6] The options grant date corresponds to the date the Board of Directors decision to grant the options.
Appendix 1Please find below the summary of the exercise of options:
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Plan 2009 1 Plan 2010 Plan 2011 Plan 2012² 1ère wave
Plan 2012² 2nde wave
Plan 2013² Plan 20141ère wave
Plan 20142nde wave
Authorization date by EGMJune 10, 2009 7th resolution
38 months until August 10 2012March 1st, 2011 5th resolution26 months until May 1th 2014
May 21, 2014 17th
resolution EXTENSION until May 1th 2015
Maximum quantity 375,0004 551,2515
Allocation date 15.04.2010 15.09.2010 21.10.2011 31.08.2012 18.12.2012 28.05.20137 3.04.20148 23.10.20149
Exercise Price 10.96 € 8.89 € 9.38 € 9.34 € 9.02 € 10.44 € 14.84 € 12.21 €
Maturity date Expired on 15.04.2017 Expired on 15.09.2017 21.10.2018 31.08.2019 18.12.2019 28.05.2020 03.04.2021 23.10.2021
Number of Options notified 14,000 8,500 58,500 315,800 19,000 65,200 43,000 33,150
Group Employees(Non Directors)
9,000 8,500 32,000 130,000 10,000 60,000 20,000 6,150
Directors and officers (subsidiaries)
10 000
Number of Options exercised 14,000 8,500 56,500 254,050 17,000 35,200 12,750 29,550
Number of Options canceledOut of the 375,000 options authorized, only 81,000 options were allocated, and 296,000 null and void.
The 400,000 options authorized by the Board on 08.31.2012 were allocated. The balance of 151,251 options corresponding to the maximum volume authorized by the GM on March 1, 2012 ex-pired on May 1, 2014. 62,100 options have been voided ( 32,100 from the 1st wave and 30,000 options from 2013 plan).
Prior to May 1st 2014 the Board decided to use the remainder of 43,000 options. 29,500 options have been voided.
In accordance with the extension until May 1, 2015, the Board decided to use the remainder of 33,150 options. The 75,101 options left have been voided on May 1, 2015.
Outstanding Options 0 0 0 29,650 2,000 0 750 3,600
[7] On 08.05.2013 the 400,000 stock options authorized by the 31.08.2012 Board were used. Given the tax and social charges impact involved with stock options granting process, the Board decided not to use the remainder 151,251 options corresponding to the maximum quantity authorized by the 01.03.2012 EGM.
[8] The terms and conditions of the 2014 plan were set by the Board dated 03.04.2014 (authorized volume 43,000 stock options)
[9] The Board decided to grant stock options to iMAGOTAG GmbH employees in connection with the extension granted by the EGM dates 21.05.2014.
[10] Exercice price in euros, set in accordance with article L. 225-177 of the French Code de Commerce.
[11] Options not granted are null and void.
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6 Special Report on bonus shares allocation
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77
Dear Sir or Madam
In accordance with the provisions of Article L. 225-197-4 of the French Commercial Code, we are pleased to report to you on the transactions carried out pursuant to the provi-sions of Articles L. 225-197-1 to L. 225-197-3 of said Code relating to bonus share allocations by De-cember 31, 2018.
The “i3” (innovation, inter-national, industrialization) strategic plan
We hereby inform you that on De-cember 16, 2015, the Board of Di-rectors, acting on the authorization of the Extraordinary Stockholders’ Meeting of December 16, 2015 (Re-solution 1), decided to set up a bonus share plan with associated conditions to substitute previously authorized bonus shares (without further dilu-tion) authorized by the Combined Stockholders’ Meeting of March 1, 2012 (Resolution 4).
After reporting that all beneficiaries of the previous bonus share plans had individually waived the bonus shares in the plan authorized by the Com-bined Stockholders’ Meeting of March 1, 2012, as well as all related rights, the Board of Directors decided to allocate bonus shares to Executive Committee members in the same quantities as the bonus shares previously granted under the bonus share plan autho-rized by the Combined Stockholders’ Meeting of March 01, 2012, which the new shares are designed to replace.
Please note that the total amount al-located is 208,459 bonus shares to be issued, i.e. less than the total au-thorized by the Stockholders’ Mee-ting (2% of the capital stock at the Extraordinary Stockholders’ Meeting of December 16, 2015, or 232,632 shares).
The Board of Directors stated that, in accordance with Article L225-197-1, the authorization granted by the Ex-traordinary Stockholders’ Meeting of December 16 automatically resulted in the waiving by stockholders of their preferential subscription rights.
The allocation conditions for these bonus shares are therefore as follows:
• Prior waiver by each Beneficia-ry of all bonus shares previously granted to them.
• Fulfilling of the associated condi-tions in 2016 and 2017
• Acquisition period: the shares shall be definitively allocated as follows:
- 2016 Tranche: final allocation of 50% of the shares after De-cember 16, 2016, at the Board of Directors meeting called to approve the 2016 annual sta-tements, if the performance conditions are met; and
- 2017 Tranche: final allocation of the second half of the shares (or of all shares if none has been al-located the previous year) after December 16, 2017, at the Board of Directors meeting which shall be called to approve the 2017 annual statements, if the perfor- mance conditions are met;
Board of Directors’ special report on the transactions carried out pursuant to the provisions of Articles L. 225-197-4 of the French Commercial Code
Financial year ended on December 31, 2018
Bonus Shares allocation
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- Or, for both tranches, on the date of the start of a public of-fering if earlier, without the final allocation taking place before December 16, 2016.
• Period of retention: The period of retention is as follows:
- 2016 Tranche: December 16, 2017; and
- 2017 Tranche: no period of reten-tion for shares if the final allocation date is the date of the Board of Di- rectors meeting called to approve the 2017 financial statements (or December 16, 2017 otherwise).
• Condition of uninterrupted pre-sence throughout the acquisition period Furthermore, on March 11, 2016, the Board of Directors, acting on the delegation of the Extraor-dinary Stock- holders’ Meeting of December 16, 2015 (Resolution 1), decided to, as of April 1, 2016, al-locate 20,000 new bonus shares to two new members of the Executive Committee who had not received bonus shares under the previous bonus share allocation plan autho-rized by the Combined Stockhol-ders’ Meeting of March 1, 2012.
The allocation conditions for these bonus shares are therefore as fol-lows:
• Prior waiver by each Beneficiary of all bonus shares previously allo-cated to them.
• Fulfilling associated conditions in 2016 and 2017
• Acquisition period: the shares shall be definitively allocated, as fol-lows:
- 2016 Tranche: definitive allo-cation of 50% of the shares on April 1, 2017 if performance conditions are met;
- 2017 Tranche: definitive alloca-tion of the second half of the shares (or all shares if none has been granted the previous year) on April 1, 2018 or on the date
of the Board of Directors will approve the 2017 annual state-ments if this board meeting is held after April 1, 2018, should the performance conditions be met;
- Or, for both tranches, on the start date of the public offering referred to above if earlier, wi-thout the final allocation being made before April 01, 2017.
• Period of retention: the length of the Period of retention is as fol-lows:
- 2016 Tranche: April 1, 2018;
- 2017 Tranche: no Period of re-tention for shares if the final grant date is April 1, 2018, or the date of the Board of Directors meeting called to approve the 2017 financial statements if this board meeting is held after April 1, 2018
• Condition of uninterrupted pre-sence throughout the acquisition period
The “Leapfrog” strategic plan
Lastly, in order to build on the en-trepreneurial dynamic and to involve managers and employees who play a decisive role in achieving results and creating value, we hereby inform you that extraordinary resolution 5 as agreed at the Stockholders’ Meeting of November 30, 2016 created a new bonus plan with strict performance conditions in line with the ambitious trajectory of the “Leapfrog 2020” strategic plan.
This is why nearly five years after this first plan, SES-imagotag is now entering a new stage in its deve-lopment with the “Leapfrog 2020” strategic plan, which aims to speed up the company’s global growth.
With the aim of maximizing our chances of reaching these ambitious goals, the company wants to set up a new plan, one designed for a wider population than the previous plan, including managers and employees
who make significant contributions to the company’s performance as well as new talented individuals who we hope to attract as we develop technologically and expand interna-tionally.
Extraordinary resolution 5 as agreed by the Stockholders’ Meeting of November 30, 2016 authorized the Board of Directors, on one or more occasions, pursuant to Article L 225-197-1 of the French Commercial Code, to allocate new ordinary bo-nus shares through a capital increase by capitalizing reserves, premiums or profits, or by delivering existing shares, to an overall ceiling of 3% of the capital stock existing on the date of the decision to allocate them (i.e. 358,614 shares).
Under this authorization, and on the recommendation of the Appoint-ments and Compensation Com-mittee, the Board of Directors de-cided at the meeting of November 30, 2016 to allocate up to 80,000 bonus shares to the Company Chair-man and Chief Executive Officer.
On December 22, 2016, and on the Chairman’s proposal, the Board of Directors decided to allocate 218,500 existing shares or shares to be issued to Company employees.
On march 10, 2017, and on the Chair-man’s proposal, the Board of Direc-tors decided to allocate 5,000 exis-ting shares or shares to be issued to one Company employee.
The allocation conditions for these bonus shares are therefore as fol-lows:
• Fulfilling associated conditions from 2017 to 2020
• Acquisition period: the shares shall be definitively allocated, as fol-lows:
- In 2018: 30% of the shares will be definitively allocated on March 31, 2018 if the cumulative performance conditions (indivi-dual and collective) have been met (2017 Target);
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- In 2019: 30% of the shares will be definitively allocated on Sunday, March 31, 2019 if the cumulative performance condi-tions (individual and collective) have been met (2018 Target);
- In 2020: 20% of the shares will be definitively allocated on Tuesday, March 31, 2020 if the cu- mulative performance conditions (individual and col-lective) have been met (2019 Target);
- In 2021: 20% of the shares will be definitively allocated on We-dnesday, March 31, 2021 if the cumulative performance condi-tions (individual and collective) have been met (2020 Target);
- Or, a definitive allocation of all shares should a public offering be made (i) recommended by the Board of Directors and (ii) covering the Company’s total capital stock.
• Period of retention: the length of the period of retention is as fol-lows:
- For shares acquired in 2018, a 1-year period of retention is sti-pulated after the 1-year acqui-sition period expiring on March 30, 2019,
- For shares acquired in 2019, 2020 and 2021, no holding pe-riod has been stipulated be-cause the acquisition period is at least 2 years. Consequent- ly, these shares will be avai-lable respectively and therefore transferable on March 31, 2019, March 31, 2020 and March 31, 2021
• Condition of uninterrupted pre-sence throughout the acquisition period.
On October 23, 2017, the Board of Directors indicated that the periods for allocating and holding these free shares would be defined as descri-bed below in the case of an effective change in control of SES-imagotag
followed by a takeover bid endorsed by the Board of Directors:
• If the alternative condition is met before the first anniversary of the allocation of the free shares, all the shares shall be delivered on this anniversary date and shall be res-tricted by a holding period of one year beginning on the date of said anniversary, i.e.
- for shares allocated on No-vember 30, 2016, a definitive delivery date of November 30, 2017, and a holding period en-ding on November 30, 2018; and
- for shares allocated on De-cember 22, 2016, a definitive delivery date of December 22, 2017, and a holding period en-ding on December 22, 2018.
• If the alternative condition is met after the first anniversary of the allocation of the free shares, all the shares shall be delivered on the date on which the alternative condition is met and shall be res-tricted by a holding period of one year beginning on said date of fulfillment of the alternative condi-tion.
The Board of Directors wanted to allow beneficiaries the possibility to opt for the delivery of all the shares two years after their allocation, na-mely, in the event that the alternative condition is met before the second anniversary of allocation of the free shares, i.e. November 30, 2018, for shares allocated on November 30, 2016, and December 22, 2018, for shares allocated on December 22, 2016. In this case, the shares delive-red would not be restricted by any holding period.
This possibility would notably al-low beneficiaries who file taxes in a foreign country and whose capital gains are taxable on the date of ac-quisition of the shares to immedia-tely dispose of their shares to cover the amount of social security and/or income tax owed on the date of delivery of the shares.
On February 21, 2017 the Board aknowledged the realisation of the performance criterias for 2016 and thus the delivery of of 50% of the performance shares allocated i.e. 110,014 shares.
On December 21, 2017, the Board of Directors confirmed fulfillment of the alternative conditions for free share allocation put in place by the Board of Directors at its meetings on De-cember 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016, and March 10, 2017.
The Board of Directors’ meeting of November 30, 2016 also stated that the corporate officers allocated bo-nus shares would undertake to re-tain 30% of the shares definitively allocated until the end of their term of office, regardless of the reason, as well as all combined bonus share plans.
On December 21, 2017, the Board of Directors noted the significance of the investment made by Mr. Thierry Gadou both in cash and in Company shares, which, moreover, amounts to a much higher percentage of ca-pital than the 30% of shares which have been or will be allocated to Mr. Thierry Gadou under the Company’s free share allocation plans currently in effect.
In light of this investment and the holding commitments made in this matter by Mr. Thierry Gadou, the Company’s Board of Directors has decided to modify the number of free shares allocated to Mr. Thierry Gadou which are to be held (directly) by him until he ceases to hold the position of Chairman and Chief Exe-cutive Officer, setting it at 20,000 shares (for all free share allocation plans combined).
On December 21, 2017, the Board noted that the alternative conditions of the free share plans implemented by the meetings of the Board of Directors held on December 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016 and March 10, 2017 had been met.
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Thus on February 6th 2018 and on September 17, 2018, 228.000 shares have been delivered.
On december 21st 2017, the Board noted that the alternative conditions of the bonus shares plans dated December 16th 2015 and March 11th 2016, have been met, thus on March 5th 2018, The Board aknowledged the delivery of the remaining 50% shares (110,017 shares). On February 11 2019, the Board has acknowledged
the delivery of 64 500 shares dated December 22, 2018 and 5 000 bo-nus shares dated March 10, 2018.
Finally, we hereby inform you that no other shares have been allocated free-of-charge during the financial year to officers by the Company and by those associated with it in accordance with the provisions pro-vided for in Article L. 225-197-2 of the French Commercial Code, or (ii) based on their duties and functions
they perform in the controlled com-panies within the meaning of Article L. 233-16 of the French Commercial Code, (iii) by the Company and by the companies and groups asso-ciated with it, in accordance with Article L. 225-197-2 of the French Commercial Code, to any of the top ten Company non-corporate officer employees with the highest number of shares allocated to them.
Free Shares allocation
Authorization date by the EGM
EGM dated 16/12/2015 1
for 26 months, i.e. 02/15/2018
Maximum Volume : 2% of the capital stock on the Boardmeeting dateD 16/12/2015 i.e 232,632 bonus shares maximum
EGM dated 30/11/2016for 26 months, i.e. 30/01/2019
Maximum Volume : 3% of the stock capital on the Boardmeeting dateD 11/30/2016 i.e. 358,614 maximum
Allocation date 2 16/12/2015 11/03/2016 30/11/2016 22/12/2016 10/03/2017
Bene
ficia
ries
Mr Thierry Gadou asChaiman and CEO
139,069 maximum None 80,000 maximum None None
other employees 69,390 maximum 20,000 maximum None 218,500 maximum 5,000 maximum
Acquisition date 3
Tranche 2016: acquisition of 50 % of the shares on 21/02/2017
Tranche 2016: acquisition of 50 % of the shares on 01/04/2017
Definitive allocation of 80,000 actions (anticipated) - alternative conditions fulfilled i.e. 21/12/2017
Definitive allocation of 148,000 actions (anticipated) - alternative conditions fulfilled i.e. 22/12/2017
Definitive allocation one year after their allocation on 10/03/2018
Tranche 2017: definitive allocation (anticipated) of 50 % of the shares, the day the public offer is open (March 2, 2018)
Tranche 2017: definitive allocation (anticipated) of 50 % of the shares, the day the public offer is open (March 2, 2018)
6,000 shares voided and defini-tive allocation of 64,500 shares on 22/12/2018
Availability date 5 02/03/18 01/04/18 21/12/18 22/12/18 10/03/18
1- Powers granted during EGM dated 16.12.2015 replace those granted pursuant to the authorization of the EGM of March 1, 2012; the beneficiaries of the prior plan having beforehand formally waived their rights under said previous plan.
2- Allocation date by the Board of Directors.
3- The allocation of the shares to their beneficiaries will become final after a minimum acquisition period of one year.
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Authorization date by the EGM
EGM dated 16/12/2015 1
for 26 months, i.e. 02/15/2018
Maximum Volume : 2% of the capital stock on the Boardmeeting dateD 16/12/2015 i.e 232,632 bonus shares maximum
EGM dated 30/11/2016for 26 months, i.e. 30/01/2019
Maximum Volume : 3% of the stock capital on the Boardmeeting dateD 11/30/2016 i.e. 358,614 maximum
Allocation date 2 16/12/2015 11/03/2016 30/11/2016 22/12/2016 10/03/2017
Bene
ficia
ries
Mr Thierry Gadou asChaiman and CEO
139,069 maximum None 80,000 maximum None None
other employees 69,390 maximum 20,000 maximum None 218,500 maximum 5,000 maximum
Acquisition date 3
Tranche 2016: acquisition of 50 % of the shares on 21/02/2017
Tranche 2016: acquisition of 50 % of the shares on 01/04/2017
Definitive allocation of 80,000 actions (anticipated) - alternative conditions fulfilled i.e. 21/12/2017
Definitive allocation of 148,000 actions (anticipated) - alternative conditions fulfilled i.e. 22/12/2017
Definitive allocation one year after their allocation on 10/03/2018
Tranche 2017: definitive allocation (anticipated) of 50 % of the shares, the day the public offer is open (March 2, 2018)
Tranche 2017: definitive allocation (anticipated) of 50 % of the shares, the day the public offer is open (March 2, 2018)
6,000 shares voided and defini-tive allocation of 64,500 shares on 22/12/2018
Availability date 5 02/03/18 01/04/18 21/12/18 22/12/18 10/03/18
4- Possibility to opt for the delivery of all the shares two years after their allocation.
5- The cumulative acquisition and holding periods may not be less than two years, as the term of the holding period begins to run from the final share allocation.
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7 Supplementary Board of Directors report (ARTICLES L. 225-129-5 AND R. 225-116 OF THE COMMERCIAL CODE)
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Ladies and gentlemen,
In accordance with the provisions of Articles L. 225-129-5 and R. 225-116 of the Commercial Code, we are honoured to inform you that the Board of Directors has exercised the delegation of powers conferred under Resolution 15 of the Company’s General Meeting of Shareholders of 22 June 2018 relating to the capital increase with cancellation of the preferential subscription right in favour of Yuen-Yu Investment Co. Ltd., a subsidiary of the E-Ink Holdings Inc. group, within the framework of the strategic partnership announced on 8 May 2018.
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1. Terms of the transaction
1.1. Summary of the terms of the delegation of powers granted to the Board of Directors under Resolution 15 of the Company’s General Meeting of Shareholders of 22 June 2018
Resolution 15 of the Company’s General Meeting of Shareholders of 22 June 2018 delegated to the Board of Directors its powers (i) to decide to increase the share capital with cancellation of the preferential subscription right by issuing 866,666 new Company shares to Yuen-Yu Investment Co. Ltd, a subsidiary of E-Ink Holdings Inc, at a price of €30 per new share, i.e. a gross total of €25,999,980 (issue premium included), and (ii) to determine the characteristics, terms and conditions of this reserved capital increase. This delegation of powers included a sub-delegation option under the conditions provided for by law and was for a period of 6 months following the General Meeting.
1.2. Board of Directors meeting of 22 June 2018
At its meeting of 22 June 2018, the Board of Directors decided to issue 866,666 new shares with a par value of two euros, with cancellation of the shareholders’ preferential subscription right, to Yuen-Yu Investment Co. Ltd., a subsidiary of E-Ink Holdings Inc. (the “Reserved Capital Increase”) and determine the terms and conditions as follows:
• Number of new ordinary shares is-sued: 866,666 (the “New Shares”);
• Issue price (par value and issue pre-mium) per New Share: the subscrip-tion price of the New Shares is €30 per share, of which €2 par value and €28 issue premium. This price includes a 1.2% premium over the average price for the last 12 months preceding the signing of the subscription agreement with
Yuen-Yu Investment Co. Ltd, i.e. 29.65 euros, a premium of 1.1% over the average price1 since the date of publication of the annual results for 2017 (2 February 2018) and 19.8% over the average rates1 since the date of publication of the 1st quarter turnover of 2018 (26 April 2018);
• Nominal amount of the capital in-crease: 1,733,332 euros;
• Total gross amount of the issue: 25,999,980 euros including the is-sue premium;
• Overall issue premium: 24,266,648 euros;
• Dividends rights of the New Shares: the New Shares will have the cur-rent dividend rights and will be immediately assimilated to the existing ordinary shares, with a par value of two (2) euros;
• Cancellation of the preferential subscription right: the transaction was carried out with cancellation of the preferential subscription rights under the provisions of Ar-ticle L.225-138 of the Commercial Code;
• Beneficiaries: the Reserved Capi-tal Increase of €1,733,332 gross (corresponding to 866,666 new shares issued at the price of €30 per share) was reserved for Yuen-Yu Investment Co. Ltd, a subsidiary of E-Ink Holdings Inc.;
• Payment-delivery: 27 June 2018;
• Listing of the New Shares: the New Shares will be listed on the regu-lated Euronext Paris market under the same code as the existing or-dinary SES-imagotag shares (ISIN code FR0010282822).
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2. Impact of the Reserved Capital Increase on the situation of holders of shares or securities giving access to the capital
2.1. Impact of the Reserved Capital Increase on the Company’s share of equity
2.2. Impact of the Reserved Capital Increase on share capital holdings
As an indication, the impact of the Reserved Capital Increase on the equity of a shareholder holding 1%
3. Theoretical impact of the Reserved Capital Increase on the market value of SES-imagotag shares
The theoretical impact on the market value of SES-imagotag shares, i.e.
in euros per shareShareholders’ equity per share as of 31 December 2017
Non-diluted basis Diluted basis 1
Prior to the New Share issue 9.64 9.44
Post-New Share issue 9.05 8.87
1 If all of the 106,925 stock options and 179,517 bonus shares are exercised.
In %Shareholders’ equity
Non-diluted basis Diluted basis 1
Prior to the New Share issue 1.00% 0.98%
Post-New Share issue 0.94% 0.92%
1 If all of the 106,925 stock options and 179,517 bonus shares are exercised.
Number of shares(non-diluted basis)
Market value per share(in euros) (non-diluted basis)
Number of shares(diluted basis)1
Market value per share(in euros) (diluted basis)1
Prior to the New Share issue
13,533,704 29.32 13,662,404 29.04
Post-New Share issue 14,400,370 29.36 14,529,070 29.10
1 If all of the 59,200 stock options and 69,500 bonus shares are exercised.
As an indication, based on the Company’s equity as of 31 December 2017 and the number of shares comprising the Company’s share capital at the time of this report, consolidated shareholders’ equity per share, before and after the Reserved Capital Increase, is as follows:
of the Company’s share capital at the time of this report (calculated on the basis of the number of shares in the Company’s share capital at the time of this report) should be as follows:
29.32 euros per share (arithmetic average of the opening prices over the 20 trading days prior to 22 June 2018), should be as follows (on the basis of the number of shares in the Company’s share capital as of 31 May 2018):
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4. Auditors’ Report
In accordance with Article R. 225-116 of the Commercial Code, the Company’s Statutory Auditors will draw up a report on the Reserved Capital Increase after having verified that the terms of this transaction are in compliance with the powers granted by the General Meeting of
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Shareholders of 22 June 2018 and the information provided to it. In their report, the auditors will also give their opinion on the choice of elements used to calculated the issue price and final amount of the New Shares, as well as the impact of the Reserved Capital Increase on the situation of the Company’s shareholders.
This report, together with the Company auditors’ supplementa-ry report, will be made available to shareholders at the Company’s re-gistered office and will be brought to the shareholders’s attention at the next general meeting.
The Board of Directors
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Dear stockholders,
In accordance with the provisions of Article L. 225-37 of the French Commercial Code, this report presents information on the Board’s composition and on the application of the principle of balanced gender representation as it relates to board members for the year ended December 31, 2018, the conditions for preparing and organizing the work of your Board of Directors, as well as the limitations imposed by the Board of Directors on the powers of the Chairman and Chief Executive Officer as well as on the specific terms and conditions relating to shareholder participation in Stockholders’ Meetings.
Furthermore, this report presents information on the specific terms and conditions relating to stockholder participation in stockholders’ meetings and on the current delegations granted by the Stockholders’ Meeting in the matter of capital increases, as well as a list of all the appointments and functions held in any company by each corporate officer and regulated agreements concluded directly or indirectly (Article L. 225-37-4 of the French commercial code).
This report refers to the management report with regard to the disclosures stipulated in Articles L. 225-37-2 and L. 225-37-3 and the principles and rules approved by the Board of Directors to determine the compensation and all benefits granted to corporate officers.
This report also states information that may have an impact in the event of a public offering, in accordance with article L. 225-37-5 of the French Code of Commerce.
The Board of Directors approved this report on April 4, 2019.
The Company is pursuing a corporate governance policy. The Company adopted a charter on December 12, 2005, which entered into force on February 2, 2006 (hereinafter “the Corporate Governance Charter” or “the Charter”), which refers to the Code of Government developed by professional organizations. The Company drew inspiration from the AFEP-MEDEF Consolidated Code of June 2018, which constitutes the Corporate Governance Code to which it refers in preparing this report.
The AFEP-MEDEF Code is available on the MEDEF website: http://www.medef.com).
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8.1 Composition and functioning of the Board of Directors 8.1.1 Members of the board of directorsThe table below summarizes the composition of the Board of Directors at December 31, 2018. The Board consists of 9 members, including three independent Directors and one non voting director.
Governance report
Name Age Independent Other roles and functionsAccounts
Committee
Nominations and Compensation
Committee
Number of years of presence
Mr Thierry GADOU 52 No
BOE Smart Retail (Hong Kong) Co, Director;
SESIM SA, France, Chairman;
Amalto Technologies SA, France, Director.
6
Mr Xiangjun YAO 41 No
BOE Technology Group Co, Ltd, Beijing,
PRC, Executive Vice president and Co-COO;
BOE Smart Retail (Hong Kong) Co, Director.
Member 1
Mrs Xiangshun YIN 36 NoIOT solution Business Group, BOE Technology Group Co, Ltd, Beijing
PRC, CFO Budget MDGT dept;President 1
MRs Candace JOHNSON 66 Yes
NorthStar Earth and Space, Montreal Canada, Vice Chair of the Board of Directors;
Seraphim Space Capital, UK, Chair of the Corporate Advisory Board;
OWNSAT - Oceania Women’s Network Satellite, Singapore, Director;
Success Europe SA, Sophia Antipolis, France, Chair of the Board of Directors.
Member Member 6
Mrs Hélène PLOIX 74 Yes
FSH Conseil SAS, France, President
Pechel Industries, France, President until December 2018
Sorepe Société civile, France, Manager;
Genesis Emerging Markets Fund Limited, Guernesey, listed company, President;
SOFINA Belgium, listed company, Director;
Ferring SA, Switzerland, Director;
Sogama Crédit associatif, France, President;
Hélène Ploix SARL, France, Manager;
Hélène Marie Joseph SARL, France, Manager.
Member Member 1
Mr Renaud VAILLANT 40 Yes
SARL DB Consulting, Manager;- aratinga.bio, President;- aratinga.bio ACI, President;- aratinga.bio TNP, President;- aratinga.bio AIO, President.
member President 11
Mr Feng BAI 42 NoSmart Retail SBU - BOE Technology Co, Ltd, Beijing, P.R.C., Co CEO;
BOE Smart Retail (Hong Kong) Co, director. 1
Mr Xingqun JIANG and then Mr Linfeng JING
40 NoIoT Solution BG, BOE Technology Co, Ltd, Beijing, P.R.C., Senior Vice President. 1
Mrs Fangqi YE 48 NoBOE Technology Group Co, Ltd, Beijing, PRC, Deputy Chief Investment Officer;
BOE Smart Retail (Hong Kong) Co, Director.1
Mr Johnson LEE 41 Non Voting E Ink Holdings Inc. President 1
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a) The chairman
(i) Appointment
In accordance with the provisions of the New Economic Regulations Act, the possibility of separating the functions of Chairman of the Board of Directors from those of Chief Executive Officer is stipulated in the Company’s Articles of Incor-poration.
In the Company’s best interests, the Board of Directors has decided that the Company’s General Manage-ment is to be performed through the Chairman of the Board of Directors. The functions of Chairman of the Board of Directors and of the Chief Executive Officer are thus unified, but with the utmost respect for the respective prerogatives of the diffe-rent corporate bodies.
This governance method corres-ponds to the way the Company’s organization operates.
At its meeting held on January 13, 2012, the Board of Directors de-cided to appoint Thierry Gadou as CEO with no term of office.
Pursuant to the Company’s Articles of Incorporation, the Board of Di-rectors appoints the Chairman of the Board from among its members for a period set by the Board of Di-rectors and which cannot under any circumstances exceed the term of office as a Director. The Chairman can be reelected (Article 12 of the Articles of Incorporation).
As per Article 12 of the Company’s Articles of Incorporation, the Board of Directors appointed Thierry Ga-dou as Chairman of the Board at its meeting held on January 18, 2012 for the duration of his term as a Direc-tor. Thierry Gadou’s term of office expired at the end of the stockhol-ders Meeting called to approve the financial statements for the year en-ded December 31, 2013, which was held on May 21, 2014.
The Stockholders’ Meeting of May 21, 2014 decided to renew Thierry
GADOU’s term of office of as Direc-tor for a 3-year period until the Or-dinary Stockholders’ Meeting called to approve the financial statements for the 2016 financial year, to be held in 2017.
The Ordinary Stockholders Meeting held on June 23, 2017, decided to renew Thierry Gadou’s term as a Di-rector for a period of three years, i.e. until the Ordinary Stockholders’ Meeting to be called in 2020 to ap-prove the accounts for the 2019 fi-nancial year.
At its meeting of June 23, 2017, the Board of Directors then de-cided, with the unanimous approval of those in attendance, to renew Thierry Gadou’s term as Chairman of the Company’s Board of Directors for the duration of his term as a di-rector.
In his role as corporate officer, Mr. GADOU does not serve as a direc-tor for any listed companies outside this group or for any foreign com-panies.
(ii) Duties
The duties of the Chairman and Chief Executive Officer are to:
• approve documents prepared by the company’s internal depart-ments;
• organize and supervise the work of the Board of Directors;
• ensure that Directors can perform their duties and in particular en-sure that they have the information and documents necessary to ac-complish these;
• ensure that representatives of the staff representative bodies are re-gularly convened and have the in-formation and documents neces-sary to perform their duties.
As decided by the Board of Direc-tors on June 11, 2008, it should be noted that the limitations imposed on the powers of the Company’s Chairman and Chief Executive Offi-
cer, which are for internal purposes and are not binding on third parties, cover the following actions, opera-tions and commitments that must receive the prior authorization of the Board of Directors:
• creation of pledges, endorsements and guarantees;
• approval of the objectives, the budget for the following year and the means of financing necessa-ry for its implementation, for the Company and its subsidiaries;
• decisions to acquire or dispose of assets or a holding in the Compa- ny or its subsidiaries by any means whatsoever;
• plans to enter into partnerships and/or strategic alliances by the Company and/or its subsidiaries;
• any investment greater than €500,000 per year (other than those provided for in the Com-pany’s annual budget);
• decisions to sell buildings and hol-dings;
• settlement or compromise in the event of litigation that may have a significant impact on the business of the Company and the subsidia-ries.
b) Directors
(i) Appointments
In accordance with the AFEP-MEDEF Governance Code, the members of the Board of Directors are ap-pointed by a Stockholders’ Meeting for a 3-year term.
The term of office of a Director concludes at the end of the ordina-ry Stockholders’ Meeting called to approve the financial statements for the past financial year and held in the year in which their term expires (Article 11 of the Articles of Incorpo-ration). During the life of the com-pany, the Ordinary Stockholders’ Meet- ing appoints, renews or dis-misses Directors. They can always
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be reelected. However, should there be a vacancy due to the death or re-signation of one or more Directors from the Board, the Board of Direc-tors may, between two Stockhol-ders’ Meetings, make provisional appoint- ments in accordance with the conditions provided for under the law. The provisional appoint-ments made by the Board of Di-rectors must be ratified by the next Stockholders’ Meeting. A Director appointed to replace another shall hold office only for the remainder of their predecessor’s term of office.
(ii) Renewal
The terms of the members of the Board of Directors were renewed at the Annual Stockholders Meeting on June 23, 2017, for a period of three years pursuant to the provisions of Article 11.1 of the Company’s ar-ticles of incorporation, namely until the Ordinary General Stockholders’ Meeting meant to approve the sta-tements for the 2019 fiscal year, slated to be held in 2020.
On December 21, 2017, the Board of Directors acknowledged, effective as of December 20, 2017, the resi-gnation of:
• the company Pechel Industries Par-tenaires from its role as a member of the Board of Directors; which also caused the termination of the duties of Ms. Hélène Ploix (as a re-presentative of Pechel Industries Partenaires) within the Company’s Accounting Committee, effective immediately.
• Mr. Jérôme Kinas from his role as a Director; which also caused the termination of the duties of Mr. Jé-rôme Kinas within the Company’s Appointments and Compensation Committee, effective immediately.
Therefore, at its meeting of De-cember 21, 2017, the Board of Di-rectors de- cided to appoint, tem-porarily and effective immediately:
• Ms. Xiangshun Yin to the role of Director, to replace the compa- ny Pechel Industries Partenaires,
which resigned, for the remainder of the latter’s term.
• Mr. Xiangjun Yao to the role of Di-rector, to replace Mr. Jérôme Ki-nas, who resigned, for the remain-der of the latter’s term.
The Ordinary General Stockholders’ Meeting which was held on February 6, 2018, ratified the nominations of Ms. Xiangshun Yin and Mr. Xiangjun Yao and also approved the nomina-tion of four other Directors, including one independent member, namely:
• Mr. Feng Bai as a Director;
• Ms. Fangqi Ye as a Director;
• Mr. Xingqun Jiang as a Director;
• Ms. Hélène Ploix as a Director.
• Mr Jonhson Lee has been ap-pointed non voting Director on June 22nd 2018.
On September 17, 2018 the Board of Directors has validated M. Xingqun JIANG’s resignation and appointed M. Linfeng JING, as a Director, for the same manadate duration as M. Xingqun JIANG, i.e. until the shareholders meeting held to ap-prove December 31, 2020 financial results, in 2021.
(iii) Independence of Directors
As a reminder, the recommenda-tions of the AFEP- MEDEF Code for assessing the independence of its Directors are as follows:
• they must not be nor have been over the preceding five years:
• an employee or executive corporate officer of the company;
• an employee, executive corporate officer or director of a company within the scope of the company’s consolidation;
• an employee, executive corporate officer or director of the parent com- pany of the company or of a com-pany within the scope of that parent
company’s consolidation;
• they must not be an executive cor- porate officer of a company in which the company directly or indirec-tly holds a director’s mandate or in which an employee designated as such or an executive officer of the company (current or within the last five years) holds a term of office as director;
• a client, supplier, investment banker, corporate banker:
• of significant importance to the company or its group;
• or for which the company or its group represents a significant part of the business;
• they must not have close family ties with a corporate officer;
• they must not have been an auditor of the company within the last five years;
• they must not have been a Director of the company for more than twelve years. The status of Inde- pendent Director ceases on the twelfth anni-versary;
• a non-executive corporate officer cannot be considered independent if he or she receives variable com- pensation in cash or securities or any compensation tied to the com- pany’s or group’s performance;
• directors representing major stock- holders of the company or its par- ent may be consideredindependent if these stockholders do not take part in the company’s management. However, beyond a 10% threshold in capital or voting rights, based on a report by the Appointments Com-mittee, the Board must always exa-mine the independent status taking into account the composition of the company’s equity and the existence of any potential conflicts of interest.
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(iv) Principle of equal gender representation on the Board of Directors
It has been specified that in accor-dance with the provisions of Law 2011-103 of January 27, 2011 on balanced gender representation on the boards of directors and supervi-sory boards as well as on professional equality as per Article L. 225-17 of the French Commercial Code, the Board of Directors must seek to have ba-lanced gender representation.
To this end, the law of January 27, 2011 stipulates that as of January 1st of the sixth year following the publi- cation year of said law, the propor- tion of directors of each gender may not be less than 40% in companies with shares traded on a regulated market at the conclusion of the next Stockholders’ Meeting called to rule on appointments.
In these companies, when the board of directors consists of fewer than eight members, the difference between the number of directors of each gender may not be greater than two. These provisions came into force on January 1st of the sixth year following the year of publica-tion of the aforementioned law, i.e. on January 1, 2017.
(v) Duties of the board of Directors
The Board of Directors has been granted the powers attributed to it by law, the Company’s Articles of Incor- poration (in particular Article 11-6) and by the Corporate Gover-nance Charter.
In accordance with the provisions of the Charter (IV “Committees”), the Board of Directors has set up two committees whose role is to foster director discussions:
• the Accounts Committee consists of three members, two of whom are independent: Mrs Yangshun YIN (Director), Mr Renaud VAILLANT (Independent Director), and Mrs Candace JOHNSON (Independent Director);
• the Appointments and Compensa-tion Committee consists of three members, two of whom are inde-pendent: Mr Xiangjun YAO (Direc-tor), Mrs Candace JOHNSON (Inde-pendent Director), and Mr Renaud VAILLANT (Independent Director).
• the Board of Directors determines the compensation and benefits of any kind granted to corporate of-ficers after review and an opinion from the Appointments and Com-pensation Committee.
(vi) Principal role of the board of directors
Organization
The functioning of the Board is go-verned by the Company’s Articles of Incorporation and the principles set forth in the Charter. In addition to the mandatory meetings of the Board (for approval of yearly and half-yearly financial statements), it also holds all meetings as required in the normal course of business.
Board of Directors meetings and at-tendance
Pursuant to Article 11-2 of the Com- pany’s Articles of Incorporation, the Board of Directors is convened by the Chairman by any means, and in an emergency, at least five days in advance.
During the 2018 financial year, the Company’s Board of Directors met as necessary and held 8 meetings. The average rate of attendance of Directors at meetings was greater than 90%.
The Board of Directors met to dis- cuss the following matters:
Financial information and commitments and the budget:
• review and approval of the annu- al statements closed on December 31, 2017;
• dividend distribution policy;
• authorization of pledges, endor-
sements and guarantees to be granted by SES-imagotag;
• implementation of the share buy- back program under delegation of authority by the Stockholders’ Meeting and authorization given to the Chairman and Chief Executive Officer to sign a liquidity contract (stockholders’ Meeting of June 22, 2018 – Resolution8);
• approval of the half-yearly financial statements for 2018 and prepara-tion of the half-year activity report;
• presentation of the results from the 3rd quarter 2018 and the pre-paration of forecast documents provided for in Articles L. 232-2 et seq. of the French Commercial Code;
• review of financial presentations and press releases;
Strategic and operational plans:
• review and approval of the MTO supporting documentation
• implementatio of the reserved ca-pital increase delegation.
