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The Supervisory Board currently consists of Andrew Browne, Doug Dunn, Guy Demuynck, Karel Vuursteen and Rob van den Bergh, who are listed in the section “Management Board and Supervisory Board” of this annual report. Karel Vuursteen and Rob van den Bergh joined the Supervisory Board following their appointment at the Annual General Meeting of Shareholders held on 25 April 2007.
SUMMARY OF ACTIVITIES
The Supervisory Board held six meetings with the Management Board during 2007. Among the items discussed in these meetings were operational, financial, legal, governance and strategic matters. The Supervisory Board discussed and agreed the financial results and the quarterly results, with the related press releases, prior to publication. The focus for the November 2007 meeting was on educational training for the Supervisory Board. At this meeting, the Supervisory Board members also met with representatives of the recently formed Works Council.
No Supervisory Board members were frequently absent from the meetings. The attendance of the 2007 Supervisory Board meetings is reflected in the table below.
In addition to the scheduled meetings, the Supervisory Board had regular contact, including conference calls, with the Management Board, and was informed and consulted by the Management Board on the course of the business and the Company’s M&A activities, including the offer for all ordinary shares in the capital of Tele Atlas and the acquisition of 29.9% of the ordinary shares in Tele Atlas.
Meetings without the Management Board being present included meetings with the external auditor, meetings to review the composition, functioning and individual performance of the Management Board, and meetings to discuss the composition, functioning and individual performance of the Supervisory Board.
The Supervisory Board thoroughly discussed the proposed acquisition of Tele Atlas with and without the Management Board being present. To be able to form a clear opinion about the transaction and related matters the Supervisory Board received extensive advice from both financial and legal advisors of the Company.
The attendance at the 2007 meetings is reflected in the following table. |
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| Date |
Andrew
Browne |
Doug
Dunn |
Guy
Demuynck |
Karel
Vuursteen |
Rob van
den Bergh |
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| 19 February |
- |
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n.a. |
n.a. |
| 20 April |
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n.a. |
n.a. |
| 19 July |
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| 23 October |
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- |
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| 29 November |
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| 4 December |
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- |
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INDEPENDENCE
The Supervisory Board confirms that all Supervisory Board members are independent within the meaning of provision III.2.2 of the Dutch Corporate Governance Code.
COMMITTEES
Since the appointment of two additional members to our Supervisory Board at our 2007 Annual General Meeting of Shareholders, the Supervisory Board has consisted of five members. In accordance with the Corporate Governance Code, the Supervisory Board intends to appoint an Audit Committee, a Remuneration Committee and a Selection and Appointment Committee from within its members during 2008. All duties and responsibilities normally performed by these committees were carried out by the entire Supervisory Board during 2007.
REMUNERATION OF THE SUPERVISORY BOARD
The remuneration of the members of the Supervisory Board, and the additional remuneration for the Chairman and the members of its sub-committees, is determined by the General Meeting of Shareholders. At the General Meeting of Shareholders in April 2007, it was resolved to revise the remuneration for the Chairman and members of the Supervisory Board and to determine the remuneration for membership of the sub-committees. The remuneration is €35,000 per year for members of the Supervisory Board and €45,000 for the Chairman, each in proportion to the number of months served.
The aggregate remuneration of the Supervisory Board members in 2007 amounted to €157,940. The individual remuneration of the members of the Supervisory Board is shown in the notes to our financial statements, which are included in this annual report.
REMUNERATION REPORT
Application in 2007
On the basis of a benchmark of salaries carried out by an independent consultancy, the Supervisory Board agreed to continue the same policy as in 2006 with respect to the base salaries and bonuses of Management Board members.
The Supervisory Board revised the Remuneration Policy for the Management Board to include the Company’s Share Based Incentive Plan (see below). The revised Remuneration Policy was approved at the Annual General Shareholders Meeting in April 2007.
