4 Supervision and Risk Management
The Supervisory Board consists of the following members:
Mr. A.J. (Ab) Pasman (1950)
Mr. Pasman (Dutch nationality) was appointed to the Supervisory Board and as chairman of same on 22 April 2010 and became chairman as of that date. Mr. Pasman was a member of the Board of Directors of Koninklijke Grolsch N.V. from 2003 to 2008 and was appointed chairman of said board in 2004. He is a member of the Supervisory Boards of the following non-listed companies: Berenschot Holding B.V. and Westland Kaas Groep B.V. Mr. Pasman was reappointed in 2014. His term of office runs until the Annual General Meeting of Shareholders due to be held in the spring of 2018.
Mr. J. (Jan) van den Belt (1946)
Mr. Van den Belt (Dutch nationality) was appointed to the Supervisory Board on 20 April 2006. He was CFO and member of the Board of Directors of Océ N.V. until the end of October 2008. Mr. Van den Belt is a member of the Supervisory Boards of Groeneveld Groep B.V., Attero Holding N.V., N.V. Holmatro, the Advisory Board of the Bosal Council, as well as a member of the Executive Board of Stichting Ahold Continuïteit. In addition, he was a (deputy) member of the Enterprise Chamber of the Amsterdam Court of Appeal untill June 2016. Mr. Van den Belt qualifies as the financial expert referred to in the best practice Article III.3.2 of the Dutch Corporate Governance Code. Mr. Van den Belt was reappointed in 2010 and 2014. Mr. Van den Belt’s (final) term of office runs until the Annual General Meeting of Shareholders due to be held in the spring of 2018.
Mr. P.B. (Peter) Ernsting (1958)
Mr. Ernsting (Dutch nationality) was appointed to the Supervisory Board at the General Meeting of Shareholders of 28 April 2011. Mr. Ernsting was appointed at the proposal of the Supervisory Board after a recommendation from the Central Works Council. Mr. Ernsting was until December 2016 Senior Vice President, Group Supply Chain, and member of the Executive Committee at Carlsberg. Mr. Ernsting previously held a number of management positions at Unilever N.V., both in the Netherlands and abroad. Mr. Ernsting’s term of office runs until the Annual General Meeting of Shareholders due to be held in the spring of 2019.
Mr. A. (Aad) Kuiper (1960)
Mr. Kuiper (Dutch nationality) was appointed to the Supervisory Board at the General Meeting of Shareholders of 25 April 2013. Mr. Kuiper joined Hunter Douglas N.V. in 1997 and is currently Vice President en President & CEO of Hunter Douglas European Operations. Mr. Kuiper held various management positions at Akzo Nobel between 1987 and 1997, both in the Netherlands and abroad. Mr. Kuiper is a member of the Supervisory Board of Bonarius Holding B.V. Mr. Kuiper’s term of office runs until the Annual General Meeting of Shareholders due to held in the spring of 2017.
For more information on the policy regarding the composition of the Supervisory Board, we refer you to chapter 4.3 Governance & compliance.
This report of the Supervisory Board provides an overview of the activities of the Supervisory Board and its committees in 2016. A description of the composition of the Supervisory Board is included in this annual report in section 4.1 Supervisory Board. The tasks have been executed in line with the regulations governing the Supervisory Board, which are available for viewing in the corporate governance section of the corporate website (www.accell-group.com). The audit committee and the selection and remuneration committee are also subject to regulations, which are available on the corporate website.
In 2016, the Supervisory Board supervised the management of the Board of Directors and the general course of events within Accell Group. The Supervisory Board also gave the Board of Directors advice in its supervisory capacity. The Supervisory Board’s tasks also include those stipulated by law and in the Accell Group articles of association. Pursuant to same, the Board of Directors submitted important decisions to the Supervisory Board for approval.
In 2016, we devoted a great deal of attention to developing a vision on the future of mobility, sport and recreation and parts and accessories for the period through to 2025. We were also closely involved in the further formulation and tightening of the company’s strategy. This means we are now able to communicate more broadly on how this will affect the various activities in the fields of mobility, sports and recreation and parts and accessories. Consumers are the main focus of this strategy, which is why we have deliberately opted for an omni-channel approach and why we plan to align our competencies and operating processes more effectively to that approach. Our tightened strategy also gives us a clear roadmap we have linked to a number of medium-term objectives. That gives an impression of the value we believe we can create with this strategy in the years ahead. Of course that includes value for our shareholders, but also the value we can create for our other stakeholders and for society as a whole.
The tightened strategy is a good fit with the path we have already chosen to travel via various new local initiatives within the group. And at group level we have launched a number of projects, such as the restructuring and more centralised management of our supply chain. Our main priorities in this are to meet consumer demand as optimally as possible and improve delivery times. Other priorities are the realisation of procurement synergies and a reduction in working capital requirements. It is certainly possible to realise improvements in these areas simultaneously, but it will be complicated due in particular to the large number of materials, components and semi-finished products we purchase to make and market our products. Nor is this complexity likely to diminish in the future, due to the fact that bicycles as a product are becoming ever more complex and include an ever increasing number of components. The growing demand for e-bikes and the rise of the connected bike are just two examples of this increasing complexity. The solution to this is greater cooperation in the chain and we plan to take the lead on this front. We will break down traditional certainties and be more transparent and open in our cooperation with our suppliers, production partners and retailers. This will increase mutual dependency and all parties in the chain will move in that direction to meet the changing demand in the market together.
Elsewhere in this report, Accell Group explores the various components of the strategy. This shows that the company has made a number of significant choices regarding a broad range of activities that will be implemented within the company in the period ahead. All of these changes are in line with the changing market, while the aim of the strategy is to help Accell Group to further strengthen its leading position. The Supervisory Board remains closely involved in the roll-out of the various elements of the strategy and will provide the Board of Directors will active assistance and supervise the coherent implementation of the strategy. We are aware that these changes will affect the organisation, as it will be business as usual during the restructuring process.
Now the elements of the strategy are clear and we are at the start of the implementation phase, it has been agreed by common consent that this is the right moment for the Chairman of the Board of Directors to pass on the baton. This is the end of a chapter and the start of a new one. We are grateful to René Takens for how he has worked with all his colleagues on the board and beyond to give form and substance to the organisation and put the organisation on the fast-track to growth, both organically and through acquisitions.
