annual report 07 Executive summary
Portfolio as of December 31/12/2007
Services Valuation Financial Valuation Energy % stake MM Intl Banking % stake MM Gas Natural 35.53% 6,366 Banco BPI 25.02% 1,019 Repsol YPF 12.67% 3,770 Boursorama 20.44% 143 Infrastructure The Bank of East Asia 8.89% 683 Otros – 147 Abertis 21.12% 2,972 Insurance Services CaiFor 100% 2,210 Agbar 27.67% 1,140 GDS-Correduría 67% 40 + Desembolso OPA 16.44% 680 Telefónica 5.48% 5,540 Specialized Financial Services BME 3.53% 138 InverCaixa Gestión 100% 224 Leisure CaixaRenting 100% 70 Finconsum 100% 100 Grupo Port Aventura 97.12% 854 GestiCaixa 100% 22 Otros 100% 75
21,535 4,658 82% 18% 26,193
Performance of asset value Performance of Criteria CaixaCorp’s listed €milion portfolio vs. benchmark indices
26,104 801 (712) 26,193 130
120 19.1%
Net Charge in investment value 10.9% GAV 110 10.4% Gross asset value 100
Net (4,708) IPO proceeds + Green Shoe (1,264) = 3,848 debt 90 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Dec-07 NAV 21,396 24,929 Net asset CriteriaCaixaCorp Replicated Replicated June 30 December 31 Listed Portfolio investments investments value Ibex35 Eurostox50
Share price performance Non-consolidated results
3,287 million 3,363 million shares Dividend Net Net profit shares income extraordinary profit +26% 9.0 +43% 2,316 NAV per share 8.0 1,833 +1.6% +4% 7.0 1,696 1,187 -28.1% -33.9% -30.4% Discount -30.3% 6.0 599 578 69 5.0 -1.5% 117 530 Share price 461 4.0 2006 2007 2006 2007 2006 2007
3.0 Dividends: same Dividends Dividends consolidation from new from divested 10-10-07 25-10-07 09-11-07 24-11-07 09-12-07 24-12-07 31-12-07 scope acquisitions stakes
> On December 13, 2007 an interim dividend of €0.03/share was paid with a charge to net recurring profit for October and November 2007, equivalent to an annual yield of c.4%.
> On March 6, 2008 the Board of Directors approved the proposed final dividend €0.02/share for 2007, to be submitted to the Annual General Meeting for approval.
> The total dividend with a charge to 2007 paid since October 10, 2007 is €0.05/share, which on an annualized basis and indexed to the flotation price of €5.25/share, would imply a yield of 4.28%. annual report 07
contents 07
Letter from the Chairman 04 1. An introduction to Criteria CaixaCorp 08
2. Economic context and market performance 12 annual report 3. Highlights for the year 16 a. IPO 18 b. Development of corporate governance 21 c. Positive Net Asset Value performance 22
d. Strong portfolio returns 22 Criteria CaixaCorp e. Growing results 23 f. Dividend yield of 4.28% 24 g. Boosting communication with shareholders 26 4. Capital structure 30 a. Shareholder structure 32 b. “la Caixa”, core shareholder 34 c. Share price analysis 40 5. The company 44 a.Mission statement. Vision. Business lines 46 b.Dividend policy 49 c.Organizational structure 50 i. Corporate Governance 50 ii. Human resources 60 iii. Key procedures 64 Decision making: investment-divestment 64 Main risk factors and risk control 66 iv. Corporate Social Responsibility 66 6. Portfolio of investees 74 a. Investment portfolio 76 b. Portfolio description 78 c. Active management of the portfolio 82 d. Portfolio returns 86 e. Our investments 88 7. Financial analysis 130 a. Highlights 132 b. Financial information 136 c. Non-consolidated financial statements 138 d. Consolidated financial statements 147 e. Risk factors 157 f. Tax matters 161
03 Letter from the Chairman
Dear Shareholder, The IPO of Criteria CaixaCorp was the highlight of 2007. The process got underway in November 2006, when the Board of Directors of Caja de Ahorros y Pensiones de Barcelona, “la Caixa”, the company’s sole shareholder at that time, approved an analysis for the flotation of its investment portfolio. The objective of the operation was to establish a market benchmark for portfolio management, increasing the independence of this management from “la Caixa”, and taking advantage of the opportunities for growth and development offered by the capital markets. On June 7, 2007, in the “la Caixa” Annual General Assembly the Criteria CaixaCorp IPO was formally approved.
360,000 new shareholders After the CNMV (National Commission of Stock Markets) approved the offering prospectus, Criteria CaixaCorp was successfully listed on October 10. Its shares began trading at €5.25 per share. Following the IPO, Criteria CaixaCorp’s free float stood at 22% and its shares are now in the hands of over 360,000 new investors. It is worth highlighting that both tranches of the offering were heavily oversubscribed. The success of the operation is even more significant if we consider that it is one of the largest placements ever made in Spain carried out at a difficult time for the financial markets, particularly the real estate and financial sectors.
04 Criteria CaixaCorp’s shares dropped 1.5% from the listing price between October 10 and December 07 31, 2007, closing the year at €5.17. This fall in the share price contrasted with 1.6% increase in the net asset value per share of Criteria CaixaCorp’s portfolio over the same period. The company has not been immune from the sharp equity market correction seen at the beginning of 2008. annual report annual report Substantial upside potential Bearing in mind that Criteria CaixaCorp’s shares are trading at a discount to net asset value (30.3% at December 31, 2007), which is smaller than the discount shown by other similar companies, it would appear that the shares have significant upside potential, notwithstanding the extreme financial market volatility seen since mid January 2008. Criteria CaixaCorp I would also point out that following a favorable ruling by the CNMV’s technical advisory committee, Criteria CaixaCorp joined the Ibex35 on February 4. Joining Spain’s benchmark index, the yardstick by which the major equity portfolio managers measure their performance, will give greater visibility to the company and increase its liquidity.
A drive towards international expansion Criteria CaixaCorp’s goal is to become an investment benchmark in financial companies which are able to create value, with a focus on international expansion. It is an ambitious project but Criteria CaixaCorp has an important factor in its favor: “la Caixa”’s experience in retail banking and its ability to create value and synergies from new acquisitions. Criteria CaixaCorp will prioritize investments in the financial sector to strike a medium-term balance vis-à-vis its services industry investment portfolio, without neglecting its presence in strategic sectors of the economy such as telecommunications, energy, infrastructure management, basic services and the leisure industry. Criteria CaixaCorp expects to continue to create value at all its investees, shaping each company’s strategic direction through direct involvement in their corresponding governing bodies. This strategy is what gives our hard-to-replicate portfolio of investees the characteristics that make it an attractive investment vehicle for the general public.
Sucess and sustainable development Sustainable development is part of Criteria CaixaCorp’s business philosophy and an integral part of its business model. We consider this to be a voluntary commitment that goes beyond legal requirements and bylaw stipulations. Therefore, it is our job to ensure that our employees are aware of and responsibly and correctly adhere to these business ethics in all our undertakings. As shareholders, we will ensure that the companies we invest in work responsibly and ethically. It is essential for Criteria CaixaCorp to obtain an economic profit to be able to carry on this important social function.
Main operations in 2007 In line with the company’s stated objectives, in the second half of 2007 several transactions were carried out which have strengthened our portfolio.
05 Letter from the Chairman
Acquisition of 50% of CaiFor An agreement was reached with the group’s former partner Fortis to acquire 50% of the CaiFor Group for €950 million. The transaction was completed on November 12, 2007. The CaiFor Group is the leading provider of life insurance in Spain. Its current positioning, combined with the potential for growth in other segments of the insurance industry in Spain and abroad, provide the strategic rationale for its full integration into the Criteria CaixaCorp project.
Acquisition of 8.89% of Bank of East Asia The first step in our expansion into international financial institutions is the acquisition of an 8.89% stake in The Bank of East Asia (BEA). Based in Hong Kong with a network of more than 50 branches in China, specialist magazine “The Asian Banker” named it the best foreign retail bank in China in 2006. The acquisition was made in two stages. The first block was taken by purchasing shares in the organized market. The second stake was taken by subscribing to a capital increase. The total investment was 628 million. We see enormous potential in the Chinese market due to both its economic growth and the relatively low penetration of banking services.
Agbar takeover Following the acquisition of a 6.67% of Agbar’s share capital in November 2007, the takeover bid for Sociedad General de Aguas de Barcelona (or Agbar) launched jointly with our historic partner Suez Environnement in 2007, was successfully completed in January 2008, with acceptances totaling 50,205,817 shares, representing 33.55% of Agbar’s share capital. Criteria CaixaCorp invested €852 million in Agbar. Now the transaction has been settled and Criteria CaixaCorp and Suez Environnment jointly control 90% of Agbar’s share capital. After working together for more than 15 years, the groups led by Criteria CaixaCorp and Suez Environnment aim to leverage the success of the takeover to reinforce Agbar's business project, jointly managing the company in accordance with the criteria laid out in the current shareholder agreement. By securing control of Agbar, Criteria CaixaCorp will be able to reinforce its active management model, predicated on participating in the governing bodies and exercising significant influence in the decision-making of its investees, the development of their businesses and carrying out corporate deals. The bidding companies intend to keep Agbar as a listed company for the next two years, with a free float of around 30%.
Sale of Occidental (OHM) and Caprabo, S.A. At the end of July the company sold its stake in the Occidental Group (OHM) to Valenza, BBVA’s private equity fund, and Pontegadea Inversiones, S.L. On September 13, the sale of its 20% stake in Caprabo, S.A. to Grupo Eroski was completed. This investment, held through Caixa Capital Desarrollo SCR de régimen simplificado, dated back to 2003.
06 The two transactions generated revenues 454 million for the company and 140 million in € € 07 consolidated capital gains. It is important to note that all these operations are part of the everyday business of a company like Criteria CaixaCorp, whose core business is the active management of its investment portfolio
(investing and divesting), and this makes year-on-year comparisons of results and accounts non- annual report meaningful. The corporate restructuring undertaken prior to the IPO makes this caveat particularly relevant in 2006 and 2007.
New Board of Directors
On September 6, five new directors were appointed to Criteria CaixaCorp’s Board, all of them Criteria CaixaCorp independent. The Board of Directors now has fifteen members, of which one third are independent, to safeguard the interests of all the company’s shareholders. Through their involvement as members of the Audit and Control and Appointments and Remuneration committees, we trust they will contribute their expertise to the good governance of the company, helping to shape our general strategy. As one chapter in the history of Criteria CaixaCorp closes, another chapter is opened, which we believe will benefit us all. Our main objective is the management of a company focused on value creation and satisfying our shareholders. Therefore, it is our policy to reward shareholders via dividends with a charge to steadily increasing earnings and we will pay out 90% of Criteria CaixaCorp net recurring profit each year in the form of dividends. This dividend policy is even more pertinent in the current context of financial market volatility.
Yours faithfully,
Ricard Fornesa Ribó
07 An investment group with financial and services stakes, which offers long term value for the shareholder through active portfolio 1management.
08 Introduction to Criteria CaixaCorp 07 annual report annual report Criteria CaixaCorp
09 1_ Introduction to Criteria CaixaCorp
Introduction to Criteria CaixaCorp
Criteria CaixaCorp is an investment group with consequently helping to define their policies and a portfolio of financial and services investees strategies, boosting their continued development and a strong commitment to internationalization, and creating value for shareholders. with an active portfolio management policy that We employ a value management policy in our offers shareholders long-term value. investments. This means identifying investment and divestment opportunities on the market, with a manageable risk level. To do this we have Our investment portfolio is the extensive knowledge of the sectors we invest in largest in Spain in terms of asset and a proven track record that bolsters our status value and it includes relevant as investor. stakes in top-ranking companies Criteria CaixaCorp has been trading on the Spanish stock market since October 10, 2007, that are leaders in their sectors. and joined the Ibex 35 on February 4, 2008. It is one of the top ten companies by market capitalization. Our investment portfolio is the largest in Spain by asset volume. It has a value of €26,193 million Criteria CaixaCorp’s investment portfolio at at December 2007 and includes top-ranking December 31, 2007 was as follows: companies with leadership or significant positions in their respective markets and the capacity to create recurrent value and returns. We hold investments in strategic sectors such as energy, telecommunications, infrastructure and services. Our active management policy involves taking influential positions in our investees, playing an active role in their governing bodies and
10 07 annual report annual report Criteria CaixaCorp
8% International banking 82% Services
8% Insurance GAV 26,193 MM
2% Specialized financial services
11 Financial markets: In the first half of the year, the main worry was related to the increase in inflation, while in the second half, it was because of a general loss of confidence in the financial markets due to the subprime mortgage crisis, as well as the liquidity crisis 2 in the sector.
12 Economic context and financial market performance 07 annual report annual report Criteria CaixaCorp
13 2_ Economic context and financial market performance
Economic context and financial market performance
Criteria CaixaCorp operates in an economic and (ii) The US Federal Reserve reduced its interest financial environment which inevitably affects rates to 5.75% (50bp). its activities. The financial markets were The impact of the subprime crisis started to be particularly turbulent in 2007. The year stands felt as the major financial entities on Wall Street out for two reasons: reported negative earnings. Then, (i) The uneven performance between the first announcements of writedowns to cover forecast and second half. losses stared to appear. The crisis was immediately felt on the financial markets, which became (ii) Several benchmark indicators hit historic highs more volatile as a result of the uncertainty amid the crisis that broke out in the capital perceived and lack of confidence over the scope markets. and duration of the situation. The first half of the year was apparently normal. In contrast to this, during the last quarter of the Inflation was the largest concern, leading the year, several indicators hit historic highs: The ECB to raise its official interest rate twice. It Dow Jones index, Brent oil prices and the reached 4% on June 6. euro/dollar cross. In Spain, the Ibex35 reached a historic high on November 8. The subprime crisis The loss of confidence in the financial markets The turning point was in August: when central was felt mostly keenly by banking entities due banks undertook the first measures to alleviate to uncertainties over the impact the crisis was the symptoms of the subprime mortgage crisis likely to have on their financial results. This lack in the US (low quality mortgage loans which are of confidence triggered a liquidity crisis in the also used in highly-leveraged structured sector although the impact was much less severe products). There were two responses to these in the monetary and bond markets. developments: (i) The European Central Bank (ECB) carried out a liquidity injection into the interbank market.
Expected growth in Spain continues to be above the European average but forecasts have been revised downwards due to the influence of the US economy, oil prices and the dollar as well as a change in the growth trend in the residential construction sector.
14 Concerted central bank action Slowdown in growth 07 In response to this market performance, the ECB The measures implemented by the central banks left its tightening campaign on hold and kept did not have the completely desired effect. The its key intervention rate at 4%, while the FED extreme volatility of the equity markets in the cut its intervention rate a further 100bp in first few months of 2008 in response to signs annual report September and down to 4.25% at December of weakness in the US economy, is evidence 31. This was the first concerted move by the of this. central banks of the US, the eurozone, the UK, The European economy is also showing Switzerland and Canada to inject liquidity into indications of slowdown although the indicators the system and alleviate the pressure on the
published to date do not throw up any clear- Criteria CaixaCorp interbank markets. cut conclusions regarding the market scenario These events did not have the same impact on in 2008. However, consumer and business all stock markets. Emerging markets rose strongly confidence indices have contracted substantially. in the year while the US and European bourses Leading analysts have revised downwards their closed the year up despite the losses recorded growth forecasts for the major world economies. in the second half. The Standard & Poor’s US Spain continues to grow above the European index closed slightly up and the EuroStoxx 50 average but forecasts have also been revised and the Ibex35 both recorded gains, although downwards due to external factors mainly the much lower than in 2006. In Spain, the Ibex35 US economy, oil prices and the dollar and internal gained ground in the fourth quarter and closed factors change in the growth trend in the the year with an increase of 7.3%. residential construction sector.
15 Main significant events and decisions made 3 by Criteria CaixaCorp during 2007.
16 Significant events in the year 07 a. The IPO b. Development of corporate governance annual report annual report c. Positive net asset value performance d. Positive portfolio returns e. Growing results f. Dividend yield of 4.28% Criteria CaixaCorp g. Boosting communication with shareholders
17 3_ Significant events in the year
The IPO
November 2007: October 2007: Green-shoe is Criteria CaixaCorp exercised September 2007: starts trading on IPO prospectus is the market approved by the June 2007: CNMV “la Caixa”’s General Assembly formally approves the IPO November 2006: “la Caixa”’s Board of Directors approves the study of the floatation of its investment portfolio
The IPO process got underway in November In January 2007, the internal restructuring of 2006, when the Board of Directors of ‘‘la Caixa’’ Criteria CaixaCorp got underway in order to approved an analysis of the flotation of its create an investment portfolio which would investment portfolio through Criteria CaixaCorp. ensure the future development of the business The objective of the operation was to establish based on the criteria of maximizing shareholder a market benchmark for portfolio management, value, in line with its defined strategy. increasing the independence of this management Therefore, in 2007, internal restructuring from “la Caixa” and taking advantage of the operations were carried out prior to the IPO, opportunities for growth and development incorporating the following lines of action: The offered by the capital markets. “la Caixa”’s exclusion of those investments which did not objective has always been to maintain a respond to Criteria CaixaCorp’s strategic controlling stake in Criteria CaixaCorp with the objectives (institutional companies, support aim of creating a vehicle for the international companies or venture capital firms at start-up expansion of the “la Caixa’’ Group. stage, among others), and the inclusion of
18 07 annual report annual report Criteria CaixaCorp
Pre-IPO Post-IPO Total shares: 2,629,870,800 Total shares: 3,362,889,837 (post green-shoe)
“la Caixa” “la Caixa” Freefloat 100% 78% 22%
19 3_ Significant events in the year
investments held by other ‘‘la Caixa’’ Group stated that they had exercised most of the green companies which did fit in with Criteria shoe rights conceded by the company. The CaixaCorp’s strategy. flotation was successfully completed. On June 7, 2007, the General Assembly of ‘‘la 360,000 new shareholders Caixa’’ formally gave their blessing to the Criteria CaixaCorp IPO. Following the IPO, Criteria CaixaCorp’s free floats stands at 22%, and its shares are now in the hands of 360,000 new investors. The offering involved the issue of 733 million new shares The main objectives for the IPO including those issued pursuant to greenshoe were to achieve a market exercised by the underwriters. assessment of the portfolio The breakdown of the offering by tranche was management, to access capital the following: 55% retail, 40% institutional and 5% employees. markets and the international It is worth highlighting that all tranches of the banking expansion. offering were heavily oversubscribed: > 4.1 times on the retail tranche After the CNMV (National Commission of stock > 2.1 times on the institutional tranche Markets) approved the offering prospectus on September 20, 2007, Criteria CaixaCorp was The success of the placement, one of the largest successfully listed on October 10. Its shares IPOs in Spain, is even more remarkable in light began trading at €5.25 per share. of the scant investor confidence in the equity markets. On November 6, Morgan Stanley & Co. International Limited and UBS Limited, underwriters of the Criteria CaixaCorp IPO,
20 Development of Corporate Governance
Criteria CaixaCorp has always been committed applied. This protocol is a public agreement 07 to applying the best corporate governance which defines each company's respective scope practices, particularly after its flotation. The of activity, regulates information flows to enable objective of these best practices is to protect “la Caixa” to meet the requirements imposed the minority shareholder, achieve transparency by its supervising body, determines intragroup in management and high standards in all contracts and services and establishes control annual report decision-making processes. mechanisms and resolves potential conflicts of interest. To meet these objectives, Criteria CaixaCorp has adhered to the recommendations of the Unified Lastly, the Board of Directors has approved the Corporate Governance Code when setting up new internal rules of conduct on matters relating its governing bodies and establishing their make- to the securities markets. This regulation Criteria CaixaCorp up, functions and specification of competences. determines the conduct and performance to be followed by Board members, employees, and Criteria CaixaCorp’s Board of Directors has fifteen external advisors and consultants in relation to members of recognized prestige and experience: their operations, and the treatment, use and one third of these independent. dissemination of confidential, privileged and The Board of Directors has set up two Board significant information. This code overrides any committees: the Audit and Control Committee earlier internal procedures in order to promote and the Appointments and Remuneration transparency in the activities of group companies Committee. Both are mainly comprised of and ensure investors are duly informed and independent directors and chaired by an protected. independent director. Furthermore, Criteria CaixaCorp has signed an Internal Protocol of Relationships with its core shareholder, “la Caixa”, which as a savings bank, is subject to Bank of Spain supervision, and must therefore comply with the regulations thereby
Best practices in corporate governance Criteria CaixaCorp counts on a Board of Directors of recognized prestige and experience, a third of which are independant.
21 3_ Significant events in the year
Positive net asset value performance
The increase in asset value owes to two main than the portfolio value loss and revenues reasons: since the company’s asset value was obtained from the flotation (including the green first published on June 30, 2007, and following shoe) have allowed the company to significantly the restructuring carried out prior to the IPO, reduce debt. financial investments made have been higher
Positive portfolio returns
The listed portfolio has outperformed its vehicles in which the same amounts would have benchmark indices since January 1, 2007. The been invested: the Ibex35 and the Eurostoxx50. chart below shows a comparison of the Criteria CaixaCorp’s portfolio has produced a performance marked by Criteria CaixaCorp’s higher return than both indices. listed portfolio and two alternative investment
Performance of net asset Performance of Criteria CaixaCorp’s listed value portfolio vs. benchmark indices
€million
130 26,104 801 (712) 26,193
120 19.1%
10.9% Net Change in 110 investment value 10.4% GAV Gross asset 100 value
(4,708) IPO proceeds + Green Shoe (1,264) Net = 3,848 90 Debt Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Dec-07
NAV CriteriaCaixaCorp Replicated Replicated 21,396 24,929 Listed Portfolio investments investments Net asset June 30 December 31 Ibex35 Eurostoxx50 value
Note: The data in the graph show the domestic market value of an investment in its benchmark index (using the share price at the end of the month), assuming that all of the amounts invested or divested in the portfolio were invested or divested for the same amount in the benchmark index. Taxes and dividend income are excluded.
22 Growing results
It is important to note that comparisons between The drop in extraordinary income was a result 07 2006 and 2007 are not meaningful due to the of divestments and corresponding capital gains IPO process and the internal restructuring taken booked in 2006, i.e. the sale of the stakes in out prior to the operation. Banco Sabadell and Inmobiliaria Colonial, being substantially higher than the figures posted in Non-consolidated results: 2007, a year in which the divestments of Suez, annual report Caprabo and Grupo OHM took place. Criteria CaixaCorp reported a 26% increase in 2007 net profit to €2,316 million. €599 million in dividends (+4%) from investees and €1,696 million of net extraordinary income (+43%) corresponding mainly to the restructuring carried Criteria CaixaCorp out prior to the IPO and specific divestments In 2007, Criteria CaixaCorp's drove earnings. non-consolidated net profit amounted to 2,316 million euros, Consolidated results: an increase of 26% compared At the consolidated level, net attributable profit to the year before. for the Group fell 20% to €1,726 million in relation to 2006. This figure entailed net recurring profit of €1,180 million (+31%) and ¤546 million of net extraordinary income. The level of extraordinaries was high, but far below the €1,260 million recorded in 2006.
23 3_ Significant events in the year
Dividend yield of 4.28%
Together these payments imply a total dividend The dividend yield from October paid of more than €168 million. This figure corresponds to the distribution of recurrent 10 to the end of the year earnings obtained between the IPO in October amounted to €0.05 per share to the year-end 2007. The total dividend per share paid out stands at €0.5, which annualized and compared with the listing price of €5.25 by At December 13, 2007, only 10 weeks after share is the equivalent of an annual dividend company was listed, the Board of Directors yield of 4.28%. Criteria CaixaCorp therefore resolved to pay an interim dividend of €0.3 per generated a substantial dividend yield barely share against 2007 results. This implied a dividend three months after coming to market. yield of over 4%, on the closing price at December 12 (€5.17). This dividend was paid on January 17, 2008. Also, the Board of Directors at its meeting held on March 6, 2008 submitted a proposal to the Shareholders' Meeting to pay a final dividend against 2007 results of €0.2 per share.
24 07 annual report annual report Criteria CaixaCorp
25 3_ Significant events in the year
Boosting communication with shareholders
One of the objectives of floating Criteria value of the companies making up their CaixaCorp was to establish a market benchmark investment portfolios, listed and unlisted, from for portfolio management. Therefore, from the which they can determine the value of the debt very beginning the company has taken on a taken out by the company at any given time. commitment to become a benchmark both in Furthermore, in January 2008, the company terms of its relations with investors and through revised the value of its unlisted assets thereby the quality of the service it provides, based on meeting its commitment to do this on a yearly the transparency of information. basis as disclosed in the IPO prospectus filed with the CNMV. This revision updates the Monthly net asset value updates valuations verified by independent experts only A first step in this policy of increasing six months previously. transparency is the regular dissemination of updated information relating to Criteria Creation of an Investor Relations CaixaCorp’s portfolio and net asset value. For department the shareholders to have access to this To improve relations with shareholders Criteria information details relating to the company, its CaixaCorp has set up an Investor Relations investment portfolio and specifically, its net asset department whose basic objective is to ensure a value, are published on the corporate website continuous two-way flow of information between (www.criteria.com). This not general practice the company and the investment community. among companies engaged in the same activity. This department maintains close contact with all By publishing a monthly net asset value update, the company’s business areas and its management Criteria CaixaCorp is providing its shareholders to ensure that information which may be of with a benchmark with which they can compare interest to the market is made available. the trading price of their shares and the market
26 Our 360,000 minority investors require a Maximum access to analysts reports 07 permanent consultancy service for which the Since the black out period ended on November following channels have been set up: 17, Spanish and international financial analysts have been publishing reports on the company.
At December 31, 2007, 12 investment research annual report Phone: +34 93 411 75 75 companies had Criteria CaixaCorp on their list E-mail: of coverage: Ahorro Corporación, Banesto Bolsa, [email protected] Bankinter, Cheuvreux CA, Citigroup, Ibersecurities, Interdin, JP Morgan, M&B Advisors, Postal address: Morgan Stanley, Société Générale and UBS. In
Avda. Diagonal, 621-629, Torre II, Criteria CaixaCorp 08028 Barcelona line with its policy of transparency, Criteria CaixaCorp gives the widest access possible to all the valuations made by research analysts, publishing them on its webpage: The Investor Relations department has been www.criteria.com. extremely active since it was set up in the last We note that most analysts (92%) hold a Buy quarter of 2007 as part of the Criteria CaixaCorp’s or a Hold recommendation on Criteria’s shares. IPO. It received a total of 148 calls and 80 emails We would also point out that the average target during this period. 208 queries made in the first price at the year-end was 6.02/share. three months of 2008, which were all addressed € by Criteria CaixaCorp, in addition to various meetings and roadshows. 169 of these queries, (47 phone calls and 122 emails) were submitted by minority shareholders.
Analysts recommendations:
Sell 8%
Buy Neutral 67% 25%
27 3_ Significant events in the year
Publication of quarterly results and Europe, where institutional investors had the significant events opportunity to air opinions and exchange views and opinions with the managing director. The In accordance with the best practices Investor Relations team also holds meetings with recommended by the CNMV, Criteria CaixaCorp investors at their request. makes a results presentation each quarter which is broadcast on the corporate website, Criteria CaixaCorp will hold its first General www.criteria.com. This allows financial analysts Shareholder Meeting since the IPO in Barcelona and investors to follow the management team’s in June. All information relating to this meeting presentation without having to attend the will be available on the corporate website from meeting in person. A Q&A session is held at the the day the meeting is called. There will be a end of each session where questions may be video-broadcast for those shareholders unable phoned in or sent by email. to attend the meeting in Barcelona. The company also issues significant event notices Eventually, Criteria CaixaCorp expects to hold for specific operations, e.g.: information other types of meeting with analysts and published by Criteria CaixaCorp relating to the institutional investors to discuss the company’s takeover bid for Aguas de Barcelona or the performance and growth strategy. This could purchase of The Bank of East Asia, which is take the form of an “Investors Day” or another available on the corporate website. type of large event. Specialized trade fairs are also a good opportunity Direct contact with shareholders for direct contact between the company and its A good relationship with institutional investors shareholders. Criteria CaixaCorp takes part in requires direct contact in the form of meetings the main stock-market fairs held in Spain with Criteria CaixaCorp’s investor relations (Borsadiner in Barcelona and Bolsalia in Madrid). specialists and, on occasion, with the company’s The company has a stand at these events where senior management. In Criteria CaixaCorp’s first it provides information and answers shareholders’ months of trading, several roadshows and queries. For Criteria CaixaCorp, this direct contact meetings were held in various cities in Spain and with shareholders is the perfect opportunity to
28 provide them with economic-financial On the opening page of www.criteria.com we 07 information and explain the company’s strategy, highlight the content likely to be of most interest while at the same time addressing any concerns to the shareholders and most likely to require arising in order to detect areas of improvement. updating, such as the share price and its performance compared to benchmark indices. Regularly-updated corporate website There is also a direct link to published press annual report releases, analysts’ recommendations on Criteria The corporate website is another key tool for CaixaCorp and a recording of the most recent ensuring active communication with results presentation, among other useful shareholders. The corporate website information resources. www.criteria.com offers a wide range of content relating to the company which is revised Criteria CaixaCorp and updated on an on-going basis. The main sections and content making up the website are the following: > Corporate information: About us, Significant milestones, Business vision and strategy, Lines of business, Board of Directors, Management team and Corporate Social Responsibility > Investment portfolio: Investments and divestments. > Information for shareholders and investors: Introduction, Economic-financial information, Share information, Corporate governance, Significant events, Investors’ agenda and Contact information.
29 The controlling shareholder of Criteria CaixaCorp is “la Caixa”, the number one savings bank in Spain and the third largest Spanish financial 4 institution.