Remuneration:
• recognition of the exercise of op- tions during 2018;
• confirmation of fulfillment of the performance conditions of the free share allocation plans autho-rized by the Board Meetings of December 16, 2015, and March 11, 2016;
• confirmation of fulfillment of the alternative conditions of the free share allocation plans put in place by the Board of Directors at its meetings on December 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016 and March 10, 2017
• approval of the remuneration of Thierry Gadou as Chairman and Chief Executive Officer based on proposals from the Compensation Committee;
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• distribution of directors’ atten-dance fees for the 2018 financial year;
• allocation of free shares with at-tached performance conditions to recently hired employees ac-cordance with the authorization granted to the Board by the Ex-traordinary Stock- holders’ Mee-ting of November 30, 2016 (Reso-lution 5);
• review and clarifications pertain- ing to certain terms of the “Per- formance Shares Leapfrog 2017- 2020” plan for free share allocation with attached performance condi- tions (Resolution 5 of the Stock- holders Meeting on November 30, 2016).
Governance:
• Approval of the minutes of the va-rious Board meetings;
• approval of all documentation re-convening of the Stockholders’ Meetings and determination of the agenda and the draft text of the resolutions to be presented to the Stockholders’ Meetings;
• replacement of non-voting director; appointments in the Audit committe as well as the Remuneration and compensation Committee
• deliberates annually on the Com-pany’s policy in term of professio-nal and salary equity (professional equality between men and women referred to in Article L. 1143-1 of the Labour Code).
• annual review of regulated agree-ments entered into and authorized in previous financial years and continued to be performed during the 2017 financial year (Article L. 225-40-1 of the French commer-cial code).
The Board received the Auditor’s re-port and the reports on the work of the two standing committees of the Board of Directors – i.e. the Audit Committee and the Appointments and Compensation Committee.
The Statutory Auditors are invited to all meetings of the Board of Direc-tors at which the annual or interim financial statements are reviewed or approved.
The Chairman of the Board chaired the meetings of the Board of Direc-tors.
The following representatives of the Employee Representative Com-mittee were appointed as epresen-tatives to the Board of Directors for 2018:
• Cédric NOBLET; and
• Jérôme CHEVAL.
Board information
For Board meetings, the directors shall receive, in good time, all docu-ments and information necessary to adequately fulfill their duties. Out-side of Board meetings, Directors regularly receive all important infor-mation relating to the Company.
To ensure that Directors can attend these meetings, a schedule of Board of Directors meetings is set at the beginning of the year.
Directors’ fees
Pursuant to the decision of the Stockholders’ Meeting of June 22, 2018 (Resolution 3), the Meeting decided to set the total annual at-tendance fees at fifty thousand eu-ros (€50,000) for the year ended on December 31, 2018.
A share of these directors’ fees have been allocated to the Independent Directors, contingent upon their at-tendance at meetings of the Board of Directors.
The independent directors, Renaud Vaillant and Candace Johnson, re-ceived €20,000 gross and €23,528 gross in directors’ fees, which consisted of a fixed base element of €10,000 and a variable element of €10,000 and €13,528 respectively. Ms Hélène Ploix did not receive any director’s fees in 2018.
(vii) Conflicts of interests
There is no existing conflict of interests between the Board members or the CEO’s private interests and the com-pany’s intesrests.
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8.2 Composition and duties of the audit committee
Pursuant to the provisions of Or-der 2008-1278 of December 2008, which transposed EC Directive 2006/43 of May 17, 2006, and co-dified in particular in Article L.823-19 of the French Commercial Code, in 2009, the Company created a specific committee to monitor is-sues relating to the preparation and control of accounting and financial information.
The Company drew on the AFEP- MEDEF Corporate Governance Code revised in November 2016 and the recommendations of the Autorité des Marchés Financiers (AMF) con- cerning Audit Committees.
The Board of Directors approved the internal regulations for this specific committee at its meeting held on December 18, 2013.
a) Membership
As the Audit Committee stems from the Board of Directors, its members are therefore appointed by the Board of Directors on the recom-mendation of the Appointments and Compensation Committee from among the Directors, with the ex-ception of those exercising mana-gement functions.
Furthermore, at least one of the members of the Accounts Com-mittee must have specific financial or accounting experience and be independent.
In accordance with the AFEP-ME-DEF Code, the Audit Committee must consist of at least three members, two of whom must be independent Direc-tors and this Committee must not in-clude any executive officers.
The term of office of the members of the Audit Committee coincides with that of their directorship.
No specific compensation is stipu-lated for the duties undertaken by Di-rectors on the Audit Committee.
The members of the Audit Committee are as follows:
Xiangshun YIN (Director); Chairwoman
Renaud VAILLANT (Independent Di-rector), Candace JOHNSON (Inde-pendent Director).
Mrs Hélène Ploix (Independant Director)
This membership therefore com-plies with the requirements of the above-mentioned recommendations.
b) Duties
In accordance with Article L. 823-19 of the French Commercial Code, this Committee is responsible for monito-ring the:
• process of preparing financial in-formation;
• effectiveness of internal control and risk management systems;
• statutory auditing of the annual statements and, where applicable, the consolidated accounts by the Statutory Auditors;
• independence of the Statutory Au-ditors.
The AFEP-MEDEF Code states that the main task of the Audit Com-mittee is to:
• examine the financial statements and to ensure that the accounting methods used for preparing the Company’s consolidated and cor-porate statements are relevant and consistent;
• monitor the financial reporting pro-cess;
• monitor the effectiveness of internal control and risk management sys-tems.
The duties of the Audit Committee are therefore as follows:
Duties relating to preparing financial information
• monitoring the preparation of ac- counting and financial informa-tion, both historical (periodic in-formation) and forecast;
• ensuring there is a process for pre- paring press releases for the pu-blication of the yearly, half-yearly and quarterly financial statements;
• verifying the accounting proce-dures for significant events or complex transactions that affect the Company’s statements;
• ensuring that corrective actions are taken should a malfunction oc-cur in the financial reporting pro-cess.
Duties relating to monitoring and reviewing income and consolidated financial statements
• reviewing the Company’s year-ly and half-yearly financial state-ments and related reports before the Board of Directors approves them;
• preparing for review by the Board of Directors the half-yearly and annual financial statements and consolidated financial statements;
• ensuring compliance with legal and regulatory requirements re-lating to accounting and financial information;
• ensuring the relevance and consis- tency of the accounting methods used for preparing the income and consolidated financial statements.
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Duties relating to the independence and objectivity of the Statutory Auditors
• examining the risks related to the independence and objectivity of the Statutory Auditors and, as ap-propriate, any measures taken to mitigate these;
• meeting with the Statutory Auditors at each accounting closing and as often as deemed necessary;
in particular, receiving the following from the Statutory Auditors annually:
• their declaration of independence;
• the amount of fees paid to the network of auditors by the com- panies controlled by the com- pany or the entity that runs it, for services not directly related to the Statutory Auditors’ duties;
• information on the services per- formed as part of the audit pro- cedures directly related to the du-ties as Statutory Auditors.
Duties relating to internal control and risk management
• Ensuring that internal control and risk management systems are in place and implementing these;
• reviewing the effectiveness of in-ternal control and risk manage-ment procedures and therefore being cognizant of the findings of the internal audit and/or exter-nal audit work carried out regar-ding these matters to ensure that should malfunctions arise, appro-priate action plans have been set up and follow-up actions have been taken;
• assessing the extent of the mal-functions or weaknesses commu-nicated to it and informing the Board of Directors, if necessary.
c) Functioning
In compliance with the principle of independence, members of the Au-dit Committee attend Committee meetings alone. The Chairman and Chief Executive Officer may partici-pate in Committee meetings at the invitation of the Audit Committee Chairman.
The Chief Financial Officer (and po-tentially his/her senior assistants), the internal auditor, the external au-ditors or any other person deemed necessary may attend Audit Com-mittee meetings.
The Audit Committee meets at least 3 times a year in March, August and October to consider respectively the yearly, half-yearly and quarterly fi-nancial statements and the manage-ment planning documents, and as often as it deems necessary.
Meetings are held either at the head office or at any other location in-dicated in the notice of meeting. Meeting notifications are to be sent in writing by any available means (letter, fax, email). Even if no notice is sent, the Committee can always validly deliberate if all its members are present or represented.
Except in emergency circums-tances, an agenda shall be sent at least five days before the Committee meeting.
Minutes of each meeting of the Audit Committee are drawn up and signed by its Chairman and at least one of its members. These Minutes provide an accurate account of the debates and discussions during each mee-ting. The Board of Directors Minutes include a summary of the work of the Audit Committee and report on its opinions and recommendations.
Over the past year, the Committee met on:
• March 5, 2018 : 2017 financial state-ments review and report its opinion and recommendations to the Board of Directors on Management Report.
• September 17 2018: Half year 2018 financial statements review and re-commendations to the Board of Di-rectors on Management Report.
• March 12, 2019 : 2018 financial sta-tements review and report its opi-nion and recommendations to the Board of Directors on Management Report.
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8.3 Membership of the appointments and compensation committee
8.4 Non-voting directors
The Company has drawn on the AFEP-MEDEF Corporate Governance Code revised in June 2018.
In accordance with the AFEP-MEDEF Code, the Appointments and Com- pensations Committee must not in-clude any executive officer and must consist of a majority of independent Directors.
It should be noted that the Annual Stockholders’ Meeting of June 28, 2011 decided to amend the Com-pany’s Articles of Incorporation to allow non- voting Directors to sit on the Board of Directors. The Articles of Incorporation stipulate that the Board of Directors may appoint one or more non-voting Directors from the population of stockholders, na-tural or legal persons, or from out-side of said population.
The non-voting directors shall per-form general, on-going duties to as-sist the Board of Directors, but they may not be involved in the Com-pany’s management or be substituted for those serving on the Company’s legal bodies. Non-voting Directors, however, may participate in an advi-sory capacity as observers at Board of Directors meetings. Within the framework of their duties, non-voting Directors may submit observations to the Board of Directors whenever they deem so necessary.
Their term of office shall be set by the Board of Directors but may not exceed three years. Non-voting Directors are always eligible for re-election. The Board of Directors may, at any time, terminate their appointment without having to state any reasons. Should a non-voting Director die, resign or stripped of
The Appointments and Compen-sation Committee consists of three members, including two Independent Directors:
• Chairman, Renaud VAILLANT (In-dependent Director);
• Candace JOHNSON (Independent Director),
office, for any reason, the Board of Directors may replace that Director for the remainder of the term.
Pursuant to Article 11.7 of the Com- pany’s Articles of Incorporation, the Board of Directors appointed Mr. Bertrand HAINGUERLOT as a non-voting Director at its meeting held on June 28, 2011 for a 3-year term. At its meeting of May 21, 2014, the Board of Directors decid- ed to renew Bertrand HAINGUER- LOT’s term of office as a non-voting Di-rector for another 3-year term. The decision to again renew Mr. HAINGUERLOT‘s term of office as a non-voting Director shall be put on the agenda of the Board of Directors meeting held on April 27, 2017.
At its meeting on December 21, 2017, the Board of Directors noted the resignation of Mr. Bertrand Hainguerlot from his position as a non-voting director.
After the strategic Alliance with E Ink as well as its stake in the com-pany’s equity, the Board of Directors has appointed, on June 22, 2018, M. Johnson Lee, E Ink president and CEO, as non voting Director for 3 years.
• Xiangjun YAO (Director).
• Helène Ploix (Independant Director).
Over the past year, the Committee met on: February 28 2018 and Fe-bruary 28 2019.
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8.5 Stockholders’ meetings and shareholder participation
Stockholders’ Meetings are conve-ned under the conditions and within the time limits set by the applicable laws and regulations.
All stockholders have the right to information, communication and consultation in accordance with the conditions and procedures provided for under the legal and regulatory provisions. The Company’s Articles of Incorporation as well as general information on the company can be found on its website to provide further information to stockholders (www.ses-imagotag.com).
Thierry Gadou, Chairman of the Board of Directors, chaired the Stockholders’ Meeting and pro-posed an executive of a Chairman and two Tellers. The Chairman has suggested that stockholders with the greatest number of votes serve as tellers.
The Stockholders’ Meeting is a place for decision- making in those areas defined by law and the Company is committed to ensuring that it is also an opportunity to communicate with its stockholders.
Minutes shall be drawn up as soon as possible after the Stockholders’ Meeting and no later than four mon-ths following it.
In accordance with the last para-graph of Article L. 225-123 of the
French Commercial Code intro-duced by the Law of March 29, 2014, known as the “Florange Law,” and on the initiative of the Board of Di-rectors, the Extraordinary Stockhol-ders’ Meeting of May 21, 2014 de-cided that no Company shares may be granted double voting rights. Ar-ticle 9.3 of the Company’s Articles of Incorporation has been amended accordingly.
In accordance with Article L. 225-27-1 of the French Commercial Code, in- troduced by the Act of June 14, 2013 on securing em-ployment, Article L. 225-23 of the French Commercial Code and on the Board of Directors’ initiative, the Extraordinary Stockholders’ Mee-ting of June 23, 2016 amended the Articles of Incorporation to define the procedures for appointing Di-rectors representing employees and to incorporate provisions relating to employee shareholder represen-tatives (Article 11 of the company’s Articles of Incorporation).
Pursuant to Article R. 225-85 of the Code issued by Decree 2014-1466 of December 8, 2014, and on the ini- tiative of the Board of Direc-tors, the Extraordinary Stockhol-ders’ Meeting held on June 23, 2016 decided to harmonize Article 20 of the Company’s Articles of In-corporation with the French regime of the “record date”.
Lastly, in accordance with Article L. 823-1 of the French Commercial Code arising from Law 2016-1691 of December 9, 2016 and on the ini- tiative of the Board of Directors, the Extraordinary Stockholders’ Mee-ting held on June 23, 2017 is being called to rule on the harmonization of Article 26 of the Company’s Ar-ticles of Incorporation with the new rules for appointing Statutory Au-ditors and in particular the removal of the obligation to appoint one or more Alternate Statutory Auditors when the auditor is not a natural person or a one-person company.
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8.6 Table of delegationsTable of delegations granted to the Board of Directors (Article L .225-37-4, paragraph 7 of the French commercial code).
Nature of authorization date of stockholders meeting Duration / Expiration date maximum amount authorized use by the Board of Directors
Authorization granted to the Board of Directors to freely allocate shares to one or more employees and/or managing corporate officers with performance conditions attached
Extraordinary Stockholders’ MeetingNovember 30, 2016 Resolution 5
26 months until January 30, 2019Up to 3% of the number of shares represen-ting the Company’s capital on the day of their allocation by the Board of Directors
On November 30, 2016, the Board of Directors decided to allocate bonus shares to the Chairman & CEO up to a limit of 80,000 shares and the majority of the bonus shares to key employees.On December 22, 2016, the Board of Directors decided, under the conditions set in its meeting of November 30, 2016, on the allocation of 218,500 bonus ordinary shares to employees. On March 10th, 2017, the Board of Directors decided, under the conditions set in its meeting of November 30, 2016, on the allocation of 5,000 bonus ordinary shares for a new employee. On June 16th, 2017 and October 23rd 2017, the Board has fine tuned the criterias for vesting and holding periods applicable to those plans. On December 21, 2017, the Board noted that the alternative conditions of the free share plans implemented by the meetings of the Board of Directors held on November 30, 2016, December 22, 2016 and March 10, 2017 had been met. Thus on February 6th 2018 ans September 17th 2018 228,000 shares have been delivered, and on February 11th 2019, 69,500 shares have been delivered.
Extraordinary Stockholders’ MeetingDecember 16, 2015 Resolution 1 (In place of the bonus shares previously authorized by
the Stockholders’ Meeting of March 1, 2012, without further dilution)
26 months until February 15, 2018Up to 2% of the number of shares represen-ting the Company’s capital on the day of their allocation by the Board of Directors
On December 16, 2015, and after having noted that all the beneficiaries of the previous bonus share allocation plans had each individually waived their right to receive the bonus shares arising from the plan authorized by the Stockholders’ Meeting held on March 1, 2012, as well as to all associated rights, the Board of Directors decided to allocate a total of 208,459 bonus shares to the members of the Exe-cutive Committee and to the Chairman in the same quantities as the bonus shares previously allocated under the bonus share allocation plan authorized by the Combined Stockholders’ Meeting held on March 1, 2012, which the new shares are intended to replace. On March 11th, 2016, the Board of Directors decided to allocate a total of 20,000 bonus shares to two newly appointed members of the executive committee. On February 21, 2017 the Board aknowledged the realisation of the performance criterias for 2016 and thus the delivery of of 50% of the performance shares allocated i.e. 110 014 shares. On December 21, 2017, the Board noted that the alternative conditions of the free share plans implemented by the meetings of the Board of Directors held on November 30, 2016 and December 22, 2016, had been met. Thus on February 6th 2018, 226.000 shares have been delivered, on September 17th 2018, 2000 shares have been delivered and on February 11th 2019, 69 500 shares have been delivered. On de-cember 21st 2017, the Board noted that the alternative conditions of the bonus shares plans dated De-cember 16th 2015 and March 11th 2016, have been met, thus on March 5th 2018, The Board aknowledged the delivery of the remaining 50% shares (110,017 shares)
Authorization to reduce the share capital in accordance with the provisions of ArticleL. 225-209 of the French commercial code
Extraordinary Stockholders’ MeetingJune 22, 2018 Resolution 11
18 months until December 22, 2019Up to 10% of the share capital per period of 24 months
None
Extraordinary Stockholders’ MeetingJune 23, 2017 Resolution 19
18 months until December 23, 2018Up to 10% of the share capital per period of 24 months
None
Authorzation to increase the share capital, with removal of the shareholders’ preferential subscription right, by the issuance of shares of the Company reserved for members of company saving plans)
Ordinary Stockholders’ MeetingJune 23, 2017 Resolution 22
26 months until August 23, 2019 750,000 € None
Authorization to increase the share capital, without removal of the shareholders’ preferential subscription, by the issuance of shares and/or debt securities granting access to new shares)
Extraordinary Stockholders’ Meeting June 22, 2018 Resolution 12
26 months until August 22, 2020 100,000,000 € None
Authorization to implement of a share buyback program
Ordinary Stockholders’ MeetingJune 22, 2018 Resolution 8
18 months until December 22, 2019 Maximum amount: €10,000,000 Maximum unit price: 150% of the last market price of the shares on the day of use of the authorization by the Board of Directors
On June 22d 2018 the Board has authorized the Chairman and CEO to renew any liquidity contract
Ordinary Stockholders’ MeetingJune 23, 2017, Resolution 7
18 months until December 23, 2018
Authorization to increase the share capital by the issuance of shares in consideration for contributions in kind within the limit of 10 % of the share capital)
Ordinary Stockholders’ MeetingJune 22, 2018 Resolution 13
26 months until August 22, 2020
Up to two million six hundred thousand eu-ros (€ 2,600,000), it being specified that the nominal amount of any share capital in-crease carried out under this resolution will be charged on the overall nominal ceiling for share capital increases ( €13,000,000)
None
Authorization to increase the share capital, with removal of the shareholders’ preferential subscription right for the benefit of Yuen-Yu Investment Co. Ltd, a subsidiary of E-ink Holdings Inc., by the issuance of 866,666 shares in a total nominal amount of 1,733,332 euros)
Ordinary Stockholders’ MeetingJune 22, 2018 Resolution 15
6 months until December 22, 2018 1,733,332 €On June 22d 2018 the Board has authorized the Chairman and CEO to implement this resolution and on June 27 2018, minutes of the CEO decisions aknowledged the capital increase for the benefit of Yuen-Yu Investment CO. Ltd.
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Please, find below the detail of cur-rently valid delegations granted to the Board of Directors and the use
of these delegations by the Board of Directors during the past financial year ended December 31, 2018.
Nature of authorization date of stockholders meeting Duration / Expiration date maximum amount authorized use by the Board of Directors
Authorization granted to the Board of Directors to freely allocate shares to one or more employees and/or managing corporate officers with performance conditions attached
Extraordinary Stockholders’ MeetingNovember 30, 2016 Resolution 5
26 months until January 30, 2019Up to 3% of the number of shares represen-ting the Company’s capital on the day of their allocation by the Board of Directors
On November 30, 2016, the Board of Directors decided to allocate bonus shares to the Chairman & CEO up to a limit of 80,000 shares and the majority of the bonus shares to key employees.On December 22, 2016, the Board of Directors decided, under the conditions set in its meeting of November 30, 2016, on the allocation of 218,500 bonus ordinary shares to employees. On March 10th, 2017, the Board of Directors decided, under the conditions set in its meeting of November 30, 2016, on the allocation of 5,000 bonus ordinary shares for a new employee. On June 16th, 2017 and October 23rd 2017, the Board has fine tuned the criterias for vesting and holding periods applicable to those plans. On December 21, 2017, the Board noted that the alternative conditions of the free share plans implemented by the meetings of the Board of Directors held on November 30, 2016, December 22, 2016 and March 10, 2017 had been met. Thus on February 6th 2018 ans September 17th 2018 228,000 shares have been delivered, and on February 11th 2019, 69,500 shares have been delivered.
Extraordinary Stockholders’ MeetingDecember 16, 2015 Resolution 1 (In place of the bonus shares previously authorized by
the Stockholders’ Meeting of March 1, 2012, without further dilution)
26 months until February 15, 2018Up to 2% of the number of shares represen-ting the Company’s capital on the day of their allocation by the Board of Directors
On December 16, 2015, and after having noted that all the beneficiaries of the previous bonus share allocation plans had each individually waived their right to receive the bonus shares arising from the plan authorized by the Stockholders’ Meeting held on March 1, 2012, as well as to all associated rights, the Board of Directors decided to allocate a total of 208,459 bonus shares to the members of the Exe-cutive Committee and to the Chairman in the same quantities as the bonus shares previously allocated under the bonus share allocation plan authorized by the Combined Stockholders’ Meeting held on March 1, 2012, which the new shares are intended to replace. On March 11th, 2016, the Board of Directors decided to allocate a total of 20,000 bonus shares to two newly appointed members of the executive committee. On February 21, 2017 the Board aknowledged the realisation of the performance criterias for 2016 and thus the delivery of of 50% of the performance shares allocated i.e. 110 014 shares. On December 21, 2017, the Board noted that the alternative conditions of the free share plans implemented by the meetings of the Board of Directors held on November 30, 2016 and December 22, 2016, had been met. Thus on February 6th 2018, 226.000 shares have been delivered, on September 17th 2018, 2000 shares have been delivered and on February 11th 2019, 69 500 shares have been delivered. On de-cember 21st 2017, the Board noted that the alternative conditions of the bonus shares plans dated De-cember 16th 2015 and March 11th 2016, have been met, thus on March 5th 2018, The Board aknowledged the delivery of the remaining 50% shares (110,017 shares)
Authorization to reduce the share capital in accordance with the provisions of ArticleL. 225-209 of the French commercial code
Extraordinary Stockholders’ MeetingJune 22, 2018 Resolution 11
18 months until December 22, 2019Up to 10% of the share capital per period of 24 months
None
Extraordinary Stockholders’ MeetingJune 23, 2017 Resolution 19
18 months until December 23, 2018Up to 10% of the share capital per period of 24 months
None
Authorzation to increase the share capital, with removal of the shareholders’ preferential subscription right, by the issuance of shares of the Company reserved for members of company saving plans)
Ordinary Stockholders’ MeetingJune 23, 2017 Resolution 22
26 months until August 23, 2019 750,000 € None
Authorization to increase the share capital, without removal of the shareholders’ preferential subscription, by the issuance of shares and/or debt securities granting access to new shares)
Extraordinary Stockholders’ Meeting June 22, 2018 Resolution 12
26 months until August 22, 2020 100,000,000 € None
Authorization to implement of a share buyback program
Ordinary Stockholders’ MeetingJune 22, 2018 Resolution 8
18 months until December 22, 2019 Maximum amount: €10,000,000 Maximum unit price: 150% of the last market price of the shares on the day of use of the authorization by the Board of Directors
On June 22d 2018 the Board has authorized the Chairman and CEO to renew any liquidity contract
Ordinary Stockholders’ MeetingJune 23, 2017, Resolution 7
18 months until December 23, 2018
Authorization to increase the share capital by the issuance of shares in consideration for contributions in kind within the limit of 10 % of the share capital)
Ordinary Stockholders’ MeetingJune 22, 2018 Resolution 13
26 months until August 22, 2020
Up to two million six hundred thousand eu-ros (€ 2,600,000), it being specified that the nominal amount of any share capital in-crease carried out under this resolution will be charged on the overall nominal ceiling for share capital increases ( €13,000,000)
None
Authorization to increase the share capital, with removal of the shareholders’ preferential subscription right for the benefit of Yuen-Yu Investment Co. Ltd, a subsidiary of E-ink Holdings Inc., by the issuance of 866,666 shares in a total nominal amount of 1,733,332 euros)
Ordinary Stockholders’ MeetingJune 22, 2018 Resolution 15
6 months until December 22, 2018 1,733,332 €On June 22d 2018 the Board has authorized the Chairman and CEO to implement this resolution and on June 27 2018, minutes of the CEO decisions aknowledged the capital increase for the benefit of Yuen-Yu Investment CO. Ltd.
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8.7 Informations about corporate officers
Name Role and length of term History and notesother roles and functions held by the officer during the financial year
MRThierry GADOU
52 yearsFrench
Chairman and CEO
Until the Ordinary Shareholders’ Mee-ting is held to approve the accounts for the financial year ending December 31, 2019, to be held in 2020
Appointment of Thierry Gadou as CEO by the Board of Directors to replace Yves Martin for an indeterminate period (meeting of January 13, 2012) Appointment of Thierry Gadou as Chairman of the Board of Directors by the Board of Directors (meeting of January 18, 2012) to replace Yves Martin Appointment of Thierry Gadou by cooptation as Director by the Board of Directors (meeting of January 18, 2012) to replace Yves Martin; ratification by the Combined Shareholders’ Mee-ting of March 1, 2012 (Resolution 1) Renewal of term as Director by the Ordinary Shareholders’ Meeting on May 21, 2014 (Resolution 9) - Re-newal of term as Chairman of the Board by the Board (Meeting on May 21, 2014) - Renewal of term as Director by the Ordinary Shareholders’ Meeting on June 23, 2017 (Resolution 12) - Renewal of term as Chair-man of the Board by the Board (Meeting on June 23, 2017)
BOE Smart Retail (Hong Kong) Co, Director;
SESIM SA, France, Chairman;
Amalto Technologies SA, France, Director.
MrXiangjun YAO
41 yearsChinese
Director
Until the Ordinary Shareholders’ Mee-ting is held to approve the accounts for the financial year ending December 31, 2019, to be held in 2020.
Appointment as co-opted Director by the Board of Directors dated December 21, 2017, to replace Jérôme Kinas. Ratification of the co-optation on the Ordinary Shareholders’ Meeting dated February, 2, 2018 (Resolution 2).
BOE Technology Group Co, Ltd, Beijing, PRC, Executive Vice pre-sident and Co-COO;
BOE Smart Retail (Hong Kong) Co, Director.
MRSXiangshun YIN
36 yearsChinese
Director
Until the Ordinary Shareholders’ Mee-ting is held to approve the accounts for the financial year ending December 31, 2019, to be held in 2020.
Appointment as Co-opted Director by the Board of Directors dated December 21, 2017, to replace Mrs Hélène PLoix representing PECHEL INDUSTRIES PARTENAIRES. Ratification of the co-optation on the Ordinary Shareholders’ Meeting dated February, 2, 2018 (Re-solution 1).
IOT solution Business Group, BOE Technology Group Co, Ltd, Beijing, PRC, CFO Budget MDGT dept;
MRSCandace JOHNSON
66 yearsAmerican
Independant Director
Until the Ordinary Shareholders’ Mee-ting is held to approve the accounts for the financial year ending December 31, 2019, to be held in 2020.
Resignation of Bernard Joliey from his post as Director on August 31, 2012 Appointment by cooptation in the capacity of Indepen-dant Director by the Board of Directors (meeting of August 31, 2012) to replace Bernard Joliey; ratification by the Ordinary Sharehol-ders’ Meeting called to decide on the accounts for the financial year ended December 31, 2012. Renewal of term as Independant Director by the Ordinary Shareholders’ Meeting on May 21, 2014 (Resolu-tion 13) Renewal of term as Independant Director by the Ordinary Shareholders’ Meeting on June 23, 2017 (Resolution 16)
NorthStar Earth and Space, Montreal Canada, Vice Chair of the Board of Directors;
Seraphim Space Capital, UK, Chair of the Corporate Advisory Board;
OWNSAT - Oceania Women’s Network Satellite, Singapore, Director;
Success Europe SA, Sophia Anti-polis, France, Chair of the Board of Directors.
MRSHélène PLOIX
74 yearsFrench
Independant Director
Until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2020, to be held in 2021.
Appointment as an Independant Director by the Ordinary Shareholders meeting on February 6, 2018 (Resolution 6)
FSH Conseil SAS, France, President Pechel Industries, France, President until December 2018
Sorepe Société civile, France, Manager;
Genesis Emerging Markets Fund Limited, Guernesey, listed company, President;
SOFINA Belgium, listed company, Director;
Ferring SA, Switzerland, Director;
Sogama Crédit associatif, France, President;
Hélène Ploix SARL, France, Manager; Hélène Marie Joseph SARL, France, Manager.
99
Governance report
Name Role and length of term History and notesother roles and functions held by the officer during the financial year
MrRenaud-VAILLANT
40 yearsFrench
Independant Director
Until the Ordinary Shareholders’ Mee-ting is held to approve the accounts for the financial year ending December 31, 2019, to be held in 2020
Appointment as interim Chairman of the Board of Directors by the Board of Directors (meeting on January 13, 2012) to replace Yves Martin until the appointment of Thierry Gadou by the Board of Directors on January 18, 2012 Appointment by cooptation as Independant Director by the Board of Directors (meeting on June 29, 2012) to replace Xavier Jaspar; ratification by the Combined Shareholders’ Meeting on September 14, 2007 (Resolution 4) Renewal of the term as Director by the Ordinary Shareholders’ Meeting on June 11, 2008 (Resolution 10) Renewal of the term as Director by the Ordinary Shareholders’ Meeting on June 22, 2010 (Resolution 15) Renewal of the term as Director by the Ordinary Shareholders’ Meeting on June 28, 2011 (Resolution 15) Renewal of the term as Director by the Ordinary Shareholders’ Meeting on May 21, 2014 (Resolution 12) Renewal of term as Director by the Ordinary Shareholders’ Meeting on June 23, 2017 (Resolution 15)
SARL DB Consulting, Manager;
aratinga.bio, President;
aratinga.bio ACI, President;
aratinga.bio TNP, President;
aratinga.bio AIO, President.
MR Feng BAI
42 yearsChinese
Director
Until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2020, to be held in 2021
Appointment as a Director by the Ordinary Shareholders meeting on February 6, 2018 (Resolution 3).
Smart Retail SBU - BOE Technology Co, Ltd, Beijing, P.R.C., Co CEO;
BOE Smart Retail (Hong Kong) Co, director.
Mr Linfeng JING(replacing Mr Xingqun JIANG)
40 yearsChinese
Director
Until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2020, to be held in 2021.
Mr JIANG appointment as a Director by the Ordinary Shareholders meeting on February 6, 2018 - On September 17, 2018 Resignation of Mr JIANG and appointment by co-optation by the Board of Directors of Mr JING. Ratification to be submitted to the Shareholders meeting on May 24, 2019.
IoT Solution BG, BOE Techno-logy Co, Ltd, Beijing, P.R.C., Senior Vice President.
MrsFangqi YE
49 yearsChinese
Director
Until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2020, to be held in 2021.
Appointment as a Director by the Ordinary Shareholders meeting on February 6, 2018 (Resolution 4).
BOE Technology Group Co, Ltd, Beijing, PRC, Deputy Chief Investment Officer;
BOE Smart Retail (Hong Kong) Co, Director.
MrJohnson LEE
41 yearsChinese
Non Voting Director Appointment as a non voting Director by the Board of Directors on June 22 2018.
E Ink Holdings Inc. President
100
Annual report
In accordance with Articles L. 225- 37-3, L. 225-185, and L. 225-197-1 II of the French commercial code, we have presented in the tables below the total compensation and benefits of any kind paid during the financial year to each corporate officer.
The Company’s approach is based on the AFEP-MEDEF Code of Corporate Governance expanded and clarified by the recommendations on the com-pensation for directors and corporate officers of listed companies adopted on October 6, 2008. The Company discloses the details of compensation for directors and corporate officers in accordance with the law and the AFEP-MEDEF recommendations.
Ten tables are proposed by the French financial markets authority (AMF) in its recommendation con- cerning the information to be dis- closed in registration documents about the remuneration of corpo- rate officers, expressly specifying
Compensation and benefits of any kind paid to corporate officers as of December 2018
1. Compensation for the executive director
that “issuers use the tables below or other table templates, provided that the equivalent information is given”.
Information on options for the subscription or purchase of shares allocated during the financial year to each corporate officer (Table 4), on options for subscription or pur-chase of shares exercised during the financial year by each corporate offi-cer (Table 5), on the history of share subscription or purchase options al-located (Table 8), and on options for subscription or purchase of shares granted to the ten employees (other than corporate officers) with the hi-ghest number of options and options exercised by these ten employees (Table 9) is provided in the special report on options and its appendices.
Information on the allocation of bo-nus shares and their availability is provided in the special report on bonus shares.
Consequently, the Company has chosen the following presentation, comprehensively listing the compo-nents of compensation paid to di-rectors and corporate officers cor-responding to:
• a table providing information equivalent to the information contained in table 2 of the AMF nomenclature: “Summary table of compensation paid to each corpo-rate officer,”
• the information contained in table 3 of the AMF nomenclature: “Table on directors’ attendance fees and other compensation received by non-executive corporate officers”, and
• the information contained in table 11 of the AMF nomenclature.
On January 2012, the Board of Direc-tors appointed Thierry Gadou in the capacity of Chairman and Chief Exe-cutive Officer with no term of office.
The Stockholders’ Meeting of May 21, 2014 decided to renew Thierry GADOU’s term of office of as Direc-tor for a 3-year period until the Or-dinary Stockholders’ Meeting called to approve the financial statements for the 2016 financial year, to be held in 2017.
The Stockholders’ Meeting of June 23, 2017 decided to renew Thierry GADOU’s term of office of as Direc-tor for a 3-year period until the Or-dinary Stockholders’ Meeting called to approve the financial statements for the 2019 financial year, to be held in 2020.
The Board of Directors of June 23, 2017 then decided with a unanimous vote to renew Thierry GADOU’s term of office of Chairman for the same duration as his Director appoint-ment.
With regard to the termination of employment contracts upon ap-pointment to a corporate office, the AFEP-MEDEF Code recommends that, when a director becomes a corporate officer of the Company, the employment contract binding the director to that company or to a company of the Group should be ter-minated, whether through contrac-tual termination or resignation.
The Company complies with this recommendation insofar as Thierry Gadou, in his capacity as Chairman
& CEO, has no employment contract. Thierry Gadou was recruited as Chief Executive Officer, a corporate officer, before being co-opted in the capacity of Director, then ap-pointed Chairman of the Company by the Board of Directors.
101
1 Start and end of term (see “List of roles lilled”).
2 Thierry GADOU’s role as CEO includes severance pay. See chapter 10 below, page 120 on «Agreements providing for compensation paid to members of the Board of Directors if they resign or are dismissed without real or proper cause or if their employement ends in the event of a public offering (severance pay, golden parachutes)».
3 Thierry GADOU’s role as CEO includes a non-compete clause. See chapter 10 below, page 120 on «Agreements providing for compensation paid to members of the Boar of Directors if they resign or are dismissed without real or proper cause or if their employement ends in the event of a public offering (severance pay, golden parachutes)».
4 The Company has obteined unemployement insurance for directors as well as liability cover for Thierry GADOU. Thierry GADOU is provided with a vehicle and driver.
Executive director Employment contractSupplemental
retirement Plan
Allowances or benefits due or likely to be due in case of termination or
change of function
Allowances relating to a non-compete clause
Other (insurance, etc.)
Yes No Yes No Yes No Yes No Yes No
Thierry GADOU
CEO1X X X2 X3 X4
AMF Table
Summary of compensation paid to the executive director for the financial year ended December 31, 2018, submitted to the Approval during the Shareholders’ Meeting of May 24, 2019
Governance report
€ 2018 (clos) 2017 (précédent)
Fixed Compensation 320,000 320,000
Annual variable compensation (cap amount) 160,000 160,000
Variable compensation cashed out on the current year regarding previous year 50,000 142,000
% annual variable compensation 31% 95%
Variable compensation booked for current fiscal year (to be cashed out the following year) 111,600 50,000
% annual variable compensation 69% 31%
Exceptional bonus booked for current fiscal year (to be cashed out the following year) 30,000 50,000
Exceptionnal bonus cashed out on the current year regarding previous year 50,000 0
Director attendance fees NA NA
Benefits in kind -5,028* 34,783
* Benefits in kind appear negative due to adjustement over the past two years, booked for in 2018.
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Annual report
Compensation paid for the 2018 financial year
Bonus shares allocated to the Chairman & CEO
Stock options allocated to the Chairman & CEO
Based on the recommendations of the Remuneration Committee mee-ting of February 28, 2018 the Board decided for 2018 fiscal year, on a fixed annual gross salary of 320,000 euros (unchanged vs previous years) and a variable bonus split in two;
The maximum amount of the va-riable compensation for the Chair-man & CEO for the 2018 financial year is of 160,000 euros, divided into two separate tranches:
• Quantitative variable portion of 110,000 euros maximum
• Qualitative variable portion of 50,000 euros maximum
The Remuneration Committee mee-ting of February 28th, 2019, adopted and approved the variable compen-sation allocated as follows to Mr Thierry GADOU for 2018 and then determined the remuneration policy for 2019.
Based on the recommendations of the Remuneration Committee mee-ting of February 28th, 2019, the Board dated April 4, 2019, decided to fix the variable remuneration of the Chief Executive for 2018 for a to-
At its meeting of December 16, 2015, the Board put in place a bonus share allocation plan, under the authori- zation given by the Extraordinary Shareholders’ Meeting of December 16, 2015. This allocation was made in place of the bonus shares authorized previously under the authorization given by the Extraordinary General Meeting of March 1, 2012, without further dilution. This plan corres-ponded to the period of the “i3” (in-novation, international, industrializa-tion) strategic plan.
None.
tal of 111,600 euros, i.e. 69% of the maximum variable remuneration, in-cluding 56%of the quantitative bonus and 100 % of the qualitative bonus.
Variable portion based on quantitative objectives:
The quantitative target achievement rate (turnover, order entries and net result and net cash flow) corres-ponds to the performance condition defined by the Board of Directors’ meeting of February 28th, 2018. Based on the triggering thresholds and variability rules defined to cal-culate the bonus, the corresponding variable portion is € 61,600.
Variable portion based on qualitative objectives:
Given the strong growth (both on revenue and order entries) of the second semester, the intense and fruitful collaboration with BOE, the signatures of strategic partnerships worldwide (Microsoft, Cisco, Wire-card, Panasonic) and the acceleration in the innovation roadmap and more specifically the successful launch of the Vusion Retail IoT platform the va-riable component on qualitative ob-jectives was set to €50,000.
Pursuant to this plan, it is recalled that the Chairman & CEO waived his right to the bonus shares autho-rized on delegation of the Combined Shareholders’ Meeting of March 1, 2012, and to all associated rights. Further- more, at its meeting of De-cember 16, 2015, the Board of Di-rectors, acting on delegation from the Extraordinary General Meeting of December 16, 2015 (Resolution 1), decided to allocate 139,069 bo-nus shares to the Chairman & CEO in place of the bonus shares previously
An Exceptional Bonus of €30,000
The Board dated March 10, 2017 had open the possibility to grant a spe-cific bonus to the CEO, depending on value creation.