As this report was being written, the procedure had been started to find a successor who together with the other members of the Board of Directors will lead the further roll-out of the strategy.
The subject of Accell North America was raised at every meeting with the Board of Directors. The American market very much has its own dynamic and varies greatly from the European market in many respects. Accell Group has made many changes both in terms of the organisation and its strategy in North America. This resulted in a major change in direction, especially for the Raleigh brand. We will see the effects of the strategy in the years ahead.
In the year under review, the Supervisory Board consulted regularly with the Board of Directors on the development and implementation of Accell Group’s corporate social responsibility strategy and the initiatives we have launched in this respect. Within the Board of Directors, the Chief Operating Officer is responsible for the realisation of the corporate social responsibility strategy.
Internal risk management
Accell devotes considerable attention within the group to continuous improvements to internal controls and the integrity of our financial reporting. In 2016, Accell launched a number of initiatives on this front. The internal auditor visited a large number of the Accell companies in the course 2016 and tested them for the presence of an internal control structure.
Throughout the year, the Supervisory Board devotes a great deal of attention to risk management and internal control and in that context assessed the risk structure. This also included a review of the findings of the internal auditor as reported to the audit committee.
The risk management and control systems are operating effectively. The Supervisory Board has therefore approved the in control statement issued by the Board of Directors. You will find an extensive explanation of risk factors and internal risk management in this annual report in chapter 4 Supervision and Risk Management. The theft in Taiwan that was discovered in late 2015 was given a great deal of attention in 2016 in the form of a recovery plan. This involved tightening up controls in both Taiwan and elsewhere in the group.
The Supervisory Board has approved a proposal from the Board of Director to cease publishing qualitative trading updates at fixed moments after the end of the first and third quarters as from the 2017 financial year. This means that Accell will only publish interim trading updates when there is good reason to do so.
The Supervisory Board regularly discussed the company’s relationship with its shareholders. A key moment in this context is the General Meeting of Shareholders. Most contacts with the shareholders take place during and after the General Meeting of Shareholders.
Changes to the Board
There were no changes in the Board of Directors or in the Supervisory Board in 2016. Aad Kuijper’s first term of office as a supervisory director ends in April 2017. A motion will be submitted to reappoint him for a second four-year period.
The Supervisory Board held seven plenary meetings with the Board of Directors in 2016, two of which were strategy meeting. The meetings took place in the months February, April, July, October and December. The main focal point was [the development and determination of the tightened strategy.
In addition, the meetings addressed a number of other important subjects: marketing and distribution; quality of the brand companies; quality of controls; the realisation of synergy benefits within and between companies; the structure of the central supply chain; the human resources policy and improved utilisation of know-how and innovation.
The Supervisory Board met twice with the external auditor in the presence of the Board of Directors and subsequently in the absence of the Board of Directors. These meetings with the external auditor did not yield any issues that required immediate attention or action.
The plenary meetings also addressed all the activities and recommendations prepared by the committees, after which decisions were made.
Batavus Bryte: Good Industrial Design 2016 (the Netherlands)
The GIO jury awarded the Batavus Bryte the title ‘Good Industrial Design 2016’ and the bicycle will be included in the GIO exhibition during Dutch Design Week in Eindhoven. One of the features of the frame design is the integrated cable inlet behind the steering stem. The bicycle also has a mono-shock suspension front fork and hydraulic rim brakes.
The audit committee met five times in 2016. A key focal point for the committee was the follow-up to the recovery plan as a consequence of the theft that took place in Taiwan in 2015. This subject was discussed at all the meetings of the audit committee. This also applied to the development of the financial results during the course of the year, with specific attention devoted to margins, operating costs and the development of the working capital. Another key point of attention for the committee was selection and appointment of the new external auditor as a result of the mandatory rotation.
The following subjects were discussed during the meetings of the committee: the quarterly results, the internal control framework, risk management (including risk of fraud and the follow-up to the recovery plan), the internal audit plan, the findings of the internal auditor and the follow-up to their recommendations, the audit plan of the external auditor, the auditor’s report and the 2016 management letter, the One Finance Programme and the organisation of the finance function, financing (including the possibility of supply chain financing and the potential refinancing) and the covenants of the group’s current financing facilities, the 2017 budget, taxes and IT. In 2016, the committee once again participated in the Controllers’ meeting, a meeting of the controllers from the larger Accell companies with the main subject of discussion: the lessons learned from the theft in Taiwan.
The audit committee devoted specific attention to the quality and integrity of the financial results. To this end, the committee discussed the group results in the presence of the external auditor every quarter. The committee also discussed the integrity of the results in detail against the background of the auditor’s report.
In the year under review, the internal auditor visited a number of larger Accell Group companies and emerged from this process with various recommendations that the audit committee, the Supervisory Board and the Board of Directors would like to see addressed in the near term. The execution, which was completed on schedule, was monitored very closely.
The management letter of the new external auditor (KPMG) also included a number of recommendations. Since this was the first management letter from KPMG, it was more extensive than we have been used to in the past. It did not note any serious deficiencies. The management letter led to a constructive discussion that contributed to an improvement in efficiency and of the internal control framework. The recommendations were related in particular to the formalisation and documentation of processes.
The external auditor devoted specific attention to subjects that are relevant to forming an opinion on the financial statements and subjects relevant at that moment. With respect to the financial statements for 2016, specific attention was devoted to the valuation of goodwill and trademark rights, deferred tax assets, pensions in the UK and the valuation of inventories, trade receivables and derivatives. The audit also devoted attention to the accuracy of revenue recognition, tax accounting, financial instruments and foreign currency exchange risks, financing and compliance with related covenants. This year’s audit devoted specific attention to the payment organisation and the associated internal control measures in the Asian operating companies.
Selection and remuneration committee
The selection and remuneration committee met five times in 2016. The main focal point of the committee was the composition of the Board of Directors. The committee also devoted specific attention to determining the criteria for the variable remuneration for the members of the Board of Directors.
The selection & remuneration committee also made preparations for the assessment of the members of the Board of Directors in 2015, submitted proposals regarding the fixed and variable remuneration of the members of the Board of Directors for 2015, and conducted the evaluation of the remuneration of the members of the Board of Directors for 2015.
