Corporate governance statement

Corporate Governance At Aquafin

Aquafin’s Corporate Governance Charter defines the rules and principles based on which corporate governance is organised within the company. In line with the Belgian Corporate Governance Code originally published in 2004, the Board of Directors approved the first charter on 26 January 2006. Following the publication of the Belgian Corporate Governance Code in 2009 and general developments in the area of corporate governance, the charter has since been reviewed several times and adapted in line with the changes occurring, where necessary.

By resolution of the Extraordinary General Meeting of 8 December 2020, the company’s articles of association were brought into line with the requirements of the new Companies and Associations Code. The new Belgian Corporate Governance Code also came into force in 2020. The Board of Directors has revised the charter to bring it into line with the Belgian Corporate Governance Code 2020 and the new Companies and Associations Code. The Board of Directors approved this new charter on 22 January 2021.

The latest version of the charter is available at Corporate Governance Statement | Aquafin

The latest composition of the Board of Directors can also be found on the website, as well as in the Belgian Official Journal.

Notes On Deviations From The Code

Aquafin applies the provisions of the Belgian Corporate Governance Code. The provisions of the code are deviated from in certain cases, according to the specific requirements and characteristics of the company. Further details of the provisions of the Code with which the company does not comply are given below.

• 5.6 The term of the mandate should not exceed four years Aquafin complies with the provisions of the articles of association, which stipulate that a mandate may be for a maximum of six years and is renewable.

• 7.6 Non-executive board members should receive part of their remuneration in the form of shares.

In view of Aquafin’s special situation in which all shares are held via Participatiemaatschappij Vlaanderen by the Flemish Region, this rule is not followed.

• 7.9 The Board of Directors should set a minimum threshold of shares to be held by members of the executive management. In view of the exception in point 7.6, this rule does not apply.

• 8.7 The Board of Directors should debate whether it would be appropriate for the company to enter into a relationship agreement with the significant or controlling shareholders. In view of the exception in point 7.6, this rule does not apply.

• 8.8 and 8.9 Institutional investors. In view of the exception in point 7.6, this rule does not apply.

KEY FEATURES OF THE COMPANY’S INTERNAL CONTROLS AND RISK MANAGEMENT SYSTEMS IN RELATION TO FINANCIAL REPORTING

The Board of Directors is responsible for approving and evaluating the existing systems of internal control and risk management.

Internal control environment

The Audit Committee plays a key role in the operation of the internal control system and in particular the financial reporting process. The tasks of the Audit Committee include:

• overseeing the integrity of the financial information;

• evaluating the systems for internal control and risk management set up to ensure that the main risks (including the risks relating to conformity with existing legislation and regulations) are suitably identified, managed, and reported;

• monitoring the activities of internal audit and the effectiveness and performance of the audit function;

• monitoring the statutory audit of the annual accounts, including follow-up of recommendations made by the statutory auditor.

• monitoring the accounting team responsible for recording income and expenses in the accounts and preparing the reports

• monitoring the controlling team responsible for reviewing and declaring fluctuations (both timewise and with respect to the budget)

• monitoring the Finance management team, together with the accounting team, responsible for the final review of the financial information and the preparation and presentation of the financial statements.

Risk management

The management team is also aware of the importance of the good operation of the internal control system and risk management. Risk-related matters are a permanent item on the agenda and discussed at the weekly meetings.

A range of control measures are implemented in all departments as part of risk management. These control measures comprise policies, procedures, specified signing authorities, segregation of duties, built-in early warning indicators, management reporting, actual/budget comparison and so on.

New or amended legislation is noted and communicated. At the same time, the necessary steps are taken to comply with it. Processes and procedures are updated if necessary.

Since 2015 the company has held ISO 55001 certification. Inherent in this standard is management based on risks and opportunities. In this context, the risk matrix is an objective tool.

Critical performance indicators are defined, which are used as a measurement tool but also as a reporting system.

