2008 ANNUAL REPORT

2008 ANNUAL REPORT

2008

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SPERIAN PROTECTIONImmeuble Edison - ZI Paris Nord 233, rue des VanessesBP 55 288 Villepinte95 958 Roissy CDG Cedex - FranceTel.: +33(0)1 49 90 79 79

www.sperianprotection.com

CONTENTS

OUR MISSION, OUR STRATEGY

MESSAGE FROM THE CHAIRMAN 022008: Sperian remains sound in an unsettled economic climate The board of directors

MESSAGE FROM THE CEO 042009 priorities: adjust costs and differentiate our offer to customers The Executive Committee

MAIN STRATEGIC dIRECTIONS 06Staying close to our customers fosters innovationPowerful brands for a global market

INNOVATIONS ANd PEOPLE

SPERIAN’S SPIRIT 10Our organization is about people

INNOVATIVE SOLUTIONS 12Head protection Body protection

KEY FIGURES 16

SHAREHOLdER INFORMATION 18

REFERENCE dOCUMENT 20

design & productionHarrison & Wolf

CopyrightsPhotographies:

Jack Burlot/Corporate Images

With special thanks to Orcières Merlette resort, France

Steve Murez

Sperian Protection

For additional information: Corporate communications department

Tel.: 33 (0)1 49 90 79 72

Fax: 33 (0)1 49 90 79 78

Document printed on recycled paper

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2008 ANNUAL REPORTSPERIAN PROTECTION

OUR MISSIONSperian Protection’s mission is to contribute to building a safer and therefore more productive working environment everywhere in the world. Our aim is to create innovative products adapted to the needs of each type of job, and to provide appropriate services for protecting men and women in their workplace, whatever risks they are exposed to; our customers are from various industry sectors; construction and public works, public safety, energy, telecommunications and utilities.

OUR STRATEGYClose proximity to the end user and the service rate we offer, the power of the Group’s brands and the trust they inspire, and an ambitious policy of innovation form the basis of our robust differentiation strategy. This is the way we have forged our identity, our expertise and our recognized leadership position in our business lines. Holding this leading position requires that we remain the reference in our main markets and innovate continuously.

SpErian protEction,protEction you can truSt

Message from the Chairman of the Board Henri-Dominique Petit

as i announced in the middle of last year, the functions of chairman of the Board and chief Executive officer of the Group are now separated, and a new cEo, Brice de La Morandière, has been appointed to head Sperian.

Because he has the trust of our teams and experience in the many positions he has held in various Group business lines, Brice was able to take over our operations smoothly, with absolutely no disruptions. He is now completely responsible for general management. i am particularly pleased that this evolutionary step forward in the life of the company was made so seamlessly and efficiently. Since mid 2008, the entire world economy has been suffering a completely unprecedented crisis - unprecedented in scale, unprecedented in its global reach, unprecedented in the speed of its transition to all economic sectors and businesses. in this troubled climate, Sperian relied for the whole of 2008 on the soundness of its business model to support implementation of our strategic development plan. the Group was able to continue strategic development, above all through targeted acquisitions, to strengthen our technical capabilities, our presence in developing markets and our positions with new customers.

the acquisition at the end of 2008 of Musitani, the leader in fall protection in argentina, complements our manufacturing and distribution facilities already operating in Mexico and Brazil, and significantly boosts our presence in the rapidly-expanding Latin-american market. in addition, acquisition of combisafe, one of the major developer and suppliers of safety systems for working at height, complements our fall protection offer, enabling us to supply globally collective and individual protective solutions, with a range of products positioned at the high end of the market. What’s more, this development strategy has helped to strengthen our positions, especially in the Middle East.

a third acquisition was doseBusters™, one of the pioneers of the technology for individual noise dosimetry, which means Sperian can now supply customers with a complete offer of intelligent hearing protection solutions. So this final acquisition also fulfils another objective of our long-term strategy to pursue a vigorous policy of technological innovation.

throughout 2008 Sperian continued to launch particularly innovative products in its various market segments, such as the fall protection system that resists severing on sharp corners, or high-visibility disposable masks for respiratory protection; these products match users’ needs perfectly. Finally, the Group has

2008SpErian rEMainS Sound in an unSEttLEd EconoMic cLiMatE

2 2008 ANNUAL REPORTSPERIAN PROTECTION

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satisfactory until october, was also affected but remains at a completely acceptable level of 13.5% of sales. in this context, our fundamentals are still very healthy, with a diversified customer base, strong brands recognized for their innovative qualities, expert customer service teams and a solid financial structure. i have every confidence in the ability of Brice de La Morandière and the Sperian teams to continue our development and to reinforce the Group’s position as a reference leader in our markets.

continued to capitalize on the Sperian brand, a symbol of trustworthiness for our workforce and for our customers; we also continued our worldwide investment in communication.

However, although our business activity was totally in line with our goals until october, it slowed in the last few months of 2008 – the earliest sign that the crisis was impacting our Group. Even so, over the whole year, sales were satisfactory at €751m or total growth of 3.3%. income of operating activities, which was

With Brice as our new CEO, we can be confident that respect for our values and principles of action are well safeguarded. These values help to make Sperian a reference leader in our business area. I have total confidence that Brice can adapt the Group to the current environment while still preserving our ability to reinvent ourselves to differentiate our offer and to open new channels to meet all our customers’ needs.

BOARd OF dIRECTORS

Chairman of the Board • Henri-Dominique Petit

Board members • Philippe Alfroid, Philippe Bacou (Co-Executive officer), patrick Boissier, Ginette dalloz, François de Lisle, patrice Hoppenot, Gunther Mauerhofer, philippe rollier, andré talmon

Corporate Secretary • Emmanuelle Camus-Nikitine

the nomination of Brice de La Morandière as Board member will be submitted to the shareholders approval at the annual General Meeting held on May 6, 2009.

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the world. and finally, we have given priority to generating a high cash-flow level, especially through optimization of our stocks management.

over and above these internal adjustment measures, our strategy is based on strengthening our differentiation for our customers by concentrating on four main strategic directions that involve the whole company.

at a time of crisis, first, we need to get as close as possible to our customers. in particular, we have to strengthen our proximity to our end users, provide them with advanced expertise, respond instantly both to changes in their needs and in the environment in which they operate, while making sure they receive top-quality service; this fosters innovation - our second strategic direction. the crisis will generate new needs for products and services. the Group depends not only on internal resources but also on external partners to adapt the cutting edge technologies that exist in other industries to the area of personal protection. the third part of our strategy is to differentiate our offer through well-established brands, whose quality and durability is recognized by customers. changing our name at the end of 2007 combined with simplifying our brand portfolio has speeded up recognition of Sperian protection and of our uvex, Miller and Howard-Leight brands.

Sperian’s men and women have made rigorous efforts for several months to actively withstand a particularly difficult economic climate and an unprecedented crisis.

Since the end of 2008 we have launched adaptation plans which we shall adjust throughout 2009 to address specific circumstances in each continent and each industry. We have also stepped up our relationship with customers to give them the added value they need; this is how Sperian will differentiate its offer and win market share.

First of all, our teams are focused on action plans that aim to preserve the Group’s competitiveness. these plans rest on a limited number of simple priorities and budgetary objectives, applicable to our entire organization. these can be adapted to various possible macroeconomic scenarios. these plans include four measures for improvement: first, cut our operating costs significantly for all units, then implement measures for optimizing purchases through economies of scale and renegotiation of contracts; organizing ourselves to get though the crisis also means adjusting every component of the organization itself. Sperian has accordingly modified production capacity and taken steps to reduce the workforce across

Message from the Chief Executive Officer Brice de La Morandière

2009prioritiES: adjuSt coStS and diFFErEntiatE our oFFEr to cuStoMErS


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THE ExECUTIvE COMMITTEE

Standing, left to rightMike Moorefield, Senior Vice President – AmericasJérôme Ronze, Chief Financial OfficerPhilippe Suhas, Senior Vice President – Eye & Face ProtectionMarc Beaufils, Senior Vice President – Europe, Middle East, AfricaBrice de La Morandière, Chief Executive OfficerJoe Reimer, Senior Vice President – Fall Protection

Seated, left to rightFrancis Allirot, Senior Vice President – Asia PacificMark Hampton, Senior Vice President – Head ProtectionJanet dekker, Senior Vice President – Human ResourcesChristophe Lamoine, Senior Vice President – Body Protection

Finally, the fourth strategic direction focuses on strengthening market share in specific developing countries. they represent a rich pool for future growth owing to their demography and their growing awareness of personal protection.

i have full confidence in our teams’ ability to implement these action plans which we will continuously adjust throughout the year. along with the whole executive committee, we will remain alert to market changes and will make sure we seize all development opportunities that arise for Sperian.