With respect to the application of the remuneration policy for the Board of Directors, the committee prepared the remuneration report for 2016, which was subsequently discussed and adopted by the Supervisory Board. The full report including all the components of the remuneration is available on Accell’s corporate website. The remuneration of the Board of Directors is in line with the policy adopted by the General Meeting of Shareholders on 24 April 2008 and last amended on 22 April 2010. We also refer to the remuneration report in section 4.4 of this report on the application of the remuneration criteria for 2016. We refer to the notes to the financial statements of this report (section 5.7, point 25) for the exact amounts of the remuneration for the members of the Board of Directors.
The Supervisory Board discussed and adopted the remuneration package of the Board of Directors for 2016 on 24 February 2016. At the same time, the committee determined the bonuses for the financial year 2015, which were recognised in the 2015 financial statements.
The evaluation of the functioning of the Supervisory Board, the committees and the individual members of the Supervisory Board in 2016 was based on an internal evaluation in 2016.
The conclusion of this evaluation was that each of the members of the Supervisory Board functioned well and that the Supervisory Board as a whole and the committees functioned appropriately. The next evaluation involving an external party will be conducted in 2019. In 2017, the board will conduct the usual internal evaluation.
As a result of the mandatory rotation of external auditors, KPMG took over the audit from Deloitte for the financial year 2016. The transfer of the audit activities went smoothly. KPMG was appointed as external auditor for the financial year 2016 in 2016.
The Supervisory Board approved the 2016 financial statements on 9 March 2017. KPMG has issued an unqualified auditor’s report. On 25 April 2017, the financial statements will be submitted to the General Meeting of Shareholders for adoption.
The Supervisory Board thanks the Board of Directors for its open and constructive cooperation. A special word of gratitude goes out to all Accell Group employees who respond to changes in the bicycle industry with enthusiasm and energy and thus help us to realise our adjusted ambition and strategy, while bearing in mind our broader role in society.
Accell Group attaches great importance to good corporate governance. The Board of Directors and Supervisory Board are responsible for the corporate governance structure of Accell Group and for compliance with the Dutch Corporate Governance Code (‘the Code’). In this annual report, we report on the basis of the Code adopted in 2008. In 2017, we will adapt our procedures and regulations to the revised Code issued in 2016.
This section of the annual report first describes the corporate governance structure of Accell Group and subsequently explains where and why Accell Group deviates from the principles and best practice provisions of the Code.
Corporate governance structure
Accell Group is a statutory two-tier company. The corporate governance structure of Accell Group is partly laid down in the company’s articles of association and partly in the legal regulations of the Dutch two-tier company regime. The full text of the articles of association can be found on Accell Group’s corporate website (www.accell.com) in the ‘Corporate Governance/Articles of Association’ section.
Board of Directors
The Board of Directors is responsible for the management of Accell Group and therefore for ensuring that the company achieves its goals, for the strategy and accompanying risk profile, the results development and the social aspects of entrepreneurship relevant to Accell Group. The Board of Directors is accountable to the Supervisory Board and the Annual General Meeting (‘General Meeting’) of Shareholders on these issues. In the performance of its tasks, the Board of Directors focuses on the interests of the company and its associated enterprise and in doing so weighs the relevant interests of the parties involved in the company. The Board of Directors provides the Supervisory Board with all the information that the Supervisory Board may need to fulfil its duties in a timely manner.
The Board of Directors is responsible for compliance with all relevant laws and regulations, for the management of the risks associated with the company’s business operations and for the financing of the company. The Board of Directors reports on same and discusses the internal risk management and control system with the Supervisory Board. As part of this system, Accell Group uses the Codes of Conduct, which are posted on the website (under ‘Corporate Governance’). This annual report includes a chapter titled ‘Risk Management’ (section 4.5), which describes the internal risk management and internal control systems in more detail.
Certain important decisions of the Board of Directors require the approval of the Supervisory Board, such as decisions on major investments, share issues and the establishment and/or termination of long-term alliances between Accell Group and other companies. The General Meeting of Shareholders’ approval is required for decisions of the Board of Directors that involve significant changes to the identity or character of the company or the enterprise.
On 26 April 2016, the General Meeting granted the Board of Directors a mandate to acquire shares in the company’s own capital. The mandate was granted under the following conditions:
- the mandate would remain in effect for 18 months (until 1 November 2017);
- the Supervisory Board’s approval would be required for the acquisition of shares in the company’s own capital;
- the number of shares would not exceed 10% of the issued share capital; and
- the acquisition price would not exceed 110% of the average price on the preceding five trading days.
The agenda for the General Meeting of 25 April 2017 includes a proposal to once again grant the Board of Directors a new mandate to acquire shares in the company’s own capital under the same conditions as those set out above and on the understanding that the mandate will remain in effect until 1 November 2018.
Decisions to issue shares are taken by the General Meeting, insofar as and as long as it has not appointed another company body to do so. Preferential rights can be limited or excluded by the company body authorised to pass resolutions on the issuance of shares, provided that said right is assigned expressly to that company body. A resolution of the General Meeting of 26 April 2016 extended the period in which the Board of Directors is authorised, with the approval of the Supervisory Board, to:
- issue ordinary shares up to a maximum of 10% of the outstanding share capital, and
- limit or exclude preferential rights upon the issuance of ordinary shares.
This authorisation has been extended until 1 November 2017.
The agenda for the Annual General Meeting of Shareholders of 25 April 2017 includes a motion to extend this term to 1 November 2018.
The Board of Directors represents the company insofar as the law does not stipulate otherwise. Each member of the Board of Directors has the authority to represent the company.
The Supervisory Board determines the number of the members of the Board of Directors and appoints and dismisses the members of the Board of Directors. The Board of Directors currently comprises four members. The Supervisory Board has appointed one of the members as chairman of the Board of Directors.
The Supervisory Board determines the remuneration of the individual members of the Board of Directors, using the policy adopted by the General Meeting most recently on 22 April 2010. The Supervisory Board also compiles an annual remuneration report, which contains an explanation of the remuneration of the individual members of the Board of Directors.
The main points of the Supervisory Board’s remuneration report for 2016 are included in this annual report in section 4.4 Remuneration report.
The Supervisory Board’s has been tasked with the supervision of the strategy of the Board of Directors and the general developments in Accell Group and its affiliated companies. In addition, the Supervisory Board provides the Board of Directors with advice and support. In the performance of its duties, the Supervisory Board is guided by the interests of Accell Group and its associated enterprise and in doing so weighs the relevant interests of the parties involved in the company. The Supervisory Board also takes into account the aspects of corporate social responsibility relevant to Accell Group. The Supervisory Board receives all the information required for the performance of its duties from the Board of Directors in a timely manner.
