Report of the Supervisory Board
The world is changing, consumers are changing and Accell Group is adapting to those changes. The year under review was particularly busy and exciting. A change in leadership, the refinement of the strategy and the start of the strategy implementation all contributed to a very challenging year for the group.
In February 2017, it was decided in mutual consultation that René Takens would step down as CEO and Chairman of the Board of Directors following the general Meeting of Shareholders in April 2017. Parallel to this, the Supervisory Board launched a procedure to select and recruit a new CEO and the type of leader who would be a good fit with the next phase of the company’s development.
The company presented its refined strategy together with the publication of the annual results in March 2017. At the same time, agreement was reached on an improved and expanded group financing facility, which gave the company a solid foundation for the implementation of its strategy.
Accell Group subsequently put the search for a new CEO and the ongoing strategy implementation on hold shortly after both these processes had been launched when Pon Holdings made a non-binding, conditional offer for a public bid on Accell Group. This is a process that requires a great deal of care and in that sense also demanded considerable attention from both the Supervisory Board and the Board of Directors.
There were several exploratory discussions with Pon Holdings. We studied and assessed all the key aspects of their non-binding and conditional proposal, while taking into consideration the interests of all our stakeholders. The Supervisory Board and Board of Directors together concluded that the final proposal on the table failed to fully reflect the future value creation of Accell Group based on the recently refined strategy and the medium-term targets the company had presented. Pon Holdings has subsequently ceased its approach.
The uncertainty created by Pon Holdings' approach delayed both the search for a new CEO and the implementation of the refined strategy. At the time of the General Meeting of Shareholders in April 2017, we were not yet able to put forward a new CEO to succeed Mr. Takens. At the end of the General Meeting, the Supervisory Board appointed Hielke Sybersma as interim CEO and Chairman of the Board of Directors, a position which he combined with his activities as CFO for a part of the year.
In the summer of 2017, we subsequently found a new CEO in Ton Anbeek, who at that time was CEO of BeterBed Holding. Mr. Anbeek started at Accell Group on 1 November 2017 with the task of further developing and implementing the refined strategy. Mr. Anbeek brings ample experience to this task in fields such as marketing, sales, retail and omni-channel e-commerce and a style of leadership that is well suited to the transitional phase Accell Group is currently in and the longer-term development of the group.
In 2017, the Supervisory Board  supervised the management and general course of events within Accell Group . The Supervisory Board was responsible for the procedure for the selection and recruitment of the new CEO and provided the Board of Directors with advice on various fronts.
All members of the Supervisory Board are independent in the sense of the Code . The composition of the Supervisory Board is such that it covers a broad range in terms of background, know-how and competencies. As such, the composition safeguards a critical attitude in the execution of joint tasks, while each member has sufficient time for their responsibilities within the Supervisory Board.
The General Meeting of Shareholders in April 2017 reappointed Mr. Aad Kuiper for a second four-year period. However, in October 2017 Mr. Kuiper indicated that he would not complete this term and resigned his tasks with immediate effect due to the pressure of activities elsewhere. Following the resignation of Mr. Kuiper, the Supervisory Board temporarily has only three members.
Under the existing schedule, the current terms of Mr. Ab Pasman (Chairman) and Mr. Jan van den Belt (Vice chairman) expire at the General Meeting of Shareholders in April of 2018. Mr. Pasman has made himself available for a third term, of two years . The Supervisory Board would like to nominate Mr. Pasman for re-appointment in view of the need for continuity after the many changes in the Board of Directors and the Supervisory Board over the past year. Mr. Van den Belt has completed his third term of four years and will therefore retire.
The company is currently looking for candidates to replace both Mr. Kuiper and Mr. Van den Belt, which will restore the Supervisory Board to its full complement of four members. The Board will nominate a female and a male candidate to fill these vacancies. The appointment of two new supervisory directors and the re-appointment of Mr. Pasman are on the agenda for the Annual General Meeting of Shareholders to be held on 25 April 2018.
Accell Group does not currently meet the norm for the division of seats on the Board of Directors and the Supervisory Board. The Supervisory Board acknowledges the value of a more even balance of men and women in the company’s management and does its utmost in the recruitment and selection process to find female candidates for executive and supervisory positions. At the same time, gender is ultimately just one aspect of diversity. The qualifications of a certain candidate and the requirements for fulfilling the role in the company are obviously also important aspects when filling a vacancy. In any event, the Supervisory Board is pleased to have a good female candidate to nominate for appointment as a supervisory director at the upcoming shareholders meeting. At the same time, Accell Group will continue to work on the realisation of a balanced division of seats on its boards.
