document de référence 2011 - sequana€¦ · the annual financial report mentioned in article l....

documentde référence

2011(english version)

contents

This English version of this Document de Référence (registration document) includes (i) all of the items from the annual financial report mentioned in Article L. 451-1-2 paragraph I of the French Monetary and Financial Code (Code monétaire et financier) and in Article 222-3 of the French financial markets authority’s (Autorité des marchés financiers – AMF) General Regulations; and (ii) all of the mandatory disclosures in the Board of Directors’ report to the Shareholders’ Meeting of 26 June 2012 (including those referred to in Article L. 225-211 paragraph 2) and set forth in Articles L. 225-100 et seq. of the French Commercial Code (Code de commerce).Tables of concordance at the end of the registration document show where to find all of the key information in the two reports.The 2011 report by the Chairman of the Board of Directors on the conditions for preparing and organising the work of the Board and on internal control procedures, prepared in accordance with Article L. 225-37 of the French Commercial Code, is included in this registration document as required by Article 222-9 of the AMF’s General Regulations. The first section of the Chairman’s report discusses the conditions for preparing and organising the work of the Board of Directors, as well as the contents of the Board’s work. This information is taken up in chapter 2 – Corporate governance. The second part of the Chairman’s report describes how to participate in Shareholders’ Meetings and also includes information likely to have a material impact in the event of a public offering, which can also be found in chapter 5 – General information about the Company. The third and final section of the Chairman’s report is on the internal control procedures described in chapter 3 – Risk

management. This report was drawn up at the request of the Chairman of the Board of Directors with the support of the Group’s operating subsidiaries and divisions concerned. It was presented to the Audit Committee and was approved by the Board of Directors on 27 April 2012. The report was reviewed by the Statutory Auditors and their findings are set out at the end of chapter 3 – Risk management.This registration document may contain statements regarding Sequana’s objectives or other forward-looking information, particularly in the section entitled "Recent developments and outlook" in the description of the outlook for subsidiaries and their business activities and with respect to the dividend payout policy.These statements are not historical facts and must not be construed as constituting guarantees that the anticipated events and results will actually materialise or that the stated objectives will be attained. By nature, these objectives might not be achieved and the assumptions on which they are based may prove to be erroneous.Readers’ attention is drawn particularly to the fact that actual events and results might differ materially from the objectives stated or from the results entailed by the forward-looking information contained with the registration document.The Company certifies that to the best of its knowledge, the information obtained from third parties included in this registration document, particularly in the "Share performance and ownership structure" section (chapter 1 – Presentation of the Group) and in chapter 5 – General information about the Company, has been faithfully reproduced.

chapter 1

PreSentAtIon of SeQuAnA4 Presentation of Sequana19 Share performance and ownership structure22 Presentation of business activities

chapter 2

corPorAte GoVernAnce44 Board of Directors58 Executive Committee58 Compensation63 Related-party agreements64 Statutory Auditors

chapter 3

rISK mAnAGement66 Industrial and environmental risks69 Business-related risks70 Financial risks73 Legal risks75 Insurance coverage76 Internal control and risk management procedures

chapter 4

fInAncIAL PoSItIon − reSuLtS84 Overview of the Group’s financial position

at 31 December 2011 86 Consolidated statement of financial position158 Parent company financial statements

for the year ended 31 December 2011175 Proposed allocation of net loss

chapter 5

GenerAL InformAtIon ABout tHe comPAnY

178 Information about the Company181 Information about the Company’s capital188 Corporate social responsibility

chapter 6

eXtrAordInArY And ordInArY SHAreHoLderS’ meetInG of 26 June 2012

206 Agenda207 Board of Directors’ report208 Resolutions

chapter 7

PerSon reSPonSIBLe for tHe reGIStrAtIon document

214 Person responsible for the registration document214 Statement by the person responsible for the registration

document and annual financial report215 Auditors216 Tables of concordance

Sequana is a major player in the paper industry, boasting top-ranking positions in each of its businesses:

• No. 1 in Europe and No. 4 worldwide in B2B distribution of paper and packaging products with Antalis;

• No. 1 producer of creative and technical papers with Arjowiggins.

Sequana’s strategy is focused on strengthening its market positions in order to create value for all of its shareholders. The Group’s goals are to refocus on distribution over the long term and to participate in the consolidation of the paper industry in order to carve out leading positions for its industrial businesses on their markets. With over 11,000 employees in 44 countries, Sequana serves corporate clients and printers across the globe. A global paper group committed to sustainable development, Sequana delivered sales of €3.9 billion in 2011.

1.1million tonnes of paper

manufactured each year by Arjowiggins

x3.9billion in sales

in 2011

2million tonnes of paperdistributed each year

by Antalis

Profile

PreSentAtIon of tHe GrouP1 Presentation of Sequana

2 / Sequana / 2011 document de référence (english version)

A worldwide player in the paper sector, Sequana is first and foremost a specialised distributor, an activity which generates two-thirds of its sales.

With over 11,000 employees in 44 countries, Sequana serves corporate clients and printers across the globe.

Key figures (€ millions)

Sales (1)

Sales slipped 1.8% (down 1.4% for Antalis and 1.6% for Arjowiggins), or 1.4% at constant exchange rates (down 1.6% for Antalis and 0.3% for Arjowiggins).

(1) After deducting intersegment sales (see Note 29 to the consolidated financial statements).

BusinessesAntalis: No. 1 in Europe and No. 4 worldwide in B2B distribution of paper and packaging products

2011 key figures

€2.8 billion in sales

Over 6,000 employees in 44 countries

More than 230,000 customers worldwide

110 distribution centres across the globe

2 million tonnes of paper distributed each year

Arjowiggins: No. 1 producer of creative and technical papers worldwide

2011 key figures


Over 5,200 employees

25 production sites

1.1 million tonnes of paper produced every year

More than 50 recognised brands

(Conqueror, Curious Collection, Satimat green, etc.)

EBITDAEBITDA fell 34.5% (down 8.1% for Antalis and 55.8% for Arjowiggins), representing 3.4% of sales.

Strategy In 2011, Sequana continued to pursue its long-term strategy of refocusing its business on distribution and carving out top-ranking positions for its industrial activities on their respective markets.

Share information(2)

Listed on the Eurolist of NYSE Euronext (Segment B)Indices: CAC Small® and CAC Mid & Small® – Eligible for the deferred settlement service (SRD)Ticker symbol: SEQ – ISIN code: FR0000063364Par value per share: €1.50

28.24% Exor SA

(incl. Allianz 11.83%)

0.66% Treasury shares

50.85% Free float

20.25% DLMD(incl. Pascal Lebard 0.03%)

100% 100%

pRoFESSIoNALdISTRIBuTIoN pRoducTIoN

2009 2011

4,088 4,016 3,944

2009 2010 pro forma (1)

2010 pro forma (1)

2011

213 206 135

(1) See preliminary remarks on page 4.

(2) At 31 December 2011.

Sequanain brief

chapter 1PreSentAtIon of tHe GrouP

4 Preliminary remarks

4 PRESENTATION OF SEQUANA

5 Market position 6 Group strengths8 Group strategy10 2011 Group results11 Key figures14 Group timeline16 2011 highlights16 Recent developments and outlook17 Business and financial data for the first quarter of 2012

19 SHARE PERFORMANCE AND OWNERSHIP STRUCTURE

19 Share information19 Share ownership and corporate actions19 Share performance20 Dividend per share21 Regular dialogue with investors21 Management of share accounts

22 PRESENTATION OF BUSINESS ACTIVITIES

22 Antalis30 Arjowiggins



Preliminary remarksKey figures are based on the following definitions:

} Sales: sales figures reported for subsidiaries calculated before eliminating intercompany transactions.

} EBITDA: recurring operating income before depreciation and amortisation and changes in provisions.

} Recurring operating income: operating income before “Other operating income and expenses".

} Recurring net income: recurring operating income after net financial income (expense) and income tax on recurring oper-ating income.

} Capital employed: sum of net fixed assets and working capital requirements.

} ROCE (Return on Capital Employed): recurring operating income/capital employed.

} Cash flow from operating activities: algebraic sum of EBITDA, changes in working capital requirements and investment expenditure net of disposals.

Information provided in this document on the role of Group compa-nies and divisions or their business segments, market share or com-petitive positions, is derived from the companies’ own research.

Changes in amounts and in margin percentages are rounded out to one decimal place.

The performance data shown for 2010 in chapter 4 – Financial position, takes account of the reclassification to income of the discontinued operations of Arjowiggins’ Decor and Abrasive paper business (see chapter 4, Note 3) and corresponding to the “IFRS pro forma” in this chapter.

The IFRS pro forma data shown for 2010 in chapter 4 – Financial position, takes account of the reclassification to income of the discontinued operations of Arjowiggins’ Decor and Abrasive paper business (see chapter 4, Note 3).

The 2010 “Management pro forma” or “pro forma” data have also been adjusted to take into account the sale of Antalis’ Office Supplies business in 2011 to allow for meaningful year-on-year comparisons.

Presentation of SequanaSequana is a global paper group chiefly focused on the distribution of paper and packaging products, and is the European leader in this sector in terms of sales. Sequana is also one of the largest producers of specialty and creative papers. Through Antalis (distribution) and Arjowiggins (production), the Group has operations in five continents and 44 countries, and employs over 11,000 people. In 2011, it distributed and produced around 2 million and 1.1 million tonnes of paper, respectively.

} Antalis represents the distribution side of the Group’s busi-ness and is the leading distributor of paper in Europe. In 20 of the 28 European countries where Antalis has operations, it has a market share of over 20%. The company is also one of the foremost global distributors with top-ranking positions in South Africa, South America and Asia-Pacific. Antalis distributes a wide range of print and office paper, packaging products and visual communication materials to more than 230,000 custom-ers. Thanks to its network of around 100 distribution centres, Antalis can offer customers the highest standard of service at competitive prices.

Breakdown of sales by business

70% Antalis

30% Arjowiggins

B2B distribution(1) production(1)

100%

0.66% 20.25% 28.24% 50.85%incl. Allianz

11.83%

100%

Treasury shares DLMD Exor S.A. Free float

(1) See the scope of consolidation on page 153 et seq.

PreSentAtIon of tHe GrouP 1Presentation of Sequana


} Arjowiggins represents the production side of the business and enjoys a unique position owing to its strategic focus on the production of technical and creative papers, a segment in which it is among the leading players worldwide. Arjowiggins is the world’s leading producer of premium fine papers in terms of sales and No. 1 worldwide in banknote paper and tracing paper in terms of volumes. It is also the largest producer of recycled graphic paper integrated in recycled pulp in terms of volumes, holding a No. 1 position in green/recycled paper in Europe (excluding lightweight coated papers – LWC).

Distribution accounts for two-thirds of Sequana’s sales and pro-duction for one-third.

market position The value chain in Sequana’s paper business essentially com-prises two main stages.

Paper production

The main ingredient used to manufacture paper is virgin or recy-cled pulp. Most producers of standard graphic paper have in-house pulp capacities which enable them to meet part or all of their pulp requirements. Producers of specialty papers are generally not inte-grated producers and purchase virgin pulp from specialised pulp manufacturers. Sequana is not an integrated producer of virgin pulp. However, it is the largest integrated producer of 100% recycled pulp. Banknote papers made from cotton derivatives (combers and linters) have a different value chain.

Papers range from standard coated papers produced in large vol-umes to specialty papers produced at lower volumes but sold at higher prices.

Paper sales

Most of the paper produced by Sequana is sold by distributors like Antalis.

Graphic and premium fine papers are mainly sold to distributors offering a wide range of products and services to major compa-nies, printers and advertising agencies and, to a lesser extent, directly to end customers (direct sales).

Specialty papers other than green and premium fine papers are mainly sold to converters which use them to produce other types of paper or to distributors which sell them to manufacturers of finished goods.

The table below shows Sequana’s position within the paper industry value chain.

Printers

Companies

Waster paper suppliers

Recycled pulp producers

Speciality paper (including recycled)

Paper distributors

Manufacturers of finished goods

End users (all segments)

Publishers

Wood supplier Virgin pulp producerGraphic paper

Companies

DirectAdvertising agencies

Raw materials Pulp production Paper productionDistribution/Converting

Printing End users

6% Arjowiggins Coated US

11% Arjowiggins Graphic

10% Antalis Visual Communication & Packaging

9% Arjowiggins Security

4% Arjowiggins Creative Papers

Breakdown of sales by business segment

12% Antalis Office

48% Antalis Print

Sequana’s business segments



Group strengths

Diversified portfolio of high-quality brands with leading market positions

The Group is engaged in a variety of businesses, most of which boast leading positions on their respective markets.

Antalis is Europe’s leading distributor of paper and among the biggest distributors worldwide. It has an extensive customer base of more than 230,000 printers and companies. Antalis has strengthened its presence in the fast-growing Packaging and Visual Communication businesses (13% of sales in 2011), while stepping up its growth push outside Europe (South Africa, South America and Asia-Pacific). Antalis’ global reach and bal-anced geographic spread in Europe allow it to diversify its cus-tomer portfolio and capitalise on the higher-than-average growth potential of emerging markets. Antalis’ profitability over the past few years has been rooted in its wide array of products and ser-vices, broad geographical presence, strong relationships with its customers and suppliers and a highly effective distribution network.

Arjowiggins enjoys leading positions on certain niche markets (No. 1 worldwide for premium fine papers, banknote paper and tracing paper). It is also the largest producer of recycled graphic paper integrated in recycled pulp, holding a No. 1 posi-tion in green/recycled paper in Europe (excluding LWC). This broad line-up of highly specialised businesses represents niche markets with their own customers, applications and market dynamics. This helps to limit the cyclical impact of Arjowiggins’ businesses. Arjowiggins enjoys top-ranking positions on mar-kets for high value-added products, where prices are signifi-cantly higher than for standard graphic paper. This allows it to generate higher margins and reduce its sensitivity to fluctuations in input costs, especially pulp. Arjowiggins’ broad geographic spread also enables it to capitalise on growth in emerging mar-kets, and particularly South America and Asia.

Strong competitive edge and barriers to entry

Antalis and Arjowiggins operate chiefly in highly concentrated markets where size (in terms of the depth of products and ser-vices offering, capacity for innovation, scale of the distribution net-work and production/storage capacity) can be major factors in forging a competitive edge.

Antalis enjoys leading positions in most countries in which it has operations and has implemented customer-focused solutions tools including Customer Relationship Management (CRM) and e-commerce applications. Potential entrants into Antalis’ markets are faced with significant barriers to entry, since market position, logistics network efficiency and the ability to attract new customers are key to profitability. The fragmented nature of the customer base also makes it hard to capture new customers and market share on a long-term basis. Antalis is in the final stages of implementing its RACE 2012 global business transformation plan, designed to achieve customer service excellence and accelerate sales growth, mainly by resizing and reallocating sales teams. To support RACE 2012, Antalis set up a Sales Academy, a training programme for sales forces which will be attended by around 2,400 people.

Arjowiggins has a strong presence on niche markets where inno-vation, customer relations, brand recognition (more than 50 rec-ognised brands among key market players) and product quality create significant barriers to entry. The size of these niche markets along with the highly specialised expertise they require and the nature of the paper manufacturing process also help prevent com-petition from major players. Arjowiggins’ growth strategy hinges on innovation and on anticipating the needs of clients and end cus-tomers. Each division has its own R&D department with a proven capacity for innovation, resulting in a steady stream of accolades over the past few years.



Strong, growing presence on high value-added segments (packaging, visual communication, green and specialty papers)

Antalis and Arjowiggins have operated in fast-growing, high value-added market segments for many years.

In 2011, Antalis generated 13% of its sales in the fragmented, high-growth markets of Packaging and Visual Communication, where it has operated over the past few years and enjoys top-ranking positions. Antalis’ development on the Packaging distri-bution market was achieved through a combination of organic growth and acquisitions (Brangs & Heinrich in Germany in 2004; Dekker Packaging BV in Benelux in 2006). Antalis has since continued to deepen its footprint on this market, carrying out acquisitions in Germany and the UK in early 2012. The com-pany is currently No. 2 in Europe on this segment, offering a broad range of standard and bespoke products and solutions to a wide variety of customers. Antalis’ increasing foothold on the Visual Communication market was achieved thanks to both organic growth and an enriched product and service offering through its acquisitions of Map and Axelium in 2007. In late 2010, the Group acquired Macron, German distributor of large-format digital printing equipment and other media. Antalis is currently among the market leaders, offering a wide range of bespoke products and services to customers such as silkscreen printers, sign and display specialists, and POS manufacturers and resellers.

Antalis intends to consolidate its positions in the Packaging and Visual Communication markets through organic growth and selective acquisitions. It will also continue to capitalise on the robust growth of its higher-margin international businesses.

Arjowiggins has long enjoyed top-ranking positions in several niche markets for high value-added products. Specialty papers(1) accounted for over 70% of its sales in 2011. Arjowiggins Security is the world’s leading producer of banknote paper, a field in which it has over two centuries of experience. Arjowiggins creative papers is the world’s No. 1 producer of premium fine papers including such recognised brands as Conqueror, Curious Collection and Keaykolour. It is also the leading pro-

ducer of casting and tracing paper. Arjowiggins Graphic has a unique position in the market for eco-friendly and recycled papers and became Europe’s No. 1 player following its acquisi-tion of Danish recycled paper producer Dalum Papir in 2007 and Greenfield in 2008, the leading producer of extra-white recy-cled pulp. Arjowiggins is No. 1 in Europe for recycled graphic papers (excluding LWC) and intends to expand its range of eco-friendly recycled products by tapping into the segment’s strong potential for growth (the penetration rate for recycled products is still low on these segments) and leveraging its price positioning. The company also intends to consolidate its positions in other specialty markets through ongoing innovation and a customer-focused strategy.

Maximising cash flow generation

Sequana has proved its capacity for maximising cash flow gen-eration in its most mature markets (e.g., office and print paper, Antalis’ core businesses) which enjoy strong market positions and require less investment spending requirements. Over the past few years, these segments have generated a steady stream of cash flow.

The industry in which Sequana operates is more sensitive than others to the prevailing economic and financial climate. In 2011, the Group was squeezed by both a drop in volumes and soaring input costs, which explains the retreat in its year-on-year oper-ating performance. However, Sequana’s business model has helped it withstand these exceptionally tough market conditions fairly well. The Group’s priorities going forward are to continue unlocking performance gains while maximising cash flow genera-tion and steadily reducing financial leverage.

The lynchpin of the Group’s strategy is to increase selling prices in order to protect margins. However, the uncertainty and lack of short-term visibility on the markets which negatively impacted demand for printing and writing papers meant that the Group was unable to implement the price increases announced for all of its business segments in 2011.

(1) Group specialty sales include products sold by the Security, Creative Papers and Graphic divisions (excluding sales of standard coated and uncoated papers).



Experienced management team

Sequana’s management team has a perfect understanding of the Group’s businesses and proven expertise in the field. It is also experienced in managing industry cycles. Consistent with its focus on value creation, in 2007 management began to realign the business as a pure paper player by reorganising its activities. Non-core businesses were sold off and a new growth push targeted high value-added segments. Profitability and cash flow generation became priorities amid tough market conditions. All members of the Group’s Executive Committee have been with Sequana for at least five years and boast over ten years’ experience on average in the paper industry.

Thanks to the new-look management structure and the new Executive Committee set up in 2009 comprising senior executives from Sequana, Arjowiggins and Antalis, Sequana has been able to ensure swift implementation of its operating decisions backed by strong central departments (strategy, HR, legal, finance and investment), and decentralised decision-making in the marketing and production field.

The Group’s performance is measured based on profitability and cash flow. Investment decisions are taken applying strict return-on-investment criteria. This strategy helped the Group to react deci-sively to address the deterioration in the markets as from 2008. By increasing selling prices and consistently reducing costs, selling off non-core businesses, improving productivity and maintaining a tight rein on cash flow, Sequana was able to safeguard its mar-gins and its cash flow generation. Nevertheless, the Group’s per-formance in 2011 was affected by a sharp downturn in volumes which prevented it from implementing selling price increases in the second half and from offsetting the negative impact of high raw material prices.

Group management has successfully integrated both large com-panies such as Map, Dalum and Greenfield as well as smaller-sized firms like Brangs & Heinrich, Dekker Packaging, Axelium and Macron. The Group’s experience makes it ideally placed to identify and successfully integrate future acquisitions, particularly distributors of products and solutions in the Visual Communication and Packaging businesses.

Group strategyThe Group’s strategy consists chiefly of acquiring and leveraging its top-ranking positions on specific markets to create value by:

} focusing on distribution and stepping up its development on fast-growing markets (such as Packaging and Visual Communication) and outside Europe; and

} playing a role in the increasing consolidation of the produc-tion market with the aim of creating market leaders, to consoli-date Arjowiggins’ foremost positions in niche segments, while gradually divesting non-core businesses.

The concrete aims of the Group’s strategy are described in more detail below.

Protect and consolidate the Group’s top-ranking positions in selected strategic markets

The Group enjoys top-ranking positions as a distributor of paper and packaging products (Antalis) and as a niche player on various production markets (Arjowiggins). Organic growth and acquisi-tion-led expansion aimed at protecting and consolidating its mar-ket positions is vital to the Group’s strategy. Sequana intends to leverage its scale in order to continue increasing its capacity for innovation, enriching its range of products and services, improv-ing customer service and maximising value creation.

On the production side of the business, Sequana enjoys lead-ing positions on a number of niche markets, including for eco-friendly papers. Its strengths allow it to continue growing its customer base and developing new product applications and more generally to pursue its business development by capitalis-ing on its key differentiating factors, notably innovation, customer service excellence, and product quality and reliability. On the distribution side of the business, Sequana intends to consoli-date its leadership by adopting a selective acquisitions policy in order to reinforce its presence in the fast-growing Packaging and Visual Communication markets.

Ongoing growth and strengthening of the Group’s position on the most profitable, value-added segments such as the produc-tion of eco-friendly and specialty papers are key to improving operating performance.



Continue to improve operating performance and maximise cash flow generation

Another lynchpin of the Group’s production and distribution strategy has been its ability to increase selling prices to safe-guard margins despite soaring input costs. However, the prevail-ing market climate in 2011 meant that it was unable to implement these price increases in all of its business segments. The price increases required to safeguard the Group’s overall profitability remain a priority for management, who intend to continue imple-menting this strict pricing policy.

Over the past few years, Sequana has strengthened commer-cial ties between Antalis and Arjowiggins’ Graphic and Creative Papers divisions. This has enabled an increasing number of syn-ergies to be unlocked between these businesses. Sequana has therefore enjoyed concrete benefits in terms of marketing, pre-scribers, business and product development and service qual-ity. These initiatives have also helped optimise Arjowiggins’ industrial capacities and generated significant cost savings by improving the supply chain, reducing delivery lead times and managing working capital more efficiently (just-in-time inventory management).

Amid efforts to accelerate growth and cement positions in the most dynamic and profitable production and distribution seg-ments, Sequana has focused on cutting costs, particularly on its most mature markets, with the aim of maximising margins and cash flow generation. Arjowiggins closely monitors its produc-tion capacity and in 2011 introduced new measures to cut over-heads and adjust production capacity. These included shorter working time arrangements and shutting down three paper machines, in Argentina, France and Denmark.

Faced with a tough overall sales environment over the past few years, the Group has also sought to generate cash flows through the combination of strict working capital management and the divestment of non-core assets at both Antalis (Promotional prod-ucts and Office supplies) and Arjowiggins (Carbonless paper, Decor paper Asia, Decor and Abrasive papers, and the Moulin du Roy plant) to give it the necessary financial clout to bolster its leadership in selected businesses and reduce net debt.

Continue to prioritise product innovation and customer service

Sequana believes that customer service is vital in creating value and constantly endeavours to meet the demands and expecta-tions of its customers across its business spectrum.

On the distribution side, the credo of Antalis’ RACE 2012 pro-gramme is delivering excellence to customers through five key priorities (customers focus, expansion into growth markets, opera-tional excellence, services and solutions and people development) by leveraging Antalis’ procurement expertise, extensive distribution network and comprehensive range of products and services.

Arjowiggins continues its innovation drive in all of its divisions, which each have their own R&D department. The Group will continue to improve customer relations by promoting new prod-ucts, developing new applications using its technological capa-bility and maximising product quality and reliability.

Monitor growth opportunities and play a part in market consolidation through mergers, acquisitions and divestments

The Group’s long-term strategy is to refocus on distribution, in particular through acquisitions in the distribution of visual com-munication and packaging products while strengthening its lead-ing positions on selected specialty paper production segments.

Sequana also intends to play a role in the consolidation of the production sector through mergers, acquisitions and disposals in order to carve out leading positions for businesses on their respective markets. This was the logic behind the sale of the Decor and Abrasive businesses based at its Arches (France) and Dettingen (Germany) plants. However, the Group will ensure that its activities deliver strong operating performances and that any transactions in which they are involved reflect their strategic value.



2011 Group results

Operating performance impacted by extremely tough market conditions

In 2011, Sequana was squeezed by sharply reduced volumes for printing and writing papers in Europe and the US, on both the distribution (down 8%) and production (down 7%) sides of the business. The downturn was sharper than expected in the sec-ond half of the year and prevented the Group from implementing the selling price increases announced before the summer.

In contrast, demand was healthy in non-paper distribution busi-nesses (Packaging and Visual Communication) and in most specialty production segments, particularly Security (banknote papers, security solutions).

Raw materials and energy prices remained high, far in excess of 2010. Prices for cotton, used to produce banknote papers, tripled between September 2010 and March 2011. As from the second half of the year, raw material costs (particularly pulp and cotton) began to decline (average price of paper pulp down 8.1% compared to the first half of the year). However, due to the time lag between the date raw material prices began to fall and the date raw materials were purchased, this failed to offset the downturn in volumes and pressure on Arjowiggins’ selling prices.

Sales for the year therefore retreated 1.8% (down 1.4% at constant exchange rates), to €3.9 billion. EBITDA came in at €135 million, down 34.5% year on year, and represented 3.4% of sales.

Recurring operating income decreased 33.9% to €89 million, representing an operating margin of 2.3%, which includes gains of €25 million arising on changes to pension plans, mainly in the UK. Including net non-recurring expenses of €108 million (mainly €61 million in writedowns taken against assets and €38 million in restructuring costs), the Group reported a net loss attributable to owners of €77 million.

Consolidated net debt declined by €65 million to €609 million compared to €674 million at 31 December 2010. The net debt figure includes €101 million in proceeds from disposals.

Strategic refocus on specialised distribution continues apace

Faced with a slowdown in demand and soaring raw material costs, Sequana continued to implement measures to reduce overheads and production capacity, shutting down three paper machines, in France, Denmark and Argentina.

It also continued to realign its business as a specialised distribu-tor. In March 2011, Arjowiggins sold its Decor and Abrasives activities to Munksjö for an enterprise value of €95 million. The Moulin du Roy plant (France) was sold to the Hamelin group in June. Antalis sold its retail and wholesale Office Supplies busi-ness in Spain and Portugal for an enterprise value of €26 million.



Key figuresCondensed analytical income statement

(€ millions, except per share amounts) 2011

2010 management

pro forma

2010pro forma

IFRS2010

reported2009

reported

Change 2011/2010

management pro forma

Sales 3,944 4,016 4,117 4,333 4,088 -1.8%

EBITDA(*) 135 206 209 224 213 -34.5%

EBITDA margin 3.4% 5.1% 5.1% 5.2% 5.2% -1.7 points

Recurring operating income(1) 89 135 137 148 137 -33.9%

Operating margin 2.3% 3.4% 3.3% 3.4% 3.4% -1.0 point

Recurring net income(**) 30 51 54 61 73 -41.2%

Recurring diluted earnings per share 0.60 1.01 1.07 1.20 1.49 –

Non-recurring items(***) (108) - - (29) (53) –

Net income (loss) attributable to owners (77) 32 32 32 20 –

Diluted earnings (loss) per share (1.57) 0.64 0.64 0.64 0.41 –

Weighted average shares outstanding, after dilution 49,256,017 50,480,341 50,480,341 50,480,341 49,117,160 –

(1) Including gains of €25 million (Arjowiggins: €17 million, Antalis: €8 million) arising on changes to pension plans, mainly in the UK. Adjusted for these items, recurring operating income amounted to €64 million instead of €89 million and the operating margin came in at 1.6% instead of 2.3%.

(*) Reconciliation of EBITDA

(€ millions) 2011

2010 management

pro forma

2010pro forma

IFRS2010

reported2009

reported

Recurring operating income(1) 89 135 137 148 137

Less depreciation and amortisation(1) (68) (68) (68) 73 71

Less movements in provisions(1) 22 (3) (4) 3 5

EBITDA 135 206 209 224 213

(1) See chapter 4 – Consolidated income statement.

(**) Reconciliation of recurring net income

(€ millions) 2011

2010 management

pro forma

2010pro forma

IFRS2010

reported2009

reported

Recurring operating income(1) 89 135 137 148 137

Net financial income (loss)(1) (41) (50) (49) (48) (47)

Less Legg Mason and Permal shares – (1) (1) (1) (3)

Income tax on recurring operating income (19) (33) (33) (38) (15)

Non-controlling interests 1 – – – 1

RECURRING NET INCOME 30 51 54 61 73


(***) Reconciliation of non-recurring items

(€ millions) 2011 2010 2009

Other operating income and expenses(1) (92) (30) (62)

Legg Mason and Permal shares – 1 3

Income tax on non-recurring items (16) – 32

Net income (loss) from discontinued operations(1) – – (26)

NON-RECURRING ITEMS(***) (108) (29) (53)




Recurring operating income (€ millions)

137 135 89

Recurring operating income fell €46 million and represented 2.3% of sales.

Net income (loss) attributable to owners (€ millions)

Sequana reported a net loss attributable to owners of €77 million, due mainly to writedowns taken against Arjowiggins assets for €61 million and restructuring costs totalling €38 million.

EBITDA (€ millions)

213 206 135

EBITDA dropped 34.5% (down 8.2% for Antalis and 55.8% for Arjowiggins) and represented 3.4% of sales.

Sales (€ millions)

2009

2009 2009

2011

2011 (3) 2011

2010 pro forma (2)

2010 pro forma (2)

2010 pro forma (2)

4,088 4,016 3,944

Sales slipped 1.8% (down 1.4% for Antalis and 1.6% for Arjowiggins) due to the sharp downturn in volumes for printing and writing papers in Europe and the US. At constant exchange rates, sales fell 1.4% (down 1.6% for Antalis and 0.3% for Arjowiggins).

17% Rest of the world

46% Europe (excl. France and UK)

17% UK

Breakdown of sales by geographic area(1)

7% US

13% France

Sequana earns 87% of its sales outside France.

2009

2011

2010

20 32

(77)

Shareholders’ equity at 31 December (€ millions)

2009 20112010

738 814 669

(2) See preliminary remarks on page 4.

(1) See chapter 4 – Notes 29e and 29f.

(3) Including gains of €25 million (Arjowiggins: €17 million, Antalis: €8 million) arising on changes to pension plans, mainly in the UK. Adjusted for these items, recurring operating income amounted to €64 million instead of €89 million and the operating margin came in at 1.6% instead of 2.3%.



Change in net debt

(€ millions) at 31 December 2011

CONSOLIDATED NET DEBT AT 31 DECEMBER 2011 (674)

EBITDA 135

Change in working capital requirements 47

CAPEX (70)

Net financial charges (36)

Income taxes paid (21)

Restructuring costs (48)

Refinancing costs (3)

Disposals/acquisitions 26

Cash flow from discontinued operations 70

Dividends (20)

Foreign exchange losses (6)

Other items (9)

CONSOLIDATED NET DEBT AT 31 DECEMBER 2011 (609)


36% Europe(excl. France and UK)

15% UK

Average headcount by geographic area

7% US

26% France

Net debt (€ millions)

2009 20112010

651 674 609

Antalis: €11mArjowiggins: €32m

Antalis: e25mArjowings: e23m

Office Supplies business

Decor and Abrasives business



Group timeline

1991 } Creation of Someal (later known as Worms & Cie) by Ifil in order to manage its French investments (Saint-Louis, Worms & Cie, Danone group, Accor).

1997 } Successful joint takeover bid launched by Someal and AGF for Worms & Cie in response to the hostile takeover bid launched by the Pinault group. AGF and certain individual shareholders contribute their shares in Worms & Cie to Someal.

1998 } Merger of Worms & Cie into the Group. Change of corporate name and listing on the Premier Marché (monthly settlement) of the Paris stock exchange (Bourse).

1999 } Public takeover bid for Arjomari Prioux followed by a man-datory withdrawal procedure (OPA-RO). Merger of Arjomari Prioux into the Group, providing the latter with direct control over Arjo Wiggins Appleton.

} Restructuring of Arjo Wiggins Appleton (AWA Ltd).

2000 } Acquisition of 15% of the voting rights of SGS.

} Sale of Saint-Louis Sucre to Financière Franklin Roosevelt, 46.9% owned by Worms & Cie, 51.1% by Belgian (Albert Frère group) and Luxembourg investors (represented by Inveparco), and 2% by management.

} Launch of a cash bid by the Group to increase its stake in AWA from 40% to 100%. Its offer is subsequently approved by AWA’s shareholders and its shares delisted from the London Stock Exchange.

2001 } Completion of the sale by AWA of its 40% stake in the Portuguese company Soporcel and sale of Appleton Papers Inc. to an entity set up by the employees of this subsidiary.

} Sale by Inveparco and the Group in late 2001 of their respec-tive 51.1% and 46.9% stakes in Financière Franklin Roosevelt, the parent company of Saint-Louis Sucre, to Raffinerie Tirlemontoise, a subsidiary of the Südzucker AG group.

2002 } Elimination of AWA’s registered office and transformation of Arjowiggins and Antalis International (the former operating divisions of AWA) into sole shareholder simplified joint stock companies and fully operational Group subsidiaries.

} Successive increases in the Group’s stake in SGS, to 21.6% at 31 December 2002 and 23% at the beginning of 2003.

} Simplified public offer by Worms & Cie for 9.84% of its own stock (representing 11,500,000 shares at a price of €21 per share), followed by cancellation of the shares acquired and a corresponding reduction in capital.

2003 } Start of an industrial link-up between Arjowiggins and Carbonless to take advantage of the synergies offered by the two businesses and optimise management of production facilities.

} Continuation of the Antalis turnaround plan.

} Expansion of Permal Group following the restructuring pro-cess initiated in 2002.

} Acquisition of additional shares in SGS, bringing Worms & Cie’s stake to 23.77%.

} Sale of Danone shares, generating post-tax capital gains of €75 million.

2004 } Implementation of the link-up between Arjowiggins and Carbonless from an operational and legal perspective.

} Sale of Accor shares, generating post-tax capital gains of €21.6 million.

} Reorganisation of Permal Group.

2005 } Change in the legal form of Worms & Cie to a joint stock cor-poration with a board of directors, and change in name to Sequana capital. New management team.

} Sale of 70.5% of Permal Group to Legg Mason for a total amount of USD 718 million, plus an earn-out payment con-tingent on Permal’s future performance. Sequana Capital retains a 6.36% stake in Permal, which it agrees to sell to Legg Mason in 2007 and 2009.

} Change in management team at Arjowiggins. Provisions are booked for exceptional items for a pre-tax amount of €197 million, including €191 million in additional provisions and writedowns of fixed assets.



2006 } Change in shareholding structure: unwinding of the share-holder agreement between the Worms, Barnaud, Meynial and Taittinger families in March, which raises the free float from 12.4% to 27.44% of the share capital.

} Successful completion by Sequana Capital in December of a public share buyback offer through the exchange of shares in SGS SA held in the portfolio or the cash equivalent. This oper-ation follows the Group’s decision to become a pure paper player through its two main subsidiaries and leads to a reduc-tion of €86,470,470 in its share capital.

} Following the operation, Sequana Capital becomes a paper industry group with a significantly enlarged free float equal to 37.38% of its share capital. Ifil Investissements SA retains a shareholding of 48.88% and AGF 13.66%.

2007 } Exor SA (formerly Ifil Investissements SA) sells 21.9% of the share capital to DLMD, a family investment company controlled by Pascal Lebard, Chief Executive Officer of Sequana Capital. Exor SA thereby reduces its stake in Sequana from 48.7% to 26.7%, while retaining principal shareholder status. Exor SA and DLMD sign a shareholder agreement to act in concert for an initial period of three years.

} Antalis acquires Map for €382 million, becoming the No. 1 paper distributor in Europe.

} Arjowiggins acquires Dalum Papir SA, Europe’s leading dis-tributor of premium recycled coated paper.

} Sequana Capital receives USD 164 million in cash and USD 29 million in Legg Mason shares as an earn-out payment on the disposal of 70.5% of Permal Group’s share capital in November 2005 and 5.36% of its share capital in November 2007. Sequana Capital retains a 1% stake in Permal after this transaction.

2008 } Arjowiggins acquires Greenfield SAS, a manufacturer of pre-mium deinked pulp.

} Antalis sells Premier Paper Group Limited to the independent UK firm Beswick Paper. The sale complies with the commit-ment made to European competition authorities in connection with the Group’s acquisition of Map to sell one of Map’s two UK subsidiaries.

} Change in Sequana Capital’s corporate name to Sequana, reflecting its move to become a pure paper player.

} Sequana decides that the roll-out of Arjowiggins’ new strat-egy should be stepped up a gear by increasing the autonomy of its divisions and launching restructuring measures for the Carbonless paper business, which involve the closure of the Dartford and Bor plants to focus production in Belgium.

} Arjowiggins sells its Bernard Dumas industrial division to the regional French private equity fund IRDI-ICSO for around €10 million.

2009 } Antalis sells its Promotional Products division to the BIC group.

} Arjowiggins closes its Faya tracing paper plant in the Ardèche and the Wizernes paper cutter plant in Pas-de-Calais (both in France).

} Sequana implements a new-look organisation for the Group, designed to accelerate operational link-ups between its sub-sidiaries. A new Executive Committee is created, composed of management executives from Sequana, Arjowiggins and Antalis.

} Sequana sells Arjo Wiggins Appleton Ltd (AWA Ltd), the entity responsible for the Fox River environmental claim. This risk is not counter-guaranteed by Sequana and the sale of this entity therefore allows the Group to extinguish its contingent liability.

} Arjowiggins sells shares in its subsidiary HKK2 to international investors. HKK2 is a holding company for the Decor paper joint venture with Chinese firm Chenming.

} Antonin Rodet, owner and merchant of Burgundy wines, is sold to the Boisset group for an enterprise value of €23 million.

} Arjowiggins sells its Carbonless paper business to local Arjowiggins managers with the support of the Walloon region.

} Sequana sells its remaining 1% stake in Permal Group to Legg Mason for USD 13.6 million. This amount was increased by an additional earn-out payment of USD 0.7 million calculated on the basis of Permal’s performance at 30 September 2009.

2010 } With the 2007 shareholder agreement due to expire, Exor SA, DLMD and Pascal Lebard enter into a new agreement for an automatically renewable period of one year. Pursuant to this agreement, DLMD sells a 1.59% stake in Sequana to Exor SA on 30 July 2010. This reduces DLMD’s interest in Sequana to 20.22%, while Exor SA, the Company’s main shareholder, increases its interest to 28.24%.

} Antalis sells its 50% holding in Chilean office supplies firm Ofimarket to its partner Lapiz Lopez.



2011 highlights

7 February Antalis finalised the sale of Antalis Office Supplies in Spain and Portugal to Lyreco. This transaction represents a total enterprise value of €23 million.

10 March Arjowiggins sold its Decor, Abrasives, Thin Opaque Papers and Fine Arts businesses based at its Arches (France) and Dettingen (Germany) plants to Swedish group Munksjö for an enterprise value of €95 million. In 2010, the businesses gener-ated €220 million in sales and posted EBITDA of €15 million.

31 March Antalis sold off its wholesale cash and carry office supplies business in Porto and Lisbon and its paper and cardboard con-verting business in Portugal to Portuguese firm AVS. This trans-action represented an enterprise value of €3 million.

30 JuneArjowiggins sold the Moulin du Roy mill in Annonay (France) to the Hamelin group.

22 JulyArjowiggins took new measures to bring production capacity into line with lower demand and shut down three paper machines, in France (Rives), Denmark (Dalum Papir) and Argentina (Witcel). These clo-sures represented a production capacity of 65,000 tonnes.

recent developments and outlook

Recent developments

As part of its acquisition-led growth strategy in high-potential markets, Antalis acquired UK-based Ambassador at the begin-ning of January and signed an agreement to acquire Pack 2000 in Germany in the middle of the month. Ambassador and Pack 2000 are distributors of packaging consumables and products. This transaction adds an additional €50 million to Sequana’s annual sales of over €200 million in this business and significantly reinforces its market position, becoming the second largest UK distributor of packaging products and solutions. Sequana final-ised its acquisition of Pack 2000 on 29 February 2012. These transactions represent an enterprise value of €26 million.

On 30 April 2012, the Group and its banks finalised an agree-ment setting out the terms and conditions of renewal for the syn-dicated credit facilities entered into by Arjowiggins and Antalis in 2007 and for Sequana’s confirmed credit line and overdraft facility. The agreement renews these facilities for a period of two years, through to 30 June 2014 (see chapter 4, Note 1 to the consolidated financial statements – Significant events of the year).

Outlook

Amid persistent economic and financial uncertainties, demand for printing and writing papers should decline in 2012, particularly in the first half of the year. Actual figures for the first two months of the year for both distribution and production confirm this outlook, as the lack of visibility hits corporate marketing and communica-tion budgets.

Arjowiggins’ specialty businesses (particularly eco-friendly papers, Security and Medical/Hospital segments) should enjoy robust demand. On the distribution side, growth in Packaging and Visual Communication and in emerging markets should con-tinue apace.

Raw material prices should fall below their 2011 levels despite continuing volatility. Despite a slight increase in March, prices for pulp have already begun to drop, along with waste paper and cotton. In contrast, the price of energy and chemical products will remain at high levels.

Selling price increases have also been announced by certain players in the printing and writing paper segment for April.

The paper industry is currently undergoing major changes, as falling volumes have led to a reduction of production capacity (closures represented production capacity of 895,000 tonnes in 2011 for the European graphic market) and the need for market consolidation.

In 2012, the Group will continue to focus on improving operating performance and strengthening its leading position by develop-ing its distribution businesses in high-growth non-paper sectors (Packaging, Visual Communications) and in emerging countries, as well as by accelerating product innovation, marketing and sales efforts in production.



Business and financial data for the first quarter of 2012(1)

Operating performance proves resilient in line with first-quarter 2011, despite the persistently difficult market environment.

Signature of banking documentation and finalisation of the Group’s financing agreement.

• Sales down 3.2% to €984 million

• EBITdA margin stable at 4%: EBITdA at €40 million versus €41 million for Q1 2011

• Net income of €3 million

Condensed analytical income statement

€ millions, except for per share data Q1 2012Q1 2011 reported

% year-on-year change(1)

Sales 984 1,016 -3.2%

EBITDA(2) 40 41 -4.3%

EBITDA margin (as % of sales)(1) 4.0% 4.1% -0.1 point

Recurring operating income 23 25 -8.9%

Operating margin (as % of sales)(1) 2.3% 2.4% -0.1 point

Recurring net income(3) 9 11 -15.2%

Recurring diluted earnings per share (€) 0.18 0.21 –

Net income attributable to owners 3 24 NA

Diluted earnings per share (€) 0.05 0.48 –

Average number of shares after dilution 49,738,718 50,783,819 –

(1) Percentage changes are based on figures rounded out to one decimal place.(2) EBITDA: recurring operating income before depreciation and amortisation and excluding movements in provisions.(3) Recurring net income: recurring operating income after net financial income (expense) and income tax on recurring operating income.

Consolidated sales for the first quarter of 2012 came in at €984 million, versus €1,016 million in the first quarter of 2011. The 3.2% drop in sales (down 3.8% at constant exchange rates) reflects the fall in demand for printing and writing papers (down 5% and 6%, respectively, in distribution and production) amid pressure on selling prices.

EBITDA for the quarter came in at €40 million, down 4.3% on first-quarter 2011 (€41 million) and the Group benefited from the positive impact of lower raw material costs and ongoing over-head reduction efforts. EBITDA margin was stable, at 4% of sales. Recurring operating income was €23 million, compared with €25 million for the same period in 2011.

Recurring net income for the quarter was €9 million versus €11 million in the first quarter of 2011. Including non-recurring items (mainly restructuring costs incurred by Antalis and Arjowiggins), net income attributable to owners totalled €3 million, compared to €24 million in the same year-ago period, which included the capital gain of €17 million on the sale of Antalis Office Supplies.

Finalisation of agreement to renew the Group’s credit facilities

On 30 April 2012, the Group finalised an agreement with its banks setting out the terms and conditions for the renewal of its financing lines through to 30 June 2014.

The Company filed its registration document with the French financial markets authority (Autorité des marchés financiers – AMF) on 30 April 2012.

(1) Non audited for the first quater of 2012.



Outlook

Demand for printing and writing papers, which continued to decline in the first quarter of the year, is set to remain weak over the coming months.

However, Antalis should continue to benefit from strong momentum in its non-paper businesses (Packaging and Visual Communication) and from planned selling price increases for printing and writing papers. Arjowiggins should continue to reap the benefits of lower raw material costs and upbeat momentum in

its specialty businesses, particularly the Security division and in recycled papers and Medical and Hospital sectors.

The Group will press on with its cost reduction programmes in order to bring supply into line with demand for printing and writing papers.

Consequently, Sequana stands by its forecast of delivering an improved operating performance (EBITDA) in 2012 ahead of 2011.

Breakdown of sales by business

€ millions First-quarter 2012 First-quarter 2011Year-on-year

change(1)

Antalis 691 718 -3.7%

Arjowiggins 363 375 -3.2%

Eliminations and other (70) (76) -8.5%

TOTAL 984 1,016 -3.2%

(1) Percentage changes are based on figures rounded out to one decimal place.

Antalis

Demand for printing and writing papers in the first quarter of the year continued to decline in Europe, and particularly in the Benelux, Iberian and Nordic countries and in Switzerland. Business held up better in France, Eastern Europe and Germany, while markets outside Europe (South America and Asia) and non-paper businesses (Packaging and Visual Communication) performed strongly. Good growth in the Packaging business was buoyed by the acquisition of UK-based Ambassador and the German firm, Pack 2000, in early 2012.

Antalis’ sales were €691 million, down 3.7% year-on-year, or 3.9% at constant exchange rates.

Arjowiggins

Arjowiggins’ sales were €363 million, down 3.2% year-on-year, or 4.4% at constant exchange rates.

This decrease was due primarily to lower demand for printing and writing papers in Europe and the United States and a dete-rioration in the premium creative papers product mix. Demand held up well in the specialty businesses, in eco-friendly papers in Europe and in recycled pulp, and the Security Solutions and Medical/Hospital activities performed particularly strongly.

PreSentAtIon of tHe GrouP 1Share performance and ownership structure


Share performance and ownership structureShare informationThe par value of each Sequana share is €1.50.

Stock market listing

Sequana shares were first floated on the Premier Marché of the Paris stock market on 25 May 1998, and have been listed since 21 February 2005 on the Eurolist market of NYSE Euronext Paris. They are presently part of Segment B. The shares have been eligible for the deferred settlement service (SRD) since 27 March 2007.

No commitments of any nature were made at the time of the flotation.

Stock market codes

Since 30 June 2003, all securities traded on the Paris spot markets have been identified by their International Securities Identification Number (ISIN) code. Sequana’s ISIN code is FR0000063364 and its ticker symbol is SEQ.

SEQ.PA is the code used by Reuters and SEQ.FP the code used by Bloomberg.

Following NYSE Euronext’s reorganisation of its French market index series with effect from 21 March 2011, Sequana’s shares are now listed on the new CAC Small®, CAC Mid & Small® and CAC All-Tradable® indices. They were previously listed on the SBF 120 index.

Share ownership and corporate actions

Shareholder agreement between Exor SA and DLMD

On 6 July 2007, Exor SA and DLMD, a family-run company con-trolled and managed by Pascal Lebard, acting in concert vis-à-vis Sequana, signed a shareholder agreement with an initial term of three years for the purpose of stabilising the Company’s owner-ship structure. On expiry of this agreement, a new agreement was signed by Exor SA, DLMD and Pascal Lebard on 21 July 2010 for an automatically renewable term of one year (see chapter 5, page 182).

Share performanceShare data over the last three years

2011 2010 2009

Number of shares at 31 December 49,545,002 49,545,002 49,545,002

Dividend (in €) – (1) 0.40 0.35

Share price (in €)

High 14.25 12.95 10.77

Low 2.76 6.83 3.51

Closing 4.29 11.65 7.98

Market capitalisation (in € millions)

At 31 December 213 577 395

(1) Subject to shareholder approval at the Shareholders’ Meeting of 26 June 2012.

0.66% Treasury shares

50.85% Free float(incl. Allianz 11.83%)

20.25% DLMD (incl. Pascal Lebard 0.03%)

Ownership structure (at 31 December 2011)

28.24% Exor SA

PreSentAtIon of tHe GrouP1 Share performance and ownership structure


Share performance between 1 January 2011 and 31 March 2012

The table below presents Sequana’s share performance and trading volume over the past 15 months (source: NYSE Euronext paris):

Average price(1)

(in €)High (in €)

Low (in €)

Average daily trading volume

(number of shares)

Average market capitalisation(2)

(€ millions)

January 2011 13.17 14.25 11.51 76,002 653

February 13.46 14.00 12.70 39,469 667

March 12.17 13.30 10.52 71,222 603

April 12.13 12.58 11.56 21,171 601

May 11.14 11.57 10.45 27,221 552

June 10.12 10.79 9.45 40,516 501

July 9.64 10.55 8.35 32,033 478

August 7.06 8.59 6.05 50,751 350

September 5.39 7.14 4.12 92,187 267

October 4.67 5.23 4.23 154,519 231

November 3.50 4.35 2.54 160,846 173

December 3.42 4.89 2.88 323,575 169

January 2012 4.68 5.99 3.85 316,177 232

February 6.70 5.38 5.98 267,076 332

March 5.46 6.25 4.72 248,723 271

(1) Arithmetic average of closing prices. (2) Based on 49,545,002 shares making up the share capital between 1 January 2011 and 31 March 2012.

dividend per shareDividends paid by the Company over the past five years

Year Net dividend(1)

2007 €0.70

2008 –

2009 €0.35

2010 €0.40

2011(1) – (1)


PreSentAtIon of tHe GrouP 1Share performance and ownership structure


Dividend payout policy

Sequana’s dividend policy is chiefly based on the Group’s earn-ings capacity, financial position, the ability of its operating sub-sidiaries to pay out dividends, and any other factors that the Board deems relevant.

In connection with its new refinancing agreement, Sequana has agreed with its financial partners not to pay any dividends in 2012 or 2013 and to limit any dividend payout in 2014.

Sequana reported a net attributable loss of €77 million in 2011, due mainly to writedowns taken against assets owned by Arjowiggins in an amount of €61 million. At its meeting of 8 March 2012, Sequana’s Board of Directors decided that it would appropriate the net loss to retained earnings and would recommend not paying any dividends in respect of 2011 at the Shareholders’ Meeting to be held on 26 June 2012 to approve the financial statements for the year ended 31 December 2011.

regular dialogue with investorsSequana provides the market with quarterly updates on its results (sales by business and condensed consolidated income statement) and its strategic focuses, and publishes full or con-densed financial statements twice a year.

All of this information can be consulted on its website in French and English. This enables the market to consult the share price in real time and obtain the latest press releases, analyst presen-tations and so on. An e-mail alert service informs all interested parties of the latest news releases.

A financial notice is published in the French media in connection with the Group’s annual and half-yearly earnings announcements.

Sequana organises information meetings that coincide with the publication of annual and interim earnings. Senior management meets regularly with investors in Europe and also takes part in conferences organised for small- and mid-caps. Sequana par-ticipated in five such meetings in 2011, in Paris and other French cities.

Further information on the Sequana share can be obtained from the communications and investor relations department:

} by mail, addressed to Sequana, 8 rue de Seine, 92517 Boulogne-Billancourt Cedex – France

} on the Group’s website, www.sequana.com

} by e-mail, at [email protected]

} by telephone, at +33 1 58 04 22 80

management of share accountsSequana’s Articles of Association require that shares be held in fully registered or administered registered form or as bearer shares in order to facilitate trading in the Company’s shares.

BNp paribas Securities Services manages Sequana’s share accounts:

BNp paribas Securities Services Shareholder Relations (Relations Actionnaires)9, rue du Débarcadère 93500 Pantin – FranceTel.: +33 826 109 119

Market capitalisation at 31 December 2011 (€ millions)

2009 20112010

395 577 213

Sequana operates in a cyclical industry which is more sensitive than other sectors to the economic and financial climate. The financial crisis and uncertainties concerning the global economic climate have weighed on Sequana’s share price.

PreSentAtIon of tHe GrouP1 Presentation of business activities – Antalis


Presentation of business activitiesAntalisNo. 1 in Europe and No. 4 worldwide in B2B distribution of paper and packaging products

Four business segments Leading positions Broad range of clients 2011 key figures

Print Coated and uncoated papers, specialty and creative papers, envelopes, graphic supplies.

OfficePaper, envelopes and consumables.

Visual communicationPaper, board and plastics.

PackagingConsumables, machines and additional services for the protection of all goods (industry, printers, companies).

No. 1 in the Baltic States, Finland, France, Ireland, Norway, Poland, Slovakia, South Africa, Switzerland.

No. 2 in Austria, Belgium, Czech Republic, Denmark, Hungary, Netherlands, Romania, Spain, Sweden, UK.

More than 230,000 customers around the world:

} printers, publishers;

} companies and government agencies;

} professionals specialised in signage systems;

} industrial firms.

110 distribution centres

13,000 deliveries every day in Europe

2 million tonnes of paper distributed each year

Over 6,000 employees in 44 countries


Geographic reach

Europe Americas Asia-Pacific Africa

Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, UK.

Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Peru.

Australia, China, Hong Kong, Japan, Malaysia, Singapore, Thailand.

Botswana, South Africa.

ProfileEurope’s leading B2B distributor of paper and packaging prod-ucts and No. 4 worldwide, Antalis offers a broad array of prod-ucts and services to more than 230,000 business customers in its four market segments.

Due to the diversity of its customers, Antalis can significantly reduce its sensitivity to changes in its customer base. Active in markets only marginally affected by seasonal fluctuations, Antalis usually reports slightly weaker sales figures in August and December.

Selling prices vary depending on the category of product, quan-tity, service offering, country, customer segment, purchasing prices, competitive environment and special offers. In general, a catalogue listing selling prices is available in each country and is used as a basis for specific discounts and net prices, which also depend on the factors mentioned above. Antalis actively moni-tors its pricing policy with dedicated pricing managers and pric-

ing tools embedded in the Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems. Sales and payment terms and conditions are closely monitored by teams specialising in receivables management in order to opti-mise cash recovery and minimise bad debt risk.

Antalis’ operations span five continents and 44 countries. Its main markets are Western and Eastern Europe, where it respec-tively generated 76% and 14% of its sales in 2011. Antalis also has operations outside Europe, in South Africa, South America and Asia-Pacific. The contribution of these regions to the com-pany’s total sales is increasing.

In 2011, Antalis had around 6,000 employees, 17% of whom were based in Eastern Europe, 16% in the UK, 10% in France and 39% in the rest of Western Europe (excluding France and the UK).

PreSentAtIon of tHe GrouP 1Presentation of business activities – Antalis


Antalis’ business segments

The paper and communication materials distribution market is fiercely competitive and has become far more concentrated in Europe over the past ten years. It currently represents around 15 million tonnes of paper. Direct sales by producers to cus-tomers accounts for around one-third of the market. The other two-thirds are served by distributors, with the top five players enjoying a market share of almost 80%.

Competition on the markets for print and office paper has inten-sified over the past few years, as well as companies whose businesses are exclusively similar to its own (PaperlinX, Igepa, Papyrus). Antalis also competes directly with paper producers who are also distributors (Torraspapel) and with office supply dealers (Lyreco, Office Depot, Staples). Excess capacity in the paper sector and a tough economic climate in recent years have prompted certain paper manufacturers to increase their direct sales in certain product categories, sometimes at the expense of sales via specialist distributors like Antalis.

Antalis operates in four segments:

Print

Antalis is a leader in the print market and is recognised as having the highest quality and most extensive range of products on the market. Printers, graphic designers, publishers and advertising agencies can choose from a huge variety of premium coated and uncoated papers, creative papers and envelopes as well as spe-cialty products such as carbonless and self-adhesive papers.

In 2011, Antalis’ share of the European print market was around 18% in volume terms. Its main competitors in this segment are PaperlinX, Papyrus and Igepa. Demand in the print market is driven by printed advertising expenditure and corporate communications. However, the market has to come to terms with the growing use of electronic media and a volume downturn in Europe. In contrast, the print market in Asia and South America remains bullish.

In 2011, Antalis’ Print business generated €1,942 million in sales, or 70% of the company’s total sales.

Office

Antalis distributes a comprehensive array of reams (for photo-copiers and printers) to large corporations, government organi-sations and resellers (central purchasing bodies, procurement centres and retailers) along with envelopes suitable for the very latest inkjet, laser jet and digital printing techniques.

In 2011, Antalis’ share of the European office paper market was around 25% in volume terms. Its main competitors in this seg-ment are Lyreco, Office Depot, Xerox and Papyrus. Demand for office paper depends on the consumption of paper for photo-copiers, inkjet and laser jet printers, and on the use of printed documents and e-mails.

In 2011, Antalis’ Office business generated €471 million in sales, or 17% of the company’s total sales.

Packaging

Packaging distribution is a fast-growing, high value-added seg-ment, and the market remains very fragmented. Thanks to its strong European presence, Antalis is one of the market leaders.

The customer base comprises major industrial groups in sectors such as the car industry and electronics, as well as SMEs and printers. Antalis provides these customers with consumables, machines, and additional services and solutions for protecting goods in transit and in storage in accordance with their specific characteristics and needs. Its product offering includes stand-ard packaging products like kraft paper, bubble wrap, cardboard boxes, strapping machines and packaging, as well as bespoke logistics and technical solutions, especially for the export market and protection against corrosion for industrial goods.

In 2011, Antalis’ share of the packaging market was around 4% in value terms and the company was ranked No. 2 in Europe. Its main competitors are Raja, Nefab, Ratioform and ScA Packaging. This market is currently undergoing consolidation.


17% Eastern Europe

16% UK

Average headcount by geographic area

39% Western Europe (excl. France and UK)

10% France

5% Visual Communication

17% Office

8% Packaging

Breakdown of sales by business segment

70% Print



Growth in the packaging market mainly depends on GDP trends and national and international trade.

In 2011, Antalis’ Packaging business generated €207 million in sales, or 8% of the company’s total sales.

Visual Communication

The Visual Communication business targets graphic art spe-cialists conducting promotional, advertising or information cam-paigns. Antalis supplies these specialists with board, plastics and paper for point-of-sale (POS) advertising displays, signage, store window and car displays and banners. The products are adapted to different printing techniques including screen, UV offset and digital/large format printing (LFP).

In 2011, Antalis’ share of this fragmented market was around 6%. Antalis is one of the leading distributors of signage systems and POS advertising in Europe. Its main competitors in this seg-ment are Spandex, Vink, ThyssenKrupp, PaperlinX and Igepa. Demand on this market is steadily growing and moves in line with the needs of the advertising, signage, self-adhesives and POS advertising sectors.

In 2011, Antalis’ Visual Communication business generated €140 million in sales, or 5% of the company’s total sales.

Antalis – Key strengths

A global player

Antalis is one of the few paper distributors to enjoy a truly global reach, with operations spanning 44 countries across Europe, South America, South Africa and Asia-Pacific.

Balanced European coverage

Antalis consolidated its position as European market leader by acquiring Map in late 2007. It now has operations in 28 European countries and has a market share of over 20% in 20 of them. This critical mass allows it to optimise its supply chain and strengthen partnerships with key suppliers. This broad geographical base also allows the company to spread risk more effectively.

Antalis has operations in 17 countries across Western Europe, and enjoys a strong presence in the UK, France, Germany and Switzerland, all of which contribute significantly to sales. Boasting a market share of almost 20% in volume terms in 2011, Antalis is the leading distributor of paper and packaging prod-ucts in the region. In 2011, Antalis generated €2,087 million in sales in Western Europe (76% of its total sales) and €68 million in EBITDA (67% of its total EBITDA).

In Eastern Europe, Antalis has operations in 11 countries includ-ing the Czech Republic, Poland, Romania, Turkey and the Baltic States. Antalis is the leading distributor of paper and packaging products in volume terms in the region with a market share of around 28% in 2011. During the year, the company generated €384 million in sales (14% of its total sales) and €16 million in EBITDA (16% of its total EBITDA) in Eastern Europe.

Growth drivers outside Europe

Outside Europe, Antalis has a strong foothold in South Africa, South America and Asia-Pacific. It has operations in seven coun-tries across Asia and a further seven across South America. It is also present in South Africa and Botswana, and exports to sev-eral African countries.

Under the sales agreement in place with xpedx, the leading paper and packaging distributor in North America, Antalis is now able to better serve its customers with international reach in the North American and Mexican markets.

In 2011, Antalis generated €288 million in sales outside Europe (10% of its total sales), €16 million in recurring operating income (19% of its total recurring operating income) and €17 million in EBITDA (17% of its total EBITDA).

Strong local presence

In spite of its international profile, Antalis also enjoys a strong local presence. This is essential for meeting customer needs and developing lasting commercial ties. Its local presence is underpinned by a hands-on sales approach adapted to the spe-cific characteristics and profile of each customer, bringing tai-lored solutions and efficient customer relationship management.

Antalis’ sales teams are generally organised into three main categories:

} a field salesforce, in charge of visiting customers in given areas;

} telesales staff, responsible for telephone marketing operations for a specific customer segment; and

} inside sales teams (known as sales advisors), providing sup-port to field sales teams, making outgoing calls, processing orders and managing certain administrative tasks.

Antalis’ sales organisation is currently undergoing a number of changes. Under the company-wide RACE 2012 programme, its aim is to provide increasing added value to customers. Field sales teams deal exclusively with major accounts, while telephone account managers handle smaller customers. The implementation of this programme is accompanied by a further specialisation and improvement of the sales teams’ expertise, tighter coordination between the different sales channels and the continued rollout of CRM tools.

Efficient data and CRM tools

Antalis makes significant, ongoing investments to upgrade its IT sys-tems, a key factor driving growth and opportunities for development.

The aims of its IT strategy are to:

} standardise and harmonise order processing, customer invoicing, raw material purchasing, inventory management, production control, delivery management and financial over-sight using ERP tools within all entities. The number of pro-grammes has been reduced from 16 in 2007 to 7 in 2011 and will be reduced to 3 by 2014;



} focus on sales, marketing and customer initiatives by rolling out CRM tools across the globe (30 countries will be cov-ered by the end of 2012), develop new electronic services and ensure that IT plays a part in programmes and initiatives aimed at improving customer service quality;

} roll-out e-commerce solutions for its customers and suppliers in order to improve efficiency and customer service, in par-ticular by developing an e-commerce platform (see page 29);

} unlock cost synergies using a central IT platform (a single data centre was created out of the three existing centres in September 2011, leading to a 30% reduction in IT infra-structure costs for Antalis) and a supplier/customer message process;

} improve data reliability, develop a catalogue of products and services and set up a reporting system based on key perfor-mance indicators (creation of a single centralised product cat-alogue as part of a master data management solution).

These initiatives aim to improve reliability, security and implemen-tation lead times. They also provide the flexibility and responsive-ness required to offer value-added services to customers.

High-performance supply chain

The organisation of Antalis’ logistics operations, coupled with major storage capacity, allow it to deliver to customers within 24 hours and even offer same-day service in most large cities. Service excellence is rooted in its highly effective distribution and transport network.

Distribution network

Two paper distribution models are used:

} the "stock" model, which represents around two-thirds of Antalis’ paper sales, where the distributor purchases its inven-tories from manufacturers and stocks them in warehouses. These inventories are then transported and delivered to cus-tomers to satisfy orders;

} the "indent" model, which represents around one-third of Antalis’ paper sales, where goods are shipped directly from production sites to end customers.

Antalis has an extensive distribution network with around 100 distribution centres worldwide, including around 80 in Europe which are used to meet its customers’ "stock" requirements. It does this through two additional distribution centre levels:

} national distribution centres located close to capital cities, which stock most of the products distributed by Antalis; and

} an extensive network of smaller regional distribution centres located near customers’ own sites. These centres offer fast delivery times but do not stock all of Antalis’ products, carry-ing in particular products with high turnover rates.

Surface areas for distribution centres range from 200 sq.m (Varna, Bulgaria) to 42,000 sq.m (Melun Sénart, France).

Antalis’ distribution network makes an average 13,000 deliver-ies per day, which not only enables it to serve a huge number of customers across Europe but also to offer high level of service at competitive prices. Thanks to the broad geographical reach of its warehousing network and an efficient, well-managed supply chain, Antalis is able to provide its customers with a cost effec-tive and efficient next day delivery (same-day service in most large cities). Antalis strives to continually improve its distribution efficiency by consolidating its ERP tools and optimising its ware-house network.

Antalis further leverages its assets to offer its customers a com-prehensive array of logistics services, which range from end-to-end service using just-in-time management to optimise their supply chain and deliver goods in accordance with consumption patterns, to the storage of customers’ goods and the delivery of these goods to the customers’ own clients.

Transport

Antalis manages its transport network either internally or using outside firms in order to improve customer service while main-taining a tight rein on upstream and downstream transportation costs.

In its upstream transport operations, products are directly deliv-ered to national or regional distribution centres by Antalis’ sup-pliers. Except for the UK and Germany, the transportation of products to Antalis’ customers is subcontracted throughout Europe. Outside Europe, products are generally routed to regional distribution centres or cross docks by international carriers.

Partnerships with key suppliers

To optimise its purchasing terms and conditions, purchases are made with a limited number of key suppliers, all of which are global paper and board manufacturers. Antalis’ biggest suppli-ers are in the print and office markets, and represent around 80% of its purchases. Dealing with a limited number of strategic suppliers, for which Antalis is a key customer in their relevant product lines, provides Antalis with a stronger bargaining power through volume pricing. Antalis is also able to offer a consist-ently high quality of service through a broader product offering and thereby increase its operating efficiency and profitability. In general, Antalis negotiates annual rebates with its key suppliers based on volume targets.

Its ten biggest suppliers for print and office paper accounted for over 80% of its purchases in 2011. No individual supplier repre-sents more than 20% of purchases. However, in the Packaging and Visual Communication businesses (not based on vol-umes), Antalis continues to have a fairly broad supplier portfolio, although its purchases are made with an ever fewer number of suppliers across all segments.



To capitalise fully on Arjowiggins’ technical and industrial expertise across Antalis’ distribution network, commercial ties between the Group’s two activities have grown stronger in crea-tive papers as well as recycled and coated papers. This allows the Group to generate synergies in terms of sales and the sup-ply chain, making it easier to adapt its products to the con-stantly changing demands of the market. In 2011, Arjowiggins accounted for around 11% of purchases made by Antalis.

Antalis – Results and strategy

2011 highlights

} Roll-out of the RACE 2012 (Results Acceleration through Customer Excellence) programme in Europe and launch of the programme in Asia, South Africa and South America.

} Sale of the Office Supplies business in Spain and Portugal.

} Strengthening of commercial synergies with Arjowiggins.

Resilient results despite tough market conditions

In 2011, Antalis had to contend with a sharp 6% downturn in vol-umes for printing and writing papers in Europe.

All market segments were affected by the decline in consump-tion, with coated and office paper volumes down 6% and 8%, respectively. Trends in demand varied from one country to the next. Volumes dropped 8% in the UK and 15% in Spain and Portugal. The "Middle Europe" region (Germany, Switzerland, Austria and Slovenia) proved more resilient, with volumes falling 4%. Against this backdrop, Antalis maintained a close rein on bad debt risk and gross margin, which compounded the volume decline and led to a slight loss in market share in Europe.