We have taken stock of the prevailing situation and demonstrated reactivity and adaptability. I am convinced that with these plans to preserve our competitiveness and further differentiate our offer for our customers, Sperian is in a good position for getting through this troubled period and for strengthening our position as the established leader for our customers, while preparing for the future.

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the Group is getting into position in segments with the highest growth potential by allocating its resources, especially to sectors that will benefit from government stimulus plans such as the public works, automobile and renewable energy sectors.

Encouraging close proximity to customers deepens our exact understanding of their business and environment. drawing on this expertise enables Sperian protection to design innovative products and also to offer complete solutions that can meet the global needs of users.

SOLUTIONS THAT MEET CUSTOMER NEEdSUnderstanding customers’ expectations in the safety area is a key factor for Sperian protection. the Group’s development is founded on close proximity to end users and depends on our efficient sales teams in every world region. With three logistic platforms located in three continents, we can guarantee a reliable rate of service to our network of distributor-partners. Sperian protection has an adaptable, reactive organization for responding to the changing needs of our markets.

in 2008 Sperian decided to bring together all our skills in the public safety protection market as a single organization to increase our efficiency and highlight our expertise. in addition,

StayinG cLoSE to our cuStoMErS FoStErS innoVation

Sperian Fire and Respiratory is being positioned to become a growth vehicle by fully integrating our core product offerings in Respiratory Protection, Fire Products and Nuclear Protective Apparel into a unified business unit with a shared sense of mission of providing our customers with the best sales, service and expert support experience possible.

Mark Hampton, Senior Vice President Head Protection

Main strategic directions


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> > FOCUS

Repositioning the gloves business

During 2008 Sperian repositioned its gloves business. First, with the acquisition of a factory in China that specializes in dipped gloves manufacture, the Group now has production capacities in this fast-growing market sector. Second, Sperian set up a laboratory specially for gloves development. This is located in France and has already applied for patents and worked on very innovative gloves concepts that will differentiate Sperian in our markets.

a personal approach to Hearing conservation, Howard Leight’s

new Veripro™ field verification technology makes it easy to get an

accurate, real-world picture of employees’ attenuation.

overall, the Group aims to increase added value for customers by offering complete solutions that include complementary services such as audits, seminars or training. in Hearing protection, particularly, Sperian has now built up a global offer in hearing conservation with, besides earplugs and earmuffs, systems for hearing protection measurement and protection recommendations.

For a genuinely personalized approach to hearing conservation, the new Veripro® testing technology from Howard Leight makes it possible to accurately measure actual noise attenuation.

INNOvATION, THE vITAL ELEMENT IN dIFFERENTIATIONBecause trusting your equipment is essential for working efficiently, the Group innovates day after day to develop better protection solutions. For Sperian protection, innovation involves the entire offer and processes. it draws on the Group’s expertise regarding risk appraisal, conditions for use and in-depth knowledge of the technical aspects of products. in 2008, the Group launched innovations in all product ranges: we have also moved forward in repositioning our gloves business by emphasizing innovation. Setting up a research laboratory

in France specifically for this business line and acquisition of a production plant in china enabled us to acquire dipped glove manufacturing techniques - an essential sector in the glove market. We also strengthened our competence in noise dosimetry in 2008 by acquiring doseBusters’ technologies and patents. Finally, to speed up our innovation program, Sperian has formed partnerships with universities or research laboratories in order to pool expertise in highly targeted areas.

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to support our differentiation strategy, Sperian protection invests in strengthening the power of its brands. these are critical for achieving awareness and loyalty not only in countries where the Group is already well established, but also in those where we aim to develop market share.

STRONG BRANdS FOR A LEAdERSHIP POSITIONThe Group’s four leading brands represent a promise of trustworthiness and quality from Sperian to our product users and to our different publics and partners. the name “Sperian”, created in 2007, has established a unifying identity for all the Group’s business arms. the simplification of our brand portfolio that followed has enabled us to rally around, and concentrate our efforts on, Sperian and the three leading brands, uvex*, Miller, and Howard Leight, which, supported by the endorsement

“By Sperian”, help to expand the Group’s visibility. now this new, more coherent and consistent identity is a means of achieving recognition which places Sperian as the ppE reference leader. the positioning of the Sperian brand and our values was explained in a 2008 media campaign in all parts of the world.

the publicity concept was based on images of men and women with confident facial expressions at work in four different industrial settings - construction, petrochemicals, work at height, and manufacturing. the reliability, design and comfort of our equipment were made clear by a statement from each worker in support of the central message “protection you can trust”, the Group’s brand signature. in addition, to strengthen recognition and serve as a benchmark in the ppE industry, Sperian protection is working on coordinating all its internet sites under the same Group banner. this will mean we can showcase the knowledge, expertise, technologies and solutions we offer in answer to the safety problems posed by different customer environments.

Main strategic directions

poWErFuL BrandS For a GLoBaL MarKEt

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* in americas only


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> > FOCUS

Expansion in the Mercosur market

With the acquisition of Musitani in December 2008, Sperian Protection has strengthened its presence in the Mercosur market. In fact the Group was already operating in this region through its manufacturing and distribution business in Mexico and Brazil, but with Musitani it has secured a foothold in Argentina and boosted its position in Brazil.

Musitani is one of South America’s leaders in the manufacture and sales of fall protection products, including harnesses, life lines, retractable solutions, and access to height systems as well as lifting equipment.

Besides this, in 2008 the Group strengthened our offer in the Mercosur market by inaugurating its new Brazilian factory which produces respiratory masks, protective eyewear and hearing protection.

TARGETEd dEvELOPMENTS IN EMERGING COUNTRIESdeveloping countries have a double attraction for groups like Sperian; their rate of economic growth tends to be higher than that of oEcd countries by several points. Further, these are countries that are waking up to safety problems. as their economies gradually develop, their safety standards get closer to those practiced in Western Europe and north america. this is why Sperian is rolling out a targeted investment strategy in the most attractive countries.

in 2008 Latin america was the focus of this development with acquisition of Mustani, the argentinian leader in fall protection. this operation completes a major presence in Mexico and Brazil, two indispensable countries for tapping into the expansion of the Latin-american market. on the other hand, the Group continued to strengthen our presence with end users in china, eastern Europe and in Middle Eastern countries, where acquisition of combisafe, the fall protection leader already established in dubai, enabled us to consolidate our presence with the big players in this region.

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our recycling policy is one of the priorities in our ecological commitment and as a general rule, all our industrial waste is dealt with by accredited recycling specialists. the Group’s employees at our sales offices also actively contribute to preserving the environment in many ways, such as paper recycling and computerised information systems which reduce

the Sperian protection group’s mission is to protect people in the workplace. this supports quite naturally our vision for development that puts people right at the centre of our thinking, within our organization and externally.

Sperian protection believes that its long term future depends on our capacity to shoulder our responsibilities towards all our stakeholders – customers, shareholders, employees, partners and suppliers and also towards the government bodies and communities where the Group operates locally.

A RESPONSIBLE ORGANIZATIONas a socially responsible company, Sperian protection is committed to growth that respects the ethical principles set out in our internal guidelines. these apply right across the Group and provide a code of conduct for all our employees, regardless of their nationality and culture. our production processes have low impact on surrounding ecosystems and consume little energy. Even so, the Group keeps a watchful eye on minimizing our environmental footprint and rationalizing our use of water, energy and raw materials.

our orGaniZation iS aBout pEopLE

For us, personal protection is more than just equipment: this is why Sperian launched an initiative in 2008 to coordinate and develop all local efforts in the areas of environmental protection, participation in local life and personal development of employees. We are also working on long-term sustainable development planning for the entire Sperian Protection group.

Philippe Suhas, Senior Vice President Eye & Face Protection

Sperian’s spirit

Sperian first anniversary, Slovakia


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printing. Finally, Sperian makes a point of being part of the life of communities where we are active or where we have established sites; we recruit from local labour pools.

Both the company and workers get involved in local life. Employees are encouraged to take action to support their surrounding environment; they often take part in environmental, solidarity and sponsorship programs, for example. Sperian protection also contributes to important national and international causes and reacted swiftly throughout the year, by providing personal protection equipment following major natural disasters such as the earthquake in china, or the raging fires on the west coast of the uS.