Although Accell Group sets great store by diversity, the company does not have a fixed diversity policy. In practice, Accell Group is working on creating more diversity at every level of the organisation. This has the broad support of both central and local management. This year, Accell Group will draw up a more explicit diversity policy.
Meetings and working visits
In 2017, the Supervisory Board held 33 physical meetings (2016: 7) and many additional conference calls. A total of 14 meetings were held in the presence of the Board of Directors. The internal auditor attended one meeting and the external auditor attended two.
In addition to the physical meetings and conference calls, the Supervisory Board also made a joint visit to Lapierre in France, and the Chairman of the Supervisory Board also visited Winora in Germany.
The large number of meetings in 2017 was entirely due to the transitional phase Accell Group is currently in, all the changes this entails and the approach made by Pon Holdings. In 2017, the Supervisory Board discussed and reviewed the following matters:
- Market trends and developments and the commercial and financial course of events, with special attention being devoted to sales in the Netherlands, the reorganisation in North America and the impact of the insecure situation in Turkey.
- The annual budget and quarterly adjustments.
- The quarterly reports and the budget for 2018.
- The more detailed definition of the refined long-term strategy and objectives, the extra investments, the associated key risks and the progress of the strategy implementation.
- The assessment of the expanded and extended group financing and the terms and covenants set by the consortium of banks.
- The advances made by Pon Holdings with respect to a possible acquisition of Accell Group, the response, the subsequent steps and the evaluation of all financial and non-financial aspects of the indicative non-binding proposal, which the parties eventually failed to reach agreement on, after which Pon withdrew its proposal.
- The assessment of possible strategic partnerships and acquisitions that are a good fit with the refined strategy.
- The structure of a more centralised management and the streamlining of operational and logistical processes, procedures and IT systems.
- The assessment of the general risks of the company’s operations, the operation of the risk management systems and internal controls.
- The assessment of the composition and functioning of the Board of Directors as a whole and the members individually, including the remuneration of the Board of Directors and the remuneration report.
- The selection criteria for a new CEO in light of the refined strategy, the structure of the recruitment process for a new CEO and the actual recruitment of candidates in cooperation with a specialised executive search agency.
- The role of Accell Group and its products in a broad social context and progress made in making production and logistical processes more sustainable, plus the reporting on same.
- Review of the effectiveness of the current governance structure and amended guidelines pursuant to the Dutch Corporate Governance Code of 2016.
- The proposed appointment of KPMG as the external auditor for the financial year 2018.
The Supervisory Board’s plenary meetings also discussed all the preparatory activities and recommendations of its committees and subsequently reached decisions on same.
The Chairman of the Supervisory Board maintained close contacts with the interim CEO and other members of the Board of Directors, in particular regarding the approach made by Pon Holdings. In addition, there were numerous informal contacts between the members of the Supervisory Board and members of the Board of Directors throughout the year.
Partly in view of the situation at the end of the year, with the resignation of Mr. Kuiper and the temporary staffing of the Supervisory Board with only three members, the board conducted only a limited self-assessment for 2017. During a highly dynamic year with various dossiers and dilemmas requiring considerable extra attention, the Supervisory Board collaborated intensively and closely both at team level and on an individual level with open and direct lines of communications.
The performance of the Supervisory Board is assessed in cooperation with a specialised external third party every three years. The board will conduct this assessment once again in 2019. The board will conduct the usual self-assessment in 2018.
The Supervisory Board has two committees: the audit committee and the selection and remuneration committee. These committees carry out their tasks on the basis of regulations  adopted by the Supervisory Board. The Supervisory Board appoints the members of the committees from its members.
The audit committee supports the Supervisory Board in the execution of its supervisory tasks and in the preparation of decision-making in the fields of financial reporting, risk management and internal control.
The committee met five times in 2017 (2016: five times). The internal auditor attended four meetings and the external auditor attended three of the meetings.
During its meetings, the committee discussed a range of important topics, including the determination of the medium-term objectives, the extra investments required for the roll-out of the refined strategy, the disappointing financial performance in the first half of 2017, the structure of the finance and IT functions and the possibility of supply chain financing.
Other matters the audit committee focused on in 2017 were:
- Compliance with internal procedures for the drawing up and publication of the annual report, the annual financial statements and the interim report.