Business was brisk in fast-growing non-paper segments (Packaging and Visual Communication), which reported a 20% advance.

Markets outside Europe also performed well. Asian operations reported growth in the first half but a slowdown in the second, especially in southern Asia. South America delivered robust sales, with volumes up 10% year on year. Demand in South Africa was more subdued having previously received a boost from the 2010 FIFA World Cup.

Antalis reported €2,759 million in sales in the period, down 1.4% year on year.

EBITDA came in at €101 million and the EBITDA margin at 3.7% of sales, down 0.2 points. The company managed to limit the EBITDA decline thanks to the combined impacts of sell-ing price increases implemented in 2010 and 2011, a proac-tive gross margin protection policy, an improved product mix due to the growing contribution of the Packaging and Visual Communication businesses, and a tight rein on overheads.

Recurring operating income amounted to €83 million, a decline of 3.4% on 2010, representing an operating margin of 3.0%.

During the year, the roll-out of the RACE 2012 business trans-formation programme picked up pace. The aim of RACE 2012 is to overhaul the business model in order to generate more added value for customers.

Antalis also refocused on its core business in the year, with the sale of its retail and wholesale Office Supplies activities in Spain and Portugal.



Key figures

(€ millions) 20112010 management

pro forma 2010

Sales 2,759 2,799 2,900

EBITDA 101 110 113

Recurring operating income(1) 83 85 88

Operating margin 3.0% 3.0% 3.0%

Cash flow from operating activities 89 99 103

Capital employed 604 – 635

Recurring operating income/Capital employed (ROCE) 13.7% – 13.8%

Net debt 226 – 261

(1) Including a gain of €8 million arising on changes to pension plans in Europe. Adjusted for these items, recurring operating income amounted to €75 million instead of €83 mil-lion and the operating margin came in at 2.7% instead of 3.0%.

Changes in cash flows

(€ millions) at 31 December 20112010 management

pro forma

EBITDA 101 110

Change in working capital requirements 11 7

CAPEX (25) (19)

Disposals of non-current assets 2 1

CASH FLOW FROM OPERATING ACTIVITIES 89 99

Net debt 226 262

Key figures – Europe


pro forma 2010

Sales 2,471 2,517 2,600

EBITDA 84 92 96

Recurring operating income(1) 67 69 72


(1) ) Including a gain of €8 million arising on changes to pension plans in Europe. Adjusted for these items, recurring operating income amounted to €59 million instead of €67 million and the operating margin came in at 2.4% instead of 2.7%.

Key figures (Asia, South America and South Africa)


pro forma 2010

Sales 288 281 299

EBITDA 17 17 17

Recurring operating income 16 16 16



14% Eastern Europe 20% UK

Breakdown of sales by geographic area


14% France


16% Eastern Europe

Breakdown of EBITDA by geographic area

67% Western Europe



Europe – Key events in 2011

Roll-out of the RACE 2012 programme aimed at cementing Antalis’ leadership

RACE 2012 is based on three core principles:

} improving operating efficiency to better meet customers’ needs;

} increasing the company’s market share on the most profitable market segments through a better understanding of custom-ers’ potential and/or their future needs and more structured efforts to reach prospects; and

} optimising sales processes.

RACE 2012’s first priority is to overhaul organisational struc-tures by putting in place identical commercial models across the Group. In 2011, the new-look sales organisation based on new customer segmentation was set up in 20 European countries. As a result, sales forces have been allocated either to field sales teams dealing with major customers or to telephone account managers handling smaller customers. The new-look organisa-tion will help increase customer contact and improve customer service, as well as freeing up more time for business develop-ment. New sales processes relating to prospection and inactive customers were implemented during the year.

Thanks to the new segmentation and data provided by CRM tools such as customer profiles and purchasing behaviour, coun-tries can design telephone marketing campaigns with an appro-priate product mix and marketing approach. They will also be able to assess the results of their campaigns using key perfor-mance indicators. In 2011, a variety of initiatives were launched including joint business development efforts in Eastern Europe, which led to a sharp increase in sales, especially in Poland.

The ultimate aim of RACE 2012 is to deliver excellence for cus-tomers, entailing the highest levels of expertise among its teams. Significant investments have therefore been made in training, especially through the Antalis Sales Academy. Designed for sales teams, online and classroom training aims to help employ-ees take change on board, while building up and developing skills in line with their role in the new organisation. The train-ing programme was available in 18 European countries in 2011. More than 170 local training sessions have been given, attended by more than 2,000 sales staff and other personnel.

Focus on fast-growing, profitable markets

As part of RACE 2012, Antalis is striving to increase its foothold in the fast-growing sectors of Visual Communication and Packaging, as well as in other bullish market segments.

The visual communication market remains highly fragmented and no one company has emerged as a clear European leader. The market is currently growing at a rate of between 5% and 10% each year. The European visual communication market is valued at €4 billion. It offers significant untapped growth poten-tial for the Group and already accounts for 5% (€140 million) of its sales. Antalis strengthened its local visual communication operations in the year and continued to expand the products and services on offer. Its teams worked on a new range of support materials designed for large format digital printing which will be launched in 2012, and continue to enrich the service offering.

The distribution of packaging products is also a key market for Antalis and one in which it ranks among the leading European players. Its products range from simple bubble wrap to sophis-ticated anti-corrosion packaging and other equipment like strap-ping and stapling machines. These products are notably sold under the company’s own brand to provide a strong base for its development going forward.

This fragmented market, currently valued at €4 billion, repre-sents €207 million in sales for Antalis, or 8% of the company’s total sales. Antalis bolstered its market position through organic growth in 2011 by developing business with key accounts and stepping up cross-selling to its print and office customers. It also recently expanded into new markets in Spain, Portugal and Italy.

The Visual Communication and Packaging businesses delivered growth of over 20% in 2011, with a greater contribution to Antalis’ gross margin (18% compared to 15% in 2010).

Antalis is also continuing its growth push on the burgeoning digital printing market. This sector currently represents around 15% of the European print market and this is expected to double by 2018. To help its customers in their quest to conquer this market, Antalis is developing a comprehensive range of innovative paper adapted to different digital printing technologies. In late 2011, it launched Digigreen, a new 100% digital and 100% green coated paper HP-certified and designed for new-generation digital print-ing presses. To provide its customers with ways to gauge the market potential, Antalis created the "D2B" (Digital-to-Business) initiative in partnership with HP Indigo and Canon. First held in France in late 2011, D2B events were attended by over 500 peo-ple from the digital industry. Antalis has also garnered a competi-tive edge by helping its customers better understand the digital sector and the growth opportunities generated by new practices such as cross media marketing and web-to-print solutions. This innovative approach will be rolled out to other European coun-tries in 2012.



A highly innovative range of products and services

Antalis continued to bolster commercial synergies with Arjowiggins by expanding its range of eco-friendly graphic papers and its creative paper offering, for example when rejuve-nating its Keaykolour and Pop’Set ranges.

On the market for uncoated papers, Antalis’ own brand of FSC®-certified (Forest Stewardship Council) premium offset papers, Olin, has now been launched throughout Europe, after having been introduced to 15 European countries in 2010. With sales growing constantly, Olin has been a resounding success with designers and printers.

In the services segment, Antalis is leveraging its expertise to implement best Group practices in more areas and continues to broaden its offering. A new logistics service was launched in Switzerland in 2011. Following France’s pioneering example, most countries have now set up a catalogue allowing customers to choose the desired level of service in line with their needs and budgetary constraints.

E-commerce is a key focus for Antalis and an important driver of efficiency and customer service excellence. Over the past three years, it has been rolling out its new-generation e-com-merce platform across Europe, providing its customers with more detailed product information thanks to product factsheets, photos, descriptions, environmental labels and so on. The e-commerce platform was rolled out to a further eight countries in 2011. The online services on offer will be constantly revis-ited and upgraded. At the beginning of 2011, the online service allowing customers to calculate their cuts for their visual commu-nication media and limit waste was extended to Switzerland and the Netherlands. The digital paper selector was also introduced in several countries during the year. This new feature allows cus-tomers to choose their digital printing media according to the technique used and desired application.

Online sales orders in Sweden jumped from 8% to 25% in just four months in 2011, testifying to the success of Antalis’ e-com-merce platform among customers.

Rest of the world – Key events in 2011

Asia-Pacific

In 2011, Antalis Asia Pacific continued to strengthen its stand-ing as an eco-friendly player with numerous initiatives aimed at promoting responsible consumption. These included customer seminars, special offers, regular "Green Weeks" and loyalty pro-grammes offered to customers buying eco-friendly products.

Antalis Asia Pacific also continued to bolster its product range, launching new products including Olin and a range of creative papers.

Efforts to optimise operations also continued apace:

} Work continued to set up an efficient supply chain allowing Antalis Asia Pacific to optimise its management of flows and inventories and offer its customers a higher standard of service.

} CRM tools were rolled out further and will help optimise cus-tomer segmentation, improve the sales process and provide better service to customers.

} The RACE 2012 programme was launched throughout the region.

South America

RACE 2012 was launched in the region, with a new-look sales organisation introduced in Chile and local working groups set up to review the Group’s key priorities such as customer segmentation.

The company continued to expand the range of products and services on offer, with the launch of digital products in Chile and sales of ink in Colombia.

To provide their customers with effective time-saving tools, Peru and Bolivia launched their e-commerce websites in 2011.

There were also further improvements in operating efficiency as a new distribution centre opened its doors in southern Chile and new ERP applications were rolled out in Brazil and Mexico.

15% France

16% Eastern Europe

22% UK



PreSentAtIon of tHe GrouP1 Presentation of business activities – Arjowiggins


South Africa

Antalis continued to make advances on high-growth markets with sales on a consistent upward spiral. The company’s range of visual communication products in the country was extended and packaging operations launched. A dedicated team was also set up specifically for the digital market.

The product range was also enriched by the launch of Arjowiggins’ range of creative papers and the introduction of new eco-friendly papers, including paper produced from cane sugar waste. Antalis South Africa was certified FSC in 2011, reflecting its commitment to responsibly managing its supply chain.

ArjowigginsNo. 1 producer of creative and technical papers worldwide

Products Brands Applications 2011 key figures

Graphic division Coated and uncoated paper for printing and publishing

Maine, Chromomat, Satimat, Publishing, illustrated books, magazine covers, catalogues, dictionaries

Over 5,200 employees


25 production sites

1.1 million tonnes of paper manufactured each year

More than 50 recognised brands

Recycled pulp

Specialty paper

• recycled and eco-friendly paper

Cyclus, Eural, Cocoon

Production of eco-friendly paper

Publishing, books, corporate communications

• paper for specialty applications

Playper, Maine 1 Face, SecureCard, Kaleïdo

Playing cards, tissue, labels and flexible packaging, transfer paper, POS advertising and posters

• paper for the medical and hospital sector

Propypel, Ethypel, Arjopeel, Sterisheet

Sterilised sealing and wrapping solutions

Coated USdivision

Coated paper for printing and publishing

Utopia, Altima Publishing, illustrated books, magazine covers, catalogues, dictionaries

Creative Papersdivision

Premium fine paper

Paper for specialty applications (tracing and casting paper)

Conqueror, Curious Collection, Keaykolour, Opale, Pop’Set, Rives, Guaflex

Gateway, Multikast, Priplak

Business stationery, corporate communications, advertising and promotion, bookbinding and luxury packaging

Specialty applications (technical drawing, paper used in the manufacture of synthetic leather in the fashion and automotive industries)

Securitydivision

Paper for secure payment Diamone, Bioguard, Bioguard V, Pixel Watermark, Combifluo

Banknotes, cheque books, vouchers

Security solutions Jetguard, PaperLam Proof-of-identity documentation (ID cards, passports and biometric passports)

Brand protection solutions Polyart, STES Anti-counterfeit solutions, synthetic paper

25% Asia

32% South America


43% South Africa

PreSentAtIon of tHe GrouP 1Presentation of business activities – Arjowiggins


Production and converting facilities

Europe Americas Asia

France: Bessé-sur-Braye, Rives, Charavines, Château-Thierry, Crèvecœur, Le Bourray, Neuilly-en-Thelle, Palalda, Wizernes

United States: Combined Locks, Charlotte, Charleston

China: Quzhou

United Kingdom: Chartham, Clacton, Ivybridge, Stoneywood Brazil: Salto

The Netherlands: Apeldoorn

Czech Republic: Brno

Italy: Arzano

Spain: Gelida

Denmark: Maglemølle, Odense

Profile

The world’s leading producer of technical and creative papers, Arjowiggins has operations in Europe, North and South America, and Asia. In 2011, Arjowiggins generated €1,465 million in sales, representing 30% of the Group’s total sales.

Arjowiggins produces a wide range of high value-added crea-tive and technical papers using environmentally-friendly, cutting-edge technology. Its operations and activities are focused mainly on the production of high value-added specialty paper, where it is a top-ranking player worldwide. Selling prices for specialty products are far higher than for traditional coated and uncoated papers, reflecting the value-added resulting from the specific technical and technological components used. Arjowiggins has a portfolio of over 50 brands, all well known in their respective markets (e.g., Conqueror and Rives) for their high quality and broad product range.

Arjowiggins is organised around four divisions (Graphic, Coated US, Creative Papers and Security) and had more than 5,200 employees in 2011, including 45% in France, 15% in the uK, 14% in North America, 13% in the rest of Europe and 13% in the rest of the world. The headcount split for each divi-sion is 38% for Graphic, 12% for Coated US, 23% for Creative Papers and 27% for Security.

Average employees by division

12% Coated US

38% Graphic

27% Security

23% Creative Papers



15% UK

14% US

45% France

Average employees by geographic area



A global player

With almost 50% of its sales generated outside Europe, Arjowiggins is truly a global player. In 2011, the Group had 25 industrial sites in Argentina, Brazil, China, Czech Republic, Denmark, France, Italy, the Netherlands, Spain, the uK and the uS representing a total pro-duction capacity of 1.5 million tonnes. Arjowiggins also operates 20 plants (including three non-paper plants producing synthetic or pol propylene substrates) and 33 paper machines of varying sizes and capacities. Most of Arjowiggins’ plants have a comprehensive production capacity which includes finishing and converting capa-bilities. The facilities are adapted to the use and type of production at each site. For example, different types of printing machines are used at plants producing specialty paper. Arjowiggins also has three sites dedicated to converting specialty papers, as well as three recycled pulp facilities at Greenfield and Le Bourray in France (the pulp pro-duction unit at Le Bourray is fully integrated with paper production) and Dalum in Denmark.

Production and converting facilities

DivisionNumber of sites Europe Americas Asia

Graphic 9

FranceBessé-sur-Braye, Château-Thierry, Le Bourray, Palalda, WizernesCzech RepublicBrnoDenmarkMaglemølle, Odense

United StatesCharleston

Coated US 1United StatesCombined Locks

Creative Papers 6

Francecharavines, Neuilly-en-ThelleUnited KingdomChartham, StoneywoodSpainGelida

China Quzhou

Security 9

FranceCrèvecœur, RivesThe NetherlandsApeldoornItalyArzanoUnited KingdomClacton, Ivybridge

ArgentinaWitcelBrazilSaltoUnited StatesCharlotte



10% UK

20% US

11% Asia

15% France




Diversified sales channels and customers

Arjowiggins sells primarily to the B2B (Business-to-Business) market and its customer base is fairly concentrated in each of its segments. Arjowiggins’ customers are paper distributors, converters, printers, corporate customers, government authori-ties and central banks. Arjowiggins sells paper and solutions in France, the uK, and the rest of Europe, Asia and North America through three different channels:

} sales to distributors, mainly paper distributors and brokers, which then sell to end users;

} sales to converters and printers; and

} direct sales to end users such as large companies, govern-ment authorities and central banks.

Strict procurement requirements

The raw materials used to make Arjowiggins’ products are mostly:

} pulp, waste paper and cotton;

} minerals and chemical products;

} energy and water.

The cost of supplies depends on the price of these raw materi-als. Due to pressure from competitors, the price of Arjowiggins’ products is not always correlated with movements in the cost of raw materials.

Pulp, waste paper and cotton

Pulp is the main raw material required to produce paper. There are two types of chemical pulp:

} long-fibre chemical pulp made of spruce or pine and used to make highly resistant paper;

} short-fibre chemical pulp made of birch, beech or eucalyptus, used to improve the surface properties of the paper.

Arjowiggins uses both short- and long-fibre chemical pulp depending on the requirements of each type of paper. Arjowiggins has long-standing relationships with different sup-pliers for each grade of pulp, as this raw material represents the bulk of its costs. The company protects itself against a rise in pulp prices by entering into hedging contracts.

Arjowiggins also produces recycled pulp using an industrial pro-cess in which printing ink is separated from waste paper fibres. This process combines mechanical methods and chemical pro-cesses to produce deinked pulp which is then used to manu-facture paper. Arjowiggins purchases waste paper from key strategic suppliers and from some local collection initiatives.

Arjowiggins Security uses cotton fibres to produce banknote papers which have to meet the highest standards of wear resist-ance and durability. The recent hike in cotton prices had a sig-nificant impact on the division’s cost base and put pressure on supply sources.

Minerals and chemical products

The main minerals and chemical products used to produce paper and coatings include latex, polymers, carbonates and starch. Arjowiggins buys these minerals and chemical prod-ucts from various leading producers worldwide. It may enter into long-term contracts to secure supplies of critical raw materi-als and ensures that it uses diverse supply sources at all times. Arjowiggins keeps an up-to-date database of suppliers across the globe.

Energy and water

Energy is a key component of Arjowiggins’ production process. The cost of gas and electricity is heavily dependent on oil and natural gas prices, and is also affected by the deregulation of energy markets, particularly in Europe.

Arjowiggins’ energy policy seeks to secure reliable gas and electricity supplies at an optimum cost by entering into fixed- and variable-price contracts with local electricity and gas suppliers. Arjowiggins Graphic is a member of the Exeltium consortium in France, which has signed a fixed-price electricity supply con-tract with EDF.

Large quantities of water are required to produce paper. All Arjowiggins’ sites are located close to water and respect local and governmental drawing rights. Over the past few years, the company has reduced the freshwater used in its production pro-cesses thanks to greater recycling efforts. Most of its installa-tions are equipped with wastewater treatment facilities which dispose of suspended solids and help reduce the quantity of oxygen in the water recovered.



Arjowiggins – Key strengths

Arjowiggins produces specialty papers and boasts a unique positioning on its market.

Predominant focus on specialty products

Arjowiggins derives more than 70% of its sales from products with a high technical component:

} papers for banknotes and official documents, brand protec-tion solutions (Arjowiggins Security);

} premium fine papers and specialty papers such as tracing or casting paper (Arjowiggins Creative Papers);

} eco-friendly papers, specialty papers such as playing cards, transfer papers or papers for medical use (Arjowiggins Graphic).

Standard coated and uncoated papers sold by the Graphic and Coated US divisions account for the remainder of sales.

Selling prices for specialty products are far higher than for tra-ditional coated papers, reflecting the value added resulting from the technical and environmental components of these papers. As the cost of pulp as a proportion of the total production cost is less than for commodity goods, Arjowiggins is less sensitive to fluctuations in paper pulp prices. This is particularly the case in the Security division, where products are chiefly manufactured using cotton fibres.

Given the broad range of its business activities, Arjowiggins has many competitors.

(1) not including negative EBITDA totalling €1 million for the Coated US division.

Integrated recycled pulp operations

Arjowiggins is the largest integrated producer of 100%-recy-cled pulp thanks to its Greenfield plant (Arjowiggins Graphic). Greenfield produces premium, extra-white FSC®-certified recy-cled pulp, giving it a major advantage amid growing demand for eco-friendly products.

Leveraging innovation to cement leadership

Innovation is a vital part of the commercial strategy pursued by Arjowiggins’ divisions, which all have their own research and development teams.

To anticipate and meet consumers’ needs, each R&D depart-ment works closely with operational teams in order to develop new highly innovative products. Partnerships developed with outside research institutes and laboratories help transfer fixed costs out of the Group and provide access to highly specialised resources.

Arjowiggins’ divisions put innovation at the centre of their strat-egy, helping to forge powerful brands and giving them a real edge in their respective markets. These innovation efforts con-tinued in 2011, resulting in the launch of a host of new prod-ucts including the new security thread for banknotes, Sequoia, a brand new 100%-recycled laminated paper representing a real alternative to plastic credit cards, and new techniques devel-oped by Greenfield to improve deinking on HP Indigo and HP Inkjet digital web presses.

Research and development expenses totalled €11.7 million in 2011, or 0.8% of sales (2010 pro forma: €9.9 million).

Breakdown of sales by division

25% Security

17% Coated US

18% Creative Papers

40% Green

32% Coated

28% Specialty

40% Graphic

Breakdown of EBITDA(1) by division

47% Security

4% Graphic

49% Creative Papers



Arjowiggins – Results and strategy

2011 highlights

} Sale of the Decor, Abrasives, Thin Opaque Papers and Fine Arts businesses based at the Arches (France) and Dettingen (Germany) plants to Swedish group Munksjö.

} Sale of the Moulin du Roy (France) plant to the Hamelin group.

} Reduction of production capacity within the Group in France, Argentina and Denmark.

Impact of the rise in raw material costs on operating performance

2011 saw a sharp drop in demand for graphic papers in Europe and the US, particularly in the second half of the year. This decline was the result of the financial crisis, which prompted companies to slash their marketing and communication budg-ets and therefore affected order intake. Against this backdrop, Arjowiggins was unable to implement the price rises announced for the second half of the year. Business slowed for Creative Papers in the six months to 31 December, after an upbeat first half. In contrast, the Security division enjoyed robust demand for banknote paper and security solutions throughout 2011.

Volumes declined by 7% over the year and sales slipped 1.6% to €1,465 million (down 0.3% at constant exchange rates).

EBITDA fell €62 million to €50 million from €112 million in 2010 (pro forma), while the EBITDA margin lost 4.1 points at 3.4%. This performance reflects the adverse impact of persis-tently high raw material costs. Pulp remained expensive while other raw materials such as waste paper, latex, starch and cot-

ton (used to produce banknote paper) hit record highs in the year. After remaining stable for 25 years, cotton prices tripled between September 2010 and March 2011. As from the second half of the year, raw material costs (particularly pulp and cotton) began to decline. However, Arjowiggins was unable to capital-ise on the pricing environment, having made the bulk of its pur-chases before costs fell.

Recurring operating income (including a gain of €17 million arising on changes to a UK pension plan) was down 66.0% at €22 million, while the operating margin came in 2.9 points lower at 1.5% of sales.

Faced with a very tough market environment, Arjowiggins scaled back overheads and production capacity. Three paper machines were shut, in France (Rives), Denmark (Dalum) and Argentina (Witcel), and the Moulin du Roy plant in France (Fine Arts) was sold to Hamelin at the end of June.

Sale of businesses based at Arches and Dettingen

In March, Arjowiggins sold the businesses based at its Arches (France) and Dettingen (Germany) plants to Swedish group Munksjö for an enterprise value of €95 million.

These plants produce decor papers used upstream in the fur-niture and flooring industries; abrasive papers for the car and building industries; thin opaque papers used to print pharma-ceutical leaflets; and fine arts papers. In 2010, these businesses generated €220 million in sales and €15 million in EBITDA. The divestment is consistent with the Group’s strategy to carve out a leading position for its industrial businesses.

Key figures


pro forma 2010

Sales 1,465 1,489 1,711EBITDA 50 112 128Recurring operating income(1) 22 66 76Operating margin 1.5% 4.4% 4.4%Cash flow from operating activities 43 45 43Capital employed 472 – 561Recurring operating income/Capital employed (ROCE) 4.8% – 13.6%Net debt 313 – 353

(1) Including a gain of €17 million arising on changes to pension plans in the UK (not reallocated in the operational divisions’ profit). Adjusted for these items, recurring operating income amounted to €5 million instead of €22 million and the operating margin came in at 0.3% instead of 1.5%.

Changes in cash flows

(€ millions) at 31 December 20112010 management

pro forma

EBITDA 50 112

Change in working capital requirements 32 (27)CAPEX (44) (45)

Disposals of non-current assets 6 5

CASH FLOW FROM OPERATING ACTIVITIES 44 45

Net debt 313 353



Graphic division

Arjowiggins Graphic produces a wide range of coated and uncoated papers adapted to four-colour printing. These papers can be white or natural with a glossy, semi-matte or matte fin-ish, and are designed for publishing, advertising and printed communications.

The division’s eco-friendly offering includes a comprehensive line-up of 100%-recycled papers, FSC®-certified papers, and papers produced with a mix of recycled and virgin fibres certified FSC®. The division’s Greenfield plant is a major asset in promot-ing its green offering as the European leader in the production of recycled, premium extra-white pulp certified FSC® for graphic applications.

Arjowiggins Graphic also enjoys strong positions in certain niche markets for specialty papers such as for playing cards, labels and flexible packaging, transfer paper, posters, displays, POS advertising, tissue and flame retardant papers. Arjowiggins Graphic boasts top-ranking positions on most of its markets. Its current growth strategy is focused on specialty papers, where it has launched a host of highly innovative products, for example in the laminated segment (an alternative to plastic for gift cards and SIM cards that uses FSC®-certified laminated paper).

The division also produces paper for medical and hospital appli-cations. It offers a wide range of sterile packaging solutions for the protection of disposable medical equipment (needles, com-presses, gowns, etc.) as well as sterilised sealing and wrapping solutions used in operating theatres or to protect sterilised reus-able medical instruments (scalpels, forceps, etc.). The Propypel, Ethypel, Arjopeel and Sterisheet brands offer a vast range of sterilised packaging and wrapping solutions certified to the strictest medical standards and replete with high bacterial barri-ers, controlled permeability, suitable strength and fluid-repellent properties.

The division has to contend with fierce competition in its numer-ous markets and has carved out a different position on each of its segments.

Arjowiggins is Europe’s sixth largest producer of coated paper in volume terms and the leading producer of recycled graphic papers in Europe (excluding LWC). The division’s main competi-tors are Burgo, Lecta, Leipa, Lenzing, M-real, Sappi, Steinbeis, Stora Enso and UPM. Demand for graphic papers is linked mainly to the publishing, magazine, catalogue and illustrated books segments.

In the medical and hospital sector, Arjowiggins is among the leading producers of medical packaging worldwide in terms of sales. Its main competitors in this sector are Ahlstrom, Billerud, Kimberley clark and Neenah. demand in the medical and hos-pital sector has been driven by the growing use of disposable instruments which are increasingly preferred over reusable instruments, and practical products such as kits rather than packs. Demand is also spurred by health regulations.

2011 highlights

} Ongoing innovation to develop the "green" offering.

} Launch of new products in specialty businesses.

} Shutdown of the paper machine at the Dalum site in order to align supply with demand.

} A partner of WWF’s Climate Savers programme, heralding a new stage in the division’s strategic partnership with WWF France.

2011 results

2011 saw a sharp drop in volumes for graphic coated papers, particularly in the second half of the year. Demand for graphic papers fell more than expected as from September, preventing the division from implementing the selling price increases announced for the second half. In contrast, demand remained robust for specialty businesses. The division posted €581 million in sales, down 6.0% year on year.

As in 2010, pulp and waste paper prices remained very high and weighed heavily on the division’s operating performance. Arjowiggins Graphic continued its productivity and cost-cutting initiatives with the aim of curbing the negative impact of these high input prices on its results. EBITDA fell €36 million to €2 million.

An eco-friendly strategy driven by innovation

Arjowiggins Graphic’s three-pronged eco-friendly strategy is based on:

} the use of recycled pulp based on waste recovery, backed by strong ties with end users and local regional authorities;

} the reduction of its carbon footprint, which helps curb green-house gas emissions; and

} the use of FSC®-certified virgin pulp.

Arjowiggins Graphic currently boasts the market’s largest eco-friendly offering, comprising a unique range of white and natural recycled papers and eco-friendly papers mixing recycled and vir-gin fibres certified FSC®.



At the beginning of 2011, the green offering was boosted by a number of new additions: Cocoon Ecolight, a 100%-recycled matte coated paper certified FSC® for the publishing and adver-tising markets, and RePrint Deluxe, an FSC®-certified 60%-recy-cled matte coated natural white paper for the publishing sector. The Graphic division’s eco-friendly strategy is supported by an innovative, responsible marketing policy which again scooped up several awards, cementing its reputation and unique position-ing on the market.

During the year the division also pressed ahead with its techni-cal innovation drive in the environment segment aimed at devel-oping the recycling of printed documents and improving plant productivity.

An agreement was signed with Hewlett Packard to improve the deinking process for documents printed on HP Indigo and HP Inkjet digital web presses, which lag significantly behind standard printed documents in terms of recycling. The division fine-tuned pioneering technologies developed at its Greenfield (France) plant for deinking digital prints on HP Indigo with a liquid toner and HP Inkjet with a solid toner. This helps to divert waste from landfills at the end of the products’ useful lives. In 2011 the division also launched Cocoon Jet, its first 100%-recycled, extra-white paper certified FSC® for high-speed inkjet printing.

Over the past few years, efforts at the Dalum site in Denmark (recycled paper production) have focused on reducing water and energy consumption. The plant has used biomass since 2006. Dalum undertook further investments in 2011, allowing it to increase its recovery of steam from drying rooms and supply more alternative energy to Odense, the neighbouring town. In all, 10,500 homes, or 15% of total households, are now supplied with this clean energy source (7,000 in 2010). Since 2006, the plant has also reduced its electricity consumption by 13%, its steam emissions by 64% and its CO2 emissions by 93%. Its environmental commitment was once again nominated for the 2011 Pulp & Paper International (PPI) Awards in 2011, where it picked up a prize in the "Green energy and Biofuels" category.

In France, the Palalda plant, which manufactures papers for the medical and hospital sector, signed an agreement with Cofely as part of a call for projects put out by Ademe, the French energy and environment management agency, for agricultural/indus-trial biomass heating projects. The use of biomass instead of fossil fuels will prevent 17,000 tonnes of CO2 being released into the atmosphere each year. Work on the project began in autumn 2011 and the technology is expected to be operational by February 2013.

Acting on a recommendation of WWF France, a strategic part-ner of Arjowiggins Graphic since 2008, in December the divi-sion became part of WWF’s Climate Savers programme, which brings together the 25 international companies with the best record in reducing carbon emissions. The division was the first

European paper producer to join this programme. WWF’s deci-sion hails its recognition of the eco-friendly strategy pursued by Arjowiggins Graphic, which is targeting a reduction of 23% in CO2 emissions over the period 2007-2014.

After the Greenfield plant in November, all Arjowiggins Graphic sites are now certified ISO 14001, reflecting the company’s commitment to developing a responsible environmental manage-ment system based on the ongoing improvement of its environ-mental performance.

Robust growth of specialty businesses

Specialty businesses reported robust growth in 2011, driven by the launch of new innovative products.

In the laminated segment, Arjowiggins Graphic launched Sequoia, its new 100%-recycled, biodegradable and composta-ble laminated paper, providing a new alternative to plastic for gift, loyalty and SIM cards. Sequoia results in superior quality print images thanks to its cutting-edge technology. Meeting the needs of the market, it is already used by large retail, telecom-munications and leisure groups.

In textile printing, the division successfully launched its Sublimage range, sublimation transfer papers for polyester printing. In a similar vein, a new transparent, eco-friendly paper for use by silkscreen printers in producing textile labels was launched at the Fespa tradeshow in Singapore.

Arjowiggins Graphic’s innovation efforts in white tissue resulted in the launch of a new range of paper for printing napkins with four glued ply (instead of three at present). This improves print-ing quality as well as productivity for customers. Demand for flame retardant paper, a market in which the division enjoys a strong presence, proved vigorous over the year.

In the medical and hospital segment, new products launched in 2010 made strong advances. These include Ethypel Reinforced ST®, a high-quality packaging solution for use in operating the-atres, and ArjoGreenTM, the first biodegradable product for the hospital sector. ArjoGreenTM is already sold to hospitals in France, Singapore, Poland and Colombia and is in the process of being listed in several European countries and in the Asia-Pacific region. International development continued apace for Sterisheet, with new distribution agreements in China, Australia and Malaysia, and for ArjoWrap, the line of papers offered as an alternative to SMS (made solely from petroleum derivatives), which landed a new contract in Canada. Lastly, the launch of Sterimed to be used for disposable medical instruments and for sterile packaging solutions will give Arjowiggins Healthcare a dedicated sales structure and greater visibility among its customers.



Cementing leadership in innovative eco-friendly solutions

Arjowiggins Graphic increasingly focuses its innovation capabili-ties on specialty businesses with the aim of designing leading-edge solutions one step ahead of consumer trends. The division will continue to develop its high value-added environmental offer-ing by making its brands more visible.

Key figures – Graphic division

(€ millions) 20112010

pro forma (1)

Sales 581 619

EBITDA 2 38

Recurring operating income (20) 16

Operating margin -3.5% 2.7%

(1) The medical/hospital business, previously part of the Industrial Solutions division, is now included within the Graphic division.

Coated US division

Appleton Coated manufactures premium coated papers for the commercial printing and book publishing industries under the Utopia brand. Thanks to its excellent service and high-end offer-ing, the division has carved out strong positions in the educa-tional textbook market supplying many well-known publishers, as well as in commercial printing for major high profile brands in industries including fashion, automotive and financial services. Demand on these markets is chiefly driven by advertising budg-ets and government education subsidies.

As a leader in environmental coated papers, Appleton Coated offers FSC®-certified products made with post-consumer recov-ered fibres, and products made with green power (electricity from renewable sources), all produced at the Combined Locks plant in the United States.

Appleton Coated is the fourth largest producer of coated paper in the US in volume terms. Its main competitors in the US are Newpage, Sappi and Verso.

2011 highlights

} Established a solid leadership position in coated papers for high-speed inkjet web technology.

} Further consolidation of leadership in eco-friendly products.

} Ongoing efforts to boost plant productivity.

2011 results

Following a sound rebound in 2010, the Coated US market stalled once again in 2011. Several factors took their toll on demand, including the morose US economic climate (GDP, unemploy-ment), the drive for e-reading and computer tablets impacting some markets and the downturn in sales of magazines and cata-logues. The financial challenges facing the United States Postal Service added to the widespread climate of uncertainty.

Despite measures taken to counter the decline in demand (cuts in production capacities, increase in exports) and taxes levied on coated papers imported from China and Indonesia, the printing and writing paper market fell 5% in volume terms in 2011.

On the commercial front, Appleton Coated continued to bolster its leadership position in coated papers for inkjet web presses. There was strong volume growth in the Inkjet publishing segment with Utopia Book Inkjet, and the company developed Utopia dull and gloss products jointly with HP for the direct mail and other commercial markets. While overall uncoated volume was down for the year, the division also benefited from new growth oppor-tunities in specialty uncoated papers.

New quality control processes enabled Appleton coated to improve product and service quality during the year.

The division continued to cut costs and improve plant produc-tivity. Appleton Coated made further cost savings across the board, particularly as regards energy, raw materials and the sup-ply chain.

Sales for the division slipped 6.0% over the year, hit chiefly by the fall in volumes that more than offset the positive impact of price increases implemented at the end of 2010 and during 2011. EBITDA came in at a negative €1 million, resulting in a negative EBITDA margin of 0.4%, squeezed by the high cost of pulp and the hike in other raw material prices in the first half of the year.



Consolidating leadership in eco-friendly papers

Appleton Coated was the first US coated paper producer to be certified FSC® and to develop a range of papers manufactured from FSC®-certified virgin or recycled pulp using electricity from renewable sources. Robust development in its eco-friendly product range powered a rise in sales of more than 25% in 2011.

Leveraging its strong market positions, Appleton Coated intends to continue expanding its eco-friendly product range and help customers in their quest for environmentally responsible solutions.

In 2011, the division cemented its environmental leadership through its product line-up and improved internal processes. An increasing number of products display the Green-e® logo, certi-fying that all electricity used is associated with renewable energy certificates resulting from clean energy sources (mostly wind power). The minimum purchase quantities required for products containing 30% post-consumer recycled fibres were reduced to encourage their use. Appleton Coated also stepped up its use of biomass as part of its ongoing commitment to reduce CO2 emissions.

Key figures – Coated US division

(€ millions) 2011 2010

Sales 253 270

EBITDA (1) (6)

Recurring operating income (5) (10)

Operating margin -2.0% -3.9%

Creative Papers division

Arjowiggins Creative Papers offers an extensive line-up of pres-tigious brands covering a wide variety of applications, including business stationery and corporate communications (Conqueror, Opale, Inuit), advertising and promotion (Curious Collection, Keaykolour, Rives, Pop’Set, Priplak), bookbinding and luxury packaging (Guaflex, Curious Collection, Delos), and specialty applications (tracing paper for technical drawing, casting paper for the fashion, furniture and automotive industries).

Arjowiggins Creative Papers helps its customers achieve max-imum impact from their communication campaigns. Innovation is relentless to ensure that customers are offered the products best adapted to market trends, featuring industry-leading con-tent, texture, feel, tint and finishes.

Paper media for corporate communications, advertising and luxury packaging are usually coloured, with smooth or textured finishes and are generally offset printed. They may also be embossed or gold-tooled.

Creative papers are produced using virgin or recycled pulp in six production facilities located in France, the UK, Spain and China (except for Priplak which uses polypropylene), and are sold through specialised distributors or directly to printers or converters. Creative papers are sold at a premium due to their superior quality and technical properties.

Arjowiggins Creative Papers boasts a leading position in most of its markets. It is the world’s leader in fine paper in terms of sales, No. 1 in tracing paper and No. 2 in casting paper in terms of volumes.

Its main competitors on these markets are Gruppo Cordenons, Fedrigoni SpA, Mohawk Fine papers Inc, Neenah paper Inc, Tullis Russel Group Ltd, M-real, Zanders GmbH, James Cropper Plc, Ecological Fiber Inc, FiberMark Inc, Schoellershammer, Ming Feng, Favini Srl and Sappi Group.

2011 highlights

} Additional commercial synergies with Antalis.

} Expansion of premium offset products in partnership with Antalis.

} Continuing policy of innovation driving the brand makeover strategy.

} Closure of the Rives plant and modernisation of the Charavines plant, both in France.

} Extension of capacity for coated paper production at the Quzhou facility in China.

} Sale of the Moulin du Roy plant in Annonay (France) to the Hamelin group.

2011 results

There were contrasting trends in demand for creative paper in 2011, with a buoyant first half of the year followed by a sharp slow-down for all product ranges in the six months to 31 December.

Sales for the division retreated 3.7% year on year to €269 mil-lion, with the positive impact of price increases implemented in 2010 and 2011 offsetting a negative product mix effect.

EBITDA came in at €25 million, compared to €32 million in 2010, squeezed by the rise in raw material costs and especially pulp and energy.

Sales push

As part of its ongoing brand makeover and enhancement strat-egy, Arjowiggins Creative Papers launched new products in the fine papers segment during the year. These new products also reflect the division’s policy of helping customers in their quest for more environmentally friendly solutions.



The division launched eight new trendy shades in its Pop’Set range of papers made from FSC®-certified pulp and 30% recy-cled fibres. The Pop’Set range is now available in 31 colours, from extra white to black. New weights and shades were also launched in the four Keaykolour ranges of papers and cards. These new products, made for use in a wide variety of appli-cations such as luxury packaging, bookbinding and invitation cards, are all recycled and are between 30% and 100% pro-duced from post-consumer waste.

To accompany these launches, Arjowiggins Creative Papers organised a number of original events using sophisticated mar-keting tools mirroring the superior quality of its products.

A worldwide contest was organised for Pop’Set encouraging designers and artists to come up with their own version of the C-Myk paper toy designed by Japanese artist Shin Tanaka using Pop’Set papers. At the beginning of July 2011, an exhibition was held in London showcasing the best creations. These were sold and the proceeds donated to uNESco’s "Award of Excellence for Handicrafts" programme. Keaykolour teamed up with Ian Wright, the internationally known British artist and illustrator who created three artworks using this paper, which were displayed in London and launched in Paris for the FIAC international con-temporary art fair.

The product and sales innovation drive also continued apace in other business segments. Six new patterns and high-gloss prod-ucts were added to the casting paper range, while new commer-cial applications were developed for tracing paper. The division also began to market and sell Priplak reels.

Arjowiggins Creative Papers also unlocked further commercial synergies with Antalis, for example in relation to premium offset papers, Priplak products and bookbinding. A range of surface-treated papers and fine metallic papers has also been developed in partnership with Antalis and will be produced at the Quzhou plant in China as from 2012.

Leveraging innovation to enhance leadership

To cement its position on the market, Arjowiggins Creative Papers focuses its innovation efforts on eco-friendly products. In 2011, its R&D department continued to work on the use of natural products and alternative fibres and well as production waste in paper production, resulting in the launch of Keaykolour ReKreate. Acqueous processes have also replaced solvents in the production of tracing and casting paper.

Work around The Blank Sheet Project, designed by Arjowiggins Creative Papers as a platform for inspirational creative excel-lence, also continued apace.

This project allows well-known graphic designers to share their approach when faced with a blank sheet of paper and to discuss changes in their profession more generally, in order to focus on both innovation and sustainability in developing their response to the question "How will we leave our mark?". Neville Brody and Sir John Hegarty, respectively internationally celebrated designer and advertising executive, were the two special guests for the pro-ject’s 2011 edition. The Blank Sheet project held its one Young World forum for the second year running, this time in Zurich. At this "Davos" event for young opinion leaders aged under 25, Arjowiggins Creative Papers put on display a huge blank sheet of Conqueror paper inviting delegates to express their thoughts and ideas.

This project has also been rolled out internally in an attempt to gal-vanise the division’s employees as regards the sustainable develop-ment strategy to be adopted for all entities, products and processes.

In 2011, the Creative Papers division forged ahead with its pro-ject to improve productivity and industrial efficiency, particularly as regards saving energy, reducing waste and curbing carbon emis-sions. The Stoneywood plant in the UK has signed a contract to purchase 100% green electricity for 2012, while the Charavines site has undertaken investments that will allow it to replace fuel with gas.

Key figures – Creative Papers division

(€ millions) 2011 2010 pro forma

Sales 269 280

EBITDA 25 32

Recurring operating income 18 25

Operating margin 6.7% 8.9%

Security division

Arjowiggins Security has three main businesses:

} secure payment solutions (banknotes, cheque books, vouchers);

} proof-of-identity documentation (ID cards, standard and bio-metric passports);

} anti-counterfeit/illicit trading and brand protection solutions.

The division produces highly technical products used by central banks, national printers, government agencies and the private sector.

Arjowiggins Security is the world’s leading producer of bank-note paper and secure documents in terms of volumes. It has harnessed this expertise to integrate cutting-edge passive and active technologies, and has become a major player in e-docu-ments as well as solutions for fighting against counterfeiting and illicit trading.



Through its subsidiary Arjobex, Arjowiggins Security produces a range of secure and non-secure synthetic papers. These prod-ucts are used in labelling and industrial applications and cover items such as food labels, labels embedded in packaging and road maps. Arjobex is the third leading producer of synthetic paper for commercial printing and labelling in volume terms.

To anticipate customer needs, the business thrives on innova-tion. Innovation is driven by the division’s R&D centre in France, which files about 20 patents each year. The division’s main brands are Diamone, Bioguard, Bioguard V®, Pixel™, Combifluo, Paperlam and Polyart.

Its main competitors are Louisenthal, De La Rue, Crane (for banknote paper), Yupo and Nan Ya (for synthetic paper), along with Gemalto and Morpho (for other security solutions). Demand on these markets depends heavily on macroeconomic factors and particularly GDP growth and population growth in emerg-ing countries.

2011 highlights

} Ongoing innovation efforts, resulting in the launch of Picture ThreadTM, the first 6 mm-wide security thread.

} Acquisition of Signoptic, a French company specialising in authentication and traceability solutions.

} Significant advances in the field of biometric passports.

} Reduction of production capacity and costs with the closure of a machine in Argentina.

} Implementation of a pooling structure for purchases and the supply chain.

Upbeat growth momentum

Volumes on the banknote market were up in 2011, as new pro-duction capacities came on stream. The division’s banknote business performed well, delivering sales growth along with new contract wins.

Business proved especially brisk in the e-passport, electronic ID card and invoice authentication segment, reporting growth of over 20% on the back of a successful structured and competi-tive offering. A number of major, high-potential contracts were signed in three big countries.

In brand protection, Arjowiggins Security made significant advances, landing contracts with major groups and interna-tionally renowned brands in the food and industrial products industries. Its acquisition of Signoptic in September allows the division to bolster its presence in this sector by offering custom-ers additional anti-counterfeit and brand and consumer protec-tion solutions. Signoptic has developed a pioneering technology based on "matter biometry" which creates an authenticator and ID for each product to guarantee traceability. This sophisticated technology also has the advantage of not modifying customers’ industrial processes.

Arjowiggins Security expanded into new markets during the year as its new engineering business came on stream. The divi-sion signed a contract to set up a production line for ID cards in Kazakhstan and for banknote paper in the Ukraine.

2011 results

Arjowiggins Security reported sales of €362 million in 2011, up 12.8% year on year.

EBITDA came in at €24 million, compared to €48 million in 2010, squeezed by rising raw material costs, chiefly cotton. Cotton prices, which spiked in fourth-quarter 2010 and subsequently continued to rise, reached a record high in 2011, with prices almost tripling in just seven months. Recurring operating income fell 65.7% to €12 million.

Stepping up innovation

Innovation is paramount on all of the division’s markets. Arjowiggins Security relentlessly develops new products and new security technology across its three businesses (bank-note paper, secure documents and product authentication and traceability), leveraging its powerful production capacity and the creative excellence of its R&D teams to make intelligent sub-strates (paper and synthetic materials) that can be secured and integrated.

In 2011, Arjowiggins Security launched Picture ThreadTM, its innovative new security thread for banknotes and the first 6 mm-wide thread (4 mm threads have been used to date) with 3D images. This innovative new technology was used to issue the commemorative 1,000th Tenge in Kazakhstan in May and helps consolidate the division’s position by proving its ability to meet market needs and expectations.

Key figures – Security division

(€ millions) 2011 2010

Sales 362 320

EBITDA 24 48


Operating margin 3.3% 10.8%

PreSentAtIon of tHe GrouP1


chapter 2corPorAte GoVernAnce

44 BOARD OF DIRECTORS

44 Composition of the Board of Directors49 Organisation and modus operandi of the Board of Directors52 Board Committees54 Directorships and positions held by the corporate officers

at present and in the past five years

58 EXECUTIVE COMMITTEE

58 COMPENSATION

58 Executive Corporate Officers61 Non-executive corporate officers63 Executive Committee

63 RELATED-PARTY AGREEMENTS

64 STATUTORY AUDITORS

64 Statutory Audit Engagements

corPorAte GoVernAnce2 Board of directors


Sequana is committed to a corporate governance policy which is compatible with the recommendations of the French stock market authorities and with best market practices. This policy ensures effective oversight structures and high-quality finan-cial information, while respecting the Company’s ownership structure and the agreements signed between its two main shareholders.

Sequana refers to AFEP-MEDEF’s corporate governance code (available on www.medef.fr) in developing its corporate govern-ance policy. Any exceptions, concerning in particular the compo-sition of the Board of Directors’ committees, are justified by its ownership structure or the provisions of the agreement between its two main shareholders (see Chapter 5, pages 182 and 183).

Board of directors composition of the Board of directorsThe composition of Sequana’s Board of Directors reflects the Company’s ownership structure and in particular the related pro-visions set out in the shareholder agreement between Exor SA and DLMD. Details of this agreement are provided on pages 182 and 183.

Changes in the composition of the Board of Directors in 2011

In accordance with corporate governance rules and to ensure an effective rotation of directors, the Ordinary and Extraordinary Shareholders’ Meeting of 19 May 2011 amended Articles 13 and 18 of the Company’s Articles of Association to enable the term of office of directors (previously set at three years) to be set at varying periods up to a maximum of three years.

The Shareholders’ Meeting decided to renew the terms of office of all directors except Alessandro Potestà for a further period of two or three years. It also appointed Raffaella Papa as director and Alessandro Potestà as non-voting observer.

The appointments made by the Shareholders’ Meeting meet the requirements of the shareholder agreement between Exor SA, DLMD and Pascal Lebard, since three directors were the subject of recommendations by Exor SA (renewal of the term of office of Tiberto Ruy Brandolini d’Adda and Exor SA and appointment of Raffaella Papa), two were the subject of recom-mendations by DLMD (renewal of the term of office of Pascal Lebard and DLMD), while the renewal of the five other directors (Luc Argand, Jean-Pascal Beaufret, Laurent Mignon, Michel Taittinger and Allianz France) was the subject of a joint recom-mendation by Exor SA and DLMD.

The appointment of Raffaella Papa as director meets the require-ments of the law of 27 January 2011 in that it is a first step towards ensuring gender equality on the Board of Directors.

The Board of Directors held on the same date (19 May 2011) following the Shareholders’ Meeting decided to reappoint Tiberto Ruy Brandolini as Chairman and Pascal Lebard as Chief Executive Officer for a period equal to the term of their respec-tive directorships. Their powers were also maintained as they stood prior to the Shareholders’ Meeting.

Composition of the Board of Directors at 31 December 2011

Expiry of term of officeAGM called to approve

the financial statements for:

Tiberto Ruy Brandolini d’Adda Chairman of the Board of Directors 2013

Pascal Lebard Chief Executive Officer 2012

Luc Argand Director 2013

Jean-Pascal Beaufret Director 2013

Laurent Mignon Director 2012

Raffaella Papa Director 2012

Michel Taittinger Director 2012

Allianz France represented by Pierluigi Riches Director 2013

dLMd represented by Nicolas Lebard Director 2013

Exor SA represented by Pierre Martinet Director 2012

Alessandro Potestà Non-voting observer 2012

corPorAte GoVernAnce 2Board of directors


Four of the ten directors (or representatives of legal entities which sit on the Board) are independent (see section ‘Criteria for selecting Board members’). Four directors are non-French. The average age of directors is 55.

Organisation of management powers and oversight

Since 1 July 2007, the duties of Chairman of the Board of Directors and Chief Executive Officer have been separate and they are currently exercised by Tiberto Ruy Brandolini d’Adda and Pascal Lebard, respectively. The separation of these two corpo-rate offices around the complementary skills and experience of both men provides Sequana with optimum visibility over its opera-tional activities while safeguarding the quality of the Board’s work.

The Board of Directors met on 19 May 2011 after the Shareholders’ Meeting altering the Board’s composition. The Board noted that the terms of office of the Chairman and Chief Executive Officer had expired and decided, on the recommendation of the Nominations and compensation committee, that Mr Brandolini d’Adda would continue to exercise his duties as Chairman until further notice and throughout the term of his directorship, i.e., until the close of the Shareholders’ Meeting called to approve the financial statements for the year ended 31 December 2013. The duties of Chairman are defined by Article 14 of the Company’s Articles of Association as follows: “The Chairperson organises and directs the work of the Board of Directors and reports to the Shareholders’ Meeting. He ensures that the Company’s deci-sion-making bodies operate effectively and that the directors are able to carry out their duties and responsibilities”.

The Board also decided, on the recommendation of the Nominations and compensation committee, that pascal Lebard would continue to exercise his duties as Chief Executive Officer subject to the limitations set out below and throughout the term of his directorship, i.e., until the close of the Shareholders’ Meeting called to approve the financial statements for the year ended 31 December 2012. The duties of Chief Executive Officer are defined by Article 17 of the Company’s Articles of Association as follows: “The Chief Executive Officer has the broadest powers to act in the Company’s name under all circumstances, within the scope of the corporate purpose and subject to the powers vested by the law in Shareholders’ Meetings and the Board of Directors. He represents the Company in its dealings with third parties”.

However, Pascal Lebard must obtain the prior authorisation of the Board of Directors before taking any decision regarding an investment or divestment of more than €150 million, any financ-ing operation involving a bilateral or syndicated loan agreement for more than €200 million, and generally any transaction likely to affect the Group’s strategy or significantly change the make-up of the Group.

Directors’ profiles

The full list of directorships and positions held is provided on pages 54 et seq.

Tiberto Ruy Brandolini d’Adda

Chairman of the Board of Directors of Sequana

} Director and Chairman of the Board since 3 May 2005

Chief Executive Officer from 3 May 2005 to 30 June 2007

Tiberto Ruy Brandolini d’Adda was also a member of the Supervisory Board of Sequana (formerly Worms & Cie) between 2000 and 2005.

His term of office, which was renewed in 2011, expires in 2014.

} Mr Brandolini d’Adda is 64 years old and holds 12,428 shares in Sequana, registered in his name.

} He holds a law degree and has held various executive manage-ment positions with Fiat, the European Economic Commission and the Ifil group (now Exor), as well as directorships in sev-eral different companies.

Professional address: Cours Saint-Pierre 5 – 1204 Geneva (Switzerland)

Pascal Lebard

Chief Executive Officer of Sequana

Director since 3 May 2005

} Deputy Chief Executive Officer from 3 May 2005 to 30 June 2007

Chief Executive Officer since 1 July 2007

Pascal Lebard was also a member of the Supervisory Board and Executive Board of Sequana (formerly Worms & Cie) between 2003 and 2005.


} Mr Lebard is 49 years old and holds 13,093 shares in Sequana, registered in his name. He also holds 10,016,153 shares (20.2% of the Company’s capital) through DLMD, which he controls and of which he is Chairman.

} He is a graduate of the EDHEC business school. He began his career in the banking sector and went on to become an Associate Director of 3i SA. He has held several executive management positions in the Exor group (formerly Ifil) and also holds a number of directorships in other companies.

Professional address: Sequana – 8, rue de Seine – 92517 Boulogne-Billancourt Cedex (France)



Luc Argand

Partner at the law firm Pfyffer & Associés, Geneva (Switzerland)

} Independent director since 3 May 2005


} Mr Argand is 64 years old and holds 100 shares in Sequana.

} He is an attorney with the Geneva Bar, of which he was President from 1996 to 1998. He is also Arbitrator at the Court of Arbitration for Sport (Lausanne), was a member of the High Council for the Judiciary (Geneva) and is chairman of the Supervisory committee of Notaries in Geneva. He is spe-cialised in business, banking, sport and arbitration law.

Professional address: Étude Pfyffer & Associés – 6 rue François Bellot – 1206 Geneva (Switzerland)

Jean-Pascal Beaufret



} Mr Beaufret is 61 years old and holds 100 shares in Sequana.

} He is a graduate of the HEC business school and of the École nationale d’administration. He has had major responsibilities at the French Treasury, in the banking world and in indus-try. He held several senior posts at the French Ministry of Economy and Finance, particularly at the General Inspectorate of Finance (Inspection générale des finances), the French Treasury, and the French General Tax Division. He was dep-uty governor of CCF (1994-1996), head of the French General Tax Division (1997-1999), Deputy Chief Financial Officer and then Chief Financial Officer of Alcatel-Lucent (1999-2007). In 2008, he was a member of the Executive Board of Natixis. From September 2009 to the end of February 2012, he was chief Financial officer of Australian firm National Broadband Networks co Limited.

Professional address: 1/10 Milson Road – Cremorne – NSW 2090 (Australia)

Laurent Mignon

Chief Executive Officer of Natixis

Director since 3 May 2005

} Vice-Chairman from 3 May 2005 to 22 June 2007

Laurent Mignon was also a member of the Supervisory Board of Sequana (formerly Worms & Cie) between 2002 and 2005.


} Mr Mignon is 48 years old and holds 101 shares in Sequana.

} He is a graduate of the HEC business school and the Stanford Executive Program. He acquired experience in the banking industry (Indosuez, Schroders) before joining the AGF group, where he held a number of executive management positions before being appointed Chief Executive Officer. In September 2007, he joined the private bank Oddo & Cie as Managing Partner. Since May 2009, he has been Chief Executive Officer of Natixis.

Professional address: Natixis – 30 avenue Pierre Mendès France – 75013 Paris (France)

Raffaella Papa

Corporate Functions Director/Chief Financial Officer of Itedi Italiana Edizioni SpA (Italy)

} Director since 19 May 2011

Her term of office expires in 2013.

} Raffaella Papa is 43 years old and holds 100 shares in Sequana.

} She is a graduate of Bocconi University. She started her career in the Operations department of La Rinascente (leading Italian retailing group) before joining the Finance department as manager of financial planning. She joined the Investments department of the Exor group in 1999 as “Principal” in charge of assessing, implementing and monitoring the group’s invest-ment projects. In September 2011, she was appointed Chief Financial Officer of Itedi Italiana Edizioni SpA (La Stampa) and since November 2011 has been corporate Functions director of the Itedi group.

Professional address: Itedi Italiana Edizioni SpA – Via Marenco 32 – 10126 Turin (Italy)

Michel Taittinger


Michel Taittinger was also a non-voting member of the Supervisory Board of Sequana (formerly Worms & Cie) between 2000 and 2005.


} Mr Taittinger is 67 years old and holds 200,000 shares in Sequana.

} He graduated from the Institut d’Études Politiques in Paris. He has held a number of executive management positions and directorships in different companies.

Professional address: 12 Mulberry Walk – London SW3 6DY (UK)



Allianz France


Allianz France was also a member of the Supervisory Board of Sequana (formerly Worms & Cie) between 1998 and 2005.

Its term of office, which was renewed in 2011, expires in 2014.

} Allianz France holds 100 shares in Sequana. Its parent group Allianz holds 5,863,292 Sequana shares (i.e., 11.8% of the Company’s share capital).

Registered office: 87, rue de Richelieu – 75060 Paris Cedex 02 (France)

Allianz France is represented by:

Pierluigi Riches

Vice-President of Group Regulatory Policy at Allianz SE (Germany)

} Mr Riches is 59 and does not hold any shares in Sequana in his own name.

} He graduated in economics from the University of Bocconi in Milan, and has held various positions, primarily in the insur-ance industry, where he began his career in financial posts. He joined the Allianz group in 1992 where he served as Chief Financial Officer then Chief Executive Officer of various divi-sions within Riunione Adriatica di Sicurtà. In May 2007, he became Chief Operating Officer responsible for investments and member of the Executive Committee of Allianz France. Since November 2011, he has been Vice-president of Group Regulatory Policy at Allianz SE in Munich.

Professional address: Allianz – Corso Italia 23 – 20122 Milan (Italy)

DLMD

} Director since 25 July 2007


} DLMD holds 10,016,153 shares in Sequana (i.e., 20.22% of the Company’s share capital).

Registered office: 20 avenue Kléber – 75116 Paris (France)

DLMD is represented by:

Nicolas Lebard

Managing Director of NL Conseil

} Mr Lebard is 45 years old and does not hold any shares in Sequana in his own name.

} He graduated from the HEC business school and began his career with Morgan Stanley. He became Deputy Director of M&A for Rothschild & Compagnie Banque before founding and becoming a partner of Lorentz, Deschamps & Associés. He was the Managing Director of ED&F Man Malaysia and Singapore responsible for the development and trading of bio-fuel, vegetable oils, latex and related by-products in Asia. He is currently an independent trading and M&A development consultant.

Professional address: 31 Jalan Girdle – Bukit Tunku - 50480 Kuala Lumpur (Malaysia)

Exor SA

} Director since 3 May 2005

Exor SA was also a member of the Supervisory Board of Sequana (formerly Worms & Cie) between 2004 and 2005.


} Exor SA holds 13,993,229 shares in Sequana (i.e., 28.24% of the Company’s share capital).

Registered office: 22-24 boulevard Royal – 2449 Luxembourg (Luxembourg)

Exor is represented by:

Pierre Martinet

Managing Director of Old Town, Luxembourg

} Director of Sequana in his own name from 3 May 2005 to 21 July 2010

Deputy Chief Executive Officer of Sequana from 3 May 2005 to 30 June 2007

Pierre Martinet was also a member of the Supervisory Board of Sequana (formerly Worms & Cie) between 2004 and 2005.

} Mr Martinet is 62 years old and holds 4,353 shares in Sequana, registered in his name.

} He is a graduate of the ESCP business school and holds an MBA from Columbia Graduate School of Business. He began his career in 1974 as an authorised M&A agent for Banque Rothschild, then joined Cartier in 1977 as General Secretary. Mr Martinet worked for Paribas Technology in 1986 as the firm’s Chief Executive Officer and a partner and manager of venture capital funds before joining the management of Perrier in 1990, where he was responsible for equity transactions. In 1993, after Nestlé’s takeover bid for perrier, Mr Martinet joined the Exor group, where he held various positions, includ-ing director and Chief Executive Officer of Exor SA. He is cur-rently Managing Director of Old Town, Luxembourg.

Professional address: 3, rue Saint-Léger – 1205 Geneva (Switzerland)



Alessandro Potestà

Managing Director of Exor SpA

} Non-voting observer since 19 May 2011

Alessandro Potestà was also a member of the Supervisory Board of Sequana (formerly Worms & Cie) between 2004 and 2005, and then served as a director up to 19 May 2011.

His term of office as non-voting observer expires in 2013.

} Mr Potestà is 44 years old and holds 2 shares in Sequana.

} He is a graduate in economics from the University of Turin, and holds several executive management positions within the Exor group (Investments department).

Professional address: Exor SpA - Via Nizza 250 – 10126 Turin (Italy)

Rules of conduct

According to the Company’s Articles of Association, each direc-tor must hold at least 100 shares during his entire term of office. Each director also undertakes to comply with the rules of con-duct set forth in the Directors’ Charter and the Code of Good Conduct.

These documents, which were approved by the Board of Directors on 3 May 2005 and amended on 28 March 2006, 19 March 2008 and 21 May 2008 to incorporate best corpo-rate governance practices, are designed to govern the rights and obligations of directors irrespective of whether they are natural persons, legal entities, or permanent representatives of these legal entities. In particular, they are intended to prevent poten-tial conflicts of interest, and to define the rules under which the directors may trade in the Company’s shares along with the dis-closure requirements for such transactions.

Within the scope of good corporate governance practices, the Directors’ Charter and the Code of Good Conduct stipulate that corporate officers must comply with stock market rules on insider trading and refrain from trading in the Company’s shares on the basis of as yet unpublished privileged information they may have in their possession due to the position they hold. Corporate offic-ers are required to hold newly-acquired shares for a minimum of three months and may not trade in the Company’s shares dur-ing periods immediately before the publication of the Company’s financial statements. They may not trade in the Company’s shares on the stock market between (i) the later of either the first trading day immediately after the end of a calendar quarter, i.e., the 20th trading day (inclusive) preceding the Board meeting that adopts the annual or interim financial statements, or the 16th trading day (inclusive) preceding the publication of quarterly financial state-ments, and (ii) the publication date (inclusive) of the financial state-ments (generally the day after the Board meeting). As these rules are stricter than the recommendations issued by the French finan-cial markets authority (Autorité des marchés financiers – AMF) in 2010 and better adapted to the Company’s way of working, no changes were deemed appropriate. In accordance with regula-tions, corporate officers must inform the AMF of any operations

they have carried out involving the Company’s shares within five trading days of the operations in question. They must also pro-vide the Company with a copy of said disclosures within the same timeframe.

To ensure that the Company’s corporate decision-making bod-ies work in an effective manner, the Board of Directors has also adopted a set of internal rules which define the precise role of the Board and the status of its members, and ensure that meet-ings and discussions are conducted in an optimal and effective manner. The Board has also set up special committees com-posed of directors to deal with matters that fall within the scope of the Board’s duties. These committees deliberate and submit their opinions and recommendations to the Board.

Criteria for selecting Board members

As discussed on page 44, the composition of Sequana’s Board of Directors reflects the Company’s ownership structure and in particular, the related provisions set out in the shareholder agreement between Exor SA and DLMD.

Most Board members have held directorships or executive man-agement positions in other companies and acquired both cor-porate management skills and sufficient financial expertise to enable them to deliberate independently and in an informed man-ner on the Group’s financial statements, as well as on account-ing compliance issues.

Directors are considered independent if they have no direct or indirect relations of any nature with the Company, the Group or the Group’s management that could compromise their freedom to make independent decisions.

According to the generally accepted criteria for assessing inde-pendence set out in AFEP-MEDEF reports, the Board has four independent directors: Luc Argand, Jean-Pascal Beaufret, Michel Taittinger and Allianz France, representing one-third of directors. Given their roles in the Company, Tiberto Ruy Brandolini d’Adda and Pascal Lebard cannot be considered as independent. In view of the Company’s ownership structure and the agreement between two shareholders, the representatives of these share-holders on the Board (Pierre Martinet and Raffaella Papa for Exor and Nicolas Lebard for dLMd) cannot be considered as independent. Laurent Mignon, chief Executive officer of Natixis, one of Sequana’s main banking partners, cannot be classified as independent based on the AFEP-MEDEF recommendations to which the Company refers in its corporate governance practices.

Particular attention is paid to ensuring directors’ freedom of judge-ment on the Board and the Board’s committees, particularly those bound by a shareholder agreement, to ensure that the directors can fulfil their duties with the objectivity required.

Based on information provided by members of the Board, the Company has ascertained that apart from Pascal Lebard and Nicolas Lebard who are brothers, no director has family ties to another director or to the management team; that over the past five years, no director has been convicted of fraud or been subject to criminal, public or administrative sanctions; and that no direc-



tor has been associated with bankruptcy, receivership or judicial liquidation proceedings or has been prevented by a court or other legal, administrative or regulatory authority from acting as a mem-ber of a corporate decision-making body or from being involved in a company’s day-to-day management or conduct of its business.

The independent directors have not reported any conflict of inter-est that would be likely to raise questions about their independence with regard to the Company or the performance of their duties as corporate officers.

None of the members of the corporate decision-making bodies or the executive management team have entered into a service agree-ment with the Company or one of its subsidiaries providing for the payment of benefits.

The Company’s Articles of Association do not provide for employee-elected directors and no director has an employment contract with the Company.

Assessment of the Board’s performance

Under the Board of Directors’ internal rules, the Board meets once a year to assess its operation and independence. At each annual meeting, it also assesses the performance of corporate officers.

The Board may also commission (at least once every three years) an assessment of its own performance by an external consultant or by the Board secretary. The Board made use of this facility and at its meeting of 8 March 2012 commissioned an assessment from the Board secretary. The results of this assessment were disclosed to the Board on 27 April 2012. Based on directors’ responses to the questionnaire sent out, the procedures in place and the quality of

work performed by the Board were felt to be satisfactory. The issues covered in the study include the frequency of and preparation for meetings, the quality of the Board’s discussions, the independence of the views expressed, the access of directors to the information needed for their deliberations along with the contents thereof, and the minutes drafted. Without calling into question the quality and quantity of information provided to the Board of Directors, the survery high-lighted that improvements are expected, especially amid the current tense market environment (lower volumes and tension over raw mate-rials prices), so that it has more comprehensive information concern-ing the Group’s industrial and commercial activities in particular, and that it be called upon more frequently to debate the strategy imple-mented by the Company. Certain directors consider that the role and composition of the Strategy Committee could be strengthened in this respect. The composition of the Board could also be bolstered by the presence of a director – preferably independent – with exper-tise in the Group’s activities (distribution, paper segment or capital-intensive industry). Lastly, among the subjects that the Board and its specialised committees could deal with to improve the quality of their work and play their role in full, the survey suggests that in future, special attention be paid to two points: the succession plans for the Chairman and Chief Executive and risk prevention and management. Although the number of independent directors on the Board and its specialised committees does not correspond to the strictest corpo-rate governance requirements, the Company does observe the rules applicable to companies controlled by one shareholder or sharehold-ers acting in concert and only departs from this principle in the com-position of its committees so as to comply with the requirements of the agreement entered into by the Company’s main shareholders (see Chapter 5, pages 182 and 183).

organisation and modus operandi of the Board of directorsThe Board of Directors has the following responsibilities:

A duty of administration

In addition to handling matters that fall within the scope of the pow-ers ascribed to it by law or by regulations, the Board regularly makes decisions regarding the Group’s strategy, internal restruc-turing operations and important investment projects designed to generate organic growth.