On April 4 2019, on the proposal of the Compensation Committee of February 28th, 2019, the Board decided to grant an exceptional bonus of €30,000 to the Chairman & CEO considering the Group’s dynamics over the 2018 fi-nancial year in its market.
In pursuance of the provisions of section L. 225-100 of the Commer-cial Code, payment of the variable and exceptional compensation items for 2018 will be conditioned by the approval of the ordinary shareholders’ meeting held on May 24,2019 to approve the financial statements for the year ending De-cember 31, 2018.
authorized (without further dilu-tion), subject to proper fulfillment of the relevant conditions.
Almost five years after the first bonus share allocation plan, SES-imagotag has now entered a new stage in its development with its “Leapfrog 2020” strategic plan, which aims to acce-lerate the Company’s global growth and to attain average annual growth of 30% between 2015 and 2020, with sales of €400-500 million by 2020.
103
2019 compensation policy
On November 30, 2016, following the authorization given by the Combined Shareholders’ Meeting of November 30, 2016, the Board of Directors put in place a new bonus share al-location plan subject to demanding quantitative performance conditions to be assessed over a period of se-veral years (2017-2020). In keeping with the Leapfrog 2020 plan, these performance conditions will include strong growth targets for company sales and profitability.
Pursuant to this plan, it is indicated that the Board of Directors, acting on delegation of the Combined Shareholders’ Meeting of November 30, 2016, decided, at its meeting of November 30, 2016, to allocate
As the Company uses the AFEP- ME-DEF Code as a reference, the quan-titative and qualitative criteria for allocating the variable component are precise and pre-established. Within the variable component, the qualitative share is measured and allows exceptional circumstances to be taken into account where ap-plicable. Moreover, the quantitative criteria are simple, few in number, objective, measurable, and adapted to company strategy.
Fixed salary of Chief Executive Officer
Based on the recommendations of the Remuneration Committee meeting of February 28th, 2019, the Board dated April 4, 2019 decided on a fixed annual gross salary of 320,000 euros which remains unchanged when compared to 2018.
Variable compensation of Chief Exe-cutive Officer
Based on the recommendations of the Remuneration Committee of Fe-bruary 28th, 2019, the Board dated April 4, 2019 decided on a variable compensation attributable in 2019 consisting in the sum of 200,000
80,000 bonus shares to the Chair-man & CEO, subject to meeting the associated conditions.
It is also noted that the Board of Di-rectors decided that the Chairman would be required to keep 30% of the registered shares allocated to him until the cessation of his duties, across all bonus share plans.
On December 21, 2017, the Board of Directors noted the significance of the investment made by Mr. Thierry Gadou both in cash and in Company shares, which, moreover, amounts to a much higher percentage of ca-pital than the 30% of shares which have been or will be allocated to Mr. Thierry Gadou under the Company’s
euros maximum, divided into two different parts:
• Qualitative variable portion of 50,000 euros maximum. this bonus will take account of the Group’s development and its ove-rall commercial performance with a particular emphasis on the In-ternational market. It may be in-creased if the scale and difficulty of projects to be conducted du-ring the year justify this. Lastly, changes in the share price will also be taken into account, dis-counting the stock market envi-ronment in general.
• Quantitative variable portion of 150,000 euros maximum based on five quantitative objectives asso-ciated with the 2019 budget & bu-siness plan:
- 2019 Revenue objective (weight 14.6%)
- 2019 Order Entry objective (weight 14.6%)
- 2019 EBITDA objective (weight 14.6%)
free share allocation plans currently in effect.
In light of this investment and the holding commitments made in this matter by Mr. Thierry Gadou, the Company’s Board of Directors has decided to modify the number of free shares allocated to Mr. Thierry Gadou which are to be held (direct-ly) by him until he ceases to hold the position of Chairman and Chief Exe-cutive Officer, setting it at 20,000 shares (for all free share allocation plans combined).
The details of these allocated shares also appear in the special report on bonus shares attached to this ma-nagement report.
- 2019 Net income objective (weight 41.6%)
- 2019 Net cash flow objective (weight 14.6%)
Finally, at the proposal of the Re-muneration Committee meeting held on February 28th, 2019, the Board dated April 4, 2019 resolved to provide the possibility of awar-ding the CEO an exceptional bonus associated with the company’s eco-nomic value creation, if applicable. This bonus could take the form of a specific bonus associated with the company’s performance in its mar-ket environment and an exceptional bonus associated with the creation of economic value for the company, its partners and shareholders.
In pursuance of section L. 225-37-2 subsection 1 of the Commercial Code, the principles and criteria for the de-termination, breakdown and allocation of fixed, variable and exceptional items comprising the total remuneration and benefits of all kinds, attributable to the Chief Executive Officer as a result of his position, will be the subject of a re-solution submitted for approval to the Shareholders’ Meeting of May 24, 2019.
Governance report
104
Annual report
Commitments made for the benefit of the Chairman and Chief Executive Officer
All the commitments listed below, made for the benefit of Mr. Gadou, as Chairman and Chief Executive Of-ficer, have been authorized by the Board of Directors and submitted to the Ordinary General Meeting of Shareholders for approval:
• severance pay in the event of ter- mination of his duties as Chief Ex- ecutive Officer;
• non-competition payment;
The Shareholders’ Meeting, delibe-rating in accordance with the quo-rum and majority requirements for Ordinary General Meetings and ha-ving reviewed the Board of Direc-tors’ report prepared pursuant to Article L. 225-37 of the Commercial
• senior executive insurance policy (garantie sociale des chefs d’en- treprises or “GSC”).
Company car
The Chairman and Chief Executive Offi-cer has a company car at his disposal.
No simultaneous holding of an em-ployment contract and a corporate office
As Chairman and Chief Executive Officer, Mr. Gadou does not benefit from an employment contract since
Code, and in accordance with the provisions of articles L. 225-37-2 and R.225-29-1 of the Commercial Code, approves the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the
he was recruited as Chief Executive Officer, a corporate office, before being co-opted as a Director and was thereafter appointed Company Chairman by the Board of Directors.
total remuneration and benefits of all kinds attributable to Mr Thierry GA-DOU, Chief Executive Officer in rela-tion to the 2019 fiscal year, by virtue of his mandate, as presented in sec-tion 8.7 of the governance report.
Approval of Mr. Gadou’s compensation policy for 2019 as Chairman and Chief Executive Officer in accordance with Article L. 225-37-2 of the French Commercial Code
Components of compensation Amount subject to vote explanation
Fixed compensation 320,000 €
Annual variable compensation 200,000 maximum Variable part split in two parts one qualitative (25%) and one quantitative (75%)
Deferred variable compensation NA No deferred variable compensation is provided for
Multi year variable compensation NA No multi-year variable compensation is provided for
Exceptional bonus -On proposal of the Compensation Committee on February 28th 2019, the Board dated April 4, 2019, decided to allow the possibility of paying to the Chairman, as appropriate, an exceptional bonus relating to the company's creation of value
Bonus shares -
Directors attendance fees - No attendance fees
Benefits of any kind (value) no change Company car and unemployement insurance for Directors
Severance pay in the event of cessation of duties of CEO following a change in control
In accordance with the procedure relating to regulated agreements, the shareholders approved the severance pay on march 1st 2012 for a period of 5 years - the renewal of this arrangement was authorized by the Board on March 10, 2017.
Non compete agreement In accordance with the procedure relating to regulated agreements, the shareholders approved the severance pay on march 1st 2012.
Supplementary pension system No supplementary pension system has been subscribed.
105
We remind you that, in accordance with the decision of the Sharehol-ders’ Meeting of June 23, 2017
We remind you that variable and exceptionnal bonuses that will be allocated in 2019 will have to be ap-
Governance report
2. other compensation received by non-executive corporate officers
Table on attendance fees and other compensation paid to non managing directors (Table 3 – AMF)
Attendance fees paid in 2018
2018 2017
Candace JOHNSON
Attendance fees 23,528 € 23,528 €
other compensation None None
Hélène PLOIX
Attendance fees 0 € 0 €
other compensation None None
Renaud VAILLANT
Attendance fees 20,000 € 20,000 €
other compensation None None
(Resolution 4), the Shareholders’ Meeting decided to set the an-nual overall amount of directors’
proved by the ordinary shareholders meeting through a resolution dedi-cated to compensation and benefits
attendance fees to fifty thousand (50,000) euros for the financial year ended December 31, 2017.
allorcated to Mr Thierry Gadou ad CEO.
3. Sums allocated to provisions by the Company for payment of pensions, retirement, or other benefits for directors and other corporate officersNo sums alIocated to provisions have been recorded by the Company for directors and other corporate officers.
106
Annual report
On June 23, 2017, the Shareholders’ Meeting, ruling under the quorum and majority conditions required for ordi-nary shareholders’ meetings, decided to appoint the company KPMG S.A. represented by Mr Grégoire MENOU as well as the company Deloitte & Associés, represented by Mr Julien RAZUNGLES as Statutory Auditors.
This appointment is granted for a term of six financial years and shall terminate after the Ordinary Shareholders’ Mee-ting called to rule on the accounts for the financial year ending December 31, 2022, and to be held in 2023.
Consequently that same shareholders meeting, in compliance with article L. 823-1 of the French Code of Com-
8.8 Statutory Auditorsmerce, and following a Board proposal, has amended article 26 of the Com-pany’s the Articles of Association to align them with the new regulation re-garding statutory auditors appointment and notably the obligation to appoint one or several alternate auditors when the Statutory Auditors are not a natural person.
No injunctions or penalties for anti-competitive practices have been issued by the Competition Council with regard to the Company. Fair competition
In accordance with Article L. 225-35 of the French labor code, at its mee-ting of June 22, 2018, the Board of Directors renewed the authoriza-tion given, as and when needed, to the Company’s Chairman and Chief Executive Officer, with the ability to delegate to any person of his choice, to grant de- posits, advances and guarantees, in the Company’s name, for third par- ties, subject to dual limitations on duration and amount.
Lastly, the Board of Directors of 17 September 2018 decided to autho-
rise the Chairman and Chief Executive Officer, with the option of delega-ting to any person of their choice, to sign a specific guarantee in the name of the Company, for the be-nefit of SES-imagotag GmbH, a wholly owned subsidiary of the Company; a guarantee necessary for the reorganisation of SES-ima-gotag GmbH in accordance with the provisions of Austrian Company Restructuring Law).
The Board of Directors, dated Sep-tember 17, 2018, has decided to authorize the Chairman and Chief
8.9 Injunctions or penalties for anticompetitive practices (article L. 464 3 i of the French commercial code)
8.10 Deposits, advances and guarantees
8.11 Regulated agreements and commitments
Executive Officer, with the option of delegating this authority to any person of his choice, to sign, for the benefit of the fully owned subsidia-ry, SES-imagotag GmbH, a letter of comfort de dicated to fulfill the le-gal prerequisites for reorganisation of SES-imagotag GmbH pursuant to the provisions of the Austrian Com-pany Reorganization Act.
Agreements and commitments autho-rized and entered into during the year
Procurement and manufacturing agree-ment “Master Service Agreement”
Person concerned: Chongqing BOE Smart Electronics System Co.,Ltd,
company indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company since December 21, 2017.
Nature and purpose:
Manufacture, test, configure, as-
semble, package and/or ship certain electronic assemblies (ESL’s) and systems pursuant to the terms and conditions set forth in this Agree-ment for the SES-imagotag Group authorized by the Board of directors dated October 23, 2018 and to be approved by the shareholders mee-
AGREEMENTS AND COMMITMENTS SUBMITTED TO THE APPROVAL OF THE ANNUAL GENERAL MEETING
107
Governance report
Credit facility agreement with Markethub Technologies Ltd.
Person concerned, nature and object:
A credit facility agreement signed on July 1, 2017 with Markethub Technologies Ltd., a UK subsidiary owned 60% by your Company, for a 5 year period. Ratification during the Shareholders meeting dated June 22, 2018, Résolution 6.
Service agreement with Markethub Technologies Ltd.
Person concerned, nature and object:
A service agreement (business provider and distributor) signed on July 1, 2017 with Markethub Technologies Ltd., a UK subsidiary owned 60% by your Com-pany for a 5 year period. Ratification during the Shareholders meeting dated June 22, 2018, Résolution 6.
Financial guarantee granted to a supplier of the subsidiary Pervasive Displays Inc.
Person concerned:
BOE Optical Science and Technology Co., Ltd and Chongqing BOE Smart Electronics System Co., Ltd (after substitution), companies indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company since December 21, 2017.
Nature and purpose:
On September 13, 2017, your Com-pany granted a guarantee to the supplier, BOE Optical Science and Technology Co., Ltd, on behalf of its wholly-owned Taiwanese subsidia-ry, Pervasive Displays Inc.
The agreement was previously au-thorized by the Board of Directors on September 8, 2017 as a security, en-dorsement or guarantee as defined by Article L. 225-35 of the French Commercial Code. On December 21, 2017, it became a regulated agree-ment following the acquisition by BOE Smart Retail (Hong-Kong) Co., Ltd of over 50% of the share capi-tal of your Company. This guarantee was granted for a 12 months period and involves a €10M cap.
The Board of Directors’ meeting of Fe-bruary 6, 2018 decided to change the beneficiary of the guarantee, replacing BOE Optical Science and Technology Co., Ltd. by Chongqing BOE Smart Electronics Systems Co., Ltd. Ratifi-cation by the Shareholders meeting dated June 22, 2018 Resolution 7).
Financial guarantee granted to a supplier of the subsidiarySES-imagotag GmbH.
Person concerned:
BOE Optical Science and Technology Co., Ltd and Chongqing BOE Smart Electronics System Co., Ltd (after substitution), companies indirectly related to BOE Smart Retail (Hong
Kong) Co., Ltd, a shareholder of your Company since December 21, 2017.
Nature and purpose:
On December 15, 2017, your Com-pany granted a guarantee to the supplier, BOE Optical Science and Technology Co., Ltd, on behalf of its wholly-owned subsidiary SES-ima-gotag GmbH.
The agreement was previously au-thorized by the Board of Directors on September 8, 2017 as a security, en-dorsement or guarantee as defined by Article L. 225-35 of the French Commercial Code. On December 21, 2017, it became a regulated agree-ment following the acquisition by BOE Smart Retail (Hong-Kong) Co., Ltd of over 50% of the share capital of your Company.
The Board of Directors’ meeting of Fe-bruary 6, 2018 decided to change the beneficiary of the guarantee, replacing BOE Optical Science and Technology Co., Ltd. by Chongqing BOE Smart Electronics Systems Co., Ltd. Ratifi-cation by the Shareholders meeting dated June 22, 2018 Resolution 7).
Severance pay to Thierry Gadou in the event of termination of his duties as Chief Executive Officer
Person concerned:
Thierry Gadou, Chief Executive Of-ficer since January 13, 2012 and
AGREEMENTS AND COMMITMENTS PREVIOUSLY APPROVED BY ANNUAL GENERAL MEETING and still valid in 2018 (article R. 225-30 of the French Commercial Code)
ting on May 24, 2019, Resolution 5..
Agreements and commitments authorized by the Board of Direc-tors in 2018 and to be ratified by the shareholders meeting on May 24, 2019.
Sales of finished goods
Person concerned:
BOE VT (Hong Kong) CO., Ltd ; company indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a
shareholder of your Company since December 21, 2017.
Nature and purpose:
the new supply chain organization has triggered an inventory sale by the end of June 2018 between the Company and BOE VT (Hong Kong) CO., Ltd to be approved by the Shareholders meeting on May 24, 2019, Résolution 6;
Technical consulting agreement
Person concerned:
Chongquing BOE Smart Electronic System Co., Ltd, company indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company since December 21, 2017.
Nature and purpose:
a technical service consultancy contract has been signed on Fe-bruary 1st, 2018 o be approved by the Shareholders meeting on May 24, 2019.
108
Annual report
The Company is pursuing a corpo-rate governance policy.
The Company adopted a charter on December 12, 2005, which entered into force on February 2, 2006 (he-reinafter “the Corporate Governance
Charter” or “the Charter”), which re-fers to the Code of Government deve-loped by professional organizations.
The Company drew inspiration from the AFEP-MEDEF Consolidated Code of June 2018, which consti-
8.12 Declaration about the Company’s Governancetutes the Corporate Governance Code to which it refers in preparing this report.
The AFEP-MEDEF Code is available on the MEDEF website:http://www.medef.com).
In accordance with the provisions of Articles L. 225-100-3 of the French commercial code, we hereby pre-sent the factors that may have a significant impact in the event of a public offering:
Structure of the capital
The structure of the capital, as re-called in paragraph III of this Mana-gement Report, in accordance with the provisions of Article L. 233-7 and L.233-13 of the French commercial code, is not likely to have an impact in the event of a public offering.
Statutory restrictions on the exercise of voting rights and share transfers or clauses of agreements brought to the knowledge of the Company pursuant to Article L. 233-11 of the French commercial code
There are no statutory restrictions on the exercise of voting rights and share transfers pursuant to Article L. 233-11 of the French commercial code.
Furthermore, Article 9.4 of the Com-pany’s articles of incorporation stipu-late that any legal or natural person acting alone or in concert, which co-mes to own or ceases to own, direc-tly or indirectly through one or more companies in which it has a majority controlling interest, a percentage of ownership greater than or equal to 1% of the capital stock and/or voting rights or a multiple of this percentage is required to notify the Company of the total number of shares and vo-ting rights and se- curities giving ac-cess to equity or voting rights that it owns, within a period of five trading days following the crossing of said threshold(s) by sending to its corpo-rate headquar- ters a registered letter with return receipt requested.
8.13 Information that may have an impact in the event of a public offering
If they are not reported in accor-dance with the conditions de scri-bed above, the shares or vot- ing rights in excess of the fraction that should have been reported are stripped of voting rights in the stockholders meetings, if the failure to report was noted and if one or more stockholders in possession of less than 1% of the capital stock file a request that is recorded in the minutes of the stockholders mee-ting. The aforementioned provi-sions apply without prejudice to the reporting of threshold breaches sti-pulated by legal or regulatory provi-sions in effect.
Direct or indirect holdings in the Company’s capital of which it is aware pursuant to Articles L. 233-7 and L. 233-12 of the French commercial code (significant or company-owned holdings)
Chairman of the Board of Directors since January 18, 2012. This agree-ment was renewed and updated (authorization of the Board dated March 10, 2017) regarding a seve-rance pay in the event of termina-tion of Thierry Gadou’s duty as a CEO or in the event of a change in control of the company.
Nature and purpose:
Payment of severance pay in the event of termination of his duties as Chief Executive Officer.
Thierry Gadou’s non-compete clause
This clause concerns Thierry Gadou, Chief Executive Officer since Ja-nuary 13, 2012 and Chairman of the Board of Directors since January 18, 2012.
Payment of a non-compete al-lowance to Thierry Gadou was au-thorized by the Board of Directors on January 13, 2012 and approved by Shareholders’ Meeting on March 1, 2012.
Chairman and Chief Executive Offi-cer director insurance policy (GSC)
This policy concerns Thierry Gadou, Chief Executive Officer since January 13, 2012 and Chairman of the Board of Directors since January 18, 2012.
On January 13, 2012, the Board of Directors authorized your Company to take out an unemployment insu-rance policy for directors (GSC) in favor of Thierry Gadou, with effect from January 18, 2012.
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There are no direct or indirect hold- ings in the Company’s capital of which it is aware pursuant to Arti- cles L. 233-7 and L. 233-12 of the French commercial code (signifi- cant or company-owned holdings).
List of holders of any securities involving special control rights and a description of those rights (especially resulting from preference shares)
The shares issued by the Company give the right to vote and to be re-presented at shareholders’ general meetings under the conditions set by law.
Article 9.3 of the Company’s Articles of Association specifies that, pur-suant to the 18th resolution of the extraordinary general meeting of 21 May 2014, it was decided not to grant double voting rights as insti-tuted by Law 2014-384 of 29 March 2014 to holders of shares referred to in Article L. 225-123 paragraph 3 of the French Commercial Code.
No action has special control rights.
The control mechanisms provided for in a possible employee shareholding system when the control rights are not exercised by the employees (e.g. in the case of FCPEs)
None.
Agreements between shareholders of which the Company is aware and which may result in restrictions on the transfer of shares and the exercise of voting rights (shareholders’ agreements).
On December 20, 2017, Chequers Capital XV and Pechel Industries III confirmed the termination of the shareholders’ agreement entered into on May 26, 2009 (the main pro-visions of which are set out in the Company’s 2016 Annual Report p. 94) which had previously governed their reports.
Rules relating to the appoint-ment and replacement of members of the Board of Di-rectors as well as the amend-ment of the Company’s Ar-ticles of Association
Members of the Board of Directors
General Provisions
The Articles of Association state that the Company is managed by a Board of Directors comprising no fewer than three and no more than eighteen members, subject to the exception provided for by law in the event of a merger (Art. L. 225-95 of the French commercial code)
The term of office for the directors is three (3) years, which shall come to an end following completion of the Ordinary General Meeting called to approve the accounts for the pre-vious year and held in the year during which their terms of office expire.
Article 11.1 of the Company’s Arti- cles of Association specifies that, during the life of the Company, the directors are appointed, renewed, or dismissed by the Ordinary Gen- eral Meeting. They can always be re-elected.
In the event of vacancy due to the death or resignation of one or more directors, the Board may make tem-porary appointments between two General Meetings, in accordance with the conditions provided for by law. Temporary appointments made by the Board of Directors are sub-ject to ratification by the next Gene-ral Meeting.
A director appointed to replace an- other shall only carry out his/her duties for the remainder of his/her predecessor’s term of office.
Each director must own a share.
Director representing employee shareholders
Article 11.1 of the Company’s Arti- cles of Association also specifies that pursuant to Article L. 225-23 of
the French commercial code, when the portion of capital held–within the framework of the provisions of Article L. 225-102 of that same Code-by the staff of the Company and affiliated companies as de-fined by Article L. 225-180 of that same Code represents more than 3%, a director representing employee shareholders shall be elected by the Ordinary General Meeting according to the procedures laid down both by the regulations in force and by these Articles of Association, provided that the Board of Directors does not include one or more directors ap-pointed from among the members of the Supervisory Board for Employee Investment Funds representing em-ployees, or one or more employees elected in accordance with Article L. 225-27 of that same Code.
Candidates for appointment as an employee shareholder director are chosen under the following condi- tions:
• If the voting right attached to the shares held by the employees or by the employee investment funds of which they are members is exercised by the members of the Supervisory Board for those em-ployee investment funds, candi-dates shall be chosen by the Su-pervisory Board from among its members.
• If the voting right attached to the shares held by the employees or by the employee investment funds of which they are members is exer- cised directly by those employees, candidates shall be chosen via the consultation provided for by Article L. 225-106 of the French commercial code, either by the em-ployee shareholders having conve-ned specially for such a purpose or via written consultation. Only ap-plications submitted by a group of shareholders representing at least 5% of the shares held by employees exercising their individual voting right will be admissible.
The procedures for selecting can- didates not defined by the legal and regulatory provisions in force or by
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these Articles of Association shall be approved by the Chairman of the Board of Directors, namely concerning the candidate selection schedule.
A list of all validly selected candi-dates shall be drawn up, comprising at least two names. The list of candi-dates will be attached to the notice of Shareholders’ Meeting convened to appoint a director representing employee shareholders.
The director representing employee shareholders shall be elected by the Ordinary General Meeting under the conditions applicable to all appoint- ments of directors, at the proposal of the shareholders referred to in Article
L. 225-102 of the French commer- cial code. The Board of Directors shall present the General Meeting with the list of candidates in order of preference and may approve the first candidate on the list. The can- didate with the most votes from the shareholders present or represented at the Ordinary General Meeting will be appointed as the director repre- senting employee shareholders.
The director representing employee shareholders is not taken into ac- count when determining the maxi- mum number of directors laid down by Article L. 225-17 of the French commercial code.
The term of the duties of the di-rector representing employee shareholders is three years. Howe-ver, this term shall expire by opera-tion of law, and the di- rector re-presenting employee share- holders shall be deemed as having resigned in the event that he/she ceases to be an employee of the Company (or an affiliated company or economic interest grouping as defined by Ar-ticle L. 225-180 of the French com-mercial code) or a shareholder (or a member of an employee investment fund whose shares comprise at least 90% shares in the Company). The Board of Directors may validly meet and deliberate until the date on which the director representing employee shareholders is appointed or replaced.
In the event that the position of di-rector representing employee share- holders becomes vacant for any rea-son, he/she shall be replaced under the conditions set out above, with the new director being appointed by the Ordinary General Meeting for a new term of three years.
The provisions concerning the di-rector representing employee share- holders shall cease to ap-ply if, at the end of a given finan-cial year, the percentage of capital held by staff of the Company and affiliated companies as defined by Article L. 225-180 mentioned above, in accordance with the provisions of Article L. 225- 102 mentioned above, represents less than 3% of the capital, with the understanding that the offices of any directors ap-pointed in accordance with para- graph 6 will expire at their term.
Amendments to the Articles of Association
Article 16 of the Company’s Articles of Association formally states that “Extraordinary General Meetings are those called to decide on or autho- rize direct or indirect amendments to the Articles of Association.”
Article 24 of the Company’s Articles of Association specifies that the decisions of Extraordinary General Meetings shall only be considered valid if the shareholders present or represented own, upon convening for the first time, at least one-fourth of the shares bearing the right to vote and, upon convening for the second time, one-fifth of the shares bearing the right to vote.
Where this quorum is not met, the se-cond Meeting may be postponed for a maximum of one month following that during which it was convened.
Extraordinary General Meetings shall act by a two-thirds majority of the votes held by the shareholders present or represented, including those having voted by mail.
Powers granted to the Board of Directors, in particular
for the issue or buyback of shares
The powers (delegations of powers and authority) granted at December 31, 2017, are listed in the table of delegations attached above. They may have an impact in the event of a public offering, especially given the fact that they allow the Board of Di-rectors to issue new shares or secu-rities granting access to the capital:
Authorization granted to the Board of Directors to reduce the share ca-pital in accordance with the terms of Article L. 225-209 of the French commercial code;
• Authorization granted to the Board of Directors to implement a share buyback program;
• Authorization granted to the Board of Directors to freely distribute shares to one or more employees and/or corporate officers subject to performance conditions
• Authorization granted to the Board of Directors to increase the capital dedicated to employees, with no preferred voting rights attached, for investment on the company’s saving plan
Agreements entered into by the Company that are amended or terminated in the event of a change in control of the Company, except in the event of a legal obligation of disclosure, and that would severely affect its interests (including clauses of com- mercial or financial contracts)
The terms of the “Euro PP” bonds issued for the amount of 40 million euros in two series in December 2016 and March 2017 (the “Bonds”) call for the early redemption of Bonds, as desired by each bondhol-der, if there is a change in control of the Company (Article 5.3) (as indi-cated in the consolidated financial statements appendix of this annual report). The majority of persons holding Bonds (in the amount of 25
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million euros) have waived their op-tion to request early redemption of the Bonds as part of the acquisition of the Controlling Stake. One bea-rer holding Bonds worth a total of 15 million euros sold the Bonds he held to a third party, which informed the Company that he did not intend to request early redemption of the Bonds as part of the acquisition of the Controlling Stake.
Similarly, certain lines of credit granted to the Company (as indi-
cated in the consolidated financial statements appendix of this annual report), including by Société Géné-rale, BNP Paribas and BPI, also in-clude early reimbursement clauses in the event of a change in control of the Company, clauses which the afo-rementioned lenders have agreed to waive in the context of the change in control resulting from the acquisi-tion of the Controlling Stake. Final-ly, it is recalled that the contractual holding commitments made to the Company by sellers (other than the
Mangers who participated in the ac-quisition of the Controlling Stake) as part of the acquisitions of Findbox GmbH and Pervasive Displays Inc., carried out by the Company res-pectively in November 2016 and Fe-bruary 2017, shall be automatically lifted in accordance with the terms agreed to during said acquisitions when the Offer opens, thus enabling the sellers concerned to contribute their shares to the Offer.
Agreements providing for compensation paid to members of the Board of Directors if they resign or are dismissed without real and proper cause or if their employment ends in the event of a public offering (severance pay, golden parachutes)
Thierry GADOU
Severance pay
The compensation due to Thierry Gadou in the event of cessation of his duties as Chief Executive Officer is in the form of contrac-tual severance pay, the terms and conditions of which were appro-ved by the Shareholders’ Meeting held on March 1, 2012.
In the specific case of a change in control, the authorization would be valid for a period of 60 mon-ths. On March 10, 2017, the Board of Directors therefore decided to renew this authorization.
Compensation shall therefore only be due if the following conditions are met:
• Event triggering the right to se-verance pay: the cessation of the duties of SES-imagotag’s CEO in case of dismissal (un-less it is because of serious or severe misconduct) or resigna-tion within six months following a change in control of SES-ima-gotag;
• Amount of compensation: lump- sum payment of a gross nominal
amount equal to 18 months of fixed and variable compensation;
• Performance condition governing severance pay: this condition will be met if at least 75% of the quan-titative objectives established for the bonus for the year preceding that of the cessation of duties as Chief Executive Officer are achie-ved.
A Change in Control is defined as the exchange of at least 40% of SES-imagotag’s capital, on or off the market, or the filing and exe-cution of a public offering for SES-imagotag’s shares.
Non compete
Moreover, in the event of cessation of his duties as Chief Executive Of-ficer for any reason whatsoever, Thierry Gadou’s term of office, in the capacity of Chief Executive Offi-cer, includes a non-compete clause under the terms of which Thierry Gadou undertakes:
• not to join a company carrying out a competing activity;
• not to exercise or be involved, ei- ther directly or indirectly, in any way whatsoever (in particular as
a self-employed worker or share- holder holding more than 3% of the capital or voting rights), in a com- peting activity;
• not to exercise or be involved, ei- ther directly or indirectly, in any way whatsoever, and not to invest in, in any way whatsoever (in par- ticular as a shareholder), in the companies Pricer or ZBD;
• not to approach or recruit or try to recruit any person who is or was employed by SES- imagotag or one of its subsidiaries in the pre-vious 12 months, with a view to using the specific knowledge or skills of that person for the benefit of a natural person or legal entity whose activities are in competi- tion with those of SES-imagotag.
The term rival activity refers to any activity involving the design, mar- keting, or installation of electronic labeling systems.
This non-compete obligation is li-mited to France, Belgium, Italy, Ger-many, Denmark, Spain, the United Kingdom, Switzerland, Hungary, Romania, Poland, Sweden, Bra-zil, Mexico, Argentina, Canada, the United States of America, and South Africa.
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The clause is limited to a duration of one year as of the end of his term of office as Chief Executive Officer of the Company. At the end of this period of one year, SES-imagotag may renew the clause for another one-year period. This renewal must be notified by registered letter with acknowledgment of receipt or de- livered by hand against receipt, at the latest 60 calendar days before the expiry of the initial period of the non-compete obligation.
In consideration of this non-compete obligation, Thierry Gadou shall re-ceive, following the effective cessation of his term of office as Chief Executive Officer of SES-imagotag, and for the entire duration of this prohibition, a special flat-rate monthly compen-sation, the gross amount of which will be equal to 50% of his gross fixed monthly salary.
This special compensation shall be paid by bank transfer at the end of each month for the entire duration of the non-compete obligation and it shall be subject to social security contributions.
Any violation or infringement of this non-compete clause shall au-thorize SES-imagotag to put a stop to the violation or infringement in question and to order, subject to a penalty, the cessation of the com-petition that infringes on the above provisions, without prejudice to any damages or interest it may claim because of the violation of this obli-gation.
Similarly, any violation of the non-compete obligation would re-lease SES-imagotag from payment of this compensation and would render Thierry Gadou liable to pay back any sums he may have re-ceived in this respect, with interest at the statutory rate from the date of formal notice to immediately cease the rival activity, without prejudice to any damages or interest it may claim because of the violation of this obligation.
SES-imagotag may release Thierry Gadou from the non-compete clause at the end of his term of office as Chief Executive Officer of SES-imagotag. In this case, the financial compensa-tion shall not be payable. This wai-ver must be notified by letter sent by registered mail with return receipt or hand-delivered in exchange for a receipt within 8 calendar days fol-lowing the date when it is notified to Thierry Gadou, or Thierry Gadou gives notice of the termination of his term of office as Chief Executive Officer at SES-imagotag.
Information on transactions carried out by directors & relatives on se-curities
The Shareholders’ Meeting is infor-med of the share purchases by the Company’s directors or their rela-tives at December 31, 2018, by the following table:
Name of directors or their relatives
Number of shares at 31.12.18
Thierry GADOU in his capacity as Chairman & CEO, As well as his relatives
225,068
SESIM 227,921
Ces opérations sont détaillées dans le rapport spécial sur les actions gra-tuites établi conformément aux dis-positions de l’article L. 225-197-4 du Code de commerce joint au présent Rapport de gestion.
Aucune autre opération n’a été ré-alisée par les dirigeants ou leurs proches durant l’exercice écoulé.
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IV-Shareholders’ meeting
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Shareholders’ meeting
Draft resolutions proposed at the combined shareholders’ meeting of May 24, 2019The Chairman reminded those present that the Meeting had been called to deliberate on the following agenda:
Ordinary resolutions:
1. Approval of the financial statements for the year ending December 31, 2018
2 . Approval of the consolidated financial statements for the year ending December 31, 2018
3 . Allocation of Directors’ fees
4 . Net income appropriation for 2018
5 . Approval of the agreements referred to in sections L. 225-38 et seq. of the French Commercial Code
6. Ratification of two conventions referred to in Articles L. 225-38 and following of the French Commercial Code not previously authorized by the Board of Directors
7 . Authorisation given to the Board of Directors to trade the Company’s shares
8 . Approval of the remuneration items paid or allocated for the year ending December 31, 2018 to Mr Thierry GADOU, Chief Executive Officer
9 . Approval of the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the total remuneration and benefits of all kinds attributable to Mr Thierry GADOU, Chief Executive Officer in relation to the 2019 fiscal year
10. Ratification of the cooptation of Mr Linfeng JING as Director, replacing Mr Xingqun JIANG
Extraordinary resolutions:
11. Authorization to be given to the Board of Directors to reduce the company capital by cancellation of treasury shares
12. Delegation of authority to the Board of Directors to increase the share capital by incorporating reserves, profits or premiums, or any other sum that can be legally capitalised
13. Delegation of authority to the Board of Directors to increase the share capital by issuing, with preferential subscrip-tion rights, shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued
14. Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and /or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued, in connection with public offers
15. Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued, through the private placements specified in Article L.411-2 II of the French Monetary and Financial Code
16. Authorisation given to the Board of Directors in the event of issue without preferential subscription rights, through public offers or private placements per Article L.411-2 II of the French Monetary and Financial Code, for the pur-pose of setting the issue price according to the terms established by the Shareholders’ Meeting, within the limit of 10% of the capital per year
17. Authorisation given to the Board of Directors to increase the amount of issues with or without preferential subscrip-tion rights
18. Delegation of authority to the Board of Directors to increase the share capital by issuing shares and/or equity se-curities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued as compensation for contributions in kind
19. Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares of the Company reserved for members of a company savings plan
20. Powers conferred
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9.1 THE PURVIEW OF THE ORDINARY GENERAL MEETINGFIRST RESOLUTION
Approval of the financial statements for the financial year ending De-cember 31, 2018
The Shareholders’ Meeting, ru-ling under the quorum and majority conditions required for ordinary shareholders’ meetings, having re-viewed the Board of Directors’ and Auditors’ reports on the financial year ended December 31, 2018, ap-proved, as presented, the annual accounts prepared as at that date, in addition to the transactions re-corded or summarized in these ac-counts and reports and which show a net income of € - 8,926,884.
In accordance with the provisions of Article 223 quater of the French General Tax Code, the Shareholders’ Meeting noted that the Company had expenses or charges referred to in Articles 39-4 and 54 quater of said Code amounting to €191,796
SECOND RESOLUTION
Approval of the consolidated financial statements for the financial year ending December 31, 2018
The Shareholders’ Meeting, ruling under the quorum and majority conditions required for ordinary shareholders’ meetings, having re-viewed the Board of Directors’ and Auditors’ reports on the conso-lidated accounts, approved the consolidated accounts for the finan-cial year ended December 31, 2018 as presented to it, in addition to the transactions recorded in these accounts and summarized in these reports.
THIRD RESOLUTION
Allocation of Directors’ fees
The Shareholders’ Meeting, ruling un-der the quorum and majority condi-tions required for ordinary sharehol-ders’ meetings, having reviewed the
Board of Directors’ report, set the overall maximum annual amount of at-tendance fees to be allocated to the Directors for the current financial year at €50,000.
FOURTH RESOLUTION
Net Income appropriation for 2018
On the proposal of the Board of Di-rectors, the Shareholders’ Meeting, ruling under the quorum and majo-rity conditions required for ordinary shareholders’ meetings, having re-viewed the Board of Directors’ and Auditors’ reports on the financial year ended December 31, 2018, de-cided to allocate the income for the 2018 financial year, in the amount of €- 8,926,884. as follows:
• Income for the financial year €- 8,926,884.
• Result fully allocated to retained earnings €- 8,926,884.
• Which, added to prior retained ear-nings, now stands at € 22,681,268.
In accordance with the provisions of Article 243 of the French General Tax Code, the Shareholders’ Mee-ting also stipulated that no divi-dends have been distributed since 2012. In 2012, the Company paid out €5,491,011.50 in dividends.
FIFTH RESOLUTION
Approval of agreements referred to in sections L. 225-38 et seq. of the French Commercial Code
The Shareholders’ Meeting, ruling under the quorum and majority conditions required for ordinary shareholders’ meetings, and having reviewed the Auditors’ special report on the regulated agreements and commitments referred to in Article L. 225-38 of the French Commer-cial Code, and ruling on this report, approved, under the conditions set out in the last paragraph of Article L. 225-40 of the French Commercial
Code, each of the agreements refer-red to therein.
SIXTH RESOLUTION
Ratification of two conventions referred to in Articles L. 225-38 and following of the French Commercial Code not previously authorized by the Board of Directors
The General Meeting, voting under the quorum and majority condi-tions required for ordinary general meetings, and having reviewed the Statutory Auditors’ special report on regulated agreements and com-mitments referred to in Article L. 225-38 of the French Commercial Code, which refers to a sale of fini-shed products invoiced on 29 June 2018 to BOE VT (Hong Kong) Co., Ltd, on the one hand, and a tech-nical consulting agreement with Chongqing BOE Smart Electronics System Co., Ltd. concluded on 1 February 2018, on the other hand, and not subject to the authorization procedure and ruling on this report, decides to ratify and approve the terms of said agreements to protect against their being voided.
SEVENTH RESOLUTION
Authorisation given to the Board of Directors to trade the Company’s shares
The Shareholders’ Meeting, ruling under the quorum and majority conditions required for ordinary shareholders’ meetings and in ac-cordance with applicable statutory and regulatory provisions and, in particular, those of Articles L. 225-209 et seq. of the French Com-mercial Code, having reviewed the Board of Directors’ report, autho-rized the Board of Directors, with the option to sub-delegate under the conditions set out by law, to trade in the Company’s shares on the stock exchange or otherwise in accordance with the terms and conditions set out below.
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The Board of Directors is authorized pursuant to this authorization to ac-quire, on one or more occasions and by any means, a number of shares representing up to 5% of the number of shares comprising the Company’s share capital at any time.
