Annual Report 2011 - Analist.be

Corporate governance statementMore specifically with regard to the principle of doubleapproval, the Articles of Association provide that theCompany is validly bound by the acts of two Directors.In the framework of day-to-day management, whichis not limited to implementation of decisions of the Boardof Directors, but extends to all acts necessary to ensure theongoing activities of GBL, the Managing Directors havea large measure of autonomy and act jointly.The Board has also assigned special mandates with respectto representing GBL in relation to third parties: in particularfor bank transfers, cash operations including derivativecontracts and delivery of securities, a Director and a memberof management may sign together.Lastly, the Statutory Auditor (Deloitte Reviseurs d’Entreprises)carries out its audits, comments on the way its assignmentis proceeding and presents its conclusions to the AuditCommittee.6.3.6. Risk related to financial instruments