A duty of review

In addition to the duties ascribed to it by law (reviewing and approv-ing the Company’s financial statements), the Board deliberates on significant acquisitions or sales of equity interests and assets that do not fall within the scope of the strategy it has determined. It also votes on any transaction or commitment that is liable to materially affect the Group’s earnings or to result in a significant change in its balance sheet structure.

A duty of caution

The Board is kept informed on a regular basis, either directly or through its committees, of any significant event affecting the con-duct of the Company’s business. It also has the right to obtain information at any time, including between meetings convened to review the financial statements, on any significant change in the Company’s financial condition, liquidity position and commitments.

Transparency

The Board of Directors is responsible to the shareholders for ensur-ing that all of its activities are conducted in a transparent manner.

Preparation of the Board’s work, organisation and modus operandiThe Board of Directors meets at least four times a year and when-ever the Company’s interests so require, to deliberate as a collegial body on the matters referred to it for approval.

The schedule of Board and committee meetings is adopted at the end of a given year for the following year. However, unscheduled meet-ings may be called where necessary in exceptional circumstances.



Barring exceptional circumstances, prior to each Board meeting directors receive a formal notice of meeting along with the minutes of the previous meeting and any documentation and information necessary to deliberate on the upcoming items on the agenda.

Depending on the agenda and nature of the issues to be dis-cussed, the Chairman of the Board may request that one of the Board’s three committees meet before the date of the Board meeting.

The information needed for the Board’s discussions is sent to directors several days before the meeting. This timing is compat-ible with the confidentiality requirements applicable to any trans-fer of privileged information, and allows directors to examine in depth the documents sent.

The same procedure applies to the Board’s committees.

The Audit Committee meets to review the annual or interim finan-cial statements before the relevant Board meeting is called to adopt those financial statements.

The information provided to directors during Board meetings includes comprehensive documentation regarding issues on the agenda. Generally speaking, and depending on the nature of the subject to be discussed, internal and/or external information is provided for each issue on the agenda as well as draft delibera-tions where appropriate. The information pack includes the draft press release usually published the day after the meeting before the Paris stock market opens for trading, in accordance with the AMF’s recommendations.

Directors may participate in Board meetings via video confer-ence or telecommunication and are deemed to be present for purposes of quorum and majority requirements, except when this is disallowed by French law due to items on the agenda of the meeting.

Board meetings and work

The Board’s work is based on executive management presenta-tions and recommendations put forward by the Chairman, which are freely discussed by the directors.

The Board met on six occasions in 2011, with an attendance rate of 85%. The Board has met on four occasions since the begin-ning of 2012.

Corporate governance

At the beginning of 2011, the Board performed its annual review of its operation and of director independence in light of gener-ally accepted independence criteria based on recommendations set out in reports published by AFEP-MEDEF. After considering the views of the Nominations and compensation committee, the Board examined the proposed renewal of directors’ terms of office and the appointment of a new director and non-voting observer, which it decided to put to the vote of the Shareholders’ Meeting on 19 May 2011. Subject to shareholder approval, it decided that the composition of its Board committees would remain unchanged,

except for the Audit Committee, where Alessandro Potestà – appointed non-voting observer – has been replaced by Exor SA as represented by Pierre Martinet. It also voted on the variable compen-sation payable to Pascal Lebard for 2010 and on the methods to be used to calculate his variable compensation for 2011.

At its meeting of 19 May 2011 following the Shareholders’ Meeting, the Board acted on a recommendation of the Nominations and Compensation Committee and decided to reappoint Tiberto Ruy Brandolini d’Adda as Chairman and Pascal Lebard as Chief Executive Officer. Their powers were also maintained as they stood prior to the Shareholders’ Meeting.

On 8 March 2012, the Board once again reviewed director inde-pendence and its own operation. Making use of its powers, the Board commissioned an assessment of its own performance from the Board secretary. The results of this assessment were disclosed to the Board at its meeting of 27 April 2012. At the same 8 March 2012 meeting, after considering the opinion of the Nominations and compensation committee and taking account of the Group’s current situation and its 2011 operating performance, the Board noted Pascal Lebard’s proposal not to receive any varia-ble compensation in respect of 2011. It also set his fixed compensa-tion and the methods for calculating the variable compensation due to the Chief Executive Officer in respect of 2012.

Conduct of the Group’s operations

The Board regularly reviews the market position of Group com-panies and deliberates on Group strategy and the industrial pro-cesses to be rolled out in its subsidiaries, as well as on any restructuring operations that need to be carried out in response to difficult market conditions. At each of the Board’s meetings, executive management gives a comprehensive presentation on the conduct of the Group’s operations.

In 2011, the Board continued its analysis of the restructuring plans and asset divestments in progress in its subsidiaries. In accordance with decisions taken in the Group’s three-year business plan, the Board closely monitored the development of Antalis’ RACE 2012 programme.

It also gave in-depth consideration to the main financial and tax issues concerning the Group and discussed at length the Group’s refinancing. A number of Board meetings were dedi-cated entirely to this issue. Since the Group’s financing lines are due to expire in 2012, the Board reviewed the refinancing plans put forward by executive management which included a bond issue as well as other credit facilities. As the bond issue did not ultimately go ahead due to economic conditions, the Board was kept regularly informed of the refinancing solutions avail-able to the Group. In 2012, the Board reviewed the terms and conditions of the refinancing arrangements negotiated with the Group’s banks and signed the agreements in principle (term sheets) setting out these terms and conditions.



Financial statements

In early 2011, after considering the views of the Audit Committee, the Board approved the financial statements for the year ended 31 December 2010 as well as the projected management accounts, and recommended the income appropriation for 2010. This included a dividend of €0.40 per share deducted from dis-tributable earnings. At this same meeting, the Board also con-sidered internal control issues within the Group and approved the Chairman’s report on internal control and risk management procedures.

At its meeting of 21 July 2011, the Board approved the consoli-dated financial statements at 30 June 2011 and the financial doc-umentation drawn up in application of the French Commercial Code (Code de commerce). It also prepared an interim review of operations.

During the year, it reviewed the budget for 2011 and monitored the budget against the Group’s actual results. At the end of 2011, the Board reviewed the provisional budget for 2012 and approved the Group’s 2012-2014 three-year business plan.

In early 2012, after noting that an agreement in principle had been signed with its banks setting out the terms and conditions of its refi-nancing and having considered the opinion of its Audit Committee, the Board approved the 2011 consolidated financial statements based on the going concern accounting principle, as well as the projected management accounts. It also recommended not pay-ing any dividends in respect of 2011. The Board also considered and approved the renewal of the Statutory Auditors whose ten-ure was due to expire. At its meeting of 27 April 2012, the Board approved the Chairman’s 2011 report on internal control and risk management procedures.

2010 share award plans

At its meeting of 21 July 2011, the Board of Directors placed on record the last adjustments to the financial terms and con-ditions of the 10 March 2011 sale by Sequana of the activities based at its Arches and Dettingen plants (Arjowiggins Industrial Solutions). Based on this information, set out in an agreement signed by the parties in June 2011, and following approval from the Nominations and Remuneration committee, the Board decided the adjustments, as provided for in the plan, to be made to the various performance conditions applicable to Sequana’s share award plan of 9 February 2010. On the same date, act-ing on a recommendation of the Nominations and compensation Committee, the Board decided that employees having left Sequana would retain their rights to share awards under the same plan despite the termination of their employment contract, given the circumstances of their departure.

On 8 March 2012, after having considered the report of the Nominations and compensation committee, the Board noted that the free shares due to vest on 30 April 2012 under the 9 February 2010 plan would be partially vested by the benefi-ciaries based on the Group’s results at 31 December 2011. The Board also decided that certain employees whose employment contract is terminated by their employer would retain their rights to all or some of the free shares granted to them.

Delegations of authority to handle financial transactions

At its meeting of 9 March 2011, the Board renewed, under the same terms, the authorisation granted on 23 March 2010 to the Chief Executive Officer to grant sureties, endorsements and guarantees on the Company’s behalf for all transactions and/or financing operations up to an aggregate limit of €200 million and for a period of one year. Sequana used €15 million of this authori-sation to guarantee commitments made by its subsidiaries. On 8 March 2012, the Board renewed the authorisation granted to the Chief Executive Officer under the same terms, i.e., the same aggregate limit of €200 million and for a period expiring on 7 March 2013.

Pursuant to the authorisation granted to it by the Shareholders’ Meeting of 19 May 2011, the Board also gave full powers to the Chief Executive Officer to trade in the Company’s shares on the open market, under the terms and within the limits set by the Shareholders’ Meeting, and in accordance with stock market regulations. This authorisation was used in 2011 and early 2012 in connection with the ongoing liquidity agreement described on page 154.

In connection with the Group’s planned refinancing, the Board of Directors of 19 May 2011 granted the Chief Executive Officer the powers needed to complete all refinancing transactions that were unable to be completed at an earlier date. As new refinanc-ing conditions were approved for the Group in 2012, at its meet-ing of 27 April 2012 the Board granted full powers to sign the final loan agreements for Sequana and its operating subsidiaries total-ling just over €1 billion.

Shareholders’ Meeting

The Board of Directors convened the Ordinary and Extraordinary Shareholders’ Meeting of 19 May 2011, approved the agenda for the meeting and the related necessary documentation, in par-ticular the resolutions to be submitted. The Board also reviewed the 2010 registration document (document de référence). During its meetings in early 2012, the Board sent out the convening notices for the Ordinary and Extraordinary Shareholders’ Meeting to be held on 26 June 2012, decided which documents would be submitted to the meeting and reviewed the 2011 registration document.



Board committeesAs mentioned in the section discussing the composition of the Board of Directors, the composition of the Board’s commit-tees meets the provisions set out in the shareholder agreement between Exor SA, DLMD and Pascal Lebard and does not com-ply with certain generally accepted corporate governance prac-tices due to the Company’s ownership structure.

Nominations and compensation committee

The Nominations and compensation committee is composed of four members (including two independent members), appointed for their tenure as directors: Luc Argand (Chairman), Tiberto Ruy Brandolini d’Adda, Pascal Lebard and Michel Taittinger.

In view of the Company’s ownership structure and the provi-sions of the shareholder agreement between Exor SA, DLMD and pascal Lebard, the composition of the Nominations and Compensation Committee does not comply with the rules set out in the AFEP-MEDEF corporate governance code. However, the committee never deliberates on nomination and compensa-tion issues regarding its members who are corporate officers or executive managers when these members are in attendance.

In accordance with the committee regulations adopted by the Board of directors on 3 May 2005, the role of the Nominations and Compensation Committee is to review all matters relating to the composition, organisation and modus operandi of the Board of Directors and its committees and to submit to the Board rec-ommendations on compensation to be paid to executive manag-ers and corporate officers, including the Chairman and the Chief Executive Officer. The committee reviews stock option plans and any proposals for share awards submitted by management.

The committee met on three occasions in 2011, with an attend-ance rate of 92%. The committee reviewed director independ-ence and made recommendations regarding the Chief Executive Officer’s variable compensation for 2010. It also set the fixed compensation payable to the CEO and the methods to be applied to calculate his variable compensation for 2011, to be used as a basis for the Board’s discussions. The committee also reviewed and approved the form and content of the “Compensation” sec-tion of the 2010 registration document.

The committee met once at the beginning of 2012. It put for-ward a number of recommendations concerning the amount of variable compensation payable to the Chief Executive Officer for 2011, the amount of his fixed compensation for 2012 and the methods to be used to calculate his variable compensation for said year. It also re-examined director independence and the form and content of the “Compensation” section of the 2011 reg-istration document.

Audit Committee

At the beginning of 2011, the Audit Committee was composed of four members (including two independent members), appointed for their tenure as directors: Alessandro Potestà (Chairman), dLMd – represented by Nicolas Lebard, Allianz France – repre-sented by Pierluigi Riches, and Jean-Pascal Beaufret, who was appointed in 2008 to boost the committee’s independence and financial expertise.

Following the Shareholders’ Meeting of 19 May 2011, all Audit Committee members were renewed in their office and the compo-sition of the committee was therefore unchanged after the meeting, except that Alessandro Potestà (appointed non-voting observer) was replaced by Exor SA, represented by Pierre Martinet and appointed Chairman. All committee members were reappointed for the length of their tenure as directors.

Given the Company’s ownership structure, the provisions of the shareholder agreement between Exor SA, DLMD and Pascal Lebard, the composition of the Board and the importance of ensuring that Audit Committee members have adequate finan-cial expertise, the composition of the committee does not com-ply with the rules set out in the AFEP-MEDEF code in that only two of its four members are independent.

In accordance with the committee regulations adopted by the Board of Directors on 3 May 2005 and subsequently amended on 27 July 2010, the Audit Committee focuses on three main areas: (i) the financial reporting process, (ii) the effectiveness of risk management and internal control procedures, and (iii) the independence of Statutory Auditors and the performance of the statutory audit engagement.

The committee monitors issues regarding the preparation and validation of accounting and financial data, ensures that the accounting policies used to prepare the consolidated and parent company financial statements are appropriate and applied con-sistently, and that major transactions are accounted for appro-priately at the level of the Group. It also verifies that internal data compilation and validation procedures are designed with this purpose in mind. The committee analyses (a) the scope of the consolidated Group and, where appropriate, the reasons why certain entities are not consolidated, (b) the accounting stand-ards applicable to the Group and their implementation, (c) the annual and interim consolidated and parent company finan-cial statements along with any financial and accounting issues brought to its attention by executive management, particularly as regards the Group’s cash position, financing and compliance with bank covenants, and (d) the risks to which the Group may be exposed and any material off-balance sheet commitments.



The committee is kept up to date on the organisation and opera-tion of risk management procedures by executive management, and ensures that these procedures are effective. It also monitors how risks are flagged up, monitored or covered by appropriate insurance policies. The committee issues recommendations on the organisation of the Group’s internal audit department and is informed of the internal audit agenda. It also receives regular summaries of internal audit reports. The committee also famil-iarises itself with the internal audit action plan, is informed at least once a year of the progress of this plan, and monitors the procedures put in place by the Company to ensure the actions taken are effective and comply with regulations and a recog-nised framework.

The Audit Committee is provided with the report of the Chairman of the Board of Directors on internal control and risk manage-ment procedures and issues an opinion before the report is approved by the Board.

The committee is responsible for the Statutory Auditor selec-tion procedure and makes recommendations to the Board on the appointment or renewal of Statutory Auditors. The committee ensures that the Statutory Auditors meet the requisite independ-ence criteria and makes recommendations on fees payable to Statutory Auditors in respect of their statutory audit engagement. It also issues recommendations on advisory engagements and other related audit services that may be provided by the Statutory Auditors or by members of their network outside the statutory audit engagement, and ensures that such engagements com-ply with legal regulations. Every year, the committee is briefed by the Statutory Auditors on the amount and breakdown of fees per category of audit and advisory engagement and other ser-vices paid by the Group to the Statutory Auditors or members of their network in the past year. It also examines the auditors’ work schedule and the findings of the audit. On closing the interim and annual financial statements, the committee receives a report from the Statutory Auditors setting out the key issues resulting from their work and the accounting options applied.

The committee meets on a regular basis and may hear reports from the Group’s executive managers and their teams, particu-larly the head of internal audit. It may also meet with the Statutory Auditors, with or without management being present.

The Audit Committee met on two occasions in 2011 in the pres-ence of management, with an attendance rate of 75%. The com-mittee reviewed issues relating to internal control within the Group and the approval of the 2010 financial statements. The committee also reviewed the Company’s interim financial state-ments at 30 June 2011 and the work of the Group’s internal audit department in the first half of the year.

Since the beginning of 2012, the committee has met on two occasions to consider Sequana’s refinancing and the impact of upcoming maturities of its outstanding debt on the approval of the 2011 financial statements. After learning of the terms and conditions of the Group’s new financing arrangements, it reviewed the 2011 financial statements and made recommenda-tions to the Board in this respect. The committee thus analysed the internal control procedures put in place. It was briefed on the internal control reports for 2011 and obtained an understanding of the internal audit plan for 2012. The committee also debated the steps to be taken given that the terms of office of a principal and a deputy Statutory Auditor were due to expire.

At each meeting attended by the Chief Financial Officer and the Statutory Auditors who make recommendations, the committee reviews the full financial statements and accompanying notes, including information on all reported entities, any risks to which the Group is exposed, and any off-balance sheet commitments.During the review of the interim and annual financial statements, the committee meets with the Statutory Auditors without man-agement being present.

Strategy Committee

The Strategy Committee is composed of four members (including one independent member), appointed for their tenure as direc-tors: Tiberto Ruy Brandolini d’Adda (Chairman), Luc Argand, Pascal Lebard and Laurent Mignon.

In accordance with the committee regulations adopted by the Board of Directors on 3 May 2005, the committee’s brief is to issue recommendations on the Group’s strategy while taking account of market trends and the potential risks to which the Group may be exposed. It also reviews the investment oppor-tunities that best fit with the predefined investment strategy. The committee meets as often as needed at its Chairman’s discretion.

No meetings of the Strategy committee were held in 2011. Strategic issues were deliberated upon at meetings involving all directors.



directorships and positions held by the corporate officers at present and in the past five years Tiberto Ruy Brandolini d’Adda

Chairman of the Board of Directors

Directorships and positions held in 2011 and since 1 January 2012:Active partner in Giovanni Agnelli e C. (Italy)Chairman of the Board of Directors and directorof Exor SA (Luxembourg)Vice-Chairman of Exor SpADirector of SGS SA (Switzerland)Director of Fiat SpA (Italy)Director of Greysac SAS director of Yura International BV (from 1 January 2011 to 1 February 2011)Member of the Board of Yafa SpA (since 2 February 2011)

Directorships and positions held in the past five years:Vice-Chairman and Managing Director of Exor group (Luxembourg)Vice-Chairman and member of the Executive Committee of Ifil SpAChairman and Chief Executive Officer of Sequana CapitalChairman of Exint SASDirector of Vittoria Assicurazioni (Italy) Director of Exor SpA (Italy)Director of Ifil SpA (Italy)Director of Espirito Santo Financial Group SA (Luxembourg)Director of Old Town SAMember of the Supervisory Board of ArjowigginsMember of the Supervisory Board of Antalis International

Pascal Lebard

Chief Executive Officer

Directorships and positions held in 2011 and since 1 January 2012:Chief Executive Officer of Arjowiggins SAS*Chief Executive Officer of Antalis International SAS*Chairman of DLMD SASChairman of Pascal Lebard Invest SASChairman of Fromageries de l’Etoile SAS (until 27 October 2011)Chairman of Etoile Plus SAS (until 27 October 2011)Chairman of Boccafin SAS*Chairman of Antalis Asia Pacific Pte Ltd (Singapore)*Chairman of AW Trading (Shanghai) Co Ltd* Member of the Supervisory Board of Ofi Private Equity Capital(from 26 June 2011 to 5 July 2011)Member of the Supervisory Board of Eurazeo PME(since 11 July 2011)Director of Arjowiggins HKK 1 Ltd (Hong Kong)*Director of Arjowiggins HKK 3 Ltd (Hong Kong)* Director of Greysac SAS

Director of Club Méditerranée Director of Lisi Director of Permal Group Ltd (UK)Director of CEPI (Confederation of European Paper Industries) (Belgium)

Directorships and positions held in the past five years:Chairman of Arjowiggins Security*Chairman of Arjobex*Chairman of Arjowiggins Security Integrale Solutions*Chairman of the Supervisory Board of Club MéditerranéeDeputy Chief Executive Officer of Sequana Capital*Director of SGS SA (Switzerland)Director of Arjowiggins HKK 2 Ltd (Hong Kong)*Manager of Ibéria SarlLiquidator of Boccafin Suisse SA*

* Companies belonging to the Sequana Group.

Luc Argand

Partner at the law firm Pfyffer & Associés, Geneva (Switzerland) Independent director

Directorships and positions held in 2011 and since 1 January 2012:Chairman of the Board of Directors of Banque Syz & Co SAChairman of the Board of Directors of Financière Syz & Co SAChairman of the Board of Directors of Salon International de l’Automobile de Genève (until 15 June 2011)Vice-Chairman of the Board of Directors of Banque Morval & Cie SAVice-Chairman of the Board of Directors of Palexpo SADirector of Banque Privée Edmond de Rothschild SADirector of Casino Barrière de MontreuxDirector of Compagnie Benjamin de Rothschild SADirector of LCF Holding Benjamin & Edmond de Rothschild SA (until 1 April 2011)Director of GEM Global Estate Managers (until 1 April 2011)

chairman of the Supervisory committee of Notaries in GenevaMember of the Committee of Salon International de l’Automobile de Genève Arbitrator at the Court of Arbitration for Sport in Lausanne

Directorships and positions held in the past five years:Chairman of the Board of Directors of Hotel Olden AGChairman of the Board of Directors of Société de Gestion d’Oncieu & Cie SAMember of the High Council for the Judiciary (Geneva)




Independent director

Directorships and positions held in 2011 and since 1 January 2012:Partner and member of the Investment Committee of Aurinvest chief Financial officer of National Broadband Networks co. Ltd (Australia) (until the end of February 2012)director of National Broadband Networks Tasmania Limited(until 1 November 2011)

Directorships and positions held in the past five years:Member of the Executive Board of Natixis director of Natixis Global Asset ManagementChief Financial Officer of Alcatel-Lucent

Chairman of Alcatel-Lucent Participations Chairman and Chief Executive Officer of ElectrobanqueChairman of TelpartChairman of SaftChairman of Aura Merger Sub, Inc.Member of the Supervisory Board of Thales Alenia SpaceDirector of Alcatel Italia SpA (Italy)Director of Alcatel Standard AG (Switzerland)

Laurent Mignon

Chief Executive Officer Of Natixis

Directorships and positions held in 2011 and since 1 January 2012:chairman of the Board of directors of Natixis Global Asset Management Director of Arkema Director of CofaceDirector of the Board of Lazard Ltdpermanent representative of Natixis Non-voting observer on the Board of BpcEpermanent representative of Natixis on the Board of directors of cofacepermanent representative of Natixis on the Board of directors of Coface Holding

Directorships and positions held in the past five years:Chairman and Chief Executive Officer of Oddo Asset ManagementManaging partner of Oddo & CieChairman of the Supervisory Board of Oddo Corporate FinanceChairman of the Supervisory Board of AGF Informatique Chairman of the Supervisory Board of AVIPChairman of the Board of Directors of CoparcChairman of the Board of Directors of Génération VieMember of the Supervisory Board of La Banque Postale Gestion PrivéeDirector of Génération VieDirector of Cogefi

Deputy Chief Executive Officer of AGF SAChief Executive Officer of Groupe AGFChief Executive Officer of AGF VieChairman of the Executive Committee of AGF FranceVice-Chairman of the Supervisory Board of Euler HermèsChairman and Chief Executive Officer of Banque AGFChairman of the Board of Directors of AGF Private BankingChairman of the Board of Directors of AGF IARTChairman of the Board of Directors of AGF VieChairman of the Supervisory Board of W FinanceChairman of the Supervisory Board of AGF Asset ManagementMember of the Supervisory Board of Oddo & Cie SCAdirector of Natixis Global Asset ManagementDirector and Deputy Chief Executive Officer of AGF HoldingDirector of GIE Placements d’AssuranceDirector of AGF VieDirector of W Finance Director of AGF InternationalDirector of AGF Asset ManagementPermanent representative of AGF International on the Board of AGF IART Permanent representative of AGF Holding on the Board of Bolloré Investissement Permanent representative of AGF Vie on the Board of Bolloré

Raffaella Papa

Corporate Functions Director/Chief Financial Officer of Itedi Italiana Edizioni SpA (Italy)

Directorships and positions held in 2011 and since 1 January 2012:Principal of Exor SpA (until 31 August 2011)Director of Alpitour SpA (Italy)Director of Almacantar SA (Luxembourg) (until 20 June 2011)

Michel Taittinger


Directorships and positions held in 2011 and since 1 January 2012:Director of Provence Prestige International – Crédit Suisse

Directorships and positions held in the past five years:Non-executive director of Alpha Value Management (uK) LLp



Allianz France


Directorships and positions held in 2011 and since 1 January 2012:Director of Allianz BanqueDirector of AGF 2XDirector of GIE RegistarDirector of ACAR Director of Allianz Iard Director of Allianz Vie Director of Calypso Director of Civipol Director of Allianz France Infrastructure (formerly AGF Assurfinance) Member of the Supervisory Board of Idinvest Partners (until 30 September 2011)Member of the Supervisory Board of SCPI Domivalor 4Member of the Supervisory Board of SCPI Allianz Pierre Actif 2Member of the Supervisory Board of SCPI Allianz Pierre Valor (until 1 July 2011)

Member of the Supervisory Board of SCPI Domivalor 2 Member of the Supervisory Board of SCPI Domivalor 3Member of the Supervisory Board of SCPI Domivalor Member of the Supervisory Board of SCPI Logivalor 6 (until 30 November 2011)Member of the Supervisory Board of SCPI Allianz Domi DurableDirector of Compagnie de Gestion et de Prévoyance

Directorships and positions held in the past five years:Director of Fédération des Indépendants du PatrimoineDirector of SMAFDirector of AGF IARTDirector of Oddo France Index ActifDirector of Camat

represented by

Pierluigi Riches

Vice-President of Group Regulatory Policy of Allianz SE (Germany)

Directorships and positions held in 2011 and since 1 January 2012:Chief Operating Officer responsible for investments and member of the Executive Committee of Allianz France (until 30 September 2011)Chairman of the Board of Directors of GIE Allianz Investment Management Paris (until 30 September 2011)Chairman of the Board of Directors of Società Agricola San Felice (Italy) (until 30 April 2011)Member of the Supervisory Board of Oddo & Cie SCA (until 30 September 2011)Director of Immovalor Gestion (until 30 September 2011)Director of Allianz Iard (until 30 September 2011)Director of Allianz Vie (until 30 September 2011)director of Allianz Nederland Asset ManagementDirector of Génération Vie (until 30 September 2011)Director of Allianz Banque (until 30 September 2011)Director of Château Larose Trintaudon (until 30 September 2011)Permanent representative of Allianz Vie on the Board of Directorsof STEF-FTEPermanent representative of Allianz France on the Supervisory Board of Idinvest Partners (until 30 September 2011)

Directorships and positions held in the past five years:Vice-Chairman of the Supervisory Board of AGF Private EquityVice-Chairman of Cityfile srl Chairman of Rasfin SimChairman of Ras Immobiliare srlMember of the Supervisory Board of Allianz Elementar Lebensversicherungs AGMember of the Supervisory Board of Allianz Elementar Versicherungs AGMember of the Supervisory Board of Idinvest Partners

Director of AVIPDirector of AGF HoldingDirector of Ras Asset Management SgrDirector of W FinanceDirector of CoparcDirector of ArcalisDirector of Ras Alternative Investment SgrDirector of RasbankDirector of Investitori SgrDirector of Borgo San Felice srlDirector of Villa La PagliaiaDirector of Società Agricola San FeliceDirector of Creditras Assicurazioni SpADirector of Creditras Vita SpADirector of GenialloydDirector of AGF Ras Holding BVDirector of Companhia de Seguros Allianz Portugal SADirector of AGI – Allianz Global Investor Luxembourg SADirector of Emittenti Titoli SpADirector of Istituto Europeo di Oncologia srlGeneral Manager of RAS – Riunione Adriatrica Di SicurtaPermanent representative of AGF IART on the Board of Directorsof AGF BoieldieuPermanent representative of AGF Holding on the Board of Directors of Allianz BanquePermanent representative of AGF Holding on the Board of Directors of Génération ViePermanent representative of Allianz France on the Board of Directors of Compagnie de Gestion et de Prévoyance



DLMD

Directorships and positions held in 2011 and since 1 January 2012:Director of Sequana

Directorships and positions held in the past five years:- none -

represented by

Nicolas LEBARD

Managing Director of NL Conseil

Directorships and positions held in 2011 and since 1 January 2012:Managing Director of ED&F Man Singapore PTE Ltd (until 1 May 2011)Managing director of Ed&F Man Malaysia SdN BHd (until 1 May 2011)


Exor SA

Directorships and positions held in 2011 and since 1 January 2012:Director of Sequana


represented by

Pierre Martinet

Managing Director of Old Town (Luxembourg)

Directorships and positions held in 2011 and since 1 January 2012:Member of the Supervisory Board of Cartier SA (Paris)Director of Cushman & Wakefield (USA)Member of the Supervisory Board of Banijay Entertainment (Paris)Director of Ipsen SA Director of Greysac SASDirector of Almacantar (Luxembourg)

Directorships and positions held in the past five years:Chairman of Arjo Wiggins Appleton LtdChairman of Exint SAS

Chairman of Ifil France Chairman of Financière de Construction de Logements SAS Director of Old Town SA Director of Arjo Wiggins Appleton Ltd Director and Vice-Chairman of Exor (USA)Member of the Supervisory Board of ArjowigginsMember of the Supervisory Board of Antalis InternationalDeputy Chief Executive Officer of Sequana CapitalDirector and Vice-Chairman of Exor (USA)director of Adriatique BV (Netherlands) Director of Exor Finance Ltd

Alessandro Potestà

Managing Director of Exor SpA (Italy) Non-voting observer

Directorships and positions held in 2011 and since 1 January 2012:Director of Alpitour SpA (Italy)Director of Exor Inc. (USA)Director of Exor SA (Luxembourg)Director of Cushman & Wakefield (USA)Member of the Investments Committee of JRE Asia Capital Management Ltd

Directorships and positions held in the past five years:Director of Turismo & Immobiliare SpA (Italy)Director of Exor Ltd (Hong Kong)

Apart from Pascal Lebard, directors do not hold any positions in other companies of the Sequana Group.

corPorAte GoVernAnce2


executive committee – compensation

executive committeeIn 2009, Sequana set up an Executive Committee made up of senior executives from Sequana, Arjowiggins and Antalis to ensure that operating decisions would be implemented more swiftly.

The following were members of the Executive Committee in 2011:

Pascal LebardChief Executive Officer of Sequana, Chief Executive Officer of Antalis and Arjowiggins

Hervé Poncin Chief Operating Officer of Antalis

Guy LéonardChief Operating Officer of Arjowiggins and Managing Director of the Creative Papers division

Xavier Roy-Contancin Group Chief Financial Officer, Chief Financial Officer of Antalis

Isabelle Boccon-Gibod Executive Vice-President

Gilles Raynaud Group Human Resources Director

Antoine Courteault Company Secretary

compensation The Board of Directors reviews the Company’s executive com-pensation practices and ensures that they comply with the recommendations published by AFEP and MEDEF, or with rec-

ommendations that may be issued by competent authorities, in particular the AMF. It was noted that the Company complied with all of these recommendations.

executive corporate officersThe roles of Chairman of the Board of Directors and Chief Executive Officer of the Company were separated in 2007. Since 1 July of that year, Pascal Lebard has been Chief Executive Officer of Sequana and Tiberto Ruy Brandolini d’Adda Chairman of the Board of Directors.

The AFEP-MEDEF’s October 2008 recommendations included the Chairman of the Board of Directors in their definition of execu-tive corporate officers – even when the Chairman has no executive role. To comply with these recommendations, the detailed informa-tion provided below discloses compensation received by Pascal Lebard and Tiberto Ruy Brandolini d’Adda.

Compensation

Compensation payable to the Chief Executive Officer

The annual compensation paid to the Chief Executive Officer comprises a fixed portion and a variable portion determined by the Board of Directors based on recommendations made by the Nominations and compensation committee.

The fixed portion of Pascal Lebard’s annual compensation, amounting to €900,000 for 2010, was maintained in 2011,

pursuant to a decision of the Board of Directors’ meeting of 9 March 2011 previously approved by the Nominations and Compensation Committee. Based on a recommendation of the Nominations and compensation committee, the Board of Directors’ meeting of 8 March 2012 decided to maintain Mr Lebard’s fixed compensation at €900,000 for 2012.

Variable compensation payable in respect of 2009, which was adjusted in line with the qualitative assessment of Mr Lebard’s performance, was calculated based on changes in consolidated debt during the year, working capital and consolidated operat-ing income in the period, as well as on the implementation of announced and/or future cost cutting plans.

Based on these principles and given the Group’s performance in 2009, the Board meeting of 23 March 2010 used its discre-tionary capacity to set Pascal Lebard’s variable compensation for 2009 at a gross amount of €740,000. This amount, pay-able in 2010, was approved upfront by the Nominations and Compensation Committee. The Board also decided to maintain the criteria used to calculate Mr Lebard’s variable compensa-tion for 2010, but to adjust the actual target amounts. This vari-able compensation may be increased by the Board of Directors

corPorAte GoVernAnce 2compensation


on the recommendation of the Nominations and compensation Committee, provided that the strategic transactions approved by the Board are carried out on good terms, the Group meets its three-year business targets and the RACE 2012 programme is implemented successfully at Antalis.

At its meeting of 9 March 2011, the Board of Directors, act-ing on a recommendation of the Nominations and compensation Committee and pursuant to the principles set out above, decided to set Pascal Lebard’s gross variable compensation in respect of 2010 at €870,000, payable in 2011. The Board also decided that the criteria previously used to determine Mr Lebard’s vari-able compensation would also apply in 2011, thereby remaining in line with the Group’s three-year business plan.

At its meeting of 8 March 2012, the Board of Directors decided that no variable compensation would be paid to Pascal Lebard in respect of 2011. This decision is in line with the recommen-dations of the Nominations and compensation committee and with Pascal Lebard’s own proposals, taking into account the Group’s current situation and its operating performance in 2011. At the same meeting, the Board decided that the criteria for cal-

culating Mr Lebard’s variable compensation would remain the same in 2012. It also decided that this variable amount could be increased by the Board on the recommendation of the Nominations and compensation committee, provided that the strategic transactions are carried out on good terms in line with the three-year business plan and with the Group’s general refi-nancing arrangements.

The level of achievement required for the performance criteria was specified but not made public to protect confidentiality.

Compensation payable to the Chairman of the Board of Directors

Since 1 January 2008, Tiberto Ruy Brandolini d’Adda has received annual attendance fees of €250,000 in his capacity as Chairman of the Board of Directors, on top of the attendance fees to which he is already entitled in his capacity as director. These additional fees are deducted from the aggregate amount of attendance fees payable (see details on page 61). The addi-tional fees are consideration for his duties as Chairman of the Board and specifically for his role and responsibilities in organis-ing the Board’s work as defined by the Articles of Association.

Aggregate executive compensation and benefits

The table below sets out compensation paid by Sequana and the companies it controls to executive corporate officers in 2010 and 2011:

(Gross amount in euros before tax)

Financial year 2010 Financial year 2011

Amounts paidduring 2010

Amounts payable and paid

in respect of 2010Amounts paid

during 2011

Amounts payable and paid

in respect of 2011s

Pascal Lebard


Fixed 900,000 e900,000 e900,000 e900,000

Variable e740,000 e870,000 e870,000 e0

Exceptional – – – –

Attendance fees e50,252 e53,302 e49,838 e52,468

Tiberto Ruy Brandolini d’Adda

Chairman of the Board of Directors

Fixed – – – –

Variable – – – –

Exceptional – – – –Attendance fees e300,252 e303,302 e299,838 e302,468

TOTAL e1,990,504 e2,126,604 e2,119,676 e1,254,936

corPorAte GoVernAnce2 compensation


No benefits of any kind (including fringe benefits) were granted by Sequana (or the companies it controls) to its executive corpo-rate officers in 2010 or 2011.

Other than the compensation mentioned above, the Company did not make commitments of any kind to its executive corporate officers in terms of compensation, indemnities or benefits pay-able or likely to be payable in connection with or following the assumption, termination or change of duties.

The executive corporate officers are not bound to the Company by any non-competition clause.

Pascal Lebard and Tiberto Ruy Brandolini d’Adda, who meet the definition of executive corporate officers provided by AFEP-MEDEF and are required to comply with rules regard-ing combining a corporate office with an employment contract, do not have and have never had an employment contract during

their respective terms of office (including any contracts which have been temporarily suspended) with Sequana or a company it controls.

Pascal Lebard benefits from the same pension scheme as the Company’s other executives. Like the Company’s other exec-utives, he is also entitled to supplementary life and disability insurance.

Stock options

No stock subscription or purchase options were granted to executive corporate officers by the Company or by the compa-nies it controls in 2010 or 2011.

No stock subscription or purchase options were exercised by executive corporate officers in 2010 or 2011.

Sequana stock subscription options held by Pascal Lebard and Tiberto Ruy Brandolini d’Adda in their capacity as executive corporate officers and by Pierre Martinet (currently a non-executive corporate officer) at 31 December 2011 are detailed below:

Date of AGM 21 May 2003 3 May 2005

Date of Board meeting 18 June 2004 3 May 2005

Total number of options initially granted 55,000 515,000

Total number of options (adjusted)(1) 68,028 626,556

Total number of shares that may be subscribed by:

Pascal Lebard 68,028 127,745

Tiberto Ruy Brandolini d’Adda – 304,153

Pierre Martinet – 194,658

Earliest exercise date 18 June 2006 3 May 2009

Expiry date 18 June 2012 3 May 2013

Original exercise price €20.47 €23.50

Adjusted exercise price(1) €17.53 €20.46

Terms and conditions of exercise – Vesting periods(2)

Number of shares subscribed at 31 december 2011 0 0

Cumulative number of options cancelled or lapsed at 31 December 2011 0 0

Stock subscription options outstanding at 31 December 2011 68,028 626,556

Value per option (IFRS 2) €5.82 €6.34

(1) Adjustments provided for by law and the plans concerned, regarding (i) the number of options and the exercise price (carried out in May 2005 and May 2006 following the payment of dividends wholly or partly deducted from the Company’s reserves), and (ii) the number of options (carried out in December 2006 following the buyback or possible buyback by shareholders of shares in the Company at a lower-than-market price).

(2) This share plan provides for gradual vesting over successive three-year periods, corresponding to one-third of options granted by year of seniority.

No hedging instruments were used by the company for beneficiaries, including corporate officers, of outstanding stock option plans.

None of the aforementioned stock options had been exercised at the date this document was filed.

Details of stock option plans outstanding at 31 December 2011 are provided on pages 114 and 186.

corPorAte GoVernAnce 2compensation


Share awards

No free shares (including performance shares) were awarded to the Company’s executive corporate officers in 2009.

On 9 February 2010, the Board of Directors set up a share award plan for its key management and executives considered to play an instrumental role in the Group’s development. Under this plan, Pascal Lebard was awarded 540,000 shares measured at the grant date in accordance with IFRS 2, at an amount of €5.4670 per share.

All 540,000 shares accruing to Mr Lebard are subject to presence and performance conditions related to Sequana’s three-year busi-ness plan. These conditions were assessed on 31 December 2011 and will be reassessed on 31 December 2012. The performance criteria for the shares granted to Pascal Lebard are based equally on Sequana’s consolidated EBITDA and on its consolidated net debt.

If 50% of the related performance conditions are met at 31 December 2011, 180,000 shares will be vested by Pascal Lebard on 30 April 2012. The vested shares will represent 50% of two-thirds of the total number of shares awarded. The remain-ing shares, i.e., a maximum of 360,000 shares, will vest on 30 April 2013 provided that the specified performance conditions are met at 31 December 2012.

In accordance with the AFEP-MEDEF recommendations on execu-tive compensation, Mr Lebard is required to hold a large portion of the shares until the end of his initial or renewed term of office. The remaining shares must also be held for a period of two years follow-ing the vesting date.

No free shares were awarded to Tiberto Ruy Brandolini d’Adda in respect of the 9 February 2010 plan.

Details of share award plans outstanding at 31 December 2011 are provided on pages 186 and 187.

non-executive corporate officers

Members of the Board of Directors receive attendance fees in an amount determined by the Shareholders’ Meeting.

Amount of attendance fees

The Shareholders’ Meeting of 21 May 2008 increased the annual amount of attendance fees payable to members of the Board of Directors to €700,000, applicable from 2008 until such time as shareholders decide otherwise. Annual attendance fees had previously been set at €550,000 pursuant to the Board’s decision of 3 May 2005.

At its meeting on the same date (21 May 2008), the Board renewed the decision taken at its meeting of 25 July 2007 based on the separation of the offices of Chairman of the Board of Directors and Chief Executive Officer of the Company, to com-pensate the Chairman with an exceptional attendance fee of €250,000 in addition to the attendance fees to which he is already entitled in his capacity as a director. These additional fees are consideration for his duties as Chairman and are deducted from the aggregate amount of annual attendance fees payable.

In line with the rules adopted by the Board on 3 May 2005 which remain in force, the remaining amount of €450,000 payable to directors is split into a fixed portion of attendance fees paid in consideration of the work carried out by the directors outside of Board meetings and for the duties entrusted to them, and a vari-able portion to be allocated among the directors in accordance with their attendance at Board meetings and, if applicable, at the meetings of any committees of which they are members.

The fixed portion, representing 40% of total attendance fees, is divided equally between the directors. The variable portion, com-prising 60% of total attendance fees, is divided among the mem-bers of the Board and the committee members in accordance with their rate of attendance at the meetings they were invited to attend in relation to their respective duties and responsibilities.

Payment of attendance fees

Pending any new decision by the Board, attendance fees for each financial year shall be paid as follows:

} prepayment of part of the fixed portion and part of the variable portion calculated on the basis of directors’ attendance at past meetings and the estimated number of meetings for the year, at the end of the Shareholders’ Meeting held during the year in question;

} payment of the remainder of the fixed and variable portions in the first month of the year following that in respect of which the attendance fees are paid.

Aggregate attendance fees paid in respect of 2011, including the amount paid to the Chairman of the Board of Directors, totalled €700,000.

When attendance fees are payable to legal-entity directors, they are paid directly to the entity in question and not to their perma-nent representatives (i.e., to Allianz France for Pierluigi Riches, to Exor SA for Raffaella Papa, Pierre Martinet and Alessandro potestà, and to dLMd for Nicolas Lebard).

corPorAte GoVernAnce2 compensation


Attendance fees(1) and other compensation received by non-executive corporate officers

The table below sets out attendance fees and other compensation paid by Sequana and the companies it controls to non-executive corporate officers in 2010 and 2011:

Non-executive corporate officerAmounts paid

during 2010Amounts paid

during 2011

Luc Argand

Attendance fees c42,784 c49,838

Other compensation – –




Pierre Martinet (until 21 July 2010)

Attendance fees c42,463 –


Laurent Mignon



Alessandro Potestà



Michel Taittinger



Allianz France



DLMD



Exor SA



TOTAL c344, 335 c311,328

(1) Before withholding tax, if applicable.

The corporate officers do not receive any other attendance fees from the Company’s subsidiaries in respect of their duties within the Company, or any other benefits from the Company.

Excluding Pierre Martinet (Deputy Chief Executive Officer of the Company from 3 May 2005 to 30 June 2007), who received stock options in 2005 and 2006, non-executive corporate offic-ers do not hold any stock options or free shares (including per-formance shares) in the Company.

corPorAte GoVernAnce 2


related-party agreements

executive committee In line with the Group’s compensation policy for top-level man-agement and key management executives, compensation pay-able to members of the Executive Committee includes a fixed portion and a variable portion based on the Group’s perfor-mance (particularly key results for the year in question), and on the executives’ individual performance.

The aggregate amount of gross compensation and benefits paid to members of the Executive Committee during 2011 (see page 58 for details of Executive Committee members), excluding compensation paid to the Chief Executive Officer and described above, totalled €2.8 million including €1.8 million relating to fixed compensation (€2.6 million in 2010, including €1.8 million relat-ing to fixed compensation).

Under the share award plan approved by the Board of Directors on 9 February 2010, the six members of the Executive Committee (excluding the Chief Executive Officer whose compensa-tion is described on page 61) were granted rights to a total of 356,000 Sequana shares, contingent on meeting the presence and performance conditions set out in the plan and detailed on pages 186 and 187.

On 30 April 2012, a total of 118,666 Sequana shares will be vested by the beneficiaries, corresponding to 50% of two-thirds of the total number of shares awarded to them. The remaining shares, representing a maximum of 237,334 shares, will vest on 30 April 2013, depending on whether or not the performance conditions are met at 31 December 2012.

related-party agreementsNo agreements were entered into in 2011 within the scope of Article L. 225-38 of the French Commercial Code.

As indicated on page 60, none of the commitments referred to in Article L. 225-42-1 of the French Commercial Code were given by Sequana (or by one of its subsidiaries) to its Chairman or Chief Executive Officer.

Sequana has not entered into any agreements with its subsid-iaries to provide services and does not therefore receive any remuneration in this respect (apart from administrative, account-ing and financial services provided to subsidiaries on an arm’s length basis, and the tax consolidation agreement, deemed to be operating agreements entered into on an arm’s length basis).

corPorAte GoVernAnce2


Statutory Auditors

Statutory Auditors Statutory Audit engagementsThe principal Statutory Auditors (see below) prepare auditors’ reports in respect of the parent company and consolidated financial statements of Sequana.

Appointment Renewal of term of office Expiry of term of office

Principal

Pricewaterhouse Coopers Audit 19 May 1998 18 June 2004 2016

63, rue de Villiers 19 May 2010

92208 Neuilly-sur-Seine cedex

represented by Catherine Sabouret

Constantin Associés (Deloitte network) 10 May 2006 2012

185, avenue Charles de Gaulle

92200 Neuilly-sur-Seine

represented by Thierry Quéron

Deputy

Yves Nicolas 18 June 2004 19 May 2010 2016

63, rue de Villiers

92208 Neuilly-sur-Seine cedex

François-Xavier Ameye 10 May 2006 2012

185, avenue Charles de Gaulle

92200 Neuilly-sur-Seine

As the terms of office of Constantin and François-Xavier Ameye as principal and deputy Statutory Auditors, respectively, expire at the end of the Shareholders’ Meeting called to approve the 2011 financial statements, the Shareholders’ Meeting of 26 June 2012 is asked to renew their appointment for a term of six years, i.e., expiring at the end of the Shareholders’ Meeting called to approve the 2017 financial statements.

This recommendation was made to the shareholders by the Board of Directors based on the prior approval of the Company’s Audit Committee in light of issues concerning auditor independ-ence and the need to rotate the Constantin partner signing off on the financial statements.

As Thierry Quéron has represented Constantin Associés as principal Statutory Auditor for six years, he will be replaced by Jean-Paul Séguret, in accordance with Article L. 822-14, para-graph 1 of the French Commercial Code.

The Audit Committee noted that Constantin is now part of the Deloitte network and that new teams had been assigned to the audit. It therefore suggested that the Board recommend renew-ing Constantin as Statutory Auditors. This does not comply with all of the recommendations of the AFEP-MEDEF corporate gov-ernance code. Based on the above, the Company is also recom-mending that François-Xavier Ameye be renewed in his role as deputy Statutory Auditor.

details of fees paid to Statutory Auditors are disclosed in Note 34 to the consolidated financial statements.

chapter 3rISK mAnAGement

66 INDUSTRIAL AND ENVIRONMENTAL RISKS

66 Risks to people67 Environmental risks68 Risks to goods and property

69 BUSINESS-RELATED RISKS

69 Risks related to the paper market69 Raw materials and energy risks69 Customer risk70 Country risk70 Incoterms

70 FINANCIAL RISKS70 Market risk70 Foreign exchange risk71 Interest rate risk71 Liquidity risk72 Equity price risk72 Credit risk

73 LEGAL RISKS73 Specific regulations 73 Links with or dependence on other parties74 Claims and litigation

75 INSURANCE COVERAGE

76 INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES

76 Report of the Chairman of the Board of Directors on internal control and risk management procedures

81 Statutory Auditors’ report, prepared in accordance with Article L. 225-235 of the French Commercial Code, on the report prepared by the Chairman of the Board of Directors of Sequana

rISK mAnAGement3 Industrial and environmental risks


Investors are requested to review all of the information pre-sented in the registration document, including the following section on risk exposure, prior to taking a decision to acquire Sequana shares or any Sequana equity-based financial instru-ments. The risks described are those risks existing at the pre-sent time which, in the opinion of Group management and in the event that they crystallise, may have a material adverse impact on Sequana’s business, financial position, results or development prospects. Investors should bear in mind that as of the date of publication of the registration document, other unidentified risks or risks not deemed by management as constituting a material potential risk to Sequana’s business, financial position, results or development prospects may also exist.

The Group has taken measures to contain certain risks and to enhance its risk management procedures. These are presented in the Report of the Chairman of the Board of Directors which describes the conditions for preparing and organising the work of the Board (chapter 2) as well as the internal control proce-dures deployed throughout the Group which are included at the end of this chapter.

The risks to which the Group is exposed mainly comprise indus-trial and environmental risks, financial risks and legal risks. Where possible, the Group insures against all or a portion of these risks.

Industrial and environmental risksSequana’s production and distribution businesses give rise to a certain number of industrial and environmental risks. Arjowiggins’ production-related risks concern the nature and use made of raw materials and equipment as well as the different types of waste generated by the manufacturing sites. Antalis’ industrial

and environmental risks are mainly indirect and upstream from its distribution activity. Antalis manages these risks by requiring all suppliers to make detailed disclosures concerning the origin of raw materials and the manufacturing processes involved.

risks to peopleThrough the equipment and the various components used in paper manufacturing, Sequana’s industrial sites present a certain number of risks for operatives. These risks break down into vari-ous different categories:

} Risks related to airborne particles (fine wood dust);

} Risks related to the use of chemical products (inhalation fol-lowing accidental liquid spills, creation of toxic clouds due to leakage from containers or faulty equipment, accidental explo-sions during movements of chemicals, accidental release into the environment of chlorine dioxide, explosions of stored prod-ucts, etc.);

} Risks related to pollution and discharges (odorous compound emissions, noise, waste sludge containing heavy metals, phe-nols, resin acids, chlorinated organic compounds, etc.);

} Risks related to machines and fixtures (fire, crushing or pinch-ing of limbs in a machine, falls into open bowls during prepara-tion, injury by cutting, electric shocks related to unprotected electric relays, etc.);

} Risks related to handling and on-site operations (back injuries, shocks or crushing caused by falling packaging/reels, shocks or crushing caused by lifting and handling vehicles, etc.).

These numerous dangers inherent to industrial paper manufactur-ing and the use of various items of equipment can lead to occupa-tional injury and serious accidents, both during the usage phase and during cleaning and maintenance operations.

Sequana is therefore responsible for putting in place and ensur-ing the rigorous application of the most stringent standards guar-anteeing the safety of its employees and regularly verifying and adjusting the Group’s policy in this area. These standards are implemented via regular audits and the analysis of each incident or accident. The Arjowiggins group also systematically organises training sessions for each employee before taking up their posts as well as regular awareness-raising campaigns.

The Group systematically engages dialogue with employee repre-sentative bodies (previously the Occupational Health and Safety Committee in France) in order to take into consideration the employees’ expectations, and to actively prepare ways of raising awareness and training schemes aimed at reducing the risks in plants and warehouses.

Furthermore, in order to prevent physical injury, and more gen-erally, ensure good workplace safety conditions, the security of industrial installations is progressively bolstered at each produc-tion site through continuous investment.

As of the date of publication, half of Arjowiggins’ sites had been certified OHSAS 18001 (occupational health and safety), with the remaining sites set to follow suit by the end of 2012.

rISK mAnAGement 3Industrial and environmental risks


environmental risksThe raw materials, different types of energies and waste gen-erated in paper manufacturing pose a number of environmental risks. The Group manages these risks in three ways: (i) by contin-ually striving to limit the use of potentially hazardous raw materials; (ii) by controlling waste through procedures that are at least com-pliant with local regulations, and (iii) by impacting its energy mix in order to reduce the use of fossil fuels with a large carbon footprint.

The Group is in the process of developing its own environmental policy and this should be finalised by the end of 2012. It will reflect current legislation, particularly Directive 2004/35/EC on environ-mental liability (or “damage to biodiversity”) and its transposition into French legislation in French Law No. 2008-757.

Risks related to the use of chemical products, fibres and mineral content, and related discharges

The risks associated with certain chemical products (chlorine dioxide, sulphuric acid and soda ash) used in paper making need to be very carefully monitored. Arjowiggins constantly strives to carefully monitor and limit the use of these products. Whenever possible, it systematically recycles waste paper and increases the use of recycled paper as a secondary raw material in certain divi-sions in an effort to deploy solutions with the least possible impact on both people and the environment. Preventing and reducing the risk of accidents due to dispersal of the aforementioned products, resulting in environmental pollution, is a major concern for the Group and its production entities.

Arjowiggins rigorously applies legislation in the countries in which it is present in respect of authorisations, security forms, labelling, and storage, utilisation, transport and evacuation procedures.

Risks related to the use of energy and atmospheric discharges

Arjowiggins’ energy policy has two major focuses. The first is improving energy efficiency on an ongoing basis. The related ini-tiatives involve daily, rigorous machine maintenance and targeted investments in machines that use less energy.

The second is concerned with the energy mix. Constantly rising prices for fossil fuels, coupled with the increasing strain placed on the environment by these same fossil fuels, are diverting the Group’s present and future energy procurement strategy towards alternative – mostly renewable – sources of energy. Initiatives to replace fuel with natural gas are systematically deployed at sites that are heavy users of this source of energy. The key strategy over the coming years will be based around switching to renew-able sources of energy such as biomass. Generating heat from biomass boilers that use wood chips has many advantages, most notably a much smaller carbon footprint than any other fossil fuel. Using waste (wood) to produce biomass-to-energy also reduces drawdown of non-renewable fossil raw materials and the related GHG emissions. Consequently, following the success of the pro-ject deployed at the Dalum, Denmark plant, a new energy switch-ing project is being developed at the Arjowiggins Healthcare plant in Palalda, France, in partnership with Cofely and should be up and running in 2013. A number of similar projects are currently being studied in the different Arjowiggins divisions.

Risks related to the use of water and waste effluent

Major quantities of water are drawn down, mainly to prepare paper pulp, but also to blend and convey the fibres throughout the manufacturing process. However, the quantity of water actually consumed (not counting the water returned to the natural environ-ment) is merely 5% to 10% of the volume drawn down. Therefore, risks related to the use of water arise on both the large volumes taken from, and the quality of the water returned to the natural environment.

Reducing the quantity of water used in the paper manufacturing process is a major issue at Arjowiggins’ different plants. Actually, some are located in areas of potential seasonal water stress where local authorities may impose restrictions on both individuals and businesses. Consequently, the Group must do its utmost to develop production techniques that reduce water drawdown and the Group’s water footprint. Closed-loop water recycling projects are currently being studied at several sites although they have to contend with numerous constraints related to the chemical quali-ties and temperature of the water recycled. Other ways of reduc-ing the amount of water used in manufacturing processes include more effective maintenance of equipment and water pipes to pre-vent and eliminate leaks as well as the use of water substitutes in certain washing processes.

rISK mAnAGement3 Industrial and environmental risks


The quality of waste effluent and management of the related risk is the overriding environmental concern at all Arjowiggins plants. Each has its own waste treatment facilities and these must com-ply with very strict legislation. This guarantees that the quality of waste water is at least superior to the quality of water drawn down upstream. Standards are set for each plant locally by the relevant authorities. The existing physico-chemical facilities at these plants now include biochemical treatment facilities and some have been equipped with tailored waste treatment cycles.

Management of waste

A commitment to reduce waste is another key plank in Arjowiggins’ strategy and initiatives here focus on reducing its carbon footprint and the related costs. The group is using ISO 14001 Environmental Management Certification – which it has obtained for nearly all of its plants – to manage its waste more efficiently through system-atic sorting of all waste before it is entrusted to firms specialised in recycling or waste treatment.

risks to goods and propertyWhile the major risks involved in manufacturing and distribut-ing paper concern people and the environment, risks relating to equipment, buildings and products also need to be considered. The different group sites are also exposed to potential risks that include fire, flooding and technical breakdowns (breakages, col-lapse, etc.).

Fire

Fires could potentially be caused by industrial manufacturing processes, certain raw materials, dust and certain maintenance operations.

An annual review of fire risks by Arjowiggins’ insurers is used as the basis for managing this risk. Most high-risk areas housing equip-ment or used for storage have been fitted with a sprinkler system.

On-site teams have been set up and trained in fire drill procedures, and evacuation exercises are organised regularly at each plant.

Flooding

Paper plants are systematically located very near rivers and potentially exposed to the risk of flooding. Flooding risks at each plant are also reviewed annually by Arjowiggins and its insurers.

Each plant has developed plans to clean up waterways and canals in their vicinity, surveillance procedures based on warn-ing levels and emergency plans for protecting or evacuating machinery and products.

Technical breakdowns

In spite of the deployment of maintenance and security measures, technical breakdowns affecting plant and equipment may still cause harm to either people or property. The related risks at each plant are also reviewed by Arjowiggins and its insurers.

In 2011, Sequana’s insurer declared that 18 plants were “Highly-Protected Risks” (HPR) – the highest possible safety status designation.

rISK mAnAGement 3Business-related risks


Business-related risksrisks related to the paper marketDemand for the Group’s products and services depends chiefly on advertising and communication investment and on consump-tion by businesses and government organisations.

Demand for printing and writing paper is particularly sensitive to changes in the economic environment and consumption habits:

} reduction by businesses of marketing and communication expenditure during an economic crisis;

} reduction in paper usage due to the widespread use of com-puterised tools and the internet.

With the propagation of these tools in the personal and pro-fessional environment, new consumption habits have formed, favouring advertising and communication by email.

Furthermore, the growing interest in ecofriendly products and greater awareness of environmental questions have reduced the physical printing of emails and electronic documents, leading mechanically to a decrease in the consumption of office paper.

The Group’s capacity to adjust to changes in demand depends on its ability to develop and manufacture new products in line with cus-tomer expectations and at competitive prices. That is why Sequana puts innovation at the heart of its strategy for all of its activities.

raw materials and energy risks(1)

There are two types of raw materials and energy risks:

} risks related to supply when there is a change in the pattern of demand. For example, the changes in paper pulp consump-tion due to the increasing importance of China put periodic pressure on supplies. Similarly, the shake-out in the European market for petroleum-derivative monomers has led to leaner sizing of resources in certain segments for other latex-type processed raw materials. The Group is also affected by geo-political and climatic events (e.g., high cotton prices in 2011).

} risks related to changes in prices driven by either periodic pressure on supplies or external factors affecting prices of paper pulp, cotton, raw materials or energy (weather condi-tions for paper pulp, monomer prices for latex, cereal prices for starch, etc.). Such changes can sometimes occur very rap-idly. For example, cotton prices increased almost three-fold between September 2010 and March 2011.

A 10% (positive or negative) change in the price of raw materials in 2011 would have had the following (positive or negative) impact on Arjowiggins’ results:

} Energy: €11 million

} Cotton: €5 million

} Pulp: €29 million

} Waste paper: €7 million

Arjowiggins has entered into long-term contracts with partner suppliers to optimise procurement costs for certain raw materi-als over time and it has hedged a large portion of its medium-term energy requirements (for between one year and 18 months) in order to lock in pricing arrangements. In 2010, as part of the Exeltium project, Arjowiggins entered into a long-term arrange-ment for the supply of electricity at stable prices over a 15-year period to cover part of the energy requirements of its four most energy-intensive French plants. It also uses fixed-price swaps to hedge a portion of its paper pulp requirements based on forecast exchange rates. New hedges were set up in 2011 covering 2012.

customer risk(1)

The Group’s companies have forged special relationships with their customers over the years. The degree of dependence on any one customer is analysed if the volume of sales with this cus-tomer exceeds 10% of total sales.

Antalis serves over 230,000 customers in 44 countries. The broad diversity of its customer mix – offset and silkscreen print-ers, converters, companies, government organisations – means

that Antalis has a relatively low customer concentration risk and none of its customers generates more than 10% of its total sales.

While Arjowiggins has a slightly narrower customer mix than Antalis (distributors, converters, transformers, printers, etc.), it still has a relatively low customer concentration risk and none of its customers (apart from Antalis) generates more than 10% of its total sales.

(1) See chapter 4 – Note 18c.

rISK mAnAGement3 financial risks


country riskThe subsidiaries of the Sequana Group operate in numerous foreign countries whose currencies may at times fluctuate errati-cally and whose political stability is not always certain. However,

the impact of these risks on the financial statements of Antalis and Arjowiggins is attenuated by the fact that their operations are mainly concentrated in the European market.

IncotermsGroup sales are exposed to a relatively low level of risk in relation to Incoterms (i.e., International Commercial Terms setting out the liabilities and obligations of a seller to a buyer under international contracts for the sale of goods, particularly those dealing with loading, carriage, means of transport, insurance and delivery). The Group’s exposure varies depending on the business and how its supply chains are organised.

As a distributor, the bulk of Antalis’ sales are in local markets. While most of its sales are subject to Incoterm DDP (Delivery Duty Paid), the fact that its supply chains are organised around physical deliveries within very short periods (less than one day) means that Incoterms are not all that relevant.

When billing export sales, Arjowiggins usually uses Incoterm DDU (Delivered Duty Unpaid) for goods sent by road, and Incoterms CIF (Cost, Insurance and Freight) and CFR (Cost and Freight) for goods sent by sea. Consequently, at the end of the reporting period, sales for goods in transit are only recognised once the risk and rewards have been transferred to the customer. However, the proportion of export sales remains limited and the amount of undelivered sales at the end of the reporting period is limited by supply chain logistics designed to keep such exposure to a minimum.

financial risksmarket riskWithin the Group, Antalis and Arjowiggins each manage their financing autonomously. The Sequana Treasury Management department manages interest rate and foreign exchange risks on behalf of each of the Group’s two main subsidiaries (Arjowiggins and Antalis). It uses swaps, collars and caps to hedge interest

rate risk and forward contracts, swaps and options to hedge exposure to the effects of fluctuations in foreign exchange rates.

Market risks and hedging of market risks are described in further detail in Note 18c to the consolidated financial statements.

foreign exchange riskForeign exchange risk is mainly concentrated in the Groups operating subsidiaries – Antalis and Arjowiggins – and related to their businesses. It may arise on sales or purchases (raw materi-als or goods for resale) billed in currencies other than an entity’s local currency. The Group hedges these risks when appropriate, mainly using forward contracts, currency swaps or, to a lesser extent, currency options.

Crystallisation and hedging of forex risk and fair value measure-ment of foreign exchange hedges are analysed in Note 18c to the consolidated financial statements.

Although Sequana’s net investments outside the euro zone are exposed to fluctuations in exchange rates generally – and in the euro in particular – that may impact the Group’s assets and lia-bilities, it has not set up any hedges of investments in foreign operations.

rISK mAnAGement 3financial risks


Interest rate riskThe Group is exposed to interest rate risk on its debt as its pri-mary sources of financing are at floating rates of one, two or three months in the currency concerned (Euribor for the euro and Libor for the US dollar and pound sterling). Derivatives are used to manage this exposure (mainly swaps and, to a lesser extent, collars and caps).

Crystallisation and hedging of interest rate risk and fair value measurement of interest rate hedges are analysed in Note 18c to the consolidated financial statements.

Liquidity riskMost of the Group’s debt is carried on the books of the two operating subsidiaries – Arjowiggins and Antalis. They finance their businesses using their own credit facilities, mainly in the form of syndicated loan agreements negotiated through 2012 and unconfirmed overdraft facilities with top-ranking banks.

At 31 December 2011, Sequana disposes of bilateral loan agreements and overdraft facilities with two top-ranking banks. A breakdown of debt by maturity is presented in Note 17 to the consolidated financial statements on page 124.

Details of each entity’s credit lines and maturities of cash flows are presented in Note 18b and Note 18c, respectively, to the consolidated financial statements.

More generally, the Group’s financing arrangements at 31 december 2011 are presented in Notes 17 and 18 of chapter 4 on pages 124 et seq. The Group’s refinancing, carried out as a result of the Group’s loan agreements nearing their maturity date, is presented in Note 1 of chapter 4 on pages 91 et seq. Due to the signing of the refinancing agreements as well as the banks’ announcement of their intention to waive their right to demand repayment of the loans in the event that the thresholds of the two covenants had been exceeded at 31 December 2011, Group companies will not be obliged to repay their loan in advance. The section below sets out the main terms and conditions of the Group’s refinancing arrangements effective from 2012.

In early 2012, Sequana, Arjowiggins and Antalis renegotiated their respective financing arrangements with their banks. All lines of credit have been approved through to 30 June 2014, which pro-vides over two years’ visibility into the Group’s liquidity position.

The main terms and conditions of these refinancing agreements are provided below.

Arjowiggins

On 30 April 2012, Arjowiggins and its banks finalised an agree-ment to renew the syndicated credit facility entered into in 2007 for a period of two years, through to 30 June 2014, for a maxi-mum amount of €400 million.

The related terms and conditions have been considerably modified, particularly those relating to the following financial covenants:

} Consolidated net debt/consolidated EBITDA(1) (Leverage):at 30 June 2012 <6.15at 30 September 2012 <5.85at 31 December 2012 <4.50at 31 March 2013 <4.50at 30 June 2013 <3.75at 30 September 2013 <4.25at 31 December 2013 <3.50at 31 March 2014 <3.60

} EBITDA(1)/consolidated net interest expense (excluding deferred interest esxpense) (Interest Cover)Tested half yearly. Must be ≥3.0.

} Free consolidated operating cash flow(2)/consolidated net interest expense (Debt Service Cover Ratio)Tested annually. Must be ≥1.1.

} Minimum level of consolidated equity, excluding changes for the period attributable to translation adjustments, actuarial gains and losses or fair value adjustments.Tested half yearly. Must be ≥€10 million.

In order to reflect changes in interest rates since 2008 which had not been factored into the previous agreement, the inter-est margin on euro-denominated drawdowns has been reset at 4.1%. Interest payments have been partially deferred until the expiration date in June 2014 as follows: 2.5% of interest due for 2012; 2.0% of interest due for 2013; and 1.0% of interest due for 2014.

(1) Equivalent of EBITDA: see Chapter 1 – Preliminary remarks on page 4.

(2) Free consolidated cash flow: algebraic sum of operational cash flow, as defined in “Preliminary remarks” on page 4, effects on the cash flow of other revenue and operating costs, taxes, net financial expenses and exceptional contributions to retirement plan deficits.

rISK mAnAGement3 financial risks


Antalis International

On 30 April 2012, Antalis International and its banks finalised an agreement to renew its credit facility for a period of two years, through to 30 June 2014, for a maximum amount of €560 million, with amortisation payments of €20 million scheduled for 2012, 2013 and 2014. The guarantee and collateral mechanism remains unchanged, particularly the assignment of trade receivables.

The agreement also stipulates that Antalis must comply with the following financial covenants:

} Consolidated net debt/EBITDA(1) (Leverage):at 30 June 2012 <3.5at 30 September 2012 <5.0 at 31 December 2012 <3.25at 31 March 2013 <4.75at 30 June 2013 <3.25at 30 September 2013 <4.0 at 31 December 2013 <2.5 at 31 March 2014 <3.75

} Gearing ratio (consolidated net debt/equity). Tested half yearly. Must be ≤1.1.

} Consolidated recurring operating income/consolidated net inter-est expense (interest cover):at 30 June 2012 ≥3.0 at 31 December 2012 ≥2.5at 30 June 2013 ≥2.75at 31 December 2013 and thereafter ≥3.0

In order to reflect changes in interest rates since 2008 which had not been factored into the previous agreement, the inter-est margin on euro-denominated drawdowns has been reset at between 2.35% and 4.00%, depending on the average consoli-dated net debt/EBITDA ratio.

Sequana

On 30 April 2012, Sequana and its bank finalised an agree-ment to renew its existing credit facility for a period of two years, through to 30 June 2014, for a maximum amount of €36 million. Interim amortisation payments of €1.2 million have been sched-uled for 2012 and 2013.