The transactions carried out by the Board of Directors pursuant to this authorization may be carried out with a view to meeting the following objectives:
- Stimulating the secondary market or share liquidity through an in-vestment services provider, acting independently, as part of a liqui-dity contract compliant with the market practice admitted by the AMF on 2 July 2018.
- Distributing all or some of the ac-quired shares to employees and/or the corporate officers of the Com-pany or other entities of the Group, in particular within the context (i) of employee profit sharing, (ii) any stock option plan of the Com-pany, pursuant to Article L.225-177 et seq. of the French Commercial Code, or (iii) any savings plan in compliance with Article L.3331-1 et seq. of the French Labour Code or (iv) any allocation of bonus shares pursuant to the provisions of Article L.225-197-1 et seq. of the French Commercial Code, as well as per-form all hedging transactions re-lating to these transactions, under the conditions provided for by the market authorities, and at the times to be determined by the Board of Directors or the person acting by delegation thereof.
Remitting shares while exercising the rights attached to securities with conversion, exercise, refund, or ex-change rights, or any other Com-pany share allocation mechanism in accordance with applicable regula-tions, as well as perform all hedging transactions relating to these tran-sactions, under the conditions pro-vided by the market authorities and at the times to be determined by the Board of Directors or the person ac-ting by delegation of the Board of Directors.
- Canceling purchased shares through capital reduction under the conditions provided for by the French Commercial Code, as long as Resolution 11 of this Sharehol-ders’ Meeting is approved.
- Keeping all or some of the acquired shares for later use in exchange or as payment as part of a future ex-ternal growth operation.
- Implement any market practice that may be authorised by the French Financial Markets Autho-rity and, more generally, perform all operations in compliance with applicable regulations;
The Board of Directors may not, unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period.
The acquisition, disposal, transfer, or exchange of these shares may be undertaken and paid for by any means, particularly as part of a li-quidity contract entered into by the Company with an investment ser-vice provider, subject to the regu-lations in force, including over the counter and by block of shares, through the use of derivatives and the establishment of option-based strategies (purchase and sale of call and put options and all combi-nations thereof in accordance with the applicable regulations), and at such times as the Board of Directors deems fit.
The Meeting decides that the maxi-mum purchase price per share shall not exceed €50 per share, excluding expenses.
The acquisitions made by the Com-pany may, under no circumstances, lead it to hold more than 5% of the shares composing its share capital at any time.
The number of shares and the price indicated above shall be adjusted in the event of a change in the nominal
value of the share, increase in share capital by incorporation of reserves, profits or premiums, allocation of free shares, division or consolida-tion of shares, capital redemption or reduction, distribution of re-serves or other assets and any other transactions affecting shareholders’ equity, so as to take account of the impact of such transactions on the value of the share.
This authorization is given for eighteen months starting on the date of this Meeting. For the purpo-ses of implementing this resolution, the Board of Directors is granted full powers, with the option to sub- de-legate under the conditions set out by law, in order, in particular, to:
- Decide how to implement this au-thorization
- Place stock market orders
- Make any declarations and carry out any formalities with respect to the AMF that may relate to the buyback program described above
- Fulfill any other formalities or en-ter into any other agreements to this end and, more generally, do whatever is necessary to imple-ment the buyback program descri-bed above
This authorization supersedes the authorization granted by the 8th re-solution of the Shareholders’ Mee-ting of June 22, 2018.
EIGHTH RESOLUTION
Approval of the remuneration items paid or allocated for the year ending December 31, 2018 to Mr Thierry GADOU, Chief Executive Officer
The Shareholders’ Meeting, delibe-rating in accordance with the quo-rum and majority requirements for Ordinary General Meetings, pursuant to section L. 225-100 of the Com-mercial Code and having reviewed the Board of Directors’ report pre-pared pursuant to Article L. 225-37 of the Commercial Code, approves,
Shareholders’ meeting
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in accordance with articles L.225-37-2 and L.225-100 of the Commer-cial Code, the components of the total compensation and benefits of all kinds paid or allocated for the year ending December 31, 2018 to Mr Thierry GADOU, Chief Executive Officer, as presented in section 8.7 of the governance report.
NINTH RESOLUTION
Approval of the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the total remuneration and benefits of all kinds attributable to Mr Thierry GADOU, Chief Executive Officer in relation to the 2019 fiscal year
The Shareholders’ Meeting, delibe-rating in accordance with the quo-
rum and majority requirements for Ordinary General Meetings and ha-ving reviewed the Board of Direc-tors’ report prepared pursuant to Article L. 225-37 of the Commercial Code, and in accordance with the provisions of articles L. 225-37-2 and R.225-29-1 of the Commer-cial Code, approves the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the total remuneration and benefits of all kinds attributable to Mr Thierry GADOU, Chief Execu-tive Officer in relation to the 2019 fiscal year, by virtue of his mandate, as presented in section 8.7 of the governance report.
TENTH RESOLUTION
Ratification of the cooptation of Mr Linfeng JING as Director, replacing
Mr Xingqun JIANG
The Shareholders’ Meeting, delibera-ting in accordance with the quorum and majority requirements for Ordinary General Meetings, ratifies the coop-tation by the Board of Directors at its meeting of September 17th, 2018 of Mr Linfeng JING as director, replacing Mr Xingqun JIANG, for the remainder of his term of office, i.e. until the Ordinary General Meeting called to approve the financial statements for the year ending 31 December 2020 and to be held in 2021.
9.2 THE PURVIEW OF THE EXTRAORDINARY GENERAL MEETING
ELEVENTH RESOLUTION
Authorization to be given to the Board of Directors to reduce the company capital by cancellation of treasury shares
The Shareholders’ Meeting, ruling under the quorum and majority conditions required for extraordi-nary shareholders’ meetings and in accordance with the provisions of Article L. 225-209 of the French Commercial Code, having reviewed the Board of Directors’ report and the Auditors’ special report, decided to authorize the Board of Directors, with the option to sub-delegate un-der the conditions set out by law, to reduce the share capital, on one or more occasions and at such times as it deems fit, by canceling shares that the Company might purchase within the context of implementing a share buyback program decided on by the Company.
As required by law, the capital re-duction may be carried out on no
more than 10% of the share capital existing as of the date of the can-cellation (i.e. adjusted based on the operations made on the share capi-tal since this resolution was accep-ted) during each twenty-four mon-th-period.
The Shareholders’ Meeting granted all powers to the Board of Directors, with the option to sub-delegate un-der the conditions set out by law, to determine the terms and condi-tions of the capital reductions and share cancellations, to apply the difference between the book value of the canceled shares and their nominal value against any reserve or premium accounts and to make the amendments to the articles of incorporation arising from this au-thorization and to complete all ne-cessary formalities.
This authorization is given for twenty-six months starting on the date of this Meeting.This autho-rization supersedes that given by the 11th resolution of the Combined
Shareholders’ Meeting of June 22, 2018.
TWELFTH RESOLUTION
Delegation of authority to the Board of Directors to increase the share capital by incorporating reserves, profits or premiums, or any other sum that can be legally capitalised
The Shareholders’ Meeting, deli-berating according to the quorum and majority required for Ordina-ry Shareholders’ Meetings, having reviewed the Board of Directors’ report and in accordance with the provisions of the French Commer-cial Code and in particular Articles L.225-129, L.225-129-2 and L.225-130 of said code:
1. delegates to the Board of Direc-tors, which in turn may delegate in accordance with legislative and regulatory conditions, its authority to increase, in one or more instances, in the propor-tions and at the times that it shall
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determine, the Company’s share capital by capitalisation of re-serves, profits or issue, merger or contribution premiums, or any other sum that can be possible either by law or according to the Articles of Association, to carry out this capital increase through the issue of new shares or by rai-sing the nominal amount of exis-ting shares or the combination of these two methods according to procedures defined by the Board of Directors;
2. decides that the nominal amount of capital increases liable to be decided by the Board of Direc-tors or carried out, immediately and/or in the future by virtue of this delegation may not exceed a maximum amount of three mil-lion euros (€3,000,000) . This cap shall be increased, where applicable, by the par value of the shares to be issued in order to preserve, in compliance with legislative and regulatory pro-visions and, where applicable, contractual stipulations, the rights of bearers of securities or other rights entitling their bearers to access the Company’s capital;
3. specifies that in the event of a ca-pital increase that results in the free allocation of new shares, the Board of Directors may de-cide that allocations resulting in fractional shares may not be traded and that the correspon-ding shares will be sold, in ac-cordance with the provisions of Article L.225-130 of the French Commercial Code; sums from the sales are allocated to the holders of rights no later than 30 days after they have registered the whole number of allocated shares in their account;
4. decides that the Board of Direc-tors shall have all powers, which it may in turn delegate in accor-dance with legislative and regu-latory conditions, to implement this delegation, and in particular:
i. determine the terms and procedures of the authorised
operations, and in particular set the amount and nature of the reserves, profits, pre-miums or other sums to be capitalised, determine the number of new shares to be issued and/or the amount by which the nominal amount of existing shares that make up share capital will be in-creased, define the date, even retroactive, as from which the new shares shall earn divi-dends or the date on which the increase in the nominal amount will take effect and, if necessary, carry out all the allocations on the issue pre-miums, and in particular the allocation of costs generated by the implementation of the issues,
ii. take all the measures intended to protect the rights of hol-ders of securities or other rights that grant access to equity, existing on the day of the capital increase,
iii. take all the necessary mea-sures and conclude all agree-ments to ensure the comple-tion of the planned operation or operations and, generally, do all that will be necessary, carry out all acts and forma-lities required to finalise the capital increase or increases that could be done by virtue of this delegation and amend the Company’s Articles of As-sociation accordingly;
5. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Com-pany’s shares, and until the end of the offer period;
6. decides that this authorisation is granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
THIRTEENTH RESOLUTION
Delegation of authority to the Board of Directors to increase the share capital by issuing, with preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued
The Shareholders’ Meeting, delibe-rating according to the quorum and majority required for Extraordinary Shareholders’ Meetings, having re-viewed the Board of Directors’ report and the special report of the Sta-tutory Auditors and in accordance with the provisions of the French Commercial Code and in particular Articles L.225-129 et seq., L.225-132, L.225-133 and L.228-92 of said code:
1. delegates to the Board of Direc-tors, which in turn may delegate in accordance with legislative and regulatory conditions, the authority to decide to carry out, in one or more instances, in the proportions that it shall deem relevant, both in France and abroad, in euros, foreign cur-rency or units of account fixed in reference to several curren-cies, the issue, with preferential subscription rights, of the Com-pany’s shares and/or equity se-curities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or trans-ferable securities giving access to equity securities to be issued, which may be subscribed to in cash, by offsetting debts due and payable, or in whole or in part, by incorporating reserves, profits or premiums;
2. decides that the total nominal amount of capital increases liable to be carried out immediately and/or in the future by virtue of this delegation may not exceed a maximum amount of fourteen million four hundred thousand
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euros (€14,400,000), or the equivalent in any other currency or monetary unit established in reference to several currencies, with the understanding that the nominal amount of the capital increases carried out by virtue of this resolution as well as the fourteenth to nineteenth resolu-tions submitted to this Sharehol-ders’ Meeting shall be deducted from this cap. This cap shall be increased, where applicable, by the par value of the shares to be issued in order to preserve, in compliance with legislative and regulatory provisions and, where applicable, contractual stipula-tions, the rights of bearers of se-curities or other rights entitling their bearers to access the Com-pany’s capital;
3. decides that the transferable se-curities giving access to equity securities to be issued by the Company that are issued may consist of debt securities or be associated with the issue of such securities, or enable their issue, as intermediate securities. The total maximum nominal amount of debt securities that may be is-sued on the basis of this delega-tion may not exceed one hundred million euros (€100,000,000), or its equivalent in foreign cur-rency or unit of account fixed in reference to several currencies, with the understanding that the nominal amount of debt security issues carried out under this re-solution as well as the fourteen-th to eighteenth resolutions submitted to this Shareholders’ Meeting shall be deducted from this cap;
4. notes that this delegation entails the waiving by shareholders of their preferential subscription rights to the equity securities of the Company to which the secu-rities issued under this delega-tion could entitle them immedia-tely or in the future;
5. decides that shareholders may exercise, under the conditions provided by law, their prefe-
rential subscription right as of right to equity securities and/or securities the issue of which will be decided by the Board of Directors by virtue of this dele-gation of authority. The Board of Directors will have the option of conferring on shareholders the right to subscribe as of right to a number of securities as excess shares higher than the number of securities to which they are en-titled as of right, in proportion to their subscription rights and, in any event, may not exceed the number of shares for which they have applied.
If the subscriptions as of right and, if relevant, subscriptions for excess shares have not taken up all the equity securities and/or securities issued, the Board of Directors may, in the order that it determines, restrict, in accor-dance with the law, the issue to the number of subscriptions re-ceived, on condition that this number corresponds at least to three-quarters of the issue that will have been decided, or freely divide all or part of the un-subscribed securities among the persons that it chooses, or offer them in the same manner to the public.
The Board of Directors may use all or some of the options men-tioned above;
6. also specifies that Board of Di-rectors, which may in its turn delegate this authority in accor-dance with legislative and regu-latory conditions, may:
i. decide and determine the characteristics of the issues of shares and securities to be issued and, in particular, their issue price (with or wi-thout issue premiums), the subscription procedure and the dividend payment date,
ii. in case of issue of stock warrants, define their num-ber and characteristics and decide, if it deems necessa-
ry, under the conditions and according to the procedure that it will define, that the warrants may be redeemed or repurchased, or allocated free of charge to sharehol-ders in proportion to their right in share capital,
iii. more generally, define the characteristics of all transfe-rable securities and, in par-ticular, the terms and proce-dures of allocation of shares, the duration of loans that may be granted in the form of bonds, whether or not they are subordinated, the issue currency, the terms of repay-ment of the principal, with or without premiums, the amor-tisation terms and conditions and, if applicable, the terms and conditions of purchase, exchange and early redemp-tion, fixed or floating interest rates and the date of pay-ment. The remuneration could include a variable portion cal-culated in reference to items related to the Company’s ac-tivity and results, and a de-ferred payment if there is no distributable profit,
iv. decide to use the shares ac-quired for a share buyback programme authorised by the shareholders to allocate them consequent to the issue of securities based on this delegation,
v. take all the measures aimed at protecting the rights of bearers of transferable secu-rities issued or other rights that give access to the Com-pany’s equity as required by legislative and regulato-ry provisions and applicable contractual clauses,
vi. suspend any exercise of rights attached to these transfe-rable securities during a pe-riod fixed in compliance with legislative and regulatory provisions and the applicable contractual clauses,
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vii. note the capital increases and issues of transferable se-curities, amend the Articles of Association accordingly, charge the issue expenses to the issue premiums and, if it deems it necessary, deduct the sums necessary to bring the legal reserve to one tenth of the new share capital from the amount of the capital in-creases,
viii. take all measures and carry out all formalities required for the admission of the se-curities for trading on a re-gulated market;
7. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period;
8. decides that this authorisation, which supersedes the autho-risation granted by the twelfth resolution of the Shareholders’ Meeting of June 22, 2018, be granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
FOURTHEENTH RESOLUTION
Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and /or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued, in connection with public offers
The Shareholders’ Meeting, deli-berating according to the quorum and majority required for Extraor-dinary Shareholders’ Meetings, ha-ving reviewed the Board of Direc-tors’ report and the special report of the Statutory Auditors and in
accordance with the provisions of the French Commercial Code and in particular Articles L.225-129 et seq., L.225-135, L.225-136, L.225-148 and L.228-92 of said code:
1. delegates to the Board of Direc-tors, which in turn may delegate in accordance with legislative and regulatory conditions, the authority to decide to carry out, through a public offer, in one or more instances, in the propor-tions that it shall deem relevant, both in France and abroad, in euros, foreign currency or units of account fixed in reference to several currencies, the issue, without preferential subscrip-tion rights, of the Company’s shares and/or equity securi-ties which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transfe-rable securities giving access to equity securities to be issued, which may be subscribed to in cash or by offsetting due and payable debts. These securities could, in particular, be issued as remuneration for securities that would be contributed to the Company as part of an exchange offer carried out in France or abroad according to local rules (for example, as part of a re-verse merger) on securities that meet the conditions set out in Article L.225-148 of the French Commercial Code;
2. decides:
• that the total nominal amount of capital increases liable to be carried out immediately and/or in the future by virtue of this delegation may not exceed a maximum amount of five million seven hundred fifty thousand euros (€5,750,000) , or the equivalent in any other currency or monetary unit established in reference to several currencies, with the understanding (i) that the nominal amount of the capital increases carried out by virtue of this resolution as well as the fif-teenth, sixteenth and eighteenth
resolutions submitted to this Shareholders’ Meeting shall be deducted from this cap and (ii) that the nominal amount of all capital increases carried out by virtue of this delegation will be charged against the total no-minal cap provided for capi-tal increases in paragraph 2 of the thirteenth resolution of this Shareholders’ Meeting,
• these caps shall be increased, where applicable, by the par value of the shares to be issued in order to preserve, in com-pliance with legislative and re-gulatory provisions and, where applicable, contractual stipu-lations, the rights of bearers of transferable securities or other rights entitling their bearers to access the Company’s capital;
3. decides to eliminate the pre-ferential subscription right of shareholders to shares and other transferable securities to be issued by virtue of this reso-lution;
4. decides that concerning the issues carried out under this delegation, the Board of Di-rectors may create a priority subscription period reserved for shareholders, to subscribe to shares as of right or for excess shares, that does not entitle them to the creation of nego-tiable rights, and consequently delegates to the Board of Direc-tors, which may in turn delegate this authority in accordance with legislative and regulatory provisions, the option of deter-mining this period and defining its terms and conditions, in ac-cordance with the provisions of Article L.225-135 paragraph 5 of the French Commercial Code;
5. decides that the transferable securities giving access to equity securities to be issued by the Company that are issued may consist of debt securities or be associated with the issue of such securities, or enable their issue, as intermediate se-
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curities. The total maximum no-minal amount of debt securities that may be issued immediately or in the future on the basis of this delegation may not ex-ceed one hundred million euros (€100,000,000), or its equiva-lent in foreign currency or unit of account fixed in reference to several currencies, with the understanding that this amount will be charged to the total no-minal cap for debt security is-sues provided in paragraph 3 of the thirteenth resolution;
6. notes that this delegation entails the waiving by shareholders of their preferential subscription rights to the equity securities of the Company to which the secu-rities issued under this delega-tion could entitle them;
7. decides that if the subscriptions have not taken up all the equity securities and/or transferable securities issued, the Board of Directors may, in the order that it determines, restrict the issue to the number of subscriptions received, on condition that this number corresponds at least to three-quarters of the issue that will have been decided, or freely divide all or part of the unsubscri-bed securities among the persons that it chooses, or offer them in the same manner to the public.
The Board of Directors may use all or some of the options men-tioned above;
8. also specifies that Board of Di-rectors, which may in its turn delegate this authority in accor-dance with legislative and regu-latory conditions, may:
i. decide and determine the characteristics of the is-sues of shares and transfe-rable securities to be issued and, in particular, their issue price (with or without issue premiums), the subscription procedure and the dividend payment date,
ii. in case of issue of stock warrants, define their num-ber and characteristics and decide, if it deems necessa-ry, under the conditions and according to the procedure that it will define, that the warrants may be redeemed or repurchased, or allocated free of charge to sharehol-ders in proportion to their right in share capital,
iii. more generally, define the characteristics of all transfe-rable securities and, in par-ticular, the terms and proce-dures of allocation of shares, the duration of loans that may be granted in the form of bonds, whether or not they are subordinated, the issue currency, the terms of repayment of the principal, with or without premiums, the amortisation terms and conditions and, if applicable, the terms and conditions of purchase, exchange and early redemption, fixed or floating interest rates and the date of payment. The remuneration could include a variable por-tion calculated in reference to items related to the Com-pany’s activity and results, and a deferred payment if there is no distributable pro-fit,
iv. set the issue price of the shares or transferable secu-rities that can be created by virtue of the previous para-graphs such that the Com-pany receives for each share created or allocated inde-pendently of all compensa-tion of any form whatsoever, interest, issue or redemption premiums in particular, a sum at least equal to the minimum price provided by the legisla-tive and regulatory provisions that apply on the day of issue (i.e., to date, the weighted average of the Company’s share price for the last three trading sessions on the Eu-ronext Paris regulated market
preceding the setting of the issue price, less a maximum discount of 5% if applicable),
v. take all the measures aimed at protecting the rights of bearers of securities issued or other rights that give ac-cess to the Company’s equity as required by legislative and regulatory provisions and ap-plicable contractual clauses,
vi. suspend any exercise of rights attached to these transferable securities during a period fixed in compliance with legislative and regulato-ry provisions and the appli-cable contractual clauses,
vii. note the capital increases and issues of transferable se-curities, amend the Articles of Association accordingly, charge the issue expenses to the issue premiums and, if it deems it necessary, deduct the sums necessary to bring the legal reserve to one tenth of the new share capital from the amount of the capital in-creases,
viii.take all measures and carry out all formalities required for the admission of the se-curities for trading on a re-gulated market;
9. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period;
10. decides that this authorisation is granted for a period of twenty-six (26) months as from this Sharehol-ders’ Meeting.
FIFTEENTH RESOLUTION
Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities
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which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued, through the private placements specified in Article L.411-2 II of the French Monetary and Financial Code
The Shareholders’ Meeting, delibe-rating according to the quorum and majority required for Extraordinary Shareholders’ Meetings, having re-viewed the Board of Directors’ report and the special report of the Statutory Auditors and in accordance with the provisions of the French Commercial Code and in particular Articles L.225-129 et seq., L.225-135, L.225-136 and L.228-92 of said code:
1. delegates to the Board of Direc-tors, which in turn may delegate in accordance with legislative and regulatory conditions, the authority to decide to carry out, under the offers mentioned in II of Article L.411-2 of the French Monetary and Financial Code, under the conditions and maxi-mum limits provided by the law and regulations, in one or more instances, in the proportions and at the times that it shall deem relevant, both in France and abroad, in euros, foreign curren-cy or units of account fixed in reference to several currencies, the issue, without preferential subscription rights, of the Com-pany’s shares and/or equity se-curities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or trans-ferable securities giving access to equity securities to be is-sued, which may be subscribed to either in cash or by offsetting due and payable debts;
2. decides that the total nominal amount of the capital increases liable to be made immediately and/or in the future under this delegation may not exceed a maximum amount of two mil-lion eight hundred eighty thou-sand euros (€2,880,000) , or the
equivalent in any other currency or monetary unit established in reference to several currencies, with the understanding that this amount will be charged to the nominal cap of five million se-ven hundred fifty thousand euros (€5,750,000) provided for capi-tal increases without preferential subscription rights in paragraph 2 of the fourteenth resolution of this Shareholders’ Meeting, as well as (ii) on the total nominal cap provided for capital increases in paragraph 2 of the thirteenth resolution of this Shareholders’ Meeting.
These caps shall be increased, where applicable, by the par va-lue of the shares to be issued in order to preserve, in compliance with legislative and regulatory provisions and, where applicable, contractual stipulations, the rights of bearers of transferable securities or other rights entitling their bearers to access the Com-pany’s capital;
3. decides to eliminate the pre-ferential subscription right of shareholders to shares and other transferable securities to be is-sued by virtue of this resolution;
4. decides that the transferable se-curities giving access to equity securities to be issued by the Company that are issued may consist of debt securities or be associated with the issue of such securities, or enable their issue, as intermediate securities.
The total maximum nominal amount of debt securities that may be issued immediately or in the future on the basis of this delegation may not ex-ceed one hundred million euros (€100,000,000) or its equivalent in foreign currency or unit of ac-count fixed in reference to seve-ral currencies, with the unders-tanding that this amount will be charged to the total nominal cap for debt security issues provided in paragraph 3 of the thirteenth resolution;
5. notes that this delegation en-tails the waiving by shareholders of their preferential subscription rights to the equity securities of the Company to which the transferable securities issued un-der this delegation could entitle them;
6. decides that if the subscriptions have not taken up all the equity securities and/or transferable securities issued, the Board of Directors may, in the order that it determines, restrict the issue, in accordance with the law, to the number of subscriptions re-ceived, on condition that this number corresponds at least to three-quarters of the issue that will have been decided, or freely divide all or part of the un-subscribed securities among the persons that it chooses, or offer them in the same manner to the public. The Board of Directors may use all or some of the op-tions mentioned above;
7. also specifies that the Board of Directors, which may in its turn delegate this authority in accor-dance with legislative and regu-latory conditions, may:
i. decide and determine the characteristics of the issues of shares and transferable se-curities to be issued and, in particular, their issue price (with or without issue pre-miums), the subscription procedure and the dividend payment date,
ii. in case of issue of stock war-rants, define their number and characteristics and decide, if it deems necessary, under the conditions and according to the procedure that it will de-fine, that the warrants may be redeemed or repurchased,
iii. more generally, define the characteristics of all transfe-rable securities and, in par-ticular, the terms and proce-dures of allocation of shares, the duration of loans that
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may be granted in the form of bonds, whether or not they are subordinated, the issue currency, the terms of repay-ment of the principal, with or without premiums, the amor-tisation terms and conditions and, if applicable, the terms and conditions of purchase, exchange and early redemp-tion, fixed or floating interest rates and the date of pay-ment. The remuneration could include a variable portion cal-culated in reference to items related to the Company’s ac-tivity and results, and a de-ferred payment if there is no distributable profit,
iv. set the issue price of the shares or transferable securi-ties that can be created by vir-tue of the previous paragraphs such that the Company re-ceives for each share created or allocated independently of all compensation of any form whatsoever, interest, issue or redemption premiums in par-ticular, a sum at least equal to the minimum price provided by the legislative and regula-tory provisions that apply on the day of issue (i.e., to date, the weighted average of the Company’s share price during the last three trading sessions on the Euronext Paris regu-lated market preceding the setting of the issue price, less a maximum discount of 5% if applicable),
v. decide to use the shares ac-quired for a share buyback programme authorised by the shareholders to allocate them consequent to the issue of transferable securities based on this delegation,
vi. take all the measures aimed at protecting the rights of bea-rers of transferable securities issued as required by legisla-tive and regulatory provisions and applicable contractual clauses,
vii. suspend any exercise of rights attached to these transfe-rable securities during a pe-riod fixed in compliance with legislative, regulatory and contractual provisions,
viii.note the capital increases and issues of transferable se-curities, amend the Articles of Association accordingly, charge the issue expenses to the issue premiums and, if it deems it necessary, deduct the sums necessary to bring the legal reserve to one tenth of the new share capital from the amount of the capital in-creases,
ix. take all measures and carry out all formalities required for the admission of the securi-ties for trading on a regulated market;
8. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Com-pany’s shares, and until the end of the offer period;
9. decides that this authorisation be granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
SIXTEENTH RESOLUTION
Authorisation given to the Board of Directors in the event of issue without preferential subscription rights, through public offers or private placements per Article L.411-2 II of the French Monetary and Financial Code, for the purpose of setting the issue price according to the terms established by the Shareholders’ Meeting, within the limit of 10% of the capital per year
The Shareholders’ Meeting, delibe-rating according to the quorum and majority required for Extraordinary Shareholders’ Meetings, having re-viewed the Board of Directors’ re-port and the special report of the
Statutory Auditors and in accor-dance with the provisions of the French Commercial Code and in particular Article L.225-136:
1. authorises the Board of Directors, which may in turn delegate this authority in accordance with legis-lative and regulatory conditions, in the event of the issue of shares and/or any other transferable se-curities giving immediate or future access to equity, without prefe-rential subscription rights, through public offers or private placements mentioned in Article L.411-2-II of the French Monetary and Finan-cial Code, under the conditions in particular the amount, set out in the fourteenth and fifteenth reso-lutions, to override the conditions for setting prices provided in the above-mentioned resolutions and to determine the issue price in ac-cordance with the following condi-tions:
i. the share issue price will be at least equal, as the Board of Directors may choose, (i) to the weighted average price of the Company’s share on the Euronext Paris regulated mar-ket the day before the date the issue price is set, less a maximum discount of 10% if necessary, or (ii) the weighted average of the Company’s share price on the Euronext Paris regulated market over a maximum period of six mon-ths prior to the date the issue price is set, less a maximum discount of 10% if necessary,
ii. the issue price of transferable securities giving access to equity should be such that the sum received immediately by the Company plus, if ap-plicable, the sum likely to be received later on by the Com-pany is, for each Company share issued as a result of the issue of these transferable se-curities, at least equal to the amount cited above;
2. decides that the total nominal amount of the capital increases
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likely to be made under this re-solution may not exceed a maxi-mum amount of 10% of share capital per 12-month period (said share capital is assessed on the day the issue price is set), with the understanding that this amount will be charged (i) to the nominal cap of five million se-ven hundred fifty thousand euros (€5,750,000) provided for capi-tal increases without preferential subscription rights in paragraph 2 of the fourteenth resolution of this Shareholders’ Meeting, as well as (ii) on the total nominal cap provided for capital increases in paragraph 2 of the thirteenth resolution of this Shareholders’ Meeting.
These caps shall be increased, where applicable, by the par va-lue of the shares to be issued in order to preserve, in compliance with legislative and regulatory provisions and, where applicable, contractual stipulations, the rights of bearers of transferable securities or other rights entitling their bearers to access the Com-pany’s capital;
3. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Com-pany’s shares, and until the end of the offer period;
4. decides that this authorisation is granted to the Board of Directors for a period of twenty-six (26) months as from this Sharehol-ders’ Meeting.
SEVENTEENTH RESOLUTION
Authorisation given to the Board of Directors to increase the amount of issues with or without preferential subscription rights
The Shareholders’ Meeting, delibe-rating under the conditions required for Extraordinary Shareholders’ Mee-tings, having reviewed the special report of the Statutory Auditors and
the report of the Board of Directors and subject to the adoption of the thirteenth, fourteenth and fifteen-th resolutions of this Shareholders’ Meeting, in accordance with the pro-visions of Article L.225-135-1 of the French Commercial Code:
1. authorises the Board of Direc-tors, which may in turn delegate this authority in accordance with legislative and regula-tory conditions, to decide to increase the number of secu-rities to be issued for each is-sue, with or without preferential subscription rights, decided under the thirteenth, fourteenth and fifteenth resolutions of this Shareholders’ Meeting, under the conditions provided by the legislative and regulatory provi-sions applicable on the day of the issue (i.e., to date, within thirty days as from the closing of the subscription, within the limit of 15% of each issue and at the same price as the one chosen for the initial issue).
2. decides that the total nominal amount of the capital increases likely to be carried out by virtue of this twentieth resolution will be factored into the resolution by virtue of which the issue is de-cided and into the total nominal cap provided for capital increases in paragraph 2 of the thirteen-th resolution of this Sharehol-ders’ Meeting. This cap shall be increased, where applicable, by the par value of the shares to be issued in order to preserve, in compliance with legislative and regulatory provisions and, where applicable, contractual stipu-lations, the rights of bearers of transferable securities or other rights entitling their bearers to access the Company’s capital;
3. decides that the transferable se-curities giving access to equity securities to be issued by the Company that are issued may consist of debt securities or be associated with the issue of such securities, or enable their issue, as intermediate securities.
The total maximum nominal amount of debt securities that may be issued immediately or in the future on the basis of this delegation may not ex-ceed one hundred million euros (€100,000,000), or its equivalent in foreign currency or unit of ac-count fixed in reference to seve-ral currencies, with the unders-tanding that this amount will be charged to the total nominal cap for debt security issues provided in paragraph 3 of the thirteenth resolution;
4. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this delegation of authority once a third party has filed a public offer for the Com-pany’s shares, and until the end of the offer period;
5. decides that this authorisation is granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
EIGHTEENTH RESOLUTION
Delegation of authority to the Board of Directors to increase the share capital by issuing shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued as compensation for contributions in kind
The Shareholders’ Meeting, delibe-rating according to the quorum and majority required for Extraordinary Shareholders’ Meetings, having re-viewed the Board of Directors’ report and the special report of the Sta-tutory Auditors and in accordance with the provisions of the French Commercial Code and in particular Articles L.225-129 et seq., L.225-147 and L.228-92 of said code:
1. delegates to the Board of Direc-tors, which in turn may delegate in accordance with legislative and regulatory conditions, the
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authority to decide to carry out, on the basis of the report of the Statutory Auditor(s), in one or more instances, in the propor-tions and at the times that it shall deem relevant, both in France and abroad, in euros, foreign currency or units of account fixed in reference to several curren-cies, the issue of the Company’s shares and/or equity securities which confer entitlement to other equity securities and/ or entit-lement to the allocation of debt securities and/or transferable se-curities giving access to equity securities to be issued, in view of compensation for contributions in kind granted to the Company and composed of equity securi-ties or transferable securities that give access to equity, when the provisions of Article L.225-148 of the French Commercial Code are not applicable;
2. decides that the total nominal amount of the capital increases likely carried out by virtue of this delegation may not exceed 10% of the share capital (assessed on the day the Board of Directors de-cides on the issue), with the un-derstanding that this amount will be charged (i) to the nominal cap of five million seven hundred fifty thousand euros (€5,750,000) pro-vided for capital increases without preferential subscription rights in paragraph 2 of the fourteenth resolution of this Shareholders’ Meeting, as well as (ii) on the to-tal nominal cap provided for ca-pital increases in paragraph 2 of the thirteenth resolution of this Shareholders’ Meeting.
These caps shall be increased, where applicable, by the par va-lue of the shares to be issued in order to preserve, in compliance with legislative and regulatory provisions and, where applicable, contractual stipulations, the rights of bearers of transferable securities or other rights entitling their bearers to access the Com-pany’s capital;
3. decides that the transferable se-curities giving access to equity securities to be issued by the Company that are issued may consist of debt securities or be associated with the issue of such securities, or enable their issue, as intermediate securities.
The total maximum nominal amount of debt securities that may be issued immediately or in the future on the basis of this delegation may not ex-ceed one hundred million euros (€100,000,000), or its equivalent in foreign currency or monetary units established in reference to seve-ral currencies, with the unders-tanding that this amount will be charged to the total nominal cap for debt security issues provided in paragraph 3 of the thirteenth resolution;
4. decides to waive, in favour of holders of securities or transfe-rable securities, contributed in kind, the pre-emptive rights of shareholders to shares and other transferable securities that will be issued by virtue of this resolution;
5. notes that this delegation en-tails the waiving by shareholders of their preferential subscription rights to the equity securities of the Company to which the transferable securities issued un-der this delegation could entitle them;
6. also specifies that the Board of Directors, which may in its turn delegate this authority in accor-dance with legislative and regu-latory conditions, may:
i. decide, on the basis of the report of the Statutory Au-ditor(s), on the valuation of contributions and the gran-ting of any special benefits,
ii. determine the characteris-tics of the issues of shares and transferable securities to be issued and, in particu-
lar, their issue price (with or without issue premiums), the subscription procedure and the dividend payment date,
iii. at its sole initiative, charge the costs of the increase(s) in share capital to the premiums relating to these contribu-tions, and deduct from this amount the sums needed to bring the legal reserve to one tenth of the new capital after each increase,
iv. take all the measures aimed at protecting the rights of bea-rers of transferable securities issued or other rights that give access to the Company’s equity as required by legisla-tive and regulatory provisions and applicable contractual clauses,
v. note the execution of all issues of shares and transferable se-curities, make the necessary amendments to the Articles of Association after all capi-tal increases, charge the issue expenses to the premium if it wishes and also bring the le-gal reserve to one tenth of the new share capital and carry out all formalities and decla-rations and request all autho-risations that would turn out to be necessary for making these contributions,
vi. take all measures and carry out all formalities required for the admission of the securi-ties for trading on a regulated market;
7. decides that unless it has the prior authorisation of the Shareholders’ Meeting, the Board of Directors may not use this de-legation of authority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period;
8. decides that this authorisation is granted for a period of twenty-
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six (26) months as from this Shareholders’ Meeting.
NINETEENTH RESOLUTION
Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares of the Company reserved for members of a company savings plan
The Shareholders’ Meeting, delibe-rating according to the quorum and majority required for Extraordinary Shareholders’ Meetings, after having reviewed the Board of Directors’ re-port and the Statutory Auditors’ spe-cial report and in accordance with the provisions of Articles L.225-129-2, L.225-129-6, L.225-138 and L.225-138-1 of the French Commercial Code and those of Articles L.3332-18 et seq. of the French Labour Code:
1. delegates, with the option to fur-ther delegate in accordance with legal and regulatory provisions, its authority to issue, in one or more instances, at its sole dis-cretion, in the proportions and at the times determined by it, both in France and abroad, new shares reserved for employees and for-mer employees and eligible cor-porate officers of the Company and/or companies related to the Company within the meaning of Article L.225-180 of the French Commercial Code and Article L.3344-1 of the French Labour Code, who are members of a company saving plan;
2. cancels, for the benefit of the said members, the preferential subscription right of shareholders to any shares that may be issued by virtue of this authorisation and waives any rights to any bo-nus shares that may be allocated based on this resolution;
3. decides that the nominal amount of the capital increase likely to be carried out pursuant to this de-legation may not exceed eight hundred sixty thousand euros
(€860,000) or the equivalent in any other currency or monetary unit established by reference to several currencies, on the unders-tanding that the nominal amount of any capital increase carried out in application of this dele-gation shall be charged against the total nominal cap provided for capital increases in paragraph 2 of the thirteenth resolution of this Shareholders’ Meeting. This cap shall be increased, where applicable, by the par value of the shares to be issued in order to preserve, in compliance with legislative and regulatory pro-visions and, where applicable, contractual stipulations, the rights of bearers of securities or other rights entitling their bearers to access the Company’s capital;
4. decides that the price of the shares issued in application of this delegation shall be deter-mined under the conditions spe-cified in Article L.3332-19 of the French Labour Code, on the un-derstanding that the maximum discount calculated in relation to the average of the share’s traded prices during the last 20 trading sessions preceding the decision setting the opening date of the subscription may not exceed 20%.
However, where this delegation is implemented, the Board of Di-rectors may reduce the amount of the discount on a case-by-case basis due to tax, corporate or accounting restrictions appli-cable in a given country where the Group entities participating in the capital increases are esta-blished.
The Board of Directors may likewise decide to allocate bo-nus shares to subscribers of new shares, in substitution of the discount and/or as an employer matching contribution;
5. decides that the Board of Direc-tors shall have all powers, which
it may delegate in its turn in ac-cordance with legal and regulato-ry conditions, to implement this delegation, within the limits and under the conditions specified above, in particular, in order to:
i. compile the list of compa-nies including employees, former employees and eli-gible corporate oTcers who may benefit from the issuance, set the condi-tions to be fulfilled by the beneficiaries, in order to subscribe, directly or via a mutual investment fund, to the shares issued based on this delegation of authority,
ii. set the amounts of these issues and determine the subscription prices and dates, periods, methods for each issue and the condi-tions for subscription, pay-ment and delivery of the shares issued by virtue of this delegation of authority, as well as the date, even if retroactive, from which the new shares will be entitled to dividends,
iii. decide, in application of Article L.3332-21 of the French Labour Code, on the allocation, free of charge, of shares to be issued or already issued, as an em-ployer matching contribu-tion and/or, as applicable, for the discount, provided that the recognition of their equivalent pecuniary value, valued at the subscription price, does not result in ex-ceeding the limits specified in Article L.3332-11 of the French Labour Code,
iv. set the period granted to subscribers for full pay-ment of their securities,
v. duly note, or have another party note the completion of the capital increase in
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the amount of the shares to be effectively subscribed,
vi. at its sole initiative, allo-cate the costs of the in-crease(s) in share capital to the premiums relating to these increases, and de-duct from this amount the sums needed to bring the legal reserve to one tenth of the new capital after each increase,
vii. generally, take any and all measures and perform any and all formalities that are useful for issuing and lis-
ting the shares, and fol-lowing the capital increases and related amendments of the Articles of Association pursuant to this delegation;
6. decides that unless it has the prior authorisation of the Sharehol-ders’ Meeting, the Board of Di-rectors may not use this dele-gation of authority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period;
7. decides that this delegation, which supersedes the authorisa-tion granted by the twenty-se-
cond resolution of the Sharehol-ders’ Meeting of 23 June 2017, is granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
TWENTYTH RESOLUTION
Powers conferred
The Shareholders’ Meeting confers full powers on the bearer of an origi-nal, a copy or an extract of these mi-nutes in order to carry out any filing, publication, and other formalities re-quired by the law.