The Supervisory Board has drawn up regulations which include the distribution of its tasks and its operating methods. The regulations include a section on its interaction with the Board of Directors and the General Meeting of Shareholders. The regulations were most recently amended in a resolution of the Supervisory Board dated 4 March 2015. The regulations can be found on the Accell Group corporate website (in the section ‘Corporate Governance/Supervisory Board’).
The Supervisory Board comprises at least three members (currently four). The General Meeting appoints the members of the Supervisory Board based on nominations submitted by the Supervisory Board. The General Meeting can reject the nomination with an absolute majority of the votes cast, these representing at least one-third of the issued and paid-up capital. If the nomination is rejected, the Supervisory Board shall draw up a new nomination. In the event that the General Meeting fails to appoint the nominee and also fails to reject the nomination, the Supervisory Board shall appoint said nominee. The Supervisory Board announces the recommendations simultaneously to the General Meeting and the Works Council of Accell Nederland B.V. The General Meeting and the Works Council are entitled to recommend candidates for membership of the Supervisory Board. The Supervisory Board will fill the nominations for one-third of the positions on the Supervisory Board with persons recommended by the Works Council, unless the Supervisory Board objects to said recommendation and provides grounds for same.
A member of the Supervisory Board shall retire no later than the date of the first Annual General Meeting held four years after their initial appointment to that position and in such an instance immediately at the end of said meeting. Members of the Supervisory Board may be appointed to the Supervisory Board for a maximum of three four-year terms. The members of the Supervisory Board receive a remuneration to be determined by the General Meeting.
The Supervisory Board has drawn up a retirement schedule, which is published on the Accell Group website (in the section ‘Corporate Governance/Supervisory Board’).
The Supervisory Board has appointed from its midst an audit committee comprising Mr. J. (Jan) Van den Belt (chairman) and Mr. P.B. (Peter) Ernsting, and a selection/remuneration committee, comprising Mr. A. (Aad) Kuiper (chairman) and Mr. A.J. (Ab) Pasman.
These committees are charged with preparatory activities as part of the decision-making process of the Supervisory Board. In a resolution dated 4 March 2015, the Supervisory Board established regulations for the audit committee and the selection/remuneration committee. These regulations can be found on the website (in the section ‘Corporate Governance/Supervisory Board’).
The Supervisory Board has drawn up a profile of its size and composition, taking into account the nature and operations of Accell Group and the desired expertise and background of the members of the Supervisory Board. The profile was most recently revised in a Supervisory Board resolution dated 21 July 2011 and is available on the Accell Group website (in the section ‘Corporate Governance/Supervisory Board’). The Supervisory Board elects a chairman and a deputy chairman from among its members. The Supervisory Board aims to align the experience and expertise of its members effectively with the nature, activities and strategy of Accell Group. The Supervisory Board’s composition is such that the members are able to operate independently and critically, vis-à-vis each other, the Board of Directors and any company interest whatsoever.
Composition Board of Directors and Supervisory Board
Although the Supervisory Board strives for a balanced distribution of seats between men and women on the Board of Directors and the Supervisory Board, it has proven difficult to find suitable female candidates for open vacancies. In any future appointments of directors, Accell Group will continue to strive for a balanced composition of the Board of Directors. Accell Group will also continue to aim for a balanced mix in the composition of the Supervisory Board in terms of age and gender, as is laid down in the profile outline for the Supervisory Board. The profile is available on Accell’s corporate website.
General Meeting of Shareholders
Key authorisations, such as powers regarding decisions to amend the articles of association and rules and regulations, legal mergers and spin-offs, and the adoption of the financial statements reside with the General Meeting of Shareholders. In addition, the General Meeting determines the remuneration policy for the members of the Board of Directors. A General Meeting is convened at least once a year.
The General Meeting is chaired by the chairman of the Supervisory Board. All matters discussed and resolved in the General Meeting are recorded in the official minutes of the meeting. Accell Group considers it important that as many shareholders as possible participate in the decision-making processes of the General Meeting.
Shareholders and others entitled to vote are therefore given the opportunity to appoint proxies or to extend voting instructions ahead of the General Meeting of Shareholders. The Board of Directors is pleased with the high level of attendance at the shareholder meetings in recent years. At the General Meeting of Shareholders held on 26 April 2016, 53.4% of the total number of outstanding shares was either present or represented.
Haibike SDURO All Mountain 8.0 Eurobike Award 2016
Haibike once again confirmed its pioneering role in the market for sporty e-bikes with the SDURO. The Haibike SDURO All Mountain 8.0 is one of the first mountain bikes to provide cloud-based communication options via GPS, GSM and Bluetooth chips. This provides access to a range of new services, such as anti-theft measures, tracking, route expert and automated emergency alerts. The SDURO also has an integrated display and various high-end components. “All functionalities customers expect from a modern trail bike,” according to the jury.
The General Meeting appoints the external auditor. The external auditor reports their findings related to the audit of the annual accounts simultaneously to the Board of Directors and the Supervisory Board and records the results of their findings in a statement. The General Meeting may question the external auditor about their statements regarding the true and fair of the annual accounts and the external auditor attends said meeting and is authorised to speak at same for that purpose. Due to the mandatory rotation of external auditors, the General Meeting of Shareholders appointed KPMG Accountants N.V. on 26 April 2016 to audit the financial statements for the 2016 financial year. The Supervisory Board put forward KPMG Accountants N.V. for reappointment as external auditor for the financial year 2017. The reappointment of the external auditor is on the agenda for the General Meeting of Shareholders of 25 April 2017.
Accell Group operates in compliance with all relevant laws and regulations. Tax payments Accell Group makes are largely related to corporate income tax, value added tax, income taxes and social security premiums. Internal transactions are settled on the basis of the ‘at arm’s length’ principle. Accell Group has regular consultations with the Dutch tax authorities, during which they discuss important fiscal aspects and developments. If necessary, Accell Group discusses key fiscal aspects with the tax authorities in advance. Risks pertaining to taxes are part of our internal risk management and control system. Compliance with fiscal laws and regulations is considered a compliance risk.