The agreement also stipulates that Antalis must comply with the following financial covenants:

} Consolidated net debt/EBITDA(1) (Leverage) at 30 June 2012 <6.00at 31 December 2012 <5.00at 30 June 2013 <4.75at 31 December 2013 <4.00

} Gearing ratio (consolidated net debt/equity):at 30 June 2012 ≤1.3at 31 December 2012 ≤1.2at 30 June 2013 ≤1.2at 31 December 2013 ≤1.1

} EBITDA(1)/consolidated net interest expense (excluding deferred interest expense) (Interest Cover)Tested half yearly. Must be ≥3.0.

In order to reflect changes in interest rates since 2008, which had not been factored into the previous agreement, the interest margin has been reset at 4.5%.

Sequana had also negotiated unconfirmed overdraft facilities of up to €5 million with a top-ranking bank and this arrange-ment has been renewed through to 30 June 2014. Interim amor-tisation payments of €120,000 million have been scheduled for 2012 and 2013 (in 2014, the outstanding balance will be due). Consolidated equity must be greater than €110 million and the interest rate on amounts drawn down has been reset at 3%.

(1) Equivalent of EBITDA: see chapter 1 – Preliminary remarks on page 4.

(See also chapter 4 – Significant events of the year, Notes 1 and 18).

In late April 2012, the Company reviewed its liquidity risk and it believes that it can honour its commitments.

As regards the renewal of the existing facilities including the alignment with current market conditions of the covenants and costs, the renegotiated financing lines do not significantly modify the available drawdowns on the Group’s credit facilities, which are adequate in respect of the Group’s liquidity requirements.

As previously mentioned, the use of the aforementioned credit lines is subject to compliance with financial covenants.

equity price riskThe Group sold virtually all of its equity interests in 2010 and now has extremely limited exposure to equity price risk.

The Group’s other marketable securities described in Note 8 to the consolidated financial statements are mainly composed of units in money-market funds which are not exposed to equity price risk.

rISK mAnAGement 3Legal risks


credit risk(1)

Credit risk represents the risk that a customer or receivable will breach a contractual obligation and cause the Group to incur a financial loss. This risk primarily arises in relation to marketable securities and trade receivables.

In view of the Group’s current financial situation, its financial investments are either used to invest excess cash drawn down under bank credit facilities or to put up collateral for its subsidi-aries. The Group’s policy is only to grant financial guarantees to subsidiaries in which it has a controlling interest.

When implementing its hedging strategy (hedging of foreign exchange, interest rate and raw materials risk), the Group is also exposed to counterparty risk with the pool of top-ranking banks it uses to set up its hedges.

Customer credit risk is assessed at the level of each sub-group based on the size of each sub-group’s portfolio of trade receiva-bles. It mainly comprises default risk arising from the period of credit granted to the customer where it is not possible to repos-sess the goods sold – in spite of the contractual clause provid-ing for retention of title – because they have been transformed by the customer.

The Group’s different types of credit risk exposure and the related procedures and provisioning policy are presented in Note 18c to the consolidated financial statements.

Legal risksSpecific regulationsEach of the Group’s companies takes measures to ensure compliance with the specific laws and regulations governing its business activities.

The industrial operations of the Arjowiggins’ sub-group are subject to a range of regulations that are constantly evolving and becoming ever-stricter, particularly in the environmental sphere. As a result, Arjowiggins treats environment-related industrial risks as an inextricable component of its operations.

In France, Arjowiggins’ businesses are required to comply with regulations concerning environmentally classified facilities. The construction of Arjowiggins’ manufacturing sites, as well as their extension or conversion therefore require a permit from the local authorities that takes into account the technical and financial capacity of the applicant in compliance with decree No. 2010-368 of 13 April 2010. Arjowiggins’ environmental report for 2011 is provided in the sustainable development section of this document.

Links with or dependence on other parties To the best of the Company’s knowledge, no contracts have been entered into by Group companies other than those mentioned below, the expiry or breach of which could have a significant impact on the Company’s financial position, operations or results.

The market structure of the Group’s subsidiaries – both in terms of purchasing and sales – enables them to limit supplier and cus-tomer risks. In addition, no Group company is overly dependent on any of its suppliers or customers.

Arjowiggins does not use virgin pulp in its production; however it remains exposed to fluctuations in paper pulp, cotton, waste paper and energy prices.

As regards intellectual property, the Group registers trademarks in France and throughout the world in order to protect the image and products of its companies. A number of these trademarks are widely renowned. All of the trademarks necessary for the Group’s operations are owned directly by the subsidiary con-cerned or by the Group.

(1) See chapter 4 – Note 18c.

rISK mAnAGement3 Legal risks


The Group’s companies – particularly Arjowiggins – hold several patents which they use directly or licence to third parties. They also use patents under licence from third parties, some of which have been granted exclusively.

Although these trademarks, patents and licences have a certain value, the expiry or loss of the related rights would not jeopardise the financial position of any of the Group’s companies.

Pension benefit obligations for staff in foreign subsidiaries(1)

Certain of the Group’s employees in foreign subsidiaries – notably in the UK and the US – benefit from pay-as-you-go and defined benefit pension plans. In particular, the Group’s UK pension plans have been completely reviewed in liaison with their independent trustees in order to bring them into line with local regulations.

The largest pension fund within the Group is the Wiggins Teape Pension Scheme (WTPS).

The employer companies fund the pension scheme in line with a funding plan reviewed annually with the trustees. Their contribu-tion is based on beneficiary risk and the return on plan assets.

There are several methods for measuring the benefit obligation and since the agreements signed in March 2008, Arjowiggins and Sequana have guaranteed 113% of the WTPS buy-out defi-cit as calculated annually, on a unilateral basis by the pension fund trustees and their actuaries. The buy-out deficit represents the theoretical deficit in the event of the transfer of the obliga-tions in relation to the fund to an insurance company. Since 1 January 2009, the amount of the guarantee is capped at the lower of (i) 113% of WTPS’s buy-out deficit as estimated at 31 December each year or (ii) GBP 200 million.

(1) See chapter 4 – Notes 16 and 31.

In 2010, negotiations between the employer entities and the trustees culminated in the transfer of virtually all of the working members of WTPS to the Antalis Pension Scheme (APS) and the Group’s obligations to the trustees of the two UK pension funds changed accordingly. Based on the pension fund regula-tions, the contribution requirements for employer entities, and the guarantees and counter guarantees given to the Trustees by the employer entities and Sequana, respectively, the overall amount of the guarantees currently given by the Group remains capped at GBP 200 million, however this amount is allocated differently between the two pension funds.

The amount is now equal to the lower of 113% of the fund’s buy-out deficit as estimated at 31 December each year, or GBP 164 million for WTPS and GBP 36 million for APS. In excess of this amount, the guarantee may only be enforced subject to approval of the Board of Directors of Sequana. The guarantees expire on 31 March 2023 and on 8 January 2024, respectively, for WTPS and for APS, but may be renewed.

Assets required for operations that are not owned by Group companies

The only plant leased by Arjowiggins is the Priplak plant built in 2002. In addition, Antalis leases a large number of its warehouses.

Anti-trust legislation

In view of stricter anti-trust laws, the Group has set up an anti-trust compliance programme aimed at sharing best practices in this field. This programme comprises training and initiatives to foster awareness among employees of developments in anti-trust legislation, and procedures for identifying, flagging and stamping out any non-compliant practices.

The policy forms one of the key planks of Arjowiggins and Antalis employee training programmes.

claims and litigation The Group is involved in a number of legal proceedings, the most significant of which are described in this document. Certain of these claims have arisen in connection with the normal course of business and, when considered separately, are not expected to result in significant costs for the Group. However, for the dis-putes described below, the Group cannot totally rule out the possibility of them having an impact on the financial statements at some date in the future.

Investigation into anti-trust practices

Since September 2010, both the EU and national competition authorities have been investigating horizontal cartel arrange-ments in the envelope sector. Antalis’ Spanish envelope produc-tion plant and a Spanish marketing entity in which Antalis has a non-controlling interest have been inspected by the Spanish competition authorities.

rISK mAnAGement 3Insurance coverage


Both entities may be served with a notice of complaint during the first-half of 2012. However, in the absence of any developments with regard to this file during the reporting period, the Company has not recognised a provision at 31 December 2011.

Tax risk

A tax dispute is currently in progress between one of Sequana’s subsidiaries, Boccafin (a simplified joint stock company, for-merly known as Permal Group, which was a limited partnership with share capital), and the French tax authorities who claim that Boccafin was not part of the Sequana tax group. The tax authori-ties issued Boccafin with tax reassessment notices and, following a number of exchanges, they reiterated their position at the end of 2010 and issued a demand for the corresponding amounts.

In early 2011, the tax authorities cancelled income tax payable by Boccafin under the parent-subsidiary regime for a total amount of €13.2 million. They also upheld Sequana’s request for cancella-tion of income tax already paid for Boccafin at tax group level for a further amount of €23.4 million (excluding interest on arrears).

The cost of the tax reassessment for Sequana, net of the afore-mentioned cancellations, would be approximately €60.7 million, including principal, late payment interest and VAT through to end-December 2011.

Boccafin and its legal advisers consider these reassessments to be unfounded. They believe that the arguments they have put for-ward to prove that Boccafin belonged to the Sequana tax group in 2005 are sufficiently solid to ensure a favourable outcome to any subsequent dispute.

Boccafin initiated legal proceedings in October 2011. The legal proceedings are ongoing.

In view of a law professor’s legal opinion in support of Sequana’s position, the Company has not set aside any provisions as of 31 December 2011 for this dispute.

To the best of the Company’s knowledge, no other governmental, legal or arbitration proceedings are in progress or pending that may have – or have had – a material impact on the financial posi-tion, business activity or results of the Company or the Group over the past 12 months.

Insurance coverage Sequana has set up worldwide insurance programmes and taken out policies with major international insurers in order to provide coverage against its main business-related risks (accidental dam-age to buildings, equipment and inventories, civil liability arising from the Group’s operations and products sold as well as claims arising from the professional travel commitments of employees and executives and the transport of goods).

The main insurance policies have been taken out in Sequana’s name and provide coverage for all of the subsidiaries in most of the countries in which the Group does business. This means that the entire Group now enjoys the same insurance coverage and the same level of guarantees.

The principal insurance cover contracted is as follows:

} insurance for damage to buildings (including production and stor-age units) and their contents (manufacturing materials, IT equip-ment, sundry equipment, inventories, etc.) providing coverage representing the amount of the loss likely to be incurred;

} insurance against business interruption arising from property damage;

} insurance to cover physical injury and material and consequen-tial damage caused to third parties and involving the civil liability of Sequana or its subsidiaries: business and product liability;

} insurance covering claims arising from the professional travel commitments of employees and executives;

} insurance covering damage to goods in transit;

} insurance against fraud and malicious damage.

The insured amounts are substantial and are considered to ade-quately reflect the risks incurred and the insurance market’s capacity to cover them.

Sequana has also deployed a prevention programme – in liaison with its brokers and insurers – for the purpose of reducing both the risk of damage to property and business interruption risk.

In accordance with standard insurance practices, these are “All risks with exceptions”-type policies and they provide for exclusions, loss limits for certain risks defined on a plant-by-plant basis, such as equipment breakdown, poor supplier perfor-mance or substandard service, natural catastrophes, pollution, IT incidents, and acts of terrorism, adapted to the amount and risks covered for each business.

rISK mAnAGement3 Internal control and risk management procedures


The Group has also taken out directors’ and corporate officers’ liability insurance.

In order to ensure that it pays competitive premiums for appro-priate levels of coverage, Sequana puts these insurance policies out to tender every two or three years.

Sequana has a captive insurance entity that it uses to optimise financing of the risk of damage to property and business interrup-tion risk. The captive entity reinsures any claims by Arjowiggins/Antalis for a net-of-excess amount of €1.5 million per claim and €3 million per loss year.

For reasons of confidentiality, and due to the structural complex-ity of the policies in question, the Group does not consider it appropriate to disclose a breakdown of the costs and coverage level for each of the insured risks.

However, the following table sets out the amounts covered for the main risk areas:

(€ millions per claim per annum) Sequana Group

Property damage and business interruption 450

Civil liability 65

To the best of the Company’s knowledge, the Group is not exposed to any specific risks – such as serious labour disputes – other than those customarily inherent in any industrial or com-mercial activity (see chapter 5, "Environmental policy" on page 199).

Internal control and risk management proceduresThis section presents the internal control and risk management procedures deployed on a Group-wide basis. As regards finan-cial and accounting information, Sequana’s internal control pro-cedures are based on a specific body of recognised standards

and the Group continues to apply in-house rules and proce-dures while striving to bring these procedures into line with the Reference Framework for internal control issued by the AMF.

report of the chairman of the Board of directors on internal control and risk management procedures

The internal control and risk management system

Objectives

Sequana has implemented various measures aimed at optimising internal control within the Group, notably by ensuring that there are no significant factors that may affect the reliability of the indi-vidual and consolidated financial statements. This involves pre-venting and managing the risks arising from the business activities conducted by the Company and its subsidiaries as described at the beginning of this section, as well as the risk of error and fraud – particularly in the area of finance and accounting – in order to ensure the reliability and transparency of financial and account-ing information and to safeguard the interests of the Company’s shareholders. However, no control system can provide absolute assurance that these risks have been completely eliminated.

The procedures applied by executive management and other employees of the Company and its subsidiaries under the supervi-sion of the Board of Directors are designed to provide reasonable assurance regarding the achievement of objectives concerning the reliability of information and compliance with (i) applicable laws and regulations and (ii) the Group’s internal practices.

The internal control system is underpinned by three principles:

} shared responsibility: internal control is based on resources provided by the subsidiaries and on the responsibility of each employee, backed by a system of delegation that enables the Group’s policies to be consistently applied. Every manager has a duty to exercise effective control over the activities for which he or she is responsible;

} definition and compliance with standards, procedures and data reporting processes;

} the segregation of tasks: the person carrying out an operation must not also be responsible for validating and controlling that operation.

Risk management is the responsibility of the different divisions in charge of the various risk areas, i.e., the Finance department, Legal department, Purchasing department, the department responsible for corporate social responsibility and for protecting people and property, and the Treasury Management department.

rISK mAnAGement 3Internal control and risk management procedures


Overview

Executive management

Sequana’s executive management team is responsible for the internal control system. The Chief Executive Officer ensures that the procedures in place enable the Group to prepare reliable consolidated financial statements, and to effectively monitor its subsidiaries.

Executive management devises the Group’s internal control strat-egy and oversees the implementation of all the related measures. Information is centralised by the Internal Audit department which provides executive management with regular reports. In addi-tion, monthly meetings are also held to review the performances of the subsidiaries.

Internal audits are directly requested and monitored by Group executive management or the heads of the Group’s subsidiaries or divisions. The fact that the Chief Executive Officer of Sequana and also Chief Executive Officer of both Arjowiggins and Antalis has simplified decision making and speeded up the entire inter-nal audit process.

The subsidiaries, which have generally become simplified joint stock companies controlled by a sole shareholder with-out any corporate decision-making bodies, are headed up by the Chairman of the Company and, where appropriate, a Chief Operating Officer chosen on the basis of his or her skills and organisational ability. They must consult with their majority shareholder before taking a certain number of key decisions. Thresholds have been laid down in the entities’ Articles of Association regarding investments and divestments, providing guarantees or collateral, taking on debt and signing settlement agreements concerning legal proceedings. The majority share-holder must be consulted if these thresholds are exceeded.

Operating departments

The Internal Audit department has operational lines of reporting to the Chief Executive Officer of Sequana and its missions are organ-ised on a Group-wide basis in accordance with a pre-determined audit plan and special assignments that may arise during the year. It comprises four auditors – mostly specialised in financial audits and critical processes – backed up by external resources. The role of the Internal Audit department is to (i) provide an independent assessment of internal control at each level in the Group, (ii) assist the executive management teams in assessing the effectiveness of their risk management systems, (iii) verify that the procedures described are correctly applied, and (iv) ensure that any problems are resolved and their causes eradicated. It is also responsible for regularly checking that accounting procedures are correctly applied, monitoring the overall internal control environment and ensuring that rules on corporate ethics are respected. Centralising the internal audit function has helped to streamline Group-wide audit plans and processes: once each mission has been completed, a report com-plete with recommendations is sent to Group executive manage-ment and to the executive management of the audited entity.

The finance departments of Sequana and its subsidiaries are in charge of preparing budgets and financial projections, as well as individual and consolidated financial statements. They are also tasked with overseeing the operations carried out by the Group as well as with drawing up and relaying accounting pro-cedures throughout the Group, and ensuring that these are cor-rectly applied and that they comply with the laws and accounting standards applicable to the preparation and publication of financial statements. In addition, the finance departments are responsible for publishing the financial statements on a timely basis.

The IT departments are responsible for data security and ensuring that information is communicated via reliable and secure networks, as well as for developing and maintaining applications tailored to the Group’s needs. They are assisted in the task of ensuring data integrity by the use of standard access control software and user profiles, which also enhance the effectiveness of the automatic controls in place. The security of the IT network and systems is enforced by advanced intrusion detection and protection technol-ogy. In addition, the Group’s main applications and financial con-solidation software have back-up procedures guaranteeing rapid recovery of data and services in the event of any major incident.

Audit Committee

Sequana’s Audit Committee is composed of four members of the Board of Directors, including two independent directors. It is responsible for verifying that adequate internal procedures have been deployed for compiling and controlling financial informa-tion and ensuring that such information is reliable through the ins-suance of internal audit reports. Audit Committee meetings are attended by Sequana’s Chief Executive Officer, Chief Financial Officer and the Statutory Auditors. The Committee’s duties also include examining and monitoring the risks to which the Group may be exposed and reviewing the Group’s material off-balance sheet commitments. Lastly, it analyses any financial or account-ing issues referred to it by the Chief Executive Officer. In 2011, Sequana’s Audit Committee – in the presence of the Head of Internal Audit – devoted two meetings to the audit plans for the main Group operating subsidiaries, the conclusions of assign-ments conducted in 2010 and in the first-half of 2011, and any specific points that needed to be followed up.

The Committee’s role is to oversee the Group’s internal control process by examining the relevant action plans, findings and result-ing recommendations, and checking that said recommendations are correctly applied. The Committee also reviews and approves the audit plan drawn up for the following year, and may perform any checks it deems fit on the individual and consolidated finan-cial statements. It reports to the Board of Directors of Sequana.

The Audit Committee meets at least twice a year to examine the interim and annual financial statements, and more often if required.



Charters and procedures

Code of conduct

The Group’s code of good conduct in relation to stock exchange rules is regularly updated to take account of the new provisions incorporated into the French Monetary and Financial Code and the General Regulations of the AMF. The Group’s ethical rules are based on both corporate responsibility and good govern-ance principles. They are designed to guarantee transparency, avoid conflicts of interest, and prevent the improper use or dis-closure of insider information.

In 2011, the Group began to recast its code of conduct to bring it into line with new regulations and best practices concerning commercial relations and the relations of the various Group enti-ties with third parties (customers and suppliers), and to boost compliance with anti-corruption and anti-trust legislation.

These rules apply to all employees and a specific awareness campaign has been conducted targeting all of the Group’s executives, particularly at gatherings of senior Group manage-ment and operational entity management committee meetings. In addition, rules relating to corporate ethics and conduct are relayed by the Group to all of the different subsidiaries.

Accounting procedures

Following the adoption of International Financial Reporting Standards (IFRS), the Group has completely overhauled its con-solidation procedures in order to establish internal management rules that are IFRS-compliant. A manual of Group IFRS account-ing policies was prepared in 2004 and is updated regularly to reflect amendments to, and interpretations of published standards.

Management procedures

Within Sequana and each of its main subsidiaries, a number of standard internal control procedures have been formally docu-mented with the aim of preventing risks, including:

} the segregation of powers concerning expense commitment and settlement procedures;

} the segregation of treasury and accounting functions;

} limits on the number of bank signatories and authorised amounts;

} limits on the delegations of authority in terms of the number of people concerned and the type of authorisations granted.

Group-wide human resource management procedures have been introduced into Arjowiggins and Antalis.

The Group has prepared and circulated general guidelines on corporate ethics and integrity to key executives and senior man-agement who may be requested to formally adhere to them.

The Group-wide risk mapping process was brought up to date in the first-half of 2010 for the purpose of enhancing internal con-trol action plans.

The Group is gradually bringing its procedures into line with the Reference Framework for internal control issued by the AMF: Sequana and Antalis’ systems are already compliant and Arjowiggins is adopting a phased compliance strategy.

Internal control initiatives

Risk-reduction measures

Every year, each of the Group’s main entities is required to com-plete, a self-assessment process based around detailed internal control questionnaires (303 questions concerning 12 different key processes). The responses to this questionnaire are centralised and analysed by the Internal Audit department which then issues a report for each entity as well as a report dealing with each key process on a Group-wide basis. An annual summary of the self-assessment process is submitted to the Audit Committee.

A total of 54 of the Group’s entities completed the self-assessment questionnaire in 2011.

Internal audits were conducted in 22 entities in the Antalis sub-group and 12 entities in the Arjowiggins sub-group during the year and in each case a report complete with recommendations was sent to Group executive management and to the executive management of the audited entity. Internal audits were also performed on two South American entities during the period. These missions were out-sourced under the responsibility of the Internal Audit department.

The recommendations issued are being followed up to ensure that the action plans deemed necessary at the time of the audit are cor-rectly applied. All of the Group’s subsidiaries are internally audited at least once every three years.

As indicated previously, risk-mapping processes have been devel-oped within both Arjowiggins and Antalis. These risks were identified by key executives and the members of the management committees and the position of each risk on the map was determined based on its importance and the Company’s ability to manage it.

The Internal Audit department draws up the annual audit plan based on the main risks identified in the risk-mapping process and the prin-ciple of covering all Group entities at least once every two or three years, and in line with specific requests from Group management.

The internal audit teams also use a database to input and moni-tor the recommendations they make to ensure that the action plans deemed necessary at the time of the audit are correctly applied.

Every month, Sequana’s executive management team reviews the action points implemented over the previous six months, the reports issued and any corrective action taken, and it examines and approves the audit plan for the following year. The Statutory Auditors and Sequana Audit Committee review the aforementioned points twice yearly.



Control procedures for legal issues

All of the Group’s main subsidiaries use the same software application for managing legal issues relating to equity holdings. This ensures that the legal information concerning all Group enti-ties is consistent.

Depending on each company’s business, particular care is taken by the various departments – including legal affairs, human resources, quality control, and safety and security – to protect registered trademarks and patents, combat counterfeiting, com-ply with economic regulations and anti-trust legislation (espe-cially within the European Union), ensure the safety and security of employees, manufacturing sites, buildings and plants, avoid employing illegal workers, and protect the environment. Steps have been taken to enhance the Group’s performance in these areas, including measures to (i) increase the number of certified plants and processes and (ii) raise employees’ awareness of the strategies adopted and provide training on their implementation. In certain sensitive areas (e.g., compliance with anti-trust legis-lation), training may be provided and tests carried out to monitor the conduct of employees and senior managers in critical situ-ations. The subsidiaries operating in countries most exposed to these types of risk are inspected on a regular basis. Monitoring compliance in all of these areas will progressively become part of the brief of the Internal Audit department.

Purchase and sales order procedures have been drafted in order to ensure that the applicable regulations are respected and that the relevant employees comply with the Group’s code of conduct.

Lastly, the Group’s management keeps careful tabs on delegations of power, ongoing legal disputes and insurance coverage, as well as on control procedures concerning employee-related issues, environ-mental matters, manufacturing processes and information systems.

In Antalis, the Legal department oversees a procedure for vali-dating contracts and significant undertakings entered into in the name of any Group company. Both Antalis and Arjowiggins have developed a procedure for tracking major legal disputes in pro-gress and reporting back to Group executive management and the Statutory Auditors.

Internal control oversight

Oversight of the internal control system is the responsibility of Sequana’s executive management team which reports to the Audit Committee. It must ensure that the system is appropri-ate for and compliant with Group objectives. The Internal Audit department is also involved in this process via the assignments they carry out and the resulting reports and follow-up proce-dures. The annual audit plan is approved by the Chief Executive Officer and Chief Financial Officer of Sequana and every month the Internal Audit department submits a formal report which it discusses with the Chief Executive Officer.

Internal audit reports give rise to action plans and documented follow-up procedures.

Financial reporting system

Sequana’s financial reporting system is underpinned by internal control procedures related to the preparation and processing of financial and accounting information.

Accounting policies

The Group’s accounting procedures are drawn up under the supervision of Sequana’s Chief Financial Officer and are regu-larly updated to incorporate changes in the applicable account-ing standards and rules. This same process is adopted for the Group’s risk management rules. Group-wide reporting instruc-tions and guidelines have also been drawn up.

Sequana complies with IFRS whose application is mandatory for the annual financial statements prepared by companies listed in the European Union.

Financial and accounting information

The individual and consolidated financial statements are used to track and analyse the performance of each business. Historical and projected financial data are regularly reviewed at meet-ings organised with the finance directors of the Group’s main subsidiaries.

Any sensitive or problematic issues are examined in depth at these meetings, mainly for the purpose of ensuring the reliability of the financial data reported by the subsidiaries.

Budgets forecasts and reporting

Although the Group’s subsidiaries manage their operations auton-omously, control procedures have been set up to oversee their budgeting and financial processes. Meetings are held between Sequana and its subsidiaries on an annual basis for budgets, six-monthly for forecasts and monthly for reporting processes.

The budgeting processes as well as the reviews of the three-year business plans and financial forecasts serve as a framework for tracking monthly and annual results. A shorter-term framework is used when medium-term forecasting becomes difficult due to a lack of visibility into the Group’s markets. In all cases, variances are analysed at Group level and must be explained by the sub-sidiaries; corrective measures are taken where necessary.

As part of the Group’s monthly consolidation process, Sequana’s Accounting department, as well as the financial control depart-ments of the main subsidiaries, check that transactions have been correctly recorded in the financial statements. The monthly reporting system also enables Sequana to keep abreast of the financial and economic developments in each business area and the operations conducted by each subsidiary.



Financing and treasury management

The general strategies for treasury management and bank rela-tions are coordinated at Group level. The subsidiaries report on their cash positions twice monthly.

The Group Finance department negotiates financing facilities and handles liquidity and cash-flow management and market transactions in line with each subsidiary’s individual capacities. Capital expenditure commitments are finalised once the corre-sponding budgets have been approved.

Participants in the financial reporting system

Sequana’s Finance department ensures that the information pro-vided in the individual and consolidated financial statements is true and fair and complies with the Group’s rules and proce-dures. As the department in charge of publishing the financial statements, it also verifies, where appropriate, that the financial statements comply with the standards applicable to listed com-panies at the end of each reporting period.

The work performed by the Finance department covers (i) rou-tine transactions such as sales, purchases, expenses, capital employed and treasury management, (ii) estimation processes, including the valuation of assets for the purpose of impairment test-ing, and (iii) handling one-off operations such as financial trans-actions or changes in Group structure. The Finance department plays an active role in the Group’s asset valuation process and provides the executive management team with all the necessary information to enable it to estimate balance sheet asset values and to assess whether any impairment losses should be recorded.

For subsidiaries that are major contributors to the Group’s earn-ings, regular meetings are organised and each month an analy-sis of the accounts is prepared and presented to management (list of individual accounts, cash flow statements, analysis of budget versus actual figures and management indicators). In its annual audit plan, the Internal Audit department includes assign-ments directly or indirectly linked to financial reporting in order to check that suitable controls are in place and work properly. The internal auditors systematically monitor the implementation of any corrective measures recommended at the conclusion of their engagements.

The objective of the systems put in place is to provide assurance to the Chairman of the Board of Directors, the Chief Executive Officer of Sequana and the Audit Committee that the procedures applied within the Group to ensure the reliability of financial infor-mation are appropriate. Sequana intends to pursue its work on internal control and to continually enhance the quality and reli-ability of the financial information provided to its shareholders.

The above report on Group administrative structures and internal control procedures testifies to the Group’s commitment in this area. In order to achieve all of the stated objectives, Sequana has deployed general internal control procedures that are based to a large extent around the Reference Framework for internal control and recommendations issued by the AMF.



Statutory Auditors’ report, prepared in accordance with Article L. 225-235 of the french commercial code, on the report prepared by the chairman of the Board of directors of SequanaFor the year ended 31 December 2011 This is a free translation into English of the statutory auditors’ report issued in French and it is provided solely for the convenience of English-speaking users. This report should be read in conjunction with and construed in accordance with French law and profes-sional auditing standards applicable in France.

Sequana8, rue de Seine92100 Boulogne-BillancourtFrance

To the Shareholders,

In our capacity as Statutory Auditors of Sequana and in accord-ance with Article L. 225-235 of the French Commercial Code (Code de commerce), we hereby report to you on the report prepared by the Chairman of your Company in accordance with Article L. 225-37 of the French Commercial Code for the year ended 31 December 2011.

It is the Chairman’s responsibility to prepare and submit to the Board of Directors for approval, a report describing the inter-nal control and risk management procedures implemented by the Company and providing other information required by Article L. 225-37 of the French Commercial Code in particular relating to corporate governance.

It is our responsibility:

} to report to you on the information set out in the Chairman’s report on internal control and risk management procedures relating to the preparation and processing of financial and accounting information; and

} to attest that the report sets out the other information required by Article L. 225-37 of the French Commercial Code, it being specified that it is not our responsibility to assess the fairness of this information.

We conducted our work in accordance with professional stand-ards applicable in France.

Information concerning the internal control and risk management procedures relating to the preparation and processing of financial and accounting information

The professional standards require that we perform procedures to assess the fairness of the information on internal control and risk management procedures relating to the preparation and processing of financial and accounting information set out in the Chairman’s report. These procedures mainly consisted of:

} obtaining an understanding of the internal control and risk management procedures relating to the preparation and pro-cessing of financial and accounting information on which the information presented in the Chairman’s report is based, and of the existing documentation;

} obtaining an understanding of the work performed to sup-port the information given in the report and of the existing documentation;

} determining if any material weaknesses in the internal con-trol procedures relating to the preparation and processing of financial and accounting information that we may have identi-fied in the course of our work are properly described in the Chairman’s report.

On the basis of our work, we have no matters to report on the information given on internal control and risk management proce-dures relating to the preparation and processing of financial and accounting information, set out in the Chairman of the Board of Director’s report, prepared in accordance with Article L. 225-37 of the French Commercial Code.

Other information

We attest that the Chairman’s report sets out the other information required by Article L. 225-37 of the French Commercial Code.

Neuilly-sur-Seine, 27 April 2012

The Statutory Auditors

PricewaterhouseCoopers Audit Constantin Associés

Catherine Sabouret Thierry Quéron

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chapter 4fInAncIAL PoSItIon − reSuLtS

84 OVERVIEW OF THE GROUP’S FINANCIAL POSITION AT 31 DECEMBER 2011

84 Consolidated results85 Parent company results

86 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

86 Consolidated statement of financial position87 Consolidated income statement88 Consolidated statement of comprehensive income88 Statement of changes in consolidated equity89 Consolidated statement of cash flows90 Notes to the consolidated financial statements157 Statutory Auditors’ report on the consolidated financial statements

158 PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

158 Statement of financial position159 Income statement160 Notes to the parent company financial statements163 Notes to the statement of financial position166 Other disclosures171 Securities portfolio at 31 December 2011171 Five-year financial summary172 Statutory Auditors’ report on the financial statements174 Statutory Auditors’ special report on related-party agreements

and commitments

175 PROPOSED ALLOCATION OF NET INCOME

fInAncIAL PoSItIon - reSuLtS4


overview of the Group’s financial position at 31 december 2011

overview of the Group’s financial position at 31 december 2011consolidated resultsReported sales for 2011 were €3,944 million, compared with €4,117 million for 2010 which took account of the reclassifica-tion of Arjowiggins’ Decor and Abrasive, Thin Opaque Papers, and Fine Arts businesses based at the Arches (France) and dettingen (Germany) plants as “Net income from discontinued operations”, in accordance with IFRS 5.

Recurring operating income for the year dropped 35% year on year to €89 million (from €137 million in 2010).

The Group posted an operating loss of €3 million in 2011, com-pared with operating income of €77 million recorded one year previously. This included “Other operating income and expenses, net” for a negative amount of €92 million, mainly comprising:

} €44 million in restructuring costs (€47 million in 2010);

} net additions to provisions for asset impairment losses of €61 million recorded by Arjowiggins (in 2010, Antalis and Arjowiggins booked net additions of €8 million and reversals of €2 million, respectively); and

} gains of €18 million on the sale of Antalis’ Office Supply busi-ness in Spain and Portugal.

The net financial loss of €40 million represents an improvement on the prior year figure of €49 million thanks to the €7 million drop in interest expense in line with the Group’s lower average level of debt and a positive foreign exchange effect of €2 million.

The Group’s effective tax rate in 2011 was a negative rate of 81.40%, versus a positive rate of 121.43% in 2010. These rates mainly reflect the impacts of the following:

} €40 million in unrecognised deferred tax assets in respect of tax loss carryforwards in 2011, compared to an amount of €15 million in 2010;

} cancellation of recognised prior-period losses of €11 million in the period compared to a non-material amount in 2010;

} the impact of €7 million in impairment recognised on goodwill and deemed to be non-deductible for tax purposes.

Net income from discontinued operations of €38 million in 2010 arose on the reclassification of Arjowiggins’ Decor and Abrasive, Thin Opaque Papers, and Fine Arts businesses based at the Arches (France) and Dettingen (Germany) plants. In 2011 the amount was non-material.

Net loss attributable to owners was €77 million, compared to net income of €32 million in 2010.

Consolidated assets totalled €2,711 million at 31 December 2011, versus €2,988 million one year earlier.

Non-current assets totalled €1,240 million at 31 December 2011, compared to €1,367 million at 31 December 2010. The differ-ence was mainly due to a €38 million year-on-year increase in the excess of plan assets over pension benefit obligations in other assets, particularly relating to the UK pension funds.

Shareholders’ equity totalled €669 million compared with €814 million at 31 December 2010.

Gross debt, i.e., short- and long-term debt, fell from €981 million at 31 December 2010, to €934 million at 31 December 2011.

Net debt, i.e., gross debt less cash and cash equivalents totalling €323 million (€299 million in 2010) and sundry items amounting to €2 million (€8 million in 2010) also dropped to €609 million at 31 December 2011, compared to €674 million one year previously.

fInAncIAL PoSItIon - reSuLtS 4


overview of the Group’s financial position at 31 december 2011

Parent company resultsThe Group’s parent company generated a net loss of €331 mil-lion in 2011 compared with net income of €272 million in 2010.

The net non-recurring loss for 2011 was €346 million and pri-marily comprised provisions for impairment losses recognised on investments.

Total assets amounted to €1,651 million at 31 December 2011 versus €1,997 million one year earlier.

Total investments fell from €1,979 million at 31 December 2010, to €1,640 million at 31 December 2011 reflecting net additions to impairment provisions for an amount of €338 million.

Trade payables of €6 million (including €3.9 million in provisions taken) can be broken down as follows by maturity:

} due within 30 days: €0.2 million;

} due within 60 days: €1.9 million.

Total equity stood at €1,546 million at 31 December 2011 versus €1,897 million at 31 December 2010.

There have been no material changes in the Group’s financial or commercial position since 31 December 2011.



consolidated statement of financial position

consolidated statement of financial positionconsolidated statement of financial position

Assets(€ millions) Notes 31/12/2011 31/12/2010

Non-current assets Goodwill 5a 625 643Other intangible assets 5b 66 62Property, plant and equipment 6 401 528Investments in associates 7 5 6Non-current financial assets 8 12 11Deferred tax assets 19 16 36Other non-current assets 10 115 81Total non-current assets 1,240 1,367Current assets Inventories 9 457 526Trade receivables 10 558 608Other receivables 10 122 136Current financial assets 8 11 20Cash and cash equivalents 11 323 299Total current assets 1,471 1,589Assets held for sale 4c – 32TOTAL ASSETS 2,711 2,988

equity and liabilities

(€ millions) Notes 31/12/2011 31/12/2010

Equity

Share capital 74 74Additional paid-in capital 95 95Cumulative translation adjustment (61) (48)Retained earnings and other consolidated reserves 638 661Net income (loss) attributable to owners (77) 32

Shareholders’ equity 12 669 814

Non-controlling interests 14 1 –

Total equity 670 814

Non-current liabilities

Provisions 15.16 146 116Long-term debt 17 28 867Deferred tax liabilities 19 56 69Other non-current liabilities 20 2 12

Total non-current liabilities 232 1,064

Current liabilities

Provisions 15.16 36 57Short-term debt 17 906 114Trade payables 20 631 646Other payables 20 236 269

Total current liabilities 1,809 1,086

Liabilities related to assets held for sale 4c – 24

TOTAL EQUITY AND LIABILITIES 2,711 2,988

The notes are an integral part of the financial statements.



consolidated income statement

consolidated income statement(€ millions) Notes 2011 2010

Sales 29 3,944 4,117

Other operating income 21 15 27

Purchases consumed and change in inventories (2,737) (2,801)

Personnel expenses 22 (587) (616)

External expenses (459) (476)

Taxes other than income taxes (14) (13)

Depreciation and amortisation (68) (68)

Net (additions to) reversals of provisions 22 (4)

Other operating expenses (27) (29)


Other operating income 28 16


Other operating income and expenses, net 24 (92) (60)

Operating income (loss) (3) 77

Cost of net debt (32) (40)

Other financial income and expenses, net (8) (9)

Net financial loss 25 (40) (49)

Income tax expense 27 (35) (34)

Net income (loss) from consolidated companies (78) (6)

Share of earnings of associates 7 1 –

Net income (loss) from continuing operations (77) (6)

Net income from discontinued operations 4b – 38

NET INCOME (LOSS) (77) 32

Attributable to:

Sequana shareholders (77) 32

Earnings per share

Weighted average number of shares outstanding 49,256,017 49,265,233

Diluted number of shares 49,256,017 50,480,341

Basic earnings (loss) per share (in €) 13

Earnings (loss) per share from continuing operations (1.57) (0.12)

Earnings per share from discontinued operations – 0.77

Consolidated earnings (loss) per share (1.57) 0.65

Diluted earnings (loss) per share (in €) 13

Diluted earnings (loss) per share from continuing operations (1.57) (0.11)

Diluted earnings per share from discontinued operations – 0.75

Consolidated diluted earnings (loss) per share (1.57) 0.64




Statement of changes in consolidated equity

consolidated statement of comprehensive income(€ millions) 2011 2010

Net income (loss) (77) 32

Items that may be recycled to profit or loss (6) 60

Translation adjustments (12) 46

Gains and losses on interest and exchange rate derivatives – hedge accounting 5 17

Tax impact of gains and losses on interest and exchange rate derivatives – hedge accounting 1 (3)

Items that may not be recycled to profit or loss (39) (3)

Actuarial gains and losses related to pension and other post-employment benefit obligations (38) 7

Tax impact of gains and losses related to pension and other post-employment benefit obligations (1) (10)

Total other comprehensive income (loss) (45) 57

TOTAL COMPREHENSIVE INCOME (122) 89

Of which:

Attributable to Sequana shareholders (123) 89

Attributable to non-controlling interests 1 –


Statement of changes in consolidated equity

(€ millions)Number of

shares issuedShare

capital

Additional paid-in capital

Cumulative translation

adjustment

Cumulative fair value

adjustment

Retained earnings

and other consolidated

reserves

Net income (loss) for

the period attributable

to ownersShareholders’

equity

Non-controlling

interestsTotal

equity

Equity at 1 January 2010

49,545,002 74 95 (96) (19) 664 20 738 4 742

Dividends – – – – – – (17) (17) – (17)

Net income – – – – – – 32 32 – 32

Other comprehensive income

– – – 46 14 (3) – 57 – 57

Changes in scope of consolidation

– – – – – – – – (4) (4)

Other movements(1) – – – 2 (6) 8 – 4 – 4

Allocation of prior-year income (loss)

– – – – – 3 (3) – – –

Equity at 31 December 2010 49,545,002 74 95 (48) (11) 672 32 814 – 814

Dividends – – – – – – (20) (20) – (20)

Net loss – – – – – – (77) (77) – (77)

Other comprehensive income

– – – (13) 6 (39) – (46) 1 (45)

Other movements(1) – – – – – (2) – (2) – (2)

Allocation of prior-year income (loss)

– – – – – 12 (12) – – –

Equity at 31 December 2011 49,545,002 74 95 (61) (5) 643 (77) 669 1 670

(1) Impact of (i) changes in the value of Sequana’s treasury shares; (ii) share award plans implemented (see Note 12c) for a negative amount of €2 million (positive amount of €3 million in 2010).



consolidated statement of cash flows

consolidated statement of cash flows(€ millions) Notes 2011 2010

Cash flows from operating activities

Net income (loss) – total (77) 32

Elimination of non-cash and non-operating income and expenses:

+/- Depreciation, amortisation and provisions (except on current assets), net 28 98 25

+/- Disposal gains and losses 28 (23) 7

+/- Other non-cash income and expenses – (7)

+/- Income tax expense and benefits (including deferred taxes) 35 34

- Share of earnings of associates (1) –

Gross cash flows from operating activities 32 91

- Taxes paid (20) (23)

Change in operating working capital 28 39 (29)

+/- Change in loans and guarantee deposits (1) (1)

Net cash generated from operating activities 50 38

Cash flows from investing activities

- Expenditure on acquisitions of property, plant and equipment and intangible assets (73) (64)

+ Proceeds from disposals of property, plant and equipment and intangible assets 13 6

- Expenditure on acquisitions of financial assets – (4)

+ Proceeds from disposals of financial assets 28 – 4

+/- Impact of changes in scope of consolidation 28 97 2

+/- Other cash flows related to investing activities 1 (1)

Net cash generated from (used in) investing activities 38 (57)

Cash flows from financing activities

Dividends paid to parent company shareholders (20) (17)

+/- Changes in the value of Sequana’s treasury shares (1) –

+ Cash received on new borrowings 12 64

- Repayment of borrowings (62) (39)

+/- Change in marketable securities with maturities greater than three months 5 (3)

Net cash generated from (used in) financing activities (66) 5

Effects of fluctuations in foreign exchange rates (4) 8

CHANGE IN CASH AND CASH EQUIVALENTS 18 (6)

Net cash and cash equivalents at start of year 285 291

Net cash and cash equivalents at end of year 303 285

Year-on-year increase (decrease) in cash and cash equivalents 18 (6)

Analysis of net cash and cash equivalents at end of year

Cash and cash equivalents 11 323 299

Short-term bank borrowings and bank overdrafts 17 (20) (14)

Net cash and cash equivalents at end of year 303 285


fInAncIAL PoSItIon - reSuLtS4 notes to the consolidated financial statements


notes to the consolidated financial statements

91 Note 1 Significant events of the year

92 Note 2 Summary of significant accounting policies

103 Note 3 Measurement of impairment losses

104 Note 4 Changes in scope of consolidation

106 Note 5a Goodwill

107 Note 5b Other intangible assets

108 Note 6 Property, plant and equipment

110 Note 7 Investments in associates

110 Note 8 Financial assets

111 Note 9 Inventories

112 Note 10 Other assets

112 Note 11 Cash and cash equivalents

113 Note 12a Share capital

113 Note 12b Stock options

114 Note 12c Share award plans

115 Note 12d Treasury shares

115 Note 12e Cumulative translation adjustment

116 Note 12f Dividends paid

116 Note 13 Earnings per share

117 Note 14 Non-controlling interests

117 Note 15 Provisions

119 Note 16 Employee benefits

124 Note 17 Debt

125 Note 18 Financial instruments

137 Note 19 Deferred taxes

140 Note 20 Other liabilities

141 Note 21 Other operating income

141 Note 22 Personnel expenses

141 Note 23 Remuneration paid to corporate officers

142 Note 24 Other operating income and expenses

143 Note 25 Net financial income

143 Note 26 Foreign exchange gains and losses

144 Note 27 Income tax benefit (expense)

145 Note 28 Analysis of consolidated cash flows

146 Note 29 Segment information

148 Note 30 Related-party transactions

149 Note 31 Off-balance sheet commitments

151 Note 32 Headcount

151 Note 33 Subsequent events

152 Note 34 Statutory Auditors’ fees

153 Note 35 Scope of consolidation

fInAncIAL PoSItIon - reSuLtS 4notes to the consolidated financial statements


note 1 - Significant events of the year

Antalis

} On 7 February 2011, Antalis completed the sale of its Spanish and Portuguese office supply retail business to Lyreco for an enterprise value of €23 million. This represents an estimated gain on disposal of €18 million which was recognised in “Other operating income” (see Note 24). At 31 december 2010, these businesses were recognised in “Assets held for sale” and “Liabilities related to assets held for sale”.

} On 31 March 2011, Antalis finalised the sale of its wholesale cash and carry office supplies business and its paper and card-board converting business in Portugal to AVS for an enterprise value of €3 million. This sale did not have a material impact on the consolidated income statement. At 31 December 2010, these businesses were recognised in “Assets held for sale” and “Liabilities related to assets held for sale”.

} Antalis incurred costs of €23 million in 2011 for restructuring plans deployed mainly in the UK, Scandinavia and the Benelux countries.

Arjowiggins

} On 10 March 2011, after obtaining the necessary authorisa-tion from the EU competition authority, Arjowiggins’ sold its Decor and Abrasive, Thin Opaque Papers, and Fine Arts busi-nesses based at the Arches (France) and Dettingen (Germany) plants to the Swedish group Munksjö. This transaction helped to reduce the Group’s net debt by approximately €70 million. If price adjustments are factored in, the gain on disposal was non-material in the period. These businesses were recognised in “discontinued operations” in 2011 and 2010 (see Note 4 – Changes in scope of consolidation).

} On 30 June 2011, Arjowiggins sold Papeteries Canson and its Moulin du Roy mill in Annonay (France) to the French group Hamelin which owns the Canson brand and was already the mill’s number one customer. In 2010, this business generated revenue of €16 million. The transaction did not have a mate-rial impact on either the Group’s consolidated net debt or pro-ceeds on disposal.

} To deal with declining demand in certain markets, Arjowiggins incurred a total of €20 million in restructuring costs, mostly involving capacity reduction measures and the shutting down of paper machines at the Witcel (Argentina), Rives (France) and Dalum (Denmark) plants.

} Following a review of the operational activities of Arjowiggins and impairment testing of property, plant and equipment and goodwill, the Group recognised a non-recurring expense of €61 million comprising impairment of €18 million on goodwill previously recognised in respect of Arjowiggins Graphic, and impairment charges totalling €43 million on property, plant and equipment (see Note 3 – Measurement of impairment losses).

} To reduce Arjowiggin’s pension benefit obligation exposure, a new clause was inserted into the Wiggins Teape Pension Scheme (WTPS) in the UK in the first-half of 2011 leading to the reversal of a provision for €17 million during the period (see Note 16 – Employee benefits – developments in 2011).

Refinancing of the Group

The Group’s financing requirements are met through confirmed lines of credit. At 31 December 2011, an amount of €876 million had been drawn down by the Sequana holding company (€36 million) and the subsidiaries (€400 million by Arjowiggins and €440 million by Antalis). The lines of credit for the Sequana holding company, Arjowiggins and Antalis expire in February, July and October 2012, respectively. The terms and conditions for these lines of credit are disclosed in Note 18.

All of these facilities are subject to a number of financial cov-enants. As of 31 December 2011, neither Arjowiggins nor the Sequana holding company complied with the consolidated net debt/consolidated EBITDA ratio.

Given that non-compliance with these ratios coincided with the proximity of the expiration dates of these two lines of credit as well as the contract relating to Antalis, the Group entered into negotiations with the pool of banks and obtained that the banks concerned waived their right to early repayment of the lines of credit. Although contractually entitled to do so, the banks did not demand early repayment of borrowings granted to Arjowiggins or the Sequana holding company.

On 24 February 2012, the Group finalised the renewal of the syndicated credit facilities signed in 2007 by Arjowiggins and Antalis as well as Sequana’s confirmed credit facility through to 30 June 2014:

} Arjowiggins’ line of credit has been extended for an amount of €400 million with the interest margin on euro-denominated drawdowns reset at 4.10% and interest payments partially deferred until the expiration date. Arjowiggins must comply with the following three ratios: consolidated net debt/consoli-dated EBITDA; consolidated EBITDA/consolidated net interest expense (excluding deferred interest expense); and consoli-dated operating cash flow/consolidated net interest expense.



} Antalis’ line of credit has been extended for an amount of €560 million with annual amortisation payments of €20 million scheduled for 2012, 2013 and 2014. The interest margin on euro-denominated drawdowns has been reset at between 2.35% and 4%, depending on the average consolidated net debt/consolidated EBITDA ratio. Guarantees and collateral arrangements remain unchanged, particularly the assignment of trade receivables. Antalis must still comply with the follow-ing three ratios: consolidated net debt/consolidated EBITDA; consolidated net debt/consolidated equity (gearing ratio); and consolidated recurring operating income/consolidated net interest expense (interest cover).

} Sequana’s line of credit has been extended for an amount of €36 million with annual amortisation payments of €1.2 million scheduled for 2012, 2013 and 2014. The interest margin has

been reset at 4.25%. Sequana must comply with the follow-ing three ratios: consolidated net debt/consolidated EBITDA; consolidated net debt/consolidated equity (gearing ratio); and consolidated EBITDA/consolidated net interest expense (excluding deferred interest expense).

} Sequana’s €5 million overdraft facility has also been confirmed through to 30 June 2014 by the lender bank.

All banking documentation relating to these credit facilities should be finalised by the end of April 2012.

In light of the preceding information, the consolidated finan-cial statements were approved by the Board of Directors on 8 March 2012 based on the going concern principle.

note 2 - Summary of significant accounting policies

A - General information

Sequana, the Group holding company, is a French société anonyme whose head office is 8, rue de Seine, 92100 Boulogne-Billancourt. It is listed on NYSE Euronext paris.

The main activities of the Sequana Group are:

} manufacture of technical and creative paper through Arjowiggins, which is wholly owned;

} distribution of paper and packaging products through Antalis, which is wholly owned.

The Group has a footprint throughout the world. A description of its subsidiaries’ businesses is provided in chapter 1.

The Group’s consolidated financial statements have been pre-pared in accordance with the International Financial Reporting Standards (including IFRSs, IASs, SIC and IFRIC interpreta-tions), adopted by the European Union before 31 December 2011 and published by the IASB (International Accounting Standards Board).

These standards can be viewed on the European Commission’s website at: http://ec.europa.eu/internal_market/accounting/ias/index_en.htm

The consolidated financial statements are presented in euros and rounded to the nearest million unless otherwise specified. They were approved by the Board of Directors on 8 March 2012.

In accordance with Article 28.1 of Regulation (Ec) No. 809/2004 of 29 April 2004, the consolidated financial statements for the year ended 31 December 2009 are incorporated by reference in the original French version of this Registration Document filed with the AMF. Consequently, the consolidated financial state-ments for the year ended 31 December 2011 do not include comparative data for 2009.

A1 - Standards and interpretations effective from 1 January 2011

A number of standards, interpretations and amendments to pub-lished standards were mandatory for accounting periods begin-ning on or after 1 January 2011, however they are not deemed to have a material impact on the consolidated financial statements.

Revised IAS 24 – Related Party Disclosures

Simplifies the disclosure requirements for government-related entities and clarifies the definition of a related party.

Amended IAS 32 – Financial Instruments: Presentation

Classification of rights issues in equity in order to eliminate any volatility in profit or loss.

Amended IFRS 1 – First-time Adoption of IFRS

Limited exemption from comparative IFRS 7 disclosures for first-time adopters.

Amended IFRIC 14 – Defined Benefit Asset, Minimum Funding Requirements

Permission to recognise as an asset some voluntary prepay-ments for minimum funding contributions within the scope of a defined benefit pension plan.

Amended IFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments

Recognising an increase in capital for the fair value of the shares issued and recognising the difference between the fair value of the shares and the carrying amount of the financial liability.



Amendments arising from the IFRS annual improvement process

The amendment with the greatest potential impact on the Group’s activity is the amendment to IFRIC 14 published in November 2009 and early adopted by the Group beginning on 31 December 2010. It has not had a material impact on the con-solidated financial statements.

The Group has not elected to early adopt any of the other stand-ards or interpretations published in the Official Journal of the European Union.

A2 - Standards and interpretations not yet effective at 31 December 2011

The Group does not expect the standards, amendments and interpretations to published standards already adopted by the European Union but not yet effective at 31 December 2011 to have a significant impact on the consolidated financial state-ments. The standards, amendments and interpretations in ques-tion are:

Amended IAS 1 – Presentation of Financial Statements

Changes to the way other comprehensive income is presented.

Amended IAS 19 – Employee Benefits

Changes to the recognition of actuarial gains and losses.

Amended IAS 27 – Consolidated and Separate Financial Statements

Amended IAS 28 – Investments in Associates and Joint Ventures

Amended IFRS 7 – Financial Instruments, Disclosures

Disclosures concerning transfers of financial assets.

IFRS 9 – Financial Instruments

Disclosures concerning financial assets and financial liabilities.

IFRS 10 – Consolidated Financial Statements

Presentation and preparation of consolidated financial state-ments when an entity controls one or more other entities.

IFRS 11 – Joint Arrangements

Disclosure requirements for partner-type arrangements.

IFRS 12 – Disclosure of Interests in Other Entities

Disclosure requirements concerning the nature of, and risks associated with interests in other entities.

IFRS 13 – Fair Value Measurement

Measurement uncertainty analysis disclosure for fair value measurements.

B - Consolidation, recognition and measurement methods

B1 - Consolidation principles

The Sequana Group is accounted for by the equity method in the consolidated financial statements of (i) Italy-based Exor and (ii) DLMD.

Subsidiaries are all entities over which Sequana has, directly or indirectly, sole or majority control. Control is defined as the power to govern the subsidiary’s financial and operating policies so as to obtain benefits from its activities. They are consolidated using the full consolidation method with recognition of non-con-trolling interests. Control is presumed to exist when the Group holds more than 50% of the voting rights, or when it exercises de facto control over the operational and financial management of an entity. The existence and effect of potential voting rights that are currently exercisable or convertible are included when calculating the control exercised by the Group.

The Group does not consolidate any joint ventures held under contractual arrangements.

Associates are entities over which Sequana exercises significant influence, based on the extent of the Group’s power to partici-pate in the financial and operating policy decisions of the inves-tee, and generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially recog-nised at cost. The Group’s share in the net income or loss of an associate is recognised in the consolidated income statement. If an operation is recognised directly in equity in the books of an associate, the Group recognises its share in consolidated equity.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The results of companies acquired during the year are included in the consolidated income statement for the period subsequent to the date on which control is transferred to the Group.

Investments in entities deemed non-material or investments in entities over which the Group does not exercise significant influence are classified either as “financial assets at fair value through profit or loss” or as “available-for-sale financial assets” and are carried at fair value.



A discontinued operation is a component of an entity that has either been disposed of or is classified as held for sale and:

} which represents a separate major line of business or geograph-ical area of operations;

} is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or

} is a subsidiary acquired exclusively with a view to resale.

Gains or losses on the disposal of a business that meets the definition of a discontinued operation are presented separately in the income statement. The amount recorded comprises the total of:

} the post-tax profit or loss of discontinued operations prior to the date of sale;

} the net-of-tax disposal gain or loss and related disposal costs; and

} any impairment losses arising on fair value measurement less costs to sell.

B2 - Reporting date

The Sequana Group has a 31 December year-end. The con-solidated financial statements include the financial statements of subsidiaries at 31 December, restated to comply with Group accounting policies.

B3 - Estimates and valuations

The preparation of financial statements frequently requires Group management to exercise its judgement in order to meas-ure or estimate financial statement items and to assess the prob-ability of future events occurring.

In order to limit uncertainties, these valuations and estimates are reviewed at the end of each reporting period and analysed based on actual data and experience obtained in the intervening period as well as on other factors deemed relevant in the light of current economic circumstances so that the assumptions used may be adjusted as necessary. The effects of any changes are recognised immediately.

In recent years the highly volatile economic and financial envi-ronment has made forecasting for the various businesses espe-cially difficult and actual results may differ from the estimates and related assumptions used.

Estimates and assumptions that may have a material impact on the assets and liabilities reported in the consolidated financial statements include:

a) Impairment tests on goodwill

Impairment testing is conducted at least once a year in accord-ance with the method described in Note 2B6. The value in use of Cash Generating Units is estimated using a multi-criteria approach (see Notes 3a and 5a).

b) Impairment tests on property, plant and equipment and intangible assets

The Group tests its property, plant and equipment and intangible assets for impairment in accordance with the method described in Notes 2B7 and 2B8. An impairment loss is recognised if an asset’s estimated recoverable amount is lower than its carrying amount (see Notes 3b and 6).

c) Provisions for pension and other employee benefit obligations

The present value of the Group’s pension and other employee benefit obligations depends on the actuarial assumptions at the end of each reporting period – including the rate used to discount the obligations to present value – and any changes in these assumptions will impact their carrying amount.

At the end of each reporting period, the Group determines the rate used to discount employee benefit obligations and the other related assumptions, particularly market conditions, in accord-ance with the procedures described in Notes 2B16 and 16.

d) Fair value of derivatives and other financial instruments

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group must use its judgement when determining the methods and assumptions used at the end of each reporting period based on market conditions (Note 2B14).

e) Other provisions

These mainly comprise provisions for environmental and legal contingencies as well as restructuring provisions. They are recalculated at the end of each reporting period based on the Group’s assumptions (see Notes 2B17 and 15).

f) Recognition of deferred tax assets relating to tax losses

Deferred tax assets relating to tax losses are recognised in accordance with prior-period results and the prospects of recov-ering these losses based on the Group’s budgets and medium-term business plans (3-5 years) (see Notes 2B12 and 19).

B4 - Inter-company transactions and balances

Inter-company transactions and balances and gains on transac-tions between Group companies are eliminated in full on con-solidation. Losses resulting from inter-company transactions are only eliminated when there is no indication of impairment.

Gains on transactions between the Group and its associates are eliminated based on the Group’s interest in the associate and are recognised as a deduction from the investment. Losses are eliminated in the same way only when there is no indication of impairment of the assets concerned.



B5 - Foreign currency translation

Functional currency and presentation currency

The consolidated financial statements are presented in euros, which is the parent company, Sequana’s functional and presen-tation currency of the parent company, Sequana.

Translation of transactions denominated in foreign currency

For each Group company, transactions denominated in a cur-rency other than its functional currency are translated using the exchange rates prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currency are translated into euros at the closing exchange rate. The cor-responding foreign exchange gains and losses are recognised in profit or loss, except when deferred in equity as qualifying cash flow hedges or hedges of net investments in a foreign operation.

Foreign exchange gains and losses on loans or borrowings with a foreign subsidiary which are, in substance, a part of the Group’s net investment in that subsidiary are recognized directly in equity until the investment is sold, when they are recycled to the income statement.

Translation of the financial statements of foreign entities

The results and financial positions of all Group companies that have a functional currency different from the presentation cur-rency are translated into euros as follows:

} assets and liabilities for each period presented are translated at the closing rate at the end of each reporting period (except for equity which is stated at historical values);

} income and expenses and items presented in the statement of cash flows are translated at average exchange rates, unless a specific exchange rate is applicable;

} all resulting exchange differences are recognised as a sepa-rate component in shareholders’ equity.

When a foreign operation is sold, translation adjustments initially recognised in equity are recycled to the income statement as part of the disposal gain or loss.

B6 - Goodwill

The purchase method of accounting is used for all business combinations carried out by the Group.

At the acquisition date, goodwill is initially measured at cost, representing the excess of the cost of the acquisition over the Group’s share in the net fair value of the identifiable assets of the subsidiary or owned associate at that date. This valuation is performed within a period of 12 months following the acquisition.

For each business combination and in accordance with the acquiree’s business outlook, goodwill may be measured using the full goodwill method, i.e., the share of goodwill attributable to equity holders of the parent plus any non-controlling interests in the business combination’s identifiable net assets at the acquisi-tion date.

Acquisition costs are expensed directly and no longer included in the cost of the business combination.

Contingent consideration or earn-out payments are measured at their fair value at the acquisition date. They are recognised in equity if payment results in the delivery of a fixed number of equity instruments to the acquiree. Otherwise they are recognised in liabilities. Any adjustments to goodwill after the 12 months fol-lowing the acquisition are recognised as a receivable or payable with a matching entry in profit or loss.

Goodwill is recognised in assets. Negative goodwill is recog-nised directly in profit or loss.

After initial recognition, goodwill is not amortised but is tested for impairment and carried at cost less any accumulated impair-ment losses. Impairment testing is performed at least once a year, or more often if events or changes in circumstances indi-cate that a risk of impairment exists. For the purpose of these tests, goodwill is allocated to cash-generating units (CGUs) or groups of CGUs likely to benefit from the synergies developed within the scope of the business combination and representing the lowest operational level at which the Group monitors the rate of return on investments.

The recoverable amount of the cash-generating unit to which the goodwill is allocated is estimated using a multi-criteria approach.

A goodwill impairment loss is recognised when the carrying amount of the CGU to which it is allocated exceeds its recover-able amount. The recoverable amount corresponds to the higher of fair value less costs to sell and value in use. Impairment losses are recognised in expenses in the income statement. Impairment losses on goodwill may not be reversed.

Goodwill relating to equity-accounted entities is included in the acquisition cost of “Investments in associates” and tested for impairment if there is objective evidence of impairment.

B7 - Other intangible assets

Other intangible assets are measured at cost, less any accumu-lated amortisation and impairment losses.



Other intangible assets mainly comprise software, which is either acquired or developed in-house. These assets are only capital-ised when it is certain that future economic benefits will flow to the Group from their use. They must be identifiable and con-trolled by the Group and their cost must be reliably measurable.

Research and development costs incurred by the Group are capitalised once they meet the capitalisation criteria set out in IAS 38 and amortised over the useful life of each project.

The Group’s other intangible assets have finite useful lives and are amortised from the time that they are ready for use. Amortisation is calculated using the straight-line method based on the following estimated useful lives:

} software 3 to 8 years

} patents up to 5 years

Amortisation methods and useful lives are revised at the end of each reporting year, or more frequently where required.

The recoverable amount of other intangible assets with indefinite useful lives is estimated at least annually at the same time each year. However, it may be estimated several times a year if there is an indication of unfavourable developments in certain indicators. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Impairment losses on intangible assets other than goodwill may be reversed.

Accounting treatment of greenhouse gas emissions allowances

Quotas are allocated to European plants within the scope of national allocation plans: the first allocation period of reference ran for three years until 31 december 2007 (pNAQ1); the sec-ond allocation period runs for a five-year period that began on 1 January 2008 (pNAQ2). Quotas are allocated annually and free of charge for the entire five-year period, provided they are not used up. Once allocated, they may be freely traded in the event of a shortfall or a surplus in relation to actual emissions. Emission rights are priced on a daily basis on an active market (“BlueNext”).

In the absence of a specific IFRS standard or interpretation, the Group has elected to develop and apply an accounting treatment, in line with recommendations applicable in France, issued by the emerging issues task force of the ANc (previ-ously the cNc) in opinion No. 2004-c of 23 March 2004 and Recommendation No. 2009-02 of 5 March 2009, relating to the accounting of greenhouse gas emission quotas in individ-ual and consolidated financial statements. This treatment is of a provisional nature until such time as clear guidance is issued by the International Accounting Standards Board. However, this treatment already complies with the principles of the concep-

tual framework or international standards relating to the follow-ing subjects:

} The emissions quotas granted every year, measured at the market price on the allocation date, are recognised in “Other intangible assets”. The matching liability is booked as a sub-sidy under “Other payables”.

} The subsidy is reversed as it is used over the period of refer-ence and a corresponding liability representing the quantity of quotas to be returned to the French State is recorded under “Other payables”.

} At the end of each reporting period, the intangible asset is impaired and a matching liability is recorded in the event that its carrying amount is greater than its market price determined by its price on the nearest trading day. This impairment has no impact on the income statement or the statement of changes in consolidated equity.

} The surplus of the allocated quotas in relation to actual emis-sions of CO2 measured during each reporting period is con-sidered as income and is recorded in the income statement as and when the surplus is recognised in the subsidy account. If necessary, this income is valued at the price at which these surplus quotas have been sold, and, by default at the observ-able market price at the end of the reporting period.

} At the effective date of return of quotas relating to emissions in the previous year, the intangible asset and its related liability are derecognised.

B8 - Property, plant and equipment

Property, plant and equipment are stated at (historical) cost, less any accumulated depreciation and impairment losses. Cost includes all costs directly attributable to the asset’s acquisition or development, transfer to the location of use and prepara-tion in order to enable it to operate in the manner intended by management.

Components of property, plant and equipment with different useful lives are recognised separately.

Expenditure related to the replacement or renewal of a compo-nent of an item of property, plant and equipment is recognised as a separate asset and the replaced asset is derecognised. Other subsequent expenditure relating to an item of property, plant and equipment is not recognised in assets unless it is probable that the future economic benefits associated with the expenditure will flow to the entity and the cost can be measured reliably. All other subsequent expenditure is expensed as incurred.

Regular maintenance costs relating to items of property, plant and equipment (cost of labour, consumables and small spare parts) are also expensed as incurred.



Bridging interest charges or construction period interest charges on assets that take a substantial period of time to get ready for their intended use (“qualifying assets”) are capitalised. However, borrowing costs are generally expensed as incurred as the nature of the Group’s business is such that it acquires or manufactures very few “qualifying assets”.

Revaluations made in accordance with local accounting stand-ards in the countries in which the Group operates are eliminated.

With the exception of land, property, plant and equipment are depreciated from the time that the assets are ready for use. Depreciation is calculated on a straight-line basis over the fol-lowing estimated useful lives:

} buildings 10 to 40 years

} industrial machinery and equipment 5 to 20 years

} other property, plant and equipment 3 to 25 years

Depreciation methods, residual values and useful lives are reviewed at least at the end of each reporting year and more often if there is an indication of impairment.

An impairment loss is recognised if an asset’s estimated recov-erable amount is lower than its carrying amount. Impairment losses on property, plant and equipment may be subsequently reversed where appropriate.

Government grants used to partially or wholly finance the cost of an item of property, plant and equipment are recognised as a liability under “deferred income” and recycled to the income statement on a systematic basis over the useful life of the cor-responding asset.

B9 - Non-derivative financial assets

Initial recognition

Purchases and sales of financial assets are recognised on the trade date corresponding to the date on which Sequana com-mits to purchasing or selling the asset.

Financial assets are derecognised when the contractual rights to receive the cash flows from the assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership to another party without retain-ing control over the asset.

Financial assets are initially recognised in the statement of finan-cial position at fair value plus transaction costs directly attribut-able to the purchase or issue of the asset (except for financial assets at fair value through profit or loss, whose transaction costs are recognised in profit or loss).

A financial asset is classified as “current” when the cash flows expected to be derived from the instrument are due within 12 months after the end of the reporting period.

Subsequent measurement

At initial recognition, the Sequana Group classifies financial assets into one of the four categories provided for in IAS 39 – Financial Instruments: Recognition and Measurement, depend-ing on the purpose for which they were acquired. The assets are subsequently measured at amortised cost or fair value depend-ing on their classification.

Amortised cost is the amount at which the financial asset is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the amount payable at maturity.

The fair value of instruments quoted in an active market corre-sponds to their quoted market price. The fair value of instru-ments that are not quoted in an active market is determined using valuation techniques including recent arm’s length market trans-actions, reference to a transaction that is substantially the same, or discounted cash flows and option pricing models, using data inputs based on observable market transactions wherever pos-sible. If it is impossible to reliably estimate the fair value of an equity instrument it is stated at historical cost.