SAFETY TRAINING ANd AUdITSSince Sperian’s goal is to help to build a safer workplace, the health and safety of our workforce are naturally central concerns. the Group never forgets that safety at work is a major productivity factor at our sites; for this reason, too, working and safety conditions at all our production sites are subject to ongoing improvement measures, specifically in the form of health and safety audits, and training aimed at raising employee awareness and identifying ways to improve. dEvELOPING SPERIAN’S SPIRITour long term development vision is rooted in the belief that the true worth of a company lies in a relationship of mutual trust with the men and women who work for it every day. this is why Sperian’s culture is based on performance, employee development, ongoing dialogue and free exchange of ideas and information. our organization’s four values: respect for people, team performance, innovation, and customer focus, serve both

as reference points and simple behavioural guidelines which help Sperian to strengthen our world leadership position and promote a culture of excellence. this commitment shapes our human resources management in the combined interests of our workers and our organization. it’s working in an environment where they know that individual competence is recognized, that motivates employees to act in the interests of collective productivity. to this end tailored training programs are offered to employees at all levels and in all positions, within all Sperian protection’s different sites. our concern for industrial relations is ongoing and particularly strong during these periods when the company is adjusting to a difficult economic climate. the Group systematically implements measures to support every worker seeking external reclassification.

BREAKdOWN OF WORKFORCE BY REGION

Europe36%

Rest of world 7%Asia Pacific

5%

Americas52%

Sperian cares about employees’ professional development, especially during these economically difficult times. For the Group, it is essential to support each worker individually by offering customized assistance, directional guidance or training according to their situation and the local context.

Janet Dekker, Senior Vice President Human Resources

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HEAd PROTECTION

52% of Sperian Protectionsales

HEad protEction

construction to glassmaking and metallurgy, and uses from chemicals handling to welding or electrical work. the Group is also number one in the uS for portable emergency eyewash stations.

CONSERvING HEARING LONG TERMto make sure that hearing in the workplace is protected, the group designs, manufactures and sells disposable and reusable ear plugs to attenuate noise, and passive or communication-enabled earmuffs under the Howard Leight by Sperian brand - a benchmark brand in its market. this complete product line offers different materials, shapes, sizes and noise-attenuation levels, providing a solution for every user and working environment. Sperian protection is also the recognized premier brand in intelligent hearing protection solutions. World leader in intelligent earplugs, the Group markets the Quietpro®, a system that combines internal electronic hearing protection, adjustable and passive, with a natural voice and radio communication process designed for environments with varying noise levels. in addition, following acquisition of doseBusters, the Group also offers a complete solution for personal noise dosimetry, which makes it possible to control, measure and define in real time a person’s actual exposure to noise in their workplace.

Vision, breathing, hearing: Sperian protects these vital functions for men and women at work. Everywhere in the world, every day, they trust our products and recognize their superior quality.

number one in the global eye protection market and number two in hearing protection, Sperian protection is also among the leaders in the manufacture of respiratory protection.

SAFEGUARdING THE APPLE OF YOUR EYEthe fragile and vulnerable human eye is particularly prone to accidents owing to three main types of hazard found in working environments: mechanical and chemical threats and those associated with radiation. Sperian’s huge range of products that includes glasses, goggles, face screens and welding masks is specifically designed to protect users against these risks.comfort is a key feature of this range: users today are looking for more comfortable, lighter products. Style is another determining factor, because someone at work is more willing to wear/eye protection that’s aesthetically pleasing. the Sperian range is suitable for a wide range of industries, ranging from

In all the markets where we do business, Sperian Protection aims to increase safety and productivity through innovative products. The Group works in direct cooperation with industry experts in order to design and develop innovative solutions for many sectors.

Innovative solutions


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BREAKdOWN OF 2008 SALES

eye & face17%

hearing15%

respiratory20%

HEAD PROTECTION

BODY PROTECTION

48%

> > INNOvATIONS

High visibility brings users out of the shadows “High Visibility” masks are designed to make sure the user can be seen in poorly lit environments or foggy weather. they also make it possible to check quickly that workers are wearing suitable protective equipment in emergency situations.

duraMaxx: seeing better for longerthe dura-streme technology used for the eyepiece of the new duraMaxx mask combines two coatings, with scratch-proofing on the outside and demisting on the internal surface, so that it’s more comfortable to wear and lasts three times longer than standard equipment.

Bilsom 303 for greater inner-ear comfort the Bilsom 303 earplug is an established leader in the European hearing protection market. now developed under the Howard Leight® by Sperian brand, the dynamised Bilsom 303 offers improved user comfort: it slides easily into the auditory canal and can be worn for long periods.

> > FOCUS

Quietdose, customized noise level dosimetry

In September 2008, Sperian Protection finalized acquisition of doseBusters™, one of the pioneers of individual noise dosimetry technology. This company designed and marketed QuietDose, a complete individual noise dosimetry solution. It links a classic hearing protection device, either earplugs or earmuffs, with an individual noise monitoring system. This combination makes it possible to control, measure and qualify in real time a person’s actual exposure to noise in the workplace. According to the data collected, safety managers can make specific decisions designed to reduce workplace induced hearing loss and select the protective solution best suited to each person, depending on their type of workstation.

BREATHING IS LIFEthere are numerous respiratory hazards : dust, poisonous gases and vapors, breathing in confined spaces... the Sperian protection group’s offer covers all needs of professions at risk, particularly the following sectors: petrochemicals, pharmaceuticals, construction, shipyards, public safety and fire-fighting. disposable masks, half masks, and full masks with filters and cartridges, filtering elements, open and closed circuit apparatus, gas detection and systems for collective protection. all Sperian’s equipment offers unrivalled levels of safety, comfort, and lightness in weight.

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BOdY PROTECTION

48% of Sperian Protectionsales

Body protEction

PROTECTION IN SURE HANdSSperian is active in the disposable gloves market, with products designed to protect against chemical, biological, thermal, and electrical hazards, abrasion and cuts. always mindful of user needs, Sperian’s research and development teams continuously study possible improvements in order to make gloves even more suitable for different working conditions in all types of job. to this end the group has reinforced r&d teams and invested in additional industrial facilities, especially in dipped glove technology through acquisition of a factory in nantong, china.

Body protection is an essential component of men and women’s safety at work. Sperian provides solutions for hand protection, fall arrest and also designs clothing and shoes.

HIGHER ANd HIGHER IN COMPLETE SAFETYFor fifty years Miller® by Sperian, the world leader in fall protection, has been perfecting equipment and solutions for working safety at height. today Miller’s range of fall arrest equipment is the most innovative on the market. comfortable and pleasant to wear these products can be worn continuously and make for greater productivity. they are designed and tested by qualified engineers and technicians; cutting edge control devices check that the manufactured products do not merely meet, but exceed current standards. Sperian protection’s solutions offer exceptional safety performance.the acquisition of combisafe in august 2008 has positioned Sperian in the segment of collective protection at height. combisafe products are benchmarks for the industry and for the sectors that requiring work at height: they include steel mesh barriers, safety nets, slab clamps, etc.

BREAKdOWN OF 2008 SALES

footwear8,5%

clothing8,5%

gloves 9,5%

HEAD PROTECTION52%

BODY PROTECTION

fall protection21,5%

Innovative solutions


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BOdY PROTECTION MEANS PEACE OF MINdSperian’s protective clothing, disposable or reusable, combines ergonomic features, advanced technology and esthetic appeal. Made to standard or not, these products meet the demands of the pharmaceutical, nuclear, petrochemical and food processing industries, and the firefighting services. the Group also makes image wear for large employee groups, such as in the transport industry.

SAFETY FOOTWEAR KEEPS FEET ON THE GROUNdin Europe and china, Sperian sells more than two million pairs of safety shoes every year. innovation and quality are the most outstanding attributes of the wide range of supremely comfortable shoes the Group offers. completely updated in two ways over the past few years, it is now segmented by job type and reflects the latest fashion trends. all the different models combine improved design with comfort, capitalizing on the latest r&d findings. Features include ultra-light, antimagnetic toe-caps, anti-perforation inserts, hardwearing, extremely supple and tough soles, and top quality leathers and other materials for uppers and linings.

> > INNOvATIONS

A much-needed new range of safety linesthe risk of safety lines breaking on sharp corners is very common, but is often not recognized. now Miller® by Sperian has developed and Miller Manyard Edge tested, a line using twisted-thread technology from the textile industry that combines two strands, one shock absorbent, the other resistant to cutting.