Codes of Conduct
The Board of Directors has drawn up an internal code of conduct incorporating the basic principles that apply to how employees of Accell Group and all of its group companies are expected to conduct themselves. The complete text of this Internal Code of Conduct is available on the Accell Group website (in the section ‘Corporate Governance’).
Accell Group has laid down its requirements for parties involved in the production and sourcing process in a code of conduct for suppliers. These requirements relate to issues including the prohibition of child labour, involuntary labour and discrimination, safety requirements, environmental requirements and labour conditions. The code of conduct for suppliers is available via the Accell Group website (in the section ‘Corporate Governance’).
The Board of Directors has established whistleblower regulations and published same on the Accell Group website (in the section ‘Corporate Governance’), so employees can report on alleged irregularities within Accell Group and its associated companies without harming their legal position. These regulations were recently amended.
Insider trading regulation
The Insider Trading Regulation established by the Board of Directors aims to provide rules to support the legal stipulations aimed at preventing insider trading. The basic premise of the Insider Trading Regulation is that people should not enter into or recommend transactions in Accell Group shares and other Accell Group financial instruments if they have insider knowledge, such in accordance with Regulation (EU) no. 596/2014 of the European Parliament and the Council of 16 April 2014 on market abuse (Regulation market abuse). By virtue of the Insider Trading Regulation, persons with a reporting obligation (including members of the Board of Directors and the Supervisory Board) and the so-called designated persons at Accell Group are subject to various closed trading periods, announced by the Compliance Officer, in which they are not allowed to conduct any transactions, regardless of whether they have insider knowledge or not. In line with the Insider Trading Regulation, persons with a reporting obligation and designated persons must report any transactions they have conducted to the compliance officer. Those with a reporting obligation must also report their transactions to the Dutch Financial Markets Authority (AFM).
On 12 December 2014, the Supervisory Board introduced a regulation in the sense of best practice provision III.6.5 of the Dutch Corporate Governance Code. This regulation includes a number of provisions related to the possession of and transactions in securities by members of the Board of Directors and of the Supervisory Board, other than those issued by their ‘own’ company.
To protect the interests of Accell Group and its stakeholders, Accell Group entered into an option agreement with Stichting Preferente Aandelen Accell Group in May 2015. This agreement replaced the previous agreement dating from December 1998, which was later amended in April 2009.
Pursuant to the option agreement, the Stichting Preferente Aandelen Accell Group shall have the right at any time to acquire the number of cumulative preference shares B required to make the Stichting Preferente Aandelen Accell Group, after the taking of said shares, the holder of one half, less one share, of the (increased) issued and paid-up capital. The Stichting Preferente Aandelen Accell Group can avail itself of this right at any time in the event that the foundation believes there is a threat to the independence and/or the identity and/or the continuity of (the strategy of) the company, the associated enterprise and any parties involved in same. The option can be exercised, among other things, to 1) prevent or delay (the threat of) a public bid on the shares in the capital of the company that is deemed hostile, and/or 2) to prevent or oppose an unwanted concentration of voting rights in the General Meeting of Shareholders, and/or 3) to resist any unwanted influence or pressure from shareholders who wish to change the strategy of the Board of Directors. In these cases, the issuance of cumulative preference shares B enables the company and its Board of Directors and Supervisory Board to determine their standpoint vis-a-vis the bidder/hostile shareholder and any plans they may have, to investigate alternatives and to defend the interests of the company and those of its stakeholders. Within six months after any issue of cumulative preference shares B, the Board of Directors shall convene a General Meeting to inform the shareholders regarding the state of affairs and discuss same with said shareholders.
Pursuant to the new option agreement, the Stichting Preferente Aandelen Accell Group has been granted the right to submit a request for an inquiry (as meant in article 2:345 of the Dutch Civil Code) to the Enterprise Chamber of the Amsterdam Court of Appeal.
The main aim of the Stichting Preferente Aandelen Accell Group, which has its registered offices in Heerenveen, is to represent the interests of Accell Group and its associated enterprise, such including enterprises which are carried out by the companies with which it is affiliated in a group and all parties involved in same. In the performance of this task, the Stichting Preferente Aandelen Accell Group shall do its utmost to safeguard the interests of Accell Group and its associated enterprise and all parties involved in same, while at the same time doing its utmost to resist any influences which may affect the independence and/or continuity and/or identity of the company and its associated enterprise in conflict with those interests. The board of the Stichting Preferente Aandelen Accell Group consists of three board members, namely Mr. M.P. (Marco) Nieuwe Weme, Mr. B. (Bart) van der Meer, and Mr. A.J.M. (Naud) van der Ven. In the opinion of the company and in the opinion of the Stichting Preferente Aandelen Accell Group, the Stichting Preferente Aandelen Accell Group is independent from the company within the meaning of Article 5:71, section 1c of the Financial Supervision Act.
Compliance with the Code
From 2017 onwards, we will report on the revised Dutch Corporate Governance Code (2016); this report discusses compliance with the current Code (2008). Accell Group has in the past complied with and currently complies with most of the principles and best practice provisions of the current Code, insofar as these are applicable to the company. In view of the nature, size and character of the Accell Group organisation, the company believes that it is in its own best interest to deviate from the best practice provisions listed below. The following explains why and to what extent Accell Group deviates from said provisions:
Best practice provision II.1.1
This provision includes a system that stipulates maximum terms of office for board members of four years. However, three of the current members of the Board of Directors were appointed – before 2005 – for an unlimited period. Accell Group has decided to respect the contractual status quo of the current members of the Board of Directors. The appointment of the new member of the Board of Directors – Mr. J.J. (Jeroen) Both – in 2015 was for a term of four years.
Best practice provision II.2.5
The regulation for share options stipulates a three-year reference period before the unconditional allocation of shares. Following definitive allocation, the shares must be held for at least two years. Although the formal period between conditional and unconditional allocation is two years, the reference period for allocation is three years and the Supervisory Board believes the term stipulated by the entire scheme is sufficient to secure the commitment of the members of the Board of Directors to the company and its associated interests.
Best practice provision III.4.3
Accell Group has a secretary to the Board of Directors. His role is limited to supporting the Board of Directors. The tasks of the secretary as outlined in the Best practice provision III.4.3 are performed by the deputy chairman of the Supervisory Board.