30 Capital structure 07 a. Shareholder structure b. “la Caixa”, core shareholder annual report annual report c. Share price performance Criteria CaixaCorp
31 4_ Capital structure
Capital structure
Changes in the company’s share capital as a result of the IPO were as follows:
09/10/2007 07/11/2007
Prior to capital Offering- 657,500,000 Green-shoe Post offering increase Employees 5%: exercised: 3,362,889,837 2,629,870,800 32.875.000 75,519,037 Retail 55%: 361,625,000 Institutional 40%: 263,000,000
Prior to its listing, Criteria CaixaCorp’s share After the capital increase the free float stood at capital stood at 2,629,870,800 shares. After the 20%, but on November 7, 2007, after the green IPO, the number of shares now stands at shoe option was exercised by the underwriters, 3,362,889,837, with a free float of 22%, divided it rose to 22%. among more than 360,000 new shareholders Criteria CaixaCorp’s core shareholder is “la and 733,019,037 newly-issued shares, including Caixa”, Spain’s leading savings bank by assets the green shoe. Criteria CaixaCorp’s shares have and branches. a nominal value of €1. The capital increase made for the IPO, broken On October 9, 2007, the shareholder structure down by tranche, is shown below: after the capital increase and prior to exercising the green shoe was as follows:
Pre-IPO Placement Total shares: 2,629,870,800 Total shares: 3,287,370,800 (pre green-shoe)
“la Caixa” “la Caixa” Freefloat 100% 80% 20%
Institutional 8% Retail 11% Employees 1%
32 07 annual report annual report Criteria CaixaCorp
Capital increase 657,500,500 shares Geographical breakdown of (20% of share capital at 10/10/2007) institutional institucional tranche
Institutional US Employees 40% 39% Spain 5% 20%
Rest of the world 1% Retail UK 55% 11% Rest of Europe 29%
33 4_ Capital structure
“la Caixa”, core shareholder
Over 100 years of experience A three-way strategic development objective: Economic, social and Caja de Ahorros y Pensiones de Barcelona, sustainable ”la Caixa”, Criteria CaixaCorp’s core shareholder, was created as a result of the merger between The objectives of “la Caixa” go beyond the strictly Caixa de Pensions per a la Vellesa i d'Estalvis de financial concerns, of achieving profitable, efficient Catalunya i Balears, founded on April 5, 1904 and solvent growth to focus on other areas that and Caixa d'Estalvis i Mont de Pietat de give shape to its commitment to society, by Barcelona, founded in 1844. The merger took reinforcing community initiatives, and its place in 1990 and the result is the current commitment to sustainability, which is defined as financial entity, the legitimate successor and responsibility and ethics in all of its activities which continued line of both these companies. generate a source of trust. This approach secures the future of “la Caixa” as the commitments it The third largest Spanish financial has acquired voluntarily will contribute to increasing group, with a clear growth strategy the overall profitability of the Group. The “la Caixa” Group is the third largest Spanish Financial Bottom Line: Profitable, financial entity with a business volume (customer efficient and solvent growth deposits plus lending), of €385,639 million at December 31, 2007. The Group reported To enhance profitable, efficient and solvent consolidated profit of €2,488 million in 2007, growth of the Group. The Banking Business is with recurring profit of €2,011 million, up 33.5%. based on providing quality professional personal advice to customers using a multichannel As a result of the clear growth strategy distribution system with the branch, supported implemented after the merger in 1990 “la Caixa” by the latest technology, at the core of its has experienced a substantial increase in relationships. The investees business manages commercial activity, business volumes and results. strategic, financial and community investments, is a source of recurring high returns and controlled risk, and contributes to the development of the fabric of manufacturing industry.
34 relationships, the environment and contributing Social Bottom Line: reinforce the 07 foundational origins to the socio-economic development of its environment. To reinforce the foundational origins by carrying out programs for the wellbeing of the The good management practices of “la Caixa”,
community through its Financial and based on the responsible exercise of their annual report Community Projects areas, working in obligations by the General Assembly, the Board coordination. ”la Caixa” aims to work of Directors and the Control Committee, secure proactively and flexibly to complement coverage stability and strength for the Institution. of society's basic needs, secure universal access to financial services and bolster the fabric of “la Caixa” Group in 2007: high quality, the country's manufacturing industry, while efficient, profitable, secure and solvent Criteria CaixaCorp reinforcing its special identity and managing growth resources efficiently and in tune with the area In 2007 “la Caixa” increased its customer base it serves. by 400,000 to 10.5 million. The increase in commercial banking activity has made “la Caixa” Sustainable Bottom Line: guided by leader in the private banking segment with a responsability to society penetration rate of 20.6% in 2007. Guided by responsability to society: Ethics and “la Caixa” is a benchmark in multichannel Corporate Reputation. management. At December 31, 2007 it had 5,468 The responsibility of “la Caixa”, as a source of offices in Spain, the largest branch network in the trust, can be clearly seen in the way it harmonizes financial sector in Spain with a share of 11.9%. It and identifies its values with those of the parties also had 10 representative offices in Porto, Lisbon, it comes into contact with, in its good Brussels, Paris, Milan, London, Frankfurt, Stuttgart, management practices based on responsible Casablanca and Peking and two operational offices and transparent management, and in the way in Warsaw and Bucharest. “la Caixa” has the it takes into account ethical behavior, employee largest network of self-service terminals (8,011
Leader in multichannel management Spain International
Customers Offices Employees (million) +1.101 +289 +0.4 26,342 5,469 25,241 10,5 5,179 10,1
2006 2007 2006 2007 2006 2007
Operational offices Representative offices
35 4_ Capital structure
terminals) and is leader in the on-line banking > Secure growth: segment with five million customers. - High level of liquidity at €25,146 million (up Banking business volumes managed rose from by 7,312). 10.1% of total assets, the result €170,237 million in 2002 to €385,639 million of active, forward-looking management. in 2007, with an increase of 14.3% in 2007. - High quality of loan investment with the The 13.3% increase in customer deposits and exercise of high levels of prudence in both 15.8% rise in lending in 2007 is evidence of the assessment and allowances (the default ratio balanced nature of this growth. stands at 0.55% with non-performing loans coverage at 281%, 336% if mortgage The company also increased its market share: guarantees are included. 10.5% in customer deposits, 11% in mortgage loans, 13.2% in payrolls and 17.6% in revenue > Solvent growth: excellent core capital figure of from cards. 8.0% (+1.8) with the capital ratio (BIS) at 12.1% (+0.6). Profits have also been driven by this growth. Therefore, net profit attributable to the Group This positive performance has allowed the group in 2007 was €2,488 million, of which €2,011 to meet the targets for 2007 as set down in the million were recurring profits, up 33.5% in “la Caixa”’s strategic plan. relation to 2006. All of the above, in addition to the targets for “la Caixa” reported high quality growth in all development and business diversification established its business lines in 2007, strengthening its in the strategic plan for 2007-2010, will guarantee efficiency, profitability, security and solvency. the success of the Group’s growth and development projects in the complex and demanding scenario > Efficient growth: the efficiency ratio improved anticipated in 2008. to 42.9% (-5.0) > Profitable growth: the recurrent ROE stood at 19.4% (-0.1)
“la Caixa” Group in 2007: High quality growth € million
Strong increase ...customer ...and lending. Strong rise in in revenues... funds... recurring profit
+14.3% +13.3% +15.8% +33.5%
385,639 223,850 161,789 2,011 337,260 197,495 139,765 1,505
2006 2007 2006 2007 2006 2007 2006 2007
36 Community Projects With a budget of 500 million 07 ”la Caixa” has financed and maintains a wide euros, “la Caixa” finances and range of social, cultural, educational and scientific maintains a vast program of activities through its welfare work. The entity social, cultural, scientific and allocates part of its earnings to specific community educational activities through annual report projects and has had a Community Projects Community Projects. department since 1918 in place to allow these projects to be managed more professionally and efficiently. In 2007 ”la Caixa” allocated €400 million to Community Projects, one of the largest budgets for this type of activity in the world. The Criteria CaixaCorp budget for 2008 is €500 million, 25% higher than the previous year.
1st in Spain 2nd in Europe 5th in the world
Obra Social 400 Wellcome Trust 742 Bill & Melinda 1,186 “la Caixa” Gates Foundation
Obra Social 220 Obra Social 400 Wellcome Trust 742 Caja Madrid “la Caixa”
Obra Social 90 Atlantic 348 Merck Co. 661 Caixa Galicia Philanthropies Foundation
Fundación 89 Obra Social 220 The Ford 547 ONCE Caja Madrid Foundation
Obra Social 76 Monte dei 197 Obra Social 400 Kutxa Paschi di Siena “la Caixa”
37 4_ Capital structure
Legislation applicable to “la Caixa” >The provisions of Royal Legislative Decree 1/2008, of March 11, passed by the Generalitat ”la Caixa” is a financial institution subject to de Cataluña approving the revised text of the Bank of Spain legislation and supervision and, laws governing Catalonian savings banks, shall at group level, to legislation governing solvency also apply to “la Caixa”. and equity standards. This legislation governs, among other factors, the investments that the > “la Caixa” is subject to the legal and regulatory financial entity is able to make. framework applicable to savings banks at both national and regional level. Other legislation which may affect potential investments made by Criteria CaixaCorp as a This legislation has specific implications with result of its links with ”la Caixa” include: regard to issues of corporate governance. These are reflected in “la Caixa”’s Corporate > Law 26/1988, of July 29 in relation to the Governance Annual Report which is available Discipline and Supervision of Credit on the company’s website and that of the CNMV. Institutions and Royal Decree 1245/1995, of July 14, on the establishment of banks, For instance, according to Decree 190/1989, of cross-border transactions and other matters August 1, passed by the Generalitat de relating to the legal framework of credit Catalunya, “la Caixa”’s Investment Committee institutions. (a delegate committee of the Board of Directors with advisory, not executive, functions) must As a result, any significant investment made by inform the Board of Directors or Executive Criteria CaixaCorp in credit entities or credit Committee of all strategic and stable investments financial institutions are subject to prior approval and divestments carried out either by “la Caixa” by Bank of Spain, in the following two directly or by any of its subsidiaries. The circumstances: committee must also report on the financial (i) The incorporation of a credit entity abroad. viability of these operations and state whether they fit in with “la Caixa”’s budget and strategy. (ii) Acquisition of a significant stake in an existing credit entity abroad, when this entity will be incorporated in or has its registered offices in a non EU member state.
38 To comply with national and regional legislation the General Assembly, the company’s purpose 07 governing savings banks, the Board of Directors and legal requirements. “la Caixa”’s Control or the Executive Committee at “la Caixa” (the Committee is comprised of nine members elected investment committee reports to both) shall by the General Assembly from among its members exercise the necessary control, at the highest who are not members of the Board of Directors. level, over the strategic investments and Its functions include issuing an opinion and it annual report divestments made by Criteria CaixaCorp to can even submit a proposal to the Department prevent or minimize the negative impact these of Economy and Finance to suspend Board of may have on its solvency or equity. Directors’ resolutions if these contravene provisions in force.
Pursuant to the afore-mentioned legislation, Criteria CaixaCorp “la Caixa”’s Control Committee is direct or indirect investments made by savings banks in real state, shares, interests or other the governing body in charge of material assets, the acquisition of significant supervising the management of stakes in credit entities, the granting of large loans or concentration of risk in a single person affairs by the Board of Directors or group, insofar as these investments exceed a of “la Caixa”, overseeing their specified amount or stake or a specified volume efficiency within the guidelines of of equity, may require prior authorization from the Generalitat de Catalunya’s Department of the General Assembly and the legal Economy and Finance and/or the Bank of Spain. regulations.
Additionally, pursuant to the afore-mentioned legislation, all savings banks must have a Control Committee in place to ensure the management activities implemented by the Board of Directors comply with the lines of action put forward by
39 4_ Capital structure
Share price performance
Criteria CaixaCorp’s shares were listed for trading The average daily trading volume for Criteria on October 10, 2007 at an issue price of CaixaCorp’s shares was 6.8 million, rising to €5.25/share. As a result of increasing market 101.6 million shares traded on the first day of volatility in the second half of 2007, the share trading. price dropped 1.5% to close the year at We highlight the following key data: €5.17/share.
Market cap at year-end €17,386 IPO issue price €5.25 High price (19/10/2007)1 €5.25 Low price (23/11/2007)1 €4.98 Share price at year-end €5.17 Maximum daily trading volume (shares) 101,560,000 Minimum daily trading volume (shares) 684,914 Average daily trading volume (shares) 6,752,470
(1) Share price at COB
Trading volume (number of shares)
105.000.000
20.000.000
15.000.000
10.000.000
5.000.000
0 10/10/2007 25/10/2007 09/11/2007 24/11/2007 09/12/2007 24/12/2007 31/12/2007
40 We analyze the performance of the share price with the main benchmark indices and an analysis 07 during its first three months of trading from two of changes in the discount: standpoints: A comparison of the share price
1. Criteria CaixaCorp’s share price performance vs. benchmark indices: annual report
110
105
+2.1% Criteria CaixaCorp
100 -1.0% -1.5%
95
90
10/10/2007 25/10/2007 09/11/2007 24/11/2007 09/12/2007 24/12/2007 31/12/2007
Criteria CaixaCorp Ibex 35 Eurostoxx50
In the chart above we can see that the share the European markets, where, as an example, price dropped 1.5% in its first three months of the Eurostoxx50 lost 1% in the same period. trading. This performance is in line with that of However, the Ibex35 rose 2.1%.
41 4_ Capital structure
2. The discount:
3,287 million shares 3,363 million shares
9.0 NAV per share 8.0 +1.6% 7.0 -28.1% -33.9% -30.4% Discount -30.3% 6.0
5.0 -1.5% Share price 4.0
3.0 10/10/2007 25/10/2007 09/11/2007 24/11/2007 09/12/2007 24/12/2007 31/12/2007
Another method of analyzing share price The discount suggests to investors that they performance is by tracking the discount. The hold shares in a company whose assets have a “discount” is defined as the difference between market value which is higher than the price paid Criteria CaixaCorp’s net asset value and the per share. This difference between the market company’s capitalization at closing prices. Looking value and the price paid is important as it at these figures we can observe that the discount indicates that the shares may have upside has increased from 28% at the time of the IPO potential - the difference between the two to 30.3% at year-end 2007; at times rising variables could reduce notwithstanding the above 33%. impact on Criteria CaixaCorp’s share price caused by the extreme volatility seen on the financial This increase is due to the fact the net value of markets. Criteria CaixaCorp’s assets has grown by 1.6% since the flotation, while the share price has dropped 1.5%.
Discount performance
35%
34%
33%
32%
31%
30%
29%
28%
27%
10/10/2007 25/10/2007 09/11/2007 24/11/2007 09/12/2007 24/12/2007 31/12/2007
42 07 annual report annual report Criteria CaixaCorp
43 Criteria CaixaCorp’s objective is to become an industrial and financial group of reference, with a commitment to creating value and achieving a balance between the satisfaction of shareholders and employees and the 5 development of the company.
44 The company 07 a. Mission statement. Vision. Business lines b. Dividend policy
c. Organizational structure annual report i. Corporate Governance ii. Human Resources iii.Key processes Decision making: investment – divestment
Main risk factors and risk control Criteria CaixaCorp iv.Corporate Social Responsibility
45 5_ The company
Mission statement. Vision. Business lines
Mission statement Services Criteria CaixaCorp is an investment group with stakes in industrial and financial companies, with Includes stakes in companies which are leaders in their respective markets with proven capacity to grow and a firm commitment to international growth that create value. We focus on Spanish companies with creates long-term value for its shareholders via operations abroad in the infrastructure, energy and the active management of its portfolio, boosting services sectors, among others, that have built up a the growth, development and return of the profitable portfolio offering upside potential and the companies it invests in, within a framework of capacity to pay an attractive dividend. controlled risk.
Vision Criteria CaixaCorp’s objective is to become an industrial and financial benchmark, with a focus on value creation and achieving a balance between shareholder satisfaction and the Financial company’s development.
Includes investments in the international banking sector Business lines via stakes acquired in banks outside Spain and Criteria CaixaCorp has a multi-sector portfolio investments in (non listed) subsidiaries operating in Spain in areas such as insurance and specialized financial combining investments in listed and unlisted services (asset management, operational leasing, companies, which are leaders or benchmarks in consumer finance...). their respective fields and which together make up a diversified portfolio that is non-replicable, giving the company a privileged position in the market. It has two main business lines:
46 Criteria CaixaCorp has extensive knowledge of Increased exposure to the financial 07 all its business lines, as a result of successful business: investments and the on-going analysis of new Criteria CaixaCorp’s objective is to acquire stakes opportunities. in financial entities to balance out its portfolio which is currently skewed towards investments annual report annual report Management principles and strategy in services companies. One of Criteria CaixaCorp’s strong points is the retail banking experience of We uphold the following management principles: its core shareholder, “la Caixa” and its ability to Active management of our investments: create value and synergies from new acquisitions. Criteria CaixaCorp plays an active role in the
Criteria CaixaCorp’s project is based on portfolio Criteria CaixaCorp governing bodies of its investees, and is involved management which is distinct from “la Caixa”, in defining their future strategies, co-coordinating which guarantees the interest of all our their management teams and contributing to shareholders, but is buoyed by its core the medium/long term development of their shareholder’s experience, knowledge, position business activities. and renown in the financial sector. Value management of our investments: Medium/long term investment focus: Criteria CaixaCorp carries out investments, Criteria CaixaCorp’s active management approach divestments and corporate projects according to implies a medium/long term investment horizon, the opportunities offered by the market. The maximizing value with a focus on corporate priority is always to create value and return for development and involvement in the strategies shareholders. Therefore, Criteria CaixaCorp’s of our investees, and divesting at the right time. buying and selling positions depend on the markets and the company has the flexibility and experience required to identify the best opportunities.
Strategic performance
Financial services Increased exposure to the financial business rm g te Future strategy /lon ium ed Services 60-40% m Banking Financial 40-60%
Criteria CaixaCorp today Criteria CaixaCorp’s 1 “active management” Financial services Services 82% 1 business model Financial 18% + “la Caixa”’s banking Criteria CaixaCorp experience Investment in management model + non-listed cpmanies Synergies
Listed VALUE CREATION INCREASED VALUE investments CREATION
(1) Percentage of gross asset value at December 31, 2007
47 5_ The company
Strategy by business line a) Financial business - International banking: Our strategy involves increasing exposure to Each business line has its own strategic focus to the financial business, particularly , through take advantage of opportunities for investment investments in companies focused on and growth in each sector and geographical international retail banking. Investments will market. be carried out mainly in central Europe, the NAFTA area, markets with high growth Services: potential and other nearby markets where Our objective is to make selective investments we expect to create value on the basis of and divestments, identifying and taking “la Caixa”’s experience in the retail banking advantage of opportunities arising on the market. sector, which, having proved to be competitive Although the weight of investment in services in the Spanish market, we intend to apply in will be reduced as a percentage of the entire other areas. portfolio, it will remain sizeable - between 40% b) Financial business - Insurance and and 60% in the medium/long term. Criteria specialized financial services: Our objective CaixaCorp’s objective is to create a value is to grow our investments in the insurance differential in these companies which operate and specialized financial services, by in strategic sectors of the economy, taking core expanding and consolidating our positions positions in their shareholder structures which in Spain. These businesses naturally leverage allow it to play an active role in their governing on the “la Caixa”’s growing distribution bodies, key decision-making and the network and the potential for cross-selling. development of their business strategies. Criteria In the medium/long term, these businesses CaixaCorp holds key positions in these companies could expand abroad, taking advantage of and may even obtain the corresponding control the experience acquired and within the premium. framework of Criteria CaixaCorp’s increasing exposure to the international banking Financial business: business. These investments naturally Criteria CaixaCorp will gradually increase its complement the banking activity which we investments in the financial business, both in intend use as a support for our expansion in the retail banking segment and specialized the banking sector abroad. financial services such as insurance, asset management, operational leasing and consumer finance. On a medium/long term horizon, investments in the financial business are expected to account for between 40% and 60% of total assets.
48 Dividend policy
Criteria CaixaCorp plans to pay out most (c.90%) 07 of its non-consolidated distributable recurring Returns to the profit each year as a dividend, excluding capital gains on divestments, which, to maintain the shareholders company’s investment capacity and drive its ordinary activities, will be used for reinvestment Criteria CaixaCorp plans to annual report in line with our stated investment strategy. pay out most (c. 90%) of its non-consolidated distributable Additionally, to boost shareholder remuneration recurring profit each year as and in line with the policy described in the dividends, excluding capital gains paragraph above, the company may consider other forms of shareholder remuneration such on divestments. Criteria CaixaCorp as share buybacks or extraordinary dividend payments. Therefore, Criteria CaixaCorp is working to be able to offer shareholders a dividend around €0.21/share against 2008 results, which would imply a minimum dividend yield of 4% for shareholders who took part in the IPO and over 5% for those who invested at €4/share.
49 5_ The company
Organizational structure
i. Corporate Governance Shareholders' Meeting, the Board of Directors, the Board committees (Audit and Control One of Criteria CaixaCorp’s main objectives is committee and Appointments and Remuneration to guarantee the transparency, independence committee) and the General Management. and good governance of the company in order to safeguard the interests of all its shareholders. Company Structure A corporate governance policy which is both Number of shares and significant shareholdings transparent and compliant with the recommendations of the Unified Good At the close of the financial year, the only Governance Code is essential to ensure the trust shareholder on the CNMV’s register with a of all investors, Spanish and international alike. significant shareholding in the company was Caja de Ahorros y Pensiones de Barcelona, The management and control of Criteria “la Caixa”, with a holding of 78.03% of Criteria CaixaCorp are divided between the General CaixaCorp’s share capital.
Board members and Treasury stock (year-end 2007)
Name of Board member Number of direct Number of indirect % of total voting rights voting rights voting rights
Ricardo Fornesa Ribó 294,000 0 0.009% María Amparo Camarasa Carrasco 3,273 0 0.000% Isidro Fainé Casas 66,191 0 0.002% Salvador Gabarró Serra 7,003 0 0.000% Manuel García Biel 4,449 3,423 0.000% Javier Godó Muntañola 0 1,230,000 0.037% Jorge Mercader Miró 1,496 0 0.000% Juan María Nin Génova 66,391 0 0.002% Miquel Noguer Planas 3,561 0 0.000% Manuel Raventós Negra 17,330 0 0.001% Isabel Estapé Tous 46,191 2,180 0.001% Susana Gallardo Torrededia 0 58,700 0.002% David K. P. Li 0 0 0% Alain Minc 0 0 0% Joan Rosell Lastortras 0 32,382 0.001%
TOTAL BOARD 509,885 1,326,685 0.055%
The company does not own any treasury shares, were admitted for trading and for a period of either directly or through any of its subsidiaries. 18 months from the date of the resolution, However, on September 6, 2007, the sole provided the shares acquired (in addition those shareholder at that time, “la Caixa”, gave Criteria already held) did not exceed 5% of the share CaixaCorp’s Board of Directors authorization to capital. acquire its own shares directly or through group companies for the purpose of either sale or cancellation after the date the company’s shares
50 Shareholders’ agreements and other strategic organization of the Meeting, voting procedures 07 agreements on proposed resolutions, majorities required for adopting resolutions and other issues relating Criteria CaixaCorp has not been informed of to the functioning of the General Shareholders’ any shareholders’ agreements signed by its Meeting are regulated by the company Bylaws shareholders for the concerted exercise of voting and Shareholders’ Meeting regulations. annual report rights or which could constrain the free transfer Shareholders may access these documents on of shares. the company’s webpage (www.criteria.com). With regard to other strategic agreements, we The General Shareholders’ Meeting shall be would point out that in relation to the takeover convened by the Board of Directors, by means bid launched for Sociedad General de Aguas de of a notice published at least one month prior Criteria CaixaCorp Barcelona, on November 21 and December 19, to the date of the meeting. The notice shall state 2007, Criteria CaixaCorp, S.A. signed two the date and place of the meeting and all the amendments to the HISUSA shareholders’ items on the agenda. From the date the notice agreement signed on July 18, 2006 relating to for the meeting is published, shareholders shall their stake in Sociedad General de Aguas de have the right to receive at their registered Barcelona with “la Caixa”, Suez, S.A., Suez address, immediately and free of charge, all Environnement, S.A. and Suez Environnement proposed resolutions, reports and other relevant España, S.L.U. respectively. The CNMV was documents. These documents shall be made informed of these amendments via significant available on the company's webpage, although event notices published on November 21 and shareholders may also request a copy of the full December 20, 2007. text of the documents made available to them be delivered or sent to them free of charge. General Shareholders' Meeting Shareholders may request information or The functions, types and competences of the clarification relating to any item on the agenda General Meeting, in addition to the most or formulate questions in writing regarding any significant factors relating to the calling and publicly available information that the company has filed with the Spanish Securities & Exchange
51 5_ The company. Organizational structure
Commission (CNMV) since the last General electronic or other means of remote Shareholders’ Meeting. Shareholders may also communication, provided that the company has request any information or clarification they established procedures to guarantee the identify consider appropriate relating to any items on of the shareholder or proxy-holder exercising the the agenda during the meeting. right to vote, the number of shares represented and whether the vote is for or against the proposed Shareholders who own at least 1,000 shares, resolution or an abstention. In any case, the individually or in combination with other procedures established for delegating voting rights shareholders, recorded in the appropriate register or voting by remote means shall be published in five days in advance of the date of the meeting the notice of the General Shareholders’ Meeting shall have right of attendance. Shareholders and on the company's website. with attendance rights may delegate another person, not necessarily another shareholder, to Regardless of the requirements for publication represent them. Proxies must be appointed laid down by law or in the regulations in each specifically for each Meeting, in writing or by case, shareholders may be informed of the means of remote communication which duly resolutions adopted at the General Shareholders guarantee the identity of the voter. Meeting on the company's website. Votes on resolutions relating to items on the agenda may be delegated or cast by shareholders by post,
From left to right and front to back: Alain Minc, Juan Maria Nin Génova, Isabel Estapé Tous, Isidre Fainé Casas, Ricardo Fornesa Ribó, Francisco Reynés Massanet, Adolfo Feijoo Rey, Susana Gallardo Torrededia, David K.P. Li, Manel García Biel, Jordi Mercader Miró, Salvador Gabarró Serra, Miquel Noguer Planas, Maria Amparo Camarasa Carrasco, Manuel Raventós Negra, Juan Rosell Lastortras and Javier Godó Muntañola.
