(item 16 on the agenda) 

Complete proposal

Background and reasons for the proposal  

The Board of Directors find it essential and in all shareholders interest that key employees in the group have a long-term interest of a good value development of the share in the company and proposes the Annual General Meeting in view of this the below described long term incentive program for key employees.

The purpose of the long term incentive program is to stimulate employees to continued loyalty and continued good performance. It is further the Board of Directors view that the incentive program increases the group’s attractiveness as an employer. To participate in the program it is required that the employee invests own money.

It is the intention of the Board of Directors to propose the Annual General Meeting a long-term incentive program also for 2009 and 2010 in accordance with the now proposed principles.

In order to implement the Performance Share Program 2008, the Board of Directors proposes that no more than 230,000 class B shares may be acquired and transferred to employees in the ÅF group and, moreover that a portion of the shares also may be transferred at the OMX Nordic Exchange Stockholm in order to cover inter alia social security payments.
 

Proposal

Performance Share Program 2008

The Board of Directors proposes that the Annual General Meeting resolves on the implementation of a long-term Performance Share Program 2008, including 230,000 class B shares, according to the principle guidelines below.

a) Up to 150 key employees including the CEO with the exception of for what is mentioned in item c) below, will be offered will be offered to participate in the Performance Share Program 2008.

b)  Employees who participate in the Performance Share Program 2008 can during a 12 month period from the implementation of the program, save up to maximum 5 per cent of the gross salary for the purchase of class B shares on the OMX Nordic Exchange Stockholm. If the purchased shares are retained by the employee for three years from the date of investment and the employment within the ÅF group have remained during the entire three-year period, the employee will be entitled to the following matching of shares, free of consideration:

• Approximately 134 Business Area Managers, Section Heads and certain Specialists may be entitled to a performance match of up to four shares for each one purchased.
• Approximately 15 employees in Group Management may be entitled to a performance match of up to five shares for each one purchased.
• The CEO may be entitled to a performance match of up to six shares for each one purchased. 

c) Participation in the Performance Share Program 2008 presupposes that such participation is legally possible as well as possible with reasonable administrative cost and financial efforts according to the assessment of the Company. The Board of Directors shall however be entitled to implement an alternative incentive solution for employees in such countries where participation in Performance Share Program 2008 is not advisable. Such alternative incentive solution shall, as far as practicably possible, correspond to the terms for the Performance Share Program 2008.

d) The terms and conditions of performance match for key employees are based on the following.

ÅF’s operating margin before extraordinary items shall correspond or exceed the average operating margin before extraordinary items relative to the comparator group of companies Pöyry, Semcon, Sweco and WSP for the period 1 July 2008 until 30 June 2011. In case ÅF’s operating margin does not fully correspond to the average operating margin before extraordinary items for the comparator group of companies, the allocation shall be reduced according to the following.

In addition ÅF’s average annual percentage growth rate in earnings per share (“EPS”) [1] between 1 July 2008 and 30 June 2011 shall be at least 5 per cent. Base value for the calculation of the growth in EPS shall be EPS for the third and fourth quarter 2007 and first and second quarter 2008. Maximum performance matching shares (i.e. four shares, five shares and six shares respectively) will be allocated if the annual average EPS growth is at or above 30 percent. No allocation of matching shares will occur if the annual average EPS growth is below 5 percent. Matching of shares between annual average EPS growth 5 and 30 percent is linear. The performance target may be adjusted at the occurrence of an event affecting the operations of the ÅF group or the number of outstanding shares of the Company or otherwise affecting the performance target and deemed relevant by the Board of Directors. Adjustment shall not be made for extraordinary costs.

e) Before the number of performance shares to be matched are finally determined, the Board of Directors shall examine whether the performance matching is reasonable considering the company’s financial results and position, conditions on the stock market and other circumstances, and if not, as determined by the Board of Directors, reduce the number of performance shares to be matched to the lower number of shares deemed appropriate by the Board of Directors. 

Costs

The total effect on the income statement is estimated to approximately MSEK 29.9 unevenly distributed over the years 2008 – 2012. The costs shall be compared with ÅF’s total remuneration costs 2007, including social security fees, amounting to MSEK 2,215.

The calculations are based on assumptions that all available shares in the Performance Share Program 2008 will be utilized.

Costs that affect the income statement, but will not have an effect on the cash flow

Compensation costs, corresponding to the value of matching shares transferred to employees, is estimated to approximately MSEK 23.4. The compensation costs are distributed over the plan period 2008 – 2012.

Social security charges as a result of transfer of shares to employees on an assumed average share price at matching at SEK 130 kronor is estimated to amount to approximately MSEK 6.5. The social security costs are expected to occur mainly during 2011 – 2012.

Costs that affect the Income Statement and Cash Flow

Administration costs have been estimated at a maximum of MSEK 2.

The acquisition cost for the repurchase of own shares is estimated to maximum MSEK 29.9 at an assumed share price of SEK 130.

Dilution and effects on key figures

The company currently has approximately 17 million issued shares. As per 31 December 2007, the company held no own shares. In order to implement the Performance Share Program 2008 a total of 230,000 class B shares are required, corresponding to approximately 1.3 per cent of the number of outstanding shares and approximately 0.9 per cent of the number of votes in the company.

Out of the 230,000 class B shares required for the Performance Share Program 2008, approximately 180,000 shares may be transferred to employees free of consideration, which corresponds to a dilutive effect of approximately 1.1 per cent on earnings per share. There will, however, be no dilutive effect on earnings per share of the approximately 500,000 shares, which may be transferred at the OMX Nordic Exchange Stockholm in order to cover social security payments, as the shares are sold at market value.

Preparation of the matter

The Performance Share Program 2008 has been prepared by the Remuneration Committee and in consultation with the Board of Directors. The proposal has been adopted by the Board of Directors. The CEO has not participated in the Board of Directors preparation and decision on the proposal.

Outstanding share-related incentive programs

On 28 April 2005 the Annual General Meeting in ÅF resolved to implement a convertible program to employees in ÅF in Sweden, Finland and Norway. The total subscribed amount was approximately MSEK 54. The conversion rate has been established at SEK 81.36. The convertibles fall due on 30 June 2008. On full conversion, share capital will increase by SEK 6,250,000 and the number of shares by 625,000, which corresponds to a dilution of approximately 3.8 per cent of the share capital and approximately 2.7 per cent of the votes. As per 31 December 2007 there are outstanding convertibles that give the possibility to convert to 94,337 shares. Outstanding convertibles can therefore result in a dilution of approximately 0.6 per cent of the share capital and approximately 0.4 per cent of the votes. 

Majority requirements

In order for the Annual General Meeting’s resolution in accordance with the Board of Directors’ proposal under this item to be valid, shareholders representing more than fifty per cent of the votes cast must be in favour of such proposal or, in case of parity of votes, the chairman of the meeting being in favour of such proposal.