The categories of financial assets used by the Group are as follows:

} held-to-maturity investments: non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has the intention and ability to hold until maturity. They are measured at amortised cost and any impairment losses are recognised through profit. For the Group, held-to-maturity investments comprise security deposits, seller loans and certain financial loans;

} loans and receivables: non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They include short-term loans and trade receivables and are measured at amortised cost using the effective inter-est method. If they are impaired, an impairment loss is recog-nised through profit;

} financial assets at fair value through profit or loss: financial assets that are acquired or originated principally for the pur-pose of selling in the short-term. They are marked to market and valuation gains and losses are recognised in profit or loss. This category includes cash and cash equivalents and certain non-consolidated investments;

} available-for-sale financial assets: non-derivative financial assets that are not classified in any of the other categories. They are marked to market and valuation gains and losses are recognised in equity. They include other non-consolidated investments and marketable securities. When available-for-sale financial assets are sold or impaired, cumulative changes in fair value previously recognised in equity are transferred to the income statement.



At the end of each reporting period, the Group assesses whether there is any objective indication that its financial assets are impaired.

B10 - Inventories

Inventories are measured at the lower of cost and net realisable value. Cost is determined using the “Weighted Average Cost” (WAC) method or the “First in-First out” (FIFO) method. Similar-type inventories are measured using the same method.

Inventories of finished goods and work-in-progress are measured on the basis of their cost, which, in addition to design, raw materials and direct labour costs, also includes a share of overheads other than administrative overheads. Borrowing costs are not included.

The net realisable value of inventories is based on their estimated market value under normal business conditions less costs to sell and includes any provisions for obsolescence.

B11 - Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost in accordance with the effective interest method, less any provisions for impair-ment losses.

A provision for impairment is recognised through the income statement if there is an objective indication of impairment, or if there is a risk that the Group will not be able to collect the con-tractual amounts due (principal plus interest) at the contractual payment dates. The amount of this provision is equal to the dif-ference between the asset carrying amount and the value of esti-mated recoverable future cash flows, discounted using the initial effective interest rate.

In accordance with IAS 39 “Financial Instruments”, the Group derecognises receivables when the contractual rights to the cash flows have been transferred, as well as the majority of risks and rewards of ownership of these receivables. Any commis-sions billed on these transfers are recognised in “Other finan-cial income and expenses” (see Note 25). For the risk transfer analysis, dilution risk is ignored in the event it has been defined and limited (and in particular, correctly distinguished from late payment risk).

The Group generally assigns only receivables without the pos-sibility of recourse against the seller in the event of non- payment by the debtor.

B12 - Current and deferred taxes

Current tax is the estimated amount of income tax due on the taxable profit or loss for the period and includes prior-period adjustments.

Deferred tax assets and liabilities are determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred taxes are calculated for all deductible or taxable tem-porary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

The following items do not give rise to deferred taxation:

} recognition of goodwill;

} temporary differences on investments in subsidiaries when these will not reverse in the foreseeable future.

Deferred tax assets and liabilities are only offset if they relate to the same tax consolidation group.

B13 - Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, demand deposits, certain highly liquid marketable securities, readily con-vertible into known amounts of cash, and subject to an insig-nificant risk of changes in value with maturities of three months or less, and bank overdrafts. In the statement of financial posi-tion, bank overdrafts appear under “Short-term debt” in current liabilities.

Short-term investments are marked to market at the end of each reporting period.

B14 - Derivative financial instruments and hedging

The Group uses derivative instruments (interest rate swaps and collars, forward contracts and options on foreign currencies and raw materials) to hedge its exposure to risks from fluctuations in interest rates, exchange rates and raw materials prices arising as a result of its operating and financial activities. Derivatives are initially recognised at fair value and are subsequently remeas-ured at fair value at the end of each reporting period. Changes in fair value are recorded in profit or loss under either financial income or expenses, or current operating income and expenses, depending on the type of instrument, except for the following instruments that qualify for hedge accounting under IFRS:

} cash flow hedges: changes in the fair value of the effective portion of a derivative that is designated and qualifies as a cash flow hedge are recognised directly in equity. Amounts accumulated in equity are recycled to the income statement during the period in which the hedged item affects profit (for example, when a planned sale actually takes place) or when the Group no longer expects the hedged forecast transaction to occur. The gain or loss relating to the ineffective portion of the hedge is recognised in the income statement in finan-cial income or expenses. When the forecast transaction that is hedged results in the recognition of a non-financial asset or liability, the cumulative fair value adjustments on the hedging instrument that were previously deferred in equity are trans-ferred from equity and included in the initial measurement of the cost of the asset or liability concerned;

} fair value hedges: changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded



in profit or loss under the same caption as any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk;

} hedges of net investments in foreign operations: any fair value gains or losses on the hedging instrument relating to the effec-tive portion of the hedge are recognised in equity. The gain or loss relating to the ineffective portion is recognised immedi-ately in profit or loss. When the foreign operation is divested, gains and losses accumulated in equity are transferred to the income statement under the same caption as the disposal gain or loss.

B15 - Assets held for sale and liabilities related to assets held for sale

When the Group expects to recover the cost of an asset through its sale rather than through use, and when a sale is deemed highly probable, the asset is classified as held for sale and is measured at the lower of its carrying amount and fair value less costs to sell. Assets classified as held for sale are not depre-ciated but an impairment loss is recognised if their carrying amount is higher than fair value less costs to sell. The impair-ment loss is reversed if there is a subsequent increase in fair value less costs to sell.

If the sale involves more than one identifiable asset and instead involves a Group of related assets and liabilities which the Group intends to dispose of in a single transaction, this disposal group is classified as being held for sale on a separate line in the state-ment of financial position – no offsetting is allowed between assets held for sale and the related liabilities – and is measured at the lower of its carrying amount and fair value less costs to sell.

B16 - Provisions for pension and other employee benefit obligations

Sequana and its subsidiaries provide their employees with differ-ent types of supplementary employee benefit plans. The specific characteristics of these plans vary depending on the laws, regu-lations and practices applicable in each of the countries where the Group’s employees work.

The plans that have been set up are either defined contribution plans or defined benefit plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions to a separate organisation which frees the employer from all future legal or constructive obliga-tions in the event that plan assets are not sufficient to cover the amounts due to the employees. Therefore, apart from the expense relating to the contributions paid to such organisations, no other related liability is carried in the Group’s books.

Defined benefit plans are all post-employment benefit plans other than defined contribution plans. The Group has an obli-gation to set aside provisions for the future benefits due to its active employees and to pay the benefits of its retired employ-ees. The actuarial risk and investment risk relating to these plans are borne in substance by the Group.

Pension and other post-employment benefit obligations are measured in accordance with the projected unit credit method. The amount of the related provision is calculated on an individual basis using assumptions in terms of life expectancy, employee turnover, increases in salaries, increases in annuities, increases in medical costs and discounting of future sums payable. The specific assumptions for each plan take account of the local eco-nomic and demographic circumstances.

According to IAS 19, the rate used to discount employee benefit obligations should be determined by reference to market yields on corporate bonds issued in the monetary zone in question, with maturities similar to the corresponding obligations, and rated “high quality” by the established rating agencies.

Sequana uses the Markit iBoxx indices for the euro and sterling zones and the Citigroup indices for the dollar zone. These indi-ces are calculated daily for quite a comprehensive range of bond maturities and ratings, and each bond in the index basket com-plies with specific rating, maturity and liquidity criteria.

All bonds in the basket are equally price-weighted in returns. Markit and Citigroup update all of the bonds in the index baskets every month based on any changes to residual maturities or to credit ratings.

Defined benefit plans are sometimes funded by external plan assets. The liability recognised in respect of defined benefit pen-sions and other long-term benefits is the present value of the projected benefit obligation at the end of the reporting period less the fair value of plan assets and minus any past-service cost not yet recognised (except for other long-term benefits for which the past service cost is recognised directly in profit or loss). If the result of this calculation is a net commitment, this is rec-ognised as a liability. If the calculated amount is a surplus, the amount of the recognised asset is capped in line with the guid-ance provided under IFRIC 14 in respect of the limits on defined benefit assets.

Actuarial gains and losses arising on pension benefit obligations, defined as changes related to experience adjustments and actu-arial assumptions in accordance with IAS 19, are recognised directly in equity (shown in the consolidated statement of com-prehensive income). Actuarial gains and losses arising on other long-term benefits are recognised immediately in profit or loss.

Defined benefit plans can give rise to the recognition of provi-sions and mainly concern:

a) pension benefit obligations:

} pension annuity plans,

} lump-sum payments on retirement,

} other pension obligations and supplementary pensions;



b) other long-term benefits:

} long-service awards,

} early retirement plans;

c) other employee benefits:

} healthcare plans,

} employee incentive and/or profit-sharing plans.

B17 - Other provisions

A provision is recognised when the Group has a present obli-gation (legal or constructive) arising from a past event, whose amount can be estimated reliably, and whose settlement is expected to result in an outflow of resources embodying eco-nomic benefits for the Group.

These mainly comprise provisions for environmental and legal contingencies as well as restructuring provisions.

Provisions are discounted where the effect of the time value of money is material. Discounting is calculated based on risk-free rates net of inflation for each geographic area concerned.

Provisions for environmental and legal contingencies

The Group generally assesses its environmental and legal con-tingencies on a case-by-case basis, in accordance with the applicable legal requirements. Provisions are recognised on the basis of the best available information at end of the reporting period, provided that such information enables a probable loss to be determined and that a reliable estimate can be made of the amount of the obligation.

Restructuring provisions

A restructuring provision is recognised when the Group has approved a detailed formal plan for the restructuring and has either started to implement the plan or has publicly announced its main features.

B18 - Debt

Interest-bearing debt is recognised at cost, which corresponds to the fair value of the amount received less directly attributable transaction costs. Debt is subsequently recognised at amortised cost. The difference between the cash received (less directly attributable transaction costs) and the redemption value is taken to profit based on the effective interest rate over the duration of the borrowings.

Debt is classified as a current liability unless the entity has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

When a loan is recognised initially, any directly-attributable transaction costs are deducted from the fair value if the borrow-ings are recognised at amortised cost and then factored into the effective interest rate.

Net debt is an important indicator for the Group. It is the sum of short- and long-term debt, less cash and cash equivalents, other

marketable securities and certain investments accounted for as cash and cash equivalents. A breakdown is provided in Note 18, “Financial instruments”.

B19 - Stock options and share awards

The Group has granted options to purchase Sequana shares and share awards to certain of its employees (“Equity-settled plans”).

At the time of the Group’s transition to IFRS in 2004, the Group elected to apply IFRS 2 to equity-settled plans set up after 7 November 2002 and which had not vested at 1 January 2005, in accordance with the option available under IFRS 1 – First- time Adoption of International Financial Reporting Standards.

At the grant date, the fair value of the options and share awards is calculated in accordance with the binomial method. This fair value is then recognised as an expense over the vesting period of the options or the shares. This method enables the follow-ing elements to be taken into account: the plans’ characteristics (exercise price and period), market data at the grant date (risk-free rate, share price, volatility, expected dividend) and assump-tions regarding the behaviour of beneficiaries.

The fair value of the options and share awards is recognised on a straight-line basis over the vesting period. This amount is rec-ognised in the income statement under “Personnel expenses” with a corresponding adjustment to equity. Upon exercise of the options or the vesting of share grants, the price paid by the ben-eficiaries to acquire the options, or the amount paid by Sequana to award the shares, is recognised in cash with a corresponding adjustment to equity.

At the end of each reporting period the Group assesses the number of options that are expected to vest or to be exercised and recognises the impact of its estimates in profit or loss, with a corresponding adjustment to equity.

The related social security charges are an integral part of these share awards and are recognised immediately in profit or loss in the reporting period in which the plans are set up.

B20 - Treasury shares

Treasury shares are used within the scope of the liquidity con-tract set up to improve both the liquidity of the Sequana share and the regularity of its quotations on the Eurolist market of NYSE Euronext paris (see Note 12d). They are recognised at cost and as a deduction from equity until they are sold.

Proceeds on the sale of treasury shares are debited to equity – and to cash when consideration is received – and no amount is recognised in profit or loss for the period.

B21 - Trade and other payables

Trade and other payables are initially recognised at fair value which in most cases corresponds to their nominal amount.



B22 - Revenue recognition

Revenues are measured at the fair value of the consideration received or receivable for sales of goods and services in the ordinary course of the Group’s activities, net of sales tax, and less any trade or volume discount granted, goods returned and intragroup sales.

Sales include sales of goods and services in the ordinary course of the Group’s main activities. For sales of manufactured goods and goods purchased for resale, revenue is recognised in “sales” when the risk and rewards inherent to ownership of the goods have been transferred to the purchaser. For sales of services, revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period, measured on the basis of work completed.

In France, research tax credits are sometimes granted for research and development expenditure incurred during the reporting period and they are recognised as a deduction from said expenditure and not as a deduction from income tax expense, except for the portion that may be capitalised in line with accounting policies.

Interest income is recognised on a time-proportion basis using the effective interest method.

Dividends are recognised in the income statement when the shareholder’s right to receive a dividend has been established.

B23 - Other operating income and expenses, net

This caption includes material items that must be disclosed sep-arately from other items of profit and loss so as not to distort the presentation of the Group’s results. Examples include:

} gains or losses on disposals of property, plant and equipment and intangible assets (when these are not recognised in “dis-continued operations”);

} impairment of assets (including goodwill impairment);

} restructuring expenses;

} environmental costs related to closed sites or discontinued operations;

} additions to (reversals of) provisions for litigation; and

} other items of a non-recurring nature.

B24 - Operating income and recurring operating income

pursuant to cNc Recommendation 2009-R-03 of 2 July 2009, the Group defines the two indicators that it discloses in its con-solidated income statement as follows:

“Operating income” corresponds to all income and expenses that are not related to financing activities, associates, discontin-ued operations and income taxes;

“Recurring operating income” is equal to “Operating income” less “Other operating income and expenses, net” (see the defi-nition in Note B23).

The Group also uses the following indicator (EBITDA) to calcu-late certain ratios (see Notes 12c and 18):

Earnings before interest, taxes, depreciation and amortisation (or EBITDA) is equal to “Recurring operating income”, less net changes in depreciation, amortisation and provisions related to operating activities. A reconciliation is provided in chapter 1 – Presentation of Sequana – Key figures.

B25 - Net financial income

Net financial income includes the following two items:

} cost of net debt, which corresponds to:

• income from the investment of cash and cash equivalents and net gains made on their sale,

• interest on debt calculated using the effective interest method, the financial expense arising on discounting non-current liabilities and the costs of early repayment of bor-rowings or of cancellation of credit facilities,

• foreign exchange gains and losses,

• changes in the fair value of derivatives related to financial assets;

} other financial income and expenses, which include:

• gains or losses on disposals of non-consolidated investments,

• dividends,

• changes in the fair value of derivatives related to compo-nents of net debt,

• bank charges and other financial fees and commissions.

B26 - Income tax

Income tax expense corresponds to current taxes for all consoli-dated subsidiaries, adjusted for deferred taxes. Income taxes are recognised in profit or loss unless they relate to items recog-nised directly in equity, in which case they are recognised imme-diately in equity.

The Group has elected to recognise the new national economic levy (contribution économique territoriale – CET) applicable to French subsidiaries within the scope of the 2010 Finance Act, as follows:

} the portion of the levy that relates to the company land tax (contribution foncière des entreprises – CFE) is recognised as an operating expense;

} the portion of the levy based on companies’ “value added” (cotisation sur la valeur ajoutée des entreprises – CVAE) is recognised as income tax because the amount of the value added is net of income and expenses and complies with the definition of an income tax provided in IAS 12.2.



B27 - Earnings per share

Basic undiluted earnings per share are calculated by dividing net income attributable to owners by the average number of shares outstanding during the year, excluding treasury shares (calcu-lated on a monthly average basis).

Diluted earnings per share are calculated by adjusting the aver-age number of shares outstanding to take into account (i) the conversion of all dilutive instruments (stock options); and (ii) the value of all goods or services to be received in respect of each stock option.

Share award plans subject to performance criteria are included in the average number of shares outstanding during the year based on the actual number of shares awarded, provided that the specified performance conditions have been met prior to the reporting date.

B28 - Leases

Non-current assets held under finance leases that transfer a significant portion of the risks and rewards of ownership to the Group are recognised in the statement of financial position under property, plant and equipment. Finance leases are capital-ised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Property, plant and equipment acquired under finance leases is depreciated on a straight-line basis over the shorter of the useful life of the asset (based on the same useful lives as for property, plant and equipment owned by the Group) or the lease term. The corresponding lease obligation, net of interest, is recognised as a debt in liabilities.

This accounting treatment applied to assets and liabilities related to finance leases leads to the recognition of corresponding deferred taxes.

Payments made under operating leases are recognised in expenses as incurred.

B29 - Segment reporting

Pursuant to IFRS 8, the operating segments reported corre-spond to the reporting basis used in the internal reports that are regularly reviewed by the Group’s operating decision mak-ers (the Chief Executive Officer assisted by members of the Executive Committee).

Segment assets are the operating assets used by a segment in the context of its operating activities. They include attributable goodwill, property, plant and equipment and intangible assets as well as all current assets attributable to the segment. They do not include current or deferred tax assets, assets held for sale, other investments, or non-current receivables and other financial assets, which are identified as “unallocated assets”.

Segment liabilities result from a segment’s activities and are directly attributable to the segment or can reasonably be allo-cated to the segment. They include current and non-current lia-bilities other than debt, liabilities related to assets held for sale, and current and deferred tax liabilities, which are identified as “unallocated liabilities”.

B30 - Statement of cash flows

The statement of cash flows is presented using the indirect method.



note 3 - measurement of impairment lossesGoodwill and intangible assets with indefinite useful lives are tested for impairment on an annual basis, or more frequently if there is an indication that they may be impaired.

Property, plant and equipment and other intangible assets with finite useful lives are only tested for impairment if there is an indication that they may be impaired. For impairment testing purposes, assets are allocated to cash-generating units (CGUs), defined as the small-est group of identifiable assets that generates cash inflows that are largely independent of the cash inflows of other groups of assets. Goodwill is tested at the level of the CGUs likely to benefit from the synergies developed within the scope of the business combination resulting from the acquisition.

The impairment test compares the CGU’s carrying amount (includ-ing any allocated goodwill) to its recoverable amount, which is the observable market price on an organised market. If no observable market data is available, the recoverable value is deemed to be the value in use which is determined based on the following:

} the four-year business plan drawn up by management using growth and earnings assumptions based on past performance, the general economic outlook and forecast market develop-ments. However, as a result of a difficult economic context, the business plan was degraded in certain cases in order to take into account the uncertain market forecasts;

} a terminal value calculated by extrapolating the most recent cash flows included in the business plan using a steady long-term growth rate for cash flows beyond the period covered by the plan that is considered appropriate for the market in which the CGU operates;

} forecast discounted cash flows calculated by reference to a rate based on the Sequana Group’s weighted average cost of capital, in the absence of a specific discount rate for the asset being tested. These discount rates are post-tax rates applied to post-tax cash flows that result in recoverable values identi-cal to those obtained by applying pre-tax rates to future cash flows estimated on a pre-tax basis, in accordance with IAS 36.

3a - Goodwill

At 31 December 2011, the goodwill arising from the AWA Ltd takeover carried out in 2000 (€425 million) was allocated to the CGUs as indicated below:

(€ millions) 31/12/2011 31/12/2010

Arjowiggins Security 180 180

Arjowiggins Creative Papers 90 90

Antalis group 155 155

TOTAL 425 425

In 2010 and 2011, the Group did not recognise any impairment losses based on impairment testing of the CGUs to which this goodwill has been allocated.

Key assumptions used in impairment testing of goodwill:

Key assumptions used in impairment calculations for Antalis 2011 2010

Long-term growth rate 1.50% 1.50%

After-tax discount rate Europe 6.50% 7.00%

South Africa 13.00% 13.00%

South America 8.75% 8.50%

Asia 7.00% 8.00%

Key assumptions used in impairment calculations for Arjowiggins 2011 2010

Long-term growth rate 1.00% 1.00%

After-tax discount rate Continental Europe 6.75% 7.00%

United States 6.75% 7.00%

United Kingdom 6.75% 7.50%

The outcome of these tests should withstand any reasonable variation in the assumptions.



Other goodwill

Impairment testing of goodwill carried on the books of Arjowiggins resulted in the recognition of impairment expense of €18 million on goodwill previously recognised for Arjowiggins Graphic. This amount was recognised in “Other operating expenses” at 31 December 2011. No impairment was identified during impairment testing of goodwill carried on the books of Antalis.

In 2010, impairment testing of goodwill carried on the books of Antalis and Arjowiggins did not highlight any risk of impairment.

3b - Property, plant and equipment

Impairment testing of the main production sites in 2011 used the same discount rates as for impairment testing of goodwill (see Note 3a).

Due to below budget operating performances and an unfavourable business outlook for certain CGUs in 2011, Arjowiggins’ manage-ment tested property, plant and equipment for impairment and rec-ognised impairment losses for a pre-tax amount of €43 million at 31 December 2011 (Graphic: €26 million, US Coated: €11 million, Creative Papers: €6 million concerning the closure of two machines). In 2010, impairment losses booked on certain CGUs in previous peri-ods were deemed no longer justified in view of their improved oper-ating performances and the Group reversed the surplus impairment charges, generating net income of €32 million for the period (includ-ing €30 million for Arches in France and Dettingen in Germany, which were sold in March 2011).

Antalis did not recognise any impairment losses on property, plant and equipment in 2011. In 2010, it recognised impairment in an amount of €2.8 million in respect of the UK.

3c - Testing sensitivity to key assumptions

Measurement of the Group’s goodwill and intangible assets is subject to changes in the key assumptions used to calculate their value in use. These include:

Sensitivity to a 1% increase in the after-tax discount rate

At 31 December 2011, a 1% increase in the after-tax discount rate would generate additional impairment expense of €30 million, mainly on property, plant and equipement, and on goodwill carried on the books of Arjowiggins (Graphic division: €21 million of which €4 million of goodwill, Coated US division: €9 million).

Sensitivity to a 1% decline in the long-term growth rate

At 31 December 2011, a 1% decline in the long-term growth rate would generate additional impairment expense of €29 million, mainly on property, plant and equipement, and on goodwill car-ried on the books of Arjowiggins (Graphic division: €23 million of which €3 million of goodwill, Coated US division: €6 million).

Sensitivity to a 1% increase in the after-tax discount rate and a 1% decline in the long-term growth rate

At 31 December 2011, the combined impact of a 1% increase in the after-tax discount rate and a 1% decline in the long-term growth rate would generate additional impairment expense of €69 million, mainly on property, plant and equipment, and on goodwill carried on the books of Arjowiggins (Graphic division: €38 million of which €6 million of goodwill, Coated US division: €13 million, Creative Papers division: €17 million of goodwill).

note 4 - changes in scope of consolidation

4a - Acquisitions

The Group did not carry out any major acquisitions in 2010 or 2011.

4b - Operations sold or in the course of being sold

2011

In March 2011, Arjowiggins’ sold its Decor and Abrasive, Thin Opaque Papers, and Fine Arts businesses based at the Arches (France) and dettingen (Germany) plants (see Note 1 – Significant events of the year).

These businesses were not classified as “Assets held for sale” at 31 December 2010 because the “highly probable” criterion stipulated in IFRS 5 was not satisfied at this date.

2010

The businesses sold by Antalis in 2011, i.e., its Spanish retail office supply business and its Portuguese wholesale office sup-plies business and paper and cardboard converting facility, were classified as “Assets held for sale” and “Liabilities related to assets held for sale” at 31 december 2010 (see Note 1 – Significant events of the year).

In 2010, the Group recorded impairment losses amounting to €4.6 million against the Portuguese business based on the esti-mated fair value less costs to sell.



An analysis of net income from discontinued operations is set out below:

(€ millions) 2011 2010

Arjowiggins’ businesses based at Arches & Dettingen

Sales 46 216

Current operating expenses (45) (205)

Non-current operating expenses (2) 30

Gain on disposal 1 –

Net financial income – 1

Pre-tax profit – 42

Income tax benefit (expense) – (4)

NET INCOME FROM DISCONTINUED OPERATIONS – 38

The consolidated statement of cash flows includes the net movements related to assets or disposal group(s) held for sale, analysed as follows by type of cash flow:

(€ millions) 2011 2010

Arjowiggins - Arches & Dettingen

Operating activities (6) (9)

Investing activities 1 5

Proceeds on disposal 75 –

Financing activities – 4

TOTAL NET CASH FLOWS 70 –

4c - Assets held for sale and liabilities related to assets held for sale

These items break down as follows:

(€ millions) 31/12/2011 31/12/2010

Assets held for sale

Property, plant and equipment – 5

Inventories – 6

Trade receivables – 20

Other current assets – 1

TOTAL – 32

Liabilities related to assets held for sale

Trade payables – 21

Other current liabilities – 3

TOTAL – 24

Amounts for 2010 primarily concern assets and liabilities related to assets held for sale in Spain and Portugal on the books of Antalis (see Note 4b).



note 5a - Goodwill(€ millions) 2011 2010

Balance at 1 January

Gross amount 1,019 1,010

Impairment losses (376) (375)

CARRYING AMOUNT 643 635

First-time consolidated subsidiaries 3 –


Impairment losses (18) –

Other – (2)

Balance at 31 December

Gross amount 1,018 1,019

Impairment losses (393) (376)


Impairment losses are shown in the income statement under “Other operating income and expenses, net”. Goodwill relating to Arjowiggins Graphic was written down by an amount of €18 million in 2011 (see Note 3a).

Goodwill can be analysed as follows by business segment as of 31 December:

(€ millions) 2011 2010

Arjowiggins Security 185 183

Arjowiggins Creative Papers 103 102

Arjowiggins Graphic 17 35

Sub-total – Arjowiggins 305 320

Antalis – Group goodwill 155 155

Antalis – France 12 12

Antalis – United Kingdom 19 18

Antalis – Germany & Austria 22 20

Antalis – Switzerland 8 8

Antalis – Benelux 8 8

Antalis – Central and Eastern Europe 14 15

Antalis – Baltic countries and Russia 9 9

Antalis – Nordic countries 13 13

Antalis – South America 31 34

Antalis – Industrial packaging 24 24

Antalis – Other subsidiaries 5 7Sub-total – Antalis 320 323




note 5b - other intangible assets

(€ millions)Purchased

goodwill

Brands, licences &

patents Software Other Total

At 1 January 2010

Gross amount 1 6 135 21 163

Accumulated amortisation and impairment – – (90) (12) (102)

CARRYING AMOUNT 1 6 45 9 61

Increases(1) – – 11 5 16

Amortisation(2) – – (12) (2) (14)

Disposals – – – (4) (4)

Translation adjustments – – 1 – 1

Reclassifications – (4) 3 3 2

At 31 December 2010


Accumulated amortisation and impairment – – (104) (14) (118)


Increases(1) – – 13 6 19

Amortisation(2) – – (14) (2) (16)

Impairment losses – – (1) – (1)

Disposals – – – (1) (1)

Changes in scope of consolidation – – – 1 1

Reclassifications – (2) 4 – 2

At 31 December 2011


Accumulated amortisation and impairment – (1) (117) (12) (130)

CARRYING AMOUNT 1 – 50 15 66

(1) This item corresponds to acquisitions and internally-generated non-current assets in the respective amounts of €10 million and €9 million in 2011 (2010: €9 million and €7 million, respectively).

(2) The €16 million in amortisation recorded in 2011 is included in the “Depreciation and amortisation” caption in the income statement (2010: €14 million).

Research and development expenditure recognised in the 2011 income statement amounted to €12 million (2010: €10 million).

Capitalised research and development expenses are non-material on a Group-wide basis (€1 million in 2011).



note 6 - Property, plant and equipment

(€ millions) Land BuildingsMachinery &

equipment Other Total

At 1 January 2010

Gross amount 19 324 1,597 144 2,084

Accumulated depreciation and impairment – (182) (1,335) (77) (1,594)


Capital expenditure – 4 29 20 53

Disposals – (1) (2) – (3)

Translation adjustments 1 5 4 1 11

Depreciation(1) – (17) (34) (3) (54)

Impairment losses(1) – – (7) (5) (12)

Reversals of impairment losses(1) – – 11 – 11

Impact of discontinued operations(2) – (1) 26 – 25

Reclassifications 6 12 29 (39) 8

Changes in scope of consolidation – – – (1) (1)

At 31 December 2010

Gross amount 26 337 1,664 142 2,169



Capital expenditure – 5 22 27 54

Disposals – (1) – (1) (2)

Depreciation(1) – (11) (33) (8) (52)

Impairment losses(1) – – (42) (1) (43)

Reversals of impairment losses(1) – – 1 – 1

Reclassifications – 2 9 (5) 6

Changes in scope of consolidation (2) (16) (66) (7) (91)

At 31 December 2011

Gross amount 24 304 1,496 139 1,963



(1) Depreciation expense for the reporting period is included in the “Depreciation and amortisation” caption in the income statement. Impairment losses and reversals are included in “Other operating income and expenses, net” and analysed in Note 3 – Measurement of impairment losses.

(2) The presentation of the results of Arjowiggins - Arches & Dettingen for 2010 in Net income (loss) from discontinued operations led to the transfer of depreciation expense of €5 million and reversals of asset impairment losses of €30 million.

The amount of expenditure recognised end-2011 in relation to property, plant and equipment in progress was €23 million (2010: €14 million).

No items of property, plant and equipment were pledged as collateral in either 2011 or 2010.

The Group’s capital expenditure projects did not generate any capitalised borrowing costs in 2011 or 2010.



Movements in property, plant and equipment held under finance leases were as follows:

(€ millions) BuildingsMachinery &


At 1 January 2010

Gross amount 8 18 20 46

Accumulated depreciation and impairment (2) (9) (4) (15)

CARRYING AMOUNT 6 9 16 31

Depreciation and amortisation – (2) (1) (3)

At 31 December 2010




Capital expenditure – 1 – 1

Depreciation and amortisation – (2) (1) (3)

Changes in scope of consolidation – – (2) (2)

At 31 December 2011




The characteristics of these leases were as follows at 31 December 2011:

(€ millions) BuildingsMachinery &


Disclosures concerning the Group’s lease liabilities

Nominal amount of liability at inception of the leases 13 9 16 38

At year-end:

Residual amount of fixed lease payments 2 4 10 16

Residual amount of conditional lease payments – 3 – 3

TOTAL RESIDUAL LEASE LIABILITIES 2 7 10 19

Maturities of residual lease liabilities at year-end

Less than 1 year 1 1 1 3

2 to 5 years 1 5 3 9

More than 5 years – 1 6 7

TOTAL RESIDUAL LEASE LIABILITIES AT YEAR-END 2 7 10 19

Present value of lease liabilities 2 6 8 16



note 7 - Investments in associates

Movements during the year

(€ millions) 31/12/2011 31/12/2010

Opening balance 6 3

Income of associates 1 –

Changes in scope of consolidation (1) 3

Translation adjustments (1) –

CLOSING BALANCE 5 6

Analysis by investment

(€ millions) 31/12/2011 31/12/2010

Closing balance

Arjowiggins subsidiaries 2 3

Antalis subsidiaries 3 3

TOTAL 5 6

Income of associates

Antalis subsidiaries 1 –

TOTAL 1 –

note 8 - financial assets

Analysis of financial assets carried in the statement of financial position

(€ millions) 31/12/2011 31/12/2010

Non-current financial assets 12 11

Current financial assets 11 20

TOTAL FINANCIAL ASSETS 23 31

Gross amount 27 35

Provision for impairment in value (4) (4)

Movements in gross amount during the year

(€ millions) 31/12/2011 31/12/2010

Opening balance 35 33

Increases 4 8

Decreases and disposals(1) (7) (11)


Changes in scope of consolidation (4) –

Reclassifications – 1

Other – 2

CLOSING BALANCE 27 35

(1) In 2010, losses on the disposal of Legg Mason shares amounted to €8 million, offset by the reversal of a financial provision of €5 million.



Movements in provisions for impairment in value

(€ millions) 31/12/2011 31/12/2010

Opening balance (4) (9)

Disposals – 5

CLOSING BALANCE (4) (4)

Maturity of non-current financial assets

(€ millions) 31/12/2011 31/12/2010

1 to 5 years 6 9

More than 5 years 6 2


Analysis by type of financial asset at closing

(€ millions)

Non-current financial assets Current financial assets

31/12/2011 31/12/2010 31/12/2011 31/12/2010

Held-to-maturity investments 6 3 8 12

Other deposits and guarantees 6 3 8 12

Available-for-sale financial assets 6 8 2 8

Non-consolidated investments 6 8 – –

Marketable securities – – 2 8

Loans and receivables issued by the Group – – 1 –

Special loans and other financial receivables – – 1 –

CLOSING BALANCE 12 11 11 20

note 9 - Inventories(€ millions) 31/12/2011 31/12/2010

Raw materials and other supplies 91 115

Work in-progress 29 30

Semi-finished and finished goods 72 108

Goods held for resale 265 273

CARRYING AMOUNT(1) 457 526

Gross amount 488 559


(1) Including the portion of inventories more than one year old. N/A N/A

The Group recognised the following amounts in the income statement in relation to inventories:

Changes in inventories recognised in “Recurring operating income” (19) 62

Under “Net additions to (reversals of) provisions”:

- Additions to provisions for impairment in value of inventories (8) (9)

- Reversals of provisions for impairment in value of inventories 8 8

Under “Other operating income and expenses, net”:

- Additions to provisions for impairment in value of inventories (2) (2)

The amount of inventories pledged totalled €4 million at 31 December 2011, the same amount as one year previously.



note 10 - other assets

Breakdown by type

(€ millions) 31/12/2011 31/12/2010

OTHER NON-CURRENT ASSETS 115 81

Other assets related to employee benefits 114 76

Current tax receivables 1 1

Derivative instruments – 4

TRADE RECEIVABLES 558 608

Gross amount 593 646


OTHER RECEIVABLES 122 136

Current tax receivables 6 7

Indirect tax receivables 24 28

Receivables on disposals of non-current assets 3 3

Advances to suppliers 4 5

Derivative instruments 2 1

Other receivables 83 92

Movements in provisions for impairment

(€ millions)

31/12/2011 31/12/2010

Trade receivables Other receivables Trade receivables Other receivables

Opening balance (38) (1) (41) (1)Net (additions to)/reversals of impairment provisions 1 – 2 –

Translation adjustments 1 – (1) –

Changes in scope of consolidation 1 – 1 –

Reclassifications – – 1 –

CLOSING BALANCE (35) (1) (38) (1)Of which, current (35) (1) (38) (1)

Maturity of other assets (net)

(€ millions) Total Less than 1 year 1 to 5 years More than 5 years

At 31 December 2011

Other non-current assets 115 – – 115

Trade receivables 558 558 – –

Other receivables 122 122 – –At 31 December 2010

Other non-current assets 81 – 4 77Trade receivables 608 608 – –

Other receivables 136 136 – –

note 11 - cash and cash equivalents(€ millions) 31/12/2011 31/12/2010

Cash and cash equivalents 323 299


Cash and cash equivalents for 2011 and 2010 only concern cash at bank.



note 12a - Share capitalAt 31 December 2011, Sequana’s share capital amounted to €74,317,503, divided into 49,545,002 fully paid-up shares, each with a par value of €1.50. There has been no change in the share capital since 1 January 2008.

note 12b - Stock optionsThe Company has granted stock options to certain of its employ-ees and corporate officers in accordance with the authorisa-tions given by shareholders at the Shareholders’ Meetings of 19 May 1998, 21 May 2003 and 3 May 2005. The exercise price of the options was set at no discount to the stock market price for the period. Under the terms of these plans, the shares can-not be purchased or sold before the end of the four-year lock-

up period applicable for tax purposes. The options expire eight years after the grant date.

At the present time, the exercise price of the options is consider-ably higher than the current share price and it is highly unlikely that the options will be exercised.

Details of the outstanding stock option plans are provided in the table below:

Date of Management Board or Board of Directors’ meeting 11/04/2002 15/05/2003 18/06/2004 03/05/2005 10/05/2006

Total number of shares

outstanding

Date of AGM 19/05/1998 19/05/1998 21/05/2003 03/05/2005 03/05/2005

Initial number of existing/newly-issued shares to be allocated on exercise of the options

658,300 420,000 55,000 515,000 90,000

Exercise period from: 11/04/2004 15/05/2005 18/06/2006 03/05/2009(1) 10/05/2010(1)

to: 11/04/2010 15/05/2011 18/06/2012 03/05/2013 10/05/2014

Initial exercise price (in €) 220.30 116.90 220.47 223.50 225.46

Adjusted exercise price at 31 December 2010 (in €)(2) 116.90 114.47 117.53 220.46 222.17

Analysis of movements

Number of shares at 1 January 2010 97,317 104,530 68,028 626,556 109,476 1,005,907

Options forfeited (97,317) – – – – (97,317)

Number of shares at 31 December 2010 – 104,530 68,028 626,556 109,476 908,590

Options forfeited – (104,530) – – – (104,530)

Number of shares at 31 December 2011 – – 68,028 626,556 109,476 804,060

(1)The 3 May 2005 and 10 May 2006 plans vest in tranches over a period of three years, at a rate of one third per year of presence in the Company.

(2) The adjusted exercise price includes adjustments made following dividend payments deducted from reserves as well as an adjustment carried out following the purchase – or potential purchase – by all of the Company’s shareholders of Sequana shares at a price below the quoted stock market price (November 2006 public buyback offer).

All of these stock options have been measured and recognised in full in the consolidated accounts since 31 December 2009.

2011 2010

Numbers of sharesWeighted average

price (in €) Numbers of sharesWeighted average

price (in €)

Options outstanding at beginning of year 908,590 19.76 1,005,907 19.48

Options forfeited (104,530) 14.47 (97,317) 16.90

Options outstanding at end of year(1) 804,060 20.44 908,590 19.76

Options exercisable at year-end 804,060 20.44 908,590 19.76

(1) The number of options outstanding at the year-end includes the impact of options granted, cancelled or exercised during the year.



note 12c - Share award plansNo share award plans were implemented in any Group entities in 2011.

On 9 February 2010 and 19 April 2010, the Board of Directors of Sequana and the Chief Executive Officer acting on the Board’s instructions, respectively, decided to set up a performance share plan involving the allocation of 1,921,000 Sequana shares to 169 beneficiaries. The plan aims at rewarding and foster-ing loyalty among key Group executives and managerial-grade staff, and giving them a stake in Sequana’s future earnings and value creation. Only Sequana shares may be awarded within the scope of this plan.

In approving this plan, the Board of Directors availed of the authorisation granted to it by the Shareholders’ Meeting of 11 May 2007.

All shares granted under this plan – regardless of the benefi-ciary – are subject to presence and performance conditions set out in the Group’s 2010-2013 three-year business plan. Thus, the vesting criteria for the different grantees have been tailored to the performance of the grantees’ specific business segment and not merely to the performance of the Group as a whole. If the presence and performance conditions have been met at 31 December 2011, a portion of the shares will vest on 30 April 2012. This portion will represent up to two-thirds of the total number of shares awarded. The remaining shares will vest on 30 April 2013, provided that the performance conditions are met at 31 December 2012.

The shares will vest between 30 April 2012 and 30 April 2014, depending on the tax situation of the beneficiaries, and they are also subject to a two-year lock-up period that runs from the vest-ing date.

Depending on the beneficiary’s position within the Group and the business to which he or she is assigned, performance cri-teria are based (i) equally on Sequana’s consolidated EBITDA and its consolidated net debt, or (ii) on Sequana’s consolidated EBITDA (30%), its consolidated net debt (30%), and EBITDA reported by the beneficiary’s business (40%).

The shares will be awarded out of new shares issued by Sequana through the capitalisation of reserves, profit or issue premiums. Grantees will acquire beneficial ownership of the shares and have entitlement to dividends from the first day of the period in which the shares were issued.

On 10 March 2011, the sale of Arjowiggins Arches SAS and Arjowiggins Deutschland GmbH (decor papers within Arjowiggins’ Industrial Solutions division) to the Swedish Munskjö group significantly altered the Group’s structure. Consequently, pursuant to the terms of the share award plan, the Board of Directors’ meeting of 21 July 2011 decided to amend the performance conditions as well as certain other conditions affected by the sale.

Moreover, the vesting process was accelerated for the por-tion of share awards to be granted to the remaining employ-ees of the Industrial Solutions division as the aforementioned sale makes is impossible to measure the contribution of these remaining employees to the performance of the Group as a whole. Therefore, 63,560 shares will vest on 30 April 2012 or 30 April 2014, depending on the tax situation of the beneficiaries.

Group management reviewed the vesting criteria for the February and April 2010 share award plans and concluded that certain performance conditions will not be met at 31 December 2011.

In accordance with IFRS 2, estimates of performance condi-tions are reviewed at each reporting date and the impact of any changes are recognised in “Personnel expenses” with a corre-sponding adjustment to equity.

Based on the review of the share award plans at 31 December 2011, the following amounts were booked in “Personnel expenses”:

(i) income of €2 million corresponding to revaluation of the expense recognised in 2010; and

(ii) an expense of €1.3 million for the estimated commitment for 2011 based on the new plan parameters.



The performance share plan implemented in 2010 is detailed in the table below:

Grant date

Initial numberof shares granted At 31 December 2011

Per-share fair value(in €)

Total costof plan at

31/12/2011

Amount recognised in personnel expenses

in 2011

Number of beneficiaries

Numbers of shares

Number of beneficiaries

Numbers of shares

09/02/2010 168 1,906,000 157 1,807,160 5.66 – 5.00 3.2 income of €0.7 million

19/04/2010 1 15,000 1 15,000 10.40 – 10.08 – –

In 2010, a total of €0.7 million was recognised in personnel expenses for employer charges relating to French beneficiaries of the performance share plan.

Per-share fair value was calculated based on (i) the share price at the grant date; (ii) expected dividend returns; (iii) forecast share price at the vesting date; (iv) the probability that Group performance conditions would be met; and (v) the interest rate used to calculate the non-transferability discount.

Sensitivity of the 2011 performance share plan to changes in key assumptions

Sensitivity to interest rates

The impact of a 50 basis point increase or decrease in the inter-est rate used to calculate the non-transferability discount for shares awarded would be a €0.1 million decrease or increase, respectively.

Sensitivity to changes in beneficiary turnover rates

The impact of a 1% increase or decrease in the beneficiary turnover rate would be a €0.1 million decrease or increase, respectively.

note 12d - treasury sharesShare buyback programmes have been authorised every year by Shareholders’ Meetings since 2003. The purposes and terms and conditions of these programmes were set out in the resolu-tions of these meetings.

On 21 June 2006, a liquidity contract was set up covering an initial maximum amount of €4 million, and increased to €8 million on 21 January 2008. The purpose of this contract is to improve both the liquidity of the Sequana share and the regularity of its quotations on the Eurolist market of NYSE Euronext paris.

On 28 April 2011, the Group amended the liquidity contract negotiated with Oddo Corporate Finance and reduced the maxi-mum amount to €6 million.

At 31 December 2011, the 325,003 Sequana shares held by the Company under the liquidity contract – representing €1.1 million – were recognised as a deduction from equity (221,926 shares at 31 December 2010, representing €2.6 million). Net losses of €2.7 million in 2011 and net gains of €1.3 million in 2010 on dis-posal of treasury shares were recognised in retained earnings.

note 12e - cumulative translation adjustmentThis caption can be analysed as follows:

(€ millions) US dollar Pound sterling Other currencies(1) Total

At 1 January 2010 (10) (81) (5) (96)

Movements during the year 7 5 36 48

At 31 December 2010 (3) (76) 31 (48)

Movements during the year (1) 3 (15) (13)

At 31 December 2011 (4) (73) 16 (61)

(1) In 2011, mainly the Brazilian real and the Swiss franc.



note 12f - dividends paidDividends paid by Sequana to its shareholders in 2011 and 2010 were as follows:

Year Numbers of shares Total dividend Net dividend per share

2010 49,281,809 €19,712,723.60 €0.40

2011(1) 49,545,002 – –


note 13 - earnings per shareThe reconciliation between basic earnings per share and diluted earnings per share is as follows:

2011 Net loss (in € millions)

Weighted average number of shares

during the year Loss per share (in €)

Net loss attributable to owners (77) 49,256,017 (1.57)

Impact of stock options(1) – – –

Impact of share award plans(2) – – –

Net loss attributable to owners – diluted (77) 49,256,017 (1.57)

2010Net income

(in € millions)

Weighted average number of shares

during the year Earnings per share (in €)

Net income attributable to owners 32 49,265,233 0.65

Impact of stock options(1) – – –

Impact of share award plans – 1,215,108 (0.01)

Net earnings attributable to owners – diluted 32 50,480,341 0.64

The average diluted and undiluted number of shares outstanding is calculated as follows:

2011 2010

Number of shares at 31 December (see Note 12a) 49,545,002 49,545,002

Weighted impact of treasury shares over the period (see Note 12d) (288,985) (279,769)

Weighted average number of shares – undiluted 49,256,017 49,265,233

Impact of share award plans(2) – 1,215,108

Weighted average number of shares – diluted 49,256,017 50,480,341

(1) Based on the average Sequana share price for 2010 and 2011, non-dilutive instruments correspond to the stock option plans described in Note 12b. At 31 December 2011, they represented a total number of 1,005,222 potential non-dilutive shares. (2010: 912,049 shares).

(2) The impact of share award plans have not been included at 31 December 2011 due to their anti-dilutive effect at that date.



note 14 - non-controlling interestsThe Group has not had any material non-controlling interests since 2010.

note 15 - Provisions

Analysis by type of provision

(€ millions)

Current portion Non-current portion

31/12/2011 31/12/2010 31/12/2011 31/12/2010

Restructuring costs 10 18 13 4

Litigation and environmental contingencies 9 8 5 10

Pensions and other post-employment benefits 12 20 115 91

Other provisions(1) 5 11 13 11


(1) Other provisions mainly comprise a provision related to the sale of Arjowiggins’ carbonless paper business amounting to €9.2 million at 31 December 2011 (2010: €13 million). The balance consists of a number of different non-material amounts.

Excluding pensions and other post-employment benefits which are analysed in Note 16, the Group mainly booked provisions in 2011:

} for restructuring costs;

} for litigation and environmental contingencies.

Since September 2010, both the EU and national competition authorities have been investigating horizontal cartel arrangements in the envelope sector in Spain. A decision in respect of the two Antalis entities concerned is expected in late 2012 or early 2013. In the absence of any developments with regard to this file, the Company had not recognised a provision at 31 December 2011.

Expected maturity of non-current provisions

(€ millions)

31 December 2011 31 December 2010

1 to 5 years More than 5 years 1 to 5 years More than 5 years

Restructuring costs 7 6 4 –

Litigation and environmental contingencies 3 2 8 2

Pensions and other post-employment benefits 5 110 11 80

Other provisions 8 5 7 4




Movements in provisions in 2011

(€ millions)Opening balance Additions

Reversals (utilised

provisions)

Reversals (surplus

provisions)

Changes in scope of

consolidation Other(1)

Closing balance

Restructuring costs 22 25 (21) (1) (1) (1) 23

Litigation and environmental contingencies 18 2 (5) (1) – – 14

Pensions and other post-employment benefits 111 6 (16) (18) (11) 55 127

Other provisions 22 2 (5) – – (1) 18

TOTAL 173 35 (47) (20) (12) 53 182

Impact on income statement captions

Additions to and reversals of provisions (recurring operating income) – 8 (11) (18) – – –

Other operating income and expenses, net – 27 (36) (2) – – –

(1) This column comprises (i) a positive amount of €2 million corresponding to translation adjustments; (ii) a positive €52 million corresponding to actuarial gains and losses recognised through equity in accordance with IAS 19; and (iii) miscellaneous adjustments for a negative amount of €1 million.

Movements in provisions in 2010

(€ millions)Opening balance Additions

Reversals (utilised

provisions)

Reversals (surplus

provisions)

Changes in scope of

consolidation Other(1)

Closing balance

Restructuring costs 27 25 (31) (1) – 2 22

Litigation and environmental contingencies 20 2 (2) (2) – – 18

Pensions and other post-employment benefits 99 8 (8) (1) – 13 111

Other provisions 25 4 (8) – – 1 22

TOTAL 171 39 (49) (4) – 16 173

Impact on income statement captions

Additions to and reversals of provisions (recurring operating income) – 9 (6) (1) – – –

Other operating income and expenses, net – 30 (43) (3) – – –

(1) This column comprises (i) a positive amount of €5 million corresponding to translation adjustments; (ii) a positive €10 million corresponding to actuarial gains and losses recognised through equity in accordance with IAS 19; and (iii) miscellaneous adjustments for a positive amount of €1 million.



note 16 - employee benefits

Change in the projected benefit obligation(1)

(€ millions)

2011 2010

Pension benefit obligations

Other long-term benefits Total



Projected benefit obligation at start of year 1,087 5 1,092 1,000 4 1,004

Service cost 11 – 11 11 – 11

Interest cost 55 – 55 55 – 55

Employee contributions 2 – 2 2 – 2

Curtailments and settlements (13) – (13) – – –

Changes to plan (19) – (19) – – –

Acquisitions/disposals (9) (3) (12) – – –

Actuarial (gains) and losses 99 – 99 32 – 32

Benefits paid (52) – (52) (53) – (53)

Other (translation adjustments) 31 – 31 40 1 41

Projected benefit obligation at end of year 1,192 2 1,194 1,087 5 1,092

Projected benefit obligation at end of year:

Partially or totally funded 1,157 – 1,157 1,050 – 1,050

Unfunded 35 2 37 37 5 42

(1) The four-year information required under IAS 19 has not been provided in these tables for 2009 and 2008 but is contained in the 2009 Registration Document which is incorporated by reference into this report.

Change in plan assets(1) (2)

(€ millions)

2011 2010





Fair value of plan assets at start of year 1,075 – 1,075 954 – 954

Expected return on plan assets 55 – 55 53 – 53

Employer contributions 32 – 32 27 – 27

Employee contributions 2 – 2 2 – 2

Acquisitions/disposals (1) – (1) – – –

Settlements (7) – (7) – – –

Benefits paid (52) – (52) (53) – (53)

Actuarial gains and (losses) 56 – 56 52 – 52

Other (translation adjustments) 33 – 33 40 – 40

Fair value of plan assets at end of year 1,193 – 1,193 1,075 – 1,075

Actual return on plan assets 10.29% – – 10.88% – –

Composition of plan assets

Equities 32.03% – – 32.69% – –

Bonds 55.28% – – 53.09% – –

Other 12.69% – – 14.22% – –


(2) These assets do not include any property occupied by, or asset used by the Group, nor any equity or debt instrument of the Sequana Group.



Financial surplus or deficit(1)

(€ millions)

2011 2010





Financial surplus or deficit 2 (3) (1) (12) (5) (17)

Ceiling on amount of plan assets (11) – (11) (16) – (16)

Net amount recognised(2) (9) (3) (12) (28) (5) (33)

Breakdown by geographical area

United Kingdom 76 – 76 50 – 50

Other European Union countries (40) (2) (42) (49) (5) (54)

Switzerland 4 (1) 3 3 – 3

North America (46) – (46) (29) – (29)

Other countries (3) – (3) (3) – (3)


(2) Reconciliation of financial surplus/(deficit) to the figures reported in the statement of financial position for employee benefits:

(€ millions) 2011 2010

provisions for pension and other employee benefit obligations (see Note 15) (127) (111)

other assets related to employee benefits (see Note 10) 114 76

Amounts for subsidiaries not subject to IAS 19 on grounds of non-materiality or outside the scope of application of IAS 19

1 2

TOTAL (12) (33)

Analysis of statement of comprehensive income

(€ millions)

2011 2010

Pension benefit obligations Total

Pension benefit obligations Total

Items recognised in the statement of comprehensive income during the year

Actuarial (gains) and losses(1) 43 43 (20) (20)

Surplus cap impact (5) (5) 13 13

Total 38 38 (7) (7)

Cumulative actuarial (gains) and losses recognised in equity

At 1 January 41 41 61 61

Actuarial (gains) and losses arising during the year 43 43 (20) (20)

At 31 December 84 84 41 41

Analysis of experience (gains) and losses arising during the year

Experience (gains) and losses – projected benefit obligation 18 18 (11) (11)

Experience (gains) and losses – plan assets (56) (56) 52 52

Total (38) (38) 41 41

(1) The €43 million in net actuarial gains for 2011 consists of €99 million in actuarial losses on the projected benefit obligation and €56 million in actuarial gains on plan assets. In 2010, there were net actuarial gains of €20 million, comprising actuarial losses on the projected benefit obligation of €32 million and €52 million in actuarial gains on plan assets.



Analysis of net expense

(€ millions)

2011 2010





Service cost 11 – 11 11 – 11

Interest cost 55 – 55 55 – 55

Expected return on plan assets (55) – (55) (53) – (53)

Past service cost (19) – (19) – – –

Amortisation of actuarial gains and losses – – – – 1 1

Impact of settlements and curtailments (6) – (6) – – –

TOTAL NET EXPENSE (14) – (14) 13 1 14

Assumptions used

2011 2010


Other long-term benefits


Other long-term benefits

To determine the benefit obligation at 31 December

Discount rate including inflation 4.60% 4.27% 5.23% 4.56%

Expected rate of increase in salaries 3.48% 1.95% 3.86% 2.07%

Expected rate of return on plan assets 4.71% – 5.35% –

Rate of increase in pension benefits 2.88% – 2.34% 2.37%

Rate of inflation of medical costs 7.60% – 6.80% –

To determine the expense for the year

Discount rate including inflation 5.23% 4.56% 5.53% 5.01%

Expected rate of increase in salaries 3.86% 2.07% 4.00% 2.72%

Expected rate of return on plan assets 5.35% – 5.26% –

Rate of increase in pension benefits 2.34% – 2.88% 2.39%

Rate of inflation of medical costs 6.80% – 7.60% –

Breakdown of assumptions used by geographical area

2011 United KingdomOther EU countries Switzerland Norway North America

Discount rate including inflation 4.75% 4.75% 2.75% 2.75% 4.50%

Expected rate of increase in salaries 4.09% 2.87% 1.50% 4.00% –

Expected rate of return on plan assets 4.56% 4.38% 3.63% 5.40% 8.00%

Rate of increase in pension benefits 2.95% 2.00% – – 2.00%

2010 United KingdomOther EU countries Switzerland Norway North America

Discount rate including inflation 5.50% 4.75% 3.00% 3.20% 5.50%

Expected rate of increase in salaries 4.35% 2.41% 1.50% 4.00% –

Expected rate of return on plan assets 5.44% 4.28% 3.33% 5.60% 8.00%

Rate of increase in pension benefits 3.31% 1.86% – 0.50% 2.00%



Sensitivity of assumptions

On all employee benefit obligations

(€ millions)Benchmark

discount rate -0.50%Benchmark

discount rateBenchmark

discount rate +0.5%

Fair value of benefit obligation at 31 December 2011 1,292 1,194 1,107

Service cost for 2012 12 11 10

On UK and North American employee benefit obligations only

(€ millions)Benchmark

discount rate - 0.50%Benchmark

discount rateBenchmark

discount rate +0.5%

Fair value of benefit obligation at 31 December 2011 924 986 1,055

Service cost for 2012 3 3 3

Sensitivity of healthcare benefit obligations to a +/-1% increase/decrease in medical costs

A +/-1% increase/decrease in medical costs would not have a material impact on the Group’s benefit obligations at 31 December 2011 or on the service cost for 2012.

Sensitivity of the service cost for 2012 to a +/-0.50% increase/decrease in the rate of return on plan assets

A +/-0.50% increase/decrease in the rate of return on plan assets (assuming all other factors remain stable) would have an impact of +/-€5.9 million on the Group’s service cost for 2012.

Estimated contributions for 2012

The amount of contributions payable by the Group in respect of pension benefit obligations for 2012 is estimated at €34.6 million.

Discount rates used

Discount rates for each monetary zone were determined based on yields at 31 December 2011 on high quality corporate bonds rated AA or better with maturities that correspond to the average maturities of the Group’s obligations in each zone.

Return on plan assets

The expected rate of return on plan assets is determined on the basis of the allocation of assets, projected returns and past performance.

Impact of the application of IFRIC 14

In accordance with IFRIC 14, as of 31 December 2011:

} The Group booked an additional provision for an onerous obligation on the McNaughton papers and Modo Merchants defined benefit pension plans in the UK for which no sur-plus will accrue to the employer. Based on the present value of the projected funding requirements for the two pension plan deficits, €6.2 million and €3.5 million were booked for McNaughton papers and €4 million for Modo Merchants.

} Net plan assets for the pensionskasse plan in Switzerland were capped at €3.9 million in line with the balance of employer contribution reserves which may be offset against future Group contributions.

Obligations under defined benefit plans

Pension benefit obligations cover the payment of pensions, sup-plementary pensions and lump-sum payments on retirement.

The Group’s main pension benefit obligations concern the United Kingdom, the United States, France and Switzerland. These countries represent 91% of the Group’s total employee benefit obligations.

In the United Kingdom, the principal defined benefit obligations arise under four pension plans:

} the Wiggins Teape Pension Scheme (WTPS) which now only covers former employees of the UK subsidiaries of Antalis and Arjowiggins (early retirees or retirees);

} the Antalis Pension Scheme (APS) which covers current and former employees (early retirees or retirees) of the UK subsidi-aries of Antalis and Arjowiggins;



} the James McNaughton and Modo Merchants pension plans which cover former employees (early retirees or retirees) of the subsidiaries of the sub-group James McNaughton;

} the Arjo UK Pension Scheme (AWS), which covers certain employees of Antalis in the UK (depending on their location). It was closed to new entrants in 2005, and was replaced by a defined contribution plan.

In the United States, the principal benefit obligations of the Group subsidiary Appleton Coated LLC arise under two post-employment benefit plans:

} defined benefit pension plans (three plans);

} post employment healthcare plans (three plans).

In France, the two main defined benefit plans are:

} The RCR supplementary defined benefit plan for certain managers of Arjowiggins. This plan has been closed to new entrants since 1981; and

} The Arjowiggins lump-sum retirement payment plan.

In Switzerland, the main plan is the Pensionskasse, a defined benefit plan covering Antalis’ Swiss-based employees.

The Sequana Group’s UK subsidiaries have defined benefit plans in place. More specifically, the Wiggins Teape Pension Scheme (WTPS) is managed by a Board of three trustees. Each year the trustees recalculate the plan funding deficit based on the advice of an actuary and they may unilaterally request addi-tional employer contributions for the purpose of eliminating the shortfall over time.

They may also require employers to provide guarantees when they consider this appropriate and Sequana and Arjowiggins provided the joint and several guarantee in respect of the APS and WTpS plans described in Note 31.

In accordance with IFRS, provisions have been recorded to cover the full amount of the Group’s obligations relating to the UK pension fund, determined using the actuarial assumptions described above. For the purposes of the financial statements, the outstanding balance of the additional contribution requested by the trustee is included in the annual calculation of the pension provision.

The deficit funding plan is currently based on the valuation carried out by the fund’s trustees on 31 December 2009 (GBP 58.4 million) and provides for the payment of GBP 8 million in October 2012, and between GBP 0.7 million and GBP 8.7 million every October between 2013 and 2016.

DEVELOPMENTS IN 2011

Changes to the WTPS (UK) plan

To reduce Arjowiggin’s pension benefit obligation exposure, a new “pension increase exchange” (PIE) clause was inserted into the Wiggins Teape Pension Scheme (WTPS) in the UK in April 2011.

This clause provides current retirees and future retirees (“deferred members”) with the choice of opting for a higher annuity than that provided under the existing terms of the plan in exchange for waiving their entitlement to revaluation of this annu-ity in the future.

At the end of June 2011, pension holders were given a detailed presentation of the new arrangement together with examples of the expected impact on the amount of the annuity. The pro-posed changes were put to the retirees between end-July and November 2011 and future retirees will only be able to decide whether to opt for the new arrangement or the existing arrange-ment upon retirement.

In accordance with IAS 19, based on an estimated rate of approval of the proposed arrangement of 35%, the Group treated this as a change to the plan and measured the corresponding impact as a reduction in pension benefit obligations. This resulted in recog-nition of income of GBP 15 million (€17.3 million) with a matching increase in defined benefit assets.

At the end of the period of deliberation, the rate of approval was 18% and the impact of the difference between the estimated rate of approval (35%) and the actual rate (18%) was recognised in an €8 million reduction in actuarial gains and losses recog-nised through equity.

Antalis in the Netherlands and Switzerland

As part of the process of harmonising employee benefits through-out the Group, a number of plans were amended in the second-half of 2011, leading to the reversal of the following provisions:

} €5.5 million for Antalis BV in the Netherlands upon the merg-ing of two defined benefit plans into a single new defined con-tribution plan; and

} €1.9 million for Antalis Switzerland following amendments to the Pensionskasse defined benefit plan.

These reversals were offset by the recognition of matching amounts of income in the second-half of 2011.



note 17 - debt

17a - Breakdown of debt by maturity

(€ millions) Less than 1 year 1 to 5 years More than 5 years Total

Short-term bank borrowings and overdrafts 20 – – 20

Other bank borrowings 882 7 5 894

Finance lease obligations 3 9 7 19

Other 1 – – 1

AT 31 DECEMBER 2011 906 16 12 934

Short-term bank borrowings and overdrafts 14 – – 14

Other bank borrowings 93 838 8 939

Finance lease obligations 4 14 7 25

Other 3 – – 3

AT 31 DECEMBER 2010 114 852 15 981

The Group’s financing is ensured through short-term drawdowns on confirmed medium-term credit facilities. The contractual conditions applicable to these facilities at 31 december 2011 are described in Note 18b. The contracts underlying these credit facilities were set to expire in 2012, and as a result, drawdowns outstanding at 31 December 2011 (€876 million) are presented as having maturities of less than one year despite the fact that the agreements have since been renewed (see Note 1 – Significant events of the year). Note 1 also sets out the maturity dates in 2012 for the three credit facilities, as well as the corresponding amounts drawn down, i.e., €36 million between 1 and 3 months, and €840 million between 6 months and 1 year.

At 31 December 2010, drawdowns on these facilities (€850 million) were shown in medium-term items in view of the maturity of these same agreements at that date.

Antalis’ confirmed credit facility (covering the period October 2007 to October 2012) is secured by a portfolio of receivables provided as a guarantee by twelve Group entities operating in ten countries, representing an aggregate amount of €354 million (2010: €379 million). This guarantee must equal at least 60% of the amount drawn down under the loan agreement.

17b - Breakdown of debt by interest rate

(€ millions) Below 3%Between

3% and 4%Between

3% and 5%Between

3% and 7.5% Over 7.5% Total

Short-term bank borrowings and overdrafts 12 7 – 1 – 20

Other bank borrowings 858 – 29 7 – 894

Finance lease obligations 4 – 14 – 1 19

Other 1 – – – – 1

AT 31 DECEMBER 2011(1) 875 7 43 8 1 934

Short-term bank borrowings and overdrafts 7 6 1 – – 14

Other bank borrowings 898 19 10 9 3 939

Finance lease obligations 4 – 18 2 1 25

Other 3 – – – – 3

AT 31 DECEMBER 2010 912 25 29 11 4 981

(1) Including the impact of derivative instruments, the Group’s average financing cost in 2011 was between 3% and 4%.



17c - Analysis of debt by main currencies

(€ millions) EUR GBP USD Other Total

Short-term bank borrowings and overdrafts 6 1 9 4 20

Other bank borrowings 782 61 – 51 894

Finance lease obligations 18 – – 1 19

Other 1 – – – 1

AT 31 DECEMBER 2011 807 62 9 56 934

Short-term bank borrowings and overdrafts 7 – 1 6 14

Other bank borrowings 837 46 – 56 939

Finance lease obligations 22 – – 3 25

Other 2 1 – – 3

AT 31 DECEMBER 2010 868 47 1 65 981

note 18 - financial instruments

18a - Breakdown of statement of financial position captions by IAS 39 financial instrument category

31/12/2011 Valuation by category of instrument(1)

(€ millions) NoteCarrying amount Fair value

Financial assets at fair value

through profit

or loss

Available-for-sale

financial assets

Loans and receivables

carried at amortised

cost

Held-to maturity

investments

Financial liabilities carried at

amortised cost

Derivative instruments

Non-current financial assets 8 12 12 6 – – 6 – –

Other non-current assets 10 115 115 – – 115 – – –

Trade receivables 10 558 558 – – 558 – – –

Other receivables 10 122 122 – – 120 – – 2

Current financial assets 8 11 11 2 – 8 1 – –

Cash and cash equivalents 11 323 323 323 – – – – –

Long-term debt 17 28 28 – – – – 28 –

Other non-current liabilities 20 2 2 – – – – 2 –

Short-term debt 17 906 906 – – – – 906 –

Trade payables 20 631 631 – – – – 631 –

Other payables 20 236 236 – – – – 233 3

(1) Instruments are broken down depending on the different valuation techniques used, such as the levels used in IFRS 7:

- Level 1 (direct reference to market prices): only applicable to cash and cash equivalents at fair value through profit and loss;

- Level 2 (valuation technique based on observable data): applicable to all of the Group’s other financial assets and liabilities, which may or may not be derivatives, and which must be measured at fair value; it consists of all derivative instruments used by the Group and assets and liabilities at fair value through profit and loss excluding cash.



31/12/2010 Valuation by category of instrument(1)

(€ millions) NoteCarrying amount

Fairvalue

Financial assets at fair value

through profit or

loss

Available-for-sale

financial assets

Loans and receivables

carried at amortised

cost

Held-to maturity

investments

Financial liabilities carried at

amortised cost

Derivative instruments

Non-current financial assets 8 11 11 8 – – 3 – –

Other non-current assets 10 81 81 – – 77 – – 4

Trade receivables 10 608 608 – – 608 – – –

Other receivables 10 136 136 – – 135 – – 1

Current financial assets 8 20 20 8 – 12 – –

Cash and cash equivalents 11 299 299 299 – – – – –

Long-term debt 17 867 867 – – – – 867 –

Other non-current liabilities 20 12 12 – – – – 3 9

Short-term debt 17 114 114 – – – – 114 –

Trade payables 20 646 646 – – – – 646 –

Other payables 20 269 269 – – – – 263 6

(1) Instruments are broken down depending on the different valuation techniques used, such as the levels used in IFRS 7:

- Level 1 (direct reference to market prices): only applicable to cash and cash equivalents at fair value through profit and loss;

- Level 2 (valuation technique based on observable data): applicable to all of the Group’s other financial assets and liabilities, which may or may not be derivatives, and which must be measured at fair value; it consists of all derivative instruments used by the Group and assets and liabilities at fair value through profit and loss excluding cash.

Methods and assumptions used to measure financial instruments

The best indicator of the fair value of a contract is the price that would be agreed upon by a buyer and a seller acting under arm’s length conditions. This is generally the transaction price at the trade date. The contract is subsequently measured using observable market data that provide the most reliable indicator of fair value.

The fair value of derivative instruments is determined as follows:

} interest rate swaps are measured by discounting contractual cash flows to present value;

} options are measured using option pricing models such as the Black & Scholes method that use quoted prices from an active market and/or prices supplied by outside financial institutions;

} forward currency contracts are measured by discounting the differential future cash flows to present value;

} commodity derivatives are valued as follows:

• futures traded on an organised market are marked to market;

• products traded over the counter (swaps, forward con-tracts): future cash flows are discounted to present value;

• options are measured using mathematical option pricing models.

The fair value of debt is measured using the amortised cost method.

Trade receivables and payables are measured at their carrying amount. Discounting “Trade payables” and “Trade receivables” balances to present value does not materially impact their fair value due to the very short payment and settlement terms applied.

The information used for the financial instruments recorded in fair value in assets/liabilities is provided by external counterparties.



18b - Treasury management – Financial instruments

Analysis of debt

Consolidated debt – which represented a gross amount of €934 million at 31 December 2011 (31 December 2010: €981 million) – is financed on an individual basis within the Group’s holding companies and subsidiaries. Consolidated net debt totalled €609 million at end-2011 (2010: €674 million) and is carried in the following statement of financial position captions:

(€ millions) 2011 2010

debt (Note 17) 934 981

cash and cash equivalents (Note 11) (323) (299)

other marketable securities (Note 8) (2) (8)

NET DEBT 609 674

Analysis by business segment:

(€ millions) 2011 2010

Antalis 226 261

Arjowiggins 314 353

Holding companies 69 58

NET DEBT 609 674

Analyses by maturity and by currency are provided in Note 17.