Composition And Functioning Of The Management Bodies And Committees

Board of Directors

The company has adopted a single-tier structure, in which the company is governed by the Board of Directors. The Board of Directors is the company’s highest decision-making body and is authorised to perform all actions required or necessary to achieve the company’s objects, with the exception of those actions that are reserved for the General Meeting, by law or by the articles of association.

Naam Type of directorship/Independent/(Non-)executive End

Alain Bernard Non-independent, non-executive

Marleen Evenepoel Independent, non-executive

Koen Helsen Independent, non-executive

Renaat De Sutter Independent, non-executive

Jozef Wittouck Independent, non-executive

Dirk Lybaert Independent, non-executive

Jochen Bultinck Independent, non-executive

Katrien Desomer Independent, non-executive

Katrijn Faket Independent, non-executive

Nathalie Heremans Independent, non-executive

Caroline Craenhals Independent, non-executive

• Composition

The composition of the Board of Directors was changed in 2022. Katrijn Faket resigned as a director in the 3rd quarter. The Board of Directors co-opted Caroline Craenhals as a director. Her directorship started on 25 November 2022.

Aquafin’s Board of Directors comprises ten members appointed by the General Meeting. All members are non-executive directors. Nine directors are independent based on the criteria of Article 7:87(1) of the new Companies and Associations Code and provision 3.5 of the Belgian Corporate Governance Code 2020. Consequently, the Board of Directors complies with provision 3.4 of the Corporate Governance Code 2020 which states that at least three members of the Board of Directors should be independent (please note that this does not refer to independence in the definition from the Administrative Decree but only in application of the Companies Code).

Until the end of June 2022, the Board of Directors was assisted by the corporate projects director, as a temporary replacement for the head of legal affairs, in the capacity of secretary of the company. During the second half of the year, this position was occupied by the new head of legal affairs

• Functioning

2023

During 2022, the Board of Directors met six times. There were two meetings at which one director was absent and two meetings at which two directors were absent. This represents average attendance of 91%.

BOARD OF DIRECTORS - ATTENDANCE

As well as exercising the powers defined in the charter, the Board of Directors once again paid close attention to the subjects of safety and well-being during the last financial year.

During each meeting, the directors were informed of occupational accidents which had occurred in the period under review. Work continued towards setting up a long-term safety programme with the ultimate goal of zero occupational accidents.

The various long-term, annual and permanent objectives were also reviewed in order to realise Aquafin’s vision within the context of the corporate values and the policy around corporate social responsibility.

The impact of the Flemish Coalition Agreement with the new coordinating role for Aquafin with respect to the sewer operators and municipalities was discussed further. It emerged from the negotiations around the new cooperation with the Flemish Environment Agency that the decree (the Water Code) needed to be amended. This took place in 2022. The text of the new cooperation agreement was finalised, approved and came into effect in January 2023.

The implementation of Aquafin’s long-term strategy for sludge treatment was also covered with plans for a full review of sales by 2026.

Some time ago, the Board of Directors approved a strategy focussing on recovery of raw materials and energy, which is also in keeping with the company’s energy policy: reducing the CO2 footprint through annual energy saving, phasing out and eventually ceasing the use of fossil fuels and producing (more) green energy. As part of the broader energy policy, the adaptation of the click strategy with regard to purchasing energy in a market under pressure was also followed by the Board of Directors.

Due to the prolonged drought of the previous years, the use of effluent was also focused on more. A number of parties showed that they were interested in using and upgrading effluent. This would provide an alternative to the use of drinking water in each case.

The Board of Directors was also closely involved in the major strategic commercial projects relating to the reuse of effluent in industrial applications and the development of sewer thermal energy. In doing this, the Board of Directors set the course for further elaboration and realisation of these projects.