Best practice provision IV.3.1
Best practice provision IV.3.1 requires that analyst meetings, analyst presentations, presentations to investors and press conferences be externally accessible via webcasting, telephone lines or other means. In view of the organisation required for the aforementioned types of broadcasts and the current size of the company, Accell Group has decided not to comply with this provision for the time being. Share-price sensitive information is published in advance on the website www.accell-group.com and presentations given during analyst and press meetings are published afterwards on the company’s website.
Transactions involving conflicts of interest
There were no transactions involving a conflict of interest as provided for in best practice provision II.3.4, III.6.3 and III.6.4 of the Code in the 2016 financial year. The regulations for the Supervisory Board include rules on how to deal with (potential) conflicts of interest involving the members of the Board of Directors, the Supervisory Board and the external auditor in relation to Accell Group and stipulate which transactions require the approval of the Supervisory Board.
Sparta M8i Ltd connected: RAI Bicycle Innovation Award (the Netherlands)
The Sparta M8i Ltd connected gives owners a direct online connection to their e-bike. The first applications are a track and trace system and automated alerts for battery charging and maintenance checks. The jury praised the connectivity and saw numerous opportunities for future applications of this innovation. Sparta can justifiably call itself a frontrunner in the field of innovations and e-bikes with this fourth Bicycle Innovation Award in a row.
Regulation article 10 of the takeover directive
The following is an overview of the information required under article 1 of the Regulation article 10 of the Takeover Directive:
- The company’s share capital is € 1,200,000 divided into 120,000,000 ordinary shares with a nominal value of € 0.01 each, divided into 55,000,000 ordinary shares, 5,000,000 cumulative preference shares F, and 60,000,000 cumulative preference shares B. As of 9 March 2017, the issued and paid-up capital of Accell Group amounts to € 258,553.08 divided into 25,855,308 ordinary shares with a nominal value of € 0.01 each.
- The company has no statutory or contractual limitation on the transfer of shares, with the exception of the statutory blocking provision with respect to the transfer of cumulative preference shares F.
- An overview of substantial shareholdings in Accell Group is included in this annual report in section 1.7 The share.
- There are no extraordinary voting rights attached to the shares issued by the company.
- Accell Group does not have a monitoring mechanism for an employee share scheme.
- There are no limitations on the execution of the voting rights attached to ordinary shares. There are no depositary receipts for shares issued with the cooperation of the company.
- The company is not aware of any agreements involving a shareholder of the company that may limit the transfer of shares or limit the voting rights vested in shares.
- The provisions for the appointment and dismissal of members of the Board of Directors and the Supervisory Board and for amendments to the articles of association are incorporated in the articles of association of the company, which can be consulted on the Accell Group website (in the section ‘Corporate Governance’).
- The powers of the Board of Directors and in particular their right to issue shares in the company and acquire shares in the company are described in section 4.3 of this annual report.
- A number of agreements between the company and its financiers include the provision that the financiers have the right to dissolve the agreements and reclaim the loans issued prematurely in the event of a substantial change in the control over the company following a public bid as meant in article 5:70 of the Financial Supervision Act (Wft).
- The company is not aware of any agreements with directors or employees that provide for a payment in the event that the employment is terminated following a public bid as meant in article 5:70 of the Financial Supervision Act.
The Supervisory Board has drawn up a remuneration report 2016 for the application of the remuneration policy for the Board of Directors. The full report is available on the Accell Group website. The remuneration of the Board of Directors is in line with the policy adopted by the General Meeting of Shareholders on 24 April 2008 and last amended on 22 April 2010.
The Supervisory Board discussed the functioning of the Board of Directors as a whole and the members individually in the absence of the Board of Directors. On 9 March 2017, the board determined the bonus payments for the 2016 financial year, as presented in the financial statements for 2016.
The aim of the remuneration policy is to enable Accell Group to recruit and retain qualified people for the Board of Directors. The level and structure of the remuneration are based in part on factors such as profit development, share price developments and other developments relevant to the company. The aim of the remuneration policy is to position the remuneration packages at a competitive level in the Dutch remuneration market for people with comparable levels of responsibility on the boards of larger companies.
An explanation of the various components of the remuneration for the Board of Directors is available in the 2016 remuneration report on the company website. For the exact amounts of the remuneration of the members of the Board of Directors, we refer to the notes to the financial statements of this annual report (section 5.7, point 25).
There are inherent risks in Accell Group’s business activities and organisation. Accell Group may fail to meet strategic, operational and financial objectives in full and the company also faces risks in the field of financial reporting and the application of laws and regulations. The extent to which the company is willing to run these risks in trying to achieve its goals differs per risk category. Accell Group has a relatively high risk appetite with respect to innovation, development and marketing. At the same time, the company has a low risk appetite when this pertains to product safety. The risks the company is unwilling to take on independently have as much as possible been transferred to an insurance company. The management of risk is an important part of the tasks of the company management, with the aim of having a positive impact on the extent to which the company’s objectives are realised. Below you will find an explanation of the main risks the company faces and how Accell Group has organised its risk management.
Risk management system
The risk management system comprises the following components:
- Identifying and weighing the risks associated with the various strategic alternatives and formulating realistic objectives and associated control mechanisms;
- identifying and evaluating the main strategic, operational and financial risks and the potential impact of same on the company;
- developing a coherent system of measures to control, limit, avoid or transfer risks. The risk management system is tailored to the size and decentralised structure of the company.
Despite the risk management and control system, material errors, fraud or illegal acts may occur. The system therefore provides no absolute certainty that objectives will be realised, but was developed to achieve a reasonable level of assurance with regard to the effectiveness of internal controls pertaining to financial and operational risks that may affect the organisation’s objectives.
The Board of Directors is responsible for the set-up and operation of the internal risk management and control system. Market and operational risk management is organised at operating company level, while the organisation of the supply chain and HRM is increasingly managed at group level. Management and control measures relating to acquisitions, treasury, financial reporting, tax and legal issues are centralised at group level. Accell Group has a decentralised management philosophy, in which the local targets are determined in consultation between the Board of Directors and management of the subsidiaries. Progress is monitored through the financial planning cycle and management information, the risk analysis and regular visits by the Board of Directors and other group-level employees to the subsidiaries. The Supervisory Board is responsible for supervising the performance of the Board of Directors, and specifically monitors the strategic risks and the set-up and operation of the risk management and internal control systems.
In early 2016, it became clear that an employee at a subsidiary in Taiwan had managed to steal from the company. This was due to a combination of circumstances, in which the employee concerned was able to abuse systems, processes and trust to circumvent the existing internal control measures around this company and misuse the availability of certain payment systems. The measures from the recovery plan drawn up after this theft were executed in 2016.