The following section provides details of current financing arrangements for each entity.

Arjowiggins

Arjowiggins’ gross debt amounted to €435 million at the end of 2011 (2010: €429 million). At present 91.8% of this debt is financed by a €400 million syndicated credit facility negotiated by Arjowiggins with a pool of front-ranking banks in July 2007 for a five-year period through July 2012.

The cost of the amounts drawn down varies according to Euribor or Libor for the US dollar at the maturity of each drawdown, plus a margin of between 0.325% and 0.625% calculated based on the most recent available net debt/EBITDA ratio.

This facility may be drawn down in euros or US dollars for peri-ods of one, two, three or six months, or longer periods, subject to agreement between the paying agent and Arjowiggins.

At 31 December 2011, the Group had drawn down €400 million of the credit facility and the average outstanding amount over the year was €378 million. The weighted average maturity of draw-downs in 2011 was 31 days.

Under the terms of the syndicated credit agreement, the Group must maintain a net debt/EBITDA ratio equal to or less than 3.5 at 30 June and 31 December each year. At 31 December 2010 and 30 June 2011, the Group complied with this ratio, however, at 31 December 2011, net debt/EBITDA stood at 6.9.

Prior to disclosing this ratio, Arjowiggins struck an agreement that the banking pool would waive its right to demand the early repayment of any outstandings under the facility in full in the event that the thresholds of the covenants had been exceeded.

The fact that the amounts outstanding under this facility are not subject to early repayment in full reflects the open discussions led by Arjowiggins with the lending banks, to extend this credit facility that was due to expire shortly.

In addition to these renegotiated credit facilities, Arjowiggins SAS’ pool of banks has granted it unconfirmed overdraft facili-ties of up to €52 million. These facilities had not been availed of at 31 December 2011.

In 2011, the Arjowiggins group also received financing via its factoring programme set up in 2008, under which the related receivables are deconsolidated. Eleven subsidiaries are now included in this programme.

At 31 December 2011, the group had raised a net amount of €97 million under the programme which helped to reduce its net debt. The amount raised in 2010 was €109 million.

Antalis

Antalis’ gross debt – which amounted to €458 million at 31 December 2011 – is mainly financed through a €580 mil-lion syndicated credit facility granted by a pool of front-ranking banks. In accordance with the contractually agreed repayment schedule, the initial amount of €650 million was partially reim-bursed as follows: €15 million on 31 October 2008 and again on 31 October 2009, and €20 million on 31 October 2010 and again on 31 October 2011.

This multi-currency line of credit is guaranteed by trade receiv-ables which must represent at least 60% of the outstanding amount at any one time. At present, the trade receivables pro-vided as collateral are drawn from twelve Group entities in ten different countries.



The credit agreement was signed on 25 October 2007 for a five-year period and includes a portion of €70 million repayable over this term. The agreement breaks down into three tranches:

} the first two tranches were drawn down at the date the agree-ment was entered into until the expiry of the agreement, in the amount of €330 million at 31 December 2011;

} the third tranche is used by successive €110 million one-month drawdowns and by periods of one to seven days under a swing line of €140 million.

At 31 December 2011, €440 million had been drawn down, rep-resenting 95.9% of Antalis’ gross debt and the average out-standing amount during the year was €484 million.

The margin charged on the amounts drawn down varies between 0.50% and 1.75% and is based on a calculation that takes account of the net debt/EBITDA ratio and the percentage of the outstanding amount covered by the trade receivables provided as collateral. Based on the net debt/EBITDA ratio of 2.24 at 31 December 2011, if the percentage of the outstanding amount covered by the trade receivables is greater than 75%, the margin charged would be 0.50%; if it was between 60% and 75%, the margin would be 0.65%.

Under the terms of this credit agreement, Antalis must comply with the following financial covenants:

Applicable financial ratios Criteria until 31 October 2012

Consolidated net debt/EBITDA ≤3.50

Gearing ratio (consolidated net debt/equity) <1.1

Recurring operating income/net interest expense ≥3.0

(1) In 2011 and 2010, Antalis complied with these ratios.

The lending bank syndicate has also been granted a pledge on the Map Merchant Group shares acquired by Antalis.

The Group has entered into negotiations with Antalis’ pool of banks to renew these credit facilities (see Note 1 – Significant events of the year).

Sequana (parent company)

Sequana’s gross debt was €40 million at 31 December 2011 (2010: €65 million) and is financed by a confirmed credit facility with a top-ranking bank. It was signed in June 2006 for an initial five-year period and extended through February 2012 based on amendments signed in June and September 2011.

It provides credit facilities of up to €36.4 million by drawing down amounts over periods of between one and three months at an annual rate of 1.80%. Under the terms of this credit agree-ment, at the end of each half year, the Group must comply with two financial covenants:

} consolidated net debt/consolidated equity <1.2

} consolidated net debt/consolidated EBITDA <4

At 31 December 2011, the Group complied with the consolidated net debt/consolidated equity ratio but not with the consolidated net debt/consolidated EBITDA ratio. In order to prevent the early repayment in full of amounts drawn down under this credit facil-ity that could have been triggered by exceeding the thresholds of the covenant, Sequana obtained an agreement from the bank to waive its right to such an early repayment. Sequana also entered into negotiations with the bank over the terms and conditions of renewing this credit facility which is due to expire shortly (see Note 1 – Significant events of the year).

Sequana has also negotiated unconfirmed overdraft facilities of up to €5 million with a top-ranking bank, of which €4.9 million had been used at end-December 2011.



18c - Risk management – interest rate risk, foreign exchange risk, equity price risk, commodity price risk, credit risk and liquidity risk

Fair value of financial instruments

In order to hedge against fluctuations in interest rates, exchange rates and commodity prices, the Sequana Group uses derivatives. Some of these qualify for hedge accounting as cash flow hedges. At 31 December 2011, these derivatives are carried in assets and liabilities for the following fair value amounts:

(€ millions) Current assetsNon-current

assets Current liabilitiesNon-current

liabilities Total fair value

Interest rate derivatives – – 3.2 – (3.2)

Exchange rate derivatives 1.4 – – – 1.4

Commodity derivatives 1.1 – – – 1.1

TOTAL 2.5 – 3.2 – (0.7)

At 31 December 2011, the fair value of these derivatives was split between equity accounts and the income statement as follows:

(€ millions)Fair value through

equityFair value through

profit or loss Total fair value

Interest rate derivatives (5.0) 1.8 (3.2)

Exchange rate derivatives (1.7) 3.1 1.4

Commodity derivatives 1.1 – 1.1

TOTAL (5.6) 4.9 (0.7)

At 31 December 2011, the fair value of derivatives that qualify as cash flow hedges recognised through other comprehensive income was offset by a net liability of €5.6 million, compared to a net liability of €10.2 million at 31 December 2010.

This total change in fair value of €4.6 million was recognised directly in equity.

Risk management

Interest rate risk

The Group manages the finances of each subsidiary, along with the related interest rate risk, on a centralised basis tailored to each individual entity.

The Group is exposed to interest rate risk on its debt as its pri-mary sources of financing are at floating rates of one, two or three months in the currency concerned (Euribor for the Euro and Libor for the US dollar and pound sterling). Derivatives are used to manage this exposure (mainly swaps and collars).



The following table shows the notional amounts and fair values of the Group’s portfolio of interest rate derivatives at 31 December 2011:

Type Buyer/seller position MaturityFair value through

equityFair value through

profit or loss Total fair value

<1 yearbetween

1 and 2 years (€ millions)

Swap (€)Pay leg (fixed rate) €255m

– (3.1) 1.8 (1.3)Receive leg (floating rate)

€255m

Collar (€)Purchase €50m

– (0.9) – (0.9)Sale €50m

Swap (GBP)Pay leg (fixed rate) GBP 20m

– (1.0) – (1.0)Receive leg (floating rate)

GBP 20m

TOTAL (5.0) 1.8 (3.2)

All of the derivatives in the table are eligible for hedge account-ing. The ineffective portion of the interest rate hedges is not material. The components of comprehensive income included in total fair value mainly correspond to the fair value of interest rate

swaps at the date they qualified as cash flow value hedges, sub-sequent to the date the interest rate swaps were set up.

In 2011, a negative amount of €9.2 million was recycled from equity to profit or loss as a result of interest rate hedging.

Fixed versus floating rate debt

Consolidated debt (as defined by the Group) can be broken down between fixed and floating rate debt as follows (not including the impact of hedging):

(€ millions) 2011 2010

Floating rate debt 928 948

Fixed rate debt 6 33

TOTAL (EXCLUDING ACCRUED INTEREST) 934 981

Consolidated debt including the impact of hedging can be broken down between fixed and floating rate debt as follows:

(€ millions) 2011 2010

Floating rate debt 649 342

Floating rate debt hedged by collars 50 50

Fixed rate debt 285 589

TOTAL (EXCLUDING ACCRUED INTEREST) 934 981

The Group has hedged 35.2% of its consolidated debt at 31 December 2011 by setting up interest rate derivatives to cap or limit its expo-sure to interest rate fluctuations.

In 2011, the average cost of bank borrowings, including the impact of these derivatives was 3.3%.



Interest rate sensitivity analysis

The interest rate sensitivity analysis included all variable-rate flows from non-derivative and derivative instruments and it was assumed that the amounts of debt and financial instruments at 31 December 2011 and at 31 December 2010 are constant over

the year. For the purposes of the analysis, all other variables, particularly exchange rates, are deemed to remain constant.

A +/-0.5% change in interest rates at the end of the reporting period, would have the following positive (negative) impacts on equity and profit or loss (pre-tax impact).

At 31 December 2011:

(€ millions) Fair value sensitivitySensitivity of annual interest rate expense

Impact of a 0.5% decrease Impact of a 0.5% increase

Type of instrument

Impact on fair value in

statement of financial

positionImpact on

profit or lossImpact on

equity



positionImpact on


equity

Impact of a 0.5% decrease

Impact of a 0.5% increase

Debt – – – – – – 4.6 (4.6)

Factoring – – – – – – 0.5 (0.5)

Derivatives (0.6) – (0.6) 0.6 – 0.6 (0.6) 0.6

TOTAL (0.6) – (0.6) 0.6 – 0.6 4.5 (4.5)


(€ millions) Fair value sensitivitySensitivity of annual interest rate expense

Impact of a 0.5% decrease Impact of a 0.5% increase

Type of instrument



positionImpact on


equity



positionImpact on


equity

Impact of a 0.5% decrease

Impact of a 0.5% increase

Debt 4.8 (4.8)

Factoring 0.6 (0.6)

Derivatives (2.2) – (2.2) 2.2 – 2.2 (1.7) 1.7

TOTAL (2.2) – (2.2) 2.2 – 2.2 3.7 (3.7)

Foreign exchange risk

The Group’s foreign exchange risk arises on (i) inter-company financing transactions between the Antalis and Arjowiggins groups and their subsidiaries and (ii) the operating activities of the subsidiaries themselves. It hedges these risks through the use of currency options and forward currency contracts.

The foreign exchange impacts of these derivatives should be off-set by gains or losses in the income statement. The exposure on financing transactions between the groups and their subsidiaries is relatively limited.

As regards operating activities, Antalis’ exposure to foreign exchange risk concerns subsidiaries outside of the eurozone whose trade receivables and payables may not be denominated in their domestic currencies, especially subsidiaries in Asia, South America, South Africa and certain Central European coun-tries which set up their own currency hedges. The Antalis holding company is only exposed to foreign exchange risk on the man-agement fees it bills to its subsidiaries which it hedges by sell-

ing currency forward and through currency options (puts, calls and collars). It mainly hedges positions in the following combina-tions of currencies: EuR/cZK, EuR/pLN, EuR/ZAR, uSd/ZAR. Antalis does not use hedge accounting to measure its positions and all changes in fair value are recognised in profit or loss.

Arjowiggins’ exposure to foreign exchange risk mainly arises on the paper pulp purchases (usually billed in US dollars) and exports of the European subsidiaries. The main currency com-binations concerned are EUR/USD and EUR/GBP for subsidi-aries in the eurozone, GBP/USD for the UK subsidiaries, and DKK/USD and DKK/GBP for the Danish subsidiary, Dalum. The group holding company sets up hedges on behalf of the subsidi-aries when they place orders.



In addition, in the last quarter of 2011, Arjowiggins sold forward a portion of the 2012 forecast sales of the operational subsidiar-ies, as it had done in 2010. It uses hedge accounting to measure these positions.

The main components (> €1 million) in the Group’s portfolio of exchange rate derivatives at end-2011, consisting of forward pur-chase and sales and European currency options (puts and calls) are presented in the following table:

Type Currency soldCurrency

purchased

Nominal amount (in millions of

currency units) Maximum maturityFair value

throughequity

Fairvalue

throughprofit

or loss

Totalfair value

value

Forward EUR USD 22.3 USD 31/10/2012 (0.3) 3.4 3.1

Forward EUR GBP 0.9 GBP 28/09/2012 – – –

Forward GBP EUR 46.5 GBP 31/10/2012 (1.2) (0.2) (1.4)

Forward USD GBP 42.6 USD 30/11/2012 (0.1) (0.1) (0.2)

Forward GBP DKK 2.9 GBP 31/10/2012 – – –

Options CZK EUR 3.7 EUR 28/03/2012 – 0.1 0.1

Options pLN EUR 10.0 EUR 25/01/2012 – (0.2) (0.2)

Forward ZAR USD 14.0 USD 02/07/2012 – 0.2 0.2

Forward ZAR EUR 6.6 EUR 15/06/2012 – (0.3) (0.3)

Forward MYR USD 1.5 USD 19/04/2012 – – –

Forward DKK EUR 52.8 DKK 31/01/2012 – – –

TOTAL (€ millions) (1.6) 2.9 1.3

At 31 December 2011, the total fair value of these hedges was a positive amount of €1.3 million split between profit and loss and equity in a positive amount of €2.9 million and a negative amount of €1.6 million, respectively.

A negative amount of €1.2 million was recycled from equity to profit or loss during the period in relation to currency hedges.

Foreign currency sensitivity analysis

Foreign currency sensitivity analyses at 31 December 2011 focus on fluctuations in EUR/GBP, EUR/USD, and GBP/USD rates as well as movements in the DKK in relation to the CHF, USD and GBP, as these are the currency combinations in which the Group has sold forward a portion of 2012 sales. The Group’s exposure to fluctuations in other currency combinations was deemed too dispersed to be broken down.

For the purposes of the analyses, all other variables, particularly interest rates, are deemed to remain constant.

Exposure to fluctuations in the EUR/GBP exchange rate at 31 December 2011

(€ millions) 10% increase in value of the euro 10% decrease in value of the euro

Type of asset/liability Nominal

amount

Currency of financial instrument

Functional currency of entity

concerned Impact on

fair value Impact on

profit or loss Impact on

equity Impact on



equity

Financial receivables 94.8 GBP EUR 9.5 9.5 – (9.5) (9.5) –

Trade receivables (4.8) GBP EUR (0.5) (0.5) – 0.5 0.5 –

Debt 110.1 GBP EUR (11.0) (11.0) – 11.0 11.0 –

Trade payables (11.0) GBP EUR 1.1 1.1 – (1.1) (1.1) –

Derivatives 54.6 GBP EUR (5.3) (0.5) (4.8) 5.3 0.5 4.8

TOTAL (6.2) (1.4) (4.8) 6.2 1.4 4.8



Exposure to fluctuations in the EUR/GBP exchange rate at 31 December 2010



amount



concerned Impact on



equity Impact on



equity

Financial receivables 221.1 GBP EUR 22.1 22.1 – (22.1) (22.1) –

Trade receivables 18.6 GBP EUR 1.9 1.9 – (1.9) (1.9) –

Debt 87.2 GBP EUR (8.7) (8.7) – 8.7 8.7 –

Trade payables 4.0 GBP EUR (0.4) (0.4) – 0.4 0.4 –

Derivatives 79.3 GBP EUR (7.8) (0.3) (7.5) 7.8 0.3 7.5

TOTAL 7.0 14.5 (7.5) (7.0) (14.5) 7.5

Exposure to fluctuations in the EUR/USD exchange rate at 31 December 2011



amount



concerned Impact on



equity Impact on



equity

Financial receivables 16.0 USD EUR 1.6 1.6 – (1.6) (1.6) –

Trade receivables 4.8 USD EUR 0.5 0.5 – (0.5) (0.5) –

Debt 3.6 USD EUR (0.4) (0.4) – 0.4 0.4 –

Trade payables 45.7 USD EUR (4.6) (4.6) – 4.6 4.6 –

Derivatives (17.1) USD EUR 1.7 2.9 (1.2) (1.7) (2.9) 1.2

TOTAL (1.1) 0.1 (1.2) 1.1 (0.1) 1.2

Exposure to fluctuations in the EUR/USD exchange rate at 31 December 2010



amount



concerned Impact on



equity Impact on



equity

Financial receivables 5.3 USD EUR 0.5 0.5 – (0.5) (0.5) –

Trade receivables 8.5 USD EUR 0.8 0.8 – (0.8) (0.8) –

Debt 1.2 USD EUR (0.1) (0.1) – 0.1 0.1 –

Trade payables 55.0 USD EUR (5.5) (5.5) – 5.5 5.5 –

Derivatives (77.9) USD EUR 7.8 4.3 3.5 (7.8) (4.3) (3.5)

TOTAL 3.5 – 3.5 (3.5) – (3.5)



Exposure to fluctuations in the GBP/USD exchange rate at 31 December 2011

(€ millions) 10% increase in value of the GBP 10% decrease in value of the GBP


amount



concerned Impact on



equity Impact on



equity

Financial receivables 0.8 USD GBP 0.1 0.1 – (0.1) (0.1) –

Trade receivables 4.2 USD GBP 0.4 0.4 – (0.4) (0.4) –

Debt 0.3 USD GBP (0.0) (0.0) – 0.0 0.0 –

Trade payables (2.4) USD GBP 0.2 0.2 – (0.2) (0.2) –

Derivatives 32.8 USD GBP (3.2) (0.5) (2.7) 3.2 0.5 2.7

TOTAL (2.5) 0.2 (2.7) 2.5 (0.2) 2.7

Exposure to fluctuations in the GBP/USD exchange rate at 31 December 2010

(€ millions) 10% increase in value of the GBP 10% decrease in value of the GBP


amount



concerned Impact on



equity Impact on



equity

Financial receivables 2.9 USD GBP 0.3 0.3 – (0.3) (0.3) –

Trade receivables 10.1 USD GBP 1.0 1.0 – (1.0) (1.0) –

Debt 0.4 USD GBP (0.0) (0.0) – 0.0 0.0 –

Trade payables 0.0 USD GBP (0.0) (0.0) – 0.0 0.0 –

Derivatives 20.5 USD GBP (2.0) (0.7) (1.3) 2.0 0.7 1.3

TOTAL (0.8) 0.5 (1.3) 0.8 (0.5) 1.3

Equity price risk

The Group has extremely limited exposure to equity risk.

Commodity and energy price risks

Arjowiggins’ activities expose it to risks arising from fluctuations in the prices of paper pulp and energy which can occur extremely rapidly, and it sets up hedges in agreement with Sequana, based on forecast prices.

As in previous years, Arjowiggins entered into fixed-price swaps that will hedge a portion of its paper pulp requirements through to end-2012. These swaps are based on Northern Bleached Softwood Kraft pulp (NBSKp) and Bleached Hardwood Kraft Pulp (BHKP) market indexes and around 15% to 25% of annual purchases of their pulps concerned are hedged until 2012.

The measurement at fair value of these fixed-price paper pulp swaps in 2011 had a €1.1 million positive impact on equity (cash flow hedges).

A negative amount of €5.9 million was recycled from equity to profit or loss during the period in relation to commodity price hedges. The impact of the ineffective portion of the hedge in profit or loss is not material.



The sensitivity of the Group’s exposure in profit or loss and in the fair value reserve to an immediate +/-10% fluctuation in the price of paper pulp is as follows:

(€ millions)

10% increase in paper pulp prices 10% decrease in paper pulp prices



position

Impact on profit

or lossImpact

on equity



position

Impact on profit

or lossImpact

on equity

NBSK + BHKp derivatives 4.7 – 4.7 (4.7) – (4.7)

TOTAL 4.7 – 4.7 (4.7) – (4.7)

Credit risk

Credit risk represents the risk that a customer or receivable will breach a contractual obligation and cause the Group to incur a financial loss. This risk primarily arises in relation to marketable securities and trade receivables.

Counterparty risks on investments and derivatives

The Group’s financial investments are either used solely to invest excess cash drawn down under bank credit facilities or to put up collateral for its subsidiaries. These investments primarily corre-spond to demand or term deposits for currencies bearing inter-est (USD, GBP), money market investments with the Group’s banking partners for non-interest bearing currencies (espe-cially the euro) and very limited investments in units in money market funds. The financial institutions that manage the invest-ments have a long-term rating of at least A+ issued by Standard & Poor’s or a government guarantee, and the Group uses the same counterparties for its derivative instruments, however it did not hold any such instruments at 31 December 2011.

With the exception of paper pulp derivatives, which are con-tracted with two counterparties, the proportion of the portfo-lios of interest rate derivatives and exchange rate derivatives contracted with a given counterparty was limited to 23% and 24%, respectively, of total portfolios at 31 December 2011.

The Group’s policy is only to grant financial guarantees to wholly-owned subsidiaries.

Customer credit risk

In view of the Group’s structure, customer credit risk manage-ment is primarily carried out on a local and decentralised basis in both Arjowiggins and Antalis. In 2006, Arjowiggins took out a group insurance policy with Coface for all of its European subsidiaries covering domestic and export default risk in all of its host countries except the United States and China. Antalis’ credit risk insurance contracts are taken out locally; it does not take out any material contracts at group level, either through a Coface policy or another group credit policy.

Customer credit risk is assessed at the level of each sub-group based on the size of each sub-group’s portfolio of trade receiva-bles. The data in the following table is presented before the elim-ination of intercompany transactions (mainly from Arjowiggins’ books) and there is no material impairment of receivables or cus-tomer risk within the Group.

The Group’s policy is to classify receivables as past due when payment is still outstanding 30 days after the invoice settlement date. Provisions for past due receivables are recorded on a case-by-case basis taking into account past experience with the customer concerned and the amount outstanding.

Statistical provisions may also be recorded for all receivables based on their age.

At 31 December 2011, the Sequana Group’s trade receivables rep-resented a net value of €558 million compared to €608 million one year earlier. This corresponds to a gross amount of €593 million, less a €35 million provision for impairment in value (in 2010, these amounts were €646 million and €38 million, respectively), rep-resenting a provision rate of 6% of the consolidated gross trade receivables portfolio (compared to 5.9% in 2010). Consequently, the cost of bad debts in absolute terms was down year on year while it remained stable in terms of the proportion of the trade receivables portfolio taken as a whole.



Trade receivables portfolio by maturity

Past due

(€ millions)Balance at

31/12/2011 Not yet due 0-30 days 31-60 days 61-90 days >90 daysDisputed

receivables

Trade receivables 593.4 455.2 89.4 13.9 4.7 7.1 23.1

Provisions for impairment of trade receivables (35.5) – – (1.6) (4.2) (6.5) (23.1)

Trade receivables, net 557.9 455.2 89.4 12.3 0.5 0.5 –

Net receivables as a % of gross receivables 94.0% 100.0% 100.0% 88.4% 10.8% 7.6% 0.0%

Net receivables as a % of total receivables portfolio – 81.6% 16.0% 2.2% 0.1% 0.1% –

At 31 December 2011, 18.4% of total outstanding net receivables were past due and not covered by a provision for impairment, up from 15.9% at end-2010.

Liquidity risk

Maturities of cash flows relating to financial liabilities

The following table analyses the maturities of the future cash outflows for financial liabilities from the last drawdown dates, with principal and interest payments given separately. It also includes forecast cash flows from derivatives.

At 31 december 2011, given the financing conditions described in Note 18b, the maturities of future cash outflows break down as follows:

(€ millions) Type of financial liability Derivative instruments

Type of financial liabilityBank

borrowingsShort-term borrowings

Leasing obligations Other Total

Interest rate Commodity Currency

Cash flows due within one year

Interest for the period (12.2) (0.6) (0.9) – (13.7) (3.5) 1.1 1.4

Principal (882.7) (20.1) (4.0) (0.5) (907.3) – – –

Cash flows due between one and two years

Interest for the period (0.8) – (0.7) – (1.5) – – –

Principal (1.5) – (3.2) – (4.7) – – –

Cash flows due between two and three years


Principal (1.5) – (2.5) – (4.0) – – –

Cash flows due between three and four years


Principal (1.5) – (2.5) – (4.0) – – –

Cash flows due between four and five years


Principal (1.5) – (2.6) – (4.1) – – –

Cash flows due in more than five years


Principal (5.1) – (4.6) – (9.7) – – –

TOTAL

Accumulated interest (15.2) (0.6) (3.3) – (19.1) – – –

Principal (893.8) (20.1) (19.4) (0.5) (933.8) – – –




(€ millions) Type of financial liability Derivative instruments

Type of financial liabilityBank

borrowingsShort-term borrowings

Leasing obligations Other Total

Interest rate Commodity Currency

Cash flows due within one year

Accumulated interests (14.7) (0.1) (1.3) – (16.1) (10.6) 3.3 (2.3)

Principal (93.2) (13.8) (3.7) (3.1) (113.7) – – –

Cash flows due between one and two years

Accumulated interests (9.6) – (1.1) – (10.6) (3.7) 1.8 –

Principal (834.4) – (4.2) – (838.6) – – –

Cash flows due between two and three years

Accumulated interests (0.9) – (0.8) – (1.7) – – –

Principal (1.5) – (4.0) – (5.4) – – –

Cash flows due between three and four years


Principal (1.5) – (2.8) – (4.2) – – –

Cash flows due between four and five years


Principal (1.5) – (2.7) – (4.2) – – –

Cash flows due in more than five years


Principal (7.4) – (7.6) – (15.0) – – –

TOTAL

Accumulated interest (29.7) (0.1) (5.2) – (35.0) – – –

Principal (939.3) (13.8) (24.9) (3.1) (981.1) – – –

note 19 - deferred taxes

19a - Breakdown by period of reversal

(€ millions) Less than 1 year (1)

Between 1 and 4 years

More than 4 years Total

Position at 31 December 2011

Deferred tax assets – 13 3 16

Deferred tax liabilities (7) (35) (14) (56)

NET POSITION AT YEAR-END (7) (22) (11) (40)


Deferred tax assets – 35 1 36

Deferred tax liabilities – (35) (34) (69)

NET POSITION AT YEAR-END – – (33) (33)

(1) Offsetting entries between deferred tax assets and liabilities are allocated first to deferred taxes that reverse in less than one year.



19b - Deferred tax assets – movements during the year

(€ millions)

Provision for employee

benefitsLoss

carryforwardsOther items

and offsets(1) Total

At 1 January 2010 19 34 – 53

Expense (income) for the year 1 (5) 7 3

Taxes on items recognised directly in equity (6) – (1) (7)

Translation adjustments 1 1 1 3

Other movements, net – (3) (13) (16)

AT 31 DECEMBER 2010 15 27 (6) 36

Expense (income) for the year – (17) 6 (11)

Changes in scope of consolidation – – (1) (1)

Translation adjustments – (1) (9) (10)

Other movements, net (5) 1 6 2

AT 31 DECEMBER 2011 10 10 (4) 16

(1) Offsets between deferred tax assets and liabilities are recorded at tax group level.

19c - Deferred tax liabilities – movements during the year

(€ millions)

Provision for employee

benefitsProperty, plant and equipment

Tax depreciation and provisions

Other items and offsets(1) Total

At 1 January 2010 (15) (46) (34) 36 (59)

Expense (income) for the year (3) 4 1 (20) (18)

Taxes on items recognised directly in equity (4) – – (2) (6)

Other movements, net 2 9 1 2 14

AT 31 DECEMBER 2010 (20) (33) (32) 16 (69)

Expense (income) for the year (6) 6 2 (7) (5)

Taxes on items recognised directly in equity (1) – 1 – –

Changes in scope of consolidation – 21 – – 21

Translation adjustments (1) – – (1) (2)

Other movements, net (3) (10) 6 6 (1)

AT 31 DECEMBER 2011 (31) (16) (23) 14 (56)

(1) Offsets between deferred tax assets and liabilities are recorded at tax group level.

19d - Current and deferred taxes related to items recognised directly in equity

(€ millions)Actuarial gains

and losses

Fair valueof financial

instrumentsOther items Total

At 31 December 2011 (1) 1 – –

At 31 December 2010(1) (10) (3) (13)

(1) At 31 December 2010, the tax impact of actuarial losses mainly relates to the capping of deferred tax assets in the US for a negative amount of €6 million.



19e - Analysis of current tax losses and tax credits for which no deferred tax assets have been recognised(1)

(€ millions)

Expiry (in base tax amounts) Estimated potential

savingsLess

than 1 yearBetween

1 and 4 yearsMore

than 4 years UnlimitedTotal

taxable base

Current tax losses (by originating country)

At 31 December 2011

France – – – 198 198 68

Germany – – – 12 12 4

United States – – 103 – 103 40

United Kingdom – – – 45 45 11

The Netherlands – 11 41 – 52 13

Czech Republic 1 12 1 – 14 3

Spain 1 – 27 – 28 8

Poland 18 – – – 18 3

Belgium – – – 22 22 8

Denmark – – – 14 14 4

Turkey 4 1 1 – 6 1

Ireland – – – 5 5 1

Other countries – – 14 12 26 6

TOTAL AT 31 DECEMBER 2011 24 24 187 308 543 170

At 31 December 2010

France – – – 140 140 48

Germany – – – 59 59 18

United States – – 55 – 55 22

United Kingdom – – – 60 60 16

The Netherlands – – 44 – 44 11

Czech Republic 3 10 1 – 14 3

Spain – – 9 – 9 3

Poland – 10 5 – 15 3

Belgium – – – 20 20 7

Denmark – – – 7 7 2

Turkey – – 6 – 6 1

Brazil – – – 3 3 1

Other countries – – 5 12 17 2

TOTAL AT 31 DECEMBER 2010 3 20 125 301 449 137

(1) These items correspond to tax loss carryforwards excluding specific regimes applicable to asset disposals.

Deferred tax assets are only recognised for tax loss carryforwards when their recovery is probable in the following financial year or in the medium term (three to five years), based on earnings forecasts determined by reference to medium-term business plans for the compa-nies concerned.



19f - Dispute between Boccafin and the French tax authorities

Following a tax audit covering 2005 and 2006, the French tax authorities claimed that Boccafin – formerly Permal Group – which was a limited partnership with share capital at that time, was not part of the Sequana tax group and issued tax reassessment notices for income tax and long-term capital gains generated mostly on the disposal of Permal shares.

Following a number of exchanges, the tax authorities reiterated their position at the end of 2010 and issued an assessment for the corresponding amounts.

In early 2011, the tax authorities cancelled income tax payable by Boccafin under the parent-subsidiary regime for a total amount of €13.2 million. They also upheld Sequana’s request for cancellation of income tax already paid for Boccafin at tax group level for a fur-ther amount of €23.4 million (excluding interest on arrears).

The cost of the tax reassessment for Sequana, net of the aforementioned cancellations, would be approximately €60.7 million, including principal, late payment interest and VAT through to end-December 2011.

Boccafin and its legal advisors consider these reassessments to be unfounded. They believe that the arguments they have put for-ward to prove that Boccafin belonged to the Sequana tax group in 2005 are sufficiently solid to ensure a favourable outcome to any subsequent dispute.

Boccafin initiated legal proceedings in October 2011. The legal proceedings are ongoing.

In view of a law professor’s legal opinion in support of Sequana’s position, the Company has not set aside any provisions as of 31 December 2011 for this dispute.

note 20 - other liabilities(€ millions) 31/12/2011 31/12/2010

OTHER NON-CURRENT LIABILITIES 2 12

Employee-related liabilities 2 –

Capital expenditure grants – 1

Derivative instruments – 9

Other liabilities – 2

TRADE PAYABLES 631 646

OTHER PAYABLES 236 269

Current tax payables 4 6

Indirect tax payables 43 47

Employee-related liabilities 90 107

Payables arising on acquisition of assets 8 6

Customer advances 12 14

Capital expenditure grants 1 1

Derivative instruments 3 6

Other payables 75 82

Maturity of other liabilities


At 31 December 2011

Other non-current liabilities 2 – 2 –

Trade payables 631 631 – –

Other payables 236 236 – –

At 31 December 2010

Other non-current liabilities 12 – 12 –

Trade payables 646 646 – –

Other payables 269 269 – –



note 21 - other operating income(€ millions) 2011 2010

Own work capitalised (8) 7

Royalties on licences and patents 1 1

Other revenues 22 19

TOTAL 15 27

note 22 - Personnel expenses(€ millions) 2011 2010

Personnel expenses

Salaries (431) (448)

Employee and employer social security contributions (116) (121)

Share-based payments (IFRS 2) – (3)

Costs of temporary staff (19) (19)

Actual costs of pension and other employee benefit obligations (6) (6)

Other components of remuneration (15) (19)

TOTAL (587) (616)

(Additions to) reversals of provisions included in operating profit

Provisions for pension and other employee benefit obligations 21 (3)

TOTAL (566) (619)

note 23 - remuneration paid to corporate officers(€ millions) 2011 2010

Remuneration and other short-term benefits:

Corporate officers 2.43 2.33

of which, members of senior management 1.82 1.69

Termination benefits –

Post-employment benefits –

Other long-term benefits –

Share-based payments (0.30) 1.35

The remuneration set out above includes amounts received by Board members who are permanent representatives of other corporate entities.



note 24 - other operating income and expenses

(€ millions) 2011 2010

Other operating income

Gain on disposal of businesses(1) 18 –

Gains on disposal of property, plant and equipment and intangible assets 5 1

Reversals of asset impairment losses(2) 1 11

Reversal of provisions for post-employment benefits – 3

Reversal of provisions for litigation 1 1

Other operating income 3 –

Sub-total 28 16

Other operating expenses

Losses on disposal of businesses(1) (1) (1)

Losses on disposal of property, plant and equipment and intangible assets – (2)

Impairment losses on goodwill in the Arjowiggins group(2) (18) –

Asset impairment losses(2) (44) (17)

Net restructuring expenses(3) (44) (47)

Provisions for other litigation (1) (4)

Other items, net (12) (5)

Sub-total (120) (76)

TOTAL (92) (60)

(1) In 2011, this amount comprised gains on the sale of Antalis’ office supply business in Spain and Portugal and a €1 million loss on the sale of Papeteries Canson by Arjowiggins (see Note 1 – Significant events of the year). The €1 million disposal loss in 2010 concerns the sale of Ofimarket by Antalis.

(2) In 2011, following impairment testing, impairment losses of €18 million and €43 million, respectively, were recognised on goodwill relating to Arjowiggins Graphic and on property, plant and equipment carried in the books of Arjowiggins (see Note 3 – Measurement of impairment losses).In 2010, impairment testing resulted in the reversal of impairment losses of €11 million on certain Arjowiggins plants (excluding the Arches and Dettingen mills), and recognition of impairment loss provisions totalling €12 million on property, plant and equipment in the books of Arjowiggins and Antalis for €9 million and €3 million, respectively. An impairment loss of €5 million was also booked on Antalis assets held for sale in Portugal.

(3) In 2011, restructuring charges concerned Antalis for an amount of €24 million (2010: €37 million) and Arjowiggins for an amount of €20 million (2010: €10 million).



note 25 - net financial income(€ millions) 2011 2010

Interest on current accounts 1 1

Foreign exchange gains 75 101

Gains on foreign currency hedges – 4

Sub-total – financial income (A) 76 106

Foreign exchange losses (76) (104)

Losses on foreign currency hedges – (4)

Interest expense on financial liabilities (30) (37)

Other financial expenses (2) (1)

Sub-total – financial expense (B) (108) (146)

COST OF GROSS DEBT (A)+(B) (32) (40)

Gains (losses) on sales of non-consolidated investments(1) – (5)

Interest income on other financial assets 1 1

Fair value adjustments to financial assets and liabilities recognised in equity – (1)

Other banking charges and financial commissions (9) (9)

Net (additions to)/reversals of financial provisions – 5

Other financial income and expenses, net (8) (9)

NET FINANCIAL LOSS (40) (49)

(1) In 2010, this concerns losses on the sale of Legg Mason shares, offset by the reversal of a provision of €5 million.

note 26 - foreign exchange gains and lossesForeign exchange gains and losses recognised in the income statement can be analysed as follows:

(€ millions) 2011 2010

Sales and other operating income 1 (4)

Purchases consumed and other operating expenses 7 1

Cost of net debt (1) (3)

FOREIGN EXCHANGE GAINS (LOSSES) 7 (6)

The exchange rates of the main currencies used by the Group are as follows:

(in €) 2011 2010

Closing rate

Pound sterling 0.8353 0.8608

US dollar 1.2939 1.3362

Average rate

Pound sterling 0.8679 0.8582

US dollar 1.3918 1.3267



note 27 - Income tax benefit (expense)(€ millions) 2011 2010

Current taxes (19) (22)

Deferred taxes (16) (12)

INCOME TAX EXPENSE (35) (34)

The tax proof breaks down as follows:

(€ millions) 2011 2010

Operating income (3) 77

Net financial loss (40) (49)

Pre-tax income of consolidated companies (43) 28

Standard tax rate in France 36.10% 34.43%

Effective tax rate for the Group (81.40)% 54.29%

Theoretical tax expense (A) 16 (10)

Actual tax expense (B) (35) (34)

DIFFERENCE (B-A) (51) (24)

This difference can be analysed as follows:

Differences in tax rates (standard rate, reduced rate, other) 3 4

Permanent differences related to impairment losses recognised on goodwill (7) –

Other permanent differences 3 (7)

Recognition/(non-recognition) of deferred tax assets(1) (40) (15)

Cancellation of deferred tax assets(2) (14) –

Tax saving on unrecognised prior-year tax losses 3 –

Other movements(3) 1 (6)

DIFFERENCE (51) (24)

(1) In 2011, these amounts represent the combined impact of impairment losses recognised on property, plant and equipment, tax losses and restructuring expenses in the Arjowiggins group totalling €28 million (2010: €6 million), tax losses in the Antalis group totalling €6 million (2010: €9 million) and in the holding company for an amount of €6 million.

(2) Most of this amount concerns the cancellation of deferred tax assets relating to Arjowiggins in the US for a negative amount of €9 million.

(3) This item includes negative amounts of €2 million and €3 million for 2011 and 2010, respectively, relating to the levy based on companies’ “value added” (CVAE) (see Note 2B26).



note 28 - Analysis of consolidated cash flows(€ millions) 2011 2010

Depreciation, amortisation and provisions

Goodwill impairment losses 18 –

Depreciation and amortisation of other assets, net 112 68

Net additions to depreciation, amortisation and provisions for discontinued operations – (24)

Net additions to (reversals of) provisions for impairment – (5)

Net reversals of other provisions (32) (14)

Net additions to depreciation, amortisation and provisions 98 25

Disposal (gains) and losses

Sale of Antalis' office supply business in Spain and portugal (see Note 1) (18) –

Disposal of Legg Mason shares – 5

Disposals of property, plant and equipment and intangible assets (5) 1

Other disposals – 1

Disposal (gains) and losses (23) 7

Change in operating working capital

Inventories 21 (52)

Trade receivables 21 45

Trade payables 24 17

Other receivables (14) (23)

Other payables (13) (16)

Change in operating working capital 39 (29)

Proceeds from disposals of financial assets

Disposal of Legg Mason shares – 4

Proceeds from disposals of financial assets – 4

Net impact of changes in scope of consolidation

Sale of Antalis' office supply business in Spain and portugal (see Note 1) 26 –

Arjowiggins – Arches & dettingen (see Note 4b) 70 –

Arjowiggins Papeteries Canson 4 –

Antalis' Portuguese businesses held for sale – 5

Other acquisitions (3) (3)

Net impact of changes in scope of consolidation 97 2



note 29 - Segment informationThe activities of the Sequana Group are:

} manufacture of technical and creative paper through Arjowiggins, which is wholly owned;

} distribution of paper and packaging products through Antalis, which is wholly owned.

29a - Business segment analysis of the 2011 income statement

(€ millions) Arjowiggins Antalis

Holding companies and

eliminations Total

Sales

External sales 1,191 2,753 – 3,944

Inter-segment sales 274 6 (280) –

TOTAL SALES 1,465 2,759 (280) 3,944

RECURRING OPERATING INCOME (LOSS) 22 83 (16) 89

OPERATING INCOME (LOSS) (53) 72 (22) (3)

Net financial loss (40)

Income tax benefit (expense) (35)

NET INCOME (LOSS) FROM CONSOLIDATED COMPANIES (78)

Share of earnings of associates 1 1

NET INCOME (LOSS) (77)

Attributable to owners (77)

29b - Business segment analysis of the 2010 income statement

(€ millions) Arjowiggins Antalis

Holding companies and

eliminations Total

Sales

External sales 1,223 2,894 – 4,117

Inter-segment sales 266 6 (272) –

TOTAL SALES 1,489 2,900 (272) 4,117

RECURRING OPERATING INCOME (LOSS) 65 88 (16) 137

OPERATING INCOME (LOSS) 49 47 (19) 77

Net financial loss (49)

Income tax benefit (expense) (34)

NET INCOME (LOSS) FROM CONSOLIDATED COMPANIES (6)

Net income from discontinued operations 38 – – 38

NET INCOME (LOSS) 32

Attributable to owners 32



29c - Other disclosures by business segment at 31 December 2011

(€ millions) Arjowiggins AntalisHolding companies

and eliminations Total

Assets

Segment assets(1) 1,054 1,281 2 2,337

Investments in associates 2 3 – 5

Unallocated assets – – – 369

TOTAL ASSETS 2,711

Liabilities

Segment liabilities(1) 330 525 10 865

Unallocated liabilities – – – 1,846

TOTAL EQUITY AND LIABILITIES 2,711

Cash flows

Expenditure on acquisitions of property, plant and equipment and intangible assets

(46) (25) (2) (73)

Depreciation and amortisation for the period 45 23 – 68

Additions to provisions for impairment losses 61 2 – 63

Reversals of provisions for impairment losses (1) – – (1)

Other additions to (reversals of) provisions (21) (13) 2 (32)

DEPRECIATION, AMORTISATION AND PROVISIONS, NET 84 12 2 98

Other non-cash items (excluding depreciation and amortisation) 10 5 (4) 11

Cumulative cash flows from operating activities 19 48 (17) 50

Cumulative cash flows from investing activities 36 3 (1) 38

Cumulative cash flows from financing activities (42) (39) 15 (66)

(1) See definition of segment assets and liabilities in Note 2B29 “Segment reporting”.

29d - Other disclosures by business segment at 31 December 2010

(€ millions) Arjowiggins AntalisHolding companies

and eliminations Total

Assets

Segment assets(1) 1,240 1,333 3 2,576

Investments in associates 3 3 – 6

Assets held for sale – 32 – 32

Unallocated assets – – – 374

TOTAL ASSETS 2,988

Liabilities

Segment liabilities(1) 362 550 9 921

Liabilities related to assets held for sale – 24 – 24

Unallocated liabilities – – – 2,043

TOTAL EQUITY AND LIABILITIES 2,988

Cash flows

Expenditure on acquisitions of property, plant and equipment and intangible assets

(45) (19) – (64)

Depreciation and amortisation for the period 45 23 – 68

Additions to provisions for impairment losses 9 3 – 12

Reversals of provisions for impairment losses (12) – (5) (17)

Other additions to (reversals of) provisions (31) (7) – (38)

DEPRECIATION, AMORTISATION AND PROVISIONS, NET 11 19 (5) 25

Other non-cash items (excluding depreciation and amortisation) 12 16 6 34

Cumulative cash flows from operating activities 21 26 (9) 38

Cumulative cash flows from investing activities (46) (15) 4 (57)

Cumulative cash flows from financing activities 32 (35) 8 5

(1) See definition of segment assets and liabilities in Note 2B29 “Segment reporting”.



29e - Geographical segment disclosures at 31 December 2011(1)

(€ millions) Sales Segment assetsAcquisitions of PPE & intangible assets

European Union

France 512 552 35

United Kingdom 657 535 7

Italy 49 11 –

Other EU countries 1,477 698 16

Total European Union 2,695 1,796 58

Other European countries 306 106 3

United States 289 128 4

Rest of the world 654 307 8

TOTAL 3,944 2,337 73

(1) Sales are presented based on the geographical location of the target market and segment assets and acquisitions of property, plant and equipment and intangible assets are presented based on the geographic location of the assets.

29f - Geographical segment disclosures at 31 December 2010(1)

(€ millions) Sales Segment assetsAcquisitions of PPE & intangible assets

European Union

France 543 734 29

United Kingdom 655 471 6

Italy 50 10 1

Other EU countries 1,614 800 18

Total European Union 2,862 2,015 54Other European countries 307 103 1

United States 296 143 4

Rest of the world 652 315 5TOTAL 4,117 2,576 64

(1) Sales are presented based on the geographical location of the target market and segment assets and acquisitions of property, plant and equipment and intangible assets are presented based on the geographic location of the assets.

note 30 - related-party transactionsTransactions with non-consolidated investees and associates are not material. However, when such transactions occur, they are gen-erally based on arm’s length terms.

In addition, the Group has not carried out financing transactions with (i) the subsidiaries of the Italian group Exor or with DLMD, which both account for the Sequana Group by the equity method; or (ii) the key management personnel of the Sequana Group.

Related-party transactions can be analysed as follows:

Short-term financial transactions Trade receivables

(€ millions) 31/12/2011 31/12/2010 31/12/2011 31/12/2010

Third parties and non-consolidated companies – – – –

Sales Purchases

(€ millions) 2011 2010 2011 2010

Third parties and non-consolidated companies – – – –



note 31 - off-balance sheet commitments

Financing and operating off-balance sheet commitments

(€ millions) 31/12/2011 31/12/2010

UNUSED CREDIT FACILITIES 168 173

COMMITMENTS GIVEN 1,250 1,330

Guarantees(1) 606 664

Pledges 4 4

Other guarantees given(2) 239 232

Commitments to purchase property, plant and equipment and intangible assets 3 1

Forward purchases of goods for resale and commodities(3) 132 163

Other commitments given(4) 266 266

COMMITMENTS RECEIVED 126 154

Guarantees 4 5

Forward sales of goods for resale and commodities(3) 121 148

Other guarantees received 1 1

(1) This item primarily concerns Antalis and corresponds to guarantees given on the sale of receivables and on the disposal of warehouses.

(2) Concerns a counter-guarantee given by Sequana of the guarantee provided by Arjowiggins and Antalis International in relation to the pension benefit obligations of the UK subsidiaries that are members of the Wiggins Teape Pension Scheme (WTPS) and the Antalis Pension Scheme (APS). The amount is calculated at the lower of 113% of the fund’s buy-out deficit as estimated at 31 December each year or GBP 164 million for WTPS and GBP 36 million for APS. In excess of this amount, the guarantee may only be enforced subject to approval of the Board of Directors of Sequana. The guarantees expire on 31 March 2023 and on 8 January 2024, respectively, for WTPS and for APS, and may be renewed. This situation has resulted from the transfer in 2011 of virtually all of the working members of WTPS to the Antalis Pension Scheme (APS), and the Group’s obligations to the trustees of the different UK pension funds have changed accordingly. Based on the pension fund regulations, the contribution requirements for employer entities, and the guarantees and counter guarantees given to the trustees by the employer entities and Sequana, respectively, the overall amount of the guarantees currently given by the Group remains capped at GBP 200 million (€239 million).

(3) Mainly forward purchases and sales of paper pulp.

(4) These mainly include:- a joint and several guarantee given to Exeltium SAS for an amount of €155 million to cover the obligations of Arjowiggins Papiers Couchés in relation to

the electricity procurement requirements of the Arjowiggins Graphic division up to 13 January 2026.- a guarantee covering the obligations of Arjowiggins Sourcing Ltd to a supplier within the scope of a contract for an amount of €12 million and covering the period up

to 30 December 2012.- a guarantee covering the obligations of Arjo Wiggins Insurance Ltd within the scope of optional reinsurance of Group insurance agreements for an amount of €3

million up to 30 June 2012.- guarantees given by Antalis International and its UK subsidiaries concerning their employee pension benefit obligations vis-à-vis Antalis Pension Scheme (APS),

Arjo UK Group Pension Scheme, James McNaughton Paper Group Limited Pension and Insurance Scheme and Modo Merchants Pension Scheme totalling €65 million at 31 December 2011 (2010: €63 million).

Maturities of off-balance sheet commitments at 31 December 2011


Unused credit facilities 168 168 – –

Commitments given 1,250 542 111 597

Commitments received 126 79 47 –

Maturities of off-balance sheet commitments at 31 December 2010


Unused credit facilities 173 35 138 –

Commitments given 1,330 612 107 611

Commitments received 154 121 33 –



Operating leases: future minimum payments (capital)


At 31 December 2011 271 57 137 77

At 31 December 2010 293 41 146 106

These operating leases mainly concern storage depots.

At 31 December 2011, future minimum payments under operating leases broke down as €200 million at fixed rates and €71 million at variable rates, compared with €236 million and €57 million, respectively, at year-end 2010.

Total lease payments recorded in the 2011 income statement amounted to €73 million (2010: €75 million), including €44 million for leased warehouses, (2010: €43 million), €12 million for other property leasing arrangements, (2010: €14 million), and €17 million for rental costs (2010: €18 million).

Other commitments

Sellers’ warranties concerning consolidated entities

Description Signature date

Amount (in millions of currency

units)Amount

(€ millions) Maturity

Disposal of Arjo Wiggins Appleton Ltd(1) 18/05/2009

Pension plan commitments GBP 6 7 Indefinite

Tax risks USD 45 35 31/12/2015

Disposal of Antonin Rodet(2)

Guarantee of SRS obligations 15/09/2009 3Between 15/03/2011

and 15/10/2012

Disposal of Arjowiggins Arches SAS and Arjo Wiggins Deutschland GmbH(3)

Guarantees given to Munksjö France 26/02/2011 40 25/02/2018

Guarantees given to Munksjö Germany 26/02/2011 1 25/02/2021

Disposal of Papeteries Canson to Hamelin group

Sellers’ warranty 30/06/2011 1.5 30/06/2016

(1) Guarantees given to the buyer of Arjo Wiggins Appleton Limited (AWA Ltd):When it sold AWA Ltd, Sequana specifically excluded any seller warranties in respect of the Fox River environmental dispute in the US, or any risks arising out of the agreement to sell Appleton Papers Inc. on 5 July 2001 and the undertakings concerning the Low Fox River environmental dispute dating from 9 November 2001. The guarantees that were given relate only to the entities normal business, tax risks and pension benefit obligations to approximately ten former employees undertaken by AWA Ltd prior to the sale. As indicated in the previous table, apart from the pension benefit obligations, all of these guarantees are for capped amounts and periods of limited duration. Sequana has recognised provisions for the pension benefit obligations in its consolidated financial statements.

(2) Guarantee provided to SA Grands Vins Jean-Claude Boisset in relation to the disposal of Antonin Rodet:Sequana guaranteed the obligations contracted by W Participations (now known as Sequana Ressources & Services) within the scope of the share sale agreement. These obligations expired on 15 March 2011, with the exception of those relating to tax and social security risks which remain in force for the statutory limitation period through 15 October 2012.

(3) Counter-guarantee of Arjowiggins’ commitments given by Sequana in favour of Munksjö: the tax and environmental guarantees expire in 7 years, the competition guarantees in 5 years and the other guarantees in 15 months.

Other operating contingent liabilities

To the best of the Company’s knowledge, no Group company has omitted to report any material commitment.



note 32 - HeadcountThe Group’s average headcount breaks down as follows for fully consolidated companies:

Number of employees 2011 2010

Breakdown by business

Arjowiggins 5,223 5,403

Antalis 6,023 6,707

Other companies 63 59

TOTAL 11,309 12,169

Breakdown by geographical area

France 3,062 3,130

United Kingdom 1,765 1,835

Italy 49 45

Other EU countries 3,422 3,892

Other European countries 496 505

United States 725 741

Rest of the world 1 790 2,021

TOTAL 11,309 12,169

Breakdown by category

Managers 100 99

Production employees 4,733 5,099

Distribution employees 2,872 3,176

Other employees 3,604 3,795

TOTAL 11,309 12,169

note 33 - Subsequent eventsOn 3 January 2012, Antalis acquired UK-based Ambassador Antalis Packaging Ltd for GBP 8.3 million representing €32 million in additional annual sales.

On 24 February 2012, the Group finalised the renewal in principle of the syndicated credit facilities signed in 2007 by Arjowiggins and Antalis, and Sequana’s confirmed credit and overdraft facilities for a two-year period through to 30 June 2014.

Term sheets have been signed with the banks setting out the terms and conditions for each new “amend and extend” contract (see Note 1 – Significant events of the year).

On 29 February 2012, Antalis completed its acquisition of the German company Pack 2000 GmbH for an amount of €16 million. This acqui-sition will add an extra €22 million to the Group’s annual sales.

Apart from these events, the Group has not experience any sig-nificant changes in its commercial or financial situation since 31 December 2011.



note 34 - Statutory Auditors’ feesThe fees charged by the Company’s Statutory Auditors, as well as by the members of their networks, over the past two financial periods are summarised in the following table:

(€ millions) (net of taxes)

PricewaterhouseCoopers Audit Constantin Associés

Amount % Amount %

2011 2010 2011 2010 2011 2010 2011 2010

Audit

Statutory audit engagement, audit and certification of the individual company and consolidated financial statements

Issuer 0.3 0.3 9% 9% 0.2 0.2 18% 22%

Fully-consolidated subsidiaries 2.3 2.7 66% 79% 0.7 0.7 64% 78%

Other reviews and services related to the statutory audit engagement(1)

Issuer 0.5 – 14% 0% 0.2 – 18% 0%

Fully-consolidated subsidiaries 0.1 0.2 3% 6% – – 0% 0%

Sub-total 3.2 3.2 91% 94% 1.1 0.9 100% 100%

Other services provided by the audit firm networks to fully-consolidated subsidiaries

Legal, tax and labour law 0.3 0.2 9% 6% – – 0% 0%

Other services (if >10% of total audit fees) – – 0% 0% – – 0% 0%

Sub-total 0.3 0.2 9% 6% – – 0% 0%

TOTAL 3.5 3.4 100% 100% 1.1 0.9 100% 100%

(1) Chiefly services carried out in 2011 as part of the Group’s refinancing.



note 35 - Scope of consolidation

Fully consolidated companies

Country% ownership

interest % control

ARJOWIGGINS

ARJoWIGGINS SAS France 100 100

AGENA N.V. Belgium 100 100

AppLEToN coATEd LLc United States 100 100

AppLEToN coATEd pApERS HoLdINGS INc. United States 100 100

ARJOBEX AMERICA United States 100 100

ARJOBEX LIMITED United Kingdom 100 100

ARJOBEX SAS France 100 100

ARJoWIGGINS cHARTHAM LIMITEd United Kingdom 100 100

ARJoWIGGINS cZEcH REpuBLIc KoNcERNoVY podNIK S.R.o Czech Republic 100 100

ARJoWIGGINS HKK 1 LTd Hong Kong 100 100

ARJoWIGGINS HKK 3 LTd Hong Kong 100 100

ARJoWIGGINS IVYBRIdGE LIMITEd United Kingdom 100 100

ARJoWIGGINS LE BouRRAY SAS France 100 100

ARJoWIGGINS pALALdA SAS France 100 100

ARJoWIGGINS pApER TRAdING (SHANGHAI) coMpANY LTd China 100 100

ARJoWIGGINS pApIERS coucHES SAS France 100 100

ARJoWIGGINS (QuZHou) SpEcIALITY pApERS co. LTd China 100 100

ARJoWIGGINS RIVES SAS France 100 100

ARJoWIGGINS SEcuRITY BV The Netherlands 100 100

ARJoWIGGINS SEcuRITY SAS France 100 100

ARJoWIGGINS SEcuRITY INTEGRALE SoLuTIoNS LIMITEd Hong Kong 100 100

ARJoWIGGINS SERVIcES LIMITEd United Kingdom 100 100

ARJoWIGGINS SouRcING LTd United Kingdom 100 100

ARJoWIGGINS SRo Czech Republic 100 100

ARJo WIGGINS cARBoNLESS pApERS EuRopE LIMITEd United Kingdom 100 100

ARJo WIGGINS cARBoNLESS pApERS cHINA LIMITEd United Kingdom 100 100

ARJo WIGGINS cARBoNLESS pApERS INTERNATIoNAL LTd United Kingdom 100 100

ARJo WIGGINS ERMSTAL GMBH & co. KG Germany 100 100

ARJo WIGGINS ERMSTAL VERWALTuNG GMBH Germany 100 100

ARJo WIGGINS ESpAÑA SA Spain 99.96 99.97

ARJo WIGGINS FEINpApIER GMBH Germany 99.99 100

ARJo WIGGINS FINE pApERS HoLdINGS LIMITEd United Kingdom 100 100

ARJo WIGGINS FINE pApERS LIMITEd United Kingdom 100 100

ARJo WIGGINS GERMANY HoLdINGS LIMITEd United Kingdom 100 100

ARJo WIGGINS ITALIA SRL Italy 100 100

ARJo WIGGINS LIMITAdA Brazil 100 100

ARJo WIGGINS LIMITEd United Kingdom 100 100

ARJo WIGGINS MEdIcAL, INc United States 100 100

ARJo WIGGINS SARL Switzerland 100 100

ARJo WIGGINS SVENSKA AB Sweden 99.99 100

ARJo WIGGINS uK HoLdINGS LIMITEd United Kingdom 100 100

ARJo WIGGINS uSA, INc United States 100 100



Country% ownership

interest % control

ARJoWIGGINS MIddLE EAST FZE United Arab Emirates 100 100

DALUM PAPIR AS Denmark 100 100

GEP SPA Italy 85.57 85.57

GREENFIELd SAS France 100 100

GUARRO CASAS SA Spain 99.93 99.93

IDEM LIMITED United Kingdom 100 100

NEWToN FALLS LLc United States 100 100

pERFoRMANcE pApERS LIMITEd United Kingdom 100 100

PRIPLAK SAS France 100 100

SIGNopTIc INduSTRIES SARL France 100 100

SIGNopTIc TEcHNoLoGIES SAS France 100 100

THE WIGGINS TEApE GRoup LIMITEd United Kingdom 100 100

TORDERA SA Panama 99.93 100

WITCEL SA Argentina 100 100

ANTALIS

ANTALIS INTERNATIoNAL SAS France 100 100

AMBASSAdoR ANTALIS pAcKAGING LTd United Kingdom 100 100

ANTALIS AB Sweden 100 100

ANTALIS AG Switzerland 100 100

ANTALIS AS Estonia 100 100

ANTALIS AS Denmark 100 100

ANTALIS AS Norway 100 100

ANTALIS AS Slovakia 100 100

ANTALIS ASIA pAcIFIc pTE LTd Singapore 100 100

ANTALIS AuSTRIA GMBH Austria 100 100

ANTALIS BoLIVIA SRL Bolivia 100 100

ANTALIS BoTSWANA (pTY) LIMITEd Botswana 100 100

ANTALIS BV The Netherlands 100 100

ANTALIS BuLGARIA Eood Bulgaria 100 100

ANTALIS do BRAZIL pRoduToS pARA INduSTRIA GRAFIcA LTdA Brazil 100 100

ANTALIS doo LJuBLJANA Slovenia 100 100

ANTALIS ENVELopES MANuFAcTuRING SL Spain 100 100

ANTALIS GMBH Germany 100 100

ANTALIS GRoup HoLdINGS LIMITEd United Kingdom 100 100

ANTALIS GRoup United Kingdom 100 100

ANTALIS HoLdINGS LIMITEd United Kingdom 100 100

ANTALIS HuNGARY KFT Hungary 100 100

ANTALIS IBERIA SA Spain 100 100

ANTALIS IRELANd LIMITEd Ireland 100 100

ANTALIS JApAN co LTd Japan 100 100

ANTALIS McNAuGHToN LIMITEd United Kingdom 100 100

ANTALIS NV/SA Belgium 100 100

ANTALIS oFFIcE LIMITEd United Kingdom 100 100

ANTALIS oVERSEAS HoLdINGS LIMITEd United Kingdom 100 100

ANTALIS oY Finland 100 100

ANTALIS pAcKAGING ITALIA SRL Italy 100 100

ANTALIS pERu SA Peru 100 100

ANTALIS poLANd SpoLKA Z.o.o. Poland 100 100



Country% ownership

interest % control

ANTALIS poRTuGAL SA Portugal 100 100

ANTALIS SA Romania 100 100

ANTALIS SA HoLdINGS United Kingdom 100 100

ANTALIS SNc France 100 100

ANTALIS SouTH AFRIcA LIMITEd South Africa 100 100

ANTALIS SRo Czech Republic 100 100

ANTALIS VERpAcKuNGEN GMBH Germany 100 100

ANTALIS VERpAcKuNGEN GMBH Austria 100 100

ANTALIS 2000 AS Denmark 100 100

ANTALIS (HoNG KoNG) LIMITEd Hong Kong 100 100

ANTALIS (MALAYSIA) SdN BHd Malaysia 100 100

ANTALIS (pRopRIETARY) LTd South Africa 100 100

ANTALIS (SHANGHAI) TRAdING co. LIMITEd China 100 100

ANTALIS (SINGApoRE) pTE LTd Singapore 100 100

ANTALIS (THAILANd) LIMITEd Thailand 90 90

ARJoWIGGINS cREATIVE pApERS SAS France 100 100

ARJo WIGGINS FINE pApERS pTY LTd Australia 100 100

AS ANTALIS Latvia 100 100

dEKKER pAcKAGING BV The Netherlands 100 100

ESPECIALIDADES DEL PAPEL DE COLOMBIA LTDA (ESPACOL LT) Colombia 100 100

G2M LOGISTICS LIMITED United Kingdom 100 100

GMS DISTRIBUIDORA GRAFICA SA Chile 100 100

GMS PRODUCTOS GRAFICOS LIMITADA Chile 100 100

GRAPHIC SERVICES TEAM LIMITADA Brazil 99.88 99.88

GRAPHIC SUPPLIES LIMITED United Kingdom 100 100

INTERpApEL SA Mexico 100 100

INVERSIoNES ANTALIS HoLdINGS LIMITAdA Chile 100 100

JAMES McNAuGHToN GRoup LIMITEd United Kingdom 100 100

MAcRoN GMBH Germany 100 100

MAp MERcHANT GRoup LIMITEd United Kingdom 100 100

MAp MERcHANT HoLdINGS BV The Netherlands 100 100

MAp MERcHANT HoLdINGS GMBH Germany 100 100

MAp MERcHANT SWEdEN AB Sweden 100 100

MAP POLSKA SP Z.O.O Poland 100 100

McNAuGHToN GRApHIcAL pApER LIMITEd United Kingdom 100 100

McNAuGHToN pApER LIMITEd United Kingdom 100 100

McNAuGHToN pApER IRELANd LIMITEd Ireland 100 100

McNAuGHToN pApER N I LIMITEd United Kingdom 100 100

McNAuGHToN pRINTALL LIMITEd United Kingdom 100 100

McNAuGHToN puBLISHING pApERS LTd United Kingdom 100 100

ooo MAp MERcHANT RuSSIA Russia 100 100

oY MAp MERcHANT AB Finland 100 100

pApER MANAGEMENT SERVIcES LIMITEd United Kingdom 100 100

SIMGE ANTALIS KAGIT SANAYI VE TIcARET SA Turkey 100 100

TALK PAPER LIMITED United Kingdom 100 100

uAB ANTALIS Lithuania 100 100

ZAo MAp uKRAINE Ukraine 100 100



Country% ownership

interest % control

HOLDING COMPANIES AND OTHER ACTIVITIES

SEQuANA SA France – –

Ap GESTIoN ET FINANcEMENT SAS France 100 100

ARJo WIGGINS AppLEToN HoLdINGS United Kingdom 100 100

ARJo WIGGINS AppLEToN INSuRANcE LIMITEd Guernsey 100 100

ARJo WIGGINS EuRopE HoLdINGS United Kingdom 100 100

ARJo WIGGINS NoRTH AMERIcA INVESTMENTS United Kingdom 100 100

ARJo WIGGINS uS HoLdINGS United Kingdom 100 100

AWA FINANcE United Kingdom 100 100

BoccAFIN SAS France 100 100

SEQuANA cApITAL uK LIMITEd United Kingdom 100 100

SEQuANA RESSouRcES & SERVIcES SAS France 100 100

Equity-accounted companies

Country% ownership

interest % control

ARJOWIGGINS

BSECURE LTD Israel 30 30

SEcuSYSTEM LTd Israel 30 30

ANTALIS

DIMAGRAF SA Argentina 30 30

QUIMIGRAF SA Argentina 30 30



Statutory Auditors’ report on the consolidated financial statements For the year ended 31 December 2011 This is a free translation into English of the Statutory Auditors’ report on the consolidated financial statements issued in French and it is provided solely for the convenience of English-speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the consolidated financial statements and includes an explanatory paragraph discussing the Auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assur-ance on individual account balances, transactions or disclosures. This report also includes information relating to the specific verification of informa-tion given in the Group’s management report.

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



In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended 31 December 2011, on:

} the audit of the accompanying consolidated financial state-ments of Sequana;

} the justification of our assessments;

} the specific verifications and information required by law.

These consolidated financial statements have been approved by the Board of Directors. Our responsibility is to express an opin-ion on these financial statements based on our audit.

I - Opinion on the consolidated financial statements

We conducted our audit in accordance with professional stand-ards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance that the con-solidated financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of account-ing policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated finan-cial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements of Sequana give a true and fair view of the assets and liabilities and of the financial position of the consolidated group of companies at 31 December 2011, 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.

Without qualifying our opinion, we draw your attention to Note 1 to the consolidated financial statements which describes the terms and conditions of the Group’s refinancing which will be legally concluded by the end of April 2012.

II - Justification of our assessments

As indicated in Note 2.B.3, the estimates used in preparing the con-solidated financial statements at 31 December 2011 were made in a climate of ongoing economic uncertainty where forecasting the business outlook is extremely difficult. Consequently, in accordance with the requirements of Article L. 823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assess-ments, we draw your attention to the following matters:

As part of our assessment of the accounting rules and princi-ples applied by your Company, and based on the information provided to date, we have verified that the notes the consoli-dated financial statements contain the appropriate disclosures on the Company’s ability to continue as a going concern, in light of the finalisation with the banks of the terms and conditions of the renewal of the credit facility agreements.

The Company has reviewed the recoverable amounts of its good-will and property, plant and equipment in accordance with the methods described in Notes 2.B.6, 2.B.8 and 3 to the consoli-dated financial statements. We have assessed the methods used to implement the impairments tests and cash flow forecasts as well as the related assumptions and ensured that the notes to the con-solidated financial statements provide appropriate disclosures.

Note 2.B.3 describes other judgements and significant estimates used by management concerning pension and other post-employ-ment benefits and obligations measured by external actuaries, and provisions for contingencies. Our work consisted of examin-ing the data used, assessing the assumptions used, reviewing, on a test basis, the calculations performed by the Company, and verifying that the information disclosed in Notes 15 and 16 to the consolidated financial statements is appropriate.

These assessments were made in the context of our audit of the consolidated financial statements, taken as a whole, and therefore contributed to the formation of our opinion which is expressed in the first part of this report.

III - Specific verification

As required by law and in accordance with professional stand-ards applicable in France, we have also verified the information presented in the Group’s management report.