52 management to ensure it meets its stated targets Board of Directors 07 and respects its social purpose and interests. Structure The Board of Directors has fifteen members. The Apart from those issues governed by the General Chairman of the Board is the only executive Shareholders' Meeting, the Board of Directors member. Nine directors are proprietary directors annual report is Criteria CaixaCorp’s highest decision-making appointed on the recommendation of “la Caixa” body. It should ensure that the company abides and the remaining five are independent directors. by the pertinent laws and regulations in its dealings with stakeholders and fulfils its When exercising its powers to propose obligations and contracts in good faith; respects appointments to the General Shareholders'
the customs and good practices of the sectors Criteria CaixaCorp and territories where it does business and upholds any social responsibility principles it has subscribed to voluntarily. Good practices in Corporate The Board of Directors should approve the Governance are essential to company’s strategy, control the organization of ensure the trust of all investors. the Group to implement this strategy and supervise and control the company’s
53 5_ The company. Organizational structure
Meeting and co-opt directors to fill vacancies, attending in person or represented by proxy. the Board shall endeavor to ensure that external In the event of a tie, the Chairman shall not (or non-executive) directors represent a majority have the casting vote. over executive directors on the Board and that the latter should be the minimum necessary. Remuneration Directors shall hold office for a term of six years, Pursant to Criteria CaixaCorp’s company bylaws, without prejudice to their reappointment or the Board of Directors may be remunerated by removal by the Board at any time as established up to 4% of the consolidated profit, net of by company bylaws and prevailing legislation. general expenses, interest, taxes and other amounts allocated to writedowns and D&A, Function unless the Board itself agrees to reduce its remuneration in the years it deems such a The Board of Directors shall meet in ordinary reduction to be necessary. The resulting amount session at least six times a year and, at the shall be employed to remunerate the Board of Chairman’s initiative, whenever he considers it Directors and Board committees and members necessary for the smooth running of the company. of these Boards who carry out executive duties. The Board of Directors shall also meet when The amount shall be distributed among the requested to do so by at least two of its members directors, and particularly the Chairman, as the or one of its independent directors. Board sees fit according to the duties and There shall be a quorum for Board meetings dedication of each one, in the form of attendance when half plus one of the Board members are fees, bylaw-stipulated remuneration, present or represented thereat. And, unless compensation for executive duties, among others. required otherwise by company bylaws or Directors carrying out executive functions at the prevailing legislation, resolutions shall be passed company, whatever the nature of their legal by an absolute majority of the Board members relationship, shall be entitled to receive
54 remuneration for these duties which may be by the General Shareholders’ Meeting. Where 07 either a fixed amount or a variable amount in appropriate, the agreement will list the number addition to incentive schemes and benefits which of shares to be delivered, the exercise price for may include pension plans and insurances and, the options, and the price of the shares taken where appropriate, social security payments. In as reference and the term set for this type of the event of removal not caused by a breach of compensation. annual report contract, directors may be entitled to receive At the meeting held on November 8, 2007, the compensation. Board of Directors, pursuant to company bylaws, The afore-mentioned amounts payable to established annual remuneration for each of its members of the Board may only be received members at €90,000 and €30,000 for each after the minimum 4% dividend has been paid member of the Audit and Control Committee Criteria CaixaCorp out to shareholders pursuant to article 130 of and each member of the Appointments and the revised text of Public Limited Companies Remuneration Committee. Law. Additionally, within the limits specified in the paragraphs above, directors may receive compensation in the form of company shares or shares in another listed group company, options or other share-based instruments. This compensation must be reported to and approved
Board members
Name Type of director
Executive Chairman Ricard Fornesa Ribó Executive
Directors
Maria Amparo Camarasa Carrasco Proprietary Isabel Estapé Tous Independent Isidre Fainé Casas Proprietary Salvador Gabarró Serra Proprietary Susana Gallardo Torrededia Independent Manel García Biel Proprietary Javier Godó Muntañola Proprietary David K. P. Li Independent Jordi Mercader Miró Proprietary Alain Minc Independent Juan Mª Nin Génova Proprietary Miquel Noguer Planas Proprietary Manuel Raventós Negra Proprietary Juan Rosell Lastortras Independent
Secretary (non board member)
Adolfo Feijóo Rey Secretary (non board member)
55 5_ The company. Organizational structure
Committees: Functions and composition as carrying out any other actions established in the Protocol to ensure the best compliance Article 40 of Criteria CaixaCorp’s bylaws with the afore-mentioned supervisory function, establishes the obligation of the company to and, in general, any others attributed thereto create an Audit and Control Committee pursuant by Law and other regulations applicable to to the stipulations of the 18th additional provision the company. of the Spanish Securities Market Act (Ley del Mercado de Valores), which requires entities Composition of the Audit and Control issuing securities admitted to trading on official Committee: secondary markets to have such a committee. Article 13 of the Regulations of the Board of Directors establishes the rules governing the Name Position held composition and functioning of this committee. Susana Gallardo Torrededia Chairwoman Alain Minc Member Audit and Control Committee Juan Mª Nin Génova Member The main functions of the Audit and Control Committee are as follows Appointments and Remuneration Committee > To make recommendations to the Board of Directors, for submission to the General In contrast to the Audit and Control Committee, Shareholders’ Meeting, for the appointment the Appointments and Remuneration Committee of the external auditor. is not a legal requirement. Notwithstanding, article 39 of the company's bylaws establishes > Review the company’s accounts and periodic that the Board of Directors shall create a financial reporting which the Board of Directors Appointments and Remuneration Committee must disclose to the markets. from among its members. Article 14 of the > Monitor compliance with legal requirements Regulations of the Board of Directors, approved and the correct application of generally- on September 6, 2007, sets forth the rules accepted accounting principles. governing the composition and operation of this Committee. > Supervise the internal audit services; ensuring compliance with the auditing contract, that The main functions of the Appointments and the opinion on the Annual Financial Statements Remuneration Committee are as follows: and the main content of the auditor's report > To submit to the Board of Directors proposals are drafted clearly and precisely, and monitoring for the appointment of independent directors the independence of the auditing function. for their co-option or for the Board to submit > Check for compliance with internal rules of to the General Shareholders’ Meeting and conduct and the rules of corporate governance. report on the appointment of other types of directors. > Report any transaction which implies, or may imply, a conflict of interest. > Propose to the Board the system for and the amount of directors’ and senior executives’ > Supervise compliance with the Internal Protocol annual compensation and the individual governing the relationship between “la Caixa” remuneration and other contractual conditions and the company and the companies for executive officers. belonging to their respective groups, as well
56 > Consider the suggestions submitted to it by The Internal Code of Conduct determines the 07 the Chairman, Board members, executives and standards of conduct and performance to be shareholders of the company, particularly when followed in relation to the operations described drawing up appointment proposals. therein and the treatment, use and dissemination of confidential, privileged and significant Composition of the Appointments and annual report information. Remuneration Committee: The Legal Advisory and Compliance Department oversees compliance with the legal requirements to which the group is subject. Subsidiaries subject Name Position held to specific regulatory norms (CaiFor, Invercaixa Criteria CaixaCorp Isabel Estapé Tous Chairwoman and Finconsum) have their own compliance staff Isidre Fainé Casas Member and procedures in place, working in co-ordination Juan Rosell Lastortras Member with Criteria CaixaCorp’s Legal Advisory and Compliance department. Compliance with regulations Related-Party Transactions and Protocol Criteria CaixaCorp has a two-tier support and for Internal Relationships supervisory structure which ensures compliance Related-Party Transactions with the various regulations which directly affect the company and its group. According to article 4 of Criteria CaixaCorp’s Board of Directors’ Regulations, the Board as a plenary The Audit and Risk Control department, reporting body shall approve all transactions the company to the Audit and Control Committee, is conducts with directors, significant shareholders, responsible for monitoring compliance with shareholders with board representation or with financial information processes and internal risk other persons related thereto (Related-party management systems, as established in article transactions) and authorization from the Board 13.1 of Criteria CaixaCorp’s Board of Directors’ shall not be required for related-party transactions Regulations. that simultaneously meet the following three (3) The Legal Advisory and Compliance Department conditions: broadly monitor the company’s compliance with > they are carried out by virtue of adhesion all the legal requirements applicable to a listed contracts, whose conditions are standardized company and supports the Audit and Control and applied en masse to many clients; Committee in the task of informing the Board of Directors of the changes that need to be > the are carried out at market prices or rates, made to adapt the company’s bylaws to generally established by the party acting as the regulatory changes and improve internal provider of the good or service in question; and compliance practices and procedures. In the > the amount of the transaction is not more latter function, it works with the Secretary of than one per cent (1%) of the consolidated the Board to achieve excellence in the field of annual revenue of the group of which the corporate governance. company is the parent. The function of the Criteria CaixaCorp’s Furthermore, the Audit and Control Committee Compliance department is explained in detail in supervises compliance with regulations governing the Internal Code of Conduct on matters relating Related-Party Transactions. Specifically, this to the securities markets.
57 5_ The company. Organizational structure
Committee is responsible for checking that with the Bank of Spain and other regulatory information relating to these transactions is agencies. Criteria CaixaCorp’s Audit and Control reported to the market, in compliance with the Committee is responsible for overseeing and provisions of Ministry of Economy and Finance supervising these functions. Order 3050/2004 of September 15, 2004, and The protocol for internal relationships establishes to report on transactions which imply, or may that Criteria CaixaCorp shall continue to invest imply, a conflict of interest and, overall, on the in the sectors in which it currently holds issues addressed in Chapter IX of the Board of investments and likewise act as a vehicle and instrument of acquisition-led growth for “la Directors’ Regulations regarding the general Caixa”, particularly in the area of international obligations of board members. expansion, via stakes acquired in companies in As stated in the 2007 Annual Corporate the banking and financial sectors. The protocol Governance Report submitted by Criteria also governs potential investments made jointly CaixaCorp to the CNMV, no significant related- by Criteria CaixaCorp and “la Caixa” in a specific party transactions between the company and business or preferential investment asset when its executives or directors took place last year. so advised by legal, financial, strategic or similar reasons. Transactions between the company and “la Caixa” carried out in 2007 are related in It also establishes the general regulations detail in the Annual Corporate Governance applicable to services rendered, or to be rendered Report submitted by the company to the CNMV. at a future date, by companies belonging to the “la Caixa” group to Criteria CaixaCorp and its Protocol for Internal Relationships subsidiaries, and vice versa. Any new intra-group service or transaction shall always have a To regulate its relationship with the core contractual relationship and must always be shareholder and to increase transparency, ruled by the general principles of transparency independence and good governance practices, and carried out under market conditions. in line with the second recommendation of the Unified Good Governance Code, Criteria The Board of Directors shall monitor the CaixaCorp and “la Caixa” have drawn up a joint publication of the annual reports prepared by protocol for internal relationships which will Criteria CaixaCorp’s Audit and Control allow them to forestall and regulate conflicts of Committee via the media available to company interest and at the same time comply with to ensure that the general public, and more different regulatory and market requirements. specifically, Criteria CaixaCorp shareholders who The objective of this protocol is to outline Criteria are not “la Caixa” shareholders, are aware of CaixaCorp’s main business areas, define the the extent of the company’s adherence to the general lines of any potential business relationship principles established in the Protocol. or services agreement that Criteria CaixaCorp and its group could enter into with the “la Caixa” and other “la Caixa” group companies and ensure an adequate flow of information so that “la Caixa” and the company are able to prepare their financial statements and meet their periodic reporting and supervision obligations
58 The company’s Audit and Control and Adherence to Corporate Good 07 Governance Recommendations Appointments and Remuneration Committees are made up exclusively of external directors Criteria CaixaCorp considers that it complies (most of which are independent) chaired in both substantially with the Recommendations of cases by independent directors, in compliance Corporate Governance issued by the annual report with recommendation 44. government’s special ad hoc working group, known as the “Unified Good Governance Code” Although only 20% of the company’s Board of of May 19, 2006, as stated in its Annual Directors is currently comprised of women, it Corporate Governance Report submitted to the should be borne in mind that, as specified in CNMV and published on the latter’s website recommendation 15 of the Unified Code, the (www.cnmv.es) and that of the company process of filling board vacancies has no implicit Criteria CaixaCorp (www.criteria.com). bias against women candidates and furthermore, the two of the Board committees are chaired by In particular, corporate governance female directors. recommendations adopted by Criteria CaixaCorp include the number of company Board members The company is aware of its obligation to carry (currently set at fifteen) which complies with out all its activities with the utmost transparency, recommendation 9 of the Unified Good and therefore plans to progressively adapt its Governance Code (between five and fifteen). internal corporate governance regulations Also, one third of the company’s Board members according to the recommendations put forward are independent directors, as specified in by the Audit and Control Committee as part of recommendation 13 of the Unified Code (five their remit. of its fifteen Board members are independent Lastly, we note that in order to strengthen the directors). Furthermore, fourteen of the fifteen company’s transparency, independence and good directors on the company's Board of Directors governance Criteria CaixaCorp and “la Caixa”, are external directors. Therefore, the company as a listed company and its core shareholder complies with recommendation 10 of the Unified respectively, have subscribed to the Protocol for Good Governance Code, as external proprietary Internal Relationships described above. and independent directors make up the majority of its Board of Directors. On September 6, 2007, the company’s sole shareholder appointed Isabel Estapé Tous, Susana Gallardo Torrededia, David K.P. Li, Alain Minc and Don Joan Rosell Lastortras as independent directors of Criteria CaixaCorp, without any prior proposal by the Appointments and Remuneration Committee, in line with recommendation 27 of the Unified Code, as this Committee did not exist at that date. However, the rules established in heading 5 of section III of the Unified Good Governance Code were followed when classifying a director as independent as set down in article 18 of Criteria CaixaCorp’s Board of Directors’ Regulations.
59 5_ The company. Organizational structure
ii. Human Resources into line with those of a listed company and with our growth strategy, based on the best The key to our success international human resources management Human resources are one of the key factors for policies. the development of Criteria CaixaCorp. The company’s purpose is to identify, grasp, Innovation and experience implement and follow up business opportunities Criteria CaixaCorp has a staff of 107 employees and these activities have to be carried out on characterized by their proven experience in the basis of team work, a constant exchange of business management (senior employees in key relevant information and specialized knowledge posts), youth (average age 36), qualification (technical and sector) in addition to the (87% are university graduates) and previous appropriate management skills. experience in different business sectors. Therefore, Criteria CaixaCorp requires its The company’s senior management is comprised employees to be well-educated, highly-qualified of the Executive Chairman, Ricardo Fornesa Ribó, and committed. and the Managing Director, Francisco Reynés All human resources management systems are Massanet. designed to help each and every one of the The Management Committee, named during company’s employees bring the highest added the 2008, comprises the company’s managing value to Criteria CaixaCorp or other group director, Francisco Reynés Massanet, and the companies. heads of its different business areas: Criteria CaixaCorp is particularly committed to creating value for the shareholder, and since the company was listed its human resources and related policies have been progressively brought
From left to right: Xavier Moragas Freixa, Antoni Garriga Torres, Jordi Morera Conde, Carmen Gimeno Olmos, Francisco Reynés Massanet, Almudena Gallo Martinez, Juan María Hernández Puértolas, Lluís Vendrell Pí and Francesc Bellavista Auladell.
60 07 Francesc Bellavista Auladell: Director of Internal Audit and Risk Management Almudena Gallo Martínez: Human Resources and CSR Director Antoni Garriga Torres: Director of Corporate Office and Investor Relations
Carmen Gimeno Olmos: Director of Insurance and Financial Services Portfolio annual report Juan María Hernández Puértolas: External Communications Director Xavier Moragas Freixa: Finance Director Jordi Morera Conde: Director of Banking Investment Portfolio
Lluís Vendrell Pí: General Counsel Criteria CaixaCorp
HR management In 2008, a new professional development model based on competence management will be rolled The main lines of Criteria CaixaCorp’s HR out. This will feature a dictionary of competences, management policy are the following: development paths and evaluation tools. Selection Strategy-linked compensation policy Criteria CaixaCorp’s selection processes look at Compensation should be linked to the company’s the professional experience, competences and business strategy and shareholders’ interests personal qualities of the candidates, using and therefore a real return from the company’s confidential, unbiased assessments which respect investment in people should be ensured. diversity and equal opportunities. In 2008 a project is underway to design a Maximizing professional development compensation system which fits in with Criteria CaixaCorp’s business needs and is consistent Criteria CaixaCorp focuses on professional with market practices. training and development. Furthermore, a performance appraisal system Training is one of the key pillars of Criteria will be introduced to clarify and prioritize the CaixaCorp’s strategy. Therefore, the group is contribution each employee makes to achieving developing (for implementation in 2008 and company’s targets on both an individual basis thereafter) the appropriate training plans and and as part of a team. Common standards will procedures for the needs and competences of be identified not only for achieving results but its employees, along with professional also governing how these results are to be development and talent management programs. achieved. Criteria CaixaCorp also provides aid for individual training programs. The ultimate goal is to link compensation to responsibility and performance, offering a full 3,754 training hours were booked in 2007, remuneration package (fixed, variable, social which is an average of 35 training hours per benefits). employee in the year. The specialized nature of our business requires a high degree of training and therefore in 2007 a total of 3,664 external training hours were given, mostly in prestigious institutions such as business schools and universities or at specialized forums.
61 5_ The company. Organizational structure
Diversity and equal opportunities Internal communications A range of employees with diverse backgrounds, Dialogue with employees is another key factor experience and knowledge is essential for a in the management of human resources. Criteria company with an international investment focus. CaixaCorp has several communications channels with its employees in place, including the intranet - its main internal communications channel. Regular meetings are also held between groups Criteria CaixaCorp promotes the of eight or nine employees and the management, professional and personal in order to make relations with employees closer development of its employees and and more fluid. Furthermore, on a quarterly basis, the guarantees equal opportunities management team informs employees of the for all of them. company's performance to encourage them to play an active part in the achievement of results.
Criteria CaixaCorp promotes the professional Workplace risk prevention and personal development of its employees The company’s workplace risk prevention policies and guarantees an equal opportunities policy and systems are focused on the type of activity and with this objective in mind, the company carried out by all employees at Criteria CaixaCorp, is implementing a conciliation policy which and are implemented by an external prevention spans a wide range of initiatives. Some of service. The different risks associated with each these are designed to make working conditions type of job have been assessed and a prevention more flexible. program is in place to deal with these risks, which are mainly related to ergonomic issues, working with CPUs, trips and stress.
Breakdown of employees
Qualification Seniority
Degree. > 10 years Postgraduate degree (mba, etc.) 6-10 years 3-5 years Other 0-2 years
University degree/Postgraduate qualification: 87% Average seniority: 7 years
62 In 2007 only one accident (involving vehicles) Key indicators 07 was reported, which resulted in sick leave of 139 days. Facts and figures Criteria CaixaCorp employees receive the > Number of employees at December necessary training in risk prevention. Specifically, 31, 2007: 107 annual report a special course held periodically for all new > Average age: 36 employees, so ensuring that all members of staff receive the appropriate training. > % of women: 60% With regard to activity coordination, is worth > % of women holding management
highlighting the company’s relationship with “la positions: 23% Criteria CaixaCorp Caixa”, which owns and manages the office > Nationalities: 4 building (Torre II) which houses Criteria CaixaCorp’s activities. “la Caixa” directly manages and controls building accesses and security and the implementation of different drills, along with activities involving coordination with suppliers and subcontracted companies. The company has worked with “la Caixa”’s risk prevention team to identify, treat and prevent incidences of semicircular lipoatrophy caused by environmental conditions in the offices. In response to this, Criteria CaixaCorp designed and implemented a series of preventative measures for all users of the office building, along with treatments for the persons affected.
Breakdown by age Breakdown by gender
< 30 years 30-39 years 40-49 years Men 50-59 years Women
Average age: 36 years Women: 60%
63 5_ The company. Organizational structure
iii. Key processes CaixaCorp make a joint investment, the Committee shall draw up a report, that it will Decision making: investment – make available to the company’s Board of divestment Directors so that this body may evaluate, in Criteria CaixaCorp’s main decision-making advance, the appropriateness or process relates to investments and divestments. inappropriateness of this joint investment These investments/divestments may be the result with “la Caixa” or the respective “la Caixa” of an active search by Criteria CaixaCorp’s group company. management team or its governing bodies. Or The Audit and Control Committee must to they may be the result of operations presented report to the Board on the creation or to Criteria CaixaCorp by external economic acquisition of stakes in special purpose vehicles agents (e.g. investment banks). A viability study or entities domiciled in countries or territories is carried for all potential investments and considered to be tax havens, as well as any divestments which considers all standpoints: other transactions or operations of a similar strategic, legal/fiscal and economic/financial. nature which, due to their complexity, may This study is submitted to the Internal Investment deteriorate the transparency of the company Committee and the Management Team who or of the group to which it belongs; decide whether the project should be passed b) Board of Directors: This is the company’s on to the corresponding governing bodies. highest governing body, except in issues The governing bodies responsible for appraising falling under the remit of the General and approving investment projects are: Shareholders' Meeting. a) The Audit and Control Committee: This The Board of Directors approves all committee analyzes the investments and investments and operations considered to be divestments made by Criteria CaixaCorp to strategic by virtue of their amount or special determine whether there are any conflicts of characteristics, unless this approval interest between “la Caixa” and Criteria corresponds to the General Shareholders’ CaixaCorp. When “la Caixa” and Criteria Meeting. It also assess the creation or
64 acquisition of stakes in special purpose vehicles The committee must also report on the 07 or entities domiciled in countries or territories financial viability of these operations and considered to be tax havens, as well as any state whether they comply with “la Caixa”’s other transactions or operations of an similar budget and strategy. An investment or nature which, due to their complexity, may divestment is considered to be strategic, and deteriorate the transparency of the Group. therefore “la Caixa”’s Investment Committee annual report must inform the Board of Directors or c) “la Caixa” Investment Committee: Management Committee of its financial “la Caixa” is a savings bank subject to the viability, when it involves the acquisition or provisions of Royal Legislative Decree 1/2008 disposal of a significant stake in a listed
of March 11, approving the revised text of company, as well as investments in business Criteria CaixaCorp the Law governing the Catalonian savings projects where the company is involved in banks sector passed by the Catalonian the management or governing bodies, parliament and other applicable provisions. provided that the investment or divestment corresponding to the “la Caixa” group This legislation has specific implications for accounts for more than 3% of its equity. savings banks with regard to issues of When this 3% threshold is not exceeded, corporate governance. For instance, “la investments and divestments may by carried Caixa”’s Investment Committee (a delegate out, without prior assessment by the committee of the Board of Directors with Committee, within the specified fluctuation advisory, not executive, functions) is range. responsible for evaluating and informing “la Caixa”’s Board of Directors or Executive Committee of all strategic and stable investments and divestments carried out either directly by “la Caixa”, or by any of its subsidiaries (such as Criteria CaixaCorp).
65 5_ The company. Organizational structure
Main risk factors and risk control a) Internal Audit The main risks affecting Criteria CaixaCorp are: b) Compliance a) Market/Sector risk: as around 86% of the c) Risk management company's investment portfolio is made up These departments are supervised by the Audit of listed companies. The listed companies in and Control Committee and the Board of which Criteria CaixaCorp invests are exposed Directors. to fluctuations in price and trading volumes caused by factors beyond its control. In iv. Corporate Social Responsibility addition, the portfolio is subject to risk relating to concentration in the services sector and Criteria CaixaCorp’s vision and mission statement country/interest rate risk. define the company’s strategy. Therefore, the creation of long-term value and a desire to be a b) The second biggest risk is Compliance risk: benchmark imply a commitment to combining Criteria CaixaCorp is subject to sector, financial success with sustainable development, mercantile and fiscal regulations and a creating value for both the company and its complex and changing legislative framework stakeholders. This means that for Criteria making non-compliance with legal CaixaCorp’s executive management, decision- requirements a potential risk which could taking is based not only on financial criteria but lead to sanctions (in Spain or abroad) or a also on the social and environmental consequences possible loss of reputation. of our actions. c) Exchange rate risk: exposure to exchange Criteria CaixaCorp is setting up mechanisms to rate risk, either through direct investments ensure at all times the awareness and commitment made by Criteria CaixaCorp in assets in of our employees and directors as regards the currencies other than the euro (BEA, exposure correct application of the two main challenges to the Hong Kong dollar), or indirect exposure facing the company, i.e. business ethics and through investees (a large part of Repsol YPF’s transparency in all our relationships with revenues are USD-denominated). stakeholders and the responsible management As part of the on-going process to improve its of our investment portfolio. Criteria CaixaCorp internal control systems and effectively manage shares the principles of the OECD Guidelines for risks, Criteria CaixaCorp has contracted the Multinational Enterprises and underscore our advisory services of Ernst & Young, leader in risk commitment to working along these lines. management. Specifically, Ernst & Young has been contracted to identify opportunities to improve the risk situation and the procedures and controls designed to reduce or eliminate exposure to these risks. In order to strengthen the company’s internal control systems, the following departments have been created:
66 CSR challenges facing Criteria CaixaCorp 07 as an active shareholder Concienciación y compromiso 1. Services portfolio Criteria CaixaCorp shares the a) Energy and basic services companies, principles of the OECD Guidelines annual report annual report leaders in sustainability for Multinational Enterprises and Criteria CaixaCorp’s strategy, based on its highlights its commitment to vision and mission statement, and carried out mainly through the active management of establish strategic work lines as its portfolio, obliges the company, as a well as its commitment to a shareholder, to assess the risks and responsible management. Criteria CaixaCorp opportunities relating to sustainable development affecting its portfolio of investees. Therefore, as a shareholder, Criteria Repsol YPF, Gas Natural, Abertis and Telefónica CaixaCorp has started to develop internal are all listed on the most important SRI indices, policies to identify and manage social and i.e. the DJSI index and/or the FTSE4good. environmental risk at its investees, in order Also, all these companies and Agbar are part to ensure that these companies work in a of the Corporate Reputation Forum and have responsible and ethical manner. won prizes and been awarded distinctions Investees on the company’s portfolio differ for CSR in Spain and abroad. We highlight widely with regard to social and environmental their position in MERCO (the Spanish risk. Therefore, listed companies, mainly in corporate reputation monitor), and Telefónica the services sector, have well-defined CSR and Repsol YPF’s top-ranking positions among strategies in place, as they are also multi- the leading companies in Europe for CSR national companies that report information according to “The Good Company Ranking on a regular and transparent basis, in 2007” or Gas Natural, Repsol YPF and accordance with the best reporting practices Telefónica’s place as finalists in the GRI in the development of their sustainability international prize-giving for the best CSR strategies. annual report. The problem of global warming is particularly b) Port Aventura significant for most of them and is therefore In our role as sole shareholder, we particularly one of the main environmental risks to be analyze the risk relating to the environmental analyzed and evaluated in terms of its impact and social impact of the activities carried out on the performance of our portfolio. by Port Aventura. Also, as Port Aventura’s Therefore, the leadership position held by strategy is closely linked to its natural and these companies in the various SRI indices social surroundings, it is extremely important and rankings should be factored into the to develop the business while ensuring respect periodic analysis of their performance as a for its surroundings. good indicator of the sustainable Port Aventura has a Certified Environmental management of their activities. Management system in place, pursuant to
67 5_ The company. Organizational structure
European EMAS regulations and ISO 14001, Specifically, in the area of fraud prevention, we which ensure that the company identifies highlight the synergies arising with “a Caixa”’s and manages the environmental impact of Internal Audit department. A joint team has its activities. Also, from a social standpoint, been created to facilitate fraud control and risk the largest impact relates to human resources processes relating to the unlisted portfolio, and management as the company employs a wide all internal audit reports relating to this portfolio variety of people and its business is extremely have a section dedicated to fraud. seasonal in nature. Another factor affecting reputation relating to ethical management is the prevention of money 2. Financial portfolio. Ethical and transparent laundering, and here we also highlight the close management and fraud prevention collaboration between Criteria CaixaCorp and The management of our financial portfolio is “la Caixa”’s compliance departments to monitor based on the criteria of transparency and ethical all the former’s investments in financial management, bearing in mind the relationships companies. that our core shareholder “la Caixa” has on its In the area of transparency and ethical own account with the companies in which we management the company has two important hold a controlling interest. tools: the Internal Code of Conduct which Our reputation depends largely on the regulates the conduct of Criteria CaixaCorp appropriate management of this portfolio and employees in regard to asset management and the transparency of our relationships with use of confidential, privileged and important investees, ensuring that our minority shareholders information, and the Protocol for internal are not adversely affected as a result of any lack Relationships with “la Caixa”, which establishes of transparency. the framework for Criteria CaixaCorp’s relationship with “la Caixa” in order to define The risk management program which is currently the activities to be developed by both entities being designed and which should be and avoid the unfair treatment of minority implemented throughout 2008 will focus on shareholders. strengthening all aspects of risk management relating to the company’s reputation, including, Other CSR factors at Criteria CaixaCorp pursuant to Criteria CaixaCorp’s CSR policy, both portfolio management processes and investment 1. International Advisory Board and divestment procedures. An International Advisory Board was created on Criteria CaixaCorp’s Internal Audit and Global February 7, 2008, made up of professionals with Risk Control department reports directly to Audit a prestigious track-record in the world of and Control Committee, drawing up the economic and finance, and extensive knowledge pertinent internal control reports and also takes of the international global markets. Its objective part in establishing internal control procedures is to make Criteria CaixaCorp an investment for the unlisted companies over which we benchmark with an investment strategy based exercise control, as part of its function to identify on the management of a portfolio that cannot and manage risk at these companies and report be replicated, to excel in active portfolio regularly to their respective governing bodies. management (solvent, dynamic and efficient portfolio management) and a strong strategic
68 socially or environmentally sensitive is also In the area of transparency 07 and ethical management, the factored in. Therefore, the role of the company has two important tools International Advisory Board in helping to identify to guarantee these principles: the and assess these risks is considered to be extremely important. Internal Code of Conduct and the annual report Internal Protocol for relations 2. Developing corporate values. Code of Ethics with “la Caixa”. EFrom 2008, the company plans to create a Code of Ethics containing its corporate values. This code will, among other aspects, be an external and internal showcase for the values Criteria CaixaCorp focus on shareholder value creation with a comprising Criteria CaixaCorp’s business project, medium/long term investment approach. and its independence from “la Caixa”’s project, The creation of this Board underscores one of with which it clearly shares values but has its Criteria CaixaCorp’s key goals, i.e. to expand in own trajectory. the international financial arena, which is central The projected Code of Ethics is based on the to its strategic focus. company's vision and mission statement, Clear functions have been described for the developing the corporate values that should be Advisory Board, based on its knowledge. reflected in Criteria CaixaCorp team of professionals. Functions include: Today, all Criteria CaixaCorp employees have > Providing high levels of advice, appraisal and signed an internal code of conduct relating to knowledge with regard to market asset investment and divestment operations, opportunities. and to the treatment, utilization and > Analyzing opportunities for acquiring dissemination of confidential information, as significant stakes in banks in the US, eastern this is a regulated activity to which Criteria Europe and major emerging markets. CaixaCorp is particularly sensitive. The projected Code of Ethics will clearly refer to this regulation > Reinforcing the criteria of prudence, discretion but is much broader in scope as it will also set and risk assessment. the base for the conduct of the Criteria CaixaCorp As part of its duties, the International Advisory team in the performance of their day-to-day Board shall assess a wide range of risks and activities. Therefore, the Code of Ethics will have opportunities (economic-financial and the corresponding safeguard mechanisms in environmental and social), backed by its specialist place, putting Criteria CaixaCorp among the knowledge in these areas, along with the Spanish companies to have adopted a Code of renewable energy market, development via new Ethics in line with best practices. technologies and research. At the same time, as we have already mentioned with regard to decision-making processes relating to investments and divestments, reputation risk deriving from actions or scenarios which are
69 5_ The company. Organizational structure
3. Green office policy basis of the average monthly consumption of one of its three floors. The total energy Criteria CaixaCorp’s activity does not have a consumed by the three floors in 2007 was direct impact on the environment that can be 288 Kwh. considered significant in terms of the impact had by some companies on its portfolio. Water consumption has been calculated on Although we aware that our biggest challenge the basis of data from the general water lies in ensuring, via controlling their governing meter at the Torre II building (“la Caixa”’s bodies, the environmental impact caused by office building housing Criteria CaixaCorp’s these companies is properly managed, we also offices) for 2007, reflecting a monthly average know that a working environment designed to of between 1200 and 1500 m3 for the whole minimize this impact is always necessary and a building (12 floors). Therefore, the average reflection of our desire to conform to the best monthly consumption per floor is estimated practices. at between 100 and 125 m3, a total of between 3600 and 4500 m3 for the three The aim of Criteria CaixaCorp’s green office floors in 2007. policy is to implement the best practices in the management of the office environment. These resources will be systematically measured and evaluated to identify a) Consumption opportunities to improve energy savings, in Criteria CaixaCorp is currently developing a line with the best practices in environmental project to refurbish its offices. The office management. refurbishment will be based on the concepts b) Separating waste of comfort, functionality and environmental efficiency. Specifically, the restroom areas will At the same time, in the cafeteria and areas be installed with sensors which automatically around the coffee machines, containers shut off the electric light or water when no have been installed so that rubbish can be longer needed. separated according to its type and subsequently recycled. The energy consumed by Criteria CaixaCorp’s offices in 2007 has been estimated on the
70 c) Paper consumption 5. Purchasing policy and suppliers 07 In 2007, 2750 packets of 500 sheets of Most of Criteria CaixaCorp’s purchases relate to recycled paper were used. Through external advisory services, although other goods “la Caixa”’s services company, Criteria and services are also purchased, mainly relating
CaixaCorp has contracted a paper disposal to office maintenance and which are largely annual report service which in addition to guaranteeing managed through SUMASA, “la Caixa”’s services the confidential treatment of the waste company which manages the office building. paper, ensures that it is recycled. In 2008 Criteria CaixaCorp will define its The company’s objective is to reduce the purchasing policy, where selection will be based
consumption of paper by using new on environmental and social criteria for both the Criteria CaixaCorp technologies incorporating electronic filing suppliers of services and the products themselves. and double sided printing. 6. Participation in forums 4. Travel policy Criteria CaixaCorp’s takes part in specialized The travel policy implemented by the company forums to establish stable channels through is significant from an environmental and social which it can get to know its market and standpoint as the advent of new technologies regulatory environment. We highlight its means that meetings can be held on membership of the following associations and videoconference and this implies a significant organizations: Círculo de Empresarios, Asociación improvement in both areas. para el Progreso de la Dirección (APD), Asociación Española de Directivos, Asociación Española de A new travel policy is currently being defined, Contabilidad y Administración de Empresas which will include responsible management (AECA), Asociación Española para las Relaciones criteria relating to means of travel, trips, meetings con Inversores (AERI) and la Asociación de padres and vehicle hiring. de personas con discapacidad derivada de Trastorno Mental Severo (Associació DAU).
