The world's local bank Annual Report and Accounts CCF - HSBC

CCF
Report of the Board of Directors to the Annual General Meeting of shareholders (continued)
In accordance to the provisions of Article L. 225-228
of the Code de Commerce, you are informed in this
resolution of the business transfers or mergers
concerning CCF or companies it controls within the
meaning of paragraphs I and II of Article L. 233-16
of the Code de Commerce over the past two years that
Mr. Benoît Lebrun, a partner in the firm proposed as
statutory auditors, who has been proposed as alternate
auditor, was responsible for verifying.
The thirteenth resolution seeks five-year authority
for the Board to issue bonds, which will cancel and
supersede the authority granted at the Annual General
Meeting of 29 March 2001. The Board will be empowered
to issue bonds on one or more occasions in all
markets up to a maximum amount of €20 billion or
the equivalent thereof in any other currency or composite
monetary unit.
The fourteenth resolution seeks approval of amendments
to the agreement governing the participating
notes issued by CCF, providing for early retirement of
all the notes should the Board deem it appropriate.
The following issues were made by CCF:
– 4 June 1984: 800,000 participating notes each with
a nominal value of FRF1,000;
– 22 July 1985: 120,000 perpetual subordinated notes
with warrants to subscribe for participating notes.
A total of 453,098 participating notes were issued
in 1987 and 1988 upon the exercise of warrants exercisable
in 1987 (A warrants) and 1988 (B warrants).
In 1990, CCF made a public offer to exchange the
participating notes for CCF shares on the basis of
11 CCF shares for 2 participating notes. Those notes
tendered to the offer were cancelled, leaving the
following notes in issue:
– 34,256 1984 participating notes (4.28% of the total
issued in 1984);
– 7,280 1987/1988 participating notes (1.6% of the total
issued in 1987 and 1988 upon exercise of warrants
attached to the 1985 perpetual subordinated notes).
Given the small number of notes still in issue and
their lack of liquidity, the proposed amendment to the
issue agreement gives CCF the option of retiring these
notes before maturity. In addition, the participating
notes were issued when CCF was still nationalised, and
they represent a class of securities available only
to state-owned companies and the cooperative
sector. They are therefore no longer appropriate to the
company’s current circumstances.
CCF wishes to offer all holders the opportunity of
achieving a fair return on their investment should the
notes be retired early. It has therefore examined the
terms and conditions of an offer open to all holders,
and has calculated the intrinsic value of the participating
notes.
The interest rate payable on the notes is still equal
to its maximum, given CCF’s published results. The
net present value of the participating notes (P), being
the sum (∑) of the discounted coupon payments, is
therefore computed as follows:
∞
130% x TMO
P = ∑ n x N
.
1 (1 + TZ n + S) n
Where:
– TMO n = TEC10 n + 0.25% (following Euronext’s
notice dated 11 October 2001) or any other rate
which would substitute;
– N is the nominal value, i.e. €152.45 (FRF1,000);
– TZ n is the zero coupon n years rate based on the
swap yield to Euribor curve, or any other rate which
would substitute;
– S is the spread representative of a perpetual note
issued by CCF at market conditions at time t;
– TZ n + S is the discount rate.
The Board of Directors is proposing to improve
the redemption terms by increasing the value of the
participating notes by 5%, computed as follows:
∞
V = 105% x ∑ 130% x TMO n x N
1 (1 + TZ n + S) n .
However, the price may not be less than 105% of
the nominal value of the participating notes.
This formula has been validated by an independent
expert. In addition, when the remaining participating
notes are redeemed, an independent expert will verify
that the formula has been properly applied.
To ensure that holders have adequate time to obtain
full information, CCF may only retire the participating
notes on 4 June each year, which is the coupon
payment date, and not before 4 June 2005.
These amendments will also be proposed to the
class meeting of participating notes holders which will
take place on 11 May 2004.
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