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

Neuilly-sur-Seine, 27 April 2012The Statutory Auditors

PricewaterhouseCoopers Audit Catherine Sabouret

Constantin Associés Thierry Quéron

fInAncIAL PoSItIon - reSuLtS4 Parent company financial statements for the year ended 31 december 2011


Parent company financial statements for the year ended 31 december 2011The parent company financial statements for the year ended 31 December 2009 and the related Statutory Auditors’ report are incor-porated by reference into this report.

Statement of financial position

Assets

(€ millions) Notes 31/12/2011 31/12/2010

Property, plant and equipment 2 1

Investments(a) 3 1,640 1,979

Total fixed assets 1,642 1,980

Operating receivables(b) 1 3

Other receivables(b) 7 10

Cash and cash equivalents 4 1 4

Total current assets 9 17

TOTAL ASSETS 1,651 1,997

(a) Short-term portion of net investments – –

(b) Of which, due in less than one year 8 13

Equity and liabilities

(€ millions) Notes 31/12/2011 31/12/2010

Share capital 74 74

Additional paid-in capital 95 95

Legal reserve 24 24

Other reserves 1,432 1,432

Retained earnings 252 –

Net income (loss) for the year (331) 272

Total equity 5 1,546 1,897

Provisions 7 7

Debt(c) 6 85 80

Operating payables 6 2

Tax and social security liabilities 6 10

Other payables 1 1

Debt(d) 98 93

TOTAL EQUITY AND LIABILITIES 1,651 1,997

(c) Of which, bank borrowings and overdrafts 41 65

(d) Of which, due in less than one year 98 93

fInAncIAL PoSItIon - reSuLtS 4Parent company financial statements for the year ended 31 december 2011


Income statement(€ millions) Notes 2011 2010

Other operating income 2 2

Total operating income 2 2

Purchases consumed (10) (8)

Taxes other than income taxes 0 2

Personnel expenses (7) (9)


Total operating expenses (18) (16)

Operating loss 7 (16) (14)

Financial income 31 31

Financial expenses (3) (5)

Net financial income 8 28 26

Income before non-recurring items and tax 12 12

Non-recurring income 8 801

Non-recurring expenses (354) (544)

Net non-recurring income 9 (346) 257

Income before tax (334) 269

Income tax expense 10 3 3

NET INCOME (LOSS) (331) 272



notes to the parent company financial statements

161 Note 1 Significant events of the year

161 Note 2 Basis of preparation

163 Note 3 Investments

163 Note 4 Cash and cash equivalents

164 Note 5 Statement of changes in equity

164 Note 6 debt (see Note 15 to the parent company

financial statements)

164 Note 7 Operating loss

165 Note 8 Net financial income

165 Note 9 Non-recurring income and expenses

166 Note 10 Income tax expense

166 Note 11 Statement of cash flows

166 Note 12 Remuneration of corporate officers

167 Note 13 Related companies

167 Note 14 Off-balance sheet commitments

169 Note 15 Treasury management – financial instruments

170 Note 16 List of subsidiaries and associates

at 31 December 2011

170 Note 17 Subsequent events



note 1 - Significant events of the year

Valuation of investments in subsidiaries

The following information concerning the value in use of the Group’s subsidiaries at 31 december 2011 – as defined in Note 2 – Basis of presentation – is based on valuations performed by the Company.

a) Operating subsidiaries

} The value in use of Arjowiggins shares was less than the carrying amount of the investment, resulting in the recognition of a provi-sion for impairment losses of €342 million.

} The value in use of Antalis shares was greater than the carrying amount of the investment, resulting in the reversal of impairment losses previously recognised of €4 million.

b) Non-operating subsidiary

} The value in use of Sequana Ressources & Services shares was less than the carrying amount of the investment, result-ing in the recognition of a provision for impairment losses of €1 million.

Refinancing of the Company

The Company’s financing requirements are met through its investments and a confirmed line of credit which had been drawn down for an amount of €36 million at 31 December 2011.

This facility is subject to a number of financial covenants. As of 31 December 2011, Sequana did not comply with the requisite consolidated net debt/consolidated EBITDA ratio.

In order to prevent the early repayment in full of amounts drawn down under this credit facility that could have been triggered by exceeding the thresholds of the covenant, Sequana obtained an agreement from the bank to waive its right to such an early repay-ment. Sequana also entered into negotiations with the bank over the terms and conditions of renewing this credit facility which is due to expire shortly.

On 24 February 2012, the Company finalised the renewal of its confirmed credit facility through to 30 June 2014.

Sequana’s line of credit has been extended for an amount of €36 million with amortisation payments of €1.2 million scheduled for 2012, 2013 and 2014. The interest margin has been reset at 4.25%. Sequana must comply with the following three ratios: consolidated net debt/consolidated EBITDA; consolidated net debt/consolidated equity (gearing ratio); and consolidated EBITDA/consolidated net interest expense (excluding deferred interest expense).

Sequana’s €5 million overdraft facility has also been confirmed through 30 June 2014 by the lender bank.

All banking documentation relating to these credit facilities should be finalised by the end of April 2012.

note 2 - Basis of preparationThe parent company financial statements are prepared in accordance with French generally accepted accounting princi-ples based on the General Chart of Accounts.

The basic method used to value items recorded in the books of account is the historical cost method.

The usual accounting conventions have been applied in compli-ance with the principle of prudence and:

} the going concern principle,

} the consistency principle, and

} the accrual basis principle.

In light of the information disclosed in Note 1, the Board of Directors has approved the financial statements on a going con-cern basis.

The Sequana Group is accounted for by the equity method in the consolidated financial statements of the Exor and DLMD groups.

Accounting policies

a) Property, plant and equipment

Property, plant and equipment are stated at cost.

They are depreciated by the straight-line method over their estimated useful lives.

b) Investments in subsidiaries and associates

Investments in subsidiaries and associates are stated at the lower of cost and value in use.



Valuation of operating subsidiaries and associates

Enterprise value is the sole basis used for determining the fair value of investments and it is calculated by discounting future cash flows to present value.

The value in use of these investments is then calculated as the enterprise value less the corresponding net debt. Any impair-ment losses are recognised through profit or loss.

Previously recognised impairment losses are reversed in the income statement when the value in use of the investments exceeds their carrying amount.

Valuation of non-operating holding companies

The value in use of holding companies is assessed based on the Company’s equity in their revalued net assets, or on consoli-dated value in the case of sub-groups.

c) Treasury shares

A liquidity contract has been set up with Oddo Corporate Finance to improve the liquidity of the Sequana share and the regularity of its quotations without distorting the workings of the market. Treasury shares acquired within the scope of the liquid-ity contract are recognised at cost and a provision for impair-ment is booked if their carrying amount if less than the average share price during the last month prior to the reporting date. Any profit or loss on the disposal of treasury shares is recognised in non-recurring income or expense.

d) Pension benefit obligations

The projected benefit obligation payable to current and for-mer employees is calculated based on assumptions regarding increases in salaries, retirement age and mortality rates and then discounted to present value. Provisions are recognised in liabili-ties with matching entries in profit or loss.

e) Stock options

Stock options are recognised as a capital increase when the options are exercised in an amount corresponding to the exer-cise price paid by the option holders. Any difference between the issue price of the shares concerned and their par value is recognised as an issue premium.

f) Tax regime

In accordance with Articles 223-A et seq. of the French General Tax Code, Sequana has elected to file a consolidated tax return and may freely determine the scope of the tax group.

In 2011, the tax group comprised 17 companies that are over 95%-owned by Sequana, either directly or indirectly.

Subsidiaries that are members of the tax group calculate and account for their income taxes on a stand-alone basis. Any tax savings arising from the tax losses of members of the tax group are directly recognised in Sequana’s income statement and no cash repayment is made. Any impacts arising from the tax regime are recognised at the level of the parent company.

List of subsidiaries in the tax group in 2011

Sequana Ressources & Services – Arjowiggins Security Solutions – Arjowiggins – Arjobex – Arjowiggins Rives – Arjowiggins Palalda – Arjowiggins Security – Arjowiggins Papiers Couchés – Arjowiggins Le Bourray – Priplak – Antalis International – Antalis SNc – Antalis Finance – Ap Gestion et Financement – Boccafin – Arjowiggins Creative Papers – Greenfield.



notes to the statement of financial position

note 3 - Investments(€ millions) 31/12/2010 Increase Decrease 31/12/2011

Investments in subsidiaries and associates (Note 16 to the parent company financial statements) 2,438 – – 2,438

Other 3 – (1) 2

GROSS VALUE 2,441 – (1) 2,440

Provisions (462) (343) 5 (800)

CARRYING AMOUNT 1,979 (343) 4 1,640

“Other” concerns treasury shares held within the scope of the liquidity agreement with Oddo Corporate Finance. At 31 December 2011, the Company held 325,003 treasury shares with a historical value of €1.3 million and it recognised an impairment loss provision of €0.2 million based on the average Sequana share price for December.

Movements in investments in 2011

(€ millions)

Carrying amount at 31 December 2010 1,979

Investments in subsidiaries and associates

• (Additions to) reversals of provisions for impairment in value of shares:

• Sequana Ressources & Services (1)

• Antalis 4

• Arjowiggins (342)

Treasury shares: (see Note 12d to the consolidated financial statements) –

CARRYING AMOUNT AT 31 DECEMBER 2011 1,640

note 4 - cash and cash equivalentsThe year-on-year change in cash and cash equivalents reflects the liquidation of mutual funds for an amount of €3.2 million. This did not have a material impact on the 2011 income statement.



note 5 - Statement of changes in equity

(€ millions)Number of

sharesShare

capital


Reserves

Untaxed provisions

Retained earnings

Net income

(loss) for the year Total

Legal reserves

Tax-regulated reserves

Other reserves

Equity at 31 December 2009 before appropriation of net income 49,545,002 74 95 24 4 33 1 514 898 1,643

- Appropriation of net income to retained earnings – – – – – 1,395 – (514) (881) –

Unavailable reserves for share award plans – – – – 2 (2) – – – –

Dividend paid for 2009 – – – – – – – – (17) (17)

Net income for 2010 – – – – – – – – 272 272

Equity at 31 December 2010 before appropriation of net income 49,545,002 74 95 24 6 1,425 1 – 272 1,897

- Appropriation of net income to retained earnings – – – – – – – 252 (252) –

Dividend paid for 2010 – – – – – – – – (20) (20)

Net loss for 2011 – – – – – – – – (331) (331)

Equity at 31 December 2011 before appropriation of net loss 49,545,002 74 95 24 6 1,425 1 252 (331) 1,546

Recommended appropriation: - Appropriation of net loss

to retained earnings – – – – – – – (331) 331 –

Dividend paid for 2011 – – – – – – – – – –

Equity at 31 December 2011 after appropriation of net loss 49,545,002 74 95 24 6 1,425 1 (79) – 1,546

note 6 - debt (see note 15 to the parent company financial statements)

This item includes current accounts with Sequana subsidiaries amounting to €43 million, €5 million in bank overdrafts and bank borrowings of €36 million. In 2010, these amounts were €14 million, €2 million and €63 million, respectively. The Company has also contracted a €1 million loan from one of its subsidiaries.

The year-on-year increase of €29 million in current account bal-ances held with subsidiaries mainly resulted from the replace-ment of bank borrowings with €30 million in borrowings from Arjowiggins.

The interest rate on the average €78 million of outstanding debt owed by Sequana in 2011 was 2.42%, excluding commissions.

note 7 - operating lossThis item is mainly composed of overhead costs of the Sequana holding company.



note 8 - net financial income(€ millions) 2011 2010

Financial income

- Interim and annual dividends from subsidiaries 31 27

- Other financial income – 4

TOTAL 31 31(1) - Antalis 15 15

- Boccafin – 4

- Arjowiggins 15 8

- Arjo Wiggins Appleton Ltd (UK) 1 –

(€ millions) 2011 2010

Financial expenses

Interest on current accounts (see Note 6) – 1

Other financial expenses 3 4

TOTAL 3 5

note 9 - non-recurring income and expensesNon-recurring income and expenses break down as follows:

(€ millions) 2010

Additions to provisions for impairment of investments:

• Antalis (26)

Reversals of provisions for impairment of investments:

• Arjowiggins 285

• Sequana Ressources & Services 23

• Boccafin 150

Boccafin share buybacks (151)

Sequana Ressources & Services share buybacks (23)

Other (1)

TOTAL 257

(€ millions) 2011

Additions to provisions for impairment of investments:

• Arjowiggins (342)

• Sequana Ressources & Services (1)

Reversals of provisions for impairment of investments:

• Antalis 4

Losses on treasury shares (2)

Refinancing costs – phase 1 (3)

Other (2)

TOTAL (346)



note 10 - Income tax expense(€ millions) Income before tax Group tax benefit Net income

Recurring 12 – 12

Non-recurring (346) 3 (343)

TOTAL (334) 3 (331)

Excluding Group relief, the theoretical tax charge in 2011 would have been nil.

The tax consolidation regime gave rise to net tax savings of €3 million for Sequana in 2011, the same amount as in 2010.

At 31 December 2011, the Company’s available tax loss carryforwards amounted to €198.4 million.

other disclosures

note 11 - Statement of cash flows(€ millions) 2011 2010

Net income (331) 272

Elimination of additions to (reversals of) depreciation, amortisation and provisions 339 (258)

Elimination of gains and losses on disposals of fixed assets – –

Gross operating cash flow 8 14

Change in operating working capital requirements 4 (3)

Net cash generated from operating activities 12 11

Acquisition of investments – –

Capital increase – –

Share buybacks(1) – 342

Disposal of investments – –

Net cash generated from investing activities – 342

Dividends paid (20) (17)

Capital increase – –

Net cash used in financing activities (20) (17)

INCREASE (DECREASE) IN NET DEBT (8) 336

Net debt at start of year (76) (412)

Net debt at end of year (84) (76)

INCREASE (DECREASE) IN NET DEBT (8) 336

Reconciliation between net debt in the statement of financial position and net debt at year-end

Marketable securities and cash 1 4

Debt (85) (80)

Net debt at end of year (84) (76)

(1) In 2010, Boccafin for €307 million, and Sequana Ressources & Services for €35 million.

note 12 - remuneration of corporate officersTotal remuneration paid in 2011 to corporate officers amounted to €2.43 million (2010: €2.33 million), including €0.66 million for mem-bers of the Board of Directors (2010: €0.69 million) and €1.77 million for Company executives (2010: €1.64 million).



note 13 - related companies(€ millions) 2011 2010

Assets and liabilities

Operating and other receivables 1 3

Debt 43 15

Operating payables – –Net financial income

Income from investments in subsidiaries and associates 31 27

Other financial income and expenses – –

Interest on current accounts – (1)

note 14 - off-balance sheet commitments(€ millions) 2011 2010

Commitments given(1)

Interest/exchange rate swaps 1 1

Reinsurance commitments 3 3

Guarantee 12 12

Joint and several guarantee(2) 155 155

UK pension benefit obligations(3) 239 232

TOTAL 403 403

Commitments received

Interest rate swaps – –

Confirmed bank credit facilities 36 66

TOTAL 66 66

(1) The expiry dates of the Group’s commitments are provided in points 2 and 4 of Note 31 to the consolidated financial statements.

(2) A joint and several guarantee given to Exeltium SAS for an amount of €155 million to cover the obligations of Arjowiggins Papiers Couchés in relation to the electricity procurement requirements of the Arjowiggins Graphic division through 13 January 2026.

(3) Concerns a counter-guarantee given by Sequana of the guarantee provided by Arjowiggins and Antalis in relation to the pension benefit obligations of the UK subsidiaries that are members of the Wiggins Teape Pension Scheme (WTPS) and the Antalis Pension Scheme (APS). The amount is calculated at the lower of 113% of the fund’s buy-out deficit as estimated at 31 December each year or GBP 164 million for WTPS and GBP 36 million for APS. In excess of this amount, the guarantee may only be enforced subject to approval of the Board of Directors of Sequana. The guarantees expire on 31 March 2023 and on 8 January 2024, respectively, for WTPS and for APS, and may be renewed.This situation has resulted from the transfer in 2011 of virtually all of the working members of WTPS to the Antalis Pension Scheme (APS). Based on the pension fund regulations, the contribution requirements for employer entities, and the guarantees and counter guarantees given to the trustees by the employer entities and Sequana, respectively, the overall amount of the guarantees currently given by the Group remains capped at GBP 200 million (€239 million).



Seller’s warranty

Description Signature date

Amount (in millions of

currency units)Amount

(in € millions) Maturity

Disposal of Arjo Wiggins Appleton Ltd (1)

Seller’s warranty Pension benefit obligations

15/05/200915/05/2009

USD 45GBP 6

357

31/12/2015Indefinite

Disposal of Antonin Rodet(2)

Guarantee of SRS obligations 15/09/2009 – 3

Between 15/03/2011 and 15/10/2012

maximum

Sale of Arjowiggins Arches SAS and Arjowiggins Deutschland GmbH(3)

Guarantees of Arjowiggins’ obligations: - given to Munksjö France- given to Munksjö Germany 26/02/2011 –

401

25/02/201825/02/2021

(1) Guarantees given to the buyer of Arjo Wiggins Appleton Limited (AWA Ltd)When it sold AWA Ltd, Sequana specifically excluded any seller warranties in respect of the Fox River environmental dispute in the US, or any risks arising out of the agreement to sell Appleton Papers Inc. on 5 July 2001 and the undertakings concerning the Low Fox River environmental dispute dating from 9 November 2001. The guarantees that were given relate only to the entity’s normal business, tax risks and pension benefit obligations to approximately ten former employees undertaken by AWA Ltd prior to the sale. As indicated in the table, apart from the pension benefit obligations, all of these guarantees are for capped amounts and periods of limited duration. Since 2009, Sequana has recognised provisions for the pension benefit obligations in its consolidated financial statements.

(2) Guarantee provided to SA Grands Vins Jean-Claude Boisset in relation to the sale of Antonin RodetSequana guaranteed the obligations contracted by W Participations (now known as Sequana Ressources & Services) within the scope of the share sale agreement. These obligations expired on 15 March 2011, with the exception of those relating to tax and social security risks which remain in force for the statutory limitation period through 15 October 2012.

(3) Counter-guarantee given to Munksjö in connection with the sale of Arjowiggins Arches and Arjowiggins DeutschlandCounter-guarantee of Arjowiggins’ commitments given by Sequana in favour of Munksjö: the tax and environmental guarantees expire in 7 years, the competition guarantees expire in 5 years and the other guarantees expire in 15 months.



note 15 - treasury management – financial instruments

Debt

At 31 December 2011, net debt recorded in the parent company financial statements stood at €84 million, compared with €76 million at end-2010. Movements in net debt during the year are analysed in the statement of cash flows (see Note 11 – Statement of cash flows).

Liquidity and maturity of debt

Sequana’s gross debt was €36.4 million at 31 December 2011 (down from €63 million in 2010) and is financed by a confirmed credit facility with a top-ranking bank. It was signed in June 2006 for an initial five-year period and extended through February 2012 based on amendments signed in June and September 2011.

It provides credit facilities of up to €36.4 million by drawing down amounts over periods of between one and three months at an annual rate of 1.80%. Under the terms of this credit agree-ment, at the end of each half year, the Group must comply with two financial covenants:

} consolidated net debt/consolidated equity <1.2

} consolidated net debt/consolidated EBITDA <4

At 31 December 2011, the Group complied with the consolidated net debt/consolidated equity ratio but not with the consolidated net debt/consolidated EBITDA ratio. In order to prevent the early repayment in full of amounts drawn down under this credit facil-ity that could have been triggered by exceeding the thresholds of the covenant, Sequana obtained an agreement from the bank to waive its right to such an early repayment. Sequana also entered into negotiations with the bank over the terms and conditions of renewing this credit facility which is due to expire shortly (see Note 1 – Significant events of the year).

Sequana has also negotiated overdraft facilities of up to €5 million with a top-ranking bank, of which €4.9 million had been used at end-December 2011.

This facility has also been confirmed through 30 June 2014 by the lender bank (see Note 1 – Significant events of the year).

In order to ensure the stability of its credit facilities, whether drawn or undrawn, the Company’s policy is to strictly limit cov-enants in financing contracts that enable lenders to require changes to the contracts’ financial terms. In particular, rating trigger clauses are excluded.

Risk management (interest rates, foreign currency)

Option sales for purposes other than hedging are prohibited. Group policy is to not carry out transactions in financial markets for speculative purposes. Derivatives are put in place when the Group is exposed – or almost certain to be exposed – to a par-ticular risk.

Interest rate risk

Although it is exposed to interest rate risk on its external debt, given the general pattern of falling interest rates that began in 2008, Sequana has decided not to set up any interest rate hedges. This policy will be reviewed in the light of economic developments.

Foreign exchange risk

Sequana has contracted a one-year loan for an amount of GBP 850,000 with its subsidiary, Arjo Wiggins Appleton Insurance Ltd, to fund cash pooling arrangements with its subsidiaries. This loan is hedged by a EUR/GBP swap of the same amount and maturity.



note 16 - List of subsidiaries and associates at 31 december 2011

(€ millions)Share

capital

Equity other than capital

before appropriation of net income

(loss)%

ownership

Carrying amount of

the investmentOutstanding

loans and advances

granted by the Company

Guarantees given by

the Company2011

net sales

2011 net income

(loss)

Dividends received

by the Company

during the year CommentsGross Net

A) Detailed disclosures for investments with a carrying amount in excess of 1% of the Company’s share capital:

1 - Subsidiaries (more than 50%-owned by the Company)

Sequana Ressources & Services 8, rue de Seine 92100 Boulogne-Billancourt 5 (1) 100.00 10 4 – 8 (1) – –

Boccafin SAS 8, rue de Seine 92100 Boulogne-Billancourt 7 2 100.00 12 9 – – – – –

Arjowiggins SAS 32, avenue Pierre Grenier92100 Boulogne-Billancourt 175 116 100.00 1,198 582 – 13 14 15 –

Antalis International SAS 8, rue de Seine 92100 Boulogne-Billancourt 681 268 100.00 1,217 1,042 – 57 59 15 –

Arjo Wiggins Appleton Insurance Ltd Maison Trinity – Trinity Square GY1 4AT St peter port Guernesey

GBP 1 million

GBP 1 million 100.00 1 1 – – – 1 –

2 - Associates (10%- to 50%-owned by the Company)

3 - Other investments (less than 10%-owned by the Company)

B) Aggregate data concerning other subsidiaries and associates:

1 - Subsidiaries not included in section A:

a) French companies – –

b) Foreign companies

2 - Associates not included in section A:

a) French companies – –

b) Foreign companies – –

TOTAL 2,438 1,638

note 17 - Subsequent eventsOn 24 February 2012, the Group finalised the renewal in principle of Sequana’s confirmed credit and overdraft facilities for a two-year period through to 30 June 2014. Term sheets have been signed with the banks setting out the terms and conditions for each new “amend and extend” contract (see Note 1 – Significant events of the year).



Securities portfolio at 31 december 2011(€ millions) % owned Net

Securities with a carrying amount greater than or equal to €300,000

French companies

1,014,250 shares Sequana Ressources & Services 100.00 4

704,406 shares Boccafin 100.00 9

11,480,000 shares Arjowiggins 100.00 582

75,692,855 shares Antalis International 100.00 1,042

Foreign companies

2,000,000 sharesArjo Wiggins Appleton

Insurance Ltd – UK 100.00 1

TOTAL 1,638

five-year financial summary2011 2010 2009 2008 2007

I – Capital at year-end

Share capital (in € millions) 74 74 74 74 74

Number of ordinary shares outstanding 49,545,002 49,545,002 49,545,002 49,545,002 49,545,002

II – Results of operations (in € millions)

Net sales(1) 33 30 170 103 125

Income before tax and non-cash expenses (depreciation, amortisation and provisions)

6 (163)65

43 65

Income tax expense 2 3 7 17 36

Net income (loss) (290) 272 898 (638) 139

Dividends distributed – 20 17 – 35

III – Per share data (in €)

Income after tax but before non-cash expenses (depreciation, amortisation and provisions) 0.15 (3.23) 1.46 1.22 2.04

Net income (loss) (5.85) 5.49 18.12 (12.88) 2.81

Net dividend per share – 0.40 0.35 – 0.70

IV – Employee data

Average number of employees during the year 20 21 22 21 24

Total payroll (in € millions) 4 6 6 5 5

Total employee benefits (in € millions) 2 3 2 1 1

(1) Sales correspond to services rendered, income from the securities portfolio and other financial income.



Statutory Auditors’ report on the financial statements For the year ended 31 December 2011 This is a free translation into English of the Statutory Auditors’ report on the financial statements issued in French and it is provided solely for the convenience of English-speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the financial statements and includes an explanatory paragraph discussing the Auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account balances, transac-tions or disclosures. This report also includes information relating to the specific verification of information given in the group’s management report. This report should be read in conjunction with and construed in accordance with French law and professional auditing standards applicable in France.



In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended 31 December 2011, on:

} the audit of the accompanying annual financial statements of Sequana;

} the justification of our assessments;

} the specific verifications and information required by law.

These financial statements have been approved by the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit.

I - Opinion on the financial statements

We conducted our audit in accordance with professional stand-ards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the financial state-ments. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the financial statements of Sequana give a true and fair view of the assets and liabilities and of the financial posi-tion of the Company at 31 December 2011, and of the results of its operations for the year then ended, in accordance with French accounting principles.

Without qualifying our opinion, we draw your attention to Note 1 to the financial statements which describes the terms and condi-tions of the Group’s refinancing which will be legally concluded by the end of April 2012.

II - Justification of our assessments

The estimates used in preparing the financial statements at 31 December 2011 were made in a climate of ongoing economic uncertainty where forecasting the business outlook is extremely difficult. Consequently, in accordance with the requirements of Article L. 823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we draw your attention to the following matters:

As part of our assessment of the accounting rules and prin-ciples applied by your Company, and based on the informa-tion provided to date, we have verified that Notes 1 and 2 to the financial statements contain the appropriate disclosures on the Company’s ability to continue as a going concern, in light of the finalisation with the banks of the terms and conditions of the renewal of the credit facility agreements and overdraft.

The Company estimates the value in use of its investments in accordance with the method described in Note 2.b to the finan-cial statements. We assessed the appropriateness of this method and ensured that it was correctly applied and that the notes to the financial statements provide appropriate disclosures. Our work also consisted of assessing the data and assumptions used by the Company and reviewing the calculations performed.

These assessments were made in the context of our audit of the financial statements, taken as a whole, and therefore contributed to the formation of our opinion which is expressed in the first part of this report.

III – Specific verifications and information

In accordance with professional standards applicable in France, we have also performed the specific verifications required by law.

We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the management report of the Board of Directors, and in the documents addressed to the shareholders with respect to the financial position and the financial statements.

Concerning the information given in accordance with the requirements of Article L. 225-102-1 of the French Commercial Code relating to remuneration and benefits received by corpo-rate officers and any other commitments made in their favour, 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 companies controlling it or controlled by it. Based on this work, we attest to the accuracy and fair presen-tation of this information.

In accordance with French law, we have verified that the required information concerning the identity of shareholders and holders of voting rights has been properly disclosed in the management report.







Statutory Auditors’ special report on related-party agreements and commitments

For the year ended 31 December 2011This is a free translation into English of the Statutory Auditors’ special report on related-party agreements and commitments issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with and construed in accordance with French law and professional auditing standards applicable in France.



In our capacity as Statutory Auditors of Sequana, we hereby pre-sent our report on related-party agreements and commitments.

It is our responsibility to report to shareholders, based on the information provided to us, on the principal terms and conditions of the agreements and commitments that have been disclosed to us or that we may have identified as part of our engagement, without commenting on their relevance or substance or identi-fying any undisclosed agreements or commitments. Under the provisions of Article R. 225-3-1 of the French Commercial Code (Code de commerce), it is the responsibility of the sharehold-ers to determine whether the agreements are appropriate and should be approved.

Where applicable, it is also our responsibility to provide share-holders with the information required by Article R. 225-31 of the French Commercial Code in relation to the implementation dur-ing the year of agreements and commitments already approved by the Shareholders’ Meeting.

We performed the procedures that we deemed necessary in accordance with the professional standards applicable in France.

Agreements and commitments to be approved by the Shareholders’ Meeting

We were not informed of any agreement or commitment author-ised in 2011 to be submitted to the Shareholders’ Meeting for approval in accordance with Article L. 225-38 of the French Commercial Code.

Agreements and commitments previously approved by the Shareholders’ Meeting

We were not informed of any agreement or commitment pre-viously authorised by the Shareholders’ Meeting and which remained in force during the year.







Proposed allocation of net loss

Proposed allocation of net lossThe Company ended 2011 with a net loss of €330,958,032.65.

The Board of Directors recommends allocating all of this amount to retained earnings.

No dividend will be paid in respect of 2011.

Dividends paid over the last three years were as follows:

Year 2010 2009 2008

Number of dividend-bearing shares 49,281,809 49,306,527 -

Total dividend €19,712,723.60 €17,257,284.45 €0

Net dividend per share(1) €0.40 €0.35 €0

(1) Eligible for tax relief of 40%.

chapter 5GenerAL InformAtIon ABout tHe comPAnY

178 INFORMATION ABOUT THE COMPANY

178 corporate name and registered office178 Legal form and governing law178 date of incorporation and term178 corporate purpose178 registration particulars179 consultation of corporate documents179 financial year179 dividends179 Shareholders’ meetings180 Shareholder identification180 disclosure thresholds

181 INFORMATION ABOUT THE COMPANY’S CAPITAL

181 Share capital and voting rights181 changes in share capital over the last five years182 ownership structure184 Share buyback programmes185 financial authorisations in force186 Potential shares

188 CORPORATE SOCIAL RESPONSIBILITY

188 corporate governance191 Labour relations and working conditions199 environmental policy202 Good business practices203 Social commitment

GenerAL InformAtIon ABout tHe comPAnY5 Information about the company


Information about the companycorporate name and registered officeAt its meeting of 13 December 2011, the Company’s Board of Directors decided to transfer Sequana’s registered office from 19 avenue Montaigne, 75008 Paris, France to 8 rue de Seine, Boulogne-Billancourt, France, with effect from 9 January 2012.

Since that date the address and telephone number of the regis-tered office are as follows:

Sequana8, rue de Seine – 92100 Boulogne-BillancourtTel: +33 (0)1 58 04 22 00

Legal form and governing lawSequana is a French joint stock company (société anonyme) governed by French commercial law, in particular the French Commercial Code (Code de commerce).

date of incorporation and termThe Company was incorporated on 29 October 1991 for a term expiring on 31 December 2050.

corporate purpose (Article 2 of the Articles of Association)

The Company’s corporate purpose is as follows:

} investing, in any form whatsoever, in any type of industrial, commercial, property or financial company;

} acquiring, in any form whatsoever, shares, bonds, receivables, commercial paper, or other securities or property rights;

} managing the above interests, securities or property rights;

} carrying out financial operations of any nature, including grant-ing loans to other companies within the Group and any other treasury transactions such as guarantees or collaterals;

} advising any person or company on financial and investing issues, and providing or receiving assistance and consulting services on technical or administrative issues;

} and more generally, carrying out any commercial, industrial, financial, personal and/or real property transactions directly or indirectly related to the above-mentioned purposes or any similar or related purposes.

registration particularsThe Company is registered with the Trade and Companies Registry under number 383 491 446 (the Paris Trade and Companies Registry for 2011 and the Nanterre Trade and companies Registry since 9 January 2012).

GenerAL InformAtIon ABout tHe comPAnY 5Information about the company


consultation of corporate documentsIn accordance with the law, the Company’s corporate docu-ments and historical financial information – including the Articles of Association – can be consulted at Sequana’s registered office located at 8 rue de Seine, 92100 Boulogne-Billancourt, France.

Further information on the Sequana Group may be obtained free of charge by writing to:

Sequana, Secrétariat général, 8 rue de Seine, 92517 Boulogne-Billancourt Cedex.

financial yearThe Company’s financial year covers a twelve-month period from 1 January to 31 December.

dividends (Articles 12 and 22 of the Articles of Association)

Each share entitles its holder to a proportion of the Company’s profits and net assets equal to the proportion of capital repre-sented by the share.

At least 5% of profit for the year, less any losses brought forward from prior years, is transferred to the legal reserve until such time as the legal reserve represents one-tenth of the share capi-tal. Further annual transfers are made on the same basis if the legal reserve falls below one-tenth of the share capital.

Distributable income is composed of profit for the year less any prior year losses and amounts appropriated to reserves in compliance with the law or the Articles of Association, plus any retained earnings.

Shareholders in a General Meeting may decide to appropri-ate all or part of this amount to any discretionary reserves or to retained earnings.

The balance is then distributed among shareholders pro rata to their shareholding.

The Company’s shareholders may decide to pay a dividend out of distributable reserves, stipulating the reserve accounts from which the dividend is to be deducted.

The methods of payment for dividends are determined by share-holders in a General Meeting or by the Board of Directors in the absence of a decision by the shareholders.

The General Meeting may offer shareholders the option of receiv-ing all or part of the dividend in the form of cash, new shares in the Company or other assets. The Board of Directors may also offer this option in relation to an interim dividend in compliance with the law.

Shareholders’ meetings

Notice of meetings (Article 20 of the Articles of Association)

Shareholders’ Meetings are called by the Board of Directors or, where necessary, by the Statutory Auditors or any duly author-ised person. Only matters on the agenda may be discussed at these meetings.

Irrespective of the number of shares held and in accordance with the applicable law and regulations, all shareholders have the right to participate in General Meetings, either in person, by proxy, or by casting a postal vote, subject to presentation of proof of identity and ownership of their shares.

In accordance with the applicable law and regulations, share-holders may send their proxy/postal voting forms for Ordinary or Extraordinary General Meetings either in paper format or, if authorised by the Board of Directors in the notice of meeting, in electronic form.

Postal and proxy votes will only be taken into account if received by the Company at least three days before the meeting. This timeframe may be shortened upon the decision of the Board of Directors. Electronic voting forms may, however, be received by the Company until 3.00 p.m. CET on the day preceding the meeting.

GenerAL InformAtIon ABout tHe comPAnY5 Information about the company


Shareholders who have indicated their intention to attend a General Meeting or who have lodged postal or proxy votes may still sell or transfer all or some of the shares to which said attend-ance, postal vote, or proxy relates. However, where any such sale or transfer takes place prior to midnight CET on the third business day preceding the meeting, the Company will cancel or amend the related proxy, postal vote, admittance card or share ownership certificate accordingly.

Voting rights (Article 21 of the Articles of Association)

The voting rights attached to the Company’s shares are based on the proportion of capital represented, with each share carry-ing one vote.

Shareholder identificationThe Company’s shares – which must be held in either regis-tered or bearer form – are recorded in shareholders’ accounts in accordance with the applicable laws and regulations.

The Company may ask to receive information, from any author-ised body or intermediary, on the identity of its shareholders or holders of other securities conferring voting rights in the Company, either immediately or in the future, the number of securities they hold, and any restrictions on said securities, in

accordance with and subject to the penalties provided by the legislation in force.

In compliance with the applicable laws and regulations, any intermediary registered on behalf of a shareholder in accord-ance with Article L. 228-1 of the French Commercial Code is required to disclose the identity of the person or entity in the name of whom it is acting, upon simple request by the Company or its representative, which may be made at any time.

disclosure thresholdsIn addition to the regulatory requirements concerning the statu-tory disclosure thresholds in force (5%, 10%, 15%, 20%, 25%, 33.3%, 50%, 66.6%, 90% and 95%), any individual or legal entity that raises its interest in the Company, held directly or indi-rectly, through one or more of the legal entities that it controls within the meaning of Article L. 233-3 of the French Commercial Code, to 0.5% of the share capital, is required to disclose to the Company by registered letter with return receipt requested the total number of shares owned. Said disclosure formalities must be carried out within five trading days of the date the threshold is crossed and must be respected each time a shareholder’s inter-est is raised to above or reduced to below any 0.5% threshold, even if the thresholds crossed are higher or lower than those pro-vided for by law. An intermediary registered as holding shares on behalf of a shareholder in accordance with the applicable laws

and regulations is required, without prejudice to the obligations of the shareholder concerned, to make the above-mentioned disclosures with respect to all of the shares registered in the intermediary’s account. In the case of fund management compa-nies, said disclosure formalities must be carried out for all of the Company’s shares held by the funds that they manage.

If a shareholder fails to comply with the above disclosure rules, the shares not disclosed pursuant to the law or the provisions described above will be stripped of voting rights for a period of two years as from the date on which the omission is reme-died. This sanction will only apply upon request by one or more shareholders owning at least 5% of the Company’s capital, duly recorded in the minutes of a General Meeting.

5Information about the company’s capitalGenerAL InformAtIon ABout tHe comPAnY


Information about the company’s capitalShare capital and voting rightsThe Company’s share capital at 31 December 2011 totalled €74,317,503, represented by 49,545,002 shares with a par value of €1.50 each, all in the same class and carrying one voting right.

There has been no change to the Company’s share capital since 31 December 2008. The Board of Directors’ meeting of 18 January 2012 noted that no stock options were exercised and no new shares of any type were issued between 1 January and 31 December 2011.

However, following the vesting of beneficiaries’ rights in respect of the share plan in 2010, the share capital will be increased as of 30 April 2012 by a nominal amount of €705,693 from €74,317,503 to €75,023,196. As a result of the 470,462 new shares, the share capital at that date will be divided into 50,015,464 shares with a par value of €1.50 per share.

Any changes in the share capital or voting rights attached to shares are subject to the applicable laws and regulations as the Company’s Articles of Association do not contain any specific provisions in this respect.

changes in share capital over the last five yearsDate of

the Board Meeting or General

MeetingIncrease/ decrease


Number of shares issued

or cancelled

Number of shares making up

the share capitalPar value of shares

Total share capital


49,119,739 €1.50 €73,679,608.50

Issuance of shares upon exercise of stock options in 2007

19/03/2008 €637,894.50 €5,589,090.40 425,263 49,545,002 €1.50 €74,317,503.00


49,545,002 €1.50 €74,317,503.00


10/03/2009 49,545,002 €1.50 €74,317,503.00


09/02/2010 49,545,002 €1.50 €74,317,503.00


09/03/2011 49,545,002 €1.50 €74,317,503.00


18/01/2012 49,545,002 €1.50 €74,317,503.00

5 Information about the company’s capitalGenerAL InformAtIon ABout tHe comPAnY


ownership structureAs each share carries one voting right (only treasury shares are stripped of voting rights in accordance with Article L. 225-210 of the French Commercial Code), there are no double voting rights and the total number of shares corresponds to the total number of voting rights. No shareholder is granted special voting rights.

The table below shows the breakdown of the Company’s ownership structure at 31 December 2011 compared to the two previous financial years. There was no significant change in the ownership structure between 31 December 2011 and the date on which this registration document was filed.

31/12/2011 31/12/2010 31/12/2009

Numbers of shares % capital

% voting rights(3)


% voting rights(3)


% voting rights(3)

Exor SA 13,993,229 28.24 28.24 13,993,229 28.24 28.24 13,203,039 26.65 26.65

DLMD 10,016,153 20.22 20.22 10,016,153 20.22 20.22 10,806,343 21.81 21.81

Pascal Lebard 13,093 0.03 0.03 13,093 0.03 0.03 13,093 0.03 0.03

Pascal Lebard acting in concert(1) 24,022,475 48.49 48.49 24,022,475 48.49 48.49 24,022,475 48.49 48.49

Groupe Allianz 5,863,292 11.83 11.83 5,863,292 11.83 11.83 5,863,292 11.83 11.83

Public(2) 19,334,232 39.02 39.02 19,437,309 39.23 39.23 19,308,449 38.97 38.97

Treasury shares 325,003 0.66 – 221,926 0.45 – 350,786 0.71 –

TOTAL 49,545,002 100.00 – 49,545,002 100.00 – 49,545,002 100.00 –

(1) The shareholders’ arrangement between Exor SA, DLMD and Pascal Lebard was disclosed to the AMF in 2007 (AMF notices 207C1330 dated 6 July 2007 and 207C1672 dated 1 August 2007) and again in 2010 (AMF notice 210C0671 dated 22 July 2010).

(2) Financière de l’Echiquier, which held 5.02% of the Company’s capital and voting rights at 31 December 2009, held only 4.87% of Sequana’s capital and voting rights at 31 December 2010 (last disclosure dated 20 April 2010 set out in AMF notice 210C0345) and 0.69% of the capital and voting rights at 31 December 2011, according to the shareholder identification study carried out by the Company in early 2012.

(3) Proportion of voting rights theoretically held by each shareholder based on all voting shares and including shares stripped of voting rights, pursuant to Article 223-11 of the AMF’s General Regulations.

To the Company’s knowledge, no other shareholder owns more than 5% of the Company’s capital or voting rights.

To the Company’s knowledge, 4,655 shareholders held Sequana shares in registered form at 31 december 2011 (source: BNp Paribas Securities Services).

Sequana carried out a survey of shareholders who held Sequana shares in registered or bearer form at 31 December 2011. At end-2011, approximately 10,000 shareholders were identified, accounting for over 99% of the Company’s share capital. Based on this survey, out of the 39% of the Company’s shares held by the public, 8% are held by private fund managers (unchanged compared with the previous year), 29% by individual investors (compared with 20% at 31 December 2010) and 57% by institu-tional investors (68% at 31 December 2010). The geographical origin of institutional investors was as follows: approximately 38% were based in France (48% end-2010), 35% in North America (30% end-2010), 20% in continental Europe (15% end-2010) and approximately 7% in Great Britain and Ireland. The percent-age of shareholders in the rest of world was non-material.

Shareholder agreement to act in concert

On 6 July 2007, Exor SA, DLMD (a family-run company con-trolled and managed by Pascal Lebard), and Pascal Lebard signed a shareholder agreement to act in concert. The agree-ment was for an initial term of three years and was designed to stabilise the Company’s ownership structure. As this agreement was due to expire, a new automatically renewable agreement was signed on 21 July 2010 for one year.

Under the new shareholder agreement replacing the agreement entered into in 2007, the parties undertook to maintain their respective stakes in Sequana throughout the contractual term. They agreed not to enter into any transactions involving Sequana shares, directly or indirectly, alone or in concert, that would require them, individually or collectively, to make a public offer for the rest of the Company’s capital. The parties also agreed to inform each other immediately of any transfer or acquisition of Sequana shares they may carry out.

Pascal Lebard also agreed not to reduce his stake in DLMD, except in the event of transfer of shares to a family member. The agreement will automatically become null and void in the event that the total stake held by the parties in Sequana falls below 15%, if the stake held by DLMD and Pascal Lebard falls below 5% or if the stake held by Exor SA falls below 10%.



The agreement also set out the terms and conditions for restruc-turing the debt taken out in 2007 by DLMD with its partner banks and Exor SA(1). The debt owed by DLMD to Exor SA was extinguished with the sale by DLMD of 790,190 Sequana shares (1.59% of share capital) to Exor SA on 30 July 2010. As a result of this transaction, DLMD’s interest in Sequana fell from 21.81% to 20.22%, while Exor SA’s interest in the Company increased from 26.65% to 28.24%.

The Exor group (Italy) – via Exor SA – and DLMD are represented on Sequana’s Board of Directors but they do not receive any significant disclosures or other advantages compared to other shareholders, except for those they receive in that capacity.

Under the shareholder agreement, the Board of Directors shall have ten members, including three appointed on the recommenda-tion of Exor SA (including the Chairman of the Board), two on the recommendation of DLMD (including the Chief Executive Officer) and five on the joint recommendation of Exor SA and DLMD.

The agreement also contains provisions governing the composi-tion of the Board’s committees.

To Sequana’s knowledge, there is no arrangement in place whose implementation could, at a subsequent date, result in a change in the Company’s control, nor any risk of control of the Company being exercised in an abusive manner.

Mandatory disclosure of changes in holdings

During 2011, Sequana received the following notifications dis-closing changes in holdings:

} on 23 March 2011, Norges Bank Investment Management dis-closed that it had gone above the threshold of 1% provided for in the Company’s Articles of Association and that it held 1.09% of the Company’s share capital, and that it had gone below the threshold of 1% on 29 November 2011, owning at that date 492,677 shares, i.e., 0.99% of the Company’s share capital and voting rights. on 13 February 2012, Norges Bank Investment Management disclosed that, following its purchase of 17,674 shares in the Company on 10 February 2012, it had gone above the threshold of 1.5% provided for in the Company’s Articles of Association and that it held 759,496 shares, i.e., 1.53% of the Company’s share capital and voting rights.

} On 25 July 2011, Sycomore Asset Management disclosed that it had gone above the 2% threshold provided for in the Company’s Articles of Association and that it held 2.09% of the Company’s capital.

} On 20 September 2011, Crédit Suisse Group disclosed that it had gone above the threshold of 0.5% and that it held 0.629% of the Company’s share capital, and that it had gone below the threshold of 0.5% on 28 November 2011, owning at that date 101,857 shares, i.e., 0.21% of the Company’s share capital and voting rights.

} On 3 October 2011, Tocqueville France disclosed that it had gone above the threshold of 0.5% and that it held 0.54% of the Company’s share capital, and that it had gone below the threshold of 0.5% on 10 October 2011, owning at that date 200,183 shares, i.e., 0.4% of the Company’s share capital and voting rights.

} on 23 November 2011, BNp paribas Asset Management disclosed that based on all the shares held by the portfolios managed by the group’s fund manager, it had gone above the threshold of 1% and that it held 1.04% of the Company’s share capital, and that it had gone below the threshold of 1% on 30 December 2011, owning at that date 478,980 shares, i.e., 0.97% of the Company’s share capital and voting rights.

} On 21 February 2012, Dimensional Fund Advisors LP dis-closed that based on all the shares held by the funds it man-ages directly or indirectly, it had gone above the threshold of 0.5% and that it held 0.52% of the Company’s share capi-tal. Then on April 5, 2012, it disclosed that it had gone above the threshold of 1% and that it held 1.05% of the Company’s share capital.

Dealings in the Company’s shares by Sequana executives, members of their family and related parties

To the Company’s knowledge, in 2011 there were no dealings in the Company’s shares by Sequana executives, members of the family and related parties within the meaning of Article L. 621-8-2 of the French Monetary and Financial Code.

(1) In accordance with the debt restructuring agreement, the loan granted to DLMD no longer bears interest. On 30 July 2010, DLMD granted, for a period of four years and to each of the two banks taken separately, purchase options on all of the Sequana shares that it holds. The exercise price of these options was fully paid up in advance by means of offsetting the entire debt owed by DLMD to BNP Paribas and RBS. In the event of the exercise of some or all of the options, DLMD will have the choice between transferring the number of shares covered by the exercise of the option and the equivalent amount in cash in accordance with the Sequana share price. The number of shares to be transferred or the cash amount to be paid will be gradually reduced in accordance with the Sequana share price, as soon as the share price equals or exceeds €12. The exercise of the options for all of the Sequana shares to which they give rights would settle DLMD’s outstanding debt in full.



Information likely to have an impact in the event of a public offering

In the event of a public offering for the Company’s shares, both the offerer and the Company must comply with relevant legislation and the guidelines published by the AMF.

Sequana’s Articles of Association do not contain any specific rules likely to have an impact in the event of a public offering, apart from the Company’s entitlement to trade in its own shares under certain conditions, even during the period in which a public offer-ing is made. The authorisation previously granted to the Board of

Directors to trade in the Company’s shares in such circumstances was renewed by the Shareholders’ Meeting of 19 May 2011 (17th resolution) and the Shareholders’ Meeting of 26 June 2012 will be called upon to renew this authorisation in its 8th resolution.

Stock option and share award plans include provisions whereby the rights of grantees may be modified in the event of a public offering for or delisting of the Company’s shares. Certain finance agreements include an early repayment clause that can be trig-gered in the event of a change in control of the Company.

Share buyback programmes In the 7th resolution of the Ordinary and Extraordinary Shareholders’ Meeting of 19 May 2010, the shareholders granted an 18-month authorisation to the Board of Directors and, by delegation, any other duly authorised person, to buy back Sequana shares rep-resenting a maximum of 10% of the Company’s capital. In the 17th resolution of the Ordinary and Extraordinary Shareholders’ Meeting of 19 May 2011, the aforementioned authorisation was terminated in respect of the unused portion, and replaced by a new 18-month authorisation to the Board of Directors and, by del-egation, any other duly authorised person, to buy back Sequana shares representing a maximum of 10% of the Company’s capital.

To improve the liquidity of the Sequana share and the frequency of its quotations on the Eurolist market of NYSE Euronext, in 2006 Sequana set up a liquidity contract. This contract is performed in compliance with the code of ethics published by the French finan-cial markets association, AMAFI. Since March 2009, the liquidity contract has been managed by Oddo Corporate Finance. A total of €8 million was allocated to the contract by Sequana in 2010. An amendment to the liquidity contract was signed with Oddo Corporate Finance on 26 April 2011, to reduce the amount allo-cated to the contract to €6 million.

All share buyback transactions in 2011 were carried out within the scope of the liquidity contract.

Between 1 January and 31 December 2011, 1,151,241 Sequana shares were purchased at an average gross volume-weighted price of €8.80. In the same period, 1,048,164 Sequana shares were sold at an average gross volume-weighted price of €8.53.

The total amount of the negotiation fees for this period totalled €35,000.

At 31 December 2011, Sequana held 325,003 treasury shares, representing 0.66% of the Company’s capital, for a market value of €1,394,262.87. All of these shares were acquired within the scope of the liquidity contract.



financial authorisations in force The following financial authorisations are currently in force:

Date of authorisationMaximum nominal

amount authorised(1)

Expiry date of authorisation

AuTHoRISATIoNS To ISSuE SHARES ANd/oR oTHER SEcuRITIES

Authorisation to issue shares and/or securities carrying rights to shares or to debt securities, with pre-emptive subscription rights for existing shareholders EGM of 19/05/2011

Shares:€200 million

Debt securities:€600 million 18/07/2013

Authorisation to issue shares and/or securities carrying rights to shares or to debt securities, without pre-emptive subscription rights for existing shareholders EGM of 19/05/2011



Authorisation to increase the number of shares and/or securities issued in the event of a share capital increase with or without pre-emptive subscription rights for existing shareholders pursuant to the above authorisations EGM of 19/05/2011

15% of the original issue 18/07/2013

Authorisation to issue shares and/or securities carrying rights to shares, without pre-emptive subscription rights for existing shareholders, by means of a public offering and/or private placement and at a price set at the Board of Directors EGM of 19/05/2011 10% of capital 18/07/2013

Authorisation to issue shares and/or securities carrying rights to shares in the Company as payment for shares tendered to a public exchange offer EGM of 19/05/2011



Authorisation to issue shares and/or securities carrying rights to shares as consideration for contributions in kind granted to the Company EGM of 19/05/2011 10% of capital 18/07/2013

Authorisation to increase the Company’s capital by capitalising premiums, reserves, profit or other eligible items EGM of 19/05/2011

Total amounts available

for capitalisation 18/07/2013

EMpLoYEE-RELATEd AuTHoRISATIoNS

Issue of shares and/or securities carrying rights to shares of the Company, reserved for employees who are members of an employee savings plan EGM of 19/05/2011 2% of capital (2) 18/07/2013

Issue of shares and/or securities carrying rights to shares of the Company, reserved for employees of foreign subsidiaries of the Sequana Group EGM of 19/05/2011 2% of capital (3) 18/11/2012

Authorisation to grant stock options EGM of 19/05/2010 6% of capital (4) 18/07/2013

Authorisation to grant stock options EGM of 19/05/2010 6% of capital (5) 18/07/2013

AuTHoRISATIoN To IMpLEMENT A SHARE BuYBAcK pRoGRAMME OGM of 19/05/2011 10% of capital 18/11/2012 (6)

AuTHoRISATIoN To REducE THE coMpANY’S cApITAL EGM of 19/05/2011 10% of capital 18/11/2012 (6)

(1) The General Meeting of 19 May 2011 capped the aggregate maximum amount of any capital increases to be carried out in accordance with these authorisations – excluding shares issued to members of an employee savings plan and employees of foreign subsidiaries – at €200 million, and set an aggregate ceiling of €600 million for the issue of debt securities. This limit does not apply to the authorisation granted to the Board of Directors in order to increase the capital by capitalising premiums, reserves, profit or other eligible items.

(2) The total number of shares and securities issued to employees of foreign subsidiaries is included in this ceiling.

(3) The total number of shares and securities issued to employees who are members of an employee savings plan is included in this ceiling.

(4) The total number of share awards is included in this ceiling.

(5) The total number of stock subscription or purchase options granted by the Board is included in this ceiling.

(6) Authorisation expiring on the date of the General Meeting called to approve the financial statements for the year ended 31 December 2011.

The only authorisation used to date concerns the authorisation to implement a share buyback programme which has been used for the liquidity agreement with Oddo Corporate Finance.



Potential shares

Stock options granted by Sequana

No company stock options were granted in 2011.

At 31 December 2011, 804,060 stock options remained outstanding, representing a potential capital increase of a nominal value of €1,206,090 and a potential dilutive impact of 1.62%. However, as of the filing date of this document, the exercise price of the options is considerably higher than the current share price and it is highly unlikely that the options will be exercised.

The key features of outstanding stock options at 31 December 2011 are detailed below:

Stock option plans at 31 December 2011

Date of General Meeting 19/05/1998 21/05/2003 03/05/2005 03/05/2005

Date of Management Board or Board of Directors’ meeting 15/05/2003 18/06/2004 03/05/2005 10/05/2006

Number of options granted 420,000 55,000 515,000 90,000

Corporate officers 160,000 55,000 515,000 0

Ten employees receiving the greatest number of options 260,000 0 0 90,000

Exercise period

Start date 15/05/2005 18/06/2006 03/05/2009(1) 10/05/2010(1)

Expiry date 15/05/2011 18/06/2012 03/05/2013 10/05/2014

Exercise price on grant date e16.90 e20.47 e23.50 e25.46

Adjusted exercise price e14.47 e17.53 e20.46 e22.17

Number of options exercised between 01/01/2011 and 31/12/2011

0 0 0 0

Number of options forfeited between 01/01/2011 and 31/12/2011

104,530 0 0 0

Number of options outstanding 0 68,028 626,556 109,476

of which options granted to corporate officers at 31 December 2011

0 68,028 626,556 0

(1) Based on the vesting period.

Share award plans

In early 2010, a share award plan was set up involving the allo-cation of 1,921,000 Sequana shares to 169 beneficiaries. The plan aims at incentivising key Group executives and managerial-grade staff, and giving them a stake in Sequana’s future earnings and value creation.

In approving this plan, the Board of Directors’ meeting of 9 February 2010 used the authorisation granted to it by the Shareholders’ Meeting of 11 May 2007.

Regardless of the beneficiary, all shares granted under this plan are subject to presence conditions and performance criteria related to the Group’s three-year business plan for the activities concerned.

Depending on the beneficiary’s position within the Group and the business to which he or she is assigned, performance cri-teria are based (i) equally on Sequana’s consolidated EBITDA and its consolidated net debt, or (ii) on Sequana’s consolidated EBITDA (30%), its consolidated net debt (30%), and EBITDA reported by the beneficiary’s business (40%).

The terms of the plan provided that, if some or all of the related performance conditions at 31 December 2011 are met, the free shares will be vested by the beneficiaries on 30 April 2012. The vested shares will represent up to two-thirds of the total number of shares awarded. The remaining shares will vest on 30 April 2013 provided that the specified performance condi-tions are met at 31 December 2012.



Provided that the specified presence conditions and performance criteria are met, the shares will vest between 30 April 2012 and 30 April 2014, depending on the tax situation of the beneficiar-ies. A two-year lock-up period running from the vesting date may also apply depending on the beneficiaries’ tax situation, during which the shares are not transferable.

The shares will be awarded out of new shares issued by Sequana through the capitalisation of reserves, profit or issue premiums. Grantees will acquire beneficial ownership of the shares and have entitlement to dividends from the first day of the period in which the shares were issued.

The sale of the decor business to the Swedish Munskjö group in 2011 significantly altered the Group’s structure. Consequently, pur-suant to the terms of the share award plan, the Board of Directors’ meeting of 21 July 2011 decided to amend the performance condi-tions as well as certain other conditions affected by the sale.

Moreover, the vesting process was accelerated for the portion of share awards to be granted to the remaining employees of the Solutions division as the aforementioned sale makes it impos-sible to measure the contribution of these remaining employees to the performance of the Group as a whole. Pursuant to a deci-sion by the Board of Directors’ meeting of 21 July 2011, a total of 63,560 shares will vest on 30 April 2012 or 30 April 2014, depending on the tax situation of the beneficiaries and regard-less of whether or not performance conditions have been met at 31 December 2011.

Due to departures within the Group, the number of free shares granted that could vest at 31 December 2011 fell to 1,822,160 shares, for a total of 158 beneficiaries.

After taking account of the achievement of performance con-ditions at 31 December 2011, without taking into account the abovementioned vested shares, and subject to amendments relating to presence conditions that are likely to occur between now and the acquisition date (30 April 2012 or 30 April 2014 for foreign beneficiaries), on 30 April 2012 (73 beneficiaries) or 30 April 2014 (79 foreign beneficiaries), two-thirds of the total number of shares awarded should be vested by a total of 152 beneficiaries, depending on their tax situation, multiplied by the percentage corresponding to the Group’s debt criterion applicable to them.

In light of the above and subject to the same conditions, 470,462 shares should be awarded to and vested by French beneficiaries on 30 April 2012 and 130,437 shares awarded to and vested by foreign beneficiaries on 30 April 2014 in respect of the performance conditions at 31 December 2011.

The above-mentioned share award plan is currently the only share award plan in force within the Sequana Group.

5 corporate social responsibilityGenerAL InformAtIon ABout tHe comPAnY


corporate social responsibilityIn 2011, the Sequana Group, which employs 11,000 people in 44 countries, decided to put in place a Group-wide corporate social responsibility (CSR) policy, starting in 2012. The aim of this policy is to group all of the subsidiaries’ CSR actions with respect to the environment, HR management, corporate govern-ance and relations with stakeholders together under the same strategic umbrella. Implementing an overall strategy for the entire Group enables Sequana to reaffirm its objectives, priori-ties and values. A more streamlined, lateral approach to CSR is being put in place, while at the same time allowing the subsidiar-ies to maintain their independence.

To achieve this, and in order to clearly define its responsibilities as regards the impact of its decisions and businesses, while making corporate responsibility an integral part of its values and practices, the Group has chosen to base its CSR policy on inter-national standard ISO 26000. This approach is compatible with and complimentary to the legal obligations laid down by Article 225 of France’s Grenelle II law on environmental commitment.

Through its CSR approach, the Group must be able to respond to the major challenges it faces as a paper manufacturer and dis-tributor while at the same time adapting to social, economic and regulatory changes. The major challenges in question touch on four main areas, the first of which is corporate governance and Sequana’s need to offer a clear, transparent vision of its strategy, decision-making process, and business ethics, as well as of its principles of equal opportunity within the Group and relations with stakeholders.

The second challenge concerns proper management and employee protection. Whether as regards safety in the workplace, social dia-logue, training or internal promotion, Sequana aims to guarantee safe, transparent working conditions for its 11,000 employees. When it comes to employer-employee relations and working con-ditions, the Group takes extreme care to comply with the regula-tions in force in each country in which it operates.

The third challenge revolves around responsible management and the protection of natural resources. With 25 plants and 110 distribution centres around the world, Sequana is highly dependent on natural resources such as wood, water and fos-sil fuels. Reducing dependency on fossil fuels and giving priority to raw materials that do not endanger the fragile ecological bal-ance of the planet is a major issue for the Group and its entities. With its numerous initiatives to improve energy efficiency and invest in renewable energy, the Group wishes to send a strong message to its various stakeholders regarding its desire to offer solutions through innovative actions and the inclusion of environ-mental issues at all stages of the value chain.

The fourth and final key challenge regards product offering and customer relations. Sequana’s various entities must, more than ever, respond not only to their customers’ increasing demands in terms of eco-responsible products, but also prompt these demands by anticipating them. The products offered by the Group must now fully incorporate the concepts of resource scar-city, the urgency of climate change and responsible consump-tion – not just for economic reasons but in order that Sequana may stand up for its convictions.

corporate governance

Decision-making structure and process

Sequana is continually strengthening its decision-making system in order to guarantee the utmost transparency when implement-ing actions and strategies. The Group endeavours to use finan-cial and natural resources and human capital as efficiently as possible to better reflect its values through its commitment to social responsibility. Sequana aims as far as possible to achieve a fair balance as regards the levels of power, responsibility and skill of its decision-makers. It also endeavours to keep track of the implementation of these decisions in order to guarantee that they are implemented in a responsible manner and remain

accountable for the outcome thereof, whether positive or nega-tive. The CSR function is represented on the Group’s three main executive committees (Sequana, Arjowiggins and Antalis), either systematically or on an ad hoc basis, ensuring it a voice on the Group’s highest decision-making body. Sequana’s accountabil-ity as regards its challenges and the social impact of its activities is thus fully taken into account by its management committees. The creation of a specific CSR Director function will be accom-panied in the near future by a higher level of coordination among the teams already dedicated to CSR within the Group’s various entities.

5corporate social responsibilityGenerAL InformAtIon ABout tHe comPAnY


Principles of legality, ethics and transparency

Sequana employs a small number of staff in developing coun-tries. In accordance with the Group’s code of conduct – which is based on respect for individuals – Sequana complies with International Labour Organisation (ILO) standards in all of the countries where it operates, particularly relating to child labour, occupational health and safety, employee representation and fundamental principles and rights at work. These principles apply both to Sequana’s relations with its own employees and to sub-contracting agreements.

Subcontractors are mainly used by the production business for site security in plants and maintenance.

Promotion of cultural diversity

The Sequana Group is mainly European in so far as 77% of its employees are based in Europe. However, it also has a presence elsewhere, with 4% of its workforce located in Asia, 7% in the US, 9% in Latin America and 3% in Africa. This international stance means that the Group is not inclined to differentiate its policies in accordance with national or cultural criteria but, to the contrary, to constantly seek to capitalise on the cross-fertilisation inherent in the juxtaposition of various cultures. The executive committees of Antalis and Arjowiggins boast a total of seven different nation-alities and all of the nationalities present in the Group are repre-sented on the various operating committees and at the frequent management meetings, proof of the multicultural and international profile of the Sequana Group. The workforce is predominantly male, at 76%, due to the bulk of the work being carried out in pro-duction plants or distribution centres, where female employees are in the minority. Women make up between 13% and 26% of the workforce depending on the business in question, with 31% in distribution. This proportion varies considerably from one conti-nent to another, with women accounting for 24% of the workforce in Europe and the US compared with 46% in Asia. This cultural difference is even more prevalent when examined on a country-by-country basis: in Argentina, 17% of distribution employees are female, but in China the figure rises to 46%. Thus, when working conditions and cultural factors allow, Sequana promotes diversity in the form of gender equality within its subsidiaries. The percent-age of women holding high-level management positions is simi-lar to the percentages seen across the group as a whole, i.e., 24% on average, with variations between 21% and 31% depend-ing on the business. The Group’s objective of having women account for 30% of management by 2013 thus appears achiev-able. Similarly, although disabled employees make up 1.5% of the workforce taken as a whole, the figure fluctuates between 1% and 3% depending on the business and management is confident that disabled employees will represent 2% of the overall workforce within the next two years.

Dialogue and negotiations with stakeholders

The Sequana Group, a major player in paper production and distribution, is aware that active and constructive dialogue with stakeholders must be central to its governance structure and way of working. This dialogue, which is based on transparency, is reflected at Group level through responsible communication and within the various entities by including stakeholders early on in the decision-making process.

Stakeholder mapping

Sequana’s economic sphere is made up of various players, with whom it is essential to correctly manage relations in order to cre-ate harmonious economic, labour, environmental and social con-ditions in order to ensure the Group’s sustainability.

The stakeholders of the Group and its legal entities break down as follows:

} Customers: focused mainly on the business-to-business sec-tor, the Sequana Group entities have a wide range of custom-ers, including major paper manufacturers, printers, service providers, paper distributors and government bodies.

} Shareholders, investors: (see chapter 1 – Share performance and ownership structure).

} Suppliers: Sequana works with a large number of suppliers with regard to both its distribution and production businesses. Each of the entities takes considerable care to respond con-structively and ethically to suppliers’ expectations and to ensure that suppliers comply with the Sequana Group’s values.

} Employees: in order to ensure good management of its 11,000 employees the Group holds constant, transparent dis-cussions with unions and places utmost importance on work-ing conditions and safety in the workplace.

} Local communities: the Group strives to maintain construc-tive and transparent relations with the local communities in the various rural and urban areas in which its plants are located. Integrating the plants into the fabric of local industry and community helps forge links between the Company and its employees.

} NGos: the very legitimate concerns of non-governmen-tal organisations about labour and environmental issues are taken into account by the Group through constant efforts with respect to dialogue and transparency. These NGos sound the alert and launch the discussions that enable the Group to carry out its various businesses. Through constructive dialogue, the Group acknowledges the impact that its businesses have on the environment and constantly endeavours to improve perfor-mance and reduce impacts in this regard.



} Government bodies: the production plants and warehouses must comply with clearly defined local, national and interna-tional regulatory requirements. Ongoing dialogue with various government bodies is necessary to ensure compliance with regulations and take into account both the interest of the indi-vidual company and the smooth running of the Group’s eco-nomic affairs.

Membership of CSR-related organisations

} Orée: this association brings together businesses, local authorities, professional and environmental organisations and academic and institutional bodies to pool ideas on best environmental practices and implement practical policies to achieve integrated environmental management at local level. Arjowiggins Graphic is a member of Orée.

} EPE (Entreprendre pour l’Environnement): an association that groups together around 40 French and international com-panies eager to work together to incorporate environmental issues into their business strategy and day-to-day manage-ment. Sequana is a contributing member of EPE.

} FSC (Forest Stewardship Council): an independent, non-governmental, not-for-profit organisation established to pro-mote the responsible management of the world’s forests. Arjowiggins Graphic is represented on the Board of Directors of FSC France.

Dialogue with stakeholders

Arjowiggins Graphic and WWF France have been partners since 2009, working together to consolidate the division’s envi-ronmental approach, reduce the environmental footprint left by its products and manufacturing processes and raise aware-ness among customers about responsible paper usage. Within the scope of this partnership programme, in 2011 Arjowiggins Graphic signed up for the WWF’s Climate Savers programme.



Labour relations and working conditions

Employer/employee relations

The Sequana Group and its various entities take seriously their responsibility to contribute to employees’ quality of life by pro-viding healthy and safe working conditions. Good management of employer/employee relations is achieved by rigorously apply-ing the various legal frameworks in the countries in which the

Group operates. The Group makes sure that all of its employees enjoy equal opportunities and treatment, without any discrimina-tion whatsoever. In today’s particularly sensitive economic envi-ronment, the Group takes particular care that, in the event of redundancies, all accompanying measures provided for by local law (if any) are applied.

Average number of employees by company

2011 Year-on-year change 2010 2009

Arjowiggins 5,223 (180) 5,403 6,288

Antalis 6,023 (684) 6,707 6,937

Holding companies (Sequana and others) 63 4 59 24

TOTAL 11,309 (860) 12,169 13,249

Average number of employees by business and geographic region

Geographic region Arjowiggins Antalis Holding companies Total

Europe 3,811 4,920 63 8,794

o/w France 2,350 649 63 3,062

North America 725 – – 725

South America 505 376 – 881

Africa-Middle East 2 460 – 462

Asia-Pacific 180 267 – 447

TOTAL 5,223 6,023 63 11,309

Average number of employees by gender and length of service

In 2011, Sequana implemented a consolidated reporting system for all of its legal entities in respect of certain indicators that had previously only been monitored at local level. This new system will allow the Group a global view of indicators such as gender distribution, the number of female management-level employ-ees, absenteeism, training figures, the percentage of disabled employees and the breakdown of employees by length of service in accordance with their business. This more consistent form of monitoring will enable the Group to implement corrective meas-ures and take a stand on certain specific subjects.