Polytril™ Air Comfort Glovesin 2008 Sperian launched the polytril™ air comfort glove made of a knitted, polyamide-coton-lycra® material which offers exceptional advantages; cotton absorbs perspiration for improved comfort, lycra gives greater elasticity and nitrile induction provides maximum resistance to abrasions and oils.

I-Tech safeguards freedom of movementto provide fire fighters with thermal and anti-shock protection, Sperian has developed i-tech, a system worn on the knee. this product, which is designed exclusively to fit the patented inner pocket of Sperian’s protective wear for north american fire fighters, gives protection while allowing complete freedom of movement.

Temptation® Elite: stylish protection temptation® Elite shoes ally design based on the latest trends with discrete protection to give women feel-good comfort and fluid, stylish lines, abrasion resistance, optimal grip and lining that resists perspiration, bacteria and regulates temperature.

We were pleased to welcome Combisafe, which has built a strong platform based on decades of experience and product competence. The addition of Combisafe’s product offering to Miller by Sperian's existing fall protection product range has created the worldwide Safety at Height leader. Fall arrest, safe access to height, rescue from height are now offered in both personal (individual) and collective (group) systems.

Joe Reimer, Senior Vice President Fall Protection

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SALES(in euro million)

2008 751

2007 754

2006 737

NET INCOME(in euro million)

2008 48

2007 59

2006 41

Leverage

NET dEBT(in euro million)

2008 303

2007 236

2006 217

A firm stand in 2008: in a difficult global economic climate, Sperian protection demonstrated the resilience of its economic model throughout the year. the Group recorded sales growth, excluding exchange rate impacts, of 3.3% and an operating margin of 13.5% of sales, giving an operational cash-flow of 69 million euros. the Group also continued with its development

strategy; in particular we went ahead with acquisitions totalling 71 million euros, and investments in technical and industrial capacities. nonetheless, momentum slowed in the last few months of 2008, and the first signs of the impact of the crisis on the Group were visible. this prompted Sperian to implement restructuring and cost cutting measures from the end of 2008.

KEy FiGurES 2008

NET CASH FROM OPERATING ACTIvITIES*(in euro million)

2008 69

2007 88

2006 81

* before capital expenditure

INCOME OF OPERATING ACTIvITIES(in euro million)

2008 101

2007 111

2006 103

Operating margin in % of sales

13.5%

14.7%

14%

2.49%

1.84%

1.79%


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2008

Total Sales: 751 million eurosBreakdown of sales by geographical areas:

50% EMEA43% Americas 7% Asia Pacific

29 million euros of capital expenditures30 production sites on 5 continents22% innovation rate

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SHARE PRICE ANd CAC MId100 INdICE PERFORMANCE IN 2008

Listing informationNYSE Euronext (compartiment B)ISIN Code: FR 0000060899Ticker: SPRIndices: SBF120, CAC Mid100,CAC Mid & Small 190

SHarEHoLdEr inForMation


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Capitalas at 31 december 2008 the capital stood at 7,655,023 shares with a face value of 2 euros, corresponding to 9,831,301 theoretical voting rights (calculated on the basis of total shares which carry voting rights, including those shares for which voting rights are withheld) and 9,716,992 exercisable voting rights (calculated excluding shares for which voting rights are withheld) taking into account allocation of double voting rights to shares

Mrs. dalloz13%

Essilor 15%

Free float72%

Shareholding

Mrs. dalloz21%

Essilor 24%

Free float55%

voting right

held in the registered form for more than two years; the composition of our shareholder base is relatively stable; apart from our two keynote shareholders, Essilor and Ms dalloz, who together hold 28%, corporate French investors hold about 14% of capital, overseas corporate investors 51%, with the rest held by individual shareholders. dividends will be paid on 9 july 2009. the record date in terms of ESES regulations is 8 july and the ex-date is 6 july.

Contacts• MailSperian Protection - Paris Nord IIImmeuble Edison33, rue des VanessesBP 55288 VillepinteF-95958 Roissy CDG Cedex

• [email protected]tion.com

• Telephone • Fax+ 33 (0)1 49 90 79 74 + 33 (0)1 49 90 79 78

• RegistrarCACEI Corporate Trust14, rue Rouget-de-Lisle F-92862 Issy-les-moulineaux Cedex 9Tel. + 33 1 57 78 34 44 Fax + 33 1 49 08 05 08

OWNERSHIP STRUCTURE ON 31 dECEMBER 2008

19%

19.4%

17.7%

GENERAL INFORMATION

Sperian makes complete financial information available to shareholders, which reflects our desire to develop long-term relationships with them. This information can be found at www.sperianprotection.com, finance section, which is a comprehensive data base for financial communication.

The Group also informs financial markets about its strategy and financial situation at regular meetings throughout the year, or when annual or half-year results, or quarterly sales figures are published.

For 2009 dates of main meetings are as follows:

6 May 2009: Annual General Meeting of shareholders17 July 2009: Sales for the second quarter 200926 August 2009: Half-year results 200921 October 2009: Sales for the third quarter 2009

dIvIdENd PER SHARE (in e)

2008 1.20*

2007 1.50

2006 1.05

Pay-out

* dividends will be paid on 9 july 2009. the record date in terms of ESES regulations is 8 july and the ex-date is 6 july.

19


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2008 reference document

This is a free translation* of the Reference Document (“Document de Référence”) filed with the French Market Authority (AMF) on april 15, 2009, in accordance with articles 212-13 of its general regulations.

*Statutory financial statements are available only in French.

copies of this document are available on request, at no charge, from the investor relations department of Sperian protection at the following address: Zi paris nord ii, immeuble Edison, 33 rue des Vanesses, Bp 55288 Villepinte, 95958 roissy cdG cedex, France; - tel: at +33 (0)1 49 90 79 74; - fax: +33 (0)1 49 90 79 78; - email: [email protected]

20 RAPPORT ANNUEL 2008SPERIAN PROTECTION

FINANCIAL REPORT 221.1. 2008 Management Report 241.2. Risk Management 281.3. Recent events and outlook 301.4. Key figures 311.5. Consolidated financial statements 32 BUSINESS REVIEW 76

2.1. History 782.2. The Personal Protective Equipment (PPE) Market 782.3. Business Segments 812.4. Strategy 842.5. Development and capital expenditure 86

SOCIAL AND ENVIRONMENTAL REPORT 88

3.1. The Sperian Spirit 903.2. Human Resources Policies 903.3. Corporate Citizenship 923.4. Workforce and Production Plants 933.5. Environnemental Policies 94

CORPORATE GOVERNANCE 964.1. Board of Directors 984.2. Directors’ interests 1044.3. Directors’ compensation 1064.4. Other information about the directors 1084.5. Organization structure 1134.6. Chairman’s Report 116

INVESTOR INFORMATION 1265.1. Information about the Company 1285.2. Information about the Company’s capital 1305.3. Authorized, unissued capital 1335.4. Ownership structure 1345.5. Market for the Company’s shares 1375.6. Divident policy 1395.7. Information policy 139

OTHER INFORMATION 1406.1. Person Responsible for the Reference Document 1426.2. Statement of Person Responsible

for the Reference Document 1426.3. Persons Responsible for Auditing

the Financial Statements 1426.4. Auditors' Fees 143

REFERENCE DOCUMENT

21


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FINANCIAL REPORT 1.1. 2008 Management Report 241.1.1. Consolidated revenue 241.1.2. Consolidated results 251.1.3. Consolidated financial position 26 1.2. Risk Management 281.2.1. Financial and market risks 281.2.2. Legal risks 281.2.3. Insurance 29 1.3. Recent events and outlook 301.3.1. Recent events 301.3.2. Outlook 30 1.4. Key figures 311.4.1. Five-year financial key figures 311.4.2. Revenue contribution by business segment 311.4.3. Revenue contribution by geographical zone 311.4.4. 2008 quarterly revenue 31 1.5. Consolidated financial statements 321.5.1. Consolidated balance sheet at December 31 321.5.2. Consolidated income statement 331.5.3. Consolidated statement of cash flows 341.5.4. Consolidated statement of changes in equity 351.5.5. Notes to the consolidated financial statements at December 31, 2008 351.5.6. Statutory Auditor’s Report on the consolidated financial statements 74

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1.1. 2008 Management Report

Despite the difficult world economic environment, Sperian Protection continued to deploy its expansion strategy throughout 2008, backed by a solid business model. The Group made several targeted acquisitions to strengthen its technological capabilities, its presence in developing markets and its positions in new end-user segments.