- The effectiveness of internal procedures that ensure that all important financial information reaches the management, to safeguard the timeliness, completeness and accuracy of the external financial reporting.
- Analysis and assessment of the financial performance on a quarterly basis.
- The effectiveness of the internal risk management and control systems, the implementation of the internal control improvements, compliance with international and local laws and regulations and the operation of codes of conduct.
- The progress in the improvement plan instigated following the Taiwan incident.
- The choices in accounting directives, the application of new rules and the effects of same.
- The structure of the internal audit plan and the audit plan of the external auditor.
- The assessment of internal and external audits, follow-up of recommendations and compliance with the introduction of desired improvements.
- Review of the budgets for 2018 and the sharing of the findings.
- The structuring and expansion of the internal audit function.
- Guiding the implementation of the One Finance programme.
- The relationship with the external auditor.
As the external auditor, KPMG did not outline any serious shortcomings in its management letter for 2017, but it did include a number of recommendations. These recommendations related in particular to the authorisation for access to systems. Accell Group has set up a specific project to remedy any shortcomings in this area. In addition, the external auditor stressed the need for stringent application of the GDRP privacy regulations and devoted specific attention to subjects that are relevant to forming an opinion on the financial statements and the introduction of IFRS 15. With respect to the 2017 financial statements, the external auditor devoted specific attention to revenue recognition, deferred tax assets, the valuation of goodwill and trademark rights, risk of fraud and the valuation of inventories and trade receivables and investigation on import duties in the United States. The audit also devoted attention to financing and compliance with covenants, as well as tax accounting, financial instruments and currency exchange risks.
The internal auditor visited local Accell Group companies in 2017 and arrived at a number of recommendations, primarily focused on strengthening the internal control framework. The follow-up to these recommendations was realised according to plan. The group will add expertise in the field of IT audit to the internal audit department.
Based on the preparatory work of the audit committee and the findings of both the internal and external auditors, the Supervisory Board approved the Board of Director’s in control statement as included in section 4.5. 
Selection and remuneration committee
This committee supports the Supervisory Board in the execution of its supervisory tasks and the preparation of decision-making in the field of selection and appointment procedures for members of the Supervisory Board and Board of Directors, the remuneration policy and the level of remuneration and employment contract terms for members of the Board of Directors.
The selection and remuneration committee met eight times in 2017 (2016: five times). Key subjects that required the attention of the committee were the departure of the Chairman of the Board of Directors and the recruitment of his successor.
Other matters the selection and remuneration committee focused on in 2017 were:
- Review of the Kornferry/Hay report (February 2017).
- Arrangements and agreements relating to the departure of the Chairman of the Board of Directors, Mr. Takens.
- Preparations for the assessment of the functioning of the members of the Board of Directors in 2016.
- Putting forward proposals for the fixed and variable bonuses of the members of the Board of Directors for 2016.
- Preparing the evaluation of the remuneration of the members of the Board of Directors for 2016.
- Preparing the 2017 remuneration report.
The Supervisory Board discussed and adopted the remuneration package for the Board of Directors for 2017 on 9 March 2017. At the same time, the Board also determined the bonuses for the 2016 financial year, which were included in the 2016 financial statements.
Based on the preparatory work of the committee, the Supervisory Board discussed and adopted the 2017 remuneration report . 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 amended most recently on 22 April 2010.
Financial statements and dividend
The Supervisory Board approved the 2017 financial statements on 9 March 2018. KPMG has issued an unqualified auditor’s report. On 25 April 2018, the financial statements will be submitted to the General Meeting of Shareholders for adoption.
The General Meeting of Shareholders will also be asked to approve the payment of an optional dividend in line with the dividend policy of € 0.50 per share. The dividend proposal is related to the earnings per share excluding one-off charges, which puts the pay-out ratio at 50%. The pay-out ratio based on the reported earnings per share amounts to 124%.
The Supervisory Board attaches great importance to effective corporate governance, with an emphasis on independence, responsibility and transparency. The Board closely monitors key developments in the field of corporate governance. 
As a sign of its appreciation, the Supervisory Board would like to express its gratitude to all stakeholders for their commitment. The Board extends a special word of gratitude to the company’s employees, who have shown enormous dedication and enthusiasm in working on the many changes in the group. They are vital to the successful realisation of Accell Group’s ambitions and long-term strategy.
The Supervisory Board
Jan van den Belt