In 2007, the remuneration of the Management Board consisted of (i) fixed remuneration, (ii) variable remuneration and (iii) long-term incentives (performance shares). |
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| (i) |
Fixed remuneration
The fixed remuneration consists of a base salary plus 8% holiday allowance where applicable, which includes pension, life and disability insurance, and health insurance. Base salaries are subject to the usual statutory deductions.
Members of the Management Board are eligible to participate in the Company’s defined contribution pension plan. The Company’s contribution to the pension of each member of the Management Board is a maximum of 10% of base salary. |
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| (ii) |
Variable remuneration
In addition to their fixed remuneration, members of the Management Board are eligible to participate in the management team bonus scheme, which is subject to approval by the Supervisory Board and based on performance criteria. For 2007, the bonus pool was established at a percentage of profit before tax and was consistent with the bonus pool for 2006. |
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| (iii) |
Long-term incentive
The members of the Management Board are eligible to participate in the Company’s 2007 Share-Based Incentive Plan. Performance criteria for vesting of performance shares were established by the Supervisory Board for performance shares granted to Management Board members during the year 2007.
For details of the remuneration of the Management Board, please refer to the notes to the financial statements, which are included in this annual report. |
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Share Based Incentive Plan 2007
At the Annual General Meeting of Shareholders in April 2007, a share-based incentive plan was adopted as a long-term incentive, replacing the previous 2005 Share Option Plan. The replacement was proposed at the shareholders meeting with a view to TomTom’s continued growth and changes in market practice. Options granted under the 2005 Share Option Plan will continue to be governed by the rules of that plan.
The purpose of the introduction of the share-based incentive plan is to offer a more stable long-term incentive. The plan provides a direct link between the long-term performance of the Company and the individual’s reward, according to pre-determined performance conditions. The performance conditions apply to vesting, assuming a ratio between total shareholder return, ranked against the other AEX funds, and earnings per share growth targets. In accordance with market practice, the period of vesting and performance measurement will be three years.
The share-based incentive plan provides for awards in performance shares; a performance share is a right to payment in cash equal to value of the TomTom share at vesting. The plan has been benchmarked against the market and is in line with market best practice. The size of awards for the Management Board are at the median level of the market.
Employment contracts
Members of the Management Board have an employment contract with the Company. The contracts are entered into for an indefinite period of time. However, the term of office of members of the Management Board is four years, after which the appointment can be renewed for another period of not more than four years at a time. In the event that the employment of a member of the Management Board is terminated by or on the initiative of TomTom, he or she shall be entitled to a fixed amount of 50% of his or her annual base salary, including holiday allowance, unless the employment is terminated for causes within the meaning of the articles 7:677 sub 1 and 7:678 of the Dutch Civil Code, in which circumstances the Management Board member is not entitled to any severance. This amount will be due in addition to the salary the Company has to pay to members of the Management Board during the agreed notice period of 12 months. A member of the Management Board will not be entitled to the severance if the employment is terminated by him or her, or on his or her initiative.
Outlook 2008
On the basis of a benchmark of Management Board salaries performed by an independent consultancy, the Supervisory Board has decided to continue the current remuneration policy for the Management Board. It is the intention of the Supervisory Board to perform an annual benchmark of Management Board salaries. Performance criteria have been established for variable remuneration and long-term incentive schemes, which will be reviewed and monitored on an ongoing basis by the Supervisory Board. The performance criteria are based on financial and operational targets.
FINANCIAL STATEMENTS 2007
The consolidated annual financial statements of TomTom NV for 2007, as presented by the Management Board, have been audited by Deloitte Accountants BV. The Supervisory Board has approved these financial statements for 2007 and all individual members of the Supervisory Board, together with the members of the Management Board, have signed the financial statements for 2007.
The Supervisory Board recommends that the General Meeting of Shareholders adopt both the Consolidated and Company Annual Accounts for 2007. The Annual Report for 2007 is available at the Company's offices on request and on the Company’s website.