Corporate values The Code of Ethics project is based on the company's vision and mission statement, developing the corporate values that should be reflected in Criteria CaixaCorp's team of professionals.
71 5_ The company. Organizational structure
Criteria CaixaCorp in compliance with therefore to inform all the company’s GRI guidelines stakeholders about its 2007 results – not only its financial results but also about the The objective of Criteria CaixaCorp’s 2007 Annual management of its main environmental and Report is to offer a reliable and balanced view social risks and opportunities relating to our of the company’s activities in terms of its business business. The recommendations included in the strategy and including the main challenges GRI’s “CSR report guidelines” have been thrown up by CSR which have been identified followed. following a materiality analysis carried out on the sector’s external information base and internal The report has been self-declared as “B” by information, following a methodology based on Criteria CaixaCorp’s management according to the Accountability AA 1000 Assurance Standard. the GRI application levels. The objective of the 2007 Annual Report is
GRI application levels
C C+ B B+ A A+
Self declaration
Third party checked
GRI checked
GRI guideline recommend included an index to This index is available on www.criteria.com with indentify the position of the various indicators the GRI indicators listed by category and part of included in the documents making up the report. the Annual Report in which they can be found.
72 07 annual report annual report Criteria CaixaCorp
73 The services portfolio accounts for 82% of the gross asset value (GAV). Criteria CaixaCorp's strategic objective is to increase the weight of the financial portfolio from 6 medium to long term.
0674 .Ourinvestments e. Portfolioreturns d. Activeportfoliomanagement c. Portfoliobreakdown b. Structure a. Our investmentportfolio
75 Criteria CaixaCorp annual report 07 6_ Our investment portfolio
Structure
At December 31, 2007:
SERVICES - LISTED COMPANIES
Repinves Hisusa (67.60%) (49.00%) 9.27% 1.74% 5.03% 5.02% 33.06% 16.74% 52.90%
BME Telefónica 1 Repsol YPF Agbar Gas Natural (3.53%) (5.48%) (12.67%) (27.67%) (35.53%)
SERVICES - NON LISTED COMPANIES
Hotel Caribe Port Aventura Holret Boursorama (60.00%) (97.12%) (100.00%) (20.44%) 19.61% 0.83% 22.13% 74.99% Caixa Capital GP Des. Urb. Hodefi Desarrollo Tarraconenses (100.00%) (100.00%) (100.00%)
(1) 0,94% of this investment is owned pursuant to an equity swap.
76 07
INSURANCE annual report
Grupo CaiFor 50.00%
Inversiones CaiFor Crisegen Inv. Autopistas 50.00% (100.00%) (100.00%) Criteria CaixaCorp (50.10%) 20.00% 80.00%
7.75% VidaCaixa (100.00%) 80.00% 100.00% 99.00% 0.50% 0.50% Abertis 0.50% AgenCaixa SegurCaixa Invervida Con. GDS 20.00% Correduría (21.12%) (100.00%) (100.00%) (100.00%) (67.00%) 9.00%
INTERNATIONAL BANKING SPECIALIZED FINANCIAL SERVICES
BEA BCP Banco BPI GestiCaixa InverCaixa CaixaRenting FinConsum (8.89%) (1.03%) (25.02%) (100.00%) (100.00%) (100.00%) (100.00%) 10,02% 8.89% 1.03%
Negocio de Fin. Catalunya de 15.00% 91.00% e Inversiones Valores (100.00%) (100.00%)
77 6_ Our investment portfolio
Portfolio breakdown
Services
Total stake Number of shares Board Market value (thousand) representation1 (€million)
Listed 20,606 Energy Gas Natural 35.53% 159,078 5 out of 17 6,366 Repsol YPF 12.67% 154,627 2 out of 16 3,770 Infrastructure Abertis 21.12% 134,856 6 out of 21 2,972 Services/other Agbar 27.67% 41,400 5 out of 12 1,140 + TOB payment 16.44% 24,592 680 Telefónica 2 5.48% 261,644 2 out of 17 5,540 BME 3.53% 2,953 1 out of 15 138
Non-listed 929 Port Aventura 97.12% 2,770 9 out of 11 830 Hotel Caribe Resort 60.00% 10,761 4 out of 7 24 Real State portfolio 100.00% – 7 out of 7 75
Insurance and financial services
Total stake Number of shares Board Market value (thousand) representation1 (€million)
Listed 1,992
International banking 1,992 Banco BPI 25.02% 190,185 2 out of 21 1,019 Boursorama 20.44% 17,759 2 out of 10 143 The Bank of East Asia 8.89% 146,965 – 683 Banco Comercial Portugués 1.03% 37,203 – 109 Other – – – 38 Non-listed 2,666 Insurance 2,250 CaiFor 100.00% 42,640 11 out of 11 2,210 GDS-Correduría 67.00% 0,3 3 1 out of 1 40 Specialized financial services 416 InverCaixa Gestión 100.00% 3 7 out of 7 224 CaixaRenting 100.00% 0,1 5 out of 5 70 FinConsum 100.00% 56 7 out of 7 100 GestiCaixa 100.00% 250 7 out of 7 22
Total LISTED 22,598
Total NON LISTED 3,595
Gross asset value (GAV) 26,193
(1) At February 29, 2008 (2) A portion of this investment –a 0.94% stake- is owned pursuant to an equity swap worth €726M (45 million shares at a price of €16.14/share) (3) Shareholdings
78 86% of the portfolio is accounted for by listed 07 86% of the portfolio corresponds companies, while the remaining 14% corresponds to investments in non-listed to listed companies, while the companies. remaining 14% corresponds to investments in non-listed annual report companies. Listed 86% Investments in listed companies are valued at the year-end 2007 closing price. Investments in Criteria CaixaCorp non-listed companies are valued according to the valuations carried out by the company itself, following the methodology used on June 30, Non listed which were revised by an independent expert, as stated in the IPO prospectus. The only 14% exception is the valuation of Port Aventura’s real state business which was appraised by an The chart below shows the performance of net independent third party on December 31. asset value (NAV) and its components in the The gross asset value of the investment portfolio second half of 2007, as the Criteria CaixaCorp can be broken down as follows: first published its NAV data on June 30, 2007, when the restructuring prior to the IPO had been completed. This figure was revised and checked Services-Listed by independent experts.
79% Insurance and specialized financial services 10% International banking 8% Net asset value (NAV) Services - Non-listed 3% €million 26,104 821 (20) (712) 26,193
Today, the services portfolio accounts for 82% of the gross asset value (GAV), while the financial Investments Divestments Change in value portfolio accounts for 18%. Criteria CaixaCorp’s GAV Gross strategic goal is to rebalance its portfolio mix asset over the medium to long term until the financial value services sector accounts for 40-60% of the total. Net debt (4,708) IPO proceeds + Green Shoe = 3,848 (1,264)
NAV Net asset 21,396 24,929 value June 30 December 31
79 6_ Our investment portfolio
The breakdown of the main components is shown below:
€million Market value Investments Divestments Change Market value 30/06/2007 in value 31/12/2007 Gas Natural 7,179 - - (813) 6,366 Repsol YPF 4,476 40 - (746) 3,770 Abertis 2,874 82 - 16 2,972 Agbar 957 172 - 11 1,140 Telefónica 4,284 27 - 1,229 5,540 BME 128 - - 10 138 Banco BPI 1,251 - - (232) 1,019 Boursorama 226 3 - (86) 143 The Bank of East Asia - 628 - 55 683 Other listed stakes 68 109 (20) (10) 147
Total listed 21,443 1,061 (20) (566) 21,918
Total non-listed 2,711 1,030 (146) 3,595
Other investments 1 1,950 (1,270) - - 680
TOTAL GAV 26,104 821 (20) (712) 26,193
Net debt 2 (4,708) 3,444 - - (1,264)
TOTAL NAV 21,396 4,265 (20) (712) 24,929
Includes investments made by Criteria CaixaCorp and investments made by group holding companies. (1) At June 30, 2007 the investment commitment in Agbar amounted to €1 billion based on the assumption of 100% acceptance in the takeover bid. Ultimately, the acceptance rate achieved in January 2008 has permitted to jointly get a 90% stake, so the amount to be paid directly and indirectly by Criteria CaixaCorp was €852 million (including €172 million in connection with the acquisition of the stake directly from Torreal at the end of 2007). (2) The pro-forma net debt position takes into consideration transactions underway but not yet completed at each close.
80 We would also highlight the increase in value The 73% reduction in the 07 debt position is a result of attributable to investments made in the second the proceeds obtained from half of 2007, mainly The Bank of East Asia (€628 million) and Banco Comercial Portugués ( 94 the IPO (€3,848 million). € million), both in the international finance annual report business, and other investments made in the services sector. The increases have offset the The increase in the net asset value seen from €712 million decline in the value of the portfolio. June 30 is mainly due to the 73% reduction in This decline was confined mainly to Criteria the debt position as a result of the proceeds CaixaCorp’s investments in listed companies obtained from the IPO and the exercise of the (basically Gas Natural, Repsol YPF and Banco Criteria CaixaCorp green shoe (€3,848 million). This has allowed BPI) whose value dropped more than the increase the company to reduce its debt to 4.8% of gross in value marked by the rest of our investments, asset value at December 31, 2007 which offers notably Telefónica (€1,229 million), in the second considerable scope for further investments should half of 2007. they be considered appropriate.
Decrease in debt position €million
-73%
Net (4,708) (1,264) debt
GAV 26,104 26,193
% debt 18.0% 4.8% s/GAV
June 30 December 31
81 6_ Our investment portfolio
Active portfolio management 1
Evidence of Criteria CaixaCorp’s active portfolio The table below shows the main investments management is reflected in the investments and made in 2007, reflecting only new investees for divestments made during the year. the Criteria CaixaCorp group:
Investments
€million % acquired Effective (acquisitions and contributions)
Telefónica 1.46 1,130 CaiFor (50%) / SegurCaixa (20%) 50.00 1,018 The Bank of East Asia 8.89 628 Abertis 1.71 232 Agbar 4.16 172 BME 3.53 123 BCP 1.03 105 Repsol YPF 0.17 53 FinConsum 45.00 50 Port Aventura 3.14 12 Other – 53
Total executed 3,576
Pending commitments
Agbar 680
Total committed 680
Total investments executed and committed 4,256
Investments made by Criteria CaixaCorp in and Pension Funds, and the Spanish anti-trust Financial companies in 2007 include: authority. A further €68 million was paid in dividends. > Grupo CaiFor: On July 11 an agreement was reached with Fortis (its partner at that time) > The Bank of East Asia: In line with the strategy to acquire its 50% stake in the CaiFor Group of acquiring significant stakes in international (leader in the life insurance segment in Spain), financial entities, since July 2007 Critiera an investment it had held since the company’s CaixaCorp has acquired shares on the open foundation in 1992, for €950M. The deal market amounting to 4.34% of the share closed successfully on November 12, 2007 capital (4.13% after capital increase) of Hong- following receipt of the corresponding Kong based The Bank of East Asia, BEA, rated authorization from the Directorate of Insurance the best foreign commercial bank in China in
(1) Excluding operations relating to the company restructuring prior to the IPO described in detail in the Prospectus filed with the CNMV on September 20, 2007.
82 2006 by the trade journal, “The Asian Banker”. The active portfolio 07 In late 2007, Criteria CaixaCorp increased its management that Criteria stake in BEA to 8.89%, after fully subscribing CaixaCorp carries out is reflected to the bank’s capital increase. in the investments and
> It has also increased its stakes in Banco divestments made throughout annual report Comercial Portugués, Boursorama, Banco BPI the year. and Finconsum. Investments made by Criteria CaixaCorp to increase its stakes in Services companies include: marked the end of the acceptance period for Criteria CaixaCorp > Telefónica: Acquisition of 45,000,000 shares the Agbar takeover bid. Shareholders of Telefónica, representing 0.94% of its share representing 50,205,817 shares or 33.55% capital hedged by an equity swap for an of the company’s share capital (or 77.06% of investment of €726.15 million. A further stake the shares to which the bid was targeted) of 0.52% was acquired on the open market accepted. This transaction was completed in for an investment of ¤404 million. January, 2008, and amounted to a total > Agbar: The purchase commitment recognized expense of €680 million in addition to the in the second half of 2007 and pending at €172 million invested in the purchase of stakes the year-end relates to the takeover bid for in Agbar from Torreal. Agbar. On October 1, 2007, Criteria CaixaCorp, > The company also increased its positions in Hisusa, Suez Environnement and Suez Abertis, Repsol YPF and Port Aventura and Environnement España filed before the CNMV acquired “la Caixa”’s 3.53% stake in Bolsas a request for authorization of a public takeover y Mercados Españoles for €123 million. bid for 65,152,672 Agbar shares, representing 43.54% of its share capital. January 16, 2008 The most significant divestments include:
Divestments
€million % sold Effective Consolidated net gain
Suez 1.1 527 220 Caprabo 20.0 259 81 Grupo OHM 40.2 172 45 Atlantia 2.0 287 30 BCP 0.29 36 9
Total 1,281 385
83 6_ Our investment portfolio
> Suez: In December 2006 the operation to sell > Atlantia (formerly Autostrade): In June 2007, the company’s 1.36% stake in Suez got Criteria CaixaCorp sold its entire 2.006% stake underway when 0.3% was divested. In January in Atlantia for €287 million. This operation 2007, Criteria CaixaCorp sold the remaining produced a pre-tax capital gain of €30 million. part of the stake (1.06%) for €527 million, Net IRR since 2006 is 14.7%. obtaining gross capital gains of €278 million (€220 million after taxes). Net IRR since 1999 Involvement in governing bodies is 6.6%. Criteria CaixaCorp is committed to becoming > Caprabo: The sale was completed in involved in the governing bodies of all the September, generating a consolidated pre-tax companies making up its investment portfolio, capital gain of €90 million (a net capital gain playing an active role in defining their future of €81 million). Net IRR since 2003 is 8.0%. policies and strategies and contributing to their growth and development. > OHM Group: the sale of this holding was completed in late July, and generated a Below we show a list of related Directors at consolidated pre-tax capital gain of €50 million these companies at February 29, 2008: (a net capital gain of €45 million). Net IRR since 1998 is 1.5%.
Services - Listed
5 out of 17 2 out of 16 Executive chairman: 2nd vicechairman: Salvador Gabarró Serra Isidro Fainé Casas Directors: Director: Enrique Alcántara García Irazequi Juan María Nin Génova Carlos Kinder Espinosa Juan María Nin Génova Francisco Reynés Massanet
6 out of 21 5 out of 12 Chairman: Chairman and CEO: Isidro Fainé Casas Jorge Mercader Miró 2nd vicechairman: 2nd vicechairman: G3T, S.L., represented by Manuel Raventós Negra Carmen Godia Bull Directors: Directors: Enrique Corominas Vila Marcelino Armenter Vidal Miquel Noguer Planas Enrique Corominas Vila Francisco Reynés Massanet Manuel Raventós Negra Leopoldo Rodés Castañé
2 out of 17 1 out of 15 1st vicechairman 2nd vicechairman: Isidro Fainé Casas Tomás Muniesa Arantegui Director: Antonio Massanell Lavilla
84 Services - Non-listed 07
9 out of 11 4 out of 7 Executive chairman and CEO: Executive chairman: Lluís Rullán Colom Lluís Rullán Colom
Directors: Directors: annual report María Amparo Camarasa Carrasco Mercedes de Pablo López Isidro Fainé Casas Francisco E. Ruiz Armengol Josep Maria Grau Greoles Sebastián Sastre Papiol Antonio Massanell Lavilla Francisco Reynés Massanet Joan Rosell Lastortras Juan Antonio Samaranch Torelló
Sebastián Sastre Papiol (Secretario Criteria CaixaCorp Consejero)
Financial - Listed
2 out of 21 2 out of 10 Directors: Directors: Criteria CaixaCorp, S.A., represented by: “la Caixa” represented by: Marcelino Armenter Vidal Antonio Massanell Lavilla Isidro Fainé Casas Criteria CaixaCorp, S.A., represented by: Francisco Reynés Massanet
Financial - Non-listed
11 out of 11 5 out of 5 Chirman: Chirman: Ricardo Fornesa Ribó Antonio Vila Bertrán CEO: CEO: Tomás Muniesa Arantegui Ángel Esteban Serrano Directors: Directors: Isidro Fainé Casas Juan Antonio Alcaraz García Javier Godó Muntañola Carmen Gimeno Olmos Jorge Mercader Miró Jordi Soldevila Gasset Juan María Nin Génova Manuel Raventós Negra Francisco Reynés Massanet 7 out of 7 Juan Antonio Samaranch Torelló Chirman: Miquel Valls Masseda Josep Ramon Montserrat Miró José Vilarasau Salat Directors: Juan Antonio Alcaraz García 1 out of 1 Carmen Gimeno Olmos Ignacio M. Moreno de Guerra Oyarzábal Sole administrator: Joan Morla Tomàs Miguel Tarré Tarré Inmaculada Puig Pla Jordi Soldevila Gasset
7 out of 7 7 out of 7 Executive chairperson: Chirman: Asunción Ortega Enciso Fernando Cánovas Atienza Directors: Directors: Lluis Deulofeu Fuguet Santiago Armada Martínez de Campos Carmen Gimeno Olmos Ernest Gil Sánchez Jorge Mondéjar López Carmen Gimeno Olmos Olga Roca Casasús Xavier Jaumandreu Patxot Jordi Soldevila Gasset Josep Ramon Montserrat Miró Roser Vilaró Vives Jordi Soldevila Gasset
85 6_ Our investment portfolio
Portfolio returns
real performance of the investment alternatives Criteria CaixaCorp’s listed existing at January 1, 2007 for the net asset investment portfolio once value of the listed portfolio: a hypothetical investment in Criteria CaixaCorp or investment again outperformed the major of the equivalent amount in the Ibex-35 or benchmark indices, despite Eurostoxx-50. the instability of the markets, 2. Daily analysis since the floatation of reaffirming its excellent Criteria CaixaCorp’s listed portfolio with track record. no replicated model of investments and divestments on benchmark indices: In 2007, Criteria CaixaCorp’s listed investment Using October 10, 2007 (the date of Criteria portfolio once again outperformed the major CaixaCorp’s listing) as a base, the performance benchmark indices, despite the instability of the of the listed portfolio has largely tracked the markets. This reaffirms the excellent track record Ibex35, and has been superior to that of the of Criteria CaixaCorp’s listed portfolio which has Eurostoxx50. The following chart shows the real historically offered higher growth the Spanish performance of both indices compared to Criteria (Ibex35) and European (Eurostoxx50) benchmark CaixaCorp’s listed portfolio excluding the impact indices. of purchases/sales to calculate changes in value.
1. 2007 monthly analysis with a replicated model of investments and divestments on benchmark indices: The listed portfolio has outperformed its benchmark indices on a monthly basis since January 1, 2007. The following chart shows the
Performance of Criteria CaixaCorp’s listed portfolio vs. benchmark indices
130
120 19.1%
10.9% 110 10.4%
100
90 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Dec-07
CriteriaCaixaCorp Replicated investments Replicated investments listed portfolio Ibex35 Eurostoxx50
Notes: • Excluding the Telefónica equity swap. • The data in the graph show the domestic market value of an investment in its benchmark index (using the share price at the end of the month), assuming that all of the amounts invested or divested in the portfolio were invested or divested for the same amount in the benchmark index. Taxes and dividend income are excluded. 86 07 annual report Criteria CaixaCorp
Daily analysis since the floatation of Criteria CaixaCorp’s listed portfolio with no replicated model of investments and divestments on benchmark indices.
120
110 +2.1%
100 +2.0% –1.0%
90
80
10/10/2007 25/10/2007 09/11/2007 24/11/2007 09/12/2007 24/12/2007 31/12/2007
Adjusted listed portfolio Ibex 35 Eurostoxx 50
87 6.e
88 Banco BPI Hotel CaribeResort Port Aventura Bolsas yMercados Españoles (BME) Telefónica Grupo Agbar Abertis Repsol YPF Gas Natural Our investments GestiCaixa FinConsum CaixaRenting InverCaixa GDS-Correduría Grupo CaiFor The BankofEastAsia(BEA) Boursorama
89 Criteria CaixaCorp annual report 07 Chairnan: Salvador Gabarró Shares traded: Spain (IBEX-35) CEO: Rafael Villaseca Website: www.gasnatural.com Gas Natural Leading gas operator in Spain
The Gas Natural Group is the leading gas Repsol YPF and Gas Natural sign an agreement operator in Spain. It is an energy services to take part in a consortium with the Angolan multinational focused on the supply, company Sonagol and other international energy distribution and sale of natural gas in Spain, companies to develop an integrated gas project Latin America, Italy and France and electricity in Angola. generation in Spain and Puerto Rico. Suez increases its share in Gas Natural by 5.9%, putting its direct interest at 6.3% (Criteria 2007 highlights CaixaCorp and Suez also hold 5% through HISUSA, in which Criteria CaixaCorp holds a The company unveiled its 2008-2012 Strategic 49% stake). Plan, through which Gas Natural aims to become Gas Natural increases its stake in Gas Natural a vertically integrated international operator and BAN (Argentina) to 70% with an investment of enter new developed markets in the Atlantic and USD55.4 million. Mediterranean Basin. Among its key financial targets, the company plans to achieve a CAGR Gas Natural is awarded three major contracts of over 8% in net profit and 10% in dividends, for 2008 with Adif, TMB and Telefónica, with a forecast investment of €12,500 million. amounting to a total supply of 1,850 GWh. Purchase of five combined-cycle units (2,233 MWh of installed capacity) and a gas pipeline in Business performance in the year Mexico valued at USD1,448 million. This Gas Natural posted double digit net profit growth acquisition gives Gas Natural a platform from in 2007 despite the decline in gains from assets which to embark on future growth opportunities sales and the fact the company was operating in the NAFTA markets (Canada, the USA and in an unfavorable scenario during the year. On Mexico). one hand, the mild winter and high rainfall levels led to a fall in gas sales and a drop in combined- Gas Natural sells its 9.4% stake in Naturgas cycle power generation, negatively impacting Energía to Energías de Portugal (EDP) for €122 electricity prices in the pool. On the other hand, million. the weakness of the dollar and Latin American Gas Natural acquires the gas group Italmeco, currencies against the euro has had a negative with 350,000 customers in Italy. impact on dollar-denominated activities, such as
Key financial data
€million 240 Income statement 2007 2006 2005 Revenues 10,093 10,348 8,527 220 EBITDA 2,277 1,912 1,519 200 Operating income 1,567 1,263 969 Net Profit 959 855 749 180 Balance sheet 2007 2006 2005 160 Net debt 3,690 3,091 3,615 140 Total Assets 15,420 13,355 13,712 Total equity 6,070 5,652 5,411 120 Data per share 2007 2006 2005 100 EPS ( ) 2.14 1.91 1.67 80 Dividends accrued 1.04 0.90 0.75 01/01/2004 01/01/2005 01/01/2006 01/01/2007 Operating indicators 2007 2006 2005 Gas Natural Bloomberg Dow Jones Gas customers ('000) 11,115 10,662 10,179 European Utilities Industrial Gas supplied (GWh) 292,730 294,451 305,324 Electric power produced (GWh) 18,700 19,514 10,466
90 midstream operations, electricity generation in businesses, which in addition to growth, confer 07 Puerto Rico or gas distribution in Latin America. secure and stable cashflow that allow the group Nonetheless, group EBITDA rose almost 20% to meet its shareholder remuneration program. and net profit grew more than 10% driven The Strategy Plan presented to the market last mainly by the strong performance of the gas November is ambitious and its main objective distribution business in Latin America, and, is to transform the company into a vertically- annual report above all, wholesale and retail gas sales, where integrated international natural gas and LNG it reported substantially growth in a fully operator. A healthy financial structure will allow liberalized market and achieving high customer it to meet the challenges put down by this retention levels. Strategy Plan via projected investments €12,500 million and maintaining dividend increase of Our opinion... 10% through to 2012, and maintaining its Criteria CaixaCorp current risk and credit ratings (A from Standard Of all the world’s energies, natural gas is expected & Poor’s). to show the strongest growth in the future, due mainly to the increasing concerns over the environment and the need for gas for power generation. A substantial part of this growth must be covered by liquefied natural gas (LNG), a market in which Gas Natural, along with Repsol YPF, holds a privileged position. In a scenario which is increasingly global and complex, vertical integration throughout the value chain and the availability of competitive and flexible gas are a key advantage and a significant platform for growth. In addition to Gas Natural’s strong position in the liberalized markets, more than half the group's EBITDA is obtained from regulated
Criteria CaixaCorp in Gas Natural
Market value (€million) 6,366 Stake held 35.53% Voting rights 33.06% Board representation 5 out of 17
91 Chairman: Antonio Brufau Niubó Shares traded: Madrid (IBEX-35), New York and Argentina 1st vicechairman: Luis Fernando del Rivero Asensio Website: www.repsolypf.com Repsol YPF One of the world’s largest oil companies
Repsol YPF is a leading international Repsol YPF and Gas Natural sign an agreement integrated oil and gas company, operating to take part in a consortium with the Angolan in more than 30 countries and a leadership company Sonagol and other international energy position in Spain and Argentina. It is one companies to develop an integrated gas project of the ten largest private oil companies in Angola. in the world and the largest private energy company in Latin America Repsol YPF is awarded a 15-year contract worth measured by assets. US$15,000 to supply liquefied natural gas (LNG) to a regasification plant at the port of Manzanillo (Mexico). 2007 highlights Repsol YPF sells its sky-scraper designed by Repsol YPF and the Petersen group signed an Norman Foster on Madrid’s Paseo de la agreement for the sale of up to 25% of YPF. In Castellana to Caja Madrid for €815 million. the first phase, Repsol YPF will sell 14.9% of YPF for US$2,235 million. The agreement also Business performance in the year includes a call option on another 10.1% of the company and contemplates the upcoming IPO In 2007, the oil sector witnessed an 11% increase of approximately 20% of YPF. international crude prices referenced to the Brent index, which, due to the strength of the euro Sale of 10% of CLH for €353 million, against the dollar did not have the expected impact generating a gross capital gain of €298 million. on industry earnings. Furthermore, the company Following the sale, Repsol YPF’s stake in CLH has been operating in a difficult context, marked stands at 15%. by a generalized increase in lifting costs and greater New discoveries include: gas field in Bolivia fiscal pressures exerted by producer countries. (Repsol YPF is the consortium operator with a Nonetheless, Repsol YPF reported record net profit stake of 37.5%) and a deep water oil field in of €3,188 million, paid a generous dividend (c.40% the Santos basin (Brazil) (25% stake held jointly increase) and reduced its net debt by 26% thanks with Petrobrás and British Gas). to its strong cashflow generation.
Key financial data
€million 200 Income statement 2007 2006 2005
Revenues 53,865 55,080 51,045 180 EBITDA 8,573 9,053 9,139 Operating income 5,808 5,911 6,161 160 Net Profit 3,188 3,124 3,120 Balance sheet 2007 2006 2005 140 Net debt 3,493 4,396 4,513 Total Assets 47,164 45,201 45,782 120 Total equity 18,511 17,433 16,262 100 Data per share 2007 2006 2005 EPS ( ) 2.61 2.56 2.56 80 Dividends accrued 0.86 0.66 0.55 01/01/2004 01/01/2005 01/01/2006 01/01/2007
Operating indicators 2007 2006 2005 Repsol YPF Bloomberg Dow Jones Hydrocarbon reserves (Mbep) 2,404 2,612 3,328 European Utilities Industrial Hydrocarbon production (Mbep) 379 412 416 Processed crude (Mtep) 57 56 55 At the end of 2007 Repsol YPF carried out an Repsol YPF is one of the ten 07 largest private oil companies operation which will be key to developing its in the world and the main future strategy. The sale of 25% of YPF to the Petersen group and subsequent placement of private energy company in an additional stake via a share offering is Latin America measured by important for the future development of Repsol annual report assets. It leads the market in YPF’s Strategy Plan as it will mean the Spain and Argentina. incorporation of a Argentinean industrial partner with a enormous experience in the regulated markets, while at the same time better diversifying its assets and re-balancing its position Criteria CaixaCorp Our opinion... in Latin America and improving its financial Over the last seven years Repsol YPF has been structure. This will put the company in an operating in an extremely complex environment, unbeatable position to achieve organic growth particularly in Latin America but nonetheless and remunerate shareholders. Therefore, the has posted consistent growth in net profit, cash recently-announced Strategy Plan for 2008- generation, investment and, above all, dividends, 2012 puts forward some ambitious financial while at the same time considerably reducing targets, including a dividend increase of over debt. The company’s business mix, with a lower 10% a year. weighting of upstream activities than the industry average, coupled with an undisputed position Criteria CaixaCorp in Repsol YPF of leadership in the Spanish R&M market, a fully integrated business covering the entire value Market value (€ million) 3,770 chain in Argentina and a stake of 30.8% in Gas Stake held 12.67% Natural, offers shareholders lower exposure to Voting rights* 14.29% international crude price volatility and therefore Board representation 2 out of 16 more stable cashflow generation. (*) Limited to 10% by the company's Bylaws
€million € 3,500 1.2
3,000 1.0 2,500 0.8 2,000 0.6 1,500 0.4 1,000 500 0.2 0 0.0 2001 2002 2003 2004 2005 2006 2007
Net profit Dividend per share
93 Chairman: Isidro Fainé Casas Shares traded: Spain (IBEX-35) CEO: Salvador Alemany Mas Website: www.abertis.com Abertis European leader in infrastructure management
Abertis is one of the leading European On December 31, 2007, Abertis Logística operators in transport and communications reached an agreement to acquire €202 million infrastructure management. It operates in worth of properties in Barcelona and Madrid the following sectors: toll roads, from Inmobiliaria Colonial for its logistics telecommunications infrastructure, airports, activities. car parks and the development of logistics On January 4, 2008, Abertis reached a platforms. The company is present in 16 preliminary agreement to acquire ACS’ stakes countries through its different areas of in two toll road concessions in Chile for infrastructure management. approximately €700 million.
2007 highlights Business performance in the year On December 5, 2006, Abertis acquired 32% In 2007 Abertis’ key financial indicators grew of the listed French satellite company, Eutelsat, significantly (revenues +9%, EBITDA +8%), due for €1,077 million, closing the operation in mainly to the positive performance marked by 2007. its different business activities, particularly toll roads, telecommunications and airports which On September 19, 2007, Abertis acquired fifteen together accounted for 95% and 99% of group airports in Latin America from ACS for €271 revenue and EBITDA respectively. million. Toll roads: The 3% increase in total ADT (3.2% On October 31, 2007, Abertis Telecom purchased in Spain, 3% Sanef) and the 3.1% tariff rise led 28.4% of the satellite operator Hispasat for to growth of 8% and 9% in revenues and €199 million. The operation is pending approval EBITDA respectively in 2007. by the competition authorities. On November 23, 2007, Abertis bought an additional 4.6% of Portuguese toll road company Brisa for €272 million, putting its total stake at 14.6%
Key financial data
€million Income statement 2007 2006 2005 Income /Operating indicators 2007 2006 2005 Revenues 3,620 3,335 1,906 Toll road management 2,751 2,537 1,209 EBITDA 2,269 2,099 1,204 ADT 26,450 25,669 24,825 EBITDA margin 62.7% 62.9% 63.2% Telecommunication management 396 369 281 EBIT Operating income 1,485 1,343 833 Airport management 300 282 282 Net Profit 682 530 511 Number of passengers (TBI) (thousand million) 23.6 22.2 21.3 Balance sheet 2007 2006 2005 Average number of employees 11,364 10,763 7,831 Total Assets 20,828 19,217 8,447 Total equity 5,020 4,447 3,036 Net debt 12,510 11,836 4,211 Data per share 2007 2006 2005 EPS ( ) 1.07 0.87 0.88 Dividends accrued 0.53 0.50 0.50
94 Telecommunciations: This activity performed Abertis is one of the leading 07 well on the back of the renewal of digital and European operators in analogue contracts and increased DTT coverage, infrastructures, transport and with revenues up 7% and EBITDA growth of communications management, 12% in 2007 (lfl).
with sustained growth and annual report Airports: Revenues grew 6% and EBITDA rose attractive profitability. 14% (lfl) as a result of higher passenger numbers, the tariff increase and cost control. The company posted a net profit increase of 29% to €682 million, 20% stripping out non- Our opinion... Criteria CaixaCorp recurring items. Abertis’ low risk profile offers sustained growth Abertis has diversified further by sector and and an attractive return. The company operates geographical area, with investments worth in regulated, transparent markets and generates €2,140 million (the highlight is the €1,077 stable, recurrent cashflow. It also offers an million investment in Eutelsat). The investments increasing and sustainable shareholder in DCA and Hispasat will be recognized in 2008. remuneration policy. Gross debt was €12,873 million, with an average cost of 5.2%, an average maturity of 8.4 years Criteria CaixaCorp in and 83% bearing a fixed interest rate. Abertis Infraestructuras
Market value (€million) 2,972 Stake held 21.12% Voting rights 24.99% Board representation 6 out of 21
240
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180
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80 01/01/2004 01/01/2005 01/01/2006 01/01/2007
Abertis Ibex 35 Eurostoxx 50
95 Chairman: Jorge Mercader Miró Shares traded: Spain (IBEX-35) Managing director: Angel Simón Grimaldos Website: www.agbar.es Grupo Agbar Spanish leader in drinking water supply and health insurance
Grupo Agbar is a multi-concession company management company The Carlyle Group for which operates in areas related to €1,480 million. Agbar received €541.6 million community services. Its core businesses are from the sale of its 53.1% stake in Applus+, the complete water cycle, health insurance generating a net capital gain of €217 million. and healthcare management. Grupo Agbar Grupo Agbar will manage drinking water supply is one of the world’s leading water and wastewater treatment projects in Jiangsu companies and the top-ranking private province (China) – population of 70 million urban water management company in people – in a joint venture with Golden State Spain, where serves more than 20 million Water Group Corporation. The operation involves inhabitants. It also has a significant three 30-year contracts and will require an international presence. The company’s investment of €30 million by Agbar. healthcare business is carried out through Adeslas, Spanish market leader by premium The company is awarded a five and a half year volume and clients, with more than 2.6 concession contract for the management and million insured clients. supply of water and waste treatment services in the province of Orán (Algeria).
2007 highlights Business performance in the year Takeover bid filed on the shares not controlled Grupo Agbar reported net profit of €352.5 by the main shareholders of SGAB by Criteria million in 2007, an increase of 110.8% on 2006. CaixaCorp, Hisusa, Suez Environnement España This rise was due largely to the sale of Applus+ and Suez Environnement. After its completion, which implies an after-tax capital gain of €217 they now jointly control 90% of its capital. million, and the strong organic performance of Criteria CaixaCorp’s stake in SGAB stands at the group's core businesses, i.e. water and waste 44.10%. management and healthcare. Stripping out the Grupo Agbar (53.1%), Unión Fenosa (25%) and extraordinary results, recurrent net profit stood Caja Madrid (21.9%) sell Applus+ to fund at €147 million, an increase of 6% on 2006.
Key financial data
€million Income statement 2007* 2006 2005 240 Revenues 2,861 3,122 2,749 220 EBITDA 557 580 481 200 Operating income 371 372 303 Net profit 353 167 252 180
Balance sheet 2007* 2006 2005 160
Net debt 533 1,600 994 140 Total assets 5,951 6,303 5,604 Total equity 2,695 2,648 2,569 120 Data per share 2007* 2006 2005 100 EPS ( ) 2.356 1.12 1.71 80 Dividends accrued 0.455 0.435 0.423 01/01/2004 01/01/2005 01/01/2006 01/01/2007 Operating data 2007* 2006 2005 Agbar Ibex 35 Eurostoxx 50 Revenues - water and waste 1,563.2 1,427.1 1,217.6 Revenues - healthcare 1,233.2 1,088.0 987.3 Revenues - inspection and certification 0 542.8 414.4 Other revenues 64.6 63.8 129.4
(*) Grupo Applus+ is recognized on the 2007 consolidated income statement and balance sheet as a discontinued operation. 96 The positive performance of the Water and In the water business, the group also entered 07 Healthcare units is reflected in the organic growth two new international markets: China and achieved in Spain and abroad, with revenues Algeria. It also consolidated its position in the rising 8% and operating profit up 10%. UK, through Bristol Water, where good forecasts have been confirmed now that the proposed business plan has been implemented. annual report
Agbar Group is Spain's urban Grupo Agbar is also involved in two major water management company projects to improved the quality and quantity of the water supply in the Barcelona metropolitan and one of the world leaders in area from 2009: the installation of inverse
its sector. It also deals in health osmosis membranes at the Sant Joan Despí Criteria CaixaCorp insurance and health care drinking water treatment plant (investment of management, carried out €60 million) and the construction of a through Adeslas. desalination plant at Llobregat (investment: €150 million). In 2007, Adeslas consolidated its leadership position in the Spanish health insurance market, In 2007, Grupo Agbar was awarded 21 new in terms of both the number of customers drinking water supply contracts (servicing 44,000 insured and premiums received, increasing its people) in the Water and Wastewater customer portfolio by 219,670 (+9.2% vs. year- management sector in Spain, and renewed a end 2006) with more than 2.6 million customers further 59 contracts (213,000 people). It won insured. 23 tenders in the sewerage business (159,000 people) and was awarded an additional 41 management contracts for wastewater treatment stations (equivalent to 285,000 people).
97 The sale of Applus+ has allowed Grupo Agbar The success of the takeover bid will allow the to significantly reduce its net debt, from €1,599 groups led by “la Caixa” and Suez to reinforce million at year-end 2006 to €533 million at year- Agbar's business project, jointly managing the end 2007. This puts the company in a privileged company in accordance with the criteria laid position, allowing it to successfully carry out out in the shareholders agreement. new investments in its strategic business areas. By securing control of Agbar, Criteria CaixaCorp will be able to reinforce its active management Our opinion... model, predicated on participating in the In 2007, Criteria CaixaCorp, S.A., jointly with governing bodies and having significant influence Suez Environnement, S.A., Suez Environnement in the decision-making of its investees, in the España, S.L.U. and HISUSA (the holding 51% development of their businesses and in drawing owned by Suez Environnement España, S.L.U up corporate deals, with the overriding aim of and 49% owned by Criteria CaixaCorp, S.A.), generating significant value for shareholders. launched a takeover bid for 100% of the shares The bidding companies intend to keep Agbar of Sociedad General de Aguas de Barcelona, as a listed company for the next two years, with S.A. not already owned by the bidders for a a free float of around 30%. price of ¤27.65 per share. The takeover bid was authorized by the CNMV on December 27, 2007 and completed successfully in January 2008, having been accepted by 77.06% of the shares subject to the bid, the equivalent of 33.55% of Agbar’s share capital. Following completion of the takeover bid, the buyers now control 90% of Agbar’s share capital, with Criteria CaixaCorp, S.A.’s stake totaling 44.10%.
Criteria CaixaCorp in Agbar (at 31/12/2007*)
Market value (€ million) €1,140 million
Payment pending from takeover bid €680 million (16.44%) (*)
Stake held 27.67%
Voting rights 56.46% (jointly with Suez Environnement –concerted action- in accordance with the provisions of the shareholders agreement signed on July 18, 2006, and amended on November 21 and December 19, 2007).
Board representation 5 out of 12 (at February 28, 2008)
(*) Following completion of the takeover bid for Agbar, Criteria CaixaCorp, S.A. holds a stake of 44.10% in Agbar’s share capital. Pursuant to the provisions of the shareholders agreement signed on July 18, 2006, amended on November 21 and December 19, 2007, Criteria CaixaCorp, S.A. and Suez Environnement, with a joint stake of 90% in Agbar, exercise joint and concerted control of the company.
98 99 Criteria CaixaCorp annual report 07 Chairman: César Alierta Izuel Shares traded: Europe, USA, Latin America, Japan 1st vice chairman: Isidro Fainé Casas Website: www.telefonica.es Telefónica Leading full-service telecommunications operator in Europe
Telefónica is one of the world’s leading full- 2007 highlights service telecommunications companies, with Telefónica presents its growth targets for 2006- a significant international presence in 2010E, which call for a CAGR in revenues of Europe, Latin America and Africa. In Spain, 5%-8%, 7%-11% in OIBDA, 16%-20% in Telefónica offers services to more than 46 operating income, along with operating cashflow million customers, with more than 134 generation of more than 60,000 million in four million in Latin America and approximately years, underpinned by strong organic growth 42 million in the other European countries at all of the company’s businesses and focusing where it operates. Telefónica this year on shareholder remuneration. successfully completed its integration of European mobile telephony company O2, Telefónica proposes to pay a dividend of €1 per and consolidated its European presence share against 2008 profits, bringing forward by with the acquisition of a significant stake one year its commitment to double the dividend in Telecom Italia. The Group ranks fourth paid in 2005. among the world’s leading Telefónica buys back 147.6 million of its own telecommunications companies, it is the shares, the equivalent of 3% of its share capital. largest full-service European carrier and second in the Eurostoxx 50 ranking. Telefónica indirectly acquires a 10% share of Telecom Italia’s voting rights. VIVO (Telefónica’s Brazilian mobile subsidiary) agrees the purchase of controlling stakes in mobile carriers Telemig Celular Participaçoes and Tele Norte Celular Participaçoes, subject to the approval of the regulators, strengthening its leadership position in the mobile telephone market in Brazil.
Key financial data
€million 220 Income statement 2007 2006 2005 Revenues 56,441 52,901 37,383 200 OIBDA 22,825 19,126 15,056 Operating income 13,388 9,421 8,363 180 Net profit 8,906 6,233 4,446 160 Balance sheet 2007 2006 2005 140 Net debt 45,284 52,145 30,067 Total Assets 105,873 108,982 73,174 120 Total equity 22,855 20,001 16,158 Data per share 2007 2006 2005 100 EPS ( ) 1.87 1.304 0.913 80 Dividends accrued 0.65 0.55 0.50 01/01/2004 01/01/2005 01/01/2006 01/01/2007 Operating indicators 2007 2006 2005 Telefónica Ibex 35 Eurostoxx Telecommunications Revenues - Spain 37% 37% 51% Revenues - Latin America 35% 35% 42% Revenues - Europe 26% 27% 6% Revenues - Other 2% 1% 1% Total accesses (million) 228.5 203.2 153.5
100 with an increase in free cashflow of 33% to Telefónica ranks fourth 07 among the world’s leading €14,798 million. 2007 results reflect the telecommunications company’s sound growth profile, underpinned by the organic growth of its businesses, the companies. It ranks first as value contributed by geographical and business the largest full-service diversification, an efficient cost structure, the annual report European carrier and second increasingly significant synergies obtained via in the Eurostoxx 50 ranking. integrated management and an active portfolio rotation when appropriate (in 2007 more than €2,600 million in net capital gains from the sale of stakes in Endemol and Airwave). Telefónica’s Criteria CaixaCorp Telefónica completes the sale of its 99.7% stake geographical balance and international in Endemol for €2,629 million, generating capital expansion is reflected in its breakdown of gains of €1,368 million. revenue by region: Spain accounts for 37%, the rest of Europe 26% and Latin America 35%. Telefónica sells its 100% stake in the UK company Airwave O2 Ltd for a capital gain of At year-end 2007 Telefónica had more than 228 €1,296 million. million accesses, an increase of 12.5% vs. December 2006 and ranks as the third largest Business performance in the year company in the world measured by customer accesses. Telefónica’s customer base grew by In 2007, Telefónica consolidated its position of more than 25 million accesses as a result of the leadership as a full-service telecommunications strong commercial activity in all its markets. operator in highly-competitive markets. Following on from previous years, in 2007 Telefónica posted growth above the sector average and is a benchmark for international management. Telefónica posted record net profit of €8,906 million in 2007, up 42.9% vs. 2006,
101 Our opinion... Telefónica's primary objective of remunerating shareholders has been evidenced further by Telefónica offers sustainable growth, the announcement of a dividend payment of profitability, and geographical and business one (1) euro per share against 2008 results, scale and diversity. Shareholder remuneration bringing forward by one year the commitment and organic business growth are the company’s of doubling its 2005 dividend by 2009 and the main strategic objectives for the next few years. introduction of new share buyback programs. Over the past few years, Criteria CaixaCorp’s stake in Telefónica has increased significantly in value. In 2007, Telefónica shareholders obtained a return of 41.9% on their investment (31.2% in 2006) as a result of the positive share price performance (+37.8% in 2007) and via dividend payments.
Criteria CaixaCorp in Telefónica
Market value * (€ million) 5,540 Stake held * 5.48% Voting rights 5.48% Board representation 2 out of 17
(*) Includes the 0.94% stake subject to an equity swap for an investment of €726 million
102 103 Criteria CaixaCorp annual report 07 Chairman: Antonio J. Zoido Martínez Shares traded: Spain (IBEX-35) Ist vicechairman: José A. Barreiro Hernández Website: www.bolsasymercados.es BME BME, the fourth largest European exchange
Bolsas y Mercados Españoles (BME) is the Creation of new indices, development of ETFs company that integrates all the securities and the Alternative Equity Market (MAB) for markets and financial systems in Spain. The new investment vehicles, etc. As a consequence, parent group comprises the Madrid, BME is one of the leading exchanges able to Barcelona, Bilbao and Valencia stock face the growing international competition and exchanges, MF Mercados Financieros, to contribute to a higher liquidity in the market. Iberclear, BME Consulting, the Alternative Equity Market (MAB) and Instituto BME. The SIBE platform (the electronic trading system) has started operating in the Dominican Republic 2007 highlights stock market, meaning that five Latin American markets are now using the Spanish trading The Spanish stock market ranks fourth in Europe platform. by size, while Spain is the fifth largest economy by GDP. Business performance in the year In July 2007, Bolsas y Mercados Españoles was Performance highlights by business line are: listed on the Ibex35 and in October it joined > Equity: cash traded in equities on the SIBE the ranks of the Dow Jones Spain Titans 30. system increased by 45% to €1,665,873 2007 was an exceptional year, with records in million. trading volume, capitalization and liquidity. It > Settlement: the number of trades settled was also a historic year for IPOs, with a total of during the year, including equity trades and ten public offerings made, beating the previous private and public fixed income securities, highest volume reached in 2000. increased by 26% to 44 million operations. During the year, several new services and > Derivatives: 52 million contracts traded. products were made available to investors:
Key financial data
€million 180 Income statement 2007 2006 2005 170 Revenues 377 285 233 160 EBITDA 285 191 145 Operating income 275 185 140 150 Net Profit 201 131 102 140 Balance sheet 2007 2006 2005 130 Net debt -475 -358 -404 120 Total assets 5,176 4,385 3,592 110 Total equity 499 428 475 100 Data per share 2007 2006 2005 90 EPS (€) 2.41 1.56 1.22 80 DPS (€) 1.55 0.92 0.52 01/01/2004 01/01/2005 01/01/2006 01/01/2007 Operating indicators 2007 2006 2005 BME Ibex 35 Eurostoxx 50 Trading Volume - Equity 1,672,399 1,158,899 850,421 Trading Volume - Fixed Income 1,303,019 1,172,564 1,196,673 Trading Volume - Derivatives (million contracts) 51.9 47.1 40.1
104 The company reported a net profit of 201 € Bolsas y Mercados Españoles 07 million, an increase of 54% compared to the ranks fourth in Europe by previous year due to the strong revenue growth size. In July 2007, it was resulting from the 33% rise in trading volume listed on the Ibex35 and in and control over operating costs (up only 1.8%). October it joined the ranks annual report All business units reported strong EBITDA, of the Dow Jones Spain especially equities (+44%) and the settlement Titans 30. business (+62%).
Our opinion... Criteria CaixaCorp This investment offers a high dividend yield (a Criteria CaixaCorp in Bolsas payout of over 70% in 2007). The company has y Mercados Españoles one of the highest margins in the sector. The Market value (€ million) 138 net profit has grown significantly since the IPO Stake held 3.53% in July 2007. Voting rights 3.53% Board representation 1 out of 15
105 Chairman: Lluís Rullán Colom Shares traded: – CEO: Lluís Rullán Colom Website: www.portaventura.es Port Aventura Leading theme park in Spain and the second largest in southern Europe
Port Aventura is the leading theme park in 2007 highlights Spain and the second largest in southern Europe by number of visits. With more than Port Aventura posted a 9.5% increase in four million visits in 2007, Port Aventura revenues in 2007, fuelled mainly by increases has grown steadily, consistently in both the numbers of visitors to the park (+5% incorporating new attractions and to a new record high of 4.1 million) and the branching into new business areas which number of hotel guests (6% increase in average have changed it from a mere theme park occupancy, to an average of 76%). These drove to a resort. a 19% improvement in net profit over 2006. This performance is the result of the company’s focus on becoming a family leisure resort and branching into new business areas, with the aim of turning Port Aventura into a unique all- year resort. Evidence of this is the new attraction opened in 2007: Furius Baco, a roller coaster ride which goes from 0 to 135 km/h in 3 seconds and the celebration of special events at Halloween and Christmas and the access to the sea through the inauguration of the Beach Club in 2006.
Key financial data Sales, EBITDA & number of visits performance
€million
Income statement 2007 2006 2005 €million Millions of visits Revenues 183 167 143 200 182.6 4.2 EBITDA 49 45 39 166.7 Operating income 32 27 21 160 142.7 4.0 Net profit 15 12 6 128.8 120 3.8 Balance sheet 2007 2006 2005 Net debt 289 222 223 80 3.6 Total assets 561 439 413 39.4 44.8 49.2 Net equity 191 176 163 40 24.4 3.4
Other data 2007 2006 2005 0 3.2 2004 2005 2006 2007 EPS* ( ) 5.2 2.5 1.3 Avg. number of employees 2,556 2,556 2,364 Sales Ebitda Number of visits Operating data 2007 2006 2005 Number of visits (thousand) 4,112 3,924 3,800
* In 2007 a capital decrease was made by buying shares to reduce the number of shares by virtually half.
106 Also, progress was made in 2007 on the zoning Our opinion... 07 project for the land adjacent to the park and Port Aventura, which currently consists of a the construction of three golf courses (totaling theme park, a water park, a Beach club and 45 holes) expected to be opened in the second three superior 4-star hotels (one of which is the half of 2008. Hotel Caribe Resort, under management annual report At the same time, the company is developing contract), is growing steadily, implementing the a SCR project in order to strengthen the position measure necessary to become the second largest and perception of Port Aventura as a responsible resort in Europe and the only one with access company which is committed to its social and to the sea, with a diversified offer and unique environmental surroundings. attractions which are becoming increasingly Criteria CaixaCorp popular with the general public and are making it an all-year-round tourist destination in itself. Port Aventura is in a process Synergies deriving from different business of continuous growth, with a activities and the on-going development of new, diversified offer full of unique complementary businesses, should lead to attractions which makes it an economies of scale and more efficient all-year-round tourist management, in addition to greater return for destination in itself. shareholders, while at the same time pursuing the aim of optimizing service quality and working in harmony with the social and environmental surroundings which define the company.
Criteria CaixaCorp in Port Aventura
Market value (€ million) 830 Stake held 97.12% Voting rights 97.12% Board representation 9 out of 11
107 Chairman: Lluís Rullán Colom Shares traded: – Website: www.portaventura.es Hotel Caribe Resort
Hotel Caribe Resort is a 504-room hotel The Hotel Caribe Resort is located inside the Port Aventura resort. It built around a large central is located on a 75,000 m2 plot and built lake and swimming pools on around a central lake and swimming pools 75,000 m2 of land, making it (area of more than 6,000m2), making it the the only resort of its kind on only resort of this kind in the Iberian peninsula. the Iberian Peninsula. Since 2006 the hotel has been managed by Port Aventura to take advantage of its sales force and obtain synergies. Business performance in the year In 2007 the hotel reported an increase in both the occupancy rate (+9%) and average revenue per room (2%) vs. 2006. Stable efficiency ratios resulted an 11% increase in EBITDA. These results are fruit of the effort made by Port Aventura to extend and diversify its offer and to turn Port Aventura into a unique resort that is open all year round.
Key financial data Ebitda and Overnight stays performance
€thousand
Income statement 2007 2006 2005 €million Overnight stays Revenues 5,642 5,387 12,398* EBITDA 4,839 4,362 2,663 6,000 280.000 Operating income 1,769 1,239 -569 5,000 240.000 Neto profit 428 166 -1,320 4,000 200.000 Balance sheet 2007 2006 2005 3,000 160.000 Net debt 25,015 26,965 28,159 Total assets 44,069 45,348 47,203 2,000 120.000 Net equity 18,363 17,936 17,769 1,000 80.000 Other data 2007 2006 2005 0 EPS ( ) 0.02 0.01 -0.07 2004 2005 2006 2007 Avg. Number of employees - - 156 Ebitda Overnight stays Operating data 2007 2006 2005 Overnight stays 263,171 238,204 211,691
* The hotel has been managed by Port Aventura since 2006 and receives annual income for its services equivalent to the income generated by the hotel business. This is booked as “Revenues”. 108 Market value( Criteria CaixaCorpinHotelCaribeResort Board representation Voting rights Stake held € million) 4 outof7 60% 60% 24 109 Criteria CaixaCorp annual report 07 Chairman: Artur Santos Silva Shares traded: Portugal Ist vicechairman: Carlos da Camâra Pestana Website: www.bancobpi.pt Banco BPI A reputable brand and operational excellence
BPI is the fourth largest private Portuguese On October 25, 2007, BPI’s Board of Directors financial group. Headed by Banco BPI, it is proposed a friendly merger with Banco Comercial a multi-specialist financial group, centred Portugués, though negotiations between the on banking activities, offering a full range banks finally broke down on November 25, 2007. of financial products and services to business, institutional and private Business performance in the year customers. In 2007 Banco BPI reported a 14.0% increase in total assets. Total customer funds and net 2007 highlights loans to customers rose by 10.8% and 10.6% On March 13, 2006 Banco Comercial Portugués respectively, in relation to 2006. Net profit (the leading Portuguese private bank) announced increased by 15% to €355 million and EPS was a takeover bid for 100% of BPI at a price of €0.47 (+15%). ROE increased to 22.4%. €5.7 per share. This bid was considered to be This improvement owed basically to the rise in hostile and rejected by BPI’s Board of Directors. NII (+14%), fees (+13%) and net trading income On April 24, 2007 Banco Comercial Portugués (+60%), although this was partly offset by the increased its offer to €7 per share, conditional increase in operating expenses (+13%) relating on 82.5% acceptance if Banco BPI’s 17.5% to the branch-opening plan and higher defaults limit on voting rights remained unchanged. (+158%) resulting from the increase in lending The bid was unsuccessful and was finalized on volumes. May 7, 2007.
Key financial data
€million Income statement 2007 2006 2005 280 Net interest income 662 581 546 260 Gross income 1,216 1,018 899 240 Net operating income 562 442 379 Net profit 355 309 251 220 200 Business data 2007 2006 2005 180 Net loans to customers 27,231 24,630 20,963 160 Customer funds 40,916 36,911 32,880 Total banking business volume 68,147 61,541 53,843 140 Total equity 1,635 1,451 1,181 120 Total Tier 9.9% 9.4% 11.5% 100 Data per share 2007 2006 2005 80 01/01/2004 01/01/2005 01/01/2006 01/01/2007 Number of shares (million) 760 760 760 EPS ( ) 0.47 0.41 0.33 Dividends accrued 0.16 0.12 0.10 Banco BPI Portugal PSI20 D.J. Eurostoxx Banks Operating data 2007 2006 2005 Cost-to-Income ratio 53.7% 56.6% 57.7% NPL ratio 1.0% 1.1% 1.3% ROE 22.4% 24.3% 23.7% Number of branches 803 692 622 110 Number of employees 9,345 8,288 7,493 Our opinion... Banco BPI has taken 07 advantage of market “la Caixa”’s investment in BPI dates back to opportunities to grow and 1995. Since then, “la Caixa” has accompanied develop its skills. As a result, the entity on a process of far-reaching changes and various acquisitions through which Banco its total assets have grown annual report BPI has changed from an investment bank to a by more than 38% in the retail bank and become fourth in the ranking last five years. of private financial entities in Portugal. Banco BPI is a financial institution that strategically fit with “la Caixa”’s philosophy. Criteria CaixaCorp in Banco BPI Criteria CaixaCorp
Banco BPI has taken advantage of opportunities Market value (€ million) 1,019 arising on the Portuguese market (and on the Stake held 25.02% international markets, mainly Angola) to grow and Voting rights 17.5% hone its skills and, as a result, its total assets have (by-articles of association grown by more than 38% in the last five years and stipulated its net profit has risen by more than 120%, achieving maximum) a market share of 10% in Portugal. Board representation 2 out of 21
111 Chairman: Vincent Taupin Shares traded: France CEO: Vincent Taupin Website: www.boursorama.com Boursorama Leading online distributor of savings products
Incorporated in 1995 with total assets of authorities gave their approval), an additional approximately €3,000 million, Boursorama 3.51% on the market, and another 1.58% after is a French financial company belonging to the end of the takeover acceptance period, after the Société Générale group (its main shareholder with a 56% stake). It is one of a bid was launched for 100% of the company the leading European online distributors in late October. of savings products and operates in four OnVista AG is the owner of the leading financial countries: France, as an online bank, and information website in Germany: in the UK, Spain and Germany as an online www.onvista.de. This acquisition will enable broker. Boursorama to accelerate the development of its online distribution of savings products in 2007 highlights Germany. Following purchase and absorption of CaixaBank Business performance in the year France in 2006, completed in December of the same year, Boursorama shifted its activity in The company reported a net profit increase of France towards a direct banking model, including 68% in 2007 to €48 million. This was due to a network of 20 branches and a full range of the increase in the banking business, boosted banking products and services carrying the by the acquisition of Caixabank France in 2006 Boursorama Banque brand. and higher advertising revenues, deriving from the growing contribution from OnVista. In the last quarter of 2007, the bank acquired Additionally, synergies deriving from the 82.49% of OnVista AG following the purchase reorganization of its activities in France and the of the 77.40% agreed upon by the main UK boosted the cost-to-income ratio to 69%. shareholders (after German competition
Key financial data
€million 280 Income statement 2007 2006 2005 260 Net interest income 85 49 17 Gross income 219 177 103 240 Net operating income 68 44 22 220 Net profit 48 29 19 200 Business data 2007 2006 2005 180 Net loans to customers 1,883 2,148 43 160 Customer funds 13,152 12,166 7,496 140 Total banking business volume 15,035 14,314 7,540 120 Total equity 553 517 181 Total Tier 16.6% 16.3% n.a. 100 80 Data per share 2007 2006 2005 01/01/2004 01/01/2005 01/01/2006 01/01/2007 Number of shares (million) 86.9 86.4 68.6 EPS ( ) 0.55 0.33 0.27 Boursorama Francia CAC40 D.J. Eurostoxx Banks Dividends accrued 0 0 0 Operating data 2007 2006 2005 Cost-to-Income 68.8% 75.2% 78.2% ROE (net profit/total equity) 8.7% 5.5% 10.2% Number of branches 20 20 0 112 Number of employees 911 839 523 and Self Trade Bank, respectively and in Germany Taking advantage of its leading 07 position in Europe, Boursorama it operates through the leading financial plans to develop its online information portal: www.onvista.de and under distribution of financial products. the Fimatex and Veritas brands.
Our opinion... annual report In 2007 Criteria CaixaCorp increased its stake in Boursorama to over 20% to reflect the stable Securities transactions grew 9% as a result of nature of this investment. the high market volatility in 2007, particularly “la Caixa” is currently analyzing with Boursorama as a result of the subprime crisis in the US. the possibility of creating an online bank in Criteria CaixaCorp However, revenues from the securities business Spain from Boursorama’s Self Trade Bank, dropped from 53% of total revenues in 2006 through which it has been operating in Spain to 42% in 2007, while revenues from the since 2003, with more than 22,600 accounts. banking business and advertising increased. Such an agreement would bolster Boursorama’s The Boursorama group operates in four presence in Spain and strengthen “la Caixa”’s countries: France, where it is leader in online position of leadership in the online banking financial information through its portal segment. www.boursorama.com and a key player in the online banking segment through the brand Boursorama Banque. It ranks among the top three players in the online brokerage market in the UK and Spain under the brands Self Trade
Criteria CaixaCorp in Boursorama
Market value (€ million) 143 Stake held 20.44% Voting rights 20.44% Board representation 2 out of 10
113 Chairman: David Li Kwok-po Shares traded: Hong Kong CEO: David Li Kwok-po Website: www.hkbea.com BEA Leading private bank in Hong Kong and the best commercial bank in China
Founded in 1918, The Bank of East Asia Business performance in the year (BEA) is Hong Kong's fifth largest private BEA reported a 35.2% increase in Total banking bank (and the No. 1 independent bank). business volume in 2007 to 45,949 million. BEA, which carries an A- rating from € Total customer funds and loans rose 38.0% and Standard & Poor’s and an A2 rating from 31.4% respectively. Highlights include the 62% Moody’s (long-term debt), was named the increase in loans granted in China, which have best foreign commercial bank in China in grown as a percentage of total lending from 2006. Its shares have been traded on the 28% to 36%. Hong Kong stock market since 1973. Net profit rose 20.6% to €361 million in relation to 2006. EPS increased by 18.3% to €0.23. ROE 2007 highlights grew to 14.6%. On March 20, 2007 BEA obtains authorization In 2007 BEA continued to roll out its expansion from the Chinese regulator to operate in strategy, opening 18 new branches in China mainland China as a local bank. and two in the US, where it plans to have 17 On September 18, 2007 BEA reaches an at year-end 2008. The bank also adopted Basel agreement with the Malaysian financial holding II solvency standards in 2007, which will lead company, Affin Holdings Bread, by which it will to improved risk management and a more acquire up to 25% of its share capital. efficient use of capital. On December 27, 2007 BEA increases capital by 4.76% to finance its expansion in mainland and other foreign markets. The increase was fully subscribed by Criteria CaixaCorp and will come into force in 2008.
Key financial data
€million €million Income statement 2007 2006 2005 Data per share 2007 2006 2005 Net interest income 521 435 328 Avg. number of shares Gross income 768 659 519 (million) 1,565 1,534 1,502 Net operating income 359 357 258 Dividends accured 0.14 0.13 0.11 Net profit 361 299 239 Operating data 2007 2006 2005 Business data 2007 2006 2005 Cost-to-Income 53.2% 45.8% 50.2% Net lending 18,945 14,415 12,018 ROE 14.6% 13.7% 12,2% Customer funds 27,004 19,571 16,627 Number of branches 217 176 160 Revenues 45,949 33,987 28,645 Number of employees 9,493 7,725 6,443 Total equity 2,622 2,375 2,108 Core Capital 7.4% 10.5% 11.2% ECB exchange rate at 31/12/2007: HK$11.48/ ¤ Total Tier 12.6% 14.2% 17.4%
114 Our opinion... The investment in BEA 07 The investment in BEA forms part of the represents a quality foothold company’s strategy to acquire significant stakes in Asia at a time when the in foreign financial entities. It represents a quality relations between Spain and foothold in Asia, at a time when relations Asia are generating increasing annual report between Spain and Asia are generating amounts of business. increasing amounts of business. BEA has been present in the Chinese market since 1920, and was able to take advantage of this to become one of the first four banks The capital increase subscribed by Criteria Criteria CaixaCorp worldwide to obtain a license to operate in the CaixaCorp in December 2007, which will come country as a local bank. In the next few years into force in 2008, should increase the bank’s the contribution of the Chinese market to the scope for future growth and allow it to pursue bank’s total results is expected to increase. It its expansion into the Chinese market. currently accounts for 24% of gross profit thanks to the far-reaching expansion policy implemented by the bank, which expects to Criteria CaixaCorp in BEA double its current branch network in China to 100 branches by 2010. Market value (€ million) 683 Stake held 8.89% Voting rights 8.89% Board representation -
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BEAHong Kong - Hang Seng Indice Hang Seng Finance
115 Chairman: Ricardo Fornesa Ribó Shares traded: - CEO: Tomás Muniesa Arantegui Website: www.caifor.es CaiFor The bancassurance benchmark in Spain
The CaiFor group operates in the and pension plans. The slowdown in the non- complementary pension plan and personal life business was due mainly to the slow growth insurance market. It employs a multichannel of the auto insurance business, affected by the distribution strategy, mainly for strong competition in this segment. bancassurance products, through “la Caixa” On November 12, Criteria CaixaCorp signed an branches. It also uses other distribution agreement to acquire the 40% stake in channels: The intermediary and advisory VidaCaixa and the 60% stake in SegurCaixa channel for businesses and groups, Internet held by Fortis after obtaining the corresponding – via the “la Caixa” website- and telephone authorization from the Directorate of Insurance sales. CaiFor is made up of three operating and Pension Funds (DGSFP), and the Spanish companies: VidaCaixa (an insurance anti-trust authority. VidaCaixa and SegurCaixa company specialized in life insurance and were valued at €1,769 million and €372 million pension fund management), SegurCaixa (a respectively for this transaction and for Criteria non-life insurance company) and AgenCaixa CaixaCorp’s IPO. (a network of business advisors specialized in the group’s products). In December, CaiFor’s Board of Directors was reorganized, putting the number of members at 11. 2007 highlights The CaiFor group exceeded 3 million individual According to estimates made by ICEA for 2007, customers in 2007. the Spanish insurance sector grew 3.9%, although there were indications of slowdown In April, CaiFor launched its car insurance activity, compared to 2006 in both life and non-life becoming the first Spanish bancassurance segments. The life insurance business was company to offer its own auto insurance, thereby affected by changes in tax legislation which had covering all of its customers’ basic insurance a negative impact on savings insurance products needs.
VidaCaixa VidaCaixa. Premiums and contributions to Key financial data pension funds 2007. €2,599 million
€thousand Data according to the accounting plan for insurance companies Group pension plans Group life-savings insurance Key data 2007 2006 2005 8,4% 14,6%, Premiums issued 1,427,099 1,567,168 1,871,239 Group life-risk Technical reserves net and health of reinsurance 16,204,577 16,444,936 16,591,175 Total equity 356,135 346,136 346,188 Individual pension 6,1% Subordinated debt 296,000 296,000 296,000 plans Net profit 131,153 106,837 100,433 Premiums and contributions 36,7% to pension funds 2,598,663 2,758,801 2,996,264 Individual life-savings Resources under management 27,511,577 26,824,987 25,900,651 insurance Key ratios 2007 2006 2005 26,1% Individual life-risk ROE 37% 31% 30% insurance Solvency margin coverage ratio 1.1 1.3 1.4 8,2% Other 2007 2006 2005 Dividends paid 121,153 106,890 73,609 Avg. number of employees at CaiFor group headquarters 441 429 419
116 insurance, which rose 10% and 13% Business performance in the year 07 respectively, compared to. 2006. 2007 was a good year for CaiFor group companies: VidaCaixa posted a net profit of In 2007 VidaCaixa issued premiums and €131 million (+23%), while SegurCaixa reported contributions to pension funds to the amount
an increase of 15% to €26 million, year-on year. of €2,599 million, a decrease of 6% compared annual report to 2006. This was due to the new tax framework for savings products. However, premiums for life-risk and health insurance, CaiFor’s consolidation as for both individual customers and groups, grew the Spanish insurance market by more than 10%. Furthermore, VidaCaixa leader is based on its exclusive continues to head the life insurance market in Criteria CaixaCorp access to the largest branch Spain in terms of resources under management. network in Spain and SegurCaixa reported a year-on year revenue “la Caixa”’s customer base. growth of 22% in 2007 to €184 million, driven by the afore-mentioned increase in home and accident insurance. Additionally, the company launched its car insurance activity during the year, At VidaCaixa, this good progress was driven by through its “SegurAuto” product and at year- the excellent performance of life-risk insurance end, this segment already accounted for more products and the increase in funds managed by than 10% of total revenues, meeting the targets the company, despite the unfavorable tax regime set for this activity. for savings products and pension plans. The improvement seen at SegurCaixa was mainly due to the increase in sales of home and accident
SegurCaixa. Premiums by product 2007 AgenCaixa. Sales breakdown. 2007 €184 million €424 million
Other Life-savings insurance Car 5,9% Health insurance insurance 1,6% 30,3% 10,2% Home insurance Accident insurance Home 7,8% 7,8% insurance Life-risk, 76,2% accident and other Pension insurance plans 11,1% 49,1%
117 AgenCaixa, the CaiFor subsidiary in charge of segments, developing new business lines. It’s selling its insurance and pension plans, recorded important to highlight the recently-launched €424 million in 2007 in premiums and pension car insurance product, where CaiFor is the first plan contributions. At year-end 2007, Agencaixa bancassurance group in Spain to offer its own had a staff of 17 representatives and 282 advisors, car insurance. distributed throughout CaiFor’s points of sale in According to Criteria CaixaCorp’s strategic plan, Spain. organic growth in both business lines can be enhanced by selective acquisitions in Spain, and Our opinion... in the medium/long term, abroad. CaiFor’s exclusive access to the largest branch If the purchase of MorganStanley Wealth network in Spain and “la Caixa”’s customer Management S.V. S.A.U by “la Caixa” is base, together with existing market completed, Criteria CaixaCorp or one of its opportunities, are important bases for its subsidiaries will acquire the pension fund consolidation as the Spanish insurance market management business. leader: Life insurance: The low penetration of this business in Spain offers high growth potential as the country converges with the EU. Furthermore, VidaCaixa is expanding its product range to include those segments with the best growth prospects. Non-life business: Growth in this area will be achieved by increasing market share in profitable
SegurCaixa Key financial data CaiFor Group performance
€thousands €million Data according to the accounting plan for insurance companies Resources under management Net profit Key data 2007 2006 2005 28,000 180 Premiums issued 184,417 150,899 126,792 27,500 160 Technical reserves net 27,000 of reinsurance 160,810 138,688 116,871 140 26,500 Total equity 40,714 37,469 31,052 120 26,000 Net profit 25,745 22,317 18,652 100 25,500 80 Key ratios 2007 2006 2005 25,000 Combined ratio 80% 77% 78% 24,500 60 ROE 66% 65% 66% 24,000 40 Solvency margin coverage ratio 1.4 1.4 1.5 23,500 20 Otther 2007 2006 2005 23,000 0 2004 2005 2006 2007 Dividends paid 22,500 15,900 13,100 Resources under management Aggregate net profit
118 Board representation Voting rights Stake held Market value( Criteria CaixaCorpinCaiFor € million) 11 outof 100.00% 100.00% 2,210 119 Criteria CaixaCorp annual report 07 Sole administrator: Miguel Tarré Tarré Website: www.gdsseguros.com GDS-Correduría Excellent results in a transition year
GDS-Correduría is an insurance broker that analyzes the risks its customers may incur GDS-Correduría increased its on all levels (personal, family, professional, net profit by 19%, despite business, among others), offering tailor- made solutions by negotiating coverage losses due to the enactment with the most appropriate and highly- of the new governing law. solvent insurance companies. In addition, in the event of a claim, the company takes charge of all the paperwork and manages the claim in defense of its customers 2007 highlights interests. GDS Correduría de Seguros is 67% owned by Criteria CaixaCorp and 33% 2007 was the first full year since the law owned by Unipsa, an insurance broker governing private insurance and reinsurance owned by the March group. (Law 26/2006 of July 17) went into effect. According to ICEA estimates, in 2007 the insurance sector showed signs of slowdown compared to the previous year. The main impact of the new law on GDS- Correduría was the loss of volume discounts and insurance products sold through the “la Caixa” branches. The stake in GDS-Correduría was valued at €40 million for the purposes of the Criteria CaixaCorp IPO.
Key financial data GDS-Correduría performance
€thousand €million Key data 2007 2006 2005 Premiums Net profit Commissions charged 10,613 9,783 7,238 Other operating revenue 352 1,230 1,230 140 Financial results 603 410 175 120 4 Operating expense -5,683 -6,296 -3,544 100 Net profit 3,973 3,333 3,317 3 80 Total equity 611 471 654 60 2 Operating data 2007 2006 2005 40 1 Premiums net of 20 cancellations 111,848 115,839 88,347 Dividends paid 3,833 3,517 3,026 0 0 Avg. number of employees 44 41 41 2004 2005 2006 2007
Premiums Net profit
120 Business performance in the year Our opinion... 07 2007 proved to be a very good year, as net Criteria CaixaCorp’s investment allows us to be profit increased by 19%, despite the loss of present in a profitable sector, which also some business segments and volume discounts complements the CaiFor group’s activities. GDS-
after the enactment of the new law. Correduría specializes in insurance products for annual report specific business areas and this gives Criteria Therefore, in this new regulatory framework, CaixaCorp access to activities which are not the company focused on strengthening its most covered by the products and services offered by profitable segments and negotiating the fees VidaCaixa and SegurCaixa. received for services rendered, which kept revenues in line with the previous year. Therefore, Criteria CaixaCorp fees from the auto and general insurance segments rose 24% and 16%, respectively. Criteria CaixaCorp in GDS-Correduría
The volume of premiums for the year totaled Market value (€ million) 40 €112 million, a decline of 3.45% compared Stake held 67.00% to.2006. It’s important to point out that the Voting rights 67.00% reorientation of GDS Correduria led to a change in the business mix. Board representation 1 out of 1
121 Executive chairwoman: Asunción Ortega Enciso Shares traded: - Website: - InverCaixa InverCaixa has increased its market share in a difficult year for the sector
InverCaixa is “la Caixa”’s asset management InverCaixa, however, slightly increased its market company. InverCaixa manages a wide range share in investment funds, to 5.6% and has of products: Investment funds, OEICs (open maintained its third position in the ranking of ended investment companies) and fund managers. portfolios. It also advises “la Caixa” with The funds managed by Invercaixa have no direct regard to the commercialization of or indirect investments in subprime assets. investment funds managed by third parties. Business performance in the year 2007 highlights By the end of 2007, InverCaixa’s assets under 2007 was a difficult year for the investment management amounted to nearly €14,000 fund industry in Spain, as assets under million. The 4% year-on-year decrease in funds management decreased by 6% and the sector managed was slightly smaller than the sector experienced a significant flight of assets average. (c.€20,000 million). The more conservative funds The funds managed by InverCaixa hold an were the hardest hit in a scenario of rising excellent position in the return rankings, with interest rates and strong competition from more than 80% of its assets between the first deposits. In the second half of the year, financial and second quartile (excluding guaranteed institutions launched aggressive campaigns to funds). In addition, the average return obtained capture deposits as a result of the lack of liquidity on investment funds in the year was higher than on the interbank markets in the aftermath of the sector average. the subprime crisis.
Assets under management and net Key financial data profit performance
€thousand €millions Income statement 2007 2006 2005 Total revenues 151,146 182,177 176,475 16,000 14 Net profit 8,849 12,579 12,151 14,000 Balance sheet 2007 2006 2005 12,000 12 Equity 28,683 48,542 48,739 10,000 10 Operative data 2007 2006 2005 8,000 8 Total AuM (€ million) 13,955 14,609 14,923 6,000 6 Investment funds 13,318 14,022 14,441 4,000 4 SICAVs 637 587 482 2,000 2 Number of investment funds 177 159 143 Market share 5.6% 5.5% 5.8% 0 0 Number of employees 126 123 109 2004 2005 2006 2007
Assets under management Net profit
122 InverCaixa reported a net profit for 2007 of 9 € InverCaixa continues to 07 million, marking a decline from 2006. This was expand its current offer with due to lower AuM, lower average commissions a sophisticated range of active –owing to fierce competition- and poorer management products, and it financial market performance.
offers outstanding service annual report Our opinion... totally personalized according to the customer segment. The main growth opportunities for this company lie in taking better advantage of “la Caixa”’s distribution network and consolidating its
strategy with regard to the types of funds sold. Criteria CaixaCorp Furthermore, all non-organic growth Specifically, the company will continue to expand opportunities will be studied. We note that if its offer with a sophisticated range of active “la Caixa”completes the acquisition of Morgan management products with an outstanding Stanley Wealth Management S.V. S.A.U., Criteria service which is personalized according to CaixaCorp will acquire the asset management customer segment (retail, personal and private business which will be integrated into InverCaixa. banking). We also believe the company will benefit from the increase in household planning and diversification of financial products. Criteria CaixaCorp in InverCaixa
Market value (€ million) 224 Stake held 100.00% Voting rights 100.00% Board representation 7 out of 7
Breakdown of investment funds
Guaranteed funds ST fixed 25% income funds 39%
Global funds Fixed income 13% funds
Equity Mixed 2% funds funds 16% 5%
123 Executive chairman: Antonio Vila Bertrán Shares traded: – Website: www.caixarenting.es CaixaRenting Strong profitable growth
CaixaRenting offers operational and Business performance in the year financial leasing services for vehicles and CaixaRenting’s volume of new investment equipment. Its offer is aimed at private increased significantly (+19% year-on-year) with customers and SMEs and products are a 25% increase in vehicles and 12% growth in distributed mainly through “la Caixa”’s equipment, amounting to a total of 443 million. branch network. In addition, it manages € fleets of vehicles. At year-end 2007, CaixaRenting had leased assets worth €953 million, +23% year-on-year. 2007 highlights It currently manages a total of 35,986 vehicles: 30,927 under operational leasing contract and In 2007, the penetration rate for vehicle 5,059 under fleet management. operational leasing in Spain increased compared to total registrations (10.5% in December 2007 The company reported a net profit of €5.3 compared to 9.5% in December 2006). million due to the growth of its portfolio as well as an increase in profitability. 2007 was a good year for CaixaRenting, which improved its market share in operational leasing units purchased (6.2% compared to 5% in 2006), and achieved a 24% year-on-year increase in its fleet, doubling the sector average.
Key financial data New production and net profit performance
€thousand Income statement 2007 2006 2005 €million Net profit 5,356 2,414 3,000 500 6 450 Balance sheet 2007 2006 2005 400 5 Total leased assets 952,897 772,067 623,598 350 4 300 Operating data 2007 2006 2005 250 3 Total new investment 442,858 370,816 336,163 200 2 New investment in vehicles 261,541 208,592 197,954 150 New investment in equipment 100 1 and other assets 181,317 162,224 138,209 50 Fleet of vehicles under management 35,986 29,027 25,113 0 0 Number of employees 193 176 156 2004 2005 2006 2007
VehiclesEquipment and other assets Net profit
124 Our opinion... CaixaRenting offers the global 07 CaixaRenting’s main competitive advantage is management of all services its ability to sell products through its preferential related to the product as well access to “la Caixa”’s distribution network, in as high quality standards.
addition to distribution via agents. This This differential allows it to annual report distribution channel offers access to the most obtain growth with high profitable segments: individual and self-employed levels of profitability. customers and SMEs. The company offers global management of all services related to the product and high quality Criteria CaixaCorp standards. This enables it to attract customer Criteria CaixaCorp in CaixaRenting loyalty and obtain profitable growth. Market value (€ million) 70 It also has high growth potential as Spain has Stake held 100.00% a penetration rate for vehicle operational leasing which is lower than the European average and Voting rights 100.00% offers a bright outlook for the next few years. Board representation 5 out of 5
125 Chairman: Josep Ramón Montserrat Miró Shares traded: – Managing Director: Dalmau Ribot Padilla Website: www.finconsum.es FinConsum “la Caixa”’s specialized consumer credit service at points of sale
FinConsum offers consumer credit products 2007 highlights through points of sale (distributors of This sector has strong potential for further consumer goods or services and automobile growth and has performed well over the past dealers facilitated by “la Caixa”’s distribution few years, with outstanding loans growing 21% network and its own commercial offices). in 2007. In 2007, default rates rose in the It also carries out direct marketing financial industry in general, and in the consumer campaigns using information databases’ finance segment in particular. information. In February 2007, Criteria CaixaCorp regained 100% control of the company after acquiring the 45% held by Sofinco (Crédit Agricole). This put an end to the joint venture set up in 2000.
Business performance in the year The company ended 2007 with an outstanding investment of €852 million, up 24% from the year before. However, new investment was down 4% as 2006 figures included new investment from a vendor that contributed a large volume of business in a short period of time, but that did not continue in 2007. Excluding this impact, new investment would have increased by 22%.
Key financial data Investment and net profit performance
€thousand Income statement 2007 2006 2005 €million
Net interest income 37,945 35,350 25,798 900 4 Net operating income 48,839 42,654 30,709 800 2 Net profit (9,661) 2,185 2,147 700 0 Balance sheet 2007 2006 2005 600 -2 Outstanding loans 829,654 675,976 492,637 500 Total assets 882,157 726,088 504,741 400 -6 300 -8 Operating data 2007 2006 2005 200 Consumer finance contracts 100 -10 (Number) 336,177 419,524 214,331 0 -12 Car finance contracts 2004 2005 2006 2007 (Number) 17,651 18,347 13,597 Doubtful rate 7.7% 4.9% 2.7% Direct mkt Autos Consumption Net profit Number of employees 280 248 211
126 The higher cost of risk related to doubtful debt, FinConsum is undergoing a 07 coupled with the €5.7 million fine related to a process of stabilization and lawsuit filed by a vendor, led FinConsum to consolidation, based on the report a loss in 2007 of 9.6 million. The ruling € further standardization of the is currently being appealed.
management of the entire annual report Our opinion... value chain. 2007 was a difficult year for consumer finance companies and particularly for FinConsum, due mainly to the increase in defaults. However, the Criteria CaixaCorp in FinConsum consumer finance sector in Spain is still expected Criteria CaixaCorp to grow, but less than in previous years. Market value (€ million) 100 FinConsum is undergoing a process of Stake held 100.00% stabilization and consolidation. This process will Voting rights 100.00% be based on the further standardization of the Board representation 7 out of 7 management of the entire value chain, with the objective of achieving quick and efficient operations for the final customer and a better management of risk and doubtful debt.
127 Chairman: Fernando Cánovas Atienza Shares traded: – Managing Director: Xavier Jaumandreu Patxot Website: www.gesticaixa.es GestiCaixa Decline in asset securitization activity
GestiCaixa is the securitization fund 2007 highlights manager of “la Caixa” and other financial companies. GestiCaixa manages mortgage The securitization business in Spain went through and asset securitization funds. two distinct periods in 2007: In the first half of the year, activity was strong, carrying on from previous years. Securitization GestiCaixa set up four new volumes were 62% higher than in the first half securitization funds in 2007, of 2006 reaching €65,000 million. and it currently ranks sixth However, in the second part of the year, activity in the securitization was negatively impacted by the confidence crisis management segment caused by the subprime crisis in the US. No new measured by new issues. Spanish securitization has been placed on the market since July. Several new issues have been made but the issuers have kept the securitized bonds on their balance sheets to ensure liquidity. It is worth highlighting that GestiCaixa does not manage any securitization funds of subprime assets.
Volume managed and net profit Key financial data performance
€thousand Income statement 2007 2006 2005 €million
Revenues 3,487 3,210 2,858 14,000 2.0 Net profit 1,749 1,587 1,401 12,000
Balance sheet 2007 2006 2005 10,000 1.5
Equity 1,954 3,391 1,965 8,000 1.0 Operating data 2007 2006 2005 6,000
Volume managed 4,000 0.5 (€ million) 13,961 11,931 8,919 Number of funds under management 26 22 17 2,000 Issuance volume 0 0.0 (€ million) 4,249 4,291 2,906 2004 2005 2006 2007 Number of new funds 4 5 4 Number of employees 7 6 6 Volume managed Net profit
128 2007 Business performance Our opinion... 07 Despite this complex environment, GestiCaixa The securitization market came to a standstill set up four new securitization funds in 2007, in the second half of the year. However, we with a total issuance of €4,250 million, similar believe the company still has long term growth to the level seen in 2006. Two of these funds potential. The expansion of the business will annual report were set up with third party financial institutions depend primarily on the development of the (Banco Sabadell and Banco Pastor) and the other regulatory environment (types of assets that can two with “la Caixa”. be included in securitization funds) as well as customers’ financing requirements. At December 31 2007, GestiCaixa managed twenty-six securitization funds (twelve mortgage Criteria CaixaCorp funds and fourteen asset funds), with a total Criteria CaixaCorp in GestiCaixa volume of €14,000 million, up 17% compared to 2006. Market value (€ million) 22 GestiCaixa ranks sixth in the securitization Stake held 100.00% management segment measured by new issues, Voting rights 100.00% with a market share of 3%. Board representation 7 out of 7
Net profit for the year rose 10% to €1.75 million.
Securitization funds managed
Assets funds- other entities “la Caixa” mortgage 34% funds 44%
Mortgage funds - other entities “la Caixa” 6% asset funds 16%
129 In 2007, Criteria CaixaCorp was successfully listed on the stock exchange. Previous to the IPO, a series of transactions were carried out to adjust the consolidation scope in order to guarantee the future development of the Group in line 7 with the strategy to maximize the value.
130 f. Tax matters Riscfactors e. Consolidatedfinancialstatements d. Non-consolidatedfinancialstatements c. Financialinformation b. Highlights a. Financial analysis 131 Criteria CaixaCorp annual report 07 7_ Financial analysis
Highlights
The IPO operation 657,500,000 new shares were issued. Later, on November 7, 2007, a further 75,519,037 shares In 2007 Criteria CaixaCorp successfully were added following the exercise of the green completed its IPO. shoe option by the global coordinators. The In November 2006, the Board of Directors of shares started trading at €5.25 per share (nominal “la Caixa” approved an analysis for the flotation value of €1 and share premium of €4.25), of its investment portfolio by listing Criteria increasing Criteria CaixaCorp’s equity by €3,848 CaixaCorp. The objective of the IPO was to million. establish a market benchmark for portfolio management and create a vehicle for Corporate restructuring prior to the IPO international expansion in the banking and In order to restructure Criteria CaixaCorp’s financial markets, and to take advantage of the investment portfolio prior to the IPO, a series of opportunities for growth and development transactions were carried out in the first half of offered by the capital markets. 2007 to ensure the future development of the business based on the criteria of maximizing shareholder value, in line with its defined strategy. The main objectives for the The following restructuring transactions were IPO were to achieve a market carried out: assessment of the portfolio 1. The sale of specific investments owned by management, to access capital Criteria CaixaCorp to “la Caixa”, namely: markets and the international a. Investments in companies where no further banking expansion. activity was expected b. Companies engaged in “la Caixa” At its General Assembly held on June 7, 2007, multichannel management services “la Caixa” passed a resolution approving the flotation of Criteria CaixaCorp and authorized c. Companies offering support services to the sale of shares in this company to the limit “la Caixa” of 49% of its share capital. These agreements d. Institutional investments were ratified at the Extraordinary General Assembly of “la Caixa” on July 19, 2007, with e. Venture capital firms at start-up stage special regard to the shareholder structure after (entrepreneurial companies) with the IPO and/or offering. institutional support for innovation Criteria CaixaCorp was successfully listed on 2. The acquisitions from “la Caixa” of the October 10, 2007, when its shares started investments held in companies whose activity trading. In the first stage of the operation, forms part of Criteria CaixaCorp’s strategy.