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9.3 REPORT OF THE BOARD OF DIRECTORS TO THE COMBINED
SHAREHOLDERS’ MEETING OF MAY 24, 2019
Dear Shareholders,
We have called a Combined Shareholders’ Meeting to deliberate on the following agenda items:
Ordinary resolutions:
1. Approval of the financial statements for the year ending December 31, 2018
2. Approval of the consolidated finan-cial statements for the year ending December 31, 2018
3. Allocation of Directors’ fees
4. Net income appropriation for 2018
5. Approval of the agreements refer-red to in sections L. 225-38 et seq. of the French Commercial Code
6. Ratification of two conventions referred to in Articles L. 225-38 and following of the French Commercial Code not previously authorized by the Board of Direc-tors
7. Authorization given to the Board of Directors to trade the Company’s shares
8. Approval of the remuneration items paid or allocated for the year en-ding December 31, 2018 to Mr Thierry GADOU, Chief Executive Of-ficer
9. Approval of the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the total remune-ration and benefits of all kinds attri-butable to Mr Thierry GADOU, Chief Executive Officer in relation to the 2019 fiscal year
10. Ratification of the cooptation of Mr Linfeng JING as Director, replacing Mr Xingqun JIANG
Extraordinary resolutions:11. Authorization to be given to the
Board of Directors to reduce the company capital by cancellation of treasury shares
12. Delegation of authority to the Board of Directors to increase the share capital by incorpo-rating reserves, profits or pre-miums, or any other sum that can be legally capitalised
13. Delegation of authority to the Board of Directors to increase the share capital by issuing, with preferential subscription rights, shares and/or equity securi-ties which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transfe-rable securities giving access to equity securities to be issued
14. Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscrip-tion rights, shares and/or equity securities which confer entitle-ment to other equity securities and /or entitlement to the allo-cation of debt securities and/or transferable securities giving access to equity securities to be issued, in connection with pu-blic offers
15. Delegation of authority to the Board of Directors to increase the share capital by issuing, wi-thout preferential subscription rights, shares and/or equity se-curities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or trans-ferable securities giving access to equity securities to be issued, through the private placements specified in Article L.411-2 II of the French Monetary and Finan-cial Code
16. Authorisation given to the Board of Directors in the event of issue without preferential subscrip-tion rights, through public offers or private placements per Article L.411-2 II of the French Monetary and Financial Code, for the purpo-se of setting the issue price accor-ding to the terms established by the Shareholders’ Meeting, within the limit of 10% of the capital per year
17. Authorisation given to the Board of Directors to increase the amount of issues with or without preferential subscription rights
18. Delegation of authority to the Board of Directors to increase the share capital by issuing shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities gi-ving access to equity securities to be issued as compensation for contributions in kind
19. Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares of the Company reserved for members of a company sa-vings plan
20.Powers conferred
The purpose of this report is to set out the reasons for the resolutions to be submitted for your approval during the Combined Shareholders’ Meeting.
1 – Approval of the annual and conso-lidated financial statements for the financial year ended December 31, 2018, Allocation of Directors’ fees, Allocation of the Company’s result, and Approval of the agreements re-ferred to in Articles L. 225-38 et seq. of the French commercial code (Re-solutions 1 to 6)
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Resolutions 1 and 2 proposed to you pertain to the approval of the Com-pany’s individual annual financial sta-tements and the consolidated finan-cial statements. Comments on these financial statements appear in the annual financial report made available to you on the Company’s website (http:// www.ses-imagotag.com).
The individual financial statements for the financial year show net inco-me of €-8,926,884.
We propose that you approve these financial statements.
In Resolution 4, the Board of Direc-tors proposes allocating the result for financial year 2018 amounting to €-8,926,884
as follows:
• Result for the financial year €-8,926,884
• Result fully allocated to retained earnings €-8,926,884
• Which, added to prior retained ear-nings, now stands at € 22,681,268
In accordance with the provisions of Article 243 of the French General Tax Code, the Shareholders’ Mee-ting also stipulated that no divi-dends have been distributed since 2012. In 2012, the Company paid out €5,491,011.50 in dividends.
Resolution 5 pertains to “regulated” agreements approved by your Board (Article L. 225-38 of the French com-mercial code). These agreements resulted in the preparation by your Statutory Auditors of the special re-port, which also lists the agreements approved in prior financial years that continued to be performed during fi-nancial year 2018. After hearing this report, you will be asked to approve it as well as the agreements referred to therein.
Resolution 6 pertains to the ratifi-cation of two so-called «regulated» agreements (Article L. 225-38 of the French commercial code) not subject to the procedure for prior authorization by your Board, na-mely a sale of finished products in-voiced on 29 June 2018 to BOE VT (Hong Kong) Co., Ltd, on the one hand, and a technical consulting agreement with Chongqing BOE Smart Electronics System Co., Ltd. concluded on 1 February 2018, on the other hand. These agreements led to the preparation of the special report by your Statutory Auditors. After reviewing this report, you will be asked to ratify and approve the terms of said agreements to pro-tect against their being voided.
In Resolution 3, we propose set-ting the maximum annual overall amount of Directors’ attendance fees for the current financial year to fifty thousand euros (€50,000). In accordance with the provisions of Article L. 225-45 of the French commercial code, this is an ove-rall amount, and it will be up to the Board of Directors to decide on its distribution.
2 – Authorization given to the Board of Directors to trade the Company’s shares (Resolutions 7)
The objective of Resolution 7 is to re-new the authorization of the Board of Directors to buy shares in the Com-pany. The Company must be able to trade in its own shares at any time. We therefore propose that you au-thorize the Board, with the option to sub-delegate under the conditions set out by law, to trade in the Com-pany’s shares on the stock exchange or otherwise in accordance with the terms and conditions set out below.
We hereby propose that you autho-rize the Board of Directors pursuant to this authorization to acquire, on one or more occasions and by any
means, a number of shares repre-senting up to 5% of the number of shares comprising the Company’s share capital at any time.
The transactions carried out by the Board of Directors pursuant to this authorization would be carried out with a view to meeting the following objectives:
• Stimulating the secondary market or share liquidity through an in-vestment services provider, acting independently, as part of a liqui-dity contract compliant with the market practice admitted by the AMF on 2 July 2018.
• Distributing all or some of the ac-quired shares to employees and/or the corporate officers of the Com-pany or other entities of the Group, in particular within the context (i) of employee profit sharing, (ii) any stock option plan of the Com-pany, pursuant to Article L.225-177 et seq. of the French Commercial Code, or (iii) any savings plan in compliance with Article L.3331-1 et seq. of the French Labour Code or (iv) any allocation of bonus shares pursuant to the provisions of Article L.225-197-1 et seq. of the French Commercial Code, as well as per-form all hedging transactions re-lating to these transactions, under the conditions provided for by the market authorities, and at the times to be determined by the Board of Directors or the person acting by delegation thereof.
Remitting shares while exercising the rights attached to securities with conversion, exercise, refund, or ex-change rights, or any other Com-pany share allocation mechanism in accordance with applicable regu-lations, as well as perform all hed-ging transactions relating to these transactions, under the conditions provided by the market authorities and at the times to be determined by
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the Board of Directors or the person acting by delegation of the Board of Directors.
• Canceling purchased shares through capital reduction under the conditions provided for by the French Commercial Code, as long as Resolution 11 of this Sharehol-ders’ Meeting is approved
• Keeping all or some of the acquired shares for later use in exchange or as payment as part of a future ex-ternal growth operation
• Implement any market practice that may be authorised by the French Financial Markets Autho-rity and, more generally, perform all operations in compliance with applicable regulations;
Under this authorization, the Board of Directors would not, unless it has the prior authorisation of the Sharehol-ders’ Meeting, the Board of Directors may not use this delegation of au-thority once a third party has filed a public offer for the Company’s shares, and until the end of the offer period.
The acquisition, disposal, transfer, or exchange of these shares may be undertaken and paid for by any means, particularly as part of a li-quidity contract entered into by the Company with an investment service provider, subject to the regulations in force, including over the counter and by block of shares, through the use of derivatives and the establishment of option-based strategies (purchase and sale of call and put options and all combinations thereof in accordance with the applicable regulations), and at such times as the Board of Direc-tors deems fit.
Under this authorization, the Meeting would decide that the maximum pur-chase price per share shall not exceed €50 per share, excluding expenses.
The acquisitions made by the Company would, under no circumstances, lead it to hold more than 5% of the shares composing its share capital at any time.
The number of shares and the price indicated above would be adjusted
in the event of a change in the no-minal value of the share, increase in share capital by incorporation of reserves, profits or premiums, allocation of free shares, division or consolidation of shares, capital redemption or reduction, distribu-tion of reserves or other assets and any other transactions affecting shareholders’ equity, so as to take account of the impact of such tran-sactions on the value of the share.
This authorization would be given for eighteen months starting on the date of this Meeting. In order to implement this authorization, it will be proposed to confer all powers to the Board of Directors with the option to sub- de-legate under the conditions set out by law, in order, in particular, to:
• Decide how to implement this au-thorization
• Place stock market orders
• Make any declarations and carry out any formalities with respect to the AMF that may relate to the buyback program described above
• Fulfill any other formalities or en-ter into any other agreements to this end and, more generally, do whatever is necessary to imple-ment the buyback program des-cribed above.
This authorization would superse-de the authorization given by the Combined Shareholders’ Meeting of June 22, 2018; this authorization was granted for a period of 18 months.
3 – Compensation of Thierry Gadou in his capacity as Chairman and CEO (Resolutions 8 to 9)
• Approval of the remuneration items paid or allocated for the year ending December 31, 2018 to Mr Thierry GADOU, Chief Executive Officer
In accordance with the new legisla-tive provisions n° 2016-1691 dated December 9, 2016, named “Loi Sapin II”, and according to article L.225-100 of the French Code of Commerce, the compensation po-
licy granted to Mr Thierry GADOU for the 2018 fiscal year is submitted to the approval of the shareholders meeting.
Under the terms of Resolution 8 pro-posed to you, and after reading the Compensation committee recom-mendation, you are asked to ap-prove, in accordance with articles L.225-37-2 and L.225-100 of the Commercial Code, the components of the total compensation and bene-fits of all kinds paid or allocated for the year ending December 31, 2018 to Mr Thierry GADOU, Chief Execu-tive Officer, as presented in section 8.7 of the governance report:
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• Approval of the principles and crite-ria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the total remuneration and benefits of all kinds attributable to Mr Thierry GADOU, Chief Executive Officer in relation to the 2019 fiscal year
In accordance with the new legisla-tive provisions n° 2016-1691 dated December 9, 2016, named “Loi Sapin
II”, and according to article L.225-100 of the French Code of Commerce, the compensation policy granted to Mr Thierry GADOU for the 2019 fiscal year is submitted to the approval of the shareholders meeting.
Under the terms of Resolution 9 proposed to you, and after reading the Compensation committee re-commendation, you are asked to approve, in accordance with the
provisions of articles L. 225-37-2 and R.225-29-1 of the Commercial Code, the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items composing the to-tal remuneration and benefits of all kinds attributable to Mr Thierry GA-DOU, Chief Executive Officer in rela-tion to the 2019 fiscal year, by virtue of his mandate, as presented in sec-tion 8.7 of the governance report:
Shareholders’ meeting
€ 2018 2017
Fixed Compensation 320,000 320,000
Annual variable compensation (cap amount) 160,000 160,000
Variable compensation cashed out on the current year regarding previous year 50,000 142,000
% annual variable compensation 31% 95%
Variable compensation booked for current fiscal year (to be cashed out the following year) 111,600 50,000
% annual variable compensation 69% 31%
Exceptional bonus booked for current fiscal year (to be cashed out the following year) 30,000 50,000
Exceptionnal bonus cashed out on the current year regarding previous year 50,000 0
Director attendance fees NA NA
Benefits in kind -5,028* 34,783
* Benefits in kind appear negative due to adjustement over the past two years, booked for in 2018
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Components of compensation Amount subject to vote explanation
Fixed compensation 320,000 €
Annual variable compensation200,000 maximum
Variable part split in two parts one qualitative (25%) and one quantitative (75%)
Deferred variable compensation NA No deferred variable compensation is provided for
Multi year variable compensation NA No multi-year variable compensation is provided for
Exceptional bonus -
On proposal of the Compensation Committee on February 28th 2019, the Board decided to allow the possibility of paying to the Chairman, as appropriate, an exceptional bonus relating to the company's creation of value
Bonus shares -
Directors attendance fees - No attendance fees
Benefits of any kind (value) no changeCompany car and unemployement insurance for Directors
Severance pay in the event of cessation of duties of CEO following a change in control
In accordance with the procedure relating to regulated agreements, the shareholders approved the severance pay on march 1st 2012 for a period of 5 years - the renewal of this arrangement was authorized by the Board on March 10, 2017.
Non compete agreementIn accordance with the procedure relating to regulated agreements, the shareholders approved the severance pay on march 1st 2012.
Supplementary pension systemNo supplementary pension system has been subscribed.
4 - Ratification of the cooptation of Mr Linfeng JING as Director, re-placing Mr Xingqun JIANG (Reso-lution 10)
Under the terms of Resolution 10, it is proposed to the General Mee-ting to ratify the co-optation by the Board of Directors at its Meeting of September 17, 2018 of Mr Linfeng JING as a director, replacing repla-cing Mr Xingqun JIANG, the latter having resigned, for the remainder of his term of office, i.e. until the Ordinary General Meeting called to approve the financial statements for the year ending 31 December 2020 and to be held in 2021.
Extraordinary resolutions
Under the terms of resolutions 12 to 19, several delegations of authori-
ties to the Board are submitted to the Shareholders meeting so that the Board proceeds, whenever ne-cessary, to capital increases, and/ or and/or equity securities issues which confer entitlement to to equity securities to be issued. Please note the Board could not use those dele-gations (except previous authoriza-tion from the Shareholders meeting) during a public offer period.
5 – Authorization to be given to the Board of Directors to reduce the company capital by cancellation of treasury shares in accordance with the provisions of Article L. 225-209 of the French commercial code (Re-solution 11)
The purpose of Resolution 11 is to authorize the Board of Directors, to potentially reduce the share capital,
by cancelling treasury shares within the limit of 10% of the existing share capital on the date of the cancella-tion per 24 month period and to al-locate the difference to the available premiums and reserves that it may choose.
This authorization would be given for twenty-six months starting on the date of this Meeting and would supersede the authorization given by the Combined Shareholders’ Meeting of June 22, 2018.
6 - Delegation of authority to the Board of Directors to increase the share capital (Resolutions 12 to 19)
For resolutions 12 to 19 the Board of Directors proposes that the shareholders’ meeting adopt the financial authorizations usually
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adopted by listed companies and to renew the financial authorizations granted by the shareholders’ meeting in 2017 and 2018.
The Board of Directors would then
have the ability to implement qui-ckly and smoothly the adequate fi-nancial tools dedicated to support the Company’s growth strategy, according to opportunities on the financial market and according to
the Company’s and the Company’s shareholders interests.
The following table is a synthetic re-port of the submitted financial au-thorizations:
Shareholders’ meeting
Resolution Financial authorization MAXIMUM NOMINAL AMOUNT duration
12
Delegation of authority to the Board of Direc-tors to increase the share capital by incorpo-rating reserves, profits or premiums, or any other sum that can be legally capitalised
€3,000,000 (about 10% of the capital as of the date of this report)
26 months
13
Delegation of authority to the Board of Directors to increase the share capital by issuing, with preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued
For capital increases: €14,400,000 (about 50% of the capital as of as of the date of this report)
For debt securities: €100,000,000
26 months
14
Delegation of authority to the Board of Direc-tors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and /or entitlement to the allocation of debt se-curities and/or transferable securities giving access to equity securities to be issued, in connection with public offers
For capital increases: €5,750,0001
(about 20% of the capital as of the date of this report)
For Debt securities: €100,000,0002
26 months
15
Delegation of authority to the Board of Direc-tors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued, through the private placements specified in Article L.411-2 II of the French Monetary and Financial Code
For capital increases: €2,880,0001-3 (about 10% of the capital as of the date of this report)
For debt securities: €100,000,0002
26 months
16
Authorisation given to the Board of Directors in the event of issue without preferential subscription rights, through public offers or private placements per Article L.411-2 II of the French Monetary and Financial Code, for the purpose of setting the issue price according to the terms established by the Shareholders’ Meeting, within the limit of 10% of the capital per year
For capital increases: 10% of the capital over a 12 months period1-3 26 months
17Authorisation given to the Board of Directors to increase the amount of issues with or without preferential subscription rights
For capital increases: €14,400,0001 (about 50% of the capital as of as of the date of this report)
For debt securities: €100,000,0002
26 months
18
Delegation of authority to the Board of Direc-tors to increase the share capital by issuing shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt se-curities and/or transferable securities giving access to equity securities to be issued as compensation for contributions in kind
For capital increases: 10% of the capital 1-3
For debt securities: €100,000,000226 months
19
Delegation of authority to the Board of Direc-tors to increase the share capital by issuing, without preferential subscription rights, shares of the Company reserved for members of a company savings plan
€ 860,000 (about 3% of the capital as of the date of this report) 1 26 months
1 Delegation charged against the € 14,000,000 total nominal cap provided for capital increases2 Delegation charged against the amount of debt securities €100,000,000 total nominal cap3 Delegation charged against the nominal cap of €5,750,000 provided for capital increases without preferential subscription rights
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7 - delegation of authority to the Board of directors to increase the share capital by incorporating re-serves profits or premium (Resolu-tion 12)
Under the terms of Resolution 12 we propose, to delegate to the Board to increase the Company’s share capi-tal by capitalisation of reserves, pro-fits or issue, merger or contribution premiums, or any other sum that can be possible, up to a € 3,000,000 limit, that independent cap being separate from caps set out in other resolutions below; and to carry out this capital increase through alloca-tion of new bonus shares or by rai-sing the nominal amount of existing shares or the combination of these two methods according to proce-dures defined by the Board of Di-rectors.
This authorization would be granted for 26 months as from this Sharehol-ders’ Meeting.
8 - Delegation of authority to the Board of Directors to increase the share capital by issuing, with pre-ferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued (Resolution 13)
Under the terms of Resolution 13 we propose to delegate to the Board of Directors, the authority to decide to carry out the issue, with prefe-rential subscription rights, of the Company’s shares and/or equity securities which confer entitlement to other equity securities and/or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be issued, up to a € 14,400,000 limit, with the unders-tanding that the nominal amount of the capital increases carried out by virtue of this resolution as well as the fourteenth to twentieth resolu-tions submitted to this Shareholders’ Meeting shall be deducted from this cap. This cap shall be increased,
where applicable, by the par value of the shares to be issued in order to preserve, in compliance with le-gislative and regulatory provisions and, where applicable, contractual stipulations, the rights of bearers of securities or other rights entitling their bearers to access the Com-pany’s capital;
The transferable securities giving access to equity securities to be issued by the Company that are is-sued may consist of debt securities or be associated with the issue of such securities, or enable their is-sue, as intermediate securities. The total maximum nominal amount of debt securities that may be issued on the basis of this delegation may not exceed one hundred million eu-ros (€100,000,000); Shareholders may exercise, under the conditions provided by law, their preferen-tial subscription right as of right to equity securities and/or securities the issue of which will be decided by the Board of Directors by virtue of this delegation of authority, and, if necessary, for excess shares if the Board of Directors provides for this.
This authorisation would superse-de the authorisation granted by the twelfth resolution of the Sharehol-ders’ Meeting of June 22, 2018 and would be granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
9 - Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares and/or equity securities which confer entitlement to other equity securities and /or entitle-ment to the allocation of debt secu-rities and/or transferable securities giving access to equity securities to be issued (Resolutions 14, 15, 16)
Under the terms of Resolutions 14, 15 and 16 we propose to delegate to the Board of Directors the autho-rity to decide to carry out, the issue, without preferential subscription rights, of the Company’s shares and/or equity securities which confer en-titlement to other equity securities
and/or entitlement to the allocation of debt securities and/or transfe-rable securities giving access to equity securities to be issued, which may be subscribed to in cash or by offsetting due and payable debts.
In compliance with AMF (Autorité des Marchés Financiers) recommen-dation, those issues are described in two separate resolutions, whether they are performed through a public offer (Resolution 14) or through pri-vate placements specified in Article L.411-2 II of the French Monetary and Financial Code (resolution 15).
Indeed, depending on market condi-tions, the type of investor at which the issue is targeted (institutional, retail, French or international) and the type of securities issued, and in order to be able to seize market opportunities, it may be preferable or even neces-sary to perform issues without prefe-rential subscription rights, with caps and limits which would be lower than issues with preferential subscription rights.
The total nominal amount of capi-tal increases to be carried out un-der resolution 14 may not exceed a maximum amount of five million seven hundred fifty thousand eu-ros (€5,750,000), with the unders-tanding (i) that the nominal amount of the capital increases carried out by virtue of this resolution as well as the fifteenth, sixteenth and eighteenth resolutions submitted to this Shareholders’ Meeting shall be deducted from this cap and (ii) that the nominal amount of all capital in-creases carried out by virtue of this delegation will be charged against the total nominal cap of fourteen million four hundred thousand eu-ros provided for capital increases of the thirteenth resolution of this Shareholders’ Meeting,
The total nominal amount of the ca-pital increases to be carried out un-der Resolution 15 may not exceed a maximum amount of two million eight hundred eighty thousand eu-ros (€2,880,000) with the unders-tanding that this amount will be charged to the nominal cap of five
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million seven hundred fifty thousand euros (€5,750,000) provided for ca-pital increases without preferential subscription rights in the fourteen-th resolution of this Shareholders’ Meeting, as well as (ii) on the total nominal cap of fourteen million four hundred thousand euros provided for capital increases the thirteenth resolution of this Shareholders’ Mee-ting.
In case of issue of equity securities which confer entitlement to other equity securities and /or entitlement to the allocation of debt securities and/or transferable securities giving access to equity securities to be is-sued, the total maximum nominal amount of debt securities that may be issued by way of public offers (fourteenth resolution) or private pla-cements (fifteenth resolution) may not exceed one hundred million euros (€100,000,000), with the understan-ding that this amount will be charged to the total nominal cap for debt se-curity issues provided in paragraph 3 of the thirteenth resolution;
Resolution 14 states that concer-ning the issues carried out under this delegation, the Board of Directors may create a priority subscription period reserved for shareholders, to subscribe to shares as of right or for excess shares, under the conditions provided for by applicable regula-tions.
The issue price of the shares or trans-ferable securities that can be created by virtue of the 14 and 15 resolutions would be at least equal to the mini-mum price provided by the legislative and regulatory provisions that apply on the day of issue (i.e., to date, the weighted average of the Company’s share price for the last three trading sessions on the Euronext Paris regu-lated market preceding the setting of the issue price, less a maximum dis-count of 5% if applicable),
Nevertheless, Resolution 16, in ac-cordance with the provisions of the French Commercial Code (Article L.225-136), suggests to autho-rize the Board of Directors to set the share issue price, as the Board
of Directors may choose, (i) to the weighted average price of the Com-pany’s share on the Euronext Paris regulated market the day before the date the issue price is set, less a maximum discount of 10% if ne-cessary, or (ii) the weighted average of the Company’s share price on the Euronext Paris regulated market over a maximum period of six mon-ths prior to the date the issue price is set, less a maximum discount of 10% if necessary.
The use of the option described above will enable the company, gi-ven the market volatility, to benefit from possible opportunities to carry out share issues when market condi-tions do not make it possible to carry out an issue under the price condi-tion defined in resolutions 14 and 15.
This authorisation would be granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
10 – Authorisation given to the Board of Directors to increase the amount of issues with or without preferential subscription rights (Resolution 17)
Subject to the adoption of Reso-lutions 13, 14 and 15, authorizing capital increases with or without preferential subscription rights, we propose, in accordance with Article L.225-135-1 of the French Commer-cial Code, to authorise the Board of Directors, for a 26 months period as from this Shareholders meeting, to decide to increase the number of securities to be issued for each is-sue, under the conditions provided by the legislative and regulatory pro-visions applicable on the day of the issue (i.e., to date, within thirty days as from the closing of the subscrip-tion, within the limit of 15% of each issue and at the same price as the one chosen for the initial issue).
The nominal amount of the capi-tal increases carried out by vir-tue of this resolution shall be charged against the total nominal cap (€14,400,000) provided for capital increases in paragraph 2 of the thirteenth resolution of this Shareholders’ Meeting. The total
maximum nominal amount of debt securities that may be issued by im-plementing Resolution 17 may not exceed one hundred million euros (€100,000,000),
This authorisation would be granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
11 – Delegation of authority to the Board of Directors to increase the share capital by issuing shares and/or equity securities which confer entitlement to other equity secu-rities and/or entitlement to the al-location of debt securities and/or transferable securities giving access to equity securities to be issued as compensation for contributions in kind (Resolution 18)
Under the terms of Resolution 18 we propose, to delegate to the Board of Directors, the authority to decide to carry out the issue of the Company’s shares and/or equity securities which confer entitlement to other equity securities and/ or entitle-ment to the allocation of debt secu-rities and/or transferable securities giving access to equity securities to be issued, in view of compensation for contributions in kind granted to the Company and composed of equity securities or transferable se-curities that give access to equity, up to a 10% of the capital share, charged against:
1) the total nominal cap provided for capital increases in the thirteen-th resolution of this Shareholders’ Meeting (€ 14,400,000)
2) as well as charged against the nominal cap of five million se-ven hundred fifty thousand euros (€5,750,000) provided for capi-tal increases without preferential subscription rights in the fourteen-th resolution of this Shareholders’ Meeting.
The total maximum nominal amount of debt securities that may be is-sued by implementing Resolution 18 may not exceed one hundred million euros (€100,000,000), with the un-derstanding that this amount will be
Shareholders’ meeting
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charged to the total nominal cap for debt security issues provided of the thirteenth resolution; and holders of securities or transferable securities, contributed in kind, would wave their pre-emptive rights of shareholders to shares and other transferable secu-rities that will be issued by virtue of this resolution;
This authorisation would be granted for a period of twenty-six (26) months as from this Shareholders’ Meeting.
12 - Delegation of authority to the Board of Directors to increase the share capital by issuing, without preferential subscription rights, shares of the Company reserved for members of a company savings plan (plan d’épargne d’entreprise) (Re-solution 19)
Resolution 19 submit a delegation of authority to the Board of Directors, with the option to further delegate in accordance with legal and regulatory provisions, its authority to issue new shares reserved for employees who are members of a company saving plan. The capital increase that may be carried out pursuant to this dele-gation may not exceed eight hundred sixty thousand euros (€860,000), and would be charged against the total nominal cap provided for capi-
tal increases of the thirteenth resolu-tion of this Shareholders’ Meeting (€ 14,000,000).
This delegation cancels, for the be-nefit of the said members, the prefe-rential subscription right of sharehol-ders to any shares that may be issued by virtue of this authorisation and waives any rights to any bonus shares that may be allocated based on this resolution;
the price of the shares issued in ap-plication of this delegation shall be determined under the conditions specified in Article L.3332-19 of the French Labour Code, on the unders-tanding that the maximum discount calculated in relation to the average of the share’s traded prices during the last 20 trading sessions prece-ding the decision setting the ope-ning date of the subscription may not exceed 20%.
However, where this delegation is im-plemented, the Board of Directors may reduce the amount of the discount on a case-by-case basis due to tax, cor-porate or accounting restrictions ap-plicable in a given country where the Group entities participating in the ca-pital increases are established.
The Board of Directors may likewise
decides to allocate bonus shares to subscribers of new shares, in subs-titution of the discount and/or as an employer matching contribution;
This authorization would superse-de the authorisation granted by the twenty-second resolution of the Shareholders’ Meeting of 23 June 2017 and would be granted for a pe-riod of twenty-six (26) months as from this Shareholders’ Meeting.
However, the Board recommends the shareholders not to approve this last delegation.
13 - Powers (Resolution 20)
The purpose of Resolution 20 is to grant the power to carry out all le-gal or administrative formalities and to file all public notices of decisions taken by this Shareholders’ Meeting.
The Board of Directors
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V-ConsolidatedFinancial StatemenTs
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Consolidated financial statements
10.1 Consolidated financial statementsAT DECEMBER 31, 2018 (UNDER IFRS)
I.1 CONSOLIDATED BALANCE SHEET
I) Consolidated financial statements
IN € ‘OOO Notes 12/31/2018 (12 MONTHS) 12/31/2017 (12 MONTHS
INTANGIBLE FIXED ASSETS 1 94,405 95,744
TANGIBLE FIXED ASSETS 2 13,849 11,403
FINANCIAL ASSETS 3 891 818
DEFERRED TAX ASSETS 22 9,571 6,197
NON-CURRENT ASSETS 118,716 114,161
INVENTORIES AND WORK IN PROGRESS 4 81,881 65,266
TRADE RECEIVABLES 5 72,254 42,503
CURRENT TAXES 2,727 2,044
OTHER CURRENT RECEIVABLES 6 10,844 9,015
CASH AND CASH EQUIVALENTS 7 29,578 38,478
CURRENT ASSETS 197,285 157,306
TOTAL ASSETS 316,001 271,467
IN € ‘OOO Notes 12/31/2017 (12 MONTHS) 12/31/2017 (12 MONTHS)
Capital 8 29,007 26,769
CONSOLIDATED RESERVES 124,867 123,208
PROFIT (LOSS) - GROUP SHARE -5,900 -21,069
SHAREHOLDERS’ EQUITY 147,975 128,908
NON-CURRENT PROVISIONS 10 1,492 711
DEFERRED TAX LIABILITIES 22 3,782 3,616
LONG-TERM LOANS 11 46,948 51,870
OTHER NON-CURRENT LIABILITIES 12 9,149 12,307
Non CURRENT LIABILITIES 61,371 68,503
TRADE PAYABLES 13 83,715 57,829
OTHER DEBTS AND ACCRUAL ACCOUNTS 14 22,941 16,226
CURRENT LIABILITIES 106,656 74,056
TOTAL EQUITY & LIABILITIES 316,001 271,467
Liabilities and shareholders’ equity
Assets
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I.2 CONSOLIDATED INCOME STATEMENT
IN € ‘OOO Notes12/31/201812 MONTHS
31/12/2017 12 months
Sales 15 187,855 153,000
PURCHASES CONSUMED 16 -133,955 -103,697
EXTERNAL EXPENSES 17 -25,064 -28,192
PAYROLL COSTS 18 -23,745 -34,242
TAXES AND DUTIES -1,424 -815
ALLOWANCES FOR DEPRECIATION AND AMORTIZATION -11,802 -9,182
NET ALLOWANCES FOR PROVISIONS 19 -2,943 -2,592
Release on impairment 19 1,433 5,293
other operating income 20 1,941 66
OTHER OPERATING EXPENSES 20 -764 -629
OPERATING PROFIT (LOSS) -8,468 -20,990
OTHER FINANCIAL INCOME AND EXPENSES 21 5,555 2,364
Other financial expenses 21 -5,716 -6,854
FINANCIAL PROFIT (LOSS) -162 -4,490
TAX EXPENSE 22 2,729 4,412
NET INCOME -5,900 -21,069
EARNINGS PER SHARE12/31/201812 MONTHS
31/12/2017 12 months
Profit (€K) -5,900 -21,069
Average NUMBER OF SHARES 13,961,761 12,906,521
STOCK OPTIONS 36,000 106,925
BONUS SHARES * 179,517
EARNINGS PER SHARE [IN EUROS]
- BEFORE DILUTION -0.42 -1.57
- AFTER DILUTION -0.42 -1.54
* Following the fulfillment of the alternative conditions of the bonus share plans, the shares were acquired as of the close of the period. The associated capital
increase was recognized for the shares delivered during the period. As of December 31, 2017, 179,517 shares have not yet been delivered.
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I.3 NET INCOME AND GAINS AND LOSSES RECOGNIZED DIRECTLY IN SHAREHOLDERS’ EQUITY
IN € ‘OOO 12/31/2018 12/31/2017
NET INCOME -5,900 -21,069
TRANSLATION ADJUSTMENTS
CASH FLOW HEDGE -65 -7,741
REVALUATION DIFFERENCES
ACTUARIAL GAINS AND LOSSES 22
COMPREHENSIVE INCOME -5,942 -28,810
- PARENT COMPANY’S SHARE -5,942 -28,810
- MINORITY INTERESTS’ SHARE
IN € ‘OOO Capital REserves REsult Total
Shareholders’ equity as of 12/31/2017 26,768 123,208 -21,069 128,908
Capital increase* -21,069 21,069 0
Change in scope (acquisition) 2,238 24,419 26,657
Self owned shares -1,620 -1,620
2018 result 119 119
Financial instruments -5,900 -5,900
Other variatons -65 -65
Shareholders’ equity as of 12/31/2018 -124 -124
I.4 CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
Acquisition: this line reflects the debt impairment still due to minority interests for market Hub and SES-imagotag Deutschland (ex Findbox).
* including €26m E Ink capital increase
Consolidated financial statements
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I.5 CONSOLIDATED STATEMENT OF CASH FLOWS
IN € ‘OOO 12/31/2018 12/31/2017
+ CONSOLIDATED NET INCOME (INCLUDING MINORITY INTERESTS) -5,900 -21,069
+/- NET ALLOWANCES FOR AMORTIZATION/DEPRECIATION AND PROVISIONS (EXCLUDING THOSE RELATING TO CURRENT ASSETS) 12,583 6,323
+/- CALCULATED EXPENSES AND INCOME RELATED TO STOCK OPTIONS AND SIMILAR INSTRUMENTS 9,760
-/+ OTHER CALCULATED INCOME AND EXPENSES -1,014 351
-/+ GAINS AND LOSSES ON DISPOSALS (FROM EXCHANGE DIFFERENCE IN IFRS P&L AND FINANCIAL INSTRUMENT PROFIT OR LOSS) -65 1,148
CASH FLOW AFTER COST OF NET FINANCIAL DEBT AND TAX 5,604 -3,487
+/- TAX EXPENSE (INCLUDING DEFERRED TAXES) -2,729 -4,412
= CASH FLOW AFTER COST OF NET FINANCIAL DEBT AND TAXES 2,876 -7,899
- TAXES PAID 390
+/- CHANGE IN WCR RELATED TO OPERATIONS -17,399 -3,061
= NET CASH FLOW GENERATED FROM OPERATIONS -14,134 -10,960
- DISBURSEMENTS RELATED TO ACQUISITIONS OF TANGIBLE AND INTANGIBLE FIXED ASSETS -13,132 -12,082
+ PROCEEDS FROM DISPOSALS OF TANGIBLE AND INTANGIBLE FIXED ASSETS
- DISBURSEMENTS RELATED TO THE ACQUISITION OF LONG-TERM INVESTMENTS -99 -91
+ PROCEEDS FROM DISPOSALS OF LONG-TERM INVESTMENTS 25 42
+/- IMPACT OF CHANGES IN SCOPE -3,332 2,221
+ INVESTMENT SUBSIDIES RECEIVED -78 -77
= NET CASH FLOW FROM INVESTING ACTIVITIES -16,616 -9,987
+ AMOUNTS RECEIVED FROM SHAREHOLDERS DURING CAPITAL INCREASES 26,705 1,795
+ LOAN ISSUES 30,000
+ LOAN REPAYMENTS -4,904 -5,717
- DIVIDEND DISTRIBUTION
-/+ TREASURY SHARE BUYBACKS AND RESALES 119 -37
= NET CASH FLOW FROM FINANCING ACTIVITIES 21,904 26,041
+/- IMPACT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES -53 70
= CHANGE IN CASH FLOW -8,899 5,164
OPENING CASH POSITION 38,478 33,314
CLOSING CASH POSITION 29,578 38,478
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II.1 ACCOUNTING RULES AND METHODS
II.1.1 BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
II) Notes to the consolidated financial statements
II.1.1.1 Consolidated financial state-ments – Basis of preparation
Pursuant to European Regulation 1606/2002 of July 19, 2002 on in- ternational accounting standards, the consolidated financial statements of the SES-imagotag Group for the pe-riod ended December 31, 2018 have been prepared in accordance with the Inter- national Financial Reporting Standards (“IFRS”) applicable on this date as approved by the European Union, as of the closing date of these financial statements.
The euro is the presentation currency of the consolidated financial state-ments. Unless otherwise indicated, all amounts are rounded to the nearest thousand (€000).
The financial statements are prepared according to the historical cost prin-ciple with the exception of a number of asset and liability accounts that have been measured at fair value.
The consolidated financial statements include the financial statements of the subsidiaries listed in § II.6 The finan-cial statements of the subsidiaries are prepared over the same reference pe-riod as those of the parent company, based on the same accounting me-thods.
The Companies close their annual fi-nancial statements on December 31. All intra-group balances, intra-group transactions, and unrealized income, expenses, and gains that are included in the book value of assets from inter-nal transactions are fully eliminated.
The financial statements of each of the Group’s Companies are prepared in accordance with the accounting principles and regulations in force in their respective countries. They
are subject to restatements in order to comply with the consolidation principles in force in the Group.
New mandatory implementing regu- lations as of January 1, 2018 applied for the first time by the SES-imagotag Group:
For the preparation of its consoli-dated financial statements at De-cember 31, 2018, the SES-imagotag Group applied the new standards applicable as of January 1, 2018, which are as follows:
• IFRS 9 “Financial Instruments: Hedge Accounting,” mandatory starting on January 1, 2018. This standard will replace IAS 39 “Fi-nancial Instruments: Recognition and Measurement.” The Group is currently reviewing the implemen-tation of this standard; the mea-surement of the impact still cannot be reasonably estimated at this stage;
• IFRS 15 “Revenue from Contracts with Customers,” mandatory starting on January 1, 2018. This standard defines the revenue recognition mo-del and will replace IAS 18 “Revenue” and IAS 11 “Construction Contracts” and the related interpretations;
• Clarification of IFRS 15 “Revenue from Contracts with Customers,” mandatory starting on January 1, 2018, according to the IASB.
• amendment to IFRS 2 “Classifica-tion and valuation of share-based payment transactions,” mandatory starting on January 1, 2018, accor-ding to the IASB
• amendment to IFRS 4: implemen-tation of IFRS 9 on financial ins-trument and IFRS 4 on insurance
contracts .IFRIC Interpretation 22 “Foreign Currency Transactions and Anticipated Consideration,” mandatory starting on January 1, 2018, according to the IASB;
New regulations, yet published but not yet implemented by the SES-imagotag Group:
Texts not yet adopted by theEuropean Union.