However, the crisis began to bite in the last few months of 2008, leading to a slowdown in business. This slowdown in sales has worsened since the beginning of this year. Sperian is therefore expecting the first quarter to be down sharply compared with 2008, when first-quarter sales were particularly strong.

The measures already initiated in late 2008 or decided in early 2009 will lead to a reduction in headcounts of approximately 760 Group employees. In addition, the Group is continuing efforts to optimize purchasing costs and to cut costs that will produce savings excluding inflation of about €23 million on a full year basis.

Because of the uncertain outlook, the Group is not providing any guidance for 2009. However, Sperian is disclosing the following two simulations: if Group’s organic growth is around -5% for the year, operating margin will be roughly between 11% and 13% of sales and net debt between 2.5x and 3x EBITDA. If Group’s organic growth is around -15% for the year, operating margin will be between 7% and 9% of sales and net debt between 3x and 4x EBITDA. Changes in the product mix, geographic composition of sales, and exchange rates will have a significant influence on these simulations.

1.1.1. Consolidated revenue

Consolidated revenue amounted to €750.9 million versus €754.4 million in 2007. Although down on a reported basis, this represents an increase of 3.3% at constant exchange rates. All geographical and business segments contributed to the growth.

The dollar's depreciation against the euro trimmed revenue by 3.8%.

(in € million) 2008 2007 % change at cst exchange rate

% organic change

Sales from continuing operations 750.9 754.4 3.3 -0.6

Head protection

Body protection

390.7

360.1

403.2

351.2

1.3

5.7

-3.4

2.5

Americas

Europe, Middle East, Africa

Asia-Pacific

325.2

373.8

51.9

346.2

360.3

47.9

0.2

5.4

10.3

-5.1

2.3

10.3

New acquisitions contributed almost €30 million to full-year revenue, representing 4% of the total. Nacre's first-half revenue bolstered the head protection segment while Combisafe, acquired in September 2008, was consolidated in the body protection segment for four months.

The negative organic growth in head protection stemmed mainly from Nacre's low second-half contribution compared with the previous year. Its business addresses the military market which is extremely cyclical and therefore unpredictable over time. Excluding this effect, revenue would have been similar to the 2007 level, with growth in hearing and respiratory protection and a slight decline in eye and face protection.

Body protection posted satisfactory organic growth of 2.5%, after a deliberate policy of reducing sales of low-margin products, mainly gloves and footwear. Fall protection had a good year, reaping the benefits of a positioning closely geared to the needs of end-users. Safety footwear, as expected, was stable compared with the previous year, with price increases, particularly in Asia, putting a brake on sales. The protective gloves business is currently being refocused, which led to a slowdown in sales during the year. Sperian has set up a new research laboratory devoted specifically to safety gloves and has also invested in a dipped gloves manufacturing facility in China. Protective clothing posted a broadly positive performance, with a continued recovery in sales of firefighting apparel in North America, strong sales of the Timberland PRO® ranges and renewed momentum in image wear.

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1.1.2. Consolidated results

• Income of operating activities

Income of operating activities amounted to €101.5 million and €105.7 million at constant exchange rates, a decrease of 4.8% compared with 2007.

(in € million) 2008 2008 at constant exchange rate

2007 % change at constant exchange rates

Revenue

Gross profit

in % of sales Sales & marketing expenses

General & administrative expenses

R&D expenses

750.9

292.3

38.9%98.5

78.4

13.9

779.6

303.0

38.9%102.2

80.6

14.5

754.4

297.5

39.4%93.1

78.7

14.6

3.3

1.9

9.7

2.4

-0.6

Income of operating activitiesin % of sales

101.513.5%

105.713.6%

111.014.7%

-4.7

At constant exchange rates, the income statement items can be analyzed as follows:

• Gross margin was 38.9%, down from 39.4% in 2007, but still up on the 2006 level of 38.5%. The contraction in margin stemmed mainly from under-utilization of some facilities towards the year end and the scale-up of the new Brazilian facility during the year. By contrast, salary inflation and a rise in some raw material costs were offset by increases in selling prices and purchasing improvement plans.

• The increase in sales & marketing expenses was partly due to the Group's strategy of substantially scaling up its Brazilian sales opera-tions following the inauguration of a new manufacturing facility, and partly to the acquisition of Combisafe.

• The increase in general & administrative expenses was in line with revenue growth.

• Research & development expenses were similar to the previous-year level, representing 1.86% of revenue versus 1.95% in 2007.

• Net income

Net income came to €48.0 million versus €59.1 million in 2007.

(in € million) 2008 2007 % change

Income of operating activities

Restructuring costs

Amortization and impairment of revalued intangible assets

Other income

101.5

(2.8)

(4.8)

(4.9)

111.0

1.0

(7.5)

(16.3)

-8.6

Operating income from continuing operationsNet finance costs

Income tax

89.0(22.6)

(18.3)

88.1(17.0)

(12.0)

0.9

Net income 48.0 59.1 -18.8

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The income statement can be analyzed as follows:

• Restructuring costs amounted to €2.8 million including €2.3 million in provisions for a cost-cutting plan initiated by the Group at the end of 2008 to counter the initial impacts of economic crisis.

• Amortization of revalued intangible assets amounted to €4.8 million, including 2.2 million related to the Nacre acquisition, compared with €7.5 million in 2007, including €3.3 million related to the Nacre acquisition and €2 million relating to the partial write-down of certain brands.

• Other income represented a net expense of €4.9 million, mainly comprising the cost of the Group's name change and brand rationaliza-tion plan (€4.2 million). In 2007, other income represented a net expense of €14.4 million, comprising provision for litigation pending in the United States involving a respiratory system for firefighters. This sum represents the best estimate of the maximum probable risk.

• Net finance costs amounted to €22.6 million, including €13.7 million in financial expense, in line with 2007. The increase in average net debt from €228 million in 2007 to €256 million in 2008 to finance acquisitions was offset by an decrease in interest charges. By contrast, net foreign exchange losses increased by about €5 million compared to 2007, mainly due to a loss on the Swedish krona.

• Income tax expense amounted to €18.3 million, representing an effective tax rate of 27.6%. This compared with an exceptionally low rate of 16.9% in 2007, due to the deductibility of some provisions recognized by the Group.

1.1.3. Consolidated financial position

• Summary cash flow statement

(in € million) 2008 2007

Operating cash flow before change in working capital

Change in working capital

85.7

(17.2)

91.2

(3.4)

Net cash from operating activities 68.5 87.8

Capital expenditure

Other acquisitions/disposals

Increase/(decrease) in borrowings

Purchase of treasury shares

Dividends paid

Other

(29.0)

(70.9)

58.1

(8.5)

(11.4)

(6.6)

(21.2)

(86.5)

27.7

(6.9)

(8.2)

6.1

Change in cash and cash equivalents 0.2 (1.2)

Net cash from operating activities amounted to €68.5 million versus €87.8 million in 2007.

Capital expenditure totaled €29.0 million versus €21.2 million in 2007. It mainly comprised the purchase of a dipped gloves manufac-turing facility in China for €3.4 million, the construction of a new manufacturing facility in Brazil for €2.9 million, the relocation of some French respiratory protection activities for €2.3 million and the acquisition of doseBusters noise dosimetry technology for €1.5 million. Other outlays were devoted to innovation, particularly in hearing protection, industrial optimization (San Diego) and IT projects.

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The Group made two acquisitions in 2008: Combisafe, leader in collective fall protection systems, in September, and Musitani, Argen-tina's leading fall protection company, in December. These acquisitions led to a €70.9 million increase in average debt for the year.

Lastly, under the share buyback program authorized by the Board of Directors in September 2007, the Group purchased treasury shares to a value of more than €8 million (including the amount allocated to the liquidity agreement).

• Summary balance sheet

(in € million) 2008 2007

ASSETS

Intangible assets

Property, plant & equipment

Other non-current assets

654

95

40

600

80

35

Total non-current assets 789 715

Current assets 326 299

Total assets 1,115 1,014

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Minority interests

567

1

548

1

569 550

Long-term interest-bearing loans & borrowings

Provisions

Other non-current liabilities

253

57

37

147

53

31

Total non-current liabilities 347 230

Short-term loans & borrowings

Trade & other payables

Provisions

Other current liabilities

75

106

7

11

109

114

8

4

Total current liabilities 199 234

Total equity and liabilities 1,115 1,014

The increase in assets during the year was mainly due to the recognition of goodwill on the Combisafe acquisition, in the amount of €43 million.

