Corporate governance

General
The Supervisory Board and the Management Board of Roto Smeets Group (RSG) respect the principles and best practice provisions of the Corporate Governance Code, and have been observing these for some time, where these apply to RSG.

The amended Corporate Governance Code of December 10, 2008 also requires that attention is given to the social aspects of entrepreneurship relevant to the company in the communication with stakeholders of the company. As RSG publishes a separate Social Responsibility Report, we will not go into too much detail in the Financial Reportwith regard to the subject in order to keep the financial accounts readable.

I. Compliance with and enforcement of the Code
Every year, in its annual report, Roto Smeets Group (RSG) states its responsibility for the Group’s corporate governance structure and compliance with the code. Any departures from its provisions are explained, with the underlying reasons. Substantial changed are presented to the Shareholders’ Annual General Meeting.

II. The Management Board
II.1. DUTIES AND PROCEDURES
RSG’s Management Board fully endorses the principle of the Management Board’s responsibilities and procedures as stated in the code and implemented the majority of the best practice provisions described therein within the Group some time ago.

The Management Board submits for approval to the Supervisory
Board:
a) the Group’s operational and financial objectives;
b) the strategy intended to lead to the achievement of these objectives;
c) the preconditions attached to this strategy, such as the financial ratios;
d) such social aspects of business conduct as are relevant to the corporation.

The Group has a specially developed internal risk management and control system. This is outlined, with information in accordance with the provisions of 11.1.5 and 11.1.6 of the code, in the annual report.

RSG has an internal whistleblower’s code so employees may report suspected abuse of a general, operational or financial nature within the company to the chairman of the Management Board or a manager designated by the chairman of the Management Board without jeopardising their legal position. Suspected
abuse by Management can be reported to the chairman of the Supervisory Board. The whistleblower’s code can be found on this corporate website.

RSG’s CEO holds no other External Directorships in listed companies and does not hold the position of chairman of a Supervisory Board of another listed company.

If Management invokes a response time as set down in 11.1.9., this response time will be used for further deliberation and constructive consultation, with both the shareholders and the Supervisory Board.

Management observes the best practice in regard to possible takeovers (II.1.10, II.1.11).

II.2. REMUNERATION
RSG remuneration policy observes the principles and best practice provisions in respect of the amount and makeup of remuneration as well as its determination and disclosure. For a more detailed description of the remuneration policy, the reader is referred to page 12 of the annual report. The remuneration policy can also be found on this corporate website.
The notes to the annual accounts contain the legally prescribed information on the amount and makeup of the remuneration of the individual members of the Management. Possible amendments to the remuneration policy to be adopted by the Shareholders’ AGM will be submitted for approval to the said Meeting.

RSG has no Management option or share scheme. The Management’s long-term incentive, the phantom shares scheme, is based on fictional shares, not genuine ones. RSG’s CEO shall receive compensation of at most one year’s
salary if his employment is terminated due to a takeover of the group.

II.3. CONFLICTS OF INTEREST
The present CEO is involved as co-owner / consultant with four small businesses. The group has looked into whether any possible conflict of interest may arise. The conclusion is that this is not an issue at present. Should this arise in the future, then the best practice principles on this issue will be complied with.

III. Supervisory Board
III.1. TASKS AND PROCEDURES
The RSG Supervisory Board of fully endorses the principles underlying the Supervisory Board’s responsibilities and procedures as stated in the Corporate Governance Code and implements the best practice provisions within the group. The regulations containing principles and best practices for the Supervisory Board can be found on this corporate website. A report of the board’s discussions can be found in the Supervisory Board’s report on p. 10 of the annual report.

III.2. INDEPENDENCE
All external directors, with the exception of Drs J.H.M. Rijper, are independent. The Board does not regard Mr. Rijper as independent since independence criterion III.2.2.f applies (board member of a legal entity owning at least 10% of the shares).

III.3. EXPERTISE AND MEMBERSHIP
The members of the Supervisory Board have been selected according to a profile for the specific expertise they require for the performance of their duties on the Board. New Supervisory Board members are appointed by the Shareholders’ AGM on the recommendation of the Supervisory Board. Each member of the Supervisory Board is capable of assessing the broad outline of overall policy. The profile can be found on the corporate website.
This profile sketch will also be taken into consideration when proposing the re-appointment of Messrs Blom and Noten to the Shareholders’ AGM on 15 May 2013. All the remaining best practice provisions in the code are complied with.

III.4. ROLE OF THE CHAIRMAN OF THE SUPERVISORY BOARD AND THE COMPANY SECRETARY
The Chairman of the Supervisory Board shall ensure the proper functioning of the Supervisory Board and its committees, and shall act on behalf of the Supervisory Board as the main contact with the Management and shareholders regarding the functioning of members of the Management and Supervisory Board members. The best practices described are observed.
The Chair and the other members of the Supervisory Board are supported by the Company Secretary, who monitors the procedures to be followed and ensures that actions taken comply with all legal and statutory obligations.