Implementation of the IFRS 16 stan-dard will trigger the following impacts:
• in the P&L, cancellation of the ren-tal expenses and booking of both amortization and financial expenses,
• in the balance sheet: booking of a tangible asset (usage right) as well as a financial liability regarding fu-ture rental expenses.
Both asset and liability relating to this IFRS 16 standard are booked in a spe-cific account of the balance sheet.
The SES-imagotag group has elec-ted to go for a simplified retroactive transition methodology, consisting in booking the cumulative effect of the IFRS 16 standard back to its effective date, and booking the rental liability through discounted future costs of renting as of the effective date, using the marginal debt rate on that date of first implementation (January 2019).
The group has elected to value the tangible asset through the future costs of renting, adjusted with already paid-for rentals/ rentals already booked for as accounts payables the day of first implementation.
The global impact of this standard implementation is in progress : col-lecting each and every rental agree-
Consolidated financial statements
The consolidated financial statements of the SES-imagotag Group (hereinafter “the Group”) at December 31, 2018 cover a 12-month period. The Board of Directors approved these financial statements on April, 4, 2019 and will be submitted to the Shareholders meeting approval on May 24, 2019.
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ment within the group (for offices, warehouses as well as vehicles) is al-most finalized.
The appreciation of the non cancel-lable leasing period or term can vary depending on local regulation and habits, as well as the nature of the underlying asset. Discount rate to be used is also being finalized to make sure impact on the first date of imple-mentation is acurate.
Thus impacts displayed in note 25 of the consolidated statements ap-pendixes as of December 31 2018 are not final.
• IFRIC Interpretation 23 “Uncertainty over Income Tax Treatments,” man-datory starting on January 1, 2019 according to the IASB;
The Group is currently assessing the impacts resulting from the initial implementation of these new texts
II 1.1.2 Business combinations
Business combinations are dealt with under revised IFRS 3, which assesses, in particular, the notion of “takeover” in the application to securities acquisition transactions; depending on the circumstance, the impacts are taken into account in in-come or in equity.
In a business combination, the fair value of the transferred conside-ration is allocated to the acquired identifiable assets and liabilities. They are measured at fair value as of the acquisition date.
Fair value is the price that would be received for the sale of an asset or paid for the transfer of a liability in a normal transaction between market participants on the valuation date.
In this context, goodwill represents the residual surplus of the transferred consideration over the share of the acquiring company’s interest in the fair value of the identifiable assets, liabilities, and contingent liabilities that can be reliably measured at the acquisition date.
The allocation period is limited to the period required to identify and mea-sure the assets and liabilities of the acquired company, the non-control-ling interests, the price paid, and the fair value of the share previously ac-quired, without exceeding 12 months.
Subsequently, goodwill is measured annually at its cost less any accumu-lated impairment losses determined in accordance with IAS 36, as described in the paragraph below entitled “Intangible fixed assets.”
In the event of a decline in value, impairment is recognized on the income statement, under operating income. Discrepancies reulting from impairment tets performed on puts on minority interests negotiated before the actual implementation of IFRS 3R and IAS 27R, are booked in shareholders equity..
II 1.1.3 Estimates and judgments
The financial statements have been prepared using the historical cost ba-sis, except for financial instruments, which are recognized in accordance with the fair value basis. As per the IFRS conceptual framework, the preparation of financial statements requires making estimates and as-sumptions that affect the amounts appearing on these financial sta-tements. The significant estimates made by SES-imagotag for the pre-paration of the financial statements mainly relate to:
• the fair value measurement of as-sets, liabilities, and contingent lia-bilities acquired during a business acquisition (IFRS 3 - Business Combinations);
• the valuations used to test impair-ment losses, in particular the reco-verable amount of goodwill;
• the fair value measurement of fi-nancial instruments;
• the valuation of provisions for contingencies and charges;
• the measurement of the recoverable value of receivables and inventories.
Due to the uncertainties inherent in any assessment process, SES-imagotag revises its estimates based on regularly updated information. It is possible that the future results of the transactions concerned will differ from these es-timates.
II.1.2 INTANGIBLE FIXED ASSETS (IAS 38)
Intangible fixed assets include:
• development costs;
• patents;
• software;
• an ERP;
• goodwill;
• technologies.
Intangible fixed assets acquired se-parately are recorded at their acqui-sition cost and are amortized.
Amortization is calculated on a straight-line basis over the esti-mated useful life of the fixed assets, on the following bases:
AMORTIZATION PERIOD
TECHNOLOGIES 15 years
DEVELOPMENT COSTS 5 to 10 years
PATENTS 10 years
ERP 10 years
SOFTWARE 2 to 5 years
No residual value was used to deter-mine the basis of amortization.
Impairment test
In accordance with IAS 36, goodwill is tested for impairment annually, and other amortizable intangible fixed assets are tested when there is evidence of a loss of value. This evidence is examined at each annual and interim closing.
The impairment test consists of comparing the net carrying amount of the asset with its recoverable amount, determined as the higher
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of its fair value less costs to sell and its value in use. Fair value less costs to sell is preferred in the rare cases where a recent transaction on the assets concerned makes the infor-mation available and reliable.
Given the global management of SES-imagotag’s activities from a technological and geographical point of view, it is impossible to al-locate assets and cash generation to clearly identified subgroups wit-hin the group. Goodwill has been monitored on the basis of a single cash-generating unit since 31 De-cember 2016.
Value in use is estimated using cash flow projections based on existing operating forecasts, including reaso-nable growth and profitability rates. The main assumptions used are:
The 8-year projection made by ma-nagement: the electronic labelling market is not yet mature at a global level and is growing strongly, hence a forecast of more than 5 years, more in line with the prospects of this market;
The long-term growth rate of 5% reflects the growth rates of a still dynamic technology market at that time;
A discount rate of 11% applied to cash flows.
The recoverable amount resulting from the annual impairment test is higher than the carrying amount of the assets.
The sensitivity of the result to changes in the assumptions used by more or less one point does not affect the results of the goodwill im-pairment test.
An impairment loss is recognised in the event of an impairment loss. Impairment losses can be reversed when conditions have changed, ex-cept for goodwill. With the excep-tion of goodwill, impairment losses prospectively modify the deprecia-tion plan since they are charged to the depreciable base.
Development costs
SES’s development costs are reco-gnized in the period in which they are incurred, with the exception of project development costs that meet the following criteria:
• the product or process is clearly identified, and the costs are indi-vidualized on a reliable basis;
• the technical feasibility of the pro-duct has been demonstrated;
• the product or process will be marketed or used internally;
• there is a potential market for the product, or its internal usefulness has been demonstrated;
• the necessary resources are available to complete the project.
Development costs that do not meet the above criteria are recognized as expenses in the period in which they are incurred. Capitalized development costs are amortized on a straight-line basis over their useful lives.
Patents
Concerning the valuation of patents, in the absence of an active market, the Group used the acquisition cost method.
II.1.3 TANGIBLE FIXED ASSETS (IAS 16)
Tangible fixed assets are recorded at their acquisition cost.
Depreciation is calculated on a straight-line basis over the following useful lives:
DEPRECIATION PERIOD
TOOLS 3 to 5 years
INSTALLATIONS AND IMPROVEMENTS
5 to 10 years
FURNITURE, OFFICE AND COMPUTER EQUIPMENT
1 to 10 years
No residual value was used to deter- mine the basis of depreciation.
The depreciation periods are re- viewed annually at each accoun-ting close. Any change in duration is treated as a prospective estimate change in accordance with IAS 8 “Accounting Policies, Changes in Ac-counting Estimates, and Errors” and results in the recognition of additio-nal impairment.
The book values of tangible fixed assets are reviewed for impairment when events or changes indicate that the book value may not be re-coverable. If there is any such index and if the book values exceed the estimated recoverable amount, the assets are written down to their re-coverable amount.
The recoverable amount of tan-gible fixed assets is the higher value between the sale price net of dispo-sal costs and the value in use. In as-sessing value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessments, the time value of money, and as- set-specific risks.
II.1.4 LEASES (IAS 17)
Rents paid under these contracts, which are classified as operating leases, constitute expenses for the financial year. In some cases, the Group is required to enter into contracts to sell equipment for which a return may be possible in order to renew a lease. These contracts are analyzed as finance leases.
II.1. 5 Stocks (IAS 2)
Non-current financial assets include deposits and guarantees as well as loans. They are recorded at their nominal value and are subject to a provision for impairment when their inventory value is lower than their probable recovery value.
II.1.6 Receivables and othercurrent assets
Receivables and other current as- sets are recorded at their gross amount, less the provisions for im- pairment of estimated non-recove-rable amounts.
Consolidated financial statements
148
Annual report
The impairment of receivables and other current assets is based on an individual analysis of the risks of non-recovery (see details in Note 5).
II.1.7. Derivatives (IFRS9)
All derivatives are valued on the balance sheet at fair value in ac-cordance with IAS 39 (Level 2 fair value).
Derivatives consist of currency forwards.
The management of financial risks by the SES-imagotag Group (interest rate risk, currency risk, counterparty risk, and liquidity risk) is described in Note 29 of this document.
Derivatives are contracted by the SES-imagotag Group under its cur-rency risk management policy. The recording of financial instruments as hedging instruments depends on whether they qualify for hedge ac-counting.
II.1.8 FORWARD PURCHASES
The SES-imagotag Group has opted for cash flow hedge accounting for its forward purchases.
Forward exchange contracts used by the SES-imagotag Group may be classified as hedges of future cash flows. Hedging future cash flows protects against changes in the va-lue of cash flows denominated in foreign currencies.
Derivatives are measured at fair value upon initial recognition. Thereafter, the fair value of derivatives is re-es-timated at each closing date.
The fair value of foreign currency forwards is determined by referring to what the Group would receive (or pay) to settle the outstanding contracts as of the closing date.
Efficiency tests of cash flow hedges are carried out at each closing to ensure that the hedge is highly effective.
Changes in the value of the effec-tive portion of cash flow hedge de-
rivatives are recognized in equity in a specific revaluation reserve ac- count.
The discount/premium component is excluded from the hedging rela-tionship, and changes in value are recognized on the income state-ment under “Other financial income and expenses”. As of december 31, 2018, open forward purchases have been fully booked in the financial result for € 603k.
II.1.9 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include:
• financial investments that are highly liquid and present a very limited risk of change in value;
• bank accounts;
• cash accounts.
Investment securities (money mar- ket funds) are recognized at fair va- lue at the closing date (Level 1 fair value).
Term deposits are recorded at amortized cost.
II.1.10 TREASURY SHARES (IAS 32)
According to IAS 32 “Financial Ins-truments,” if an entity purchases its own equity instruments, they must be deducted from shareholders’ equity. No profit or loss should be recognized in income at the time of purchase, sale, issue, or cancellation of the entity’s equity instruments.
Such treasury shares may be ac-quired and held by the entity or by other members of the consolidated Group. The consideration paid or received must be recognized di-rectly in shareholders’ equity.
II.1.11 PROVISIONS (IAS 37)
In accordance with IAS 37 “Provi-sions, Contingent Liabilities, and Contingent Assets,” the Group reco-gnizes a provision when, as of the closing date of the period, it has an obligation (legal or implicit) towar-ds a third party due to a past event
whose settlement is likely to result in an outflow of resources for the Group representing economic benefits and when the amount of the loss or liabi-lity can be measured reliably.
Should such a loss or liability be unli-kely, or cannot be reliably measured, but is still possible, the Group must report a contingent liability in its commitments.
Provisions are intended in particular to cover the probable costs that li- tigation or on-going litigation could incur, the cause of which predated the closing date.
II.1.12 STOCK OPTIONS AND GRANTINGOF BONUS SHARES (IFRS 2)
IFRS 2 “Share-based Payment” pro- vides for the recording of an expense in consideration for services obtained under share purchase plans (and simi-lar plans) granted to employees.
The Group has set up stock option, bonus share, or share purchase plans and has issued subscription warrants to some employees. The Board of Directors, which grants the options, sets the option or purchase prices.
Changes in values subsequent to the grant dates have no impact on the initial valuation of the options; the number of options taken into ac- count to value the plans is adjusted at each accounting close to factor in the presence of beneficiaries and the fulfillment of internal performance conditions at the end of the rights vesting periods.
The valued benefit is equivalent to compensation for the beneficiaries, which is therefore recognized as payroll costs, on a straight-line basis over the vesting period, in conside-ration of a corresponding adjustment in shareholders’ equity.
The stock option plans have been valued by referring to the fair value of the granted instruments.
The fair value of the allocated bonus shares corresponds to the value of the share on the date of the grant less
149
the dividend distribution assumption during the vesting period. The total cost of the plan corresponds to the estimated fair value multiplied by the number of shares allocated over the vesting periods in the plan, multi- plied by the probability of achieving the performance objectives.
II.1.13 EMPLOYEE BENEFITS (IAS 19 REVISED)
End-of-career benefits
The provision for employee benefits relates exclusively to retirement be-nefits that are legally owed to em-ployees in France.
The calculation is done in accordance with IAS 19 (revised) based on the projected unit credit method. Under this method, benefit entitlements are allocated to service periods based on the plan’s vesting formula, taking into account a linearization effect when the rate of vesting is not uniform during subsequent service periods.
The amount of the future payments corresponding to the benefits granted to employees is measured on the ba-sis of assumptions of sala- ry trends, retirement age, and mortality and then reduced to their present value on the basis of interest rates on long-term bonds of first- class issuers.
The expense for the year correspon-ding to the change in the cost of ser-vices rendered is recognized as pay-roll costs, and the discounting cost is recognized as a financial expense.
The main assumptions used in the calculation of pension liabilities are as follows:
• retirement age: 65 to 67 years;
• employer contribution rate: 46%;
• discount rate: 1.57%;
• mortality table used: INSEE 2017;
• collective bargaining agreement: metallurgy.
In addition, actuarial gains and losses arising from experience-related ad-
justments and changes in actuarial assumptions are now recognized in “Other income and expense recognized directly in equity.”
II.1.14 DEFERRED TAXES (IAS 12)
Deferred taxes arise from temporary differences between the book and tax values of assets and liabilities on the balance sheet. In accordance with IAS 12 “Income Taxes,” they are recognized according to the liability method, based on future tax rates adopted at the end of the financial year. The rate currently used is the ordinary tax rate of 33 1/3% (exclu-ding social security contributions).
The 2017 Finance Act (Act no. 2016- 1917 of December 29, 2016) includes a reduction in the corporate tax rate, which will gradually decrease to 28% for all companies for periods begin-ning on or after January 1, 2020. The impact on the Group’s financial statements at December 31, 2017 is not significant.
II.1.15 RESEARCH TAX CREDIT (IAS 20)
The research tax credit is a tax incen-tive similar to a subsidy. It therefore falls within the scope of IAS 20. Ac-cording to this standard, an allocation of the research tax credit should be made according to whether the re-search expenditure is recognized as an asset (recording in intangible fixed assets in accordance with IAS 38) or in profit and loss.
The Group capitalizes its develop-ment costs in accordance with IAS 38. The tax credit must therefore be deferred over time over the amor-tization period of the research and development expenses that gene- rated this tax credit.
II.1.16 CONVERSION OF ITEMSIN FOREIGN CURRENCIES
The consolidated financial statements at December 31, 2018 were prepared in euros, which is the parent company’s functional currency.
Each Group entity determines its own functional currency, and the items in-
cluded in the financial statements of each entity are measured using that functional currency.
Recognition of foreign currency tran-sactions in the consolidated companies’ accounts
Foreign currency transactions reco-gnized on the income statement are translated at the exchange rate prevai-ling on the transaction date, except for transactions for which the Company has hedges (USD), which are recorded at the hedging rate. Monetary items expressed in foreign currencies recorded on the balance sheet are translated at the ex-change rate prevailing as of the date of the accounting close, with the exception of debts denominated in USD, which are converted at the hedging rate. The resulting exchange rate differences are recorded on the in- come statement
Conversion of accounts of foreign subsidiaries
The financial statements of Group com-panies whose functional currency is different from that of the parent com-pany are translated into euros:
• assets and liabilities are translated into euros at the exchange rate prevailing as of the date of the ac- counting close;
• income and expenses are trans-lated at the average exchange rate for the period as long as said ex-change rate is not affected by si-gnificant price changes;
• the resulting translation differences are recognized directly in equity.
II.1.17 EARNINGS PER SHARE
The Group reports basic earnings per share and diluted earnings per share.
Earnings per share are calculated by dividing net income by the weighted average number of shares outstan-ding during the financial year. Net diluted earnings per share are calcu-lated using the conversion of dilutive instruments outstanding as of the closing date into common shares.
Consolidated financial statements
150
Annual report
II.1.18 REVENUE (IFRS 15)
Sales are recognized and presented in accordance with IAS 18 “Revenue.”
The revenue-generating event va-ries depending on the type of sale:
• when the Group is responsible for installing label systems, revenue is recognized when the system beco-mes operational (installation of the antenna). At the closing of the ac-counts, for installations invoiced but not yet completed, deferred income is recognized, and for installations completed but not yet invoiced, ac-crued income is recognized.
• when the Group only delivers la-bels, revenue is recognized when the goods are taken over by the carrier or the freight forwarder (in the case of FOB sales).
In addition, training is invoiced sepa-rately, when the service is performed.
Annual lump-sum rebates granted to customers are recorded as a re-duction of sales.
Lastly, maintenance contracts are invoiced in advance for periods from four to six months. Deferred income is recognized to prorate sales related to the following period.
II.1.19 OPERATING SEGMENTS (IFRS 8)
The SES-imagotag group has only one operating segment correspon-ding to a homogeneous activity of installation and maintenance of electronic shelf labels.
Operating results are reviewed at the group level to make decisions about resources to be allocated and performance evaluation. Isolated in-formation at the lower level is not available, given the global manage-ment of activities, technologies and geographical areas.
II.2 HIGHLIGHTS OF THE PERIOD
Highlights of the year
Acquisition of SES-imagotag shares by E Ink
The Group and E Ink® Holdings (“E Ink”), the leader in electronic ink technology, have strengthened their strategic alliance to accelerate and expand their growth on the market of IoT solutions for physical retail, with the acquisition of a 6.01% stake in the Company by E Ink, represen-ting an investment of €26 million, with a price per share of €30 as part of a capital increase reserved for E Ink, which was approved by the Shareholders’ Meeting of 22 June 2018. This stake represents 5.98% of the capital as at December 31, 2018.
Simplified takeover bid process
On 20 December 2017, BOE Smart Retail (Hong Kong), jointly owned by BOE Technology and the mana-gement of SES-imagotag, acquired a controlling interest of 6,669,176 SES-imagotag shares at €30 per share. Prior to the acquisition of this block of shares, the Company controlled by the management had contributed 537,520 SES-imagotag shares to BOE Smart Retail and taken part in a cash capital increase of €17.9 million in BOE Smart Re-tail. The main executive managers undertook in particular to keep their BOE Smart Retail shares for at least five years. This huge reinvestment reflects the strong commitment of the management to the Company’s long-term development.
In accordance with regulations, BOE Smart Retail filed an offering circu-lar with the French market regulatory authority, AMF, in view of a simpli-fied takeover bid for the remaining SES-imagotag shares at the same price of €30 per share. On 20 Fe-bruary 2018, the AMF approved the offering circular under the number
18-050, and BOE Smart Retail’s of-fer was launched on 2 March and closed on 15 March 2018.
On 15 March 2018, Société Gé-nérale informed the AMF that un-der the simplified takeover bid for SES-imagotag’s shares, opened from 2 to 15 March 2018 inclusive, BOE Smart Retail had acquired 3,582,490 SES-imagotag shares on the market at a unit price of €30.
When the bid was closed on 15 March 2018, the initiator held 10,789,186 SES-imagotag shares representing 79.94% of the voting rights, this stake being 74.39% on December, 31, 2018.
II.3 POST-CLOSING EVENTS
None.
151
AMORTIZATION in € ‘000 opening ALLOWANCETRANSFERS
BETWEEN LINE ITEMS
CHANGE IN SCOPE WRITE-BACK Closing
RESEARCH AND DEVELOPMENT 25,011 5,694 0 0 30,705 27,977
CONCESSIONS, PATENTS & SIMILAR RIGHTS 9,290 2,037 0 -7 11,320 10,340
TOTAL 34,301 7,731 0 -7 42,025 38,317
in € ‘000 OPENING increaseTRANSFERS BETWEEN
Line ItemsCHANGE IN SCOPE closing
Goodwill 51,372 0 -98 0 51,273
RESEARCH AND DEVELOPMENT 31,873 0 1,990 0 33,863
CONCESSIONS, PATENTS & SIMILAR RIGHTS 37,375 56 139 0 37,564
INTANGIBLE FIXED ASSETS IN PROGRESS 9,428 6,333 -2,031 0 13,730
TOTAL 130,047 6,389 0 0 136,430
II.4 NOTES TO THE FINANCIAL STATEMENTS
Notes to the balance sheet - assets and equity & liabilitiesNote 1 - Intangible fixed assets
As of December 31, 2018, the amount of goodwill is broken down as follows:
• SES-ESL merger: €12.6 M;
• acquisition of Imagotag: €13.4 M;
• acquisition of PDi: €18.3 M;
• acquisition of Findbox: €6.7 M;
• acquisition of Market Hub: €0.3 M (provisional goodwill).Goodwill allo-cation process has led to the identi-fication of a € 98K technolgy value.
Research and development expenses represent the cost of the research
and innovation expenditures incur-red by the Group that allowed our product offering to be improved and diversified.
Intangible fixed assets in progress correspond to expenditures incur-red for research and development projects, development of the ERP, as well as expenses incurred for the filing of patents not yet issued as of the close of the period.
The increase over the period of €6,333 K breaks down as follows:
• research and development expen- diture for €4,458 K
• ERP development expenditure for €1,722 K;
• patent expenditures for €165K. As of December 31, 2018, intan-gible assets in progress amount to €13,730 K, of which € 4,647K will be activated beginning of 2019 when the actual market launch will take place (new Jeegy Cloud ver-sion and new ESL’s ).
Consolidated financial statements
152
Annual report
Note 2 - Tangible fixed assets
The machinery, tools and equipement increase consists in new industrial equipments implemented in our new EMS production lines.
in € ‘000 OPENING INCREASETRANSFERS
BETWEEN LINE ITEMS
CHANGE IN SCOPE WRITE BACK CLOSING
BUILDINGS AND IMPROVEMENTS 1,473 254 196 0 0 1,923
MACHINERY, EQUIPMENT, AND TOOLS 14,918 1,389 0 0 0 16,307
OTHER TANGIBLE FIXED ASSETS 3,093 1,129 -196 0 0 4,026
TOTAL 19,484 2,772 0 0 0 22,256
Note 3 - Financial assets
in € ‘000 opening increase decrease CLOSING
DEPOSITS AND GUARANTEES 477 51 -16 512
OTHER LOANS 332 48 380
OTHER 9 -9 0
TOTAL 818 99 -25
AMORTIZATION in € ‘000 opening ALLOWANCE WRITE-BACK CHANGE IN SCOPE CLOSING
BUILDINGS AND IMPROVEMENTS 595 136 0 0 731
MACHINERY, EQUIPMENT, AND TOOLS 6,239 1,432 0 0 7,671
OTHER TANGIBLE FIXED ASSETS 1,247 186 0 0 1,433
TOTAL 8,081 1 0 0 9,836
Note 4 - Inventories
in € ‘000 31/12/2018 31/12/2017
INVENTORY OF RAW MATERIALS 21,062 26,479
INVENTORY OF FINISHED PRODUCTS 45,290 29,479
INVENTORY OF GOODS PURCHASED FOR RESALE 18,753 10,557
IMPAIRMENT OF INVENTORY -3,224 -1,250
TOTAL 81,881 65,266
153
Note 5 - Trade receivables
in € ‘000 12/31/2018 12/31/2017
GROSS TRADE RECEIVABLES 71,954 42,763
PROVISION FOR IMPAIRMENT -233 -311
CUSTOMERS – ACCRUED INCOME 533 51
TOTAL 72,254 42,503
Note 6 - Other current receivables
in € ‘000 12/31/2018 12/31/2017
TAX RECEIVABLES 7,452 6,598
SOCIAL SECURITY RECEIVABLES 70 70
SUPPLIERS - ADVANCES AND PREPAYMENTS 647 684
FINANCIAL INSTRUMENTS 603
OTHER RECEIVABLES 1,367 403
PREPAID EXPENSES 705 1,260
TOTAL 10,844 9,015
Under the factoring contract, the amount of assigned trade receivables is €7.5 M, of which €4.2 M has already been repaid.
Impairment of trade receivables is as follows:
any receivable exceeding 90 days late payment is analyzed on a case-by-case basis:
Tax receivables are mainly VAT re-ceivables as well as importation taxes for a €7,452 total amount.
In accordance with its currency risk hedging policy, the Company makes forward currency purchases. The
• a 33% provision is established for cases of equipment recovery;
• a provision is established for re- ceivables in litigation according to the historical recovery success ratio (50%);
• a 100% provision is established for accounts receivable deemed non-recoverable
portion of these hedges not sett-led, depending on whether there is a potential gain or loss, results in the booking of respectively ano-ther receivable or another debt as of 12/31/2018. In contrast to 2017, the unsettled portion as of December
31, 2018 resulted in an unrealized profit of €603 K recorded in other receivables other receivables include an insurance indemnification to be cashed in in 2019. Tax receivables mainly include tax credit relating to CICE mechanism.
Inventory impairment is based on the following rule:
• category A: items whose turnover is less than 6 months=>no impairment;
• category B: items with a turnover rate of between 6 months and 12 months => 50% impairment;
• category C:
• after 12 months without movements within the Group, 80% impairment;
• after 18 months without move- ments within the Group, these items are transferred to a “Scrap” invento-ry, resulting in 100% impairment.
In addition to the above impairment rule, a reference-by-reference ana-lysis was conducted to refine the provision on the basis of initiated action plans and sales prospects.
Consolidated financial statements
154
Annual report
Note 7 - Cash and cash equivalents
in € ‘000 12/31/2018 12/31/2017
SHORT-TERM INVESTMENTS 31 17
CASH - ACCOUNTS RECEIVABLE 29,548 38,461
AVAILABLE CASH 29,578 38,478
Note 8 - Capital
MOVEMENT OF SHARES number € NOMINAL VAL. SHARE CAPITAL
Opening – number of shares 13,384,229 2 26,768,458
SHARES ISSUED 1,119,108 2 2,238,216
Closing – number of shares 14,503,337 2 29,006,674
This number of shares making up the capital reflects:
a) all exercised stock options booked over financial year 2018 until December 31;
b) all performance shares granted after recognition of the fulfill-ment of the alternative condi-
tions, by the Board of Directors on February 21, 2017of the De-cember 32015 and March 2016 performance shares plans;
c) the reserved capital increase for E Ink (866,666 shares)
At December 31, 2018, the Com-pany held a total of 11,406 treasury
shares, all of which relate to the cash contract renewed during financial year 2014.
Treasury shares have been restated less shareholders’ equity in accor-dance with IAS 32.
Plans NUMBER OF OPTIONS NOTIFIEDNUMBER OF REMAINING OPTIONS
OUTSTANDING *
4/15/2010 14,000 0
9/15/2010 8,500 0
10/21/2011 58,500 0
8/31/2012 315,800 29,650
12/18/2012 19,000 2,000
6/30/2013 65,200 0
4/3/2014 43,000 750
10/23/2014 33,150 3,600
557,150 36,000
* Net of options exercised and/or canceled
Stock options and allocation of bo-nus shares
Allocation of stock options
At December 31, 2018, six stock op-tion allocation plans were therefore in progress:
Within the framework of the authoriza-tion granted by EGM of June 10, 2009
• the 2011 Plan dated October 21, 2011, expiring on October 21, 2018.
Within the framework of the autho-rization granted by the EGM on March 1, 2012
• the 2012 Plan (1st wave) dated Au-gust 31, 2012, expiring on August 31, 2019;
• the 2012 Plan (2nd wave) dated De-cember 18, 2012, expiring on De-cember 18, 2019;
• the 2013 Plan dated May 28, 2013, expiring on May 28, 2020;
Note 9 - Other equity instruments
• the 2014 Plan (1st wave) dated April 3, 2014, expiring on April 3, 2021.
Within the framework of the authori-zation granted by the EGM on May 21, 2014,
• the 2014 Plan (2nd wave) dated Oc-tober 23, 2014, expiring on October 23, 2021.
The table below shows the information relating to stock options in effect as of December 31, 2018:
155
At December 31, 2018, the number of stock options in force, which can be used to subscribe for a total nu-mber of 36,000 shares, represents 0.02% of the share capital and vo-ting rights of SES-imagotag after dilution.
Non-current provisions mainly in-clude labor court disputes and a liti-gation with a supplier for €527K: the
Note 10 - Non-current provisions
in € ‘000 Opening Allowance RELEASE OF ALLOWANCE Closing
Provisions for RMA’s 413 327 - 172 568
Other provisions for risks 298 1 234 - 608 924
TOTAL 711 1 561 - 780 0 1,491
Note 12 - Other non-current liabilities
in € ‘000 12/31/2018 12/31/2017
OTHER DEBTS - PRICE SUPPLEMENT 7,211 9,782
RESEARCH TAX CREDIT 1,676 1,909
OTHER OPERATING GRANTS 262 538
OTHER 0 78
TOTAL 9,149 12,307
Note 11 - Long-term loans
Loans are recognized at the amortized cost using the effective interest rate method.
in € ‘000 opening + - closing
BOND DEBTS 39,761 15 39,776
OTHER LONG-TERM LOANS FROM CREDIT INSTITUTIONS 12,109 -4,937 7,173
TOTAL 51,870 15 -4,937 46,949
As of 12/31/18 the group is complying with the debt covenants.
Bonus share allocations
On December 21, 2017, the Board of Directors confirmed fulfillment of the alternative conditions for bo-nus share plans put in place by the Board of Directors at its meetings
company is running a legal action agains this suplier and is claiming for damages which claimed amount
on December 16, 2015, March 11, 2016,
November 30, 2016, December 22,
2016, and March 10, 2017.
is superior to the alowance booked for as of 12/31/18.
Consolidated financial statements
156
Annual report
Debts relating to price supplements consist of:
• €2,620 (€5,500 K as of 12/31/17) for the put on the 33% tranche of the acquisition of SES-imagotag Deutschland GmbH, which was the subject of a firm and final agree- ment in August 2017;
Note 13 - Trade payables
in € ‘000 12/31/2018 12/31/2017
TRADE PAYABLES 72,707 44,914
SUPPLIERS - ACCRUED EXPENSES 11,008 12,915
TOTAL 83,715 57,829
Note 14 - Other debts and accrual accounts
Trade payables increase is due to high activity level in Q4 2018 12/31/2018 12/31/2017
FINANCIAL INSTRUMENTS 0 983
CUSTOMERS - ADVANCES AND PREPAYMENTS 3,381 2,140
CUSTOMERS - ACCRUED INCOME 1,858 1,749
SOCIAL SECURITY AND TAX LIABILITIES, PENSION COMMITMENTS 15,231 9,133
DEFERRED INCOME AND OTHER LIABILITIES 2,472 2,221
TOTAL 22,941 16,226
The increase in tax liabilities is mainly due to VAT charged during Q4.
Other debts - price supplement in € ‘000 12/31/2018 12/31/2017 Variation
Put on miniroty interests in Findbox 2,620 5,500 -2,880
Earn out Market Hub 2,000 - 2,000
Earn out PDi 2,591 4,282 -1,691
TOTAL 7,211 9,782 -2,571
• € 2,591 (€4,282 K as of 21/31/17) for the earn-out on the acquisition of PDi;
• €2,000 K for Market Hub
The amount of €1,676 K corresponds to the share of the research tax cre-dit for capitalized development pro-jects, reported on the income state-ment at the rate of depreciation of the under- lying assets.
• Findbox: EUR 2,500k paid in Ja-nuary 2018 for the put on the 33% acquisition of SES-imagotag Deutschland GmbH, which was the subject of a firm and definitive agreement on the amount in Au-gust 2017; in addition, an adden-dum was signed in January 2019 on the terms of payment and re-sulted in the reclassification of part of the additional costs in per-sonnel costs for EUR 380k.
• Market Hub: EUR 2,000k corres-ponding to the estimated put on
the 40% acquisition of Market Hub. This amount is provisional and will be subject to a definitive ad-justment in the next 12 months. In accordance with the accounting method adopted by the Group, this adjustment was recognised in equity over the period.
• PDi: EUR 783k paid in October 2018 for the earn out on the acqui-sition of PDi, which was the sub-ject of a firm and final agreement in September 2018 and resulted in a price reduction of EUR 915k. In
accordance with IFRS3, this price adjustment has been included in the income statement. In addition, late interest was recorded for an amount of EUR 7k. The amount of EUR 1,676k corresponds to the CIR’s share of capitalised deve-lopment projects, compared to the income statement at the rate of amortisation of the underlying assets.
157
Notes to the income statement
Note 15 - Sales Sales for the period break down as follows by geographical zone:
Millions of € 12/31/2018 12/31/2017 12/31/2018 12/31/2017
MAINLAND FRANCE 59,5 32% 69,2 45%
EXPORTS 128,4 68% 83,8 55%
TOTAL 187,9 153,0
Sales can be broken down into: €164.8m for goods and € 23.1m for services.
Note 16 - Purchases consumed
The amount of purchases consumed is composed of the following:
• consumption of purchases of raw materials and merchandise;
• consumption of inventories of finished products;
• transportation and incidental expenses relating to these purchases.
Note 17 - External expenses
in € ‘000 12/31/2018 12/31/2017
Subcontracted variable expenses -7,517 -10,101
Outsourced personnel and recruitment expenses -2,505 -2,551
Travel expenses -4,645 -4,264
Marketing expenses -2,124 -2,122
Consulting fees -3,685 -5,396
IT and telecom expenses -1,669 -1,617
Other -2,919 -2,141
TOTAL -25,064 -28,192
Decrease in external expenses is due to export sales : installation costs are borne by external distDecrease in consulting fees, compared to 2017, is mainly due to the change in the majority shareholder in 2017, which has triggered significant lawyers fees.ributors.
Note 18 - Payroll costs
in € ‘000 12/31/2018 12/31/2017
PAYROLL COSTS -27,335 -24,264
PENSION COMMITMENTS 1 1
CAPITALIZED FIXED ASSET EXPENSES - DEVELOPMENT COSTS 3,589 2,929
STOCK OPTIONS
BONUS SHARES (IFRS 2 EXPENSES INCLUDING EMPLOYER CONTRIBUTION) -12,908
TOTAL -23,745 -34,242
Consolidated financial statements
158
Annual report
Note 21- Other financial income and expenses
in € ‘000 12/31/2018 12/31/2017
FINANCIAL INSTRUMENTS 1,825 -565
BANK INTEREST EXPENSES -1,757 -1,587
Other financial expenses -726
EXCHANGE GAINS 2,631 2,873
EXCHANGE LOSSES -2,134 -5,211
TOTAL -162 -4,490
Note 20 - Details of other operating income and expenses
in € ‘000 31/12/2018 31/12/2017
Fair value of securities acquired (product) 55
Acquisition price supplement adjustment (income) 915
Compensation insurance to be received in the event of a claim 1,009
Other income 17 11
Other operating income 1,941 66
Fair value of securities acquired (expenses) -325
Net book value of scrapped fixed assets -198 -249
Other expenses -166 -56
Expenses due in the event of a claim -400
Other operating charges -764 -630
Total 1,177 -564
Note 19 - Net allowance for provisions
TYPE OF PROVISIONS IN € ‘000 Opening Allowance RELEASE OF ALLOWANCE CLOSING
WARRANTY FOR PROVISIONS 413 327 -172 568
OTHER PROVISIONS FOR CONTINGENCIES AND CHARGES 298 1 234 -608 923
PROVISIONS ON INVENTORY VALUE 1 250 2 387 -413 3 224
PROVISIONS FOR TRADE RECEIVABLES 311 168 -245 233
TOTAL 2 272 4 116 -1 439 4 948
CURRENT
CHANGE IN PROVISIONS FOR CONTINGENCIES AND CHARGES 2 942 -1 433
PERSONNEL 185 -6
OTHER 462
FINANCIAL
FINANCIAL EXPENSES 527
Total P&L 4 116 -1 439
159
Note 22 - Income tax and deferred taxes
Millions of € 12/31/2018 12/31/2017
DEFERRED TAXES 3,093 4,449
TAX LIABILITIES -365 -37
DEFERRED TAXES 2,729 4,412
Deferred tax has been calculated on the best estimate of the average anual tax rate.
Average tax rate 28%
NET INCOME -5,900
THEORETICAL TAX 2,416
TAX REPORTED 2,729
DIFFERENCE 313
IMPACTS:
PERMANENT DIFFERENCES -36
OTHER - TAX RATE DIFFERENCES 349
Total 313
Average tax rate 12/31/2018 12/31/2017
Deferredtax assets
TAX LOSS CARRY-FORWARDS 8,296 4,189
TEMPORARY DIFFERENCES 1 1,274 1,658
FINANCIAL INSTRUMENTS 350
Total DTA 9,571 6,197
DEFERRED Tax LIABILITIES
AMORTIZATION OF TECHNOLOGIES 2,342 2,537
CAPITALIZATION OF R&D EXPENSES 1,238 948
TEMPORARY DIFFERENCES 1 33 131
Instruments financiers 169
Total DEFERREDTAX LIABILITIES
3,782 3,616
Deferred tax assets relating to tax loss carry-forwards include the group entities except Germany.
The deferred tax liabilities relating to the technologies identified following
the goodwill allocation work break down as follows:
• Pervasive Displays Inc: €1,027 K• Findbox: €517 K• SES-imagotag GmbH: €798 K
Consolidated financial statements
160
Annual report
Note 23 - Net income - Earnings per share
Net profit for the year amounted to -€5,900 K
Effect of potential dilution on the capital
Instruments NUMBER Effect
STOCK OPTIONS 36,000 0.4%
Total 36,000 0.4%
Earnings per share
EARNINGS PER SHARE 12/31/2018 12/31/2017
PROFIT (LOSS) (€K) -5,900 -21,069
average NUMBER OF SHARES 13,961,761 12,906,521
STOCK OPTIONS 36,000 106,925
BONUS SHARES 179,517
EARNINGS PER SHARE [IN EUROS]
- BEFORE DILUTION -0.42 -1.63
- After dilution -0.42 -1.63
Commitments made:
Comfort letter to Bank Austria (SES-imagotag GmbH’s bank): €4,600 K throughout the term of the loan;
• Comfort letter to SES-imagotag Deutschland GmbH (insolvency, illi-quidity, overindebtedness risk);
• rental payment guarantee of €182 K (CIC);
• interest-bearing collateral account (CIC);
• rent payment guarantee of €45 K (BNP)
• guarantee for export market of €2,700 K (CIC)
Future rental fees to be paid according to existing leasing contracts
LEASES (€) < 1 year BETWEEN 1 AND 5 YEARS > 5 years
OFFICES/ WAREHOUSES 1,233,363 1,912,388 -
VEHICLES 457,226 362,719 -
Total 1,690,589 2,275,107 -
The number of employees at 31 December 2018 was as follows:
geographic Area Salariés
France 188
International 191
TOTAL 379
Note 24 - Effectifs
Note 25 - Off-balance sheet commitments
161
The compensation of the Chairman and Chief Executive Officer is as follows:
CATEGORY 12/31/2018 12/31/2017
SHORT-TERM BENEFITS 420,000 462,000
POST-EMPLOYMENT BENEFITS 0 0
OTHER LONG-TERM BENEFITS 0 0
END-OF-CONTRACT COMPENSATION 0 0
SHARE-BASED PAYMENTS 0 0
In financial terms, the Company is mainly exposed to currency fluctua-tions on its purchases made in dollars (approximately 80% of the volumes).