Working capital represented 84 days of revenue versus 77 days in 2007.(1)(2)

Net debt stood at €303 million at the year end versus €236 million at end-2007, including €77 million for the Combisafe and Musitani acquisitions.

The Group's financial structure was solid, with net debt to EBITDA standing at 2.49(3) versus 1.84 at end-2007 and net debt to equity at 53% versus 43%.

(1) Excluding the receivable from an insurance company under a lawsuit (recognized under trade receivables) and in 2007 excluding the earn-out potentially payable to the former Nacre shareholders based on future performance (recognized under trade payables).

(2) Excluding Combisafe(3) Pro forma for Combisafe/Musitani.

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1.2. Risk Management

1.2.1. Financial and market risks

Market risk is the risk of adverse fluctuations in the value of finan-cial instruments caused by changes in exchange rates, interest rates or stock market prices. The Group is exposed to exchange rate and interest rate risk. The Group does not believe it is exposed to liquidity risk. Detailed information on the management of these risks is provided in note 4.14 to the consolidated financial statements.

1.2.2. Legal risks

The Company exercises the manufacturing and/or distribution of personal protective equipment throughout the world either through its subsidiaries or through contractual relationships with third parties. In that respect, it is subject to a complex regulatory environment associated with the types of businesses and / or the business location (see chapter 2 of this document). The risks to which it is exposed are the typical risks for identical companies given the domain covered: defective products, product sales methods, sub-contractor relationships, suppliers and / or distribu-tion networks and intellectual property.

• LitigationIn the course of normal business, the Company can find itself confronted with litigation. The Sperian Protection group believes that it has subscribed to an appropriate level of liability insurance (except for applicable insurance loss retentions) which provides coverage against any material financial loss which could result should its legal responsibility be put in question. With the excep-tion of the actions described in the paragraph on responsibilities related to defective products, to the knowledge of the Company, at this day, no litigation or arbitration exists which could have a significant impact on the business, financial structure, the Company value or those of its subsidiaries either in the past or within the foreseeable future.

• Protection of Sperian Protection Intellectual Property rightsSperian Protection policy is to protect its intellectual property rights through the filing of patents, trademarks and through confi-

dentiality agreements. Nonetheless, there can be no assurance that this policy will be adequate for the protection of its technology or the prevention of fraudulent copies or imitations. In addition, although the Company believes that its products do not infringe upon the proprietary rights of third parties, there can be no assur-ance that infringement or invalidity claims will not be asserted against it in the future. The costs of defending such claims or the costs and interest associated with any unfavorable judgment resulting from such litigation could have a material negative impact upon the Company’s financial position and business.

• Liability for defective productsIn general, given the nature of the business, the Group can be confronted with product liability claims if it is alleged that the use of its products results in, or such products fail to protect from, personal injury. As far as PPE products are concerned, legal actions related to defective products are generally claims based upon negligence, product design defects or safety requirements, or inadequate warnings, sometimes without the possibility of establishing a link between the damages and the cause of the source event.

Similarly, in the event that any of its products is shown to be defec-tive, Sperian Protection may be required to recall or redesign such product. The Company maintains insurance against product liability claims; however, there can be no assurance that such coverage will be adequate to cover liabilities which the Company may incur or that such insurance will continue to be available on reasonable terms. Certain of the Company’s American subsidiaries are currently the subject of mass tort suits for respiratory product liability in several states. The plaintiffs, who claim to have contracted respiratory illnesses (silicosis, asbestos or other respi-ratory illnesses) at their workplace, have challenged the quality of the masks used and the nature of warnings on the masks and, consequently seek damages against many defendants, including the manufacturers of respiratory products. In 2003 and 2004, the number of legal claims increased significantly as a result of changes in Mississippi and Texas law, which led plaintiffs’ attor-neys to file proceedings prior to the effective date of those changes. During 2006 through 2008, the number of such claims declined significantly. Although, so far, the risk per case has been relatively small, the legal expense for the American subsidiaries concerned is significant due to the large number of cases in process. The

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Group has taken the necessary measures to reduce the risks related to this litigation, and most notably has created adequate provisions based upon actuarial estimates (see note 4.10 of the consolidated financial statements). While insurance is in place and can be obtained, it is often unavailing because of policy exclusions and high retention levels. The Group does not expect these legal proceedings to have a significant impact upon its financial position and business. In September 2007, as part of a lawsuit related to the death of a firefighter in 2002, the jury in a St Louis, Missouri, court decided against the company's US respiratory manufacturing subsidiary. If the verdict is confirmed, the financial impact for the Group would be $15 million plus interest. The company believes that the decision was contrary to the evidence presented and has filed an appeal. The appeal is expected to be concluded within 12-18 months. There are no other litigation or arbitration claims outstanding which may have, or may have had, in the recent past, a significant impact on the Company’s financial statements, its business or its profitability and as a consequence, on the Group.

1.2.3. Insurance

The Sperian Protection Group has renewed the global insurance policies for 2009 that provide diverse categories of insurance coverage for subsidiaries worldwide on either a primary or DIC (Difference In Conditions) basis. Additionally, various local policies are still in place in those countries where mandated by local laws. Civil (general) liability policies are in place to cover all entities for exposures stemming from the daily operations of its manufac-turing facilities. Additionally, product liability coverage is in force to provide protection for the Company for potential claims emanating from the use of Sperian Protection products. Of partic-ular relevance, any claims related to exposure in 2009 to asbestos and silica are excluded from coverage. The global property policy provides coverage for property damage resulting from the perils of fire, explosion, lighting, windstorm, vandalism, riot or civil commotion, and other miscellaneous extensions of coverage iden-tified in the policy. Coverage for business interruption losses is provided for all entities in the United States and for Sperian Protec-tion companies outside the US as well. Limited coverage for earth-quakes and floods is provided up to certain limits dependent upon location. Workers compensation coverage is provided for all Sperian Protection companies in the United States as required by applicable law. Employer’s liability coverage is provided on a

worldwide basis. This global program provides a level of coverage deemed to be suitable by the Company. Globalization of the company’s insurance program provides for consistency of coverage across all operating companies, efficiencies of administration and premium savings due to the economies of scale associated with a worldwide program. For 2009, Sperian Protection has purchased a global cargo policy.

• Europe & Rest of the WorldEach Sperian Protection company benefits from, at a minimum, a liability insurance policy as well as a “property damage” policy on either a primary or DIC basis. Liability coverage is provided within the framework of a European program, with local policies meeting the legal specifications resulting from local legal environments, and supplemented by additional insurance coverage provided within the framework of the Group policy subscribed to by the parent company. The insurance coverage includes “Completed Operations” and “Product” risks for all operating entities.

With respect to “Property Damage”, an insurance program has been implemented which provides coverage in line with the capacity of the insurance market and for coverage amounts which are sufficient given the property values which are regularly reassessed.

The retention levels are at levels commensurate with the Compa-ny’s size and risk exposure and is reflective that recent claims have been low in frequency as well as in total amounts. In the current state, insurance has been taken against losses related to business interruption.

For companies which benefit from coverage outside of the program, the amount of their coverage corresponds to reported values existing and should insurance related to losses as a result of business interruption have been subscribed, that coverage amount is based upon the gross margin amounts as recorded in accounting records.

The total amount of the premium in 2008 for the Eastern Hemi-sphere amounted to USD1.6 million, an amount which is subject to controlled changes with respect to the generally observed price demands of insurers.

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• United StatesThe American companies benefit from their own insurance programs, which are subscribed locally. These programs cover risks such as: • liability, most notably product liability with significant coverage provided through the use of several “layers” of which the cumulative

amount is fixed for the financial year at 53 million US dollars; • property damage claims and losses related to Business Interruption, the combined amount of insurance coverage per incident is a

blanket limit of USD200 million;• employer liabilities as well as coverage for employees according to the local laws and regulations or local common proactive for

amounts required by those jurisdictions; • crime, fiduciary, and automotive according to the standards in force. The total cost of the premiums amounted to USD2.9 million in 2008 and is the subject of regular analysis and control. All insurance companies with which Sperian Protection has subscribed its policies are rated A or A+ by A.M. Best. In addition, the Company holds a worldwide insurance policy for Management Liability for a cumulative amount of USD25 million. In 2008, Sperian Protection purchased A-side DIC coverage for non-indemnifiable claims with a limit of USD5 million.