The Board of Directors was also kept up-to-date regarding investments for maintaining existing infrastructure. The growth, but above all the obsolescence of our assets, leads to an increasing budgetary requirement for repairs and replacements year by year. By 2030, we expect to need around double the current budget to keep the infrastructure working efficiently. This evolution will be followed closely.

• Conflicts of interest

1 conflict of interest was reported in 2022.

Proximus, of which Mr Dirk Lybaert is a director, is one of the potential stakeholders in the dossier relating to the possibilities for the realisation of monitoring and data communications in sewers. Strictly speaking, since there is no question of a direct or indirect conflict of interest under property law (art. 7.96 of the Companies Code) at this stage, the rules on conflicts of interest do not apply. Nevertheless, Mr Dirk Lybaert considered it opportune to voluntarily abstain from taking part in the deliberations and/or voting and therefore left the meeting relating to this dossier.

Audit Committee

• Composition

The composition of the Audit Committee was changed in 2022. Katrijn Faket resigned as a director in the 3rd quarter. The Board of Directors co-opted Caroline Craenhals as a director and member of the Audit Committee. Her directorship started on 25 November 2022. The committee has a balanced composition as a whole and possesses the necessary independence, competencies, knowledge and experience to perform its tasks effectively.

Chairman Jochen Bultinck

Katrien Desomer

Katrijn Faket (directorship until 16/09/2022)

Koen Helsen

Nathalie Heremans

Caroline Craenhals (directorship until 18/04/2023)

• Functioning

The main function of the Audit Committee is to assist the Board of Directors in the exercise of its mission of control, in the broadest sense. The tasks relate in particular to supervision of financial reporting, internal controls and risk management, the internal audit process and the external audit process. The Audit Committee is the main link between the Board of Directors, the internal auditor and the statutory auditor.

The Chairman of the Audit Committee reports systematically on the activities of the Audit Committee at the next meeting of the Board of Directors. The annual report on the activities of the Audit Committee was presented to the Board of Directors.

During the 2022 financial year, the Audit Committee also focused on the following matters in particular:

• the financial reporting was discussed in depth at all meetings. At the March and September meetings respectively, the 2021 financial statements and the 2022 interim results were discussed, in the presence of the independent auditor.

• preparation of the 2023 budget for presentation to the Board of Directors

• evolution and results of management of interest rate risk, in particular the credit risk for Aquafin with regard to counterparties

• the approval of the internal audit plan and monitoring of the KPIs relating to the functioning of internal audit and follow-up by the management of the recommendations made by internal audit

• discussion of the management letter from the independent auditor and supervision of the policy for non-audit services

• internal audit reports

• the appointment of the auditor

• the security of the ICT systems with regard to cybersecurity.

• Number of meetings and attendance record

The Audit Committee met four times in 2022. All directors took part in all meetings. This represents average attendance of 100%.

It also contributes to the objective and professional functioning of the process for appointing and re-appointing directors and the annual evaluation of the performance of the management team.

• Composition

Chairman Marleen Evenepoel

Renaat De Sutter

Dirk Lybaert

Jozef Wittouck

• Functioning

The Appointments and Remuneration Committee met three times during the past financial year. These meetings were attended by all directors. This represents average attendance of 100%.

The independent auditor, the CEO, the Finance & Procurement director and the internal audit manager attended all or part of the meetings.

Appointments and Remuneration Committee

The main task of the Appointments and Remuneration Committee (ARC) is to assist the Board of Directors to define the outline of the Company’s remuneration policy.

During the meetings in the past financial year, the objectives of the Management Committee for 2021 were reviewed. The committee then decided on the objectives for 2022. Besides the overall remuneration for 2022, the remuneration of the Management Committee was also discussed.

At the request of the ARC, the HR vision and strategy was explained. It is important for an organisation going through change (social, sector, corporate) to have a modern and supportive HR policy.

In response to the vacancy created on the Board of Directors, a procedure was started for the purpose of selecting a new director. This was completed during the ARC meeting on 25 November where advice was formulated for the Board of Directors.