Over financial year 2018, €4,458 K in research and development expendi-ture was capitalized on the balance
Note 27 - Research and development expenditure
Note 28 - Transactions with related parties
Note 26 - Degree of exposure to market risks
The related parties identified by the Group are:
• Group shareholders owning more than 10% of the share capital;
• members of the Board of Directors.
In K$ end of December 2018
Cover portfolio at the end of December 2017 139,000
Released on 2018 107,000
Sold in 2018 13,000
Cover portfolio at the end of December 2018 (due in 2019) 19,000
sheet, including €1,968K in fixed assets in progress.
As of December 31, 2018, the amount of transactions completed with the Group’s majority shareholder after the acquisition of the equity stake on December 20, 2017 was € 20.9m including a €8.1m sales of com-ponents with BOEVT (Hong Kong
Note 29 – Compensation paid to the C.E.O. and retirement plan (GSC)
Co) and €5.6m consulting fees to Chongqing BOE Smart electronic Stystems Co Ltd to assist for the new plant starting phase.
The gross compensation paid to the Chairman and Chief Executive Offi-cer for the past period amounts to EUR 420k in respect of their 2018 fixed compensation and 2017 bo-nus. A contract under the Social Guarantee of Chief Executive Offi-cers (GSC) was signed during 2012
to the benefit of the Chairman and Chief Executive Officer. The an-nual subscription for the year 2018 amounts to EUR 19k. This contract includes the basic plan and a sup-plemental plan, providing compen-sation coverage over a 12-month period (former plan).
Consolidated financial statements
162
Annual report
Liquidity risk
To manage the liquidity risk that may Note 31 arise from the collecta-bility of financial liabilities, whether at their contractual due date or ear-ly, the Group implements a cautious financing policy based in particu-lar on the investment of its excess available cash in risk-free financial investments.
All short-term investments consist of term deposits.
Credit risk
The financial assets that could poten-tially expose the Group to credit or counterparty risk mainly correspond to:
• trade receivables: customer ac-ceptance procedures and related credit risk analyses are fully in-corporated into the overall risk as-sessment process implemented by the Group. This risk is controlled on a daily basis through the col-lection and recovery processes. In addition, the large number of in-dividual customers minimizes the risk of concentration of credit re-lating to trade receivables;
• and financial investments: the Group’s policy is to spread out its investments over short-term mone-tary instruments, generally for less than one month, in keeping with rules of diversification and coun-terparty quality. The book value of financial assets recognized on the financial statements, which is pre-sented net of impairment losses, represents the Group’s maximum exposure to credit risk.
The Group does not hold any signifi-cant financial assets that are outstan-ding and not impaired.
COMPANY NAME SiègeConsolidation
method% CONTROLLED
12/31/2018% Held
12/31/2018% Held
12/31/2017
SES-imagotag Nanterre S.A. (France). France (Parent) (Parent) (Parent) (Parent)
SES-imagotag Pte Ltd Singapore FC 100 100 100
SES-imagotag Mexico srl. de cv. Mexico FC 99 99 99
SES-imagotag Italia Srl. Italy FC 100 100 100
SES-imagotag GmbH. Austria FC 100 100 100
Solutions Digitales SES-imagotag Ltée. Canada FC 100 100 100
Market Hub Technologies Ltd. Ireland FC 100 100 60
SES-imagotag INC. United States FC 100 100 100
SES-imagotag Netherlands BV. Netherlands FC 100 100 100
SES-imagotag Denmark Aps. Denmark FC 100 100 100
SES-imagotag Iberia S.L. Spain FC 100 100 N.A
SES-imagotag Deutschland GmbH. Germany FC 100 100 100
Pervasive Displays Inc. Taiwan FC 100 100 100
Société non consolidée car l’activité n’est pas significative sur la période
SES-imagotag Hong Kong Ltc. Hong Kong 100 100 100
II.5 CONSOLIDATION SCOPE
Note 31 - Credit, liquidity, and cash flow risks
Note 30 - Auditors Fees
The expense recognised in res-pect of the Statutory Auditors’ fees amounts to EUR 454k for the certifi-
cation of the individual and conso-lidated accounts and EUR 31k for services other than the certification
Deloitte KPMG TotalIN € ‘OOO Amount Amount Amount
Fees related to the certification of the individual and consolidated accounts
Issuer 204 189 393
Subsidiaries 35 26 61
Services other than account certification*
Issuer 14 14
Subsidiary 17 17
TOTAL 253 232 484
* Other services for the Deloitte firm consist in CSR audit and for the KPMG firm consist in tax compliance audit regarding transfer pricing policy impact in Taiwan.
of the accounts and is detailed as follows:
163
BALANCE SHEET (ASSETS)
10.2 Corporate financial statements AT DECEMBER 31, 2018
IN € ‘OOO PERIOD ENDED 12/31/2018 PERIOD ENDED 12/31/2017
(12 months)
Gross AMORT./ DEPR. & PROV. Net Net
RESEARCH AND DEVELOPMENT COSTS 26,063 23,241 4,812 6,746
CONCESSIONS, PATENTS & SIMILAR RIGHTS 22,670 14,012 15,557 10,789
GOODWILL 12,639 12,639 12,639
INTANGIBLE FIXED ASSETS IN PROGRESS 7,501 8,653 7,501
BUILDINGS 1,214 701 1,022 724
PLANT, MACHINERY, AND EQUIPMENT 2,612 2,464 199 257
OTHER TANGIBLE ASSETS 2,546 1,231 1,315 806
PARTICIPATING INTERESTS 60,839 60,839 61,754
RECEIVABLES DUE FROM EQUITY INTERESTS 11,582 11,582 10,197
LOANS 382 382 337
OTHER LONG-TERM INVESTMENTS AND LOANS 378 378 359
FIXED ASSETS 159,026 41,649 117,377 112,109
RAW MATERIALS, SUPPLIES 4,756 663 4,093 5,472
INTERMEDIATE AND FINISHED PRODUCTS 16,531 676 15,855 18,316
GOODS PURCHASED FOR RESALE 12,949 579 12,370 7,120
ADVANCE PAYMENTS TO SUPPLIERS 0 0 0
TRADE RECEIVABLES 41,368 100 41,268 23,460
OTHER RECEIVABLES 50,757 50,757 36,143
SHORT-TERM INVESTMENTS 213 213 332
CASH AND CASH EQUIVALENTS 19,419 19,419 31,581
PREPAID EXPENSES 323 323 936
CURRENT ASSETS 146,317 2,019 144,298 123,360
UNREALIZED FOREIGN EXCHANGE LOSSES 1,607 1,607 1,863
TOTAL ASSETS 306,949 43,668 263,281 237,332
Corporate financial statements
164
Annual report
BALANCE SHEET (EQUITY & LIABILITIES)
IN € ‘OOO Period ended 31/12/2018 (12 months) Period ended 31/12/2017 (12 months)
Capital social ou individuel (dont versé : 29 007) 29,007 26,768
Primes d'émission, de fusion, d'apport ... 96,664 67,693
Réserve légale 2,604 2,604
Report à nouveau 31,608 45,046
Résultat de l'exercice -8,927 -8,886
CAPITAUX PROPRES 150,955 133,226
Provisions pour risques 2,480 2,031
Provisions pour charges
PROVISIONS POUR RISQUES ET CHARGES 2,480 2,031
Emprunts et dettes auprès des établissements de crédit 46,494 49,972
Découverts, concours bancaires
Emprunts et dettes financières divers
Avances et acomptes reçus sur commandes en cours 2,156 1,610
Dettes fournisseurs et comptes rattachés 47,829 33,133
Dettes fiscales et sociales 6,462 6,450
Autres dettes 5,725 10,561
Produits constatés d’avance 881 148
EMPRUNTS ET DETTES 109,547 101,874
Ecart de conversion passif 298 201
TOTAL PASSIF 263,281 237,332
165
IN € ‘OOO PERIOD ENDED 12/31/2018 (12 MONTHS)) PERIOD ENDED 12/31/2017 (12 MONTHS)
SALES 118,486 98,557
INCREASE IN STOCKS OF FINISHED GOODS AND WORK IN PROGRESS 112,437 -4,478
OWN WORK CAPITALIZED -2,598 1,386
WRITE-BACKS OF AMORT. DEPR. AND PROVISIONS EXPENSES REALLOCATED 1,788 1,235
OTHER INCOME 6 742 4,481
FOREIGN EXCHANGE GAINS ON COMMERCIAL RECEIVABLES AND PAYABLES 2,114 3,307
TOTAL OPERATING INCOME 121,908 104,488
PURCHASES OF RAW MATERIALS AND OTHER SUPPLIES -88 693 -64,792
INVENTORY CHANGES (RAW MATERIALS AND OTHER SUPPLIES) 5,360 1,199
OTHER PURCHASES AND EXTERNAL EXPENSES -21,913 -23,471
TAXES AND SIMILAR CHARGES -1,261 -740
WAGES AND SALARIES -11,254 -10,035
SOCIAL SECURITY CONTRIBUTIONS -4,485 -7,270
ALLOWANCES FOR AMORTIZATION/DEPRECIATION OF FIXED ASSETS -6,124 -5,234
ALLOWANCES FOR PROVISIONS ON FIXED ASSETS -535 -535
ALLOWANCES FOR PROVISIONS ON CURRENT ASSETS -1,453 -718
ALLOWANCES FOR PROVISIONS FOR CONTINGENCIES AND CHARGES -1 038 -156
OTHER EXPENSES -48 -109
FOREIGN EXCHANGE LOSSES ON COMMERCIAL RECEIVABLES AND PAYABLES -420 -473
TOTAL OPERATING EXPENSES -131,863 -112,334
OPERATING PROFIT (LOSS) -9,955 -7,846
INCOME FROM OTHER SHORT-TERM INVESTMENTS AND RECEIVABLES 37 1
OTHER INTEREST AND RELATED INCOME 2,061 2,608
AMOUNTS RELEASED FROM PROVISIONS AND EXPENSES REALLOCATED 1,632 1,274
POSITIVE EXCHANGE DIFFERENCES 3,241
NET INCOME FROM DISPOSALS OF SHORT-TERM INVESTMENTS 39 49
TOTAL FINANCIAL INCOME 7,010 3,931
FINANCIAL ALLOWANCES FOR AMORTIZATION/DEPRECIATION AND PROVISIONS -1,281 -1,863
INTEREST AND SIMILAR EXPENSES -1,645 -1,344
NEGATIVE EXCHANGE DIFFERENCES -3,325 -2,191
2. INCOME STATEMENT
Corporate financial statements
166
Annual report
INCOME STATEMENT (CONTINUED)
CHANGES IN SHAREHOLDERS’ EQUITY
IN € ‘OOO PERIOD ENDED 12/31/2018 (12 MONTHS)) PERIOD ENDED 12/31/2017 (12 MONTHS)
NET EXPENSES ON DISPOSALS OF SHORT-TERM INVESTMENTS -221 -56
TOTAL FINANCIAL EXPENSES -7,324 -5,453
FINANCIAL PROFIT (LOSS) -83 -1,522
PROFIT (LOSS) BEFORE TAXES AND EXTRAORDINARY ITEMS -9,417 -9,368
EXTRAORDINARY OPERATING INCOME 1
EXTRAORDINARY INCOME ON CAPITAL OPERATIONS 0
AMOUNTS RELEASED FROM PROVISIONS AND EXPENSES REALLOCATED 0
TOTAL EXTRAORDINARY INCOME 0 1
EXTRAORDINARY OPERATING EXPENSES -32 -13
EXTRAORDINARY EXPENSES ON CAPITAL OPERATIONS 0
EXTRAORDINARY ALLOWANCES FOR AMORTIZATION/DEPRECIATION AND PROVISIONS 0
TOTAL EXTRAORDINARY EXPENSES -32 -13
EXTRAORDINARY PROFIT (LOSS) -32 -12
TAX ON PROFITS 522 494
NET INCOME -8,927 -8,886
IN € ‘OOO Capital CAPITAL RESERVESRESERVES AND PROFIT (loss)
Total Total
SHAREHOLDERS’ EQUITY AT 12/31/2016 24,155 34,253 2,604 54,897 115,909
NET INCOME FOR THE PERIOD -8,886 8,886
CAPITAL INCREASE 2,613 33,440 -9,851 26,203
SHAREHOLDERS’ EQUITY AT 12/31/2016 26,768 67,693 2,604 36,160 133,226
NET INCOME FOR THE PERIOD -8,927 8,927
CAPITAL INCREASE 2,238 28,970 -4,552 26,657
SHAREHOLDERS’ EQUITY AT 12/31/2018 29,007 96,664 2,604 22,681 150,955
167
I.INTRODUCTION
The annual financial statements at December 31, 2017 cover a period of 12 months.
The following information is an in- tegral part of the annual financial statements for the period ended De-cember 31, 2017, approved by the Board of Directors on March 5, 2018.
Only significant information is mentioned in these notes. Unless otherwise indicated, the presented data are in thousands of euros.
II. ACCOUNTING RULES AND METHODS
The financial statements for the pe-riod ended December 31, 2017 were prepared in accordance with the provisions of the French commercial code, the French general accoun-ting code (Plan Comptable Géné-ral) as described in ANC regulation 2016-07 of November 4, 2016, and the generally accepted accounting practices in France.
General accounting conventions were applied in keeping with the principle of prudence, in accor-dance with the following basic as-sumptions:
• going concern;
• consistency of accounting me-thods between periods;
• independence of accounting periods
and in accordance with the general rules for preparation and presenta-tion of annual financial statements.
The basic method used to value items booked to the accounts is the historical cost method.
The main methods used are the fol- lowing:
1) Intangible fixed assets
Self-financed research and deve-lopment costs are recognized in the period in which they are incurred, with the exception of project re-search and development costs that meet the following criteria:
• the product or process is clearly identified, and the costs are indi-vidualized on a reliable basis;
• the technical feasibility of the pro- duct has been demonstrated;
• the product or process will be marketed or used internally;
• there is a potential market for the product, or its internal usefulness has been demonstrated;
• the necessary resources are avai- lable to complete the project.
Research and development costs are amortized over a period of 3 to 5 years on a straight-line basis. Pa- tents and trademarks are amortized on a straight-line basis over a pe- riod of 10 to 15 years, and software is amortized over a period of 2 to 5 years. Development costs for the ERP are amortized on a straight- line basis over 10 years.
The merger completed on May 16, 2007 between SES-imagotag and SES ESL resulted in a technical loss. In accordance with ANC regulation 2015-06, this technical loss was al-located to the various assets contri-buted by the Transferring Company, insofar as the unrealized gains reco-gnized per asset are significant.
In this case, the technical loss corres-ponds to the contributed patents for €8,025 K and goodwill for €12,639 K.
Impairment tests are performed at each annual close and whenever inte-
rim financial statements are prepared if there is an indication of loss of va-lue. In this case, the asset’s net book value is compared with its present value as of the same date.
With regard to goodwill, the pre-sent value is reviewed according to the Discounted Cash Flows method, based on future earnings prospects.
2) Tangible fixed assets
Tangible fixed assets are valued at their acquisition cost (purchase price and incidental expenses, ex-cluding fixed asset acquisition costs) or their production cost.
Since January 1, 2005, the corpo-rate financial statements have been based on the new texts of the CRC (French accounting regulatory com-mittee) on the definition and valua-tion of assets (CRC 2004-06) and the depreciation, and impairment of assets (CRC 2002-10 and 2003-07).
Depreciation is calculated based on the useful life of the fixed as- sets concerned, according to the straight-line method. If tax depre-ciation is different from economic depreciation, the difference is re- corded as excess tax depreciation.
Breakdown of useful lives used to calculate depreciation:
Notes
Corporate financial statements
168
Annual report
the date of the transaction. As of the closing date, assets and liabilities denominated in foreign currencies are translated into euros at the ex-change rate in force on that date. The difference resulting from the transla-tion of payables and receivables in foreign currencies is recognized on the balance sheet in “translation ad-justments.” Unrealized losses are the subject of a provision.
8) Revenue recognition
The revenue-generating event varies depending on the type of sale:
• When SES-imagotag is responsible for installing label systems, reve-nue is recognized when the system becomes operational (installation of the antenna). At the closing of the accounts, for installations in-voiced but not yet completed, de-ferred income is recognized, and for installations completed but not yet invoiced, accrued income is reco-gnized;
• when SES-imagotag only delivers labels, revenue is recognized when the goods are taken over by the carrier or the freight forwarder (in the case of FOB sales).
In addition, training is invoiced se-parately, when the service is perfor-med.
Annual lump-sum rebates granted to customers are recorded as a re-duction of sales.
Lastly, maintenance contracts are invoiced in advance for monthly, quarterly, four-month, or six-mon-th periods. Deferred income is re-cognized to prorate sales related to the following period.
3) Long-term investments and loans
These items primarily consist of participating interests and recei-vables related to these interests.
Participating interests appear on the balance sheet at their acquisition cost. Where appropriate, an impair-ment loss is recorded to reduce this cost to the value in use. The value in use is based on cash flow and ope-rating projections of the entities in-volved, prepared by the operational departments as part of their budget process and with the business plans established as part of the acquisi-tions of equity interests. In the event of a loss of value, impairment tests are carried out based on an esti-mate of the value in use according to the prospects of future business and profitability.
4) Inventories and work in progress
The valuation of inventory compo-nents is determined according to their cost price valued at the ave-rage weighted cost.
Work in progress consists of instal-lation projects started but not yet completed at the close of the period. They are valued at the cost price of materials and the cost of time spent as of the closing date.
The valuation of finished products consists of the following:
• cost price of components valued at the weighted average unit cost;
• cost of assembly by the subcontractor;
• additional costs consisting essen-tially of component storage costs and transit costs for labels.
A provision for inventory impair-ment is recorded when an item shows slow turnover either because it can no longer be sold or because it is defective or obsolete.
5) Provisions for asset impairment
These are recorded to take into ac-count the risk of non-recoverabi-lity relating to assets existing at the close.
6) Provisions for contingencies and charges
In accordance with CRC Regulation 2000-06 on liabilities, a provision is recorded for any obligation of the Company to a third party able to be estimated with sufficient reliability and requiring a likely outflow of re-sources without consideration.
7) Translation of transactions denominated in foreign currencies
These transactions in foreign cur-rencies are initially recorded in euros at the exchange rate in force as of
NATURE OF CAPITAL ASSETS Duration
NSTALLATIONS AND IMPROVEMENTS 5 to 10 years
INDUSTRIAL TOOLS 3 to 5 years
INDUSTRIAL EQUIPMENT 2 to 5 years
TRYearsPORT EQUIPMENT 4 to 5 years
OFFICE AND IT EQUIPMENT 3 to 5 years
OFFICE FURNITURE 5 to 10 years
169
9) End-of-career benefits
No provision is established for retire-ment benefits. Where appropriate, the Company pays all or part of the debt for these commitments to the insurance company.
The unpaid balance appears in off-balance sheet commitments.
10) Foreign exchange gains and losses
In accordance with regulation no. 2015-05 of July 2, 2015, applicable to periods beginning on or after January 1, 2017, foreign exchange gains and losses on trade receivables and payables, pre-viously recognized in financial income, are recognized in operating income and expenses respectively. Foreign ex-change gains and losses on financial transactions are recognized in financial income and expense respectively.
The allowance for the foreign exchange loss provision follows the same classifi-cation on the income statement.
III. HIGHLIGHTS OF THE PERIOD
Highlights of the year
Acquisition of SES-imagotag shares by E Ink
The Group and E Ink® Holdings (“E Ink”), the leader in electronic ink technology, have strengthened their strategic alliance to accelerate and expand their growth on the market of IoT solutions for physical retail, with the acquisition of a 6.01% stake in the Company by E Ink, represen-ting an investment of €26 million, with a price per share of €30 as part of a capital increase reserved for E Ink, which was approved by the Shareholders’ Meeting of 22 June 2018. This stake represents 5.98% of the capital as at December 31, 2018.
Simplified takeover bid process
On 20 December 2017, BOE Smart Retail (Hong Kong), jointly owned by BOE Technology and the mana-gement of SES-imagotag, acquired a controlling interest of 6,669,176 SES-imagotag shares at €30 per
share. Prior to the acquisition of this block of shares, the Company controlled by the management had contributed 537,520 SES-imagotag shares to BOE Smart Retail and taken part in a cash capital increase of €17.9 million in BOE Smart Re-tail. The main executive managers undertook in particular to keep their BOE Smart Retail shares for at least five years. This huge reinvestment reflects the strong commitment of the management to the Company’s long-term development.
In accordance with regulations, BOE Smart Retail filed an offering circu-lar with the French market regulatory authority, AMF, in view of a simpli-fied takeover bid for the remaining SES-imagotag shares at the same price of €30 per share. On 20 Fe-bruary 2018, the AMF approved the offering circular under the number 18-050, and BOE Smart Retail’s of-fer was launched on 2 March and closed on 15 March 2018.
On 15 March 2018, Société Gé-nérale informed the AMF that un-der the simplified takeover bid for SES-imagotag’s shares, opened from 2 to 15 March 2018 inclusive, BOE Smart Retail had acquired 3,582,490 SES-imagotag shares on the market at a unit price of €30.
When the bid was closed on 15 March 2018, the initiator held 10,789,186 SES-imagotag shares representing 79.94% of the voting rights, this stake being 74.39% on December, 31, 2018.
Corporate financial statements
170
Annual report
IV NOTES TO THE BALANCE SHEET
Note 1 - Fixed assets
Movements during the period are detailed in the tables below:
Tangible fixed assets
Increase breakdown:
• €6,900K Pervasive Displays Inc. technology• €1,990K Jeegy Cloud new version activated expenses• €1,619K ERP development expenses• €1,375K R&D activated expenses
GROSS FIXED ASSETS Opening INCREASETRANSFERS BETWEEN
LINE ITEMSDECREASE Closing
BUILDINGS AND IMPROVEMENTS 1,214 508 1,723
MACHINERY, EQUIPMENT, AND TOOLS 2,612 50 2,663
OTHER TANGIBLE FIXED ASSETS 1,753 793 2,546
TOTAL 5,580 1,352 0 0 6,931
Long-term investments and loans
The increase in participating interests mainly corresponds to the acquisitions of PDi: €2,367 K vs. €3,282 K accounted for on December 31, 2017.
FINANCIAL ASSETS OPENING increase decrease closing
PARTICIPATING INTERESTS 61,754 -915 60,839
RECEIVABLES DUE FROM EQUITY INTERESTS 10,197 1,385 11,582
OTHER LONG-TERM INVESTMENTS AND LOANS 696 64 760
TOTAL 72,647 1,449 -915 73,180
GROSS FIXED ASSETS IN € ‘000 Opening INCREASETRANSFERS BETWEEN
LINE ITEMSDECREASE Closing
GOODWILL 12,639 12,639
RESEARCH & DEVELOPMENT 26,063 1,990 28,053
CONCESSIONS, PATENTS & SIMILAR RIGHTS 14,645 6,900 21,545
Technical loss assigned to patents 8,025 8,025
INTANGIBLE FIXED ASSETS IN PROGRESS 7,501 3,142 -1,990 8,653
TOTAL 68,873 10,042 0 0 78,915
171
Tangible fixed assets
Note 3 - Inventories
At December 31, 2018, the impairment of the technical loss corresponds to the impairment of the fair value of patents for €535 K (gross value: €8,025 K at 01/01/2004, amortized over 15 years on a straight-line basis).
The increase in inventory at December 31, 2018 is mainly due to the high delivery level by the end of the year and delivery planned for beginning 2019.
DEPRECIATION OPENING allowance WRITE-BACK closing
BUILDINGS AND IMPROVEMENTS 490 211 701
MACHINERY, EQUIPMENT, AND TOOLS 2,355 108 2,463
OTHER TANGIBLE FIXED ASSETS 947 284 1,231
TOTAL 3,792 603 0 4,395
Inventories 12/31/2018 12/31/2017
INVENTORY OF RAW MATERIALS 4,756 5,472
INVENTORY OF FINISHED PRODUCTS 16,531 18,882
INVENTORY OF GOODS PURCHASED FOR RESALE 12,949 7,120
IMPAIRMENT OF INVENTORY -1,919 -566
TOTAL 32,317 30,909
Note 2 - Amortization and depreciation
Intangible fixed assets
Amortissements OPENING allowance transferOPENING
RESTATEMENTclosing
RESEARCH & DEVELOPMENT 19,317 3,924 23,241
CONCESSIONS, PATENTS & SIMILAR RIGHTS 4,391 1,597 5,988
TECHNICAL LOSS ALLOCATED TO PATENTS 7,490 535 8,025
TOTAL 31,198 6,056 0 0 37,254
Corporate financial statements
172
Annual report
Other asset impairments
Provisions for contingencies are established to take account of contingencies existing as of the closing of the accounts.
The provision for foreign exchange losses was recorded following the recognition as of December 31, 2018 of an unrea-lized foreign exchange loss mainly on receivables denominated in Mexican pesos of €1,073 K and on receivables deno-minated in other currencies for €534 K.
Other provisions for contingencies totaled €874 K and were related to labor court disputes (€347K) and supplier litiga-tion (€527K).
NATURE OF PROVISIONS OPENING allowance WRITE-BACK not used closing
INVENTORIES AND WORK IN PROGRESS 566 1,353 1,918
TRADE RECEIVABLES 135 100 -135 100
TOTAL 700 1,453 -135 2,018
Provisions for contingencies and charges
NATURE OF PROVISIONS OPENING allowance WRITE-BACK used NOT USED Closing
PROVISION FOR FOREIGN EXCHANGE LOSSES 1,863 1,607 -1,863 1,607
OTHER PROVISIONS FOR CONTINGENCIES 168 712 -6 874
TOTAL 2,031 2,318 -1,863 -6 2,480
Impairment of trade receivables is as follows:
Group A - any individual receivable exceeding a €2 K threshold and 90 days late is analyzed on a case-by- case basis:
• a 35% provision is established for cases of equipment recovery;
• a provision is established for recei-vables in litigation according to the historical recovery success ratio (50%);
• a 100% provision is established for accounts receivable deemed non-recoverable.
Group B - receivables below the €2 K threshold and more than 90 days late are classified as outstanding payments:
• no provision is established for re-quests for additional documentation;
• a provision is established on any grounds related to a disagreement or dispute on a prorated basis de-termined at impairment of Group A receivables.
Inventory impairment is based on the following rule:
The average item turnover is between 0 and 6 months; for all stored items whose consolidated turnover is longer than 6 months, three categories are identified:
• category A: items with a turnover of less than 6 months and items subject to upgrading/industrial adaptation - no impairment;
• category B: items that cannot be transformed industrially having a turnover rate of between 6 months and 12 months => 50% impairment;
• category C:
- after 12 months without move-ments within the Group, 80% impairment;
- after 18 months without move-ments within the Group, these items are transferred to a “Scrap” inventory, resulting in 100% im-pairment.
In addition to the above impairment
rule, a reference-by-reference analy-sis was conducted to refine the pro-vision on the basis of initiated action plans and sales prospects
Depreciation of accounts receivable
Depreciation of trade receivables is considered as follows:
Only receivables with an overrun of more than 90 days and a cause of dispute from the client are analysed on a case-by-case basis according to the following criteria:
• Any reason for a request for ad-ditional documentation is not sub-ject to any provision.
• Cases to consider material recove-ry are provisioned at 33%.
• Claims entrusted to litigation are provisioned based on the histori-cal recovery success ratio (50%).
• Claims deemed irrecoverable are 100% provisioned.
173
Note 4 – Receivables and payables
Receivables
RECEIVABLES GROSS AMOUNT AT 1 YEAR OVER 1 YEAR
RECEIVABLES DUE FROM EQUITY INTERESTS 11,582 11,582
LOANS AND OTHER LONG-TERM INVESTMENTS 760 760
TRADE RECEIVABLES 41,368 41,368
SOCIAL SECURITY RECEIVABLES 100 100
TAX RECEIVABLES 4,000 1,637 2,363,
CURRENT ACCOUNTS AND ACCRUED INTEREST 40,417 40,417
OTHER RECEIVABLES 6,240 6,240
PREPAID EXPENSES 323 323
TOTAL 104,791 90,086 14,705
RECEIVABLES 2018 2017
RECEIVABLES DUE FROM EQUITY INTERESTS 11,582 10,197
LOANS AND OTHER LONG-TERM INVESTMENTS 760 696
TRADE RECEIVABLES 41,368 23,595
SOCIAL SECURITY RECEIVABLES 100 30
TAX RECEIVABLES 4,000 3,820
CURRENT ACCOUNTS AND ACCRUED INTEREST 40,417 27,246
OTHER RECEIVABLES 6,240 5,047
PREPAID EXPENSES 323 936
TOTAL 104,791 71,566
The increase in the balance of trade receivables at December 31, 2018 compared with December 2017 is mainly due to a very high level of ac-tivity during the two last months of the year.
The increase in receivables from equity interests is mainly due to loans made over the period to Per-vasive Displays Inc (€ 1,364 K).
The increase in current accounts and accrued interest mainly relates to cash advances granted over the period to the subsidiaries SES-imagotag GmbH, Pervasive Displays Inc., SES-imagotag Italy and SES-imagotag Deutschland GmbH.
In 2017, the amount of prepaid ex-penses consisted in marketing ex-penses booked in December, 2017
and dedicated to January 2018 ex-hibitions for €520K. Those prepaid expenses did not occur in December 2018.
Corporate financial statements
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Annual report
The increase in the balance of trade payables is due to greater pur- chases by the Company at the end of 2017 compared with the previous year in order to build up the inven- tory of products to be delivered to customers in 2019.
The amount of other debts at De-cember 31, 2018 mainly concerns the following price supplements:
• €3,000 K for the put on the 33% tranche of the acquisition of SES-imagotag Deutschland GmbH, which was the subject of a firm and final agreement in August 2017;
Payable
• €1,591 K for the earn-out on the acquisition of PDi;
• €505 K for the acquisition price balance (retention payment) on the PDi acquisition.
Statement of debts in € ‘000 TOTAL AMOUNT AT 1 YEAR 1 TO 5 YEARS MORE THAN 5 YEARS
Bond issues 40,000 40,000
LOANS AND DEBTS FROM CREDIT ESTABLISHMENTS 6,494 3,136 3,358 0
Other financial liabilities 62 62
Received advances and prepayments 2,156 2,156
Suppliers and related accounts 47,829 46,680 1,148
Social & Tax liabilities
• personnel 1,997 1,997
• social security bodies 1,672 1,672
Turnover taxes report 2,418 2,418
Other taxes, duties and similar 376 376
Assets to be established and other debts 5,663 5,043 620
Deferred income 881 881 ,
TOTAL 109,548 64,421 45,126 0
Statement of debts in € ‘000 2018 2017
Bond issues 40,000 40,000
LOANS AND DEBTS FROM CREDIT ESTABLISHMENTS 6,494 9,972
Other financial liabilities 62 0
Received advances and prepayments 2,156 1,610
Suppliers and related accounts 47,829 33,133
Social & Tax liabilities
• personnel 1,997 1,610
• social security bodies 1,672 3,512
Turnover taxes report 2,418 1,048
Other taxes, duties and similar 376 281
Assets to be established and other debts 5,663 10,561
Deferred income 881 148
TOTAL 109,547 101,874
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2018
LONG-TERM INVESTMENTS AND LOANS - ACCRUED INTEREST 133
CUSTOMERS – ACCRUED INCOME 6,858
ACCRUED INTEREST ON CURRENT ACCOUNTS 571
7,562
Note 5 – Accrued income
Note 6 – Accrued expenses
Note 7 – Adjustments accounts
Prepaid expenses amounted to €323 K, and deferred income totaled €881 K.
Unrealized foreign exchange losses were €1,607 K, and unrealized foreign exchange gains were €298 K.
Note 8 – Cash
Short-term investments. Short-term investments totaled €16 K (excluding treasury shares). They are composed of term deposits.
Liquidity agreement. Under a liquidity agreement dated June 22, 2012, €531 K and 3,000 shares were made available to Gilbert Dupont SNC. This liquidity agreement was signed for a term of 12 months, automatically renewable, with the aim of promoting the liquidity of transactions and the regularity of quotations of the shares on the market.
Under this agreement, 11,406 treasury shares were held by SES-imagotag as of December 31, 2018, for a total of €197K, leaving €238 K in cash available.
ACCRUED EXPENSES Gross amount
CREDIT INSTITUTION 10
SUPPLIERS – ACCRUED EXPENSES 24,776
DEBTS – PROVISION FOR PAID LEAVE 866
STAFF – OTHER ACCRUED EXPENSES 1,104
SOCIAL SECURITY CONTRIBUTIONS ON PAID LEAVE 381
OTHER ACCRUED SOCIAL SECURITY CONTRIBUTIONS 354
CENTRAL GOVERNMENT – OTHER ACCRUED EXPENSES 376
TAXES AND SOCIAL SECURITY CONTRIBUTIONS PAYABLE 3,080
ACCRUED CREDIT NOTES 547
TOTAL 28,413
The amount of the invoices to be drawn up mainly corresponds to the various billings of management fees and patent fees within the group for the year 2018 for an amount of EUR 6,737k.
Corporate financial statements
176
Annual report
Note 9 – Shareholders’ equity
Share capital
Allocation of stock options
At December 31, 2018, six stock op-tion allocation plans were therefore in progress:
Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on June 10, 2009:
• the 2011 plan dated October 21, 2011, expiring on October 21, 2018.
Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on March 1, 2012:
• the 2012 plan (1st wave) dated August 31, 2012, expiring on August 31, 2019;
• the 2012 plan (2nd wave) dated De-cember 18, 2012, expiring on De-cember 18, 2019;
• the 2013 plan dated May 28, 2013, expiring on May 28, 2020;
• the 2014 plan (1st wave) dated April 3, 2014, expiring on April 3, 2021.
Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on May 21, 2014:
• the 2014 plan (2nd wave) dated Oc-tober 23, 2014, expiring on Octo-ber 23, 2021.
The table below shows the informa- tion relating to stock options in effect as of December 31, 2018:
At December 31, 2018, the number of stock options granted, which can be subscribed for a total of 36,000 shares, re-presents 0.02% of the share capital and voting rights of SES-imagotag after dilution.
MOVEMENT OF SHARES Number NOMINAL VAL. SHARE CAPITAL IN €
SHARES AT START OF PERIOD 13,384,229 2 26,768,458
SHARES ISSUED 1,119,108 2 2,238,216
SHARES AT END OF PERIOD 14,503,337 2 29,006,674
Plans NUMBER OF NOTIFIED OPTIONS NUMBER OF REMAINING OPTIONS OUTSTANDING *
4/15/2010 14,000 0
9/15/2010 8,500 0
10/21/2011 58,500 0
8/31/2012 315,800 29,650
12/18/2012 19,000 2,000
6/30/2013 65,200 0
4/3/2014 43,000 750
10/23/2014 33,150 3,600
557,150 36,000
* net of options exercised and/or canceled
Stock options and free share awards
177
Bonus share allocations
Note 10 – Loans
On December 21, 2017, the Board of Directors confirmed fulfillment of the alternative conditions for bonus share plans put in place by the Board of Directors at its meetings on December 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016, and March 10, 2017.
Effect of potential dilution on the capital
Earnings per share
Issue premium
The issue premium of €96,663 K is the result of various capital increases carried out since the creation of the company. Over the period, the issue premium increased by €28,970 K, including €24,203 K related to the capital increase (E Ink).
EARNINGS PER SHARE 12/ 31 /2018 12/31/2017
EARNINGS (€K) -8,927 -8,886
WEIGHTED AVERAGE NUMBER OF SHARES 13,961,761 12,906,521
STOCK OPTIONS 36,000 106,925
BONUS SHARES 179,517
EARNINGS PER SHARE (IN EUROS)
- BEFORE DILUTION -0,64 -0,69
- AFTER DILUTION -0,64 -0,69
Instruments Number Effect
STOCK OPTIONS 36,000 0.41%
BONUS SHARES -
Total 36,000 0.41%
Loans OPENING + - closing
BOND DEBTS 40,000 40,000
OTHER LOANS FROM CREDIT INSTITUTIONS 9,972 -3,478 6,495
TOTAL 49,972 0 -3,478 46,495
Corporate financial statements
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Annual report
€M 12/31/2018 12/31/2017
MAINLAND FRANCE 59.5 50% 69.2 70%
Exports 52.9 50% 29.4 30%
TOTAL 112.4 98.6
VI. NOTES TO THE INCOME STATEMENTNote 11 – Sales
Sales for the period break down as follows:
Note 12 – Other income
Note 13 – Reversal of amortisations and provisions, expense transfers
Note 14 – Details of other external charges and charges
Amount in €K 2018 2017
Variable external expenses 3 363 6 595
Travel Expenses and Travel 2 804 2 591
IT and telecom expenses 1 443 1 417
External staff costs and recruitment fees 579 817
Fees 6 267 6 061
Marketing 1 725 1 500
Other external charges 5 732 4 490
Grand Total 21 913 23 471
At 31 December 2018, the company recorded EUR 1,416k in transfers of expenses corresponding mainly to EUR 1,009k in respect of an insu-rance indemnity in the event of a claim on a category of goods and EUR 391k in charge reversal within the group. In addition, the company has reversals of operating provisions
amounting to EUR 372k of which EUR 135k related to the deprecia-tion of trade receivables and EUR 231k to the reversal of provisions on unrealised foreign exchange losses on trade receivables and payables.
At 31 December 2017, this item amounted to EUR 1,235K and main-
ly concerned reversals of provisions on current assets for EUR 823K and EUR 310K reversal on provisions for liabilities and charges
Other income amounted to EUR 6,742k and mainly correspond to management fees invoiced within
The decrease in variable external charges is explained by the fact that in 2017, two major deployment contracts in France accounted for EUR 3.5m of installation costs.
the Group for EUR 6,048k compared to EUR 4,481k. at 31 December 2017, and the annual patent license fee of
Other external expenses mainly consist of subcontracting expenses (recovery, R&D, after-sales service) and rental expenses.
EUR 690k invoiced within the group.
179
As of December 31, 2018, the Company recognized a tax loss of €8,779 K.
The amount of €522 K corresponds to the amount of the research tax credit
recognized for 2018 for €450 K and the recognition of the research tax cre-dit rejected during the tax audit for €72 K (offset by a provision write-back).
Recognition and presentation of the CICE (Crédit d’impôt pour la compé- titivité et l’emploi or Tax Credit for Competitiveness and Job Creation).
The CICE is recorded at the rate of the commitment and is taken into
account as corresponding compen- sation costs are incurred.
Accounting for the CICE was carried out via the option of lowering pay- roll costs.
The impact of taking into account
the CICE on the financial statements is €223 K.
The purpose of the tax credit was to facilitate the Company’s continued training and recruitment efforts.
Note 15 – Tax on profits
Breakdown of tax on profits
Increases and reductions in future tax liabilities
LEVEL OF PROFIT (LOSS) BEFORE TAX Tax AFTER TAX
OPERATING PROFIT (LOSS) -11,028 522 -10,506
FINANCIAL PROFIT (LOSS) 1,611 1,611
EXTRAORDINARY PROFIT (LOSS) -32 -32
TOTAL -9,448 522 -8,927
INCREASES AND REDUCTIONS IN € ‘000 Amount Taxes
INCREASES
REDUCTIONS
- PROVISION NOT DEDUCTIBLE IN THE YEAR OF FUNDING 2,299 766
TOTAL 2,299 766
Note 16 – Financial income and expenses
Financial income totaled €7,010 K, including €1,346 K in dividends, €715 K in accrued interest on re-ceivables from equity interests and current accounts, and €3,241 K in foreign exchange gains.