In 2003, the Company formed a captive insurance company chartered in Vermont, USA. At that time, the Company transferred the self-insured portion of its product liability related to Respiratory Protection Products to that Captive and, as a result, transferred all of the related damages. The captive insurer covers the Company for all of the self-insured indemnities with respect to claims covered by this program including rights, expenses and other related costs. At the end of 2007, the Company added liabilities for the self-insured posi-tion of its other product liability claims, as well as Workers Compensation claims, to the Captive.

1.3. Recent events and outlook

1.3.1. Recent events

No other events have occurred after the year end.

1.3.2. Outlook

The Group is unable to make forecasts for full year 2009 given the uncertain economic outlook.

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1.4. Key figures

1.4.1. Five-year financial key figures

(in € million) 2008 2007 2006 2005 2004

Revenue

Income of operating activities

Net income from continuing operations

Net income attributable to equity holders of the parent

Net debt at December 31

Net cash from operating activities(1)

750.9

101.5

48.0

48.0

302.9

68.5

754.4

111.0

59.1

59.1

235.5

87.8

736.8

103.1

45.0

41.1

217.0

80.8

694.2

94.3

44.7

44.5

272.6

85.3

677.5

90.9

29.8

(13.8)

314.5

47.1

(1) Cash flows from operating activities before capital expenditure.

1.4.2. Revenue contribution by business segment

(in % of revenue) 2008 2007 2006 2005 2004

Eye and face protection

Respiratory protection

Hearing protection

17.0

20.0

15.0

19.0

20.0

14.5

20.0

21.0

12.0

22.0

19.0

12.5

23.0

19.0

12.5

Head protection 52.0 53.5 53.0 53.5 54.5

Fall protection

Protective gloves

Safety footwear

Protective clothing

21.5

9.5

8.5

8.5

19.0

10.5

8.5

8.5

18.0

11.0

8.0

10.0

17.0

12.0

7.5

10.0

16.0

12.0

6.5

11.0

Body protection 48.0 46.5 47.0 46.5 45.5

Total 100.0 100.0 100.0 100.0 100.0

1.4.3. Revenue contribution by geographical zone

(in % of revenue) 2008 2007 2006 2005 2004

Americas


Asia-Pacific

43.0

50.0

7.0

46.0

48.0

6.0

47.0

47.0

6.0

50.0

45.0

5.0

50.5

44.0

5.5

Total 100.0 100.0 100.0 100.0 100.0

1.4.4. 2008 quarterly revenue

(in € million) 2008 Q1 Q2 Q3 Q4

Total 750.9 186.7 191.7 174.8 197.8

Head protection

Body protection

390.7

360.1

100.6

86.1

99.2

92.5

87.5

87.3

103.5

94.3

Americas


Asia-Pacific

325.2

373.8

51.9

87.8

87.8

11.1

81.5

97.0

13.1

80.1

81.6

13.0

75.8

107.4

14.6

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1.5. Consolidated financial statements

1.5.1. Consolidated balance sheet at December 31

(in thousands of euros) Note December 2008 December 2007

ASSETS

Non-current assets

Goodwill 4.1 554,869 516,570

Other intangible assets 4.2 98,213 83,673

Intangible assets 653,082 600,243

Property, plant & equipment 4.4 95,315 79,777

Deferred tax assets 4.21 35,698 29,850

Other financial assets 4.5 4,188 5,155

Total non-current assets 788,283 715,025

Current assets

Inventories and work in progress 4.6 140,047 116,138

Trade receivables 4.7 126,786 133,674

Other operating receivables 4.7 28,843 27,031

Derivative financial instruments 4.15 6,044 2,025

Cash and cash equivalents 4.8 24,629 19,772

Total current assets 326,349 298,640

Total assets 1,114,632 1,013,665

EQUITY AND LIABILITIES

Equity

Share capital 4.9 15,310 15,503

Share premium 436,533 442,138

Treasury shares 4.9 (69,382) (58,206)

Cumulative translation differences 4.9 (1,298) (858)

Net income for the period 47,776 58,833

Reserves and retained earnings 138,511 91,040

Total equity attributable to equity holders of the parent 567,450 548,450

Minority interests 1,289 1,116

Total equity 568,739 549,566

Non-current liabilities

Deferred tax liabilities 4.21 26,204 18,780

Long-term financial liabilities 4.13 252,668 146,573

Retirement benefit obligation 4.11 11,128 11,782

Provisions 4.10 57,481 52,919

Total non-current liabilities 347,481 230,054

Current liabilities

Trade payables 4.12 95,679 108,038

Current tax liabilities 10,462 5,965

Short-term financial liabilities 4.13 74,814 108,741

Derivative financial instruments 4.15 10,172 3,755

Provisions 4.10 7,285 7,546

Total current liabilities 198,412 234,045

Total liabilities 545,893 464,099

Total equity and liabilities 1,114,632 1,013,665

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1.5.2. Consolidated income statement

(in thousands of euros) Note December 31, 2008 December 31, 2007

CONTINUING OPERATIONS

Sales 750,880 754,386

Cost of goods sold (458,568) (456,932)

Gross profit 292,312 297,454

Sales & marketing expenses (98,492) (93,145)

General & administrative expenses (78,448) (78,732)

R&D expenses (13,903) (14,599)

Income of operating activities 101,469 110,978

Restructuring costs 4.16 (2,833) 993

Amortization and impairment of revalued intangible assets 4.18 (4,805) (7,495)

Other income/expenses 4.16 (4,855) (16,342)

Operating income from continuing operations 88,976 88,134

Net finance costs 4.17 (22,580) (17,048)

Income before tax 66,396 71,086

Income tax 4.21 (18,348) (11,986)

NET INCOME 48,048 59,100

Attributable to:

Equity holders of the parent 47,776 58,833

Minority interests 272 267

48,048 59,100

Earnings per share 4.22

Basic earnings per share 6.32 7.65

Diluted earnings per share 6.30 7.59

Weighted average number of shares in issue 7,565,342 7,688,063

Weighted average number of shares, fully diluted 7,577,689 7,751,304

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1.5.3. Consolidated statement of cash flows

(in thousands of euros) Note December 31, 2008 December 31, 2007

Operating activities

Income before income tax 66,124 70,819

Minority interests 272 267

Non-cash income and expenses

Share-based payment 4.20 2,590 1,614

Depreciation, amortization and impairment 4.18 23,487 25,816

Change in provisions (409) 11,539

Change in financial instruments 4,632 (699)

Other financial transactions 4.17 5,144

Gains or losses on divestment of non-current assets (32) (1,185)

Interest charges 4.17 12,629 12,948

Interest paid (13,019) (12,775)

Income taxes paid (15,708) (17,167)

Operating cash flow before change in working capital 85,710 91,177

(Increase)/decrease in inventory and work in process (15,242) (897)

(Increase)/decrease in trade and other receivables 12,129 (1,308)

Increase/(decrease) in trade and other payables (7,791) 1,737

Change in other operating assets/(liabilities) (6,275) (2,902)

Change in working capital (17,179) (3,370)

Net cash provided by operating activities 68,531 87,807

Investing activities

Acquisitions of property, plant & equipment, intangible and financial assets (28,951) (21,160)

Acquisition of investments in consolidated companies, net of cash acquired 2 (71,153) (87,492)

Disposal of investments in consolidated companies, net of cash sold 0 (1,483)

Divestment of property, plant & equipment and intangible assets 237 2,463

Net cash provided/(used) by investing activities (99,867) (107,672)

Financing activities

Increase/(decrease) in financial liabilities 90,471

Change in borrowings 58,098 (62,749)

Other financial transactions 4.17 (5,144)

Capital increase 4.9 86 6,711

Capital increase by minority shareholders in subsidiaries 80

Change in treasury shares 4.9 (8,474) (6,924)

Dividends paid to equity holders of the parent 4.23 (11,362) (8,062)

Dividends paid to minority shareholders of consolidated companies (79) (173)

Net cash provided/(used) by financing activities 33,125 19,355

Effect of exchange rate changes on cash and cash equivalents (1,580) (647)

Change in cash and cash equivalents 209 (1,157)

Opening cash and cash equivalents 4.8 (10,740) (9,583)

Closing cash and cash equivalents 4.8 (10,531) (10,740)

Movement in cash and cash equivalents 209 (1,157)

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1.5.4. Consolidated statement of changes in equity

See Note 4.9 Attributable to equity holders of the parent Total Minority interests