The Board of Directors and the management of the subsidiaries draw up periodical analyses of the strategic, operational and financial risks. For the purpose of the risk analysis, Accell Group conducted an extensive inventory of internal and external risks which the members of the Board of Directors and the management of the subsidiaries assess individually for their potential impact on the company. The control measures of the main risks are also assessed. The Board of Directors aims to continuously assess the system and make any necessary improvements. The Board of Directors periodically discusses the outcome of the risk analysis and the main risks with the Supervisory Board.
Financial planning cycle and management information
The various operating companies draw up a strategic plan each year based on the main developments in the company’s operating environment. Once harmonised and approved, these plans are translated into annual budgets. The Board of Directors discusses the consolidated strategic plan and budget with the Supervisory Board. Management information reports are compiled on a daily, weekly and monthly basis. Prognoses are drawn up at least three times a year. The actual results are reviewed and compared to budgets and prognoses on a monthly basis and the outcome is reported to the Board of Directors.
Internal risk management and control system
To safeguard the quality of the company’s financial reporting and operational audits, Accell Group uses an extensive system of administrative organisation and internal controls. The internal control system is largely embedded in the company’s information systems. This system was tightened in line with the recovery plan drawn up following the above-mentioned theft in Taiwan in early 2016.
Risk management manual
In 2015, Accell Group drew up a risk management manual, which devotes attention to the risk management system and the organisation, as well as to risk identification, risk assessment and plans of action.
Financial administration guidelines
The personnel of the financial departments are provided with guidelines and instructions pertaining to the set-up and maintenance of the financial administration and reporting systems. Details of these are provided in a reference document. The guidelines and instructions comply with the prevailing IFRS standards.
The Internal Auditor carries out his tasks on the basis of a detailed internal audit plan, a predetermined assessment framework and the Accell Group Internal Control Framework. The Accell Group Internal Control Framework outlines the inherent risks for each process and the related internal control measures. The Internal Audit yields findings and recommendations that are used to strengthen the internal controls. The findings and recommendations are shared with the members of the Board of Directors and are subject to fixed follow-up deadlines. It has been agreed with the Supervisory Board’s audit committee that the Internal Auditor reports any high-priority findings directly to the committee. This also applies to the follow-up on previous high-priority findings.
The follow-up on high-priority findings is a regular item on the agenda of the Audit Committee meetings.
The Accell Group Internal Control Framework also includes embedded internal procedures, guidelines and management regulations that could have a financial impact. The company has drawn up management regulations to involve the Board of Directors in important decentralised decisions and for it to grant approval for such decisions, frequently in writing.
In recent years, internal audits were conducted at various Accell Group subsidiaries and attention was devoted to group-wide control measures. The subject of fraud is discussed with the local management, as well as in regular consultations with the CFO, as part of the internal audit plan. The subject of fraud risk management is an item on the agenda of the controllers meeting and in consultations between the Board of Directors and the Supervisory Board. This way, the responsibility for the prevention and detection of fraud risk is brought to the attention of and shared with the local management.
In 2017, the company will continue to develop the Accell Group Internal Control Framework and the group-wide control measures. In 2017, we will use data analysis as a control tool within Accell Group’s Internal Audit department. The aim is to apply continuous monitoring through the use of data analysis, with a view to obtaining indicators from IT systems, processes and control measures, which are collated, checked and monitored on a continuous basis. The internal auditor will also review the risk management system and facilitate the 2017 risk analysis. In addition to the previously mentioned regular internal audits, the Board of Directors or the audit committee may request specific ad hoc audits. In 2016, the company decided to add a second member to the Internal Audit department. Accell group expects to fill this position in 2017.
The external auditor draws up an annual audit plan. In the context of the audit of the financial statements, the external auditor carries out an assessment of the design and implementation of the most important internal controls of the business processes. This is reported in a formal letter to the management. The most important findings are discussed with the plenary Board of Directors and also with the Audit Committee of the Supervisory Board (partly in the absence of the Board of Directors).
Letter of Representation
The directors of subsidiaries each year sign a Letter of Representation, a detailed statement, related to financial annual reports and the presence and functioning of the internal control systems. For this detailed statement, the company has drawn up a checklist of subjects that is also signed annually by other members of the management of the Accell Group subsidiaries.
Sparta Vedette: Good Industrial Design 2016 (The Netherlands)
The Vedette is a hybrid e-bike, in which the saddle clamp is integrated in the frame and the compact back wheel motor has been integrated in the battery. The electrical system is controlled via a smartphone. The built-in track and trace function ensures that the owner can easily trace their bike in the event of loss or theft. Dutch former professional racing cyclist and Tour de France winner Joop Zoetemelk has attached his name to the Sparta Vedette.
Other risk management measures:
- Accell has an internal code of conduct, which was updated by the Board of Directors of Accell Group and approved by the Supervisory Board in 2013. This internal code of conduct applies to all personnel of Accell Group and its subsidiaries and is published on the Accell Group corporate website;
- The basic premises for the directors of Accell Group’s operating companies have been laid down in management regulations. These include detailed regulations related to internal decision-making and communications;
- Accell has a whistle-blower regulation, which was updated and adopted by the Board of Directors of Accell Group and approved by the Supervisory Board in 2017, following changes in legislation in Netherlands. The whistle-blower regulation has been published on the corporate website of Accell Group and ensures that any violations of existing policy and procedures can be reported without any negative consequences for the person reporting the violation;
- In 2015, the company executed the earlier decision to organise the supply chain at group level to improve control of the availability of products for sale, and realise a reduction in working capital, especially in inventories. To this end, the company added a Chief Supply Chain Officer (CSCO) to the Board of Directors and has since set up a department with some 20 employees.
Main risks and mitigation of these risks
The results of Accell Group are affected by the general economic conditions and the economic outlook of the countries in which the company is active. The conditions in the key purchasing markets also play a role. The following overview is not an exhaustive list of risks to which the company is exposed.
Changes in the market
Accell Group devotes considerable attention to market positioning and innovation to inspire consumer preferences for our products. Accell wants to ensure that its products are available via all outlets, both offline and online, where consumers want to make their purchases. The retail trade can play a service role on this front. Accell Group’s tightened strategy has a strong focus in this area. Accell Group has tightened its IT policy to place greater focus on consumer services and consumer data.