Financial expenses amounted to €6,471 K, including €3,225 K in fo-reign exchange losses on the reva-luation of bank accounts in foreign currencies, €1,589 K in interest on loans, and €1,281 K in net provisions
for foreign exchange losses.
Corporate financial statements
180
Annual report
VII. ADDITIONAL INFORMATION
Note 17 – Employee headcount
The headcount at December 31, 2018 breaks down as follows:
Contingent liabilities: N/A
Commitments made:
Rent payment guarantee of €182 K (CIC). Interest-bearing collateral account (CIC). Rent payment gua-rantee of €45 K (BNP).
• an “end-of-career benefits” insu-rance contract was signed with “CIC Assurances” on September 17, 2007. The payments made to this organization are intended to cover this commitment, esti-mated at €375 K at December 31, 2018. No sums were paid in 2018.The amount of commitments re-lated to retirement benefits not covered by the contract is esti-mated at €294 K;
• the method used for this estimate
is the retrospective projected credit units method.
The assumptions considered in de-termining this commitment are as follows:
• retirement age: 65 to 67 years;
• employer contribution rate: 46%;
• discount rate: 1.57%;
• mortality table used: INSEE 2017;
• collective bargaining agreement: Metallurgy.
Commitments made:
• Comfort letter to Bank Austria
(SES-imagotag GmbH’s bank): €4,600 K throughout the term of the loan;
• Comfort letter to SES-imagotag Deutschland GmbH (insolven-cy, illiquidity, overindebtedness risk);
• rental payment guarantee of €182 K (CIC);
• interest-bearing collateral ac-count (CIC);
• rent payment guarantee of €45 K(BNP)
• guarantee for export market of €2,700 K (CIC)
Note 18 – Commitments
EMPLOYEE CATEGORIES EMPLOYEES
MANAGERIAL STAFF 109
SUPERVISORS AND TECHNICIANS 24
WORKERS 51
APPRENTICES UNDER CONTRACT 9
TOTAL 193
LEASES (€) < 1 YEAR BETWEEN 1 AND 5 YEARS > 5 YEARS
OFFICES / WAREHOUSES 993,664 1,893,744
CARS 308,635 196,675
Total 1,302,299 2,090,499
181
Note 19 – Executive Compensation
The gross compensation paid to the Chairman and Chief Executive Officer for the period amounted to €420 K for his 2018 base pay and his 2017 bonus.
A contract under the Company
Guarantee for Company Executives (GSC) was signed in 2012 for the benefit of the Chairman and Chief Executive Officer.
The annual fee amounts to €19K.
This contract includes the basic plan as well as a supplementary plan providing for compensation cove-rage over a 12-month period (former plan).
Note 20 – Auditors’ fees
Note 21 – Degree of exposure to market risks
Note 22 – Amounts concerning related companies
The expense recognized for the Au- ditors’ fees amounted to €407 K for the statutory audit.
With regard to receivables and payables subject to exchange rate fluctuations:
Total sales in foreign currencies in financial year 2018 amounts to €6,263 K, including 4,857 K in USD .
Total purchases in foreign curren-cies in financial year 2018 amount to $26,643 K. As of December 31, 2018, outstanding debts in foreign currencies represented $8,775 K, or €7,692 K, resulting in the reco-gnition of an unrealized foreign ex-
change loss of €222 K and an unrea-lized foreign exchange gain of €17 K.
SES-imagotag S.A. has booked the following transactions with its majority shareholder, BOE Smart Retail Hong Kong Ltd or its affiliated companies: €5.6M revenue with Chongqing BOE Smart Electronics Systems Co. Ltd. relating consulting and technical assistance for the Chongqing industrial ramp-up; €4.8M revenue with BOEVT (Hong Kong Co. Ltd) relating to finished goods sales.
IN € ‘000 AMOUNT
SALES AND OTHER INCOME 10,408
TRADE RECEIVABLES 5,600
Corporate financial statements
182
Annual report
SUBSIDIARIES AND EQUITY INTERESTS
SHARE CAPITAL
RESERVES AND RETAINED
EARNINGS
% OFCAPITAL HELD
GROSS VALUE OF SHARES
HELD
NET VALUE OF SHARES HELD
LOANS AND ADVANCES
GRANTED BY THE COMPANY
DEPOSITS ANDGUARANTEES PROVIDED
BY THE COMPANY1
TURNOVER EXCLUDING
TAXES OF THE PRIOR PERIOD
PROFIT (LOSS) FOR THE
PRIOR PERIOD
SES-imagotag Mexico srl. de cv
0 -837 99 0 0 2,263 899 -283
SES-imagotag Pte Ltd 32 -279 100 29 29 0 1,681 -129
SES-imagotag Italia Srl. 10 255 100 10 10 823 9,567 121
SES-imagotag Gmbh 50 6,161 100 17,570 17,570 29,645 113,188 1,238
Solutions Digitales SES-imagotag Ltd
0 -689 100 0 0 1,468 600 -108
SES-imagotag Inc. 9 -739 100 7 7 4,679 9,631 230
SES-imagotag Deutschland GmbH
67 -1,752 100 12,360 12,360 6,168 2,285 -2,028
Pervasive Displays Inc 4,285 241 100 30,052 30,052 5,851 52,762 4,584
SES-imagotag Denmark Aps.
7 0 100 7 7 353 206 3
SES-imagotag Netherlands BV
1 0 100 0 0 239 436 6
SES-imagotag Iberia 3 0 100 3 3 213 401 9
Market Hub Technologies Ltd
872 522 60 800 800 257 1,651 11
SES-imagotag Hong Kong Ltc
1 -9 100 0 0 23 0 -18
Note 23 – Subsidiaries and equity interests
Data presented in thousands of euros, converted on the basis of the average rate observed for the period ended December 31, 2018.1 Information provided in Note 15 of the report on off-balance sheet commitments. On May 30th 2018, PDi’s Board approved a dividend distribution up to €1,346K
Note 24 - Credit, liquidity, and cash flow risks
The Company does not hold any risky investments. All short-term investments consist of term deposits.
183
Corporate financial statements
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Annual report
11 Reports by the statutory auditors and certifications
VI-AUDITORS REPORTSAND CERTIFICATION
Reports and certification
To the SES-imagotag S.A. Annual General Meeting,
Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying financial statements of SES-imagotag S.A. for the year ended December 31, 2018.
In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as of December 31, 2018 and of the results of its operations for the year then ended in accordance with French accounting principles.
The audit opinion expressed above is consistent with our report to the Accounts Committee.
Basis for Opinion
Audit Framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the “Statutory Auditors’ Responsibilities for the Audit of the Financial Statements” section of our report.
Independence
We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2018 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014 or in the French Code of ethics (Code de déontologie) for statutory auditors.
Justification of Assessments - Key Audit Matters
In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring your attention to the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in the audit of the financial statements of the current period, as well as our responses to those risks.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on specific items of the financial statements.
Measurement of equity securities and related receivables
• Risk identified
Equity securities were recognized in the December 31, 2018 balance sheet for a net amount of €60,839 thousand and constitute the largest balance sheet heading. They are initially recognized at acquisition cost and impaired where necessary based on their value in use.
11.1 Statutory Auditors’ report on the financial statements Year ended December 31, 2018
185
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Annual report
As indicated in Note “II. Accounting rules and methods – 3) Financial assets” to the financial statements, the value in use is estimated by management based on the business outlook and future profitability.
In determining the value in use of these securities, management is required to exercise judgment to estimate these forward-looking components.
Given the inherent uncertainties surrounding the realization of forecasts, we considered the correct mea-surement of equity securities and related receivables to be a key audit matter.
• Response as part of our audit
To assess the reasonableness of the value in use estimates for equity securities, based on the information communicated to us, our work mainly consisted in:
- assessing the consistency of assumptions adopted by management with the business forecasts of the relevant entities prepared by their management as part of the budget process and with business plans prepared on acquisition of the investments;
- assessing the recoverability of the related receivables with regard to the analyses conducted on the equity securities.
Lastly, we also assessed the appropriateness of the disclosures in the notes to the financial statements.
Specific verifications
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by French law.
Information given in the management report and other documents provided to shareholders with respect to the financial position and the financial statements
We have no comments to make on the fair presentation and consistency with the financial statements of the information given in the Board of Directors’ management report and in the other documents addressed to shareholders with respect to the financial position and the financial statements.
We attest the fair presentation and the consistency with the financial statements of the information relating to payment terms, mentioned in Article D.441-4 of the French Commercial Code.
Report on corporate governance
We attest that the Board of Directors’ report on corporate governance contains the information required by Articles L. 225-37-3 and L. 225-37-4 of the French Commercial Code.
Concerning the information given in accordance with the requirements of Article L. 225-37-3 of the French Commercial Code relating to remunerations and benefits received by the directors and any other commitments made in their favor, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your Company from controlling and controlled companies. Based on this work, we attest the accuracy and fair presentation of this information.
Concerning the information relating to items your Company considers likely to have an impact in the event of a public tender offer or public exchange offer, provided pursuant to Article L. 225-37-5 of the French Commercial Code, we have verified its compliance with the source documents communicated to us. Based on this work, we have no comments to make on this information.
Other information
In accordance with French law, we have verified that the required information concerning the purchase of investments and controlling interests and the identity of the shareholders and holders of the voting rights has
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Reports and certification
been properly disclosed in the management report.
Report on Other Legal and Regulatory Requirements
Appointment of the Statutory Auditors
Deloitte & Associés and KPMG were appointed as statutory auditors of SES-imagotag S.A. by the Annual General Meeting held on June 23, 2017.
As of December 31, 2018, Deloitte & Associés and KPMG were in the 2nd year of total uninterrupted engagement, which is the 2nd year since securities of the Company were admitted to trading on a regulated market.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with French accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.
The Accounts Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems and, where applicable, its internal audit, regarding the accounting and financial reporting procedures.
The financial statements were approved by the Board of Directors.
Statutory Auditors’ Responsibilities for the Audit of the Financial Statements
Objectives and audit approach
Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As specified in Article L. 823-10-1 of the French Commercial Code, our statutory audit does not include assurance on the viability of the Company or the quality of management of the affairs of the Company.
As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:
• Identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence consi-dered to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the financial statements;
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Annual report
• Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a mate-rial uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein;
• Evaluates the overall presentation of the financial statements and assesses whether these statements repre-sent the underlying transactions and events in a manner that achieves fair presentation.
Report to the Accounts Committee
We submit a report to the Accounts Committee which includes in particular a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report, if any, significant deficiencies in internal control regarding the accounting and financial reporting procedures that we have identified.
Our report to the Accounts Committee includes the risks of material misstatement that, in our professional judgment, were of most significance in the audit of the financial statements of the current period and which are therefore the key audit matters that we are required to describe in this report.
We also provide the Accounts Committee with the declaration referred to in Article 6 of Regulation (EU) No. 537/2014, confirming our independence in the sense of the rules applicable in France as defined in particular by Articles L.822-10 to L.822-14 of the French Commercial Code and or in the French Code of ethics for statutory auditors. Where appropriate, we discuss with the Accounts Committee the risks that may reasonably be thought to bear on our independence, and the related safeguards
The Statutory Auditors
Paris La Défense, May 3, 2019 Paris La Défense, May 3, 2019
KPMG Audit Deloitte & Associés Division of KPMG S.A.
Grégoire Menou Julien Razungles Partner Partner
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Reports and certification
To the SES-imagotag S.A. Annual General Meeting,
Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of SES-imagotag for the year ended December 31, 2018.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as of December 31, 2018 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.
The audit opinion expressed above is consistent with our report to the Accounts Committee.
Audit Framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the “Statutory Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements” section of our report.
Independence
We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2018 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014 or in the French Code of Ethics (Code de déontologie) for statutory auditors.
Observation
Without qualifying the above opinion, we draw your attention to the following matter set out in Note II. 1.1.1 to the consolidated financial statements on new standards with mandatory application as of January 1, 2018 and applied for the first time by the SES-imagotag group relating to:
• IFRS 9 “Financial instruments: hedge accounting”
• IFRS 15 “Revenue from contracts with customers”
Justification of Assessments - Key Audit Matters
In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed those risks.
11.2 Statutory Auditors’ report on the consolidated financial statements Year ended December 31, 2018
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These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on specific items of the consoli-dated financial statements.
Measurement of SES-ESL and imagotag goodwill
(Notes II.1.1.2, II.1.2 and II.4- Note 1 to the consolidated financial statements)
• Risk identified
Two historical goodwill balances are recognized in assets in the consolidated financial statements.
These goodwill balances, with a net carrying amount of €51.3 million as of December 31, 2018, reflect the difference between the fair value of the consideration transferred and the fair value of assets acquired and liabilities assumed. They were allocated to the same cash-generating unit (CGU).
Management confirms at each year-end, and more frequently where there is indication of loss in value, that the net carrying amount of these goodwill balances does not exceed their recoverable amount and that there is no risk of loss in value.
The impairment test methodology and the assumptions adopted are presented in the “Impairment test” pa-ragraph of Note II.1.2 to the consolidated financial statements.
The recoverable amount of goodwill is largely determined based on Management judgment, particularly with regard to the growth rates, cash flow projections based on operating forecasts and the discount rate applied to such projections. We therefore considered the measurement of goodwill to be a key audit matter.
• Our response
We familiarized ourselves with the implementation methods for impairment tests performed by Management and reviewed the compliance of the methodology applied with prevailing accounting standards.
We also performed a critical analysis of the implementation of this methodology and assessed, in particular:
- the relevance of the method used by Management to determine the cash-generating unit,
- the reasonableness of cash flow projections for periods after 2018 prepared by Management, with regard to our knowledge of the economic environment in which the group operates,
- the consistency of these cash flow projections with the most recent Management estimates prepared in the budget process and the latest sales forecasts for 2019,
- the accuracy of projections prepared in previous years compared with 2018 actual figures to assess their reliability,
- the consistency of long-term growth rates and discount rates applied with market analyses and with the external expert’s report prepared pursuant to the takeover bid for the Company’s shares,
- the sensitivity of the value in use determined by Management to a change in one of the main assumptions adopted.
Specific verifications
We have also performed, in accordance with professional standards applicable in France, the specific verifi-cations required by the laws and regulations of the Group information given in the Board of Directors’ mana-gement report.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
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Report on Other Legal and Regulatory Requirements
Appointment of the Statutory Auditors
Deloitte & Associés and KPMG were appointed as statutory auditors of SES-imagotag S.A. by the Annual General Meeting held on June 23, 2017.
As of December 31, 2018, Deloitte & Associés and KPMG were in the 2nd year of total uninterrupted engagement, which is the 2nd year since securities of the Company were admitted to trading on a regulated market.
Responsibilities of Management and Those Charged with Governance for the Consoli-dated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.
The Accounts Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems and, where applicable, its internal audit, regarding the accounting and financial reporting procedures.
The consolidated financial statements were approved by the Board of Directors.
Statutory Auditors’ Responsibilities for the Audit of the Consolidated Financial State-ments
Objectives and audit approach
Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstate-ment. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstate-ments can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As specified in Article L. 823-10-1 of the French Commercial Code, our statutory audit does not include assu-rance on the viability of the Company or the quality of management of the affairs of the Company.
As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:
• Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion The risk of not de-tecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
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• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the consolidated financial statements;
• Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a mate-rial uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein;
• Evaluates the overall presentation of the consolidated financial statements and assesses whether these sta-tements represent the underlying transactions and events in a manner that achieves fair presentation;
• Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The statutory au-ditor is responsible for the direction, supervision and performance of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial statements.
Report to the Accounts Committee
We submit a report to the Accounts Committee which includes in particular a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report, if any, significant deficiencies in internal control regarding the accounting and financial reporting procedures that we have identified.
Our report to the Accounts Committee includes the risks of material misstatement that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period and which are therefore the key audit matters that we are required to describe in this report.
We also provide the Accounts Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our independence within the meaning of the rules applicable in France such as they are set in particular by Articles L. 822-10 to L. 822-14 of the French Commercial Code and in the French Code of Ethics for statutory auditors. Where appropriate, we discuss with the Audit Committee the risks that may reasonably be thought to bear on our independence, and the related safeguards.
The Statutory Auditors
Paris La Défense, May 3, 2019 Paris La Défense, May 3, 2019
KPMG Audit Deloitte & AssociésDivision of KPMG S.A.
Grégoire Menou Julien Razungles Partner Partner
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To the SES-imagotag S.A. Annual General Meeting,
In our capacity as statutory auditors of your Company, we hereby report to you on regulated agreements and commitments.
The terms of our engagement require us to communicate to you, based on information provided to us, the principal terms and conditions of those agreements and commitments brought to our attention or which we may have discovered during the course of our audit, as well as the reasons justifying that such commitments and agreements are in the Company’s interest, without expressing an opinion on their usefulness and appro-priateness or identifying other such agreements and commitments, if any. It is your responsibility, pursuant to Article R. 225-31 of the French Commercial Code (code de commerce), to assess the interest involved in respect of the conclusion of these agreements and commitments for the purpose of approving them.
Our role is also to provide you with the information stipulated in Article R. 225-31 of the French Commercial Code relating to the implementation during the past year of agreements and commitments previously appro-ved by the General Meeting, if any.
We performed the procedures that we considered necessary with regard to the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) appli-cable to this engagement. These procedures consisted in agreeing the information provided to us with the relevant source documents.
AGREEMENTS AND COMMITMENTS SUBMITTED TO THE APPROVAL OF THE ANNUAL GENERAL MEETING
Agreements and commitments authorized and entered into during the year
Pursuant to Article L. 225-40 of the French Commercial Code, the following agreements and commitments, entered into during the year and previously authorized by the Board of Directors, have been brought to our attention.
Master Service Agreement with Chongqing BOE Smart Electronics System Co. Ltd
• Person concerned:
BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder with over 10% of your Company’s voting rights and indirectly related to Chongqing BOE Smart Electronics System Co., Ltd
• Nature, purpose and terms and conditions:
Production, assembly, testing and packaging of finished goods (electronic labels).
This agreement was previously authorized by your Board of Directors on October 23, 2018.
No products or services were purchased under this agreement in 2018.
• Reasons justifying the agreement is in your Company’s interest:
Your Board of Directors considered that this master service agreement will provide your company with a major integrated plant for digital labels and boost the competitiveness of the products offered by the Group.
11.3 Statutory Auditors’ special report on regulated agreements and commitments Annual General Meeting held to approve the financial statements for the year ended December 31, 2018
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Agreements and commitments not previously authorized
Pursuant to Articles L. 225-42 and L. 823-12 of the French Commercial Code, we bring to your attention the following agreements and commitments which were not previously authorized by your Board of Directors.
Our role is to communicate to you the circumstances which explain why the authorization procedure was not followed.
Sales of finished goods to BOE VT (Hong Kong) Co., Ltd
• Person concerned
BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder with over 10% of your Company’s voting rights and indirectly related to BOE VT (Hong Kong) Co., Ltd
• Nature, purpose and terms and conditions:
On June 29, 2018, your Company invoiced BOE VT (Hong Kong) Co., Ltd for finished goods in the amount of €4.8 million payable within 60 days.
This sale is in connection with the organization of sales resources to prospect the Chinese market, which is key to the sales strategy of the 2022 strategic plan.
This agreement was not previously authorized by your Board of Directors due to an omission.
Technical consulting agreement with Chongqing BOE Smart Electronics Systems Co., Ltd
• Person concerned:
CBOE Smart Retail (Hong Kong) Co., Ltd, a shareholder with over 10% of your Company’s voting rights and indirectly related to Chongqing BOE Smart Electronics System Co., Ltd
• Nature, purpose and terms and conditions:
The technical consulting agreement with Chongqing BOE Smart Electronics System Co., Ltd was signed on Fe-bruary 1, 2018; this service and support agreement concerns the start-up of the Chongqing plant, which is key to your Group’s industrial and geographical strategy (Chinese market delivery).
In 2018, your Company invoiced €5.6 million that will be paid in two instalments by Chongqing BOE Smart Elec-tronics Systems Co., Ltd.
This agreement was not previously authorized by your Board of Directors due to an omission.
AGREEMENTS AND COMMITMENTS PREVIOUSLY APPROVED BY ANNUAL GENERAL MEETING
Previously approved agreements and commitments that remained in force during the year
Pursuant to Article R. 225-30 of the French Commercial Code, we have been informed that the following agreements and commitments, previously approved by prior-year General Meetings, have remained in force during the year.
Credit facility agreement with Markethub Technologies Ltd
This credit facility agreement was entered into with Markethub Technologies Ltd., a UK subsidiary 60% owned by your Company..
It was signed on July 1, 2017 for a term of 5 years, and approved by your General Meeting of June 22, 2018.
The maximum credit amount over the 5-year term is K€ 500, bearing interest at EURIBOR + 1.5%. As of De-
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cember 31, 2018, the credit facility granted by your Company was drawn down by K€ 254 and interest for the year totaled K€ 3.
Service agreement with Markethub Technologies Ltd
This 5-year service agreement (business provider and distributor) was signed on July 1, 2017 with Markethub Technologies Ltd., a UK subsidiary 60% owned by your Company and approved by your General Meeting of June 22, 2018.
In 2018, your Company received commission amounting to K€ 11.
The commission is set at 28% of completed sales paid by your Company to its subsidiary. The rate is revised annually.
Financial guarantee granted to a supplier of the subsidiary Pervasive Displays Inc.
This agreement involves BOE Optical Science and Technology Co., Ltd and Chongqing BOE Smart Electronics System Co., Ltd (after substitution), companies indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company.
The agreement was signed on September 13, 2017 and previously authorized by the Board of Directors on September 8, 2017 as a security, endorsement or guarantee as defined by Article L. 225-35 of the French Com-mercial Code. It then became a regulated agreement following the acquisition by BOE Smart Retail (Hong-Kong) Co., Ltd of over 50% of the share capital of your Company. The Board of Directors’ meeting of February 6, 2018 decided to change the beneficiary of the guarantee, replacing BOE Optical Science and Technology Co., Ltd. by Chongqing BOE Smart Electronics Systems Co., Ltd, which was approved by the General Meeting of June 22, 2018.
This is a guarantee granted by your Company to one of the suppliers of Pervasive Displays Inc. in Taiwan, a subsidiary wholly owned by your Company, i.e. BOE Optical Science and Technologie Co., Ltd and Chongquing BOE Smart Electronics System Co., Ltd (after substitution). This 12-month guarantee was signed for a maximum amount of USD 10 million.
The guarantee was granted by your Company on behalf of its subsidiary responsible for the industrial scheduling of its product ranges, in favor of a supplier-subsidiary of BOE Technology Group, in order to obtain an invoice settlement period for supply and assembly services.
Financial guarantee granted to a supplier of the subsidiary SES-imagotag GmbH
This agreement involves BOE Optical Science and Technology Co., Ltd and Chongqing BOE Smart Electronics System Co., Ltd (after substitution), companies indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company.
The agreement was signed on December 15, 2017 and previously authorized by the Board of Directors on De-cember 15, 2017 as a security, endorsement or guarantee as defined by Article L. 225-35 of the French Com-mercial Code. It then became a regulated agreement following the acquisition by BOE Smart Retail (Hong-Kong) Co., Ltd of over 50% of the share capital of your Company. The Board of Directors’ meeting of February 6, 2018 decided to change the beneficiary of the guarantee, replacing BOE Optical Science and Technology Co., Ltd. by Chongqing BOE Smart Electronics Systems Co., Ltd, which was approved by the General Meeting of June 22, 2018.
This is a guarantee granted by your Company to one of the suppliers of SES-imagotag GmbH, a subsidiary wholly owned by your Company, i.e. BOE Optical Science and Technologie Co., Ltd and Chongquing BOE Smart Electronics System Co., Ltd (after substitution). This 12-month guarantee was signed for a maximum amount of USD 10 million.
The guarantee was granted by your Company on behalf of its subsidiary responsible for the industrial scheduling of its product ranges, in favor of a supplier-subsidiary of BOE Technology Group, in order to obtain an invoice settlement period for supply and assembly services.
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Chairman and Chief Executive Officer director insurance policy (GSC)
This policy concerns Thierry Gadou, Chief Executive Officer since January 13, 2012 and Chairman of the Board of Directors since January 18, 2012.
On January 13, 2012, the Board of Directors authorized your Company to take out an unemployment insurance policy for directors (GSC) in favor of Thierry Gadou, with effect from January 18, 2012.
Your Company paid premiums of €19,000 for the fiscal year ended December 31, 2018.
Previously approved agreements and commitments that have not remained in force during the year
Furthermore, we have been informed that the following agreements and commitments, previously approved by prior-year General Meetings, have not remained in force during the year.
Commitments undertaken for Thierry Gadou, Chairman and Chief Executive Officer
• Person concerned:
Thierry Gadou, Chief Executive Officer since January 13, 2012 and Chairman of the Board of Directors since January 18, 2012.
a) Payment of severance pay to Thierry Gadou in the event of termination of his duties as Chief Executive Officer
On March 1, 2012, shareholders approved for a period of 5 years this severance pay, previously authorized by the Board of Directors on January 13, 2012.
The Board of Directors’ meeting of March 10, 2017 authorized the renewal of this commitment, which was approved by the General Meeting of June 22, 2018.
• Terms and conditions:
In the event the Chief Executive Officer of your Company ceases to exercise his duties following dismissal (except for serious or severe misconduct) or resignation within six months of a change in control of your Company, the Chief Executive Officer will be entitled to a lump-sum payment of a gross amount equal to 18 months of fixed and variable remuneration.
In accordance with the law and without prejudice to any damages which the Chief Executive Officer may claim based on the conditions of his departure, payment of this severance pay will be subject to meeting performance criteria corresponding to achieving at least 75% of the quantitative targets set for the bonus in the year prior to the termination of his duties as Chief Executive Officer.
Furthermore, in the event that, at any time whatsoever after the Chief Executive Officer of your Company takes up his post, he terminates his duties following dismissal (except for serious or severe misconduct) or resignation, it being stipulated that this dismissal or resignation must occur within six months of a change in control of your Company, all free shares allocated to him will definitively vest, notwithstanding the pre-sence and performance conditions stipulated in the governing plan, provided however that he has met the performance criteria specified above and without prejudice to compliance with the minimum legal vesting period after which the shares may be transferred to him.
A change in control is defined as the exchange of at least 40% of your Company’s capital, on or off market, or the filing of a public offering for your Company’s shares.
b) Payment of a non-compete allowance
Payment of a non-compete allowance to Thierry Gadou was authorized by the Board of Directors on January 13, 2012 and approved by Shareholders’ Meeting on March 1, 2012.
The non-compete clause states that, in the event of his departure, for any reason whatever, Thierry Gadou undertakes:
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- not to join a company carrying out a competing activity;
- not to exercise or be involved, either directly or indirectly, in any way whatsoever (in particular as a self-em-ployed worker or shareholder holding more than 3% of the capital or voting rights), in a competing activity;
- not to exercise or be involved, either directly or indirectly, in any way whatsoever, and not to invest in, in any way whatsoever (in particular as a shareholder), in the following companies (space left intentionally blank in the minutes of the Board of Directors’ meeting of January 13, 2012),
- not to approach or recruit or try to recruit any person who is or was employed by your Company or one of its subsidiaries in the previous 12 months, with a view to using the specific knowledge or skills of that person for the benefit of a natural person or legal entity whose activities are in competition with those of your Company.
The term competing activity refers to any activity involving the design, marketing, or installation of electronic labeling systems.
This non-compete obligation is limited to the following countries: France, Belgium, Italy, Germany, Denmark, Spain, the United Kingdom, Switzerland, Hungary, Romania, Poland, Sweden, Brazil, Mexico, Argentina, Ca-nada, the United States of America, and South Africa.
The clause is limited to a duration of one year from the end of his term of office as Chief Executive Officer of your Company. At the end of this one-year period, your Company may renew the clause for the same period. This renewal must be notified by registered letter with acknowledgment of receipt or delivered by hand against receipt, at the latest sixty calendar days before the expiry of the initial period of the non-compete obligation.
In consideration of this non-compete obligation, Thierry Gadou shall receive, following the effective cessation of his term of office as Chief Executive Officer of your Company, and for the entire duration of this prohibition, a spe-cial flat-rate monthly allowance, the gross amount of which will be equal to 50% of his gross fixed monthly salary.
This special allowance shall be paid by bank transfer at the end of each month for the entire duration of the non-compete obligation and will be liable to social security contributions.
Any violation or infringement of this non-compete clause will authorize your Company to put a stop to the violation or infringement in question and to order, subject to a penalty, the cessation of the competition that infringes on the above provisions, without prejudice to any damages it may claim because of the violation of this obligation.
Similarly, any violation of the non-compete obligation would release your Company from payment of this allowance and would render Thierry Gadou liable to pay back any sums he may have received in this respect, with interest at the statutory rate from the date of formal notice to immediately cease the competing activity, without prejudice to any damages it may claim because of the violation of this obligation.
Your Company may release Thierry Gadou from the non-compete clause at the end of his term of office as Chief Executive Officer of your Company. In this case, the financial compensation shall not be payable.
Finally, payment of this severance pay will be subject to meeting performance criteria corresponding to achieving at least 75% of the quantitative targets set for the bonus in the year prior to the termination of his duties as Chief Executive Officer.
Les Commissaires aux Comptes
Paris La Défense, May 3, 2019 Paris La Défense, May 3, 2019
KPMG Audit Deloitte & AssociésDivision of KPMG S.A.
Grégoire Menou Julien Razungles Partner Partner
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11.4 Statutory Auditors' report on the share capital decreaseCombined General Meeting of May 24, 201911th resolution
To the SES-imagotag General Meeting,
In our capacity as statutory auditors of your Company and pursuant to the provisions of Article L.225-209 of the French Commercial Code (Code de commerce) concerning share capital decreases by cancellation of shares purchased, we hereby report to you on our assessment of the reasons for and the terms and conditions of the proposed share capital decrease.
Shareholders are requested to confer all necessary powers on the Board of Directors, during a period of 26 months starting from this General Meeting, to cancel on one or more occasions, up to a maximum of 10% of the share capital in any twenty-four month period, shares purchased by the Company pursuant to the autho-rization to purchase its own shares under the provisions of the above-mentioned Article.
We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) relating to this engagement. Those procedures consisted in examining whether the reasons for and the terms and conditions of the proposed share capital decrease, which does not interfere with the equal treatment of shareholders, are due and proper.
We have no matters to report on the reasons for or terms and conditions of the proposed share capital de-crease.
Deloitte & Associés
Julien RAZUNGLES
KPMG Audit
Division of KPMG S.A.
Grégoire MENOU
Paris La Défense, May 3, 2019
The Statutory Auditors
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11.5 Statutory Auditors’ report on the issue of shares and/or other marketable securities with retention and/or cancellation of preferential subscription rightsCombined General Meeting of May 24, 201913th, 14th, 15th, 16th, 17th and 18th resolutions
To the SES-imagotag General Meeting,
As Statutory Auditors of your company (the “Company”) and pursuant to the assignment set forth in Articles L. 228-92 and L. 225-135 et seq. of the French Commercial Code (Code de commerce), we hereby present our report on the proposed delegations of authority to the Board of Directors to issue shares and/or marketable securities, transactions that you are being asked to approve.
Based on its report, your Board of Directors proposes:
• that shareholders delegate to it, with the option to sub-delegate under the applicable laws and regula-tions, for a period of 26 months starting from the date of this General Meeting, the authority to decide the following transactions and to set the final terms and conditions of these issues and proposes, where appropriate, to cancel your preferential subscription rights:
• issue, with retention of preferential subscription rights (13th resolution), shares of the Company and/or equity securities granting access to other equity securities and/or conferring entitlement to the allocation of debt securities, and/or marketable securities granting access to equity securities to be issued;
• issue, with cancellation of preferential subscription rights, of shares of the Company and/or equity securities granting access to other equity securities and/or conferring entitlement to the allocation of debt securities, and/or marketable securities granting access to equity securities to be issued, by way of a public offering (14th resolution), it being specified that these securities may be issued in consideration of securities that would have been contributed to the Company as part of a public exchange offer performed in France or abroad according to local rules on securities satisfying the conditions set forth in Article L. 225-148 of the French Commercial Code;
• issue, with cancellation of preferential subscription rights, shares of the Company and/or equity securities granting access to other equity securities and/or conferring entitlement to the allocation of debt securities, and/or marketable securities granting access to equity securities to be issued, as part of offers referred to in Article L. 411-2 II of the French Monetary and Financial Code (Code mo-nétaire et financier), within the limit of 20% of the share capital per year (15th resolution);
• issue of shares of the Company and/or equity securities granting access to other equity securities and/or conferring entitlement to the allocation of debt securities, and/or marketable securities gran-ting access to equity securities to be issued, in exchange for contributions in kind to the Company comprising equity securities or marketable shares granting access to share capital (18th resolution), up to a maximum of 10% of the share capital.
• to authorize it, by virtue of the 16th resolution and pursuant to the implementation of the delegations granted by the 14th and 15th resolutions, to set the issue price within the legal limit of 10% of the share capital per 12-month period.
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The overall par value amount of share capital increases that may be carried out, immediately or in the future, pursuant to the 13th, 14th, 15th, 16th, 17th, 18th and 19th resolutions, may not, according to the 13th resolution, exceed €14,400,000, it being specified that the total par value amount of share capital increases that may be carried out immediately or in the future, may not exceed:
• €14,400,000 under the 13th resolution;
• €5,750,000 under the 14th resolution, this amount also representing the overall ceiling for share capital increases that may be carried out, immediately or in the future, pursuant to the 14th, 15th, 16th and 18th resolutions;
• €2,880,000 under the 15th resolution.
The overall par amount of debt securities that may be issued, pursuant to the 13th, 14th, 15th, 16th, 17th and 18th re-solutions, may not, according to the 13th resolution, exceed €100,000,000, it being specified that this amount will represent the individual ceiling for each of the 13th, 14th, 15th, 17th and 18th resolutions.
These ceilings take into account the additional number of securities to be created by virtue of the delegations set forth in the 13th, 14th and 15th resolutions, under the terms and conditions stipulated in Article L. 225-135-1 of the French Commercial Code, should you adopt the 17th resolution.
It is the responsibility of the Board of Directors to prepare a report in accordance with Articles R. 225-113 et seq. of the French Commercial Code. Our role is to express an opinion on the fairness of the quantified data extracted from the financial statements, on the proposed cancellation of preferential subscription rights, and on certain other information pertaining to these transactions, as presented in this report.
We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) relating to this engagement. These procedures consisted in verifying the content of the Board of Directors’ report in respect of these transactions and the methods used to determine the issue price of the equity securities to be issued.
Subject to a subsequent review of the terms and conditions of each issue that may be decided, we have nothing to report on the method used to determine the issue price of the equity securities to be issued, as described in the Board of Directors’ report in respect of the 14th, 15th and 16th resolutions.
Moreover, as this report does not specify the method used to determine the issue price of the equity securities to be issued pursuant to the 13th and 18th resolutions, we cannot express an opinion on the selected items used to calculate this issue price.
As the final terms and conditions under which the issues will be carried out have not yet been set, we do not express an opinion thereon and, as such, on the proposed cancellation of preferential subscription rights on which you are asked to vote in the 14th and 15th resolutions.
Pursuant to Article R. 225-116 of the French Commercial Code, we will prepare an additional report, as required, when the Board of Directors makes use of these delegations, in the event of the issue of marketable securities that are equity securities granting access to other equity securities or conferring entitlement to the allocation of debt securities, the issue of marketable securities granting access to equity securities to be issued or the issue of shares with cancellation of preferential subscription rights.
Deloitte & Associés
Julien RAZUNGLES
KPMG Audit
Division of KPMG S.A.
Grégoire MENOU
Paris La Défense, May 3, 2019
The Statutory Auditors
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11.6 Statutory Auditors’ report on the share capital increase reserved for members of a company savings planCombined General Meeting of May 24, 201919th resolution
To the SES-imagotag General Meeting,
In our capacity as statutory auditors of your Company and pursuant to the provisions of Articles L. 225-135 et seq. of the French Commercial Code (Code de commerce), we hereby report on the proposed delegation of authority to the Board of Directors to decide on a share capital increase through the issue of ordinary shares with cancellation of preferential subscription rights, reserved for eligible employees, former employees and corporate officers of the Company and/or its affiliated companies, within the meaning of Article L. 225-180 of the French Commercial Code and Article L. 3344-1 of the French Labor Code (Code du travail) who are members of a company savings plan, a transaction on which you are being asked to vote.
The par value amount of any share capital increase carried out pursuant to this delegation may not exceed €860,000, it being specified that this amount shall be deducted from the overall par value ceiling for share capital increases specified in paragraph 2 of the 13th resolution submitted to this General Meeting.
This share capital increase is being submitted for your approval pursuant to Article L. 225-129-6 of the French Com-mercial Code and Articles L. 3332-18 et seq. of the French Labor Code.
Based on its report, your Board of Directors recommends that you confer on it, for a period of 26 months as from this General Meeting, with the option to sub-delegate under the applicable laws and regulations, the authority to decide one or more issues, and cancel your preferential subscription rights to the shares to be issued. If necessary, the Board of Directors will set the final issue terms and conditions of this transaction.
It is the responsibility of the Board of Directors to prepare a report in accordance with Articles R. 225-113 and R. 225-114, of the French Commercial Code. Our role is to express an opinion on the fairness of the quantified data extracted from the financial statements, on the proposed cancellation of preferential subscription rights, and on certain other information pertaining to the issue, as presented in this report.
We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) relating to this engagement. These procedures consisted in verifying the content of the Board of Directors’ report in respect of this transaction and the methods used to determine the issue price of the shares.
Subject to a subsequent review of the final terms and conditions of each issue that may be decided, we have nothing to report on the method used to determine the issue price of the ordinary shares to be issued, as described in the Board of Directors’ report.
As the final terms and conditions under which the issues will be carried out have not yet been set, we express no opinion thereon and, as such, on the proposed cancellation of the preferential subscription rights on which you are being asked to vote.
Reports and certification
202
Annual report
In accordance with Article R. 225-116 of the French Commercial Code, we will issue an additional report, where ne-cessary, when this delegation of authority is used by your Board of Directors.
Deloitte & Associés
Julien RAZUNGLES
KPMG Audit
Division of KPMG S.A.
Grégoire MENOU
Paris La Défense, May 3, 2019
The Statutory Auditors
203
Reports and certification
204
Financial report
204
Annual report
12 Certifications from person in charge of the annual report
VI-AUDITORS REPORTSAND CERTIFICATION
205
Reports and certification
I hereby certify that, to the best of my knowledge, the consolidated financial statements have been drawn up in accordance with the applicable accounting standards and provide a true and fair view of the assets and liabilities, the financial position and the profits of the SES-imagotag Group, and that the Activity Report provides a true and fair view of the evolution of the Group’s business, results and financial position, as well as a description of the main risks and uncertainties to which the Group is exposed.
Mr Thierry Gadou
Chairman & Managing Director
55 Place Nelson Mandela
CS 60106
92024 Nanterre Cedex, France
Tél. : +33 1 34 34 61 61
Fax : +33 1 55 69 78 00
www.ses-imagotag.com