The industrial nature of the paper production business means that there is a higher percentage of male than female employees. With women making up 19.2% of the workforce, Arjowiggins nonetheless endeavours to promote staff regardless of origin, gender or religion. At Antalis, which is a distribution business, women account for 31% of the workforce.

There is a 25.5% and 22.6% representation of women in man-agement positions at Arjowiggins and Antalis respectively. This indicator, which has recently been consolidated at Group level, will enable the Group to make adjustments.

New indicators in 2011:

} number of women on each of the three executive committees

• Arjowiggins: four out of ten

• Antalis: two out of fifteen

• Sequana: one out of seven

} number of women on the Board of Directors: one out of a total of ten Directors.



Breakdown by gender

Antalis ArjowigginsHolding

companies TOTAL

% men 69% 80% 52.5% 74%

% women 31% 20% 47.5% 26%

Breakdown by age group


companies TOTAL

Less than 20 years old

1% 1% 0 1%

20-30 years old

11% 11% 15% 11%

30-40 years old

26% 19% 28% 22%

40-50 years old

34% 36% 33% 35%

50-60 years old

23% 29% 23% 26%

Over 60 years old

5% 4% 1% 5%

Breakdown by length of service


companies TOTAL

Less than 1 year

8% 6% 7% 6%

1-5 years old 25% 20% 39% 23%

5-10 years old

21% 11% 28% 16%

10-20 years old

27% 25% 16% 26%

Over 20 years old

19% 38% 10% 29%

Internal communication

At Arjowiggins, communication policy is formulated at divisional level in order to foster greater cohesion and to rally support for common objectives.

A quarterly seminar is organised for managerial-level staff at Arjowiggins Graphic and, for the first time in 2011, a seminar was organised for the plant managers of the Security division. The Creative Papers division organises a telephone conference each quarter to keep management abreast of business developments. In the Coated US division an open day was organised in 2011, at which staff could discuss with management at an informal level. The divisions also hold one-off meetings or use the intranet to keep employees regularly informed of business news and key events.

On the Arjowiggins’ internet site, employees can access up-to-date documentation such as corporate presentations or infor-mation concerning safety issues within the group. The “News” section allows employees to access the latest press releases published by the group.

At Antalis, internal communication regarding the RACE 2012 strategic programme continued throughout 2011. In 2010 a major communication campaign was launched targeting group employ-ees across Europe, and 2011 saw the campaign rolled out to employees in all Asian countries in which the group has opera-tions. The video introducing the programme as well as items such as posters and e-newsletters have been adapted to local needs and employee meetings have been held at each plant similar to those held in Europe in 2010.

Internal communication about this programme also continued in Europe. The three management meetings organised in 2011 were attended by 120 managers and were an opportunity to review the state of progress of the RACE 2012 founding pro-jects. Presentations were given on each project and workshops were held around specific themes. Antalis’ in-house magazine Keynotes and the intranet platform BetweenUs acted as efficient communication channels for RACE 2012 in 2010, highlighting the achievements and state of progress of each project.

A recent survey showed that Keynotes continues to be highly appreciated as a source of information by Antalis employees, with 81% of employees reading the magazine and 82% consid-ering it a useful resource.

As in 2010, regional chat sessions were organised in Europe, allowing all employees with an internet connection to submit questions to management about the state of progress of the RACE 2012 programme and other subjects. This new means of communication reported a certain degree of success with more than half of the employees concerned on-line for each session.

Working conditions and social protection

Compensation policy

The Group’s employees – in production or distribution or at the registered office – are paid a fixed salary which, for most manage-rial-level staff, comes on top of a variable salary generally based on the performance of the Group and/or the businesses to which the employee belongs, as well as on whether individual perfor-mance targets have been met. At the beginning of 2010, the com-pensation policy for the Group’s key executives was reviewed in depth. In 2011, the Group reviewed its executive compensation policy with the aim of basing a portion of annual variable pay on the objectives set for the Group, thereby encouraging executives to work actively towards these goals. The review also sought to bring compensation arrangements at Arjowiggins and Antalis into line with the same principles.

The Group’s employees are also eligible for statutory healthcare, welfare and disability benefits. Certain senior executives or high-performing managers may be awarded fringe benefits on top of their salary depending on their position within the Group. They may also be granted long-term rights on Sequana shares, such as those described below.



Mandatory annual negotiations took place in Arjowiggins and Antalis in January and February, management and social partners considering that it would be too late to hold them in Spring, as is normally the case, given the surge in inflation recorded in early 2011. These negotiations, which were held against a more diffi-cult economic backdrop than in 2010, nevertheless enabled the Group to preserve employee’s purchasing power.

Further to the plan set up in July 2011, the Group is also required to pay its employees a profit-sharing bonus. The management of the French companies concerned by this requirement opened negotiations in October 2011, which concluded in the payment of a bonus of between €100 and €200 depending on the company’s economic situation, reinforcing the Group’s ability to preserve the purchasing power of its employees.

Succession plans for managers

Following the divisional autonomy introduced at Arjowiggins and the finalisation of the Map integration at Antalis, a more sta-ble organisational structure has allowed Sequana to resume its succession planning under a standard policy applicable to all Arjowiggins divisions and all regions in which Antalis is present.

This process, made necessary due to the obsolescence of the succession plans following the aforementioned restructuring, culminated at the beginning of 2011 in the organisation of career committees. The committees are responsible for validating the current HR situation and for enforcing the measures taken to establish succession plans for all businesses (see the section on internal control initiatives in chapter 3, “Risk management”).

Within the scope of management appraisals organised every year by the subsidiaries, all the succession plans were updated and validated at the six career committee meetings held between December 2010 and January 2011 under the responsibility of Sequana’s Chief Executive Officer.

The committee’s findings were that half of the key positions were secured, i.e., at least one successor identified. The focus in 2011 was on attracting and retaining best talents and in par-ticular on fostering the loyalty of potential successors in view of recruitment difficulties encountered by certain subsidiaries, such as the paper sector, which is less attractive than the other growing business sectors.

The Group validated the Talent Management project created at the level of Arjowiggins’ Graphic division to be adopted by all the subsidiaries.

By operating at the Group’s level and not only at the subsidiaries’ level, better career paths for staff can be provided. The Group pursues an active mobility policy in terms of both career changes and country transfers.

Employee savings

The French companies of the Sequana Group have progres-sively adopted a collective reward scheme, in the form of either an incentive scheme or a statutory profit-sharing arrangement.

Company savings plans, widely implemented within the Group in France, are not or are rarely implemented in the other countries even if some of them have adopted a similar collective reward scheme (Antalis in the UK and Belgium).

Profit-sharing and incentive arrangements

French holding companies of the Group

Employees of Sequana and Sequana Ressources & Services fall within the scope of a profit-sharing agreement set up at the Group’s own initiative. Under this voluntary profit-sharing scheme, a special profit-sharing reserve is calculated every year based on the higher of consolidated recurring net income attributable to owners and consolidated net income for the period attributable to owners. The amount allocated to the reserve is determined using a ratio of 1.5:1,000 by reference to this calculation base.

This aggregate amount is then allocated among employees in proportion to their gross annual salary and within the limits authorised by law. The amounts allocated to beneficiaries under this scheme may, at the employee’s request, be invested in part or in full in the employee savings plan and/or the collective retire-ment savings plan described below.

Amounts owed to employees under the profit-sharing scheme are invested in corporate mutual funds managed by CIC-Épargne Salariale, for which the employees concerned can select from a number of different investment profiles. In accordance with French law, the beneficiaries may either request immediate payment of all or part of these sums, or else block the amounts for a five-year period and qualify for special tax and social security treatment.

The total gross profit-sharing amount paid to employees eligible for the scheme in 2011 came in at €91,013. A gross amount of €42,262 was paid to employees in 2012 in respect of 2011.

The incentive bonus agreement signed by Sequana employees in June 2009 (with retroactive effect from 1 January 2009), in accordance with Articles L. 3312-2 et seq. of the French Labour Code (Code du travail) expired on 31 December 2011. The incentive bonuses payable are calculated based on the Group’s consolidated recurring operating income. A new incentive bonus agreement should be signed before end-June 2012.

Employees of Sequana Ressources & Services are eligible for incentive bonuses under an agreement signed in 2010 (with ret-roactive effect from 1 January 2010) for a three-year period. The incentive bonuses payable under this agreement are calculated based on Sequana’s consolidated recurring operating income.



The amounts allocated to employees under this scheme may, at the employee’s request, be invested in part or in full in the employee savings plan and/or the collective retirement savings plan discussed below.

The total gross amount of incentive bonuses paid to eligible employees (Sequana and Sequana Ressources & Services) in 2011 in respect of 2010 was approximately €344,000. A gross amount of approximately €271,000 is payable to Sequana and Sequana Ressources & Services employees in 2012.

Arjowiggins

Besides its mandatory profit-sharing scheme, Arjowiggins chose to set up a variety of incentive arrangements to enhance its col-lective reward policy. Mandatory profit-sharing and discretionary incentive arrangements are renewed every three years.

Such arrangements exist at the level of each French subsidiary of Arjowiggins and not at the level of the group, since the related performance criteria are assessed in light of the economic and financial performance of each company.

This is because each company operates on markets with very different economic characteristics and earnings can therefore vary widely. The collective compensation policy has therefore been designed to reward the performance of employees in the country in which they are based. This policy chimes with the group’s new-look organisation introduced in June 2008.

All profit-sharing agreements comply with statutory profit-shar-ing provisions, whereas incentive bonus schemes are based on criteria that can vary from one company to the next.

As well as criteria based on operating income which measure only economic performance, incentive schemes also look to assess the company’s performance in terms of customers (ser-vice rate), HR issues (absenteeism, commitment) and safety record (occupational accident rate). The achievement of objec-tives in these areas is directly related to how well teams under-stand and manage industrial processes as a whole, and these results are therefore taken into account when calculating incen-tive bonuses.

Incentives are generally paid on a six-monthly basis so that teams can work towards visible targets. Employees usually receive equal amounts to reinforce the concept of a collective achievement.

Antalis

Like Arjowiggins, Antalis has also chosen to adopt a collective reward scheme, introducing a discretionary incentive scheme on top of its statutory profit-sharing arrangement.

When it was created in 1999, Antalis International set up a profit-sharing agreement based on statutory profit-sharing provisions, and entered into an incentive arrangement concerning all teams at the company’s registered office, renewed every three years.

Employees of Antalis International primarily provide services to Antalis’ subsidiaries across the globe. Incentive arrangements are therefore based on the group’s consolidated performance determined using two criteria: (i) return on sales and (ii) return on capital employed (ROCE). Performance is measured by com-paring actual figures against budget.

Antalis SNc (distribution business in France) set up similar com-pensation arrangements when it was created in 1999. The cri-teria used for incentive bonuses (operating income and working capital requirement) are directly related to the economic condi-tions of Antalis SNc (actual figures measured against budget). Sound management of working capital and operations is essen-tial in a distribution company.

Creative Papers, which acts as the registered office for the Creative Papers division, was created on 1 January 2010 and is wholly owned by Antalis International. Creative Papers has less than 50 employees and has set up an incentive bonus scheme with performance conditions based on return on sales and the ratio of working capital to Creative Papers sales, measured against budget.

Employee savings plans


Sequana and Sequana Ressources & Services set up an employee savings plan within the meaning of Article L. 3322-7 of the French Labour code and French Law No. 2001-152 of 19 February 2001 on employee savings.

The amounts paid into this plan by beneficiaries may be used to acquire units in mutual funds, including a fund invested exclu-sively in Sequana shares and/or other listed securities issued by Sequana.

These mutual funds are managed by CIC-Épargne Salariale.

Only amounts invested in the mutual fund dedicated to Sequana shares (“Sequana Épargne”) are eligible for top-up cash pay-ments made by the participating companies.

The amount paid in by the beneficiaries, plus the top-up pay-ments invested in this fund by the two companies for 2011, came to €292,664.



Arjowiggins

To round out the local employee savings plans offered by subsid-iaries, Arjowiggins has set up two group savings plans (“PEG”).

The first plan was set up at the level of Arjowiggins SAS follow-ing a collective agreement dated 31 January 2002. The separate entities covered by this plan were spun off in June 2008, thereby maintaining their eligibility for the group savings plan.

This plan was designed with the aim of encouraging employee share ownership. The amounts paid into the plan by employees may be used to acquire units in mutual funds, including a fund invested exclusively in Sequana shares and are eligible for top-up payments by the company of up to €500 per year.

These mutual funds are managed by BNp paribas.

Only amounts invested in the mutual fund dedicated to Sequana shares (“Arjowiggins Croissance”) are eligible for top-up cash payments made by the company.

This initial group savings plan was supplemented by a second plan set up unilaterally on 28 February 2003 for the same popu-lation as the initial plan.

The second plan was designed with the aim of boosting employee share ownership. The amounts paid into this plan by employees may be used to acquire units in the Horizon Plus AW mutual fund managed by Étoile Gestion du crédit du Nord.

In November 2010, these two group savings plans were amended to incorporate a new solidarity fund, as approved by trade unions and ratified by the Group Works Council. The aforementioned companies are also responsible for the management of this fund.

Antalis

Antalis International launched an employee savings plan on set-ting up its profit-sharing and incentive bonus schemes. The amounts paid into this plan by employees may be used to acquire units in the mutual fund managed by Natixis.

In 2010, this employee savings plan was amended to incorporate a new solidarity fund managed by Natixis and a new mutual fund invested exclusively in Sequana shares. Management arrange-ments for this latter fund are currently being put in place.

Only amounts invested in the mutual fund dedicated to Sequana shares are eligible for top-up cash payments made by Antalis.

Creative Papers is a member of the employee savings plan run by Antalis International.

In 2010, Antalis SNc approved the principle of an employee sav-ings plan on the renewal of the incentive bonus agreement. The terms and conditions of this plan are currently being discussed with the social partners.

Collective retirement savings plan (“PERCO”)


Sequana and Sequana Ressources & Services also operate a collective retirement savings plan (“PERCO”), set up in accord-ance with the French Pension Reform Act of 21 August 2003 (the “Fillon Act”). Under this plan, employees can build up retire-ment savings over the long term. The amounts collected are invested in mutual funds and may be topped up by the member companies.

The amount paid in by the beneficiaries, plus the top-up pay-ments invested in this fund by the two companies for 2011, came to €128,103.

With such a broad and diversified offering (around ten employee savings plans and four to six corporate mutual funds), and in light of the fact that (i) all the employee savings plans have incorporated solidarity funds in 2010 and 2011, and (ii) certain employees have access to about fifteen funds, which renders the employee savings offering unclear within Arjowiggins, the Group wishes to manage these plans more efficiently.

Since the retirement savings plan represents a key strategy for Sequana’s collective reward policy in France, even more so in view of longer employment due to the raising of the retirement age, the following two courses of action were proposed:

} the implementation of a collective retirement savings plan within Arjowiggins, after consulting the trade union organisa-tions, to replace one of the two Group savings plans so as not to supplement the local employee savings plans with a collec-tive retirement savings plan which would burden the employee savings offering;

} the reduction of the number of savings fund manager and depository partners to optimise the employee savings offering within the Group.

In 2012, collective retirement savings plans will continue to be proposed to entities that have not yet set up such a plan.

Plans granting rights to Sequana shares – Employee share ownership

The Group set up stock option plans which grant beneficiaries rights to Sequana shares at certain times and at prices set by the law in accordance with the resolutions of the Shareholders’ Meeting authorising the plans. These plans are described in the section on potential shares on (page 186). In most cases, the conditions applicable to these (now old) plans make it unlikely that the related stock options will be exercised.



More recently, the Group set up share award plans for (i) senior executives of Sequana, or (ii) more generally in 2010, high-per-forming Group employees considered to play an instrumental role in the Group’s development. However, these shares are subject to presence and performance conditions (see page 186) under which beneficiaries are only entitled to receive the Sequana shares if certain specified conditions relating to the Group’s three-year business plan are met. This gives beneficiaries a direct stake in the Group’s future earnings and the performance of the businesses for which they work or which they manage.

Some employees have become owners of Sequana shares under such plans. Depending on the characteristics of the plan concerned and any applicable lock-up period, such shares must be either held by their beneficiaries or are freely transferable. The Group’s employees are also indirect owners of Sequana shares through the units they own in mutual funds under incentive bonus and employee savings schemes. At 31 December 2011, 377,623 Sequana shares were held by Group employees under mutual funds invested in Sequana shares.

Social dialogue

Sequana wants to organise social dialogue based on the prin-ciple according to which the most relevant dialogue must occur where the social partners can capture all the dimensions in accordance with applicable national laws.

It is for this reason that social dialogue must be initiated at the local level in view of the fact that economic and human dimen-sions can better be assessed and that all the Group companies, which must have an employee representative body or initiate negotiations, are places where discussions can be held.

Arjowiggins

A series of meetings with all trade unions were held as from summer 2010, to supplement the existing corporate exchanges, European Works Council and Group Works Council meetings.

In 2010, Arjowiggins negotiated with trade union organisations and entered into an agreement aimed at creating within each division – having a pan-European dimension – a division-level information committee with the same prerogatives as those of a Group Works Council and the same scope as that of a European Works Council to enhance dialogue within each division.

The division-level Works Council is a forum for discussion of the division’s economic, financial and labour strategies. The company and the group were not found to be as well equipped to handle these issues. In France, Arjowiggins’ Group Works Council informs the personnel representatives, assisted by a chartered accountant, of the situation of the various divisions enabling them to assess their division’s performance and pros-pects compared to the other entities.

The agreement constituting the Group Works Council, signed in 2002, provides for two annual meetings instead of one. These series of meetings validated the new composition of union rep-resentative bodies in light of revised legal requirements on union representation.

They also contributed to employee-employer relations within each division with the creation of a division-level Works Council, and launched discussions on the introduction of a group collec-tive retirement savings plan.

Antalis

The social partners of Antalis, which only has two companies in France, decided to favour social dialogue within the distribution subsidiary, which re-elected the members of its central Works Council and of its three Works Councils in 2010.

Antalis replaced the members of its European Works Council whose tenure had expired at the end of 2009 and trained up new members to ensure that they would be able to successfully take on their new duties.

An agreement was signed by Antalis SNc setting up a central Works Council. An employee savings plan was also set up on the renewal of the incentive bonus scheme (see above).

As regards the departments of the registered offices of Arjowiggins and Antalis, the social partners decided to favour a common and dynamic management of the labour and cultural activities by creating an intercompany Works Council.

In 2011, the European Works Council met three times at Arjowiggins, including twice in closed session to discuss the proposed sale of the Decor and Papeteries Canson businesses and once at Antalis in plenary session.

Employee protection – Health and Safety

As Sequana’s businesses involve risks that can cause per-sonal injury or illness, the Group places great emphasis on the safety and security of its staff. The Group has appointed a team in charge of personal safety and product security which audits, supports and coordinates the practices and action plans imple-mented in each of its businesses. This team comprises three or four people, managed by a security officer who reports to the Group’s HR Director. Sequana aims to make safety and secu-rity issues a force for cohesion within the Group and a driver of ongoing improvement in all business processes. Progress meet-ings are held four times a year within the scope of Antalis and Arjowiggins European Works Council meetings and the France Arjowiggins Group Works Council.



In 2011, the Group decided to increase the emphasis placed on the prevention of work-related illnesses by rolling out a proce-dure for monitoring and harmonising this issue in each country in which it has operations.

Arjowiggins

As the paper business gives rise to risks that can cause seri-ous personal injury, analysing and managing the risks to which its employees are exposed is a critical priority for Arjowiggins. Each line of management is responsible for managing safety and security risks, assisted by a specific organisation within each division and site.

The Occupational Health and Safety Committee is consulted regularly and special meetings are held frequently. Harder work-ing conditions than those for the distribution business or the reg-istered office and the focus on safety call for more stringent work safety measures than in the other Sequana Group entities.

The main health and safety initiatives implemented in 2011 fol-lowed on from those rolled out over previous years:

} continuing to improve processes and practices:

• upgrading and enhancing risk analyses,

• regularly reviewing processes, risk management tools, operating practices, organisational structure and training materials, with particular attention paid to chemicals, the segregation of pedestrians from vehicles, mechanical han-dling and fire risk,

• protecting paper machines and finishing equipment under the highest industry standards,

• continuing to enhance workplace organisation based on the “5S” method,

• monitoring action plans per site and business activity,

• encouraging the use of lean management techniques;

} feedback and experience sharing:

• intensifying and diversifying intra- and inter-site safety audits and inspections,

• encouraging the reporting and handling of incidents by all players,

• ensuring that high-quality analyses are performed of all accidents,

• identifying and sharing best practices;

} a health and safety system based on:

• having an individual safety and security policy for each division,

• formalising Arjowiggins’ safety and security policy based on a health and safety management system (OHSAS 18001) that is compatible with environmental and quality standards. Three new sites were certified to OHSAS 18001 in 2011, bringing the total number of certified sites to 12;

} continuing to develop a safety-oriented culture, requiring the commitment of all members of staff and their representatives, with particular importance placed on management:

• specific training for middle management,

• training and awareness-raising initiatives on behaviour,

• implementation of behavioural audits.

Antalis

Antalis employees are exposed to various risks, chiefly those inherent in commercial, storage, transport and road travel activi-ties. Several processing sites are nevertheless exposed to risks similar to those arising in the production business. Safety and security rules form an integral part of the organisation of work-ing practices at Antalis and the company ensures that these rules are strictly respected at all of its sites. Antalis is working to develop a consistent safety management framework for each of its businesses across the globe that complies with the interna-tionally recognised standard OHSAS 18001.

Antalis now has:

} a benchmark that gives it a breakdown of all lost-time acci-dents and major incidents occurring at each site, as well as indicators that measure the frequency and severity thereof;

} a mixed system of safety audits based on a self-assessment benchmark and field-based audits led by the group’s safety correspondents, giving rise to action plans monitored by the group’s prevention team;

} in addition to local training plans, there are awareness-raising modules on fire prevention, lift handling, manual handling tech-niques and elevated storage. These modules are presented by the group’s prevention team during a safety day organised in each region or country.



In 2011, the Sequana Group also:

} raised awareness among management through the executive committee of each Arjowiggins division;

} extended the “safety zone” concept to France, aimed at encour-aging awareness-raising initiatives and interactive discussions with warehouse and workshop staff on health and safety issues encountered during the year or likely to be encountered the fol-lowing year depending on activities foreseen.

Personalsafety and security Antalis Arjowiggins Holdings

Lost-time accidents 120 71 0

Frequency index 2011 19.5 13.0 0

Frequency index 2010 24.9 20.9 0

Frequency index = number of lost-time accidents/number of full-time employees and temporary personnel x 1,000.

Human Resources development and vocational training

Vocational training

The Group pursues an active training policy in order to forge a highly qualified workforce, and offers extensive skills-building courses so that employees can perform their duties in the best possible conditions and meet the Group’s expectations. These training initiatives are also run in the departments responsible for the Group’s corporate functions (Sequana and Sequana Ressources & Services).

At Arjowiggins, despite downbeat economic conditions and strict control over operating costs, the Group pressed ahead with its training efforts – focusing chiefly on personal and mate-rial safety and security issues.

Besides its conventional training courses, Antalis created a Sales Academy in 2010 as part of the RACE 2012 programme (see chapter 1). The Academy aims to train its 2,400 sales staff over two years and reflects Antalis’ belief in the critical role played by highly qualified sales personnel in its success. As part of this training drive, Antalis teamed up with a UK-based training firm with proven, recognised expertise in similar in-house initiatives.

Training efforts in the form of safety awareness are more impor-tant in the production business compared to the distribution business or the registered office, as the percentage of payroll dedicated to such training is higher.

The Sequana Group nonetheless wishes to pay more rigorous attention to the numerous questions surrounding the issue of HR management. In this respect, several indicators are now avail-able at Group level that will allow Sequana to have a clearer overview of certain developments and make the necessary adjustments in these areas.


companies TOTAL

Percentage of employees trained in 2011

83.5% 90.4% 40% 86.3%

Number of training days per employee in 2011

2.78 2.06 2.14 2.45

Antalis Arjowiggins TOTAL

Number of employees hired in 2011

731 297 1,028

Turnover 5.7% 3.1% 4.5%


Percentage of women in management in 2011

22.6% 25.5% 23.9%


Percentage of disabled employees in 2011

0.83% 1.88% 1.51%


Percentage of absenteeism in 2011

3.76% 3.09% 3.4%



environmental policy

Overall environmental policy

In July 2011, the Group set up a Corporate Social Responsibility (CSR) department, with a view to coordinating and directing policies specific to each entity and enabling the Group to have centralised information in order to respond to the regulatory obli-gations laid down by Article 225 of the French environmental law Grenelle 2. From early 2012 a Group-wide CSR policy and strat-egy will be rolled out. This policy will, through action plans and formal commitments, respond to the major environmental, social and economic challenges faced by the various businesses of the paper sector in which the Group has operations. This depart-ment was also set up to streamline and consolidate an inter-disciplinary approach by the entities in order to enhance both requirements and results in each area.

Raising awareness among employees and training them on the major environmental challenges of each business and of the Group’s operations as a whole is one of Sequana’s main responsibilities along with training and awareness-raising initia-tives related to occupational health and safety. To date, no offi-cial record is kept of the number of training sessions of this type that have been carried out.

Site certification

The various Arjowiggins and Antalis entities are involved in an ambitious certification programme for the production and distri-bution plants. The five main certifications that the Group wishes to be more widely implemented are: ISO 9001 (quality man-agement systems), ISO 14001 (environmental management), OSHAS 18001 (occupational health and safety), and the FSC and PEFC certifications (forestry management).

Certification of Arjowiggins Graphic and Antalis sites (%)

ISO 9001 ISO 14001 OHSAS 18001 FSC PEFC

Arjowiggins 19/25 20/25 12/25 8/25

% 76% 80% 48% 33% 88/110

Antalis 49/110 28/110 5/110 100/110 80%

% 44% 25% 4.5% 90%

Pollution prevention

The Group is responsible for implementing all the necessary measures to prevent, anticipate and manage any and all pollution risks related to its business. The main pollution risks faced by the manufacturing and distribution businesses regard recycling and waste disposal, odour and noise pollution.

The paper manufacturing and distribution plants – more and more of which are working in accordance with ISO 14001 requirements – have implemented systematic management of the various waste products inherent to their business. This waste is sorted and collected according to type and treated by special-ist firms. Where possible, paper waste is systematically reintro-duced into the manufacturing process.

The strict control of water discharge by means of the stringent management of treatment centres is one of the main issues with regard to the management of water pollution risks.

Sustainable use of resources

Water consumption and supply in accordance with local requirements

The Group faces two main challenges with respect to responsi-ble water consumption, mainly as regards paper manufacturing. These are (i) reducing water consumption in its manufactur-ing processes and (ii) guaranteeing that water discharged into the natural environment is at least of the quality required by the standards in force in the countries in which the Group operates.

Even though almost 95% of the water used in the manufactur-ing cycle is returned downstream to the source, reducing the volume of water necessary to the process is essential for the Group. A certain number of plants are located in areas of poten-tial seasonal water stress where local authorities have imposed restrictions on both individuals and businesses. Reducing water requirements would enable the Group to better plan for the sum-mer period when water use, both from rivers and the local water network, is restricted.



Controlling the quality of water discharged into the natural environment after use is a major concern for the Group. This is reflected in ongoing investment in the quality of waste water treatment centres and the daily measurement of the properties of water returned to the natural environment. Controls, which are also carried out upstream of source, are transmitted to local authorities on a regular basis (e.g., to Regional Environment, Development and Housing Departments (DREAL) in France).

Consumption of raw materials and measures taken to improve the efficient use thereof

Efforts to optimise the consumption of raw materials concern water and energy use as well as use of the various compo-nents required to manufacture paper. One of the main avenues for improvement revolves around the Group’s drive to gradually replace virgin pulp with recycled paper pulp. This anticipates and meets customer demand for more eco-friendly products, in par-ticular recycled paper. The process used to manufacture recycled paper uses less energy and water and emits less greenhouse gas, thus reducing the Group’s environmental footprint. Another major area for development is forestry management, in particular the growing use of FSC®-certified paper pulp. This certification offers the highest and most demanding standards on the market as regards the management of forests used for the production of wood fibre. With all of the plants and almost 97% of the distri-bution warehouses FSC®-certified (Chain of control), the Group can provide its customers with concrete guarantees that the value chain is fully respected. Sequana is also aiming to gradually increase its use of FSC®-certified virgin or recycled fibres so that it can offer customers an increasingly wide range of products. The Group is making progress with its efforts to replace certain raw materials with others that have less impact on the environ-ment. For example latex, which is key to the paper manufacturing process, is being replaced by various types of starch. The Group dedicated a considerable €11.7 million to R&D in this domain in 2011, up 18% on 2010.

Total (kilotonnes)

Total fibrous materials (pulp, waste paper, cotton) 684.4

Total binders (latex, starch, polyvinyl acetate) 59.4

Dyes/pigments/optical brighteners 2.9

Organic loads 298.3

Banknote security features 1.1

Other chemical products(1) 2.5

(1) PP (Polypropylene), H2O2 (hydrogen peroxide), AKD (Alkyl Ketene Dimer), NaOH (sodium hydroxide), TiO2 (titanium dioxide), PAC (polyaluminium chloride).

Energy consumption: measures taken to improve energy efficiency and use of renewable energy.

A responsible energy policy means constantly fine-tuning the energy efficiency of plants and machines. With regular and high-quality maintenance and appropriate investments, the energy requirements of the various machines are gradually diminishing. Over and above the cost reductions associated with energy pur-chasing, which is a key motivating factor in itself for plant manag-ers and industrial groups, value is also placed on environmental benefits, bringing another dimension for the teams implementing such measures. Economic, environmental and human pillars are fully integrated into this approach. Use of renewable energy is the second major area for improvement, with the Group aiming to enhance the energy efficiency of plants. This falls within the scope of the Group’s medium-term plan to redefine and adjust its energy mix. The increase in the price of fossil fuels, the grow-ing risk for the planet of over-consumption thereof, as well as an ever-mounting number of regulations on CO2 quotas, are leading manufacturers to diversify their energy supply, gradually turning to renewable energies. The use of wood chip biomass fuel is a solution that provides many advantages for a paper manufac-turer: it enables combined heating and power generation appli-cations for plant supply; is a raw material already tied-up with paper manufacturing; and brings other players from the wood sector in on the process. With two projects already in progress (at Dalum and Palalda) and several others under review, the Group’s entities are seizing this opportunity to reduce their car-bon footprint, their dependency on fossil fuels, and their costs.



The environmental report – which covers all Arjowiggins sites – shows the following data for 2011:

Key environmental performance data

Indicator Unit GraphicCoated

USCreative

PapersMedical/ Hospital Security TOTAL

Water consumption

Water consumption/Net production m3/tonne of paper 11.9 49.1 70.0 56.9 112.4 60.1 m3/tonne

Liquid effluent

Water discharge/Net sellable production m3/tonne of paper 10.4 48.7 60.4 34.2 94.7 49.7 m3/tonne

Suspended Solids (SS)

SS effluent/Net sellable production kg/tonne of paper 1.10 0.59 1.40 0.11 0.48 3.7 kg/t

Chemical Oxygen Demand (COD)

cod/Net sellable production kg/tonne of paper 1.23 4.86 6.29 4.52 5.11 4.4 kg/t

5-day Chemical Oxygen Demand (COD 5)

cod 5/Net sellable production kg/tonne of paper 0.09 0.24 0.94 1.06 6.58 1.8 kg/t

Nitrogen (N)

N/Net sellable production kg/tonne of paper 0.07 n/a 0.16 n/a 0.20 0.14 kg/t

Phosphorous (P)

p/Net sellable production kg/tonne of paper 0.004 n/a 0.051 n/a 0.041 0.03 kg/t

CO²

CO² emissions/Net sellable production kg/tonne of paper 151 1,914 1,177 551 684 896 kg/t

Gas consumption (Energy)

Gas consumption/Net sellable production pcI kWh/tonne of paper 685 1,232 4,968.65 2,496.28 1,142.05 2,105 kWh/tonne

Steam purchased externally (Energy)

Steam purchased/Net sellable production kWh/tonne of paper 1,021 59 2,145.32 n/a n/a 1,075 kWh/tonne

Electricity consumption (Energy)

Electricity consumption/Net sellable production kWh/tonne of paper 637 1,659 1,538 1,104 1,910 1,370 kWh/tonne

Energy consumption

Energy consumption/Net sellable production kWh/tonne of paper 2,092 6,702 5,893 3,514 3,827 4,406 kWh/tonne

Energy consumption

Fossil fuel consumption/Net sellable production kWh/tonne of paper 1,340 3,476 3,866.55 2,409 1,470 2,512 kWh/tonne

Biomass consumption (Energy)

Biomass consumption/Net sellable production pcI kWh/tonne of paper 3,005 1,568 n/a n/a n/a 2,286 kWh/tonne

Biomass consumption/Net sellable production GJ GJ/tonne of paper 11 6 n/a n/a n/a 8.23 GJ/tonne

District heating kwh 225,663,333 n/a n/a n/a n/a 225,663,333 kWh

Fuel oil consumption (Energy)

Fuel oil consumption/Net sellable production kWh/tonne of paper 9 n/a 586 2 652 312 kWh/tonne

Coal consumption (Energy)

coal consumption/Net sellable production kWh/tonne of paper n/a 2,184 n/a n/a n/a 2,184 kWh/tonne

NB: these data, which are given per tonne of sellable paper, correspond to average values for the whole Group. These data are in line with those disclosed by other high-performing paper manufacturing groups that produce comparable paper ranges. Significant differences may exist between different plants due to the type of products manufactured.



Mitigating and adapting to climate change

Greenhouse gas emissions (GHG)

Of all the Group’s businesses, the production of paper and related products is by far the main cause of greenhouse gas emis-sions. The manufacturing processes in the Group’s 25 plants con-sume a great deal of energy and are a source of gas effluents. Greenhouse gas emission accounting is currently performed mainly with respect to the production business and, as of the date hereof, is neither systematic nor centralised for the distribu-tion businesses. As emissions generated by the distribution busi-nesses remain marginal, the Group has decided to concentrate its efforts on the main impact of its production plants. The climate issues currently faced by the planet require stringent emission-management by all involved. Even though an increasingly strict regulatory framework is emerging over the years, voluntary com-mitments on the part of companies are now also vital if effective action is to be taken to mitigate and adapt to climate change. Arjowiggins uses strict and comprehensive accounting systems to closely manage its greenhouse gas emissions and seeks to implement all and any measures to reduce such emissions. Each of the Group’s 25 plants is continually striving to improve energy efficiency with a view to reducing the energy needed to run the various machinery. Through daily controls, proper maintenance and appropriate investments, the Group can significantly reduce emissions caused by badly-managed consumption.

Adapting to the consequences of climate change

In 2011, as in previous years, Arjowiggins was allocated pNAQ2 emission allowances to cover its emissions of CO2. CO2 emis-sions per tonne of paper produced in Arjowiggins’ plants in France, the UK, Belgium, Germany, Denmark and Spain fell 4.5% between 2009 and 2011. Arjowiggins’ surplus allowances were sold on the market.

Arjowiggins Climate Savers programme

Arjowiggins Graphic has chosen to anticipate and adapt to the consequences of climate change through a committed partner-ship agreement with WWF France. By joining the Climate Savers programme, Arjowiggins Graphic formally undertook to reduce its greenhouse gas emissions by 23% between 2007 and 2014. This undertaking, which is separate from any regulatory obligation, shows Arjowiggins’ readiness to make a voluntary commitment reflecting the seriousness with which the division takes its respon-sibility to the environment and, in particular, to climate change. Through its participation in this programme, Arjowiggins Graphic has joined the ranks of the world’s 25 most-committed compa-nies in this domain, proving that economic growth can go hand-in-hand with reducing greenhouse gas emissions. A key focus of this commitment is innovation and, more especially, the growing share of recycled paper used in paper production, which means a reduction in the amount of energy and water used in the manu-facturing process.

Good business practices Ethics and good business practices are an integral part of Sequana’s values. The Group endeavours to implement all and any measures and actions to ensure that it is in compliance with the laws in force in the countries in which it operates and that the values it upholds are respected.

Combating corruption and unfair competition

The Sequana Group is responsible for ensuring that rules of busi-ness conduct are respected, implemented and monitored in each of the 44 countries in which it is present. The Group also makes sure that relations between its entities and public bodies, other companies, suppliers, subcontractors, customers or competitors are managed in a fair and responsible manner, to avoid the possibil-ity of corruption or illegal practice. To prevent such practices and underscore the importance of integrity with respect to the Group’s business vision, Sequana consolidates its prevention and control measures each year.



Social commitment Sequana, already firmly committed to sustainable development, has chosen to concentrate its corporate sponsorship actions on culture and creation. Its commitment is reflected by the involve-ment of both businesses in local initiatives, at community level, mainly in the fields of culture, education and health.

Promoting culture and education

As part of its sponsorship agreement with the Louvre, since 2007 Sequana has been helping supply the catalogues for the museum’s temporary exhibitions. These catalogues are printed on high-quality, eco-friendly, Arjowiggins’ paper. The Group also prints the catalogue for the FIAC (International Contemporary Art Fair).

The Group’s distribution and production businesses are also involved in a number of initiatives in support of design. Antalis provided paper to the students of the School of Art, Design and Fashion in Poland, as well as to various cultural organisations in Düsseldorf, and to well-known events such as the KultCrossing festival in Cologne, Germany.

Sponsoring education and health initiatives

Child-focused initiatives are a priority for the two businesses and in 2011 Arjowiggins Graphic sponsored a project led by the Ministry of National Education, Sport and the Voluntary Sector and the company Deyrolle pour l’Avenir, which involves pro-viding 5th grade students at a school in Rouen, France with a series of 10 educational posters on the theme of sustainable development. One of these posters, all of which are printed on Cyclus paper, focuses specifically on “the paper cycle”, raising awareness among children about simple ways to recycle and the importance of recycling in preserving forest resources.

Antalis also donated paper to children’s charities in various coun-tries, including Jo’Burg Child Welfare (JCW) in South Africa and the Maria Carolina Foundation in Brazil.

Each year, Anatalis employees around the world support ini-tiatives in favour of the fight against breast cancer, notably in Belgium (“Pink Ribbon” and “Think Pink” days), Brazil, France (the “La Parisienne” race), Spain (Asociación Española Contra el Cáncer) and the UK (“Wear it Pink” day).

The Group’s support of child-focused health initiatives has also led to numerous projects in Finland and Hungary, as well as in Latvia with the “Latvia Children Fund”, an organisation dedi-cated to the protection and health of children.

5 GenerAL InformAtIon ABout tHe comPAnY


chapter 6eXtrAordInArY And ordInArYSHAreHoLderS’ meetInG of 26 June 2012

206 AGENDA

206 Ordinary resolutions206 Extraordinary resolutions

207 BOARD OF DIRECTORS’ REPORT

207 ordinary resolutions208 extraordinary resolutions

208 RESOLUTIONS

208 Ordinary resolutions210 Extraordinary resolutions

eXtrAordInArY And ordInArY SHAreHoLderS’ meetInG of 26 June 20126 Agenda


Agenda } Board of Directors’ management report and Statutory Auditors’ reports on the financial statements of the parent company and the Group for the year ended 31 December 2011.

} Statutory Auditors’ special reports on related-party agree-ments and commitments, on the authorisation to be given to the Board of Directors to reduce the Company’s capital and on the authorisation to be given to the Board to increase the Company’s capital reserved for employees of foreign subsidiar-ies of the Group.

ordinary resolutions1. Approval of the parent company financial statements for the year ended 31 December 2011.

2. Approval of the consolidated financial statements for the year ended 31 December 2011.

3. Allocation of loss for the year.

4. Related-party agreements and commitments.

5. Renewal of the term of office of Constantin Associés as prin-cipal Statutory Auditor.

6. Renewal of the term of office of François-Xavier Ameye as deputy Statutory Auditor.

7. Ratification of the transfer of the registered office.

8. Authorisation to be given to the Board of Directors to imple-ment a share buyback programme.

extraordinary resolutions9. Authorisation to be given to the Board of Directors to reduce

the Company’s capital by cancelling treasury shares.

10. Authorisation to be given to the Board of Directors to increase the Company’s capital by issuing shares and/or securities carrying rights to shares reserved for a category of beneficiaries, employees of foreign subsidiaries of the Sequana Group, either directly or as members of a group savings plan, in order to implement any similar mechanism.

11. Opening of the possibility for the shareholders to participate in Shareholders’ Meetings electronically and correlative amend-ment of Articles 20 and 21 of the Articles of Association.

12. Powers to carry out formalities.

6Board of directors’ report on the resolutions submitted to the Shareholders’ meetingeXtrAordInArY And ordInArY SHAreHoLderS’ meetInG of 26 June 2012


Board of directors’ report on the resolutions submitted to the Shareholders’ meetingThis report sets out the terms and purposes of the resolutions to be submitted to shareholders for approval at the Ordinary and Extraordinary Shareholders’ Meeting.

ordinary resolutionsIn the 1st resolution, shareholders are asked to approve the parent company financial statements of Sequana for the year ended 31 December 2011, which show a net loss for the year of €330,958,032.65.

The 2nd resolution concerns the approval of the consolidated financial statements of the Sequana Group for the year ended 31 December 2011, which show a net loss for the year of €77 million.

The purpose of the 3rd resolution is to allocate the loss for the year. It is recommended not to pay a dividend in respect of 2011 and to allocate the net loss for the year to retained earnings.

The 4th resolution concerns agreements governed by Article L. 225-38 of the French Commercial Code (Code de commerce). The Company’s Statutory Auditors have drawn up a report on related-party agreements and commitments in accord-ance with the law. No related-party agreements were entered into during the year.

The 5th and 6th resolutions concern the renewal of the terms of office of Constantin Associés (Deloitte network) and François-Xavier Ameye as principal and deputy Statutory Auditors respec-tively. The Board of Directors recommends renewing their terms of office, which are due to expire, for a term of six years, expir-ing at the end of the Shareholders’ Meeting called to approve the 2017 financial statements. As the current representative of Constantin Associés has been in office for six years, the replacement is provided for in accordance with paragraph 1 of Article L. 822-14 of the French Commercial Code.

The 7th resolution concerns the ratification of the transfer of the Company’s registered office to 8 rue de Seine, 92100 Boulogne-Billancourt, approved by the Board of Directors at its meeting of 13 December 2011, with effect from 9 January 2012. The share-holders are also asked to note and approve the decision of the Board of Directors to amend Article 4 (registered office) of the Articles of Association.

In the 8th resolution, shareholders are asked to renew, for a period of 18 months, the authorisation previously granted to the Company to implement a share buyback programme in accord-ance with Articles L. 225-209 et seq. of the French Commercial Code. The maximum purchase price would be set at €20 per share. The total number of shares that may be bought back by the Company would be limited to 10% of the total number of shares outstanding and the number of shares held by the Company after such buybacks would be capped at 10% of the Company’s capital. The purpose of this authorisation is the same as the authorisations of the same type granted by the share-holders in previous years, namely to improve the liquidity of the Sequana share via the liquidity contract, in response to finan-cial market volatility, and to cover its obligations towards the beneficiaries of shares granted free of consideration. The other objectives of the authorisation are described in the text of the resolution. The Company’s use in 2011 of the previous authori-sation granted on 19 May 2011 is described in chapter 5 of the 2011 registration document.

6 resolutionseXtrAordInArY And ordInArY SHAreHoLderS’ meetInG of 26 June 2012


extraordinary resolutionsThe purpose of the 9th resolution is to renew, for a period of 18 months, the authorisation previously granted to the Board of Directors to cancel, at its discretion, Sequana shares held by the Company in connection with share buyback programmes, pro-vided that the number of shares cancelled in any 24-month period does not represent over 10% of the Company’s share capital. The Board of Directors did not use the previous authorisation granted on 19 May 2011.

The purpose of the 10th resolution is to renew, for a period of 18 months, the authorisation given to the Board to issue shares and/or securities carrying rights to shares, which shall not repre-sent more than 2% of the Company’s capital, reserved for employ-ees of foreign subsidiaries of the Sequana Group, either directly or as members of a group savings plan, and to implement any similar mechanism. The subscription price to be paid by the beneficiaries may not be at a discount of more than 20% of the average of the

opening prices quoted for Sequana’s shares on the Eurolist mar-ket of NYSE Euronext paris during the 20 trading days preceding the decision to increase the Company’s capital and issue the cor-responding shares. This resolution is similar to the resolution voted by shareholders at the Shareholders’ Meeting of 19 May 2011 to authorise the issue of shares and/or securities carrying rights to shares to Sequana Group employees, which is in force until 18 July 2013, the purpose being to give employees of foreign sub-sidiaries of the Sequana Group the same possibility as was already approved on 19 May 2011, but for a period of 18 months.

In the 11th resolution, shareholders are asked to approve the open-ing of the possibility for the shareholders to participate in sharehold-ers’ meetings electronically and to amend Articles 20 and 21 of the Company’s Articles of Association accordingly.

The 12th resolution deals with powers to carry out formalities relat-ing to the Shareholders’ Meeting.

resolutions

ordinary resolutions

First resolution

Approval of the parent company financial statements for the year ended 31 December 2011

Having considered the reports of the Board of Directors and the Statutory Auditors, the shareholders approve in their entirety the Board of Directors’ management report and the parent company financial statements for the year ended 31 December 2011 as pre-sented, showing a loss for the year of €330,958,032.65.

In accordance with Article 223 quater of the French Tax Code (Code général des impôts), the shareholders approve the non-deductible expenses and charges governed by Article 39-4 of said code – amounting to €35,688 for 2011 – as well as the cor-responding tax liability of €12,287.

Second resolution

Approval of the consolidated financial statements for the year ended 31 December 2011

Having considered the report of the Board of Directors and the Statutory Auditors’ report on the consolidated financial state-ments for the year ended 31 December 2011, the shareholders approve said consolidated financial statements, as presented.

6resolutionseXtrAordInArY And ordInArY SHAreHoLderS’ meetInG of 26 June 2012


Third resolution

Allocation of loss for the year

Having considered the report of the Board of Directors, the shareholders approve the allocation of the loss for the year ended 31 December 2011 as recommended by the Board of Directors and resolve to allocate the entire amount to retained earnings.

No dividends shall be paid in respect of 2011.

Dividends paid in the last three years were as follows:

Year 2010 2009 2008

Number of dividend-bearing shares

449,281,809 449,306,527 –

Total dividend €19,712,723.60 €17,257,284.45 €0

Dividend per share(1) €0.40 €0.35 €0

(1) Eligible for tax relief of 40%.

Fourth resolution

Related-party agreements and commitments

Having considered the Statutory Auditors’ special report on agreements and commitments governed by Article L. 225-38 of the French Commercial Code, the shareholders note that no such agreements or commitments were entered into during the year ended 31 December 2011.

Fifth resolution

Renewal of the term of office of Constantin Associés as principal Statutory Auditor

Having considered the report of the Board of Directors, the shareholders resolve to renew the term of office of Constantin Associés, which they have noted is soon to expire, as principal Statutory Auditor for a period of six years, i.e., until the close of the Shareholders’ Meeting called to approve the financial state-ments for the year ending 31 December 2017.

Sixth resolution

Renewal of the term of office of François-Xavier Ameye as deputy Statutory Auditor

Having considered the report of the Board of Directors, the shareholders resolve to renew François-Xavier Ameye’s term of office, which they have noted is soon to expire, as deputy Statutory Auditor for a period of six years, i.e., until the close of the Shareholders’ Meeting called to approve the financial state-ments for the year ending 31 December 2017.

Seventh resolution

Ratification of the transfer of the registered office

Having considered the report of the Board of Directors, the shareholders resolve to ratify the transfer of the Company’s reg-istered office to 8 rue de Seine, 92100 Boulogne-Billancourt, as approved by the Board of Directors at its meeting of 13 December 2011. The shareholders note and approve the decision of the Board of Directors to amend Article 4 (registered office) of the Articles of Association.

Eighth resolution

Authorisation to be given to the Board of Directors to implement a share buyback programme

Having considered the report of the Board of Directors, in accordance with Articles L. 225-209 et seq. of the French Commercial Code, the shareholders authorise the Board of Directors to trade in the Company’s shares on the open market or otherwise, subject to the conditions described below.

The maximum purchase price is set at €20 per share with a par value of €1.50.

The total number of shares that may be bought back may not exceed 10% of the total number of shares outstanding at the date of the related transactions, and the number of Sequana shares held by the Company after such buybacks is capped at 10% of the Company’s capital.

In accordance with Article R. 225-151 of the French Commercial Code, based on the number of shares outstanding at 31 December 2011 and excluding any shares already held, the maximum theoretical number of shares that may be acquired is 4,954,500, representing a maximum theoretical investment of €99,090,000.

In the event of any corporate action, including a capital increase by capitalising reserves, awarding new shares, or a stock split or reverse stock split, the above price will be adjusted based on the ratio between the number of shares issued and outstanding before and after the transaction.

The shareholders resolve that the share buyback programme may be implemented for the following purposes:

} to purchase shares for cancellation in connection with a capi-tal reduction, subject to the limits set by law, provided that the 9th resolution of this Shareholders’ Meeting is adopted;

} to purchase shares for allocation to executive managers and other employees of the Group, subject to the conditions and according to the methods provided for by law (such as under stock option, share award and employee profit-sharing plans);

} to purchase shares for allotment upon exercise of rights attached to securities carrying rights to shares;



} to purchase shares to be held and subsequently used as pay-ment or exchange in connection with external growth transac-tions initiated by the Company, either through a public offer or otherwise, representing up to 5% of the Company’s capital;

} to maintain a liquid market for the Company’s shares through an investment services provider acting under a liquidity con-tract that complies with a code of ethics recognised by the French financial markets regulator (Autorité des marchés financiers – AMF);

} to implement any other market practices that may be author-ised in the future by the AMF, and generally to carry out any transaction allowed under applicable legislation.

Subject to the limits set by applicable regulations, the shares may be purchased, sold, exchanged or transferred at any time – including while a public tender offer is in progress – either on the market, over the counter or otherwise, by any method including

through block trades and the use of options and derivatives. The entire share buyback programme implemented by the Company in accordance with this resolution or previous authorisations may be carried out in the form of a block trade.

This authorisation is given for a maximum period of 18 months expir-ing at the latest at the Shareholders’ Meeting called to approve the financial statements for the year ending 31 December 2012. As from the date of this Shareholders’ Meeting, it supersedes the authorisation given in the 17th resolution of the Ordinary and Extraordinary Shareholders’ Meeting of 19 May 2011.

The shareholders accordingly give the Board of Directors full powers, with authority to delegate such powers, to implement this authorisation, place any and all buy and sell orders, enter into any and all agreements, including for recording share pur-chases and sales, make any and all disclosures and filings with the AMF and any other organisation, carry out all other formali-ties, and generally do whatever is necessary.

extraordinary resolutions

Ninth resolution

Authorisation to be given to the Board of Directors to reduce the Company’s capital by cancelling treasury shares

Having considered the report of the Board of Directors and the Statutory Auditors’ special report, the shareholders author-ise the Board of Directors, in accordance with paragraph 7 of Article L. 225-209 of the French Commercial Code and for a maximum period of 18 months as from this Shareholders’ Meeting and expiring at the latest at the Shareholders’ Meeting called to approve the financial statements for the year ending 31 December 2012, to:

} cancel, on one or more occasions at its discretion, all or some of the shares held by the Company following the implemen-tation of the share buyback programmes, provided that the total number of shares cancelled in any 24-month period does not exceed 10% of the total shares making up the

Company’s share capital (as adjusted where applicable to take into account any corporate actions carried out subse-quent to this Shareholders’ Meeting), and to reduce the capi-tal accordingly. The difference between the purchase price of the cancelled shares and their par value will be deducted from premiums and available reserves, and an amount correspond-ing to 10% of the capital reduction may be deducted from the legal reserve;

} grant all powers to the Board of Directors, under the condi-tions provided by law and this resolution, to implement this authorisation, and in particular to place on record the capital reduction(s), amend the Articles of Association and carry out any and all necessary formalities.

As from the date of this Shareholders’ Meeting, this authorisation supersedes any previous authorisation having the same purpose.

6resolutionseXtrAordInArY And ordInArY SHAreHoLderS’ meetInG of 26 June 2012


Tenth resolution

Authorisation to be given to the Board of Directors to increase the Company’s capital by issuing shares and/or securities carrying rights to shares reserved for a category of beneficiaries, employees of foreign subsidiaries of the Sequana Group, either directly or as members of a group savings plan, in order to implement any similar mechanism

Having considered the report of the Board of Directors and the Statutory Auditors’ special report, in accordance with the provi-sions of Articles L. 225-129 to L. 225-129-2 and L. 225-138 of the French Commercial Code, the shareholders:

1) resolve that any unused portion of the authorisation given by the Shareholders’ Meeting of 19 May 2011 in its 28th resolution is no longer valid as from the date of this Shareholders’ Meeting;

2) authorise the Board of Directors to issue, on one or several occasions and to the extent and at the times that it deems appropriate, shares or securities carrying rights to shares in the Company, reserved for individuals meeting the character-istics of one or more categories as defined below;

3) resolve to waive their pre-emptive right to subscribe to the shares or securities carrying rights to the Company’s capi-tal, as well as their rights to the shares to which said securi-ties carry rights and to reserve such right for any category or categories of beneficiaries meeting the following condi-tions: (i) employees and corporate officers of companies of the Group whose registered office is located outside France and related to the Company within the meaning of Article L. 225-180 of the French Commercial Code or within a group that is in the same consolidated group as the Company pursuant to Article L. 3344-1 of the French Labour Code, (ii) corporate mutual funds or other employee share ownership structures (with or without legal status), invest-ing in Company shares with the unit holders or shareholders defined in (i), and/or (iii) any banking institution or subsidiary of such an institution acting on behalf of the Company to set up a company savings plan or an employee share ownership plan to the benefit of persons mentioned in (i) above since the subscription by the person authorised pursuant to this resolu-tion would enable the employees of the foreign subsidiaries to benefit from share ownership plans or savings plans with the same financial benefits as those to which the other employees of the French companies of the Sequana Group are eligible;

4) resolve that the shares or securities issued may not be offered at a price higher than the average of the opening prices quoted for Sequana’s shares on the Eurolist market of NYSE Euronext paris during the 20 trading days preceding the decision setting the opening date for subscriptions or at a discount of more than 20% of said average. However, the shareholders expressly authorise the Board of Directors, if it deems fit, to reduce or cancel the aforementioned discounts, within the limits provided by the applicable law and regula-tions, in order to respect any legal, accounting, tax or labour requirements applicable in the country concerned by the plan, and in particular in the country of residence of the beneficiar-ies or of persons mentioned in (i) above;

5) resolve that the number of shares to be issued pursuant to this authorisation shall not represent more than 2% of the Company’s capital at the time of each issue in accordance with the provisions of the French Commercial Code and Article L. 3332-1 of the French Labour Code. The number of shares issued under the 27th resolution of the Shareholders’ Meeting of 19 May 2011 or any resolution having the same purpose and under this resolution shall not represent more than 2% of the Company’s capital;

6) grant full powers to the Board of Directors, with authority to delegate such powers under the terms provided by law and this resolution, to implement this authorisation, and more par-ticularly to:

• decide, in accordance with applicable law, the companies whose employees, early retirees and retirees may subscribe for shares or securities carrying rights to shares and, where appropriate, may benefit from shares or securities carrying rights to shares granted free of consideration,

• set the amounts of the issues, the issue price of the shares and/or securities, the subscription dates and periods and other terms and conditions for the issues, including the pay-ment, delivery and dividend entitlement of securities (which may be retroactive),

• charge the issuance costs and expenses against the related premiums and deduct from said premiums the amount necessary to increase the legal reserve to 10% of the Company’s new capital after each issue, together with any amounts decided by the Board of Directors or an Ordinary Shareholders’ Meeting;

• generally, enter into any and all agreements, in particular to permit the successful completion of the proposed issues, take all appropriate steps and carry out all formalities for the issue, listing and service of the securities issued in accordance with this authorisation and for the exercise of any related rights;

7) resolve that this authorisation is granted to the Board of Directors for a period of 18 months as from the date of this Shareholders’ Meeting.



Eleventh resolution

Opening of the possibility for the shareholders to participate in Shareholders’ Meetings electronically and correlative amendment of Articles 20 and 21 of the Articles of Association

Having considered the report of the Board of Directors, the shareholders resolve to provide for the possibility for sharehold-ers to participate in Shareholders’ Meetings electronically.

The shareholders resolve to amend Articles 20 (General Meetings: Convocations – Meeting committee – Minutes) and 21 (General meetings – Quorum – Voting) of the Company’s Articles of Association accordingly, as follows:

The following paragraph shall be inserted into Article 20, below the sixth paragraph regarding participation in General Meetings:

“In accordance with the applicable law and the terms and condi-tions previously determined by the Board of Directors, sharehold-ers may participate in and vote at all Ordinary or Extraordinary General Meetings by video conference or any other means of telecommunication enabling their identification. “

The following paragraph shall be inserted into Article 21, below the first paragraph regarding calculation of the quorum:

“Shareholders participating in General Meetings by videocon-ference or by any other means of telecommunication enabling their identification, whose nature and conditions of use are determined by applicable legislation, shall be deemed present for the purposes of calculating the quorum and majority.»

Twelfth resolution

Powers to carry out formalities

The shareholders give full powers to the bearer of an original, copy or extract of the minutes of this meeting to carry out all nec-essary filing and other formalities.

chapter 7PerSon reSPonSIBLe for tHe reGIStrAtIon document

214 PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT

214 STATEMENT BY THE PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT AND ANNUAL FINANCIAL REPORT

215 AUDITORS

216 TABLES OF CONCORDANCE

216 Information required under Annex I of European Commission Regulation No. 809/2004

218 Annual financial report

PerSon reSPonSIBLe for tHe reGIStrAtIon document7 Person responsible for the registration document


Person responsible for the registration documentPascal Lebard Chief Executive Officer

Statement by the person responsible for the registration document and annual financial reportAfter taking all reasonable measures for this purpose, I hereby attest that to the best of my knowledge, the information provided in this registration document fairly reflects the current situation and that no material omissions have been made.

I further declare that, to the best of my knowledge, the financial statements for 2011 have been prepared in accordance with the appli-cable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings in the consolidation taken as a whole, and that the management report presented in this registration document includes a fair review of the operations, profit or loss and financial position of the Company and the undertakings in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The annual and consolidated financial statements for the year ended 31 December 2011 were reviewed by the Statutory Auditors and are presented on pages 172 and 157 respectively. These reports contain an observation drawing attention to Note 1 to the financial statements, which sets out the terms and conditions of the Group’s refinancing which was legally finalised on 30 April 2012.

I obtained a statement from the Statutory Auditors at the end of their engagement affirming that they have read the entire registration document and verified the information in respect of the financial position and the financial statements contained therein.

Boulogne-Billancourt, 30 April 2012

Pascal Lebard


PerSon reSPonSIBLe for tHe reGIStrAtIon document 7Auditors


AuditorsStatutory Auditors

PricewaterhouseCoopers Audit

63 rue de Villiers, 92208 Neuilly-sur-Seine cedex, France

Constantin Associés (Deloitte network)

185, avenue charles de Gaulle, 92200 Neuilly-sur-Seine, France

Deputy Statutory Auditors

Yves Nicolas

63 rue de Villiers, 92208 Neuilly-sur-Seine cedex, France

François-Xavier Ameye

185, avenue charles de Gaulle, 92200 Neuilly-sur-Seine, France

PricewaterhouseCoopers Audit and Constantin Associés (mem-ber of the Deloitte network) are registered as Statutory Auditors with the Versailles Compagnie régionale des commissaires aux comptes and fall under the authority of the Haut Conseil du commissariat aux comptes.

Information relating to the Statutory Auditors and their terms of office is provided on page 64.

The original French version of this registration document was filed with the French financial markets Authority (Autorité des marchés financiers – AMF)

on 30 April 2012 under No. D.12-0473

in accordance with Article 212-13 of the AMF’s General Regulation.It may not be used in support of a financial transaction unless it is accompanied

by an information memorandum approved by the AMF. This registration document was prepared by the issuer

and is legally binding for its signaturies.

Copies of this registration document may be obtained from the Company’s registered office:

8, rue de Seine – 92100 Boulogne-Billancourt

or may be downloaded from the website of the issuer (www.sequana.com)or the AMF (www.amf-france.org)

PerSon reSPonSIBLe for tHe reGIStrAtIon document7 tables of concordance


tables of concordance

Information required under Annex I of european commission regulation no. 809/2004

Pages

1 pERSoNS RESpoNSIBLE 214

2 STATuToRY AudIToRS 64–215

3 SELEcTEd FINANcIAL INFoRMATIoN11 to 13 – 16 – 17 – 22 to 42

84 to 85

4 RISK FACTORS 66 to 76

5 INFoRMATIoN RELATING To THE ISSuER

5.1 History and development of the issuer 4 to 10 – 14 to 16 – 178

5.2 Capital expenditure 16 – 41

6 BuSINESS oVERVIEW

6.1 Principal activities 4 to 10 – 22 to 42

6.2 Principal markets 4 to 10 – 22 to 42

6.3 Exceptional factors –

6.4Dependence of the issuer on patents or licences, industrial, commercial or financial contracts or new manufacturing processes

73 – 74

6.5 The basis for any statements made by the issuer regarding its competitive position 4

7 oRGANISATIoNAL STRucTuRE 2 – 4

7.1 Brief description of the Group 2 to 10 – 22 to 42

7.2 List of significant subsidiaries 153 to 156 – 170

8 pRopERTY, pLANT ANd EQuIpMENT

8.1 Existing or planned material tangible fixed assets 31 to 32 – 96 – 97 – 108 – 109

8.2 Environmental issues that may affect the utilisation of tangible fixed assets 66 to 68 – 199 to 202

9 opERATING ANd FINANcIAL REVIEW

9.1 Financial position 11 to 13 – 84 to 173

9.2 Operating results11 to 13 – 17 – 84 – 85 – 87

159 – 164

10 CAPITAL RESOURCES

10.1 Information concerning the issuer’s capital resources 89 – 125 to 137 – 159 – 164

10.2 Sources and amounts of the issuer’s cash flows12 – 13 – 66 – 89 – 125 to 137

145 – 169

10.3 Information on the borrowing requirements and funding structure of the issuer 70 to 73 – 126 to 137 – 169

10.4Information regarding any restrictions on the use of capital resources that have materially affected, or could materially affect the issuer’s operations

70 to 73

10.5Information regarding the anticipated sources of funds needed to fulfil the commitments referred to in items 5.2 and 8.1

–

11 RESEARcH ANd dEVELopMENT, pATENTS ANd LIcENcES 34 – 107 – 200

12 TRENd INFoRMATIoN 10 – 16 – 22 to 42

13 PROFIT FORECASTS OR ESTIMATES –

14 AdMINISTRATIVE, MANAGEMENT ANd SupERVISoRY BodIES ANd SENIoR MANAGEMENT 44 to 64

14.1 Administrative and management bodies 44 to 58

14.2 Administrative, management and supervisory bodies and senior management conflicts of interest 48 – 49

PerSon reSPonSIBLe for tHe reGIStrAtIon document 7tables of concordance


Pages

15 REMuNERATIoN ANd BENEFITS

15.1 Amount of remuneration paid and benefits in kind granted 58 to 62 – 141 – 166

15.2Total amounts set aside or accrued by the issuer or its subsidiaries to provide pension, retirement or similar benefits

117 – 118 – 141

16 BOARD PRACTICES

16.1 Date of expiry of current terms of office 44 to 48

16.2 Service contracts with members of the administrative, management or supervisory bodies 48 – 49

16.3 Information about the issuer’s audit committee and remuneration committee 52 – 53

16.4A statement as to whether or not the issuer complies with its country of incorporation’s corporate governance regimes

44 – 58

17 EMpLoYEES

17.1 Number of employees2 – 4 – 22 – 30 – 151 – 188

189 – 191

17.2 Directors’ shareholdings and stock options 45 to 48 – 60 to 62 – 183 to 187

17.3 Arrangements for involving the employees in the capital of the issuer113 – 114 – 184 – 186 – 187

195 – 196

18 MAJOR SHAREHOLDERS 2 – 4 – 182 – 183

18.1 Shareholders holding over 5% of the Company’s capital and/or voting rights 2 – 4 – 182

18.2 Whether the issuer’s major shareholders have different voting rights 182

18.3 Control of the issuer 182

18.4Any arrangements known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer

19 RELATEd-pARTY TRANSAcTIoNS 63 – 148 – 167 – 174

20FINANcIAL INFoRMATIoN coNcERNING THE ISSuER’S ASSETS ANd LIABILITIES, FINANcIAL poSITIoN ANd pRoFITS ANd LoSSES

20.1 Historical financial information 84 to 173

20.2 Proforma financial information

20.3 Financial statements 84 to 173

20.4 Auditing of historical annual financial information 155 – 156 – 170 – 214 – 215

20.5 Age of latest financial information

20.6 Interim and other financial information

20.7 Dividend policy 21

20.8 Legal and arbitration proceedings 74 – 75

20.9 Significant change in the issuer’s financial or trading position 16 – 85 – 151

21 AddITIoNAL INFoRMATIoN

21.1 Share capital 113 to 116 – 181 to 187

21.2 Memorandum and Articles of Association 178 to 180

22 MATERIAL coNTRAcTS

23 THIRd pARTY INFoRMATIoN ANd STATEMENT BY EXpERTS ANd dEcLARATIoNS oF ANY INTEREST

24 docuMENTS oN dISpLAY 21 – 178

25 INFoRMATIoN oN HoLdINGS 153 to 156 – 170

In accordance with Article 28 of European Commission Regulation No. 809/2004 dated 29 April 2004, the following information has been incorporated by reference into this regis-tration document:

} the consolidated financial statements for the year ended 31 December 2010 and the related Statutory Auditors’ report, set out on pages 71 to 141 of the registration document filed with the AMF on 8 April 2011 under No. d.11-0262;

} the consolidated financial statements for the year ended 31 December 2009 and the related Statutory Auditors’ report,

set out on pages 65 to 129 of the registration document filed with the AMF on 8 April 2010 under No. d.10-230;

} the review of the financial position and results for the year ended 31 December 2010 set out on page 70 of the regis-tration document filed with the AMF on 8 April 2011 under No. d.11-0262.

The chapters of registration documents D.11-0262 and D.10-230 which are not mentioned above are either not pertinent for inves-tors or are covered in another section of the 2011 registration document.

PerSon reSPonSIBLe for tHe reGIStrAtIon document7 tables of concordance


Annual financial report

Information required under AMF’s article L. 451-1-2 of the French monetary and financial code (Code monétaire et financier) and article 222-3 of the AMF’s General Regulation

Pages

Parent company financial statements for the year ended 31 December 2011 158 to 171

Consolidated financial statements for the year ended 31 December 2011 86 to 156

Board of Directors’ management report for 20114 to 42 – 44 to 64 – 84 85 – 171 – 178 to 203

Statement by the person responsible for the annual financial report for 2011 214

Statutory Auditors’ report on the consolidated financial statements for the year ended 31 December 2011 172 – 173

Statutory Auditors’ report on the financial statements for the year ended 31 December 2011 157


notes

Registration document designed by:

Photo Credit:William Beaucardet

This document is printed on eco-friendly paper: Olin Regular Absolute White 300g (cover) and 100g (inside pages). This FSC®-certified, high-quality, premium offset paper is an Antalis product and brand.

Printer:AMI, Imprim’Vert®, FSC® and PEFC-certified

Printed in France, May 2012©Sequana® all rights reserved

8, rue de Seine92100 Boulogne-Billancourt – FranceTel.: +33 1 58 04 22 00E-mail: [email protected]

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