Accell Group uses its extensive internal knowledge and experience, including external experts. The Board of Directors is always directly involved in an acquisition. The Supervisory Board is an active partner in the acquisition process and must approve acquisitions. New companies are generally integrated into the group in the short term.
Marketing and development
Accell Group invests continuously in the development of its brands and products. The availability of talented and motivated managers and staff is a key factor in this respect. Accell Group periodically assesses the management teams of the companies.
Human Resource Management
To enable the management of Accell Group to implement the strategy effectively, and overcome the related strategic and operational challenges, we will:
Accell Group invests a great deal of time and money in market research, the outcome of which is used in the decision-making process.
Seasonal sales and logistical risks
Accell Group uses seasonal production and sales plans and aims to continuously improve the predictability of its sales. Long supply lines combined with the unpredictability of the weather and the sales can result in higher stock levels. The company therefore aims to be as flexible as possible in its response to changes in supply and demand during the season. An annual collection is less important in online sales. Product innovations can be introduced throughout the entire season. The introduction of a supply chain organisation at Group level enables more effective control of the planning, which in turn increases availability and helps prevents the build-up of surplus stocks. Accell Group does not use hedging products to cover the impact of the weather.
The company takes great care to ensure the quality and safety of its products. This includes the use of standards based in part on laws and regulations, test and control systems and recall scenarios. Accell Group has a low level risk appetite when it relates to product safety.
Bicycle manufacturers that import components for in-house assembly are exempt from this duty. All the Accell Group production companies in Europe are exempt.
Currency and interest rate
Accell Group seeks to minimise the impact of non-functional currencies and controls the transaction risk by using derivatives to cover its currency needs. All derivatives used have an underlying economic basis. This principle is applied strictly to prevent potentially speculative positions. Accell Group has an active interest rate policy, partly through the use of interest rate swaps.
Accell Group mitigates this risk with a committed group financing facility which has been agreed upon with a number of solid financing parties. The facility is in line with the characteristics of the company and provides the financing parties with sufficient transparency and security. The conditions of the committed facility are explained in more detail in the financial statements (section 5.6, point 3) of this annual report.
Further risk analysis
The Board of Directors and the local management conduct a bi-annual risk analysis as part of the risk management system, to assess the likelihood and impact of potential risks. Based on that assessment, they draw up an overview of the main risks.
In accordance with Best Practice provision II.1.5 of the Dutch Corporate Governance Code, and taking into account the aforementioned, the Board of Directors declares that the internal risk management and internal control system offers reasonable assurance that the financial reporting contains no significant material inaccuracies. In the view of the Board of Directors, the risk management and control system performed adequately in the year under review and the Board also expects the system to function adequately in the current financial year.
With reference to article 5:25c, section 2, of the Financial Supervision Act and with due observance of the above, and taking the results of the audit of the financial statements by the external auditor in consideration, the Board of Directors state that:
- the financial statements as included in chapter 5 of this report provide a true representation of the assets, liabilities and the financial position on the balance sheet date, as well as the profit for the financial year of Accell Group N.V. and the companies included in the consolidation;
- the annual report provides a true representation of the situation on 31 December 2016, and the course of business at the company and at companies included in the consolidation during the 2016 financial year.
This annual report describes the material risks Accell Group N.V. faces. The Board of Directors wishes to note that the internal risk management and internal control system is intended to identify and control significant risks to which the company is exposed, taking into account the nature and scope of the organisation.
Such a system does not provide absolute certainty that objectives will be realised. Similarly, it is not possible to completely prevent potential material errors, damage, fraud or the violation of statutory regulations. Actual effectiveness can only be assessed on the basis of the results across a longer period of time.
‘Stopping illegal trading within days’
Trade in counterfeit products is a growing, global problem. In the past, the main victims of this trade were sectors such as fashion, sports, jewellery and luxury items. These days, the negative consequences of counterfeiting affect the entire business sector, including the bicycle industry. Hardly surprising then that Accell Group goes out of its way to protect its brands and branded products. And even more so these days, as the company’s omni-channel strategy is increasing its e-commerce activity every single year.
In 2015, Accell Group began working with Convey, a firm specialising in online brand protection. Convey’s Managing Director Michele Provera explains what makes their approach so effective.
Has the internet increased the misuse of intellectual property?
“The internet offers perpetrators a wide range of channels to market and trade their products. From websites, digital trading platforms and social networks to mobile messaging services. We focus primarily on market places, because that is where most of the transactions that are harmful to the bicycle sector are conducted.”
How would you characterise Convey’s approach?
“We have developed advanced datamining technologies to screen the internet for illegal product offerings 24 hours a day. And I mean any and all offers that constitute a violation of intellectual property rights. That is not just misuse of brand names and designs, but also every production batch not authorised by Accell Group. If we find an illegal offer, we take action immediately. The seller receives a warning and if they fail to respond we alert their service provider to the violation of intellectual property rights via their network. Providers are legally obliged to cease transmission in such instances. This approach is very effective. Most sellers remove their offers after the first warning.”
Why is this better than a legal procedure?
“International legal procedures are expensive, complicated and take a long time. In the meantime, the seller can move their trade elsewhere or continue under a new name. We make sure an offer is taken off the internet within days and that the seller is removed from the market place.”
What have you achieved for Accell Group so far?
“We went to work for Accell Group in January 2015. Less than two years later, we have successfully blocked 5,500 offers. And bear in mind that every offer can include thousands of products!
This saves Accell Group considerable revenue losses, reputation damage to the brands and protects against potential claims for damages. The same goes for Accell Group resellers. The retail trade also needs to be able to do business profitably in a safe environment, both online and in physical stores. It is difficult to compete with non-authorised products that are sold for a fraction of the price. By blocking illegal trade, we prevent those products from entering the market. And consumers should be able to rely on the fact they are buying a safe product from a familiar brand, whether that is a complete bicycle or a spare part. A Lapierre has to be an original Lapierre and a Koga has to be a real Koga. Anyone racing down a mountain at 50 km/h needs to be certain that they are not riding a problem-prone fake product. Safety above all else.”
What do you expect for the future?
“We have the problem under control for Accell Group brands. We have found and eliminated the illegal companies and networks. There will always be new ones, but that is inevitable with strong brands. We are winning the battle because we are not giving them the time to develop their operations.”