Equity

(in thousands of euros) Share capital

Share premiums

Treasury shares

Reserves Cumulative translation differences

Net income for the period

At January 1, 2007 15,330 441,818 (597) 60,084 (16,956) 40,963 540,642 961 541,603

Allocation of 2006 net income 40,963 (40,963) 0 0

Dividends paid (8,062) (8,062) (172) (8,234)

Shares issued on exercise of stock options 173 6,538 6,711 6,711

Capital increases made by subsidiaries 0 78 78

Share-based payment 1,303 1,303 1,303

Purchase of treasury shares (6,924) (6,924) (6,924)

2007 net income 58,833 58,833 267 59,100

Gains/losses on hedging instruments (2,803) (2,803) (2,803)

Change in cumulative translation

differences (41,250) (41,250) (18) (41,268)

At December 31, 2007 15,503 449,659 (7,521) 90,182 (58,206) 58,833 548,450 1,116 549,566

Allocation of 2007 net income 58,833 (58,833) 0 0

Dividends paid (11,362) (11,362) (75) (11,437)

Shares issued on exercise of stock options 2 84 86 86

Share-based payment 2,590 2,590 2,590

Purchase of treasury shares (8,474) (8,474) (8,474)

Cancellation of treasury shares (195) (7,022) 7,217 0 0

2008 net income 47,776 47,776 272 48,048

Gains/losses on hedging instruments (440) (440) (440)

Gains/losses on hedges of net investments (8,729) (8,729) (8,729)

Change in cumulative translation

differences (2,447) (2,447) (24) (2,471)

At December 31, 2008 15,310 445,311 (8,778) 137,213 (69,382) 47,776 567,450 1,289 568,739

1.5.5. Notes to the consolidated financial statements at December 31, 2008

Introduction

On March 3, 2009, the Board of Directors approved the consolidated financial statements for the year ended December 31, 2008 and authorized their publication. Sperian Protection is a listed société anonyme registered in France.

Note 1: Accounting policies

1.1 Basis of preparation

As required by European Council regulation 1606/2002 of July 19, 2002, the Group's 2008 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and their interpretations as endorsed by the European Union on December 31, 2008.

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The Group made the following elections on first-time adoption of the new standards: - not to restate business combinations prior to January 1, 2004; - to transfer cumulative translation adjustments at January 1, 2004

to reserves; - to apply IFRS 2 "Share-based Payment" to plans granted after

November 7, 2002 that had not vested at January 1, 2005. The Group elected not to recognize its unrecognized actuarial gains or losses at December 31, 2003 in equity as permitted by IFRS 1, as they were not material.

Accounting policies are consistent with those used to prepare the financial statements for the previous year, with the following exceptions. During the year, the Group adopted the following new standards, amendments or interpretations:- IFRIC 11: IFRS 2 – Group and Treasury Share Transactions

The adoption of these revised standards and interpretations had no impact on the Group's performance or financial position.

The Group has elected not to early adopt those standards and interpretations endorsed by the European Union whose applica-tion is not mandatory as of January 1, 2008:- Amendment to IAS 1: Presentation of financial statements

(revised)- Amendment to IAS 23: Borrowing Costs- IFRS 8: Operating Segments- IFRIC 13: Customer Loyalty Programmes- Amendment to IFRS 2 - Share-based Payment: Vesting Condi-

tions and Cancellations- IFRIC 14: IAS 19 - The Limit on a Defined Benefit Asset Minimum

Funding Requirements and their Interaction

Sperian Protection is currently analyzing the potential impacts of applying these new standards to the consolidated financial state-ments. At this stage, their impacts cannot be determined with sufficient precision.

The consolidated financial statements have been prepared using the historical cost convention, except for certain asset and liability classes which are measured at fair value as required by IFRS. The assets and liabilities concerned are described in the notes below.

1.2. Accounting policies 1.2.1. Consolidation principles and methodsEntities over which the Sperian Protection group has exclusive control, either directly or indirectly, are fully consolidated. Control is defined as the power to govern the financial and operating poli-cies of the subsidiary in order to derive economic benefits from its activities.Entities over which the Sperian Protection group exercises signifi-cant influence are accounted for using the equity method. Signifi-cant influence is the power to participate in the financial and operating policies of the subsidiary but is not control or joint control over those policies. Significant influence is generally presumed to exist if the reporting entity holds at least 20% of the voting rights.Subsidiaries are included in the financial statements from the date control commences until the date control ceases.

1.2.2. Elimination of intra-group transactionsTransactions between consolidated companies and any intra-group profits are eliminated.

1.2.3. Year endThe consolidated financial statements are based on the separate financial statements of Sperian Protection S.A. and its subsidiaries as of December 31 each year. All subsidiaries have the same year end as the parent company and use the same accounting methods.

1.2.4. Translation of financial statements of foreign entitiesThe consolidated financial statements are presented in euros, which is the functional currency of the Sperian Protection group. Each Group entity determines its own functional currency and the items included in their separate financial statements are meas-ured using that currency.The balance sheets of subsidiaries whose functional currency is not the euro are translated at the exchange rates ruling on the reporting date. Their income statements are translated at the average rate for the year. Any translation differences are recog-nized in consolidated reserves for the Group share and in minority interests for the non-Group share. Goodwill and fair value adjust-ments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity. Accordingly, they are expressed in that entity's functional currency and translated at the year-end rate.On disposal of a foreign entity, the cumulative translation differ-ences recognized in equity in respect of that entity are recycled to profit or loss.

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The exchange rates of the main currencies used in consolidation are as follows:

Vs the euro Year-end rate Average rate

2008 2007 2008 2007

Australia AUD 2.0274 1.6757 1.7389 1.6356

Brazil BRL 3.2436 2.6018 2.6731 2.6635

Canada CAD 1.6998 1.4449 1.5570 1.4671

China CNY 9.4956 10.7524 10.2109 10.4186

United States USD 1.3917 1.4721 1.4688 1.3706

Hong Kong HKD 10.7858 11.4800 11.4393 10.6928

Morocco MAD 11.2585 11.3520 11.3466 11.2180

Mexico MXN 19.2333 16.0735 16.2799 14.9769

Norway NOK 9.7500 7.9580 8.2258 7.9004

United Kingdom GBP 0.9525 0.7334 0.7961 0.6913

Slovakia SKK 30.1260 33.5830 31.2602 33.7750

Sweden SEK 10.8700 9.4415 9.6158 9.2521

Switzerland CHF 1.4850 1.6547 1.5886 1.6427

1.2.5. Foreign currency transactionsForeign currency transactions are translated at the exchange rate ruling on the transaction date. Monetary assets and liabilities denomi-nated in foreign currencies are translated at the rate ruling on the reporting date. The resulting exchange differences are recognized in profit or loss.

1.2.6. Hedges of a net investment in a foreign operationHedges of a net investment in a foreign operation, including hedges of a monetary asset recognized as part of the net investment, are accounted for in the same way as cash flow hedges (Note 1.3.7). Gains or losses on the effective portion of the hedge are recognized directly in equity and gains or losses on the ineffective portion are recognized through profit or loss. When the foreign operation is sold, or the criteria for recognition as a hedge of a net investment in a foreign operation under IAS 21 are no longer met, the cumulative gains and losses recognized in equity are recycled to profit or loss.

1.2.7. Use of estimatesIn preparing the financial statements in accordance with IFRS, the Group is required to make certain estimates and assumptions that affect the amounts presented. The balance sheet items whose carrying amount is likely to be significantly affected by changes in esti-mates made by the Group are non-financial assets (Note 4.3), provisions and contingent liabilities (Note 4.10), pension and other post- employment benefits (Note 4.11), share-based payments (Note 4.20) and deferred tax assets (Note 4.21.3).

1.3. Significant accounting methods applied to balance sheet and income statement items

1.3.1. Intangible assetsGoodwillGoodwill is initially measured as the excess of the cost of the business combination over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity. On the acquisition date, goodwill is allocated to one or more cash-generating units (CGUs). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill is not amortized but tested for impairment whenever there is an indication that it may be impaired and at least once a year on the reporting date. Impairment testing consists of comparing the carrying amount of a CGU with its value in use, which is the present value of the future cash flows expected to be derived from continuing use of the CGU and its ultimate disposal. If value in use is less than the carrying amount, an impairment loss is recognized in profit or loss and deducted to the extent possible from the goodwill allocated to that CGU. Goodwill impairment losses are not reversible.

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Research & development expensesResearch expenditures are recognized as an expense when they are incurred. Development expenditures are only recognized as an intangible asset if they will generate ind

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