Upon approval of the Consolidated and Company Annual Accounts for 2007, and in accordance with Article 2:394 and Article 2:395 of the Dutch Civil Code, the Management Board will file the Annual Accounts for 2007 with the Chamber of Commerce in Amsterdam.
AUDIT
During 2007, the Supervisory Board assumed the roles and responsibilities of an Audit Committee.
All members of the Supervisory Board are independent of the Company. During the meeting of 29 November 2007, the Supervisory Board discussed both its own functioning and that of its individual members. The Dutch Corporate Governance Code requires the Supervisory Board to be satisfied that at least one member is a financial expert. The Supervisory Board considers that there is a sufficient breadth of financial expertise across the Supervisory Board that, collectively, the members have requisite skills and attributes to enable them to properly discharge their responsibilities relating to the business of an audit committee.
During the year, the Supervisory Board assisted the Company in meeting its responsibilities in respect of the following areas: |
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the integrity of annual and quarterly financial reporting as presented under IFRS, together with related press releases; |
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the maintenance of an effective system of internal control and risk management relating to strategic, financial, operational and compliance risks; |
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the role and functioning of the internal audit department; |
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relations with the external auditor, including the scope of their plans, assessment of their independence, approval of their remuneration, and their re-appointment or dismissal; |
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compliance with the recommendations and observations of the internal and external auditors; and |
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review of the policies for managing cash and foreign exchange risks. |
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Financial reporting
The Supervisory Board reviewed the quarterly financial results and full year financial statements prior to their release. Attention was paid to critical accounting policies, clarity of disclosure, compliance with accounting standards, stock exchange requirements of Euronext Amsterdam, and other corporate governance, legal and regulatory requirements.
Risk Management and Internal audit
The Company monitors its internal controls through a systematic program of risk analysis, internal audits and control self-assessments. The Risk Management and Internal Audit department assists in the independent review of controls and management of risks. The department is the responsibility of the Chief Internal Auditor, who reports functionally to the Supervisory Board and administratively to the Chief Financial Officer.
During 2007, Risk Management and Internal Audit reporting was performed for the Supervisory Board at five Supervisory Board meetings. In order to facilitate free and open discussions during the course of the year, the Chief Internal Auditor met separately and maintained open communication lines with the Chairman of the Supervisory Board.
During 2006, an Internal Audit Plan for 2006–2008 was developed under the directive of the Supervisory Board. In 2007, this Internal Audit work schedule continued to be rolled out according to plan, and included additional audits that were requested to address changing business needs.
Independence
We maintain a high level of independence and objectivity within our Risk Management and Internal Audit team, primarily through the following principles: |
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Risk Management and Internal Audit provides assurance on internal controls and advises on business risks. The Management Board is accountable for managing risks associated with the Company’s activities and for maintaining appropriate internal control systems; |
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through the Chief Internal Auditor the Supervisory Board maintains a direct relationship with the Risk Management and Internal Audit department; and |
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the Charter describing the purpose, authority and responsibility of the Internal Audit function is approved by the Supervisory Board. |
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External audit
The Supervisory Board agrees the appointment and compensation of the external auditor, subject, in each case, to the approval of the Company’s shareholders at the Annual General Meeting of Shareholders. Deloitte Accountants BV has acted as external auditor for the Company since 2004. They have expressed their willingness to continue in office. Resolutions proposing their re-appointment and authorising the board to set their remuneration will be submitted to the forthcoming Annual General Meeting of Shareholders.
During the 2007 financial year, the Supervisory Board met three times with the external auditor together with the Management Board. In order to facilitate free and open discussions between the Supervisory Board members and the external auditor, they also met separately, without the Management Board being present, during the course of the year.
The Supervisory Board reviewed the independence of the external auditor, Deloitte Accountants BV, taking into account audit and non-audit services provided to the Company and its subsidiaries. Below is a summary of services performed by Deloitte Accountants BV. |
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Supervisory Board
Amsterdam, 21 February 2008 |
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