III.5. COMPOSITION AND ROLE OF THREE KEY COMMITTEES OF THE SUPERVISORY BOARD
Since the Supervisory Board consists of four members, all members sit on the two key committees: the audit and risk management committee and the appointment and remuneration committee. The regulations of these two key committees make up an integral part of the principles and best practices regulations governing the Supervisory Board and are to be found on the corporate website.

III.6. CONFLICTS OF INTEREST
In view of the fact that one of the Supervisory Board members cannot be regarded as independent, every and all indication of a conflict of interest between the Group and the particular member shall be avoided. The specified best practice provisions in relation hereto shall be carefully complied with.

III.7. REMUNERATION
The remuneration of the members of the RSG Supervisory Board is independent of the Group’s results. The remuneration of the members of the Supervisory Board is submitted to and adopted by the Shareholders’ AGM. Amendments to this remuneration policy are submitted for adoption to the Shareholders’ AGM.

III.8. ONE-TIER MANAGEMENT STRUCTURE
The principles applicable to a One-tier management structure do not apply to RSG.

IV. (General Meeting of) Shareholders
IV.1. POWERS
The shareholders’ powers (in the Annual General Meeting) set down in the Corporate Governance Code are carefully considered. Decisions of the management board on a major change in the identity or character of the Group or the enterprise shall, in accordance with the Articles of Association, be submitted to the Shareholders’ AGM for approval. The agenda items mentioned as best practice are discussed by the Shareholders’ AGM. The Group places no restrictions on a certain percentage or number of votes. Votes are cast at the Shareholders’ AGM. Shareholders who are unable to attend the meeting may cast their votes electronically via the securities voting site of the ABN AMRO Bank. At such time as the Shareholders’ Annual General Meeting is called, a registration date is also fixed. All shareholders owning shares on this registration date have the right to vote at the Shareholders’ AGM.

Every year the Group requests its shareholders to authorise the issue of shares and restrict or exclude preferential rights for a period of 18 months. During that period, the Management may resolve to issue shares, grant rights to take up shares and restrict or exclude the preferential rights of shareholders. This authority applies to ordinary shares up to a number equal to 10% of the capital placed at that time.

The Management also requests the shareholders to authorize the acquisition of fully paid-up shares in the capital of the company itself or depository receipts for these shares, to the maximum provided in law and statute for other than no
consideration, through any means of ownership acquisition, at a price that deviates no more than 15% (fifteen per cent) from the highest or the lowest price at which such shares in the Group’s equity are traded on NYSE Euronext Amsterdam at the date on which the agreement on the acquisition of ownership was entered into.

Both these authorisations remained unused in 2012.

IV.2. DEPOSITARY RECEIPTS FOR SHARES
The principle with regard to depository receipts for shares and the best practice provisions thereby described do not apply to RSG.

IV.3. PROVISION OF INFORMATION TO AND LOGISTICS OF THE GENERAL MEETING OF SHAREHOLDERS
The RSG CEO and the Supervisory Board endorse principle IV.3 and observe all best practice provisions as applicable. Complete presentations, possible webcasts, etc. will be available directly after the meetings via the website www.rotosmeetsgroup.com.
Since RSG is tracked by a permanent number of journalists, separate press conferences are no longer held. Instead telephone interviews are held with these journalists after each press release.

Material amendments to the Group’s Articles of Association, as well as proposals for the appointment of members of the Supervisory Board, will be submitted separately to the General Meeting of Shareholders. In regard to IV.3.11, it should be added that a decision was taken in 2012 to wind up the Preference Share Foundation [‘Stichting Preferente Aandelen’].

In conformity with best practice IV.3.13 of the Corporate Governance
code, RSG has set down the principal areas of its policy in respect of bilateral contacts with shareholders. These have been published on the corporate website.

IV.4. RESPONSIBILITY OF SHAREHOLDERS AND INSTITUTIONAL INVESTORS
The principle with regard to the responsibility of shareholders and institutional investors and the thereby described best practice provisions do not apply to RSG.

V. The audit of the financial reporting and the position of the internal auditor function and of the external auditor
V.1. FINANCIAL REPORTING
RSG’s Management acknowledges its responsibility for the accuracy and completeness of external financial reporting. The Management and the Supervisory Board also acknowledge the role of the Supervisory Board in supervising the Management’s fulfilment of this responsibility.

V.2. ROLE, APPOINTMENT, REMUNERATION AND ASSESSMENT OF THE FUNCTIONING OF THE EXTERNAL AUDITOR
The external auditor is present at the General Shareholders’ Meeting. The Supervisory Board, with due observance of advice from Management, shall if necessary submit the appointment of the external auditor to the Shareholders’ AGM. The performance of the external accountant is assessed annually by the
audit and risk management committee.

V.3. INTERNAL AUDIT FUNCTION
The principle regarding the internal audit function does not apply to RSG.

V.4. RELATIONSHIP AND COMMUNICATION OF THE EXTERNAL AUDITOR WITH THE BODIES OF THE COMPANY
The principle regarding the relationship and communication of the external auditor with the corporate bodies and the best practice provisions are observed by RSG.