132 and obtained an attributable stake of 4.16%. Investments made in 2007 07 As a result of the transaction, the bidders went Total investments committed and made by on to hold 56.46% of Agbar’s share capital and Criteria CaixaCorp in 2007 amount to €4,256 achieved joint control of the company. million, excluding those relating to the restructuring prior to the IPO. On December 27, 2007, the CNMV authorized annual report the bid made jointly by the two companies, We highlight the following: which effectively extended to the shares of Agbar they did not control, i.e. 43.54% of Agbar’s CaiFor share capital, at a price of €27.65 per share. On July 11, 2007, a preliminary agreement was Consequently, the purchase commitment relating Criteria CaixaCorp reached with Fortis to acquire its 50% stake in to the takeover bid for Agbar that Criteria the CaiFor group (which encompasses CaiFor CaixaCorp had pending at year-end 2007 was itself, VidaCaixa, SegurCaixa and AgenCaixa) carried out in January 2008. Shareholders for a total amount of €950 million. The representing 33.55% of the company’s share acquisition was completed on November 12, capital accepted the offer which required an 2007, after authorization was obtained from outlay of €680 million by Criteria CaixaCorp, in the regulatory authorities and the purchase addition to the €172 million paid to acquire the agreement drawn up. The company has stake held by Torreal. exercised full control of the insurance business since that date. The Bank of East Asia
Agbar In 2007, in line with its strategy of acquiring significant stakes in international financial entities, On April 10, 2007, Criteria CaixaCorp, Hisusa, Criteria CaixaCorp purchased 8.89% of the Suez Environnement and Suez Environnement share capital of Bank of East Asia for €628 España (the bidders) informed the CNMV through million. The purchase was made in two stages. a joint significant event notice of their intention Firstly, shares representing a 4.34% stake (4.13% to launch a takeover bid for all of the shares of after capital increase) were acquired on the Aguas de Barcelona (Agbar) they did not own. market in the second half of 2007, for an amount On October 10, 2007, the CNMV admitted the of €283 million and the second purchase was bid for processing. made on December 27, 2007, once authorization In accordance with Royal Decree 1066/2007 of had been obtained from the Spanish authorities July 27, which allows control to be obtained to increase the stake to over 5%. The second prior to the authorization of the bid, on stake was obtained by fully subscribing to a November 21, 2007, Torreal, S.A. sold its shares capital increase of 4.76%, for an investment of 345 million, giving the company a total stake to the bidders (at a price of €27.65 per share) € with the following breakdown: 1.74% of Agbar’s of 8.89% at December 31, 2007 (after the share capital was sold directly to Criteria corresponding earnings dilution). CaixaCorp and 4.93% to Hisusa. Criteria CaixaCorp paid €172 million in this transaction
133 7_ Financial analysis
All of these investments fit in with Criteria Atlantia CaixaCorp management’s investment strategy. Lastly, in June, the company sold its entire stake The company also increased its stakes in in Atlantia (formerly Autostrade) on the market companies already held in the portfolio, including for €287 million and a net consolidated gain Abertis Infraestructuras, Banco Comercial of €30 million. Portugués and Telefónica. Dividend policy and dividends paid by Divestments made in 2007 Criteria CaixaCorp The total value of divestments made in 2007 Criteria CaixaCorp’s Board of Directors resolved was €1,281 million, excluding transactions to pay three interim dividends in 2007, against relating to the restructuring made prior to the results for that year. The first two dividends (for IPO. a joint amount of €1,680 million) were agreed on prior to the IPO of Criteria CaixaCorp. The most significant transactions were the following: Following the IPO, the company redefined its shareholder remuneration policy. Criteria Suez CaixaCorp plans to pay out the majority (c.90%) of its non-consolidated recurring profit each year The divestment of the 1.36% stake held in Suez, as a dividend, excluding gains on the disposal initiated in late 2006 (when 0.3% was sold), of investments, which will be used for was completed in 2007. This meant that the reinvestment in line with its stated investment sale of 1.06% held in the company was sold at strategy, in order to maintain the company’s the beginning of 2007 for €527 million, for a investment capacity and drive its ordinary net consolidated gain of €220 million. activities. Caprabo Only 10 weeks after the company was listed, the Board of Directors resolved to pay a third In September 2007, the sale of the 20% stake interim dividend of 101 million ( 0.03/share). held by Critieria CaixaCorp in Caprabo to the € € This corresponds to around 90% of the net Eroski group was completed for an amount of recurring profit obtained in October and €259 million and a net consolidated gain of €81 November 2007, thus complying with Criteria million, in addition to €16 million relating to CaixaCorp’s dividend policy described above. guarantees granted by the former owners.
Occidental Hotels Management Group In July, the company sold its entire stake in OHM to BBVA’s private equity fund, Valanza, and Pontegadea Inversiones for €172 million and a net consolidated gain of €45 million. In addition to €7 million relating to guarantees granted by the former owners.
134 Furthermore, at the General Shareholder Meeting 07 on March 6, 2008, Criteria CaixaCorp’s Board of Directors proposed the payment of a final dividend of €67 million (€0.02/share) against 2007 results. Therefore, the dividends paid against net recurring profit since Criteria annual report CaixaCorp’s IPO total €168 million (€0.05/share), in line with the company’s dividend policy.
Comparability of information
Criteria CaixaCorp’s core business is active Criteria CaixaCorp investment portfolio management. This means that the company is consistently analyzing transactions which may lead to the acquisition or disposal of a stake in a company. Therefore, the effect of these acquisitions and disposals on the company's financial statements, non-consolidated and consolidated (a summary of which is shown below), may make these statements difficult to compare. This is even more important in 2007, when the restructuring of the company carried out prior to the IPO had a significant impact on the comparison with 2006, in addition to several investments/disposals made in the normal course of the company’s operations.
135 7_ Financial analysis
Financial information
Key financial data for Criteria CaixaCorp
Non-consolidated financial data
€million 31/12/2007 31/12/2006
Recurring net profit 1 620 646 Total net profit 2,316 1,833 Shares outstanding (M) 3,363 2,630
EPS on total net profit (€) 2 0.83 0.70 EPS on recurring net profit (€) 1, 2 0.22 0.24 Recurring operating expense as a % of NAV 0.07% 0.04%
01/10/2007-31/12/2007
EPS on recurring net profit, 4Q07 (€) 0.06
(1) Including the release of the €101 million portfolio provision in 2006 (2) Pro forma for the IPO, based on the weighted average number of shares for the corresponding period (2.789 billion equivalent shares)
Net debt and liquidity position Criteria CaixaCorp’s net asset value (NAV) breaks down as follows:
€million 31/12/2007 30/06/2007
GAV 1 (Gross asset value) 26.193 26.104 Pro-forma net debt 2 (1,264) (4,708) NAV 24,929 21,396 Net debt / GAV 4.8% 18% Shares outstanding 3 (M) 3,363 2,630 NAV/share (€) 7.41 8.14
(1) Listed investees were appraised using the number of shares and the closing price at the date considered. Non listed investees at June 30 were valued based on internal analysis at that date using widely recognized valuation methods that were validated by independent experts (see IPO prospectus). At year-end, this internal analysis was updated in-house, except for the Port Aventura land which was assessed by an independent expert. (2) Pro-forma figures based on the net debt position reflected in the non-consolidated financial statements, the net cash positions at the holding companies and transactions in progress but not yet completed. (3) Contemplates the equity offering (including the exercise of the green-shoe) entailing the issuance of 733 million shares.
Criteria CaixaCorp’s objective is to maintain a Criteria CaixaCorp had a net debt/GAV ratio net debt/GAV ratio of below 20%, with net of around 19.7% prior to the IPO, which was debt understood to be bank debt less the cash reduced to around 5% at year-end 2007, as and cash equivalents of Criteria CaixaCorp and the proceeds from the capital increase held to the holding companies. fund the IPO were used by Criteria CaixaCorp to reduce its existing debt.
136 As a result, the company currently has a net rate on both facilities for credit balances is one- 07 debt/GAV ratio which leaves scope to increase month Euribor plus 30 basis points. debt by around €4,000 million by undertaking The reconciliation between the credit balance additional investments. of the Criteria CaixaCorp’s facilities and its pro-
At year-end 2007, Criteria CaixaCorp’s credit forma net debt position is shown in the table annual report facilities comprised two credit lines granted to below: the company by “la Caixa”. The first has a limit of €2,500 million and matures on June 30, 2009. At December 31, 2007 a balance of €1,590 million had been drawn down on this facility. The second has a limit of €2,900 million Criteria CaixaCorp and matures June 30, 2008. No balance has been drawn down on this facility. The interest
€million Credit balance (1,590) Equity Swap guarantee deposits 291 Net balance payables/receivables and others (36) Net debt holding companies 751 Commitments pending relating to Agbar TOB (680)
Criteria CaixaCorp net debt (1,264)
137 7_ Financial analysis
Non-consolidated financial statements
The non-consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Spain.
Balance sheet
€million
ASSETS 2007 2006
Non - current assets 1 9 Financial investments 13,020 8,398 Investments in group companies 3,289 2,249 Investment in associates 5,373 3,348 Portfolio of long-term securities 4,264 2,940 Long-term loans to group companies 134 0 Provisions (40) (139)
Total fixed assets 13,021 8,407 Debtors 134 1,118 Financial investments 796 187 Cash 3 2,167
Total current assets 933 3,472
TOTAL ASSETS 13,954 11,879
€million
LIABILITIES 2007 2006
EQUITY: Share capital 3,363 2,630 Issue premium 7,711 5,999 Reserves 526 1,148 Legal reserve 526 526 Voluntary reserve – 622 Profit/loss 2,316 1,833 Interim dividend paid out in the financial year (1,961) (500)
Total equity 11,955 11,110 Provision for risk and expenses 10 183 Long-term debt with group companies Credit facilities 1,590 – Deferred tax liabilities 15 15 Other liabilities – 211
Total non-current liabilities 1,605 226
Total current liabilities 384 360
TOTAL LIABILITIES 13,954 11,879
138 prior to the IPO to adjust Criteria CaixaCorp's Long-term investments: 07 consolidation scope. As a result the following In the first half of 2007, the afore-mentioned transactions were carried out: corporate restructuring process was carried out annual report 1. Sale to “la Caixa”of companies
(i) Where no further activity was expected > Caixa de Barcelona Seguros de Vida, S.A. de Seguros y Reaseguros, (hereinafter, CaixaVida) > Corporación Hipotecaria Mutual E.F.C., S.A. > RentCaixa, S.A. Criteria CaixaCorp
(ii) Engaged in “la Caixa” multichannel > e-”la Caixa” S.A. and its subsidiaries: management services - ECT MultiCaixa, S.A. - C3 Caixa Center, S.A. - Serviticket, S.A.
(iii) Providing support to “la Caixa” or institutional > Banco de Europa, S.A. and its subsidiaries: investors - Telefónica Factoring, E.F.C., S.A. - FinanciaCaixa 2, E.F.C, S.A. - Telefónica Factoring Brasil, L.T.D.A. - GDS-CUSA, S.A. > Servicios Urbanos y Mantenimiento, S.A. (SUMASA), > PromoCaixa, S.A. > Caixa Preference, S.A.U. > Telefónica Factoring México, S.A.
(iv) Venture capital firms at start-up stage > Barcelona Emprèn, S.C.R., S.A. (entrepreneurial companies) with an element > BCN Ventures, S.G.E.C.R., S.A. of institutional support for innovation > Catalana d'Iniciatives, S.C.R., S.A. > Invercat Exterior, F.C.R. > Neotec Capital Riesgo, S.C.R., S.A. > Caixa Capital Risc, S.G.E.C.R., S.A. > Caixa Capital Semilla, S.C.R. de régimen simplificado, S.A., > Caixa Capital Pyme Innovación, S.C.R. de régimen simplificado, S.A., > Iniciativa Emprendedor XXI, S.A
(v) Other > Edicions 62, S.A. > Trade Caixa I, S.A. > Inforsistem, S.A. > Inversiones Inmobiliarias Oasis Resort, S.L. > Inversiones Inmobiliarias Teguise Resort, S.L. > 4-D Neuroimaging > Directo Inc. > Chip Card, S.A. > Productora Eléctrica Urgelense, S.A. > Foment de Ciutat Vella, S.A.
139 7_ Financial analysis
2. Criteria CaixaCorp acquired the following stakes from “la Caixa”:
Name Stake acquired (%)
Abertis Infraestructuras, S.A. 1 12.79 Inversiones Autopistas, S.L 1, 2 50.10 Telefónica, S.A. 1 0.39 Bolsas y Mercados Españoles, S.H.M.S.F, S.A 3.53 Gas Natural, S.D.G, S.A 1 0.20 FinConsum, E.F.C, S.A. 1 55.00 CaixaRenting, S.A. 1 100.00 GestiCaixa, S.G.F.T, S.A 1 6.00
Most of these investments were sold previously to “la Caixa” by other companies belonging to the Criteria CaixaCorp group. (1) Purchase from “la Caixa” of the holdings it had in companies whose activity forms part of Criteria's strategy. (2) Holding company with a 7.75% interest in Abertis Infraestructuras, S.A.
Movements in “Investments in Group accompanying 2007 balance sheets are shown companies”, “Investments in Associates” and in the tables below: “Long-term investment securities” in the
€million Stakes in Group Stakes in Associates Long-term sercurities companies and Multigroup companies portfolio Balance at 31/12/2006 2,249 3,348 2,940
Investments 2,516 2,211 1,633 Abertis 0 1,786 0 Banco BPI 0 312 0 BME 0 0 123 Caifor 34 0 0 CaixaRenting 52 0 0 Crisegen Inversiones 876 0 0 FinConsum 98 0 0 Gas Natural 0 40 0 Inversiones Autopistas 524 0 0 Holret 259 0 0 Negocio de Finanzas e Inversiones I 658 0 0 Port Aventura 13 0 0 Repsol 0 0 53 Sgab 0 72 0 Telefonica 1 0 0 1,441 Other 2 1 16 Divestments (759) (10) (12) Banco de Europa 2 (68) Caixa de Barcelona Seguros de Vida 2 (488) e-la Caixa 2 (89) Other (114) (10) (12) Transfers 176 (176) 0 Dividends against portfolio cost (570) 0 0 Other 3 (323) 0 (297)
Balance at 31/12/2007 3,289 5,373 4,264
(1) Equity Swap contracts for €726M have been taken out on 0.94% of the stake.. (2) Divestments associated with the internal reorganization prior to the IPO. (3) Companies transferred as part of the contribution to the capital increase at Negocio de Finanzas e Inversiones I, S.L. and Hodefi, S.A.S., made by Criteria CaixaCorp.
140 The most significant investments made in 2007, CaiFor, S.A., Crisegen Inversiones, S.L. (antes 07 excluding those relating to the restructuring Fortis AG España Invest, S.L.) y VidaCaixa, S.A. prior to the IPO, were the following: de Seguros y Reaseguros: On July 11, 2007, Criteria CaixaCorp and Fortis FinConsum, E.F.C., S.A.: reached an agreement whereby Criteria annual report In February 2007, Criteria CaixaCorp acquired CaixaCorp would acquire the stakes held by 45% de Finconsum, E.F.C., S.A. from Sofinco Fortis in CaiFor, S.A. (50%) and SegurCaixa, S.A. for €38 million. On December 20, 2007, a €12 de Seguros y Reaseguros (20%), through Criteria million capital increase was held, fully subscribed CaixaCorp’s purchase of the holding company
by Criteria CaixaCorp, which at year-end 2007 Fortis AG España Invest, S.L. (owner of 50% of Criteria CaixaCorp owned 100% of this company. CaiFor), and CaiFor, S.A.’s subsequent acquisition of 20% of SegurCaixa, held by Fortis España Negocio de Finanzas e Inversiones I, S.L.: Invest, S.L.. On November 12, 2007, after On March 29, Criteria CaixaCorp subscribed the authorization had been obtained from the entire capital increase in this company for €298 pertinent authorities, the purchase of 50% of million (of which €100 million was capital and CaiFor’s shares went ahead, through the the remainder was share premium), through the acquisition of 100% of Fortis AG España Invest, non-monetary contribution of 11,470,159 shares S.L. for €876 million. Through this transaction, in Atlantia, S.p.A. (formerly Autostrade, S.p.A.), Criteria CaixaCorp obtained a 100% stake in representing 2.01% of its share capital, 367,548 CaiFor, S.A., and its subsidiaries VidaCaixa, S.A. shares in Boursorama, S.A., representing 0.43% de Seguros y Reaseguros, SegurCaixa, S.A. de of its share capital and 14,385,783 shares in Seguros y Reaseguros and AgenCaixa, S.A. Banco Comercial Portugués, S.A., representing Consequently, its investment in VidaCaixa, S.A. 0.40% of its share capital. The cost value of this de Seguros y Reaseguros y CaiFor, S.A. was non-monetary contribution recognized by Criteria reclassified from “Investments in Associates and CaixaCorp was the carrying amount of these Multigroup companies” to “Investments in Group shares in Criteria CaixaCorp. companies”. On December 20, 2007 Criteria CaixaCorp paid €34 million in dividends relating The company subsequently paid a dividend, of to CaiFor, S.A. The remaining amount was paid which €96 million was recognized by Criteria directly by CaiFor and therefore is not recognized CaixaCorp as a deduction from the cost of the in the non-consolidated financial statements. investment. On December 12, 2007, it was resolved to On November 5, 2007, Criteria CaixaCorp change the name of Fortis AG España Invest, subscribed an additional capital increase S.L to Crisegen Inversiones, S.L. (monetary in this case) for a nominal amount of €120 million and a share premium of €240 million, destined to company transactions.
141 7_ Financial analysis
Port Aventura, S.A.: S.A.’s direct stake of 1.74% in Agbar from Torreal, S.A. for €72 million (€172 million at Criteria CaixaCorp acquired an additional 3.14% Criteria CaixaCorp group level). interest in Port Aventura, S.A. for €13 million. The total interest held by Criteria CaixaCorp at Telefónica, S.A.: December 31, 2007, is 97.12%. In 2007, Criteria CaixaCorp acquired Telefónica Banco BPI, S.A.: S.A. shares worth €715,061 thousand, of which €311 million were acquired from “la Caixa” as Criteria CaixaCorp acquired a 6.45% holding in part of the Group’s restructuring process. Banco BPI, S.A. for €310 million and an additional 0.02% interest for €1 million from the subsidiary Additionally, on June, 2007, Criteria CaixaCorp Catalunya de Valores S.G.P.S., U.L. Criteria acquired an additional 0.94% in Telefónica’s CaixaCorp’s direct interest in Banco BPI, S.A. at share capital for €726 million thereby optimizing December 31, 2007 was 15% and Criteria the net financial return on the investment. This CaixaCorp’s total investment stood at 25.02%. investment was hedged through derivative hedging instruments and equity swap contracts, Sociedad General de Aguas de Barcelona, S.A. and accordingly is not subject to market risk and (Agbar): is recognized at cost. On April 10, 2007, Hisusa, Suez Environnement, Debtors Suez Environnement España S.L.U. and Criteria CaixaCorp informed the CNMV, through a joint The decrease in this heading relative to December significant event notice followed by an additional 31, 2006 was mainly due to a €539 million significant event notice dated April 13, 2007, payment pending in 2006 for the sale of 1.11% of their intention to launch a takeover bid for of Suez’s share capital sold by Criteria CaixaCorp all of the shares of Agbar they did not own at to Negocio de Finanzas e Inversiones I (100% a price of €27.65 per share. After obtaining the owned by Criteria CaixaCorp, and holder of pertinent authorization from the authorities, the most of the group's international investments). takeover prospectus was approved by December Additionally, an amount of €482 million relating 27, 2007, and the bid was pending completion to the last transactions which took place at the at December 31, 2007. Prior to this, on very end of 2006 related to the sale of Banco November 21, Hisusa, Suez Environnement, S.A. de Sabadell were still pending settlement. Both and Criteria CaixaCorp announced the acquisition amounts were paid in January 2007. from Torreal, S.A., Agbar’s second largest shareholder with a 6.671% stake in the company, Short-term Financial Investments subsequent to its irrevocable commitment to The breakdown of short-term financial transfer its shares as part of the takeover investments is mainly as follows: transaction. This transaction gave Criteria CaixaCorp and Suez Environnement a joint > Short-term loans granted by Criteria interest of 56.46% in Agbar, and both parties CaixaCorp to group companies for investment undertook to jointly manage and exercise control purposes: over Agbar. Criteria CaixaCorp acquired Torreal
142 – 100 million to Hisusa on November 20, require a guarantee deposit which will be € 07 2007, to finance the acquisition of adjusted throughout the life of the derivative 7,371,613 Agbar shares from Torreal, S.A.. by contributions made by the either the This transaction formed part of the IPO counterparties or Criteria CaixaCorp, process described above. The loan matures according to the market value of Telefónica’s annual report on November 20, 2008, and pays interest shares. This deposit ensures that the funds at a rate of 1-day Euribor plus 30 basis are made available to both parties in the points with monthly settlements. event of the partial or full cancellation of the contract, early or at maturity. The contract – €6 million to Crisegen Inversiones, S.L. on also establishes a return on the guarantee
December 20, 2007, in relation to CaiFor Criteria CaixaCorp deposit paying interest at the daily EONIA transaction maturing June 30, 2008 and rate for the previous month. paying interest at a rate of one-month Euribor plus 30 basis points with monthly Cash interest settlements The cash balance increased significantly in 2006, – €250 million to Negocio de Finanzas e as a result of the disposal of significant Inversiones I for the acquisition of the stake investments in the second half of the year. The in The Bank of East Asia on December 27, most noteworthy were: Inmobiliaria Colonial 2007, maturing March 31, 2008, and (€686 million) and Banco de Sabadell (€912 paying interest at a rate of one-month million). Euribor plus 30 basis points with monthly interest settlements Equity > Equity swap guarantee deposits of 291 € The movement in Equity between January 1 and million on December 31, 2007, correspond December 31, 2007, was follows: to the equity swap contracts subscribed on the 45,000,000 Telefónica shares which
€million Equity at 31/12/2006 11,110 Final dividend 2006 (165) Distribution of share premium and voluntary reserve (3,194) Capital increases 3,848 Profit attributable to 2007 2,316 Interim dividend 2007 (1,961)
Equity at 31/12/2007 11,955
143 7_ Financial analysis
> On March 8, 2007, the sole shareholder 2007 profits. This dividend was paid on July approved: (i) the payment of a final dividend 31, 2007. of €165 million; and (ii) to allocate €1,168 > Capital increase on October 10, 2007 via the million from 2006 profits to voluntary reserves. issuance of 657,500,000 shares with a > On June 7, 2007, the Board of Directors nominal value of €1 each. Later, on November approved the payment of the first interim 7, 2007 the company held a second capital dividend of €1,010 million out of 2007 increase, issuing an additional 75,519,037 profits. This dividend was paid on June 29, shares, due to the exercise of the green shoe 2007. option by the underwriters. > On June 21, 2007, the sole shareholder > On December 13, 2007, the Board of Directors approved the payment of: (i) €403 million approved the payment of a third interim with a charge to the share premium; and (ii) dividend of €101 million with a charge against €1,790 million with a charge to the company’s 2007 profits. This dividend was paid on voluntary reserves. January 17, 2008. > On July 30, 2007, the sole shareholder Payable to credit entities approved a €1,000 million share premium distribution, which was paid on July 31, Includes the amounts drawn down on credit 2007. facilities taken out with “la Caixa”. The credit facilities have a combined limit of €5,400 million > On June 26, 2007, the Board of Directors and bear interest at Euribor plus 30 basis points. approved the payment of the second interim dividend of €850 million with a charge against
Non-consolidated income statement
€million January-December
2007 2006
Dividends from investees 530 461 Dividends from changes in consolidation 69 117 Operating expenses (18) (10) Operating profits, recurring 581 568 Portfolio provisions (net) 21 101 Financial profit (net) 31 18
Recurring profit 633 687 Corporate income tax (13) (41) Net recurring profit 620 646
Non recurring profit 1,442 1,588 Corporate income tax 254 (401) Net non recurring profit 1,696 1,187
Net profit for the year 2,316 1,833
The income statement presented herein has been prepared in accordance with the principles and accounting provisions contained in the Spanish General Chart of Accounts. However, for purposes of explaining the key data it has been presented in accordance with the criteria used by the company’s management.
144 In 2007, Criteria CaixaCorp reported a non- Recurring net profit 07 consolidated net profit of €2,316 million, an Recurring net profit fell 4% in 2007, due mainly increase of 26% on the previous year. Of this to the reversal of security price fluctuation amount, €1,696 million correspond to allowances for some investments in 2006. extraordinary income deriving mainly from the restructuring operations carried out at the Recurring net dividends grew 4% to €599 million annual report company prior to the IPO and specific disposals compared to the previous year. made at the beginning of 2007. Recurring The breakdown of dividends was as follows: dividends rose 4%to €599 million in relation to 2006, however, like-for-like recurring dividends rose 15% compared to 2006. Criteria CaixaCorp
€million January-December
2007 2006
Telefónica 112 92 Gas Natural 154 132 Repsol YPF 99 73 Repinves 36 29 Abertis 10 10 CaiFor 57 44 BPI / Catalunya de Valores 16 16 VidaCaixa 24 21 Other 22 44 Recurring dividends, same consolidation scope 530 461 15.0% Abertis 25 - Telefónica 20 - BPI/Cat. Valores 14 - Inv. Autopistas 7 - Bolsas y mercados 3 - Dividends from new acquisitions 69 - Caixa Barcelona Vida - 43 Banco Sabadell - 29 Suez -17 Caixa Capital Risc - 10 Inmobiliaria colonial - 8 Other -10 Dividends from investments sold - 117
Total 599 578 3.6%
145 7_ Financial analysis
If the evolution of the dividends are analyzed in Non-recurring income also includes the Criteria a constant scope, the recurring dividends rose CaixaCorp’s IPO-related expenses, including €59 15% in 2007 compared to 2006. million in banking fees paid to the global coordinators, and €38 million in Transfer tax on Operating expenses increased due to the process the capital increases, both before taxes. of adaptation to the needs of listed company. In annualized terms, they represent approximately In 2006, the non-recurring income mainly 0.1% of the net asset value at December 31. included gross proceeds from the disposals of This level of operating expenses compares very investments in Inmobiliaria Colonial (€559 million) favourably with Criteria CaixaCorp's peers. and Banco de Sabadell (€929 million).
Non-recurring income In 2007, the internal restructuring carried out by the company prior to the IPO led to an extraordinary dividend income of €1,565 million, of which €1,350 million related to the dividend paid by Caixa Barcelona Vida. Caixa Barcelona Vida was sold to “la Caixa” as part of the reorganization process.
Recurring net profit €million
-4% 646 700 620 18 If the evolution of the 31 Financial profit, net 600 21 101 dividends are analyzed in a 69 500 117 Release of portfolio constant scope, the provisions 400 recurring dividends rose Recurring dividends change 599 530 578 in consolidation scope 15% in 2007 compared to 300 461 Recurring dividends same the same period of 2006. 200 15% consolidation scope
100 Operating expenses 0 -18 -10 Income tax -13 -41 -100 2007 2006
146 Consolidated financial data
Key data for the consolidated group headed by Criteria CaixaCorp (hereinafter, the Group) are as 07 follows:
€million 31/12/2007 31/12/2006 annual report
Recurring net profit 1,180 899 Net profit attributable to equity holders of the parent 1 1,726 2,159
(1) Profit fell in relation to 2006 due to changes in the consolidation scope and disposals made in 2006 Criteria CaixaCorp
At December 31, 2007, Criteria CaixaCorp > Recognition of other investments in which consolidated its shareholdings in accordance the company owns less than 20% of the with the IFRS. This means: voting rights as available-for-sale financial assets. > The full consolidation of subsidiaries of companies over which it has control (generally The following table presents the Criteria over 50% of the voting rights). CaixaCorp Group’s investments at December 31, 2007, grouped by the consolidation method > The equity method of jointly controlled applied: companies. > Consolidation using the equity method of companies in which it owns at least 20% of the voting rights,
Full consolidation Equity method Available for sale financial assets
Insurance Specialized financial Services-Listed companies Services-Listed companies services
CaiFor 100.00% CaixaRenting 100.00% Gas Natural 35.53% Repsol YPF 12.67% FinConsum 100.00% VidaCaixa 100.00% Abertis 21.12% Telefónica 5.48% 1 SegurCaixa 100.00% InverCaixa AgenCaixa 100.00% Gestión 100.00% Grupo Agbar 2 27.67% BME 3.53% GDS-Correduría 67.00% GestiCaixa 100.00%
Services Non-listed International banking International banking companies
Caixa Capital Banco BPI 25.02% BEA 8.89% Desarrollo 100.00% Boursorama 20.44% BCP 1.03% Holret 100.00% Port Aventura 97.12% Hotel Caribe Resort 60.00%
(1) The investment includes 45,000,000 shares of Telefónica, representing 0.94% of its share capital, hedged by an equity swap (2) Jointly controlled with the Suez group.
147 7_ Financial analysis
Consolidated balance sheet summary
€million
Criteria CaixaCorp consolidated balance sheet - main asset headings 31/12/2007 31/12/2006
Goodwill and other intangible assets 784 27 Property, plant and equipment and investment properties 1,140 1,027 Investments consolidated under the equity method 5,381 4,459 Financial investments 28,594 25,070 Other non-current assets 121 317
Non-current assets 36,020 30,900 Financial assets 2,689 2,078 Cash and cash equivalents 1,185 3,376 Other current assets and other 787 1,047
Current assets 4,661 6,501
Total Assets 40,681 37,401
€million
Criteria CaixaCorp consolidated balance sheet - main liability headings 31/12/2007 31/12/2006
Total equity 15.014 14.945 Long-term provisions 16,242 13,631 Long-term debt 4,005 1,989 Deferred tax liabilities 1,591 1,424 Equity instruments classified as financial liabilities - 3,000
Non-current liabilities 21,838 20,044 Provisions for insurance contracts 404 169 Interest-bearing loans and borrowings and other 2,971 1,773 Other current liabilities 454 470
Current liabilities 3,829 2,412
Total equity and liabilities 40,681 37,401
The main changes in the balance sheet at IPO and the acquisition of Fortis’ entire insurance December 31, 2007 were the result of the business, summarized below: internal restructuring carried out prior to the
148 insurance business from that date and at Internal restructuring prior to flotation 07 December 31, 2007, included on its consolidated As part of the internal restructuring of Criteria balance sheet all the assets and liabilities relating CaixaCorp prior to the IPO, the group sold to to the insurance business, mainly available-for- “la Caixa” those subsidiaries which for various sale financial assets (securities) and provisions reasons would not form part of its group. The annual report for insurance contracts, in addition to goodwill most important disposals, given their impact of and intangible assets arising from the business comparability of information, were those of combination, the impact of which is reflected Caixa de Barcelona Seguros de Vida, SA de below. Seguros y Reaseguros and Caixa Preference,
SAU. Therefore, at December 31, 2006 the Movements in the main accounts of the Criteria CaixaCorp Group’s consolidated balance sheet included consolidated balance sheet are as follows: assets totalling €6,489 million, technical provisions of €3,406 million and equity Goodwill and other intangible assets instruments classified as financial liabilities of The increase in this heading was almost entirely 3,000 million relating to these companies. € due to the acquisition of CaiFor’s insurance business from Fortis, of which €198 million was Acquisition of Fortis’ entire insurance recognized in intangible assets linked to the life business and non-life insurance portfolios and €574 Since 1992, “la Caixa” and Fortis had jointly million was taken to goodwill. controlled the insurance business carried out by the CaiFor and comprised mainly of the Investments consolidated under the equity companies CaiFor, SA (parent), VidaCaixa, SA method de Seguros y Reaseguros (hereinafter VidaCaixa), The movement in this heading in 2007 was as engaging mainly in the sale of individual and follows: collective life and health insurance, SegurCaixa, SA de Seguros y Reaseguros (hereinafter SegurCaixa), engaging primarily in the sale of €million home and accident insurance, and AgenCaixa, Balance at December 31, 2006 4,459 SA engaging in commercial insurance advisory Investments 415 services and the distribution of products and Abertis 232 services. “la Caixa”’s branch network was the Agbar 172 Boursorama 8 CaiFor group’s most important distribution Gas Natural 2 channel. BPI 1 Divestments (9) On July 11, 2007 a preliminary agreement was reached with Fortis to acquire its stake in the Transfers Boursorama * 132 Change in value due to application CaiFor group for €950 million. The acquisition of equity method of consolidation 384 was completed on November 12, 2007 after authorization was obtained from the regulatory Balance at December 31, 2007 5,381 authorities and the purchase agreement drawn up. The group obtained full control of the (*) Transferred to “Available-for-sale financial assets” after a stake of over 20% was obtained during the year.
149 7_ Financial analysis
The variation in value of investments consolidated (€339 million), Abertis (€311 million), Agbar under the equity method corresponds mainly to (€99 million) and Boursorama (€65 million). profits relating to these companies (€697 million) The table below shows the stake held and market net of dividends (€274 million). value of the main listed companies included in At December 31, 2007, the heading included this heading: goodwill from Gas Natural (€422 million), BPI
€million 31/12/2007 31/12/2006
Company Total stake (%) Market value Total stake (%) Market value Gas Natural, SDG, SA 35.53% 6,366 35.51% 4,769 Abertis Infraestructuras, SA 21.12% 2,972 19.21% 2,616 Banco BPI, SA 25.02% 1,019 25.00% 1,123 Sociedad General de Aguas de Barcelona, SA 27.67% 1,140 23.46% 976 Boursorama, SA 20.44% 143 - -
Market value 11,640 9,484
Acquisition cost 5,091 4,192
Gross capital gain 6,549 5,292
The most significant transactions carried out in > Sociedad General de Aguas de Barcelona, investments consolidated under the equity S.A.: The Group increased its ownership method in 2007 were the following: interest by 4.21% in 2007, mostly as part of the takeover bid for Agbar. The acquisition > Abertis Infraestructuras, S.A.: The of the Torreal group’s 4.16% stake required acquisition of 1.71% of the share capital de an investment outlay of €172 million for the Abertis Infraestructuras, SA. for €232 million, Group. At December 31, 2007, Criteria of which 1.12% (€150 million) was acquired CaixaCorp’s ownership interest in Agbar from “la Caixa” in the restructuring prior to stood at 27.67%. the IPO. The company’s stake in Abertis Infraestructuras, SA at December 31, 2007, was 21.12% and its controlling stake was 24.99% (understood to be control over the total stake through its subsidiaries).
150 Financial assets. The main investments and divestments made 07 by the Group in the year were as follows: At December 31, 2007, these were mainly available-for-sale financial investments, both > The Bank of East Asia, Ltd. In 2007, in line debt instruments associated with the insurance with its strategy of acquiring significant stakes business (€16,010 million) and equity in international financial institutions, Criteria annual report investments related to portfolio activities CaixaCorp purchased 8.89% of the share (€10,590 million). It also included loans and capital of The Bank of East Asia (hereinafter receivables of €1,729 million, mainly from the BEA) for €628 million. BEA is a company financial services business. listed on the Hong Kong stock exchange and
forms part of the Hang Seng index (the main Criteria CaixaCorp Available-for-sale financial assets (debt Chinese stock market index in Hong Kong). instruments) increased by €4,136 million due The purchase was made in two stages. Firstly, mainly to the incorporation of assets from shares representing a stake of 4.34% were CaiFor’s insurance business in November 2007. acquired on the market in the second half of The movement in available-for-sale equity 2007 for an amount of €283 million, and instruments in 2007 is shown in the table below: the second purchase was made on December 27, 2007, once authorization had been obtained from the Spanish regulatory €million 2007 authorities to increase the stake to over 5%. Balance at December 31, 2006 8,439 The second stake was obtained by fully Investments 2,085 subscribing to a capital increase of 4.76%, for an investment of €345 million, giving the Telefónica 1,131 BEA 628 company a total stake of 8.89% at December Repsol YPF 53 31, 2007 after the corresponding earnings Bolsas y Mercados Españoles 123 dilution. BCP 105 Other 45 > Telefónica, S.A.: The Group increased its Divestments of listed companies (850) interest in Telefónica, SA by 1.58% for an Suez (527) investment of €1,131 million. At December Atlantia (286) 31, 2007, its total stake in the operator’s BCP (37) share capital was 5.48%. At the same time, Divestments of non-listed companies (461) in June 2007, several Equity Linked Swap Caprabo (238) contracts were taken out on a 0.94% stake OHM Group (179) Other (44) in Telefónica, SA. The objective of this was to establish a fair value hedging relationship Valuation adjustments 1,516 between the portfolio and the derivative, Transfers (139) eliminating the risk of changes in value. Balance at December 31, 2007 10,590 Therefore, there is market risk relating to the remaining 0.64% of the shares acquired in the year and to the 3.90% stake acquired in previous years. At December 31, 2007, both the portfolio and the derivative were carried at market value.
151 7_ Financial analysis
At December 31, 2007, the > Occidental Hoteles Group. In July 2007, financial assets were mainly the Group sold through its subsidiary Caixa available-for-sale financial Capital Desarrollo SCR de Régimen investments, including debt Simplificado, SA, the 30.37% stake it held instruments associated with the in the Group made up of Occidental Hotels insurance business as well as Management (30.37%), Soteltur, SL (50%) equity investments related to and Soteltur Internacional, BV (50%), to portfolio activities. Valanza, a venture capital firm belonging to BBVA, and Pontegadea Inversiones, SL. for €172 million, recording a gross capital gain of €50 million (€45 million after tax). > Suez, SA. In January 2007, Criteria CaixaCorp > Boursorama, SA. In 2006, Hodefi, SAS, sold its entire stake in Suez, SA (1.05%) for received a 19.9% stake in the share capital a capital gain of €279 million (€220 million of Boursorama, SA as part of the payment after taxes). In 2006, the Group sold a 0.3% from the sale of CaixaBank France, SA. In stake for a capital gain of €76 million (€61 January 2007, after increasing the stake to million after taxes). over 20%, the investment was consolidated > Atlantia, SpA. (formerly Autostrade, SpA): under the equity method and recorded under In June 2007, Criteria CaixaCorp sold its Investments consolidated under the equity entire 2.01% stake in Atlantia SpA for €287 method. million. The group recognized a gain (pre and after tax) of €30 million from this transaction. > Caprabo, SA. In September, 2007, the Group sold the 20% stake held in the company through its subsidiary, Caixa Capital Desarrollo SCR de Régimen Simplificado, SA, to the Eroski group for €259 million, recording a gross capital gain of €90 million (€81 million after taxes).
152 In 2007, the value of the investments in this share prices. The table below shows the stake 07 heading increased by €1,516 million (€1,061 and market value of the main listed investments million after taxes) due to the increase in their in this heading: annual report
€million 31/12/2007 31/12/2006
Companies Total Stake (%) Market value Total Stake (%) Market value Telefónica, S.A. 5.48% 5,814 3.90% 3,093 Repsol YPF, S.A. 12.67% 3,770 12.50% 3,997 The Bank of East Asia Limited 8.89% 683 - - Banco Comercial Portugués 1.03% 109 0.28% 29 Criteria CaixaCorp Bolsas y Mercados Españoles 3.53% 137 - - Boursorama, S.A. - - 19.74% 176 Atlantia SpA - - 1.99% 248 Suez, S.A. - - 1.05% 525 Other - 38 - - Market value 10,551 8,068 Acquisition cost 5,391 3,964
Gross capital gain 5,160 4,104
Loans and receivables included under non-current Long-term debt. At December 31, 2007, the financial assets decreased by €2,819 million, balance of €4,004 million included the credit due mainly to the deconsolidation of Caixa facility granted to Criteria CaixaCorp and drawn Preference SAU (€3,000 million) as a result of down by the amount of €1,590 million and the the restructuring process prior to the IPO. €1,714 million in credit facilities granted to the Additionally, the increase in trading income led company’s financial institutions, with financing to an increase of €208 million in non-current in both cases obtained from “la Caixa”. loans and receivables. Equity instruments classified as financial liabilities Long-term provisions. At December 31, 2007, have decreased from €3,000 million at year-end long-term provision were mainly comprised of 2006 to not being included on the balance sheet provisions for insurance contracts of €16,190 at December 31, 2007 following the elimination million, an increase of €2,629 million in relation of Caixa Preference, S.A.U., as part of the to 2006. The change reflects the incorporation restructuring carried out prior to the IPO. of the insurance business acquired form the Interest-bearing loans and other borrowings, CaiFor group in November 2007 for €6,473 were €2,971 million, an increase of €1,198 million and the €3,406 million decrease due to million due almost entirely to the increase in the elimination of Caixa Barcelona Vida in the repurchase operations relating to the insurance first half of 2007. The remainder corresponds business, largely due to the incorporation of to normal insurance activities. CaiFor’s assets.
153 7_ Financial analysis
Consolidated income statement although they are presented according to the summary Group management model. The consolidated income statement shown below has been prepared in accordance with IFRS,
January-December
€million 2007 2006 % Var.
Net income from equity instruments 276 268 3% Net profit of companies consolidated under the equity method 670 471 42% Net profit of companies under the full consolidation method 234 160 46%
Recurring net profit 1,180 899 32% Net non-recurring profit from the disposal of investments and others 546 1,260 (57%)
Net profit attributed to the group 1,726 2,159 (20%)
Net profit attributed to the group was €1,726 Movements in the headings mentioned above million (a decrease of 20% compared to 2006). were as follows: However, consolidated recurring net profit in 2007 was €1,180 million, an increase of 32% compared Income from equity instruments to 2006. This increase was due to the increase in Dividends earned on available-for-sale financial profit reported by companies consolidated under assets remained largely stable overall, increasing the full consolidation method and companies by 3%. However, income obtained from the consolidated by the equity consolidation method, investments in Telefónica and Repsol YPF in 2007 where net profit increased by 46% and 42%, increased by 30%, pursuant to the dividend respectively. Extraordinary results fell from €1,260 policies adopted these companies. The disposal million in 2006 to €546 million in 2007. This of the investment in Banco de Sabadell in 2006 decrease was due to the significant disposals carried had the opposite affect on the comparison with out in 2006, mainly Banco de Sabadell and 2007. The gains from this sale are recognized Inmobiliaria Colonial, which led to net consolidated in Net profit from the disposal of investments capital gains of €698 and €680 million, respectively. and other non-recurring. Investment disposals made in 2007 (Suez, Caprabo, Grupo OHM and Atlantia) resulted in net The breakdown of these gains by company, consolidated capital gains of €220, €81, €45 and before and after tax, is as follows: €30 million respectively.
154 January-December 07
€million 2007 2006 % Var.
Telefonica 132 103 28% Repsol YPF 134 101 33%
Banco de Sabadell – 29 – annual report Other 10 35 71% Income from equity instruments 276 268 3%
Profit (loss) from companies consolidated under of the participations in this company in 2006 the equity method and, to a lesser extent, to the higher results Criteria CaixaCorp reported by the company, higher results made Profit attributable to the Group from companies by Agbar’s due mainly to the disposal of the consolidated under the equity method (Gas stake in Applus+, and due to the profits reported Natural, Abertis, Agbar, BPI and Boursorama in by Abertis as a result of the growth achieved 2007) increased by 42% in total, from €471 during the year. The contribution of Gas Natural million in 2006 to €670 million in 2007, net of grew by 8%, contributing most to this heading. taxes and minority interests, due to the higher results reported by these companies. Profit before Net profit (loss) from companies consolidated tax and minority interests were €491 and €697 under the full consolidation method million in 2006 and 2007 respectively. This heading includes revenues and expenses It’s important to highlight the contributions made corresponding the Group’s different activities to this increase by Banco BPI, due to the increase
January-December
€million 2007 2006
Revenues 2,227 2,740 Insurance activity 1,578 1,785 Financial activity 317 380 Other activities 332 575 Expenses arising from activities (1,599) (2,002)
Gross margin from companies consolidated by the full and proportionate method 628 738 Personnel expenses (122) (151) Depreciation (114) (137) Other operating expenses (147) (187) Other profits/losses 2 73 Finance profit/loss 12 (33)
Pre-tax profit 259 303 Income tax (23) (101)
Consolidated profit for the year 236 202 Profit attributable to minority interests (2) (42)
Net profit (loss) from companies consolidated under the full consolidation method 234 160
155 7_ Financial analysis
(insurance, finance, real estate, leisure, Net profit from the disposal of investments and operational leasing, etc.) and results reported other non-recurring profit by portfolio companies, mainly Criteria This heading includes the sale of available-for- CaixaCorp, SA, and financial revenues and sale assets (Suez, Caprabo, Atlantia and OHM in expenses relating to the Group’s financial 2007 and Banco de Sabadell in 2006) and the position. sale of stakes in consolidated companies (mainly The internal restructuring carried out prior to Inmobiliaria Colonial in 2006), with gains of €461 the IPO in 2007, and the disposal of Inmobiliaria and €385 million before and after tax respectively. Colonial in 2006 (gain recognized in Net profit Other non-recurring profit in 2007 included from the disposal of investments) led to a deductions for the reinvestment of capital gains decrease in net revenues in 2007 compared to from the sale of assets made in previous years to 2006, and likewise to a decrease in Expenses the amount of €104 million. In 2006, this heading arising from activities, Personnel expenses, was mainly an extraordinary provision related to Depreciation, Other operating expenses and the insurance business made for Caixa Barcelona Profit attributable to minority interests. Vida. This stake was sold as part of the internal Revenues from Other activities in 2007 mainly restructuring process carried out prior to the IPO. relate to Port Aventura (€192 million) and the The breakdown of these results, before and after Group’s operational leasing (€115 million). In tax, was as follows: 2006, €283 million corresponding to the real estate business (basically Inmobiliaria Colonial) was included, while this contribution was €63 million in 2007.
January-December 2007 2006
€million Before tax After tax Before tax After tax
Profit from the disposal of investments 465 388 2,067 1,484 Suez 279 220 76 61 Caprabo 90 81 – – Atlantia 30 30 – – OHM 50 45 – – Inmobiliaria Colonial – – 1,015 680 Banco Sabadell – – 929 698 Other 16 12 47 45
Other non-recurring profit 82 158 (288) (224) Deductions applied for the reinvestment of capital gains - 104 - - Extraordinary provision for insurance activity - - (286) (200) Other 82 54 (2) (24)
Profit attributable to equity holders of the parent company 547 546 1,779 1,260
156 Risk factors
The group engages in a wide variety of activities, > Credit risk. The risk of incurring losses as a 07 particularly (a) holding equity investments in result of debtors failing to meet their listed companies, (b) life and non-life insurance contractual payment obligations and possible activities and (c) consumer credit financial losses caused by changes in credit ratings. activities. This type of risk also covers portfolio annual report investments in multigroup and associated companies. Several methods and tools are > Operational risk. Risk relating to errors in the used to assess and measure the implementation and executions of Group's exposure to risk, and transactions. Criteria CaixaCorp consequently to take the > Risk relating to the insurance business. appropriate decisions to minimize Technical or subscription risk. Technical- actuarial risk is carefully controlled. the impact of these risks on its Below, the main risks and the measures adopted annual consolidated financial by the company to minimize their impact on its statements. financial statements are described.
I. Market risk Its main financial risks are associated with its Market risk is the risk that the value of a financial portfolio of investees, and to a lesser extent, instrument may vary as a result of changes in risks relating to the insurance and financial the share price, interest rate or exchange rate. activities. The management’s priority is to identify This could lead to a decrease in net equity or the main risks related to its main business losses caused by movements in market prices activities and apply the appropriate measures to and/or the breakdown of positions making up offset this risk on a decentralized basis, given the investment portfolio, not the trading the variety of its business activities and its high portfolio, in the medium-long term degree of specialization. Several methods and tools are used to measure and monitor risk. Equity price risk These methods and tools allow the company to assess and measure the Group’s risk exposure At December 31, 2007, the Group’s investments and consequently take the appropriate measures in financial instruments classified as available- to minimize the impact of these risks on its for-sale financial assets had a market value of consolidated financial statements. €10,585 million, implying pre-tax underlying capital gains of €5,195 million. At December The group has identified its main risks according 31, 2007, 99% of the market value of the to the following categories: group’s assets corresponded to investments in > Market risk. Risk of variations in the value of listed companies. Therefore, the Group is exposed its investments in other companies, classified to market risk generally associated with listed as available-for-sale assets, variations in the companies. Listed companies are exposed to interest rate and in exchange rates. fluctuations in price and trading volumes caused by factors beyond the company’s control. > Liquidity risk. Mainly due to a lack of liquidity in its investments.
157 7_ Financial analysis
The company has specialized teams which variable interest rate. Risk associated with these continuously monitor transactions carried out financial assets are assessed on a regular basis in investees according to their importance, using in accordance with prevailing market conditions indicators which are monitored on an on-going to decide when to enter into new cash flow basis. Additionally, in tandem with “la Caixa”’s hedges or modify their variability. The measures Strategic Risk Management Department, Criteria adopted mitigate the interest risk associated CaixaCorp measures the risk exposure of its with financial assets bearing fixed interest rates. investments from the standpoint of the risk Insurance companies must calculate the inherent in market price volatility using VaR mathematical provision in accordance with the models on the interest rate yield differential in maximum interest rate published by the Dirección relation to risk-free interest rates as proposed General de Seguros. If the real return on the by Basel II regulations for banking institutions, investments is lower, the insurance provision and from the viewpoint of the uncertainty of shall be calculated using the effective interest default, using models based on the PD/LGD rate. Additionally, where specific operations are approach, also following the guidelines contained assigned to insurance transactions, the interest in the NBCA. rate applied to calculate the technical provisions These indicators are monitored on an ongoing shall be determined according to the internal basis to ensure that the most appropriate rate of return of the investment. decisions are always adopted on the basis of the past and projected performance of the Exchange rate risk markets and of the Group’s strategy. The functional currency of virtually all the assets and liabilities on the Group’s consolidated balance Interest rate risk sheet is the Euro. However, the functional Interest rate risk arises mainly as a result of currency of the €628 million investment in The changes in (a) financial expenses relating to Bank of East Asia, Ltd. at December 31, 2007 variable rate debt, and (b) the value of financial is the Hong-Kong dollar (HKD). This means there assets bearing a fixed interest rate (mainly loans is exchange rate risk related to this investment. granted and investments in debt). Therefore, The Group’s policy, according to the global risk the risk derives mainly from the Group’s financial involved, revolves around arranging derivative and insurance activities and its debt. Therefore, financial instruments or incurring debt in the interest rate risk management considers the same currencies or in currencies belonging to sensitivity of the fair value of assets and liabilities the economic environment of the assets in which to changes in the structure of the market rate the investment is being made. curve. The Group may also be exposed indirectly to This risk is managed and directly controlled by exchange rate risk through foreign currency the management of the companies concerned. investments made by its investees. The Group’s financial institutions are exposed to interest rate risk caused by their fixed-rate financial investments and lending acquired as part of their activities, while its debt bears a
158 II. Liquidity risk A credit risk management 07 Liquidity risk arises when a financial investment and monitoring system exists cannot be divested rapidly enough without for the Group's financial incurring significant additional costs or when activities using specialized sufficient liquidity is not available to meet tools (e.g. scoring systems, annual report payment obligations. procedures to capture transactions, repayment The liquidity risk associated with the possibility management, etc.) as well of converting financial investments into cash is as a monitoring of the use and insignificant as these investments are generally
effectiveness of these tools. Criteria CaixaCorp listed on deep and active markets. Liquidity risk related to the ability to meet payment obligations derives mainly from the and concentration. These guidelines are insurance business. Therefore, the Group particularly significant for the insurance business manages its liquidity so that it is always able to where the majority of the company's fixed- meet its commitments. This objective is achieved income investments are concentrated. through active liquidity management, which consists of an on-going monitoring of the balance The Company implements credit risk sheet maturity structure, the early detection of management and monitoring systems for its possible inadequate short-medium term liquidity financial activities based on the evaluation and structures, and the adoption of a strategy that management of current and future risk using gives stability to the sources of financing. specialized tools (e.g. scoring systems, procedures to capture transactions, repayment management, II. Credit risk etc.) and monitoring the effectiveness of these tools. The counterpoint to risk is always the risk This is the risk of incurring losses due to the acceptance level for the transactions pursued. failure of debtors to meet their contractual payment obligations or to changes in the risk The company’s investments in multigroup and premium that are linked to debtors’ financial associated companies (valued at €5,381 million) solvency. The main credit risks are linked to fixed- is not in theory subject to the risk of share price income investments on insurance and financial variations, as they do not affect consolidated portfolios made via loans and credits granted to balance sheet or income statement figures given customers. There is also credit risk relating to that these investments are consolidated under the Group’s investments in associated companies, the equity method. The risk of this type of mainly listed companies, which is distinct from investment derives from the business the risk of market value of their shares. performance of the investees, or its eventual bankruptcy. The share price is merely an indicator. The Group’s credit risk management is governed This risk is generally considered to be credit risk. by strict internal guidelines defined by the The tools used to assess these risks are PD/LGD directors. These guidelines define the types of models, and following the guidelines contained assets likely to be included in the investment in the NBCA. portfolio using definition parameters such as the main rating scales, maturities, counterparts
159 7_ Financial analysis
IV. Risk relating to the insurance business Concentration of insurance risk The risks associated with the various branches Risks occurring in the insurance activities where of the insurance business are managed directly the Group operates are widely diversified given by the CaiFor Group’s management team, which the large number of policy-holders and the small has drawn up a technical scorecard to keep the amount of each individual claim. Therefore, the synthetic vision of the technical performance of management considers that the concentration the products up to date. This scorecard defines of insurance risk in group activities is low. the following policies: Claims Subscription risk The group operates mainly in the life and home Risk acceptance according to the main actuarial insurance business segments. Therefore, the variables (age, capital insurance and duration information related to historic claims is not of the guarantee). significant given the short time elapsing between the filing of the claim and its settlement – less Tariffs than a year in virtually all cases. In accordance with regulations issued by the V. Operational risk. Directorate of Insurance and Pension Funds, tariffs in the life insurance business shall be This is defined as the risk of losses deriving from established using the mortality tables permitted errors in operating processes. by current legislation. Additionally, the interest Risk management procedures encompass systems rates for the tariffs shall be established according and personnel issues, administrative processes, to the maximum rate set by the law governing information security and legal aspects. These and monitoring private insurance activities are managed with the aim of establishing approved by Royal Decree 2486/1998 of adequate controls to minimize possible losses. November 20.
Reassurance This involves an appropriate diversification of risk among several reassurance companies with sufficient capacity to absorb unexpected losses, thereby giving stability to claims. The definitions and monitoring of these policies allows these to be modified in order to adapt risk to the Group’s global strategy. The treatment of loans and the size of the provisions are the basic principles of insurance management. Technical provisions are estimated using specific procedures and systems.
160 Tax matters
Criteria CaixaCorp’s main business objective is the time the interest is held - article 30.5 07 to carry out investments to create value in the of TRLIS-, for resident companies, and the medium/long term. This means that the payment exemption regulated by article 21 of TRLIS, of taxes is generally deferred by Criteria to the for non-resident companies. moment when the investments are transferred. > Furthermore, Criteria CaixaCorp holds the annual report The current breakdown of Criteria CaixaCorp’s 100% stake of a company which applies the tax regime regulating companies holding Criteria CaixaCorp carries out foreign investments “Entidades de Tenencia de Valores Extranjeros” (hereinafter, ETVE)
investments to create value in the through which it carries out investments in Criteria CaixaCorp medium/long term. This means companies in which it does not hold a stake that the payment of taxes is equal to or higher than 5% but has an acquisition cost higher than €6 million. Under generally deferred by Criteria to the ETVE tax regimen dividends and capital the moment when the stakes are gains deriving from these companies are transferred. exempt from taxation. > Criteria CaixaCorp also has a stake in a venture capital company which tax regimen allows investment portfolio allows the application of to apply a 99% exemption to any capital specific tax benefits regulated by current gain obtained from the sale of its investments. legislation. The main tax benefits are the The dividends received by the venture capital following: company from its investments benefit for the application of the double taxation relief > Holding and acquiring stakes of over 5% regardless the percentage and the holding means that: period of the investment. – Dividends received from these investments > Furthermore, the corporate income tax rate do not pay taxes as they are eligible for applicable in 2008 has been reduced to 30% the double taxation relief under article 30.2 (from 32.5% in 2007). However, article 42 of the revised Corporate Income Tax Act of TRLIS allows, when specific requirements (hereinafter TRLIS) for companies resident are met, the reinvestment relief, a tax credit in Spain or for the application of the to be applied to capital gains arising from exemption regulated by article 21 of TRLIS, the disposal of shareholdings of at least 5% for non-resident companies. in portfolios entities subject to the – The double taxation relief to avoid the reinvestment of the proceeds in qualifying double taxation may also be applied to the assets (the capital gain is effectively taxed at capital gains obtained on the disposal of a rate of 18%). Criteria CaixaCorp’s objective the investments in relation to the retained is to maximize the reinvestment relief. earnings accrued by the investment during
161 7_ Financial analysis
As of 31 december 2007, the group still has Lastly, it is important to highlight that Criteria pending of application the reinvestment relief CaixaCorp has historically transferred its stakes relating to the disposal of investments carried in listed companies at a significant premium to out in 2006. This tax credit will be applied by their share price, which, in general, offsets the Criteria CaixaCorp when the reinvestment of tax effect relating to the investments the proceeds of said disposals takes place pursuant to article 42 of TRLIS.
Resident participations Non resident Non resident Otrhers 2 %> 5; 1 year participations participations 1 %> 5; 1 year %> 5; 1 year; > 6MM€
Dividends Double taxation relief Exemption 3 Exemption 3 15% 4 / 30% 5
Capital gains Price-Cost-Non Exemption 3 Exemption 3 Price-Cost = distributed income 6 Taxable Gains = Taxable Gains Taxation = Taxation = Taxable Gains x 30% Taxable Gains x 30%
Reinvestment relief If reinvestment of price N/A N/A N/A (Deduction) of sales: 12% deduction 7 Taxation = Taxable Gains x 18% (30%-12%)
(1) Participations held by the ETVE (Negocio de Finanzas e Inversiones): BCP; 0,84% of Boursorama, and others. (2) Participations < 5% and < €6M or non resident participations >5% that do not meet the requirements to apply the exemption established in art. 21 TRLIS. (3) Withholding tax practised in the country of residence of the participation, if any, becomes the final taxation of the dividend or the gain. (4) Only for residents <5%. (5) For dividends from non resident participations >5% there is the possibility to apply the deduction established in art. 32 TRLIS. (6) Accrued reserves during the participation is held. (7) Assuming that art. 42 TRLIS requirements are met (Sales >5%; Reinvestment > 5%; reinvestment has to be made 1 year before or 3 years after of the sale).
162 163 Criteria CaixaCorp annual report 07 Avda. Diagonal 621-629. Torre II Shareholder/investor contact 08028 Barcelona 93 411 75 75 Telephone: 93 409 21 21 [email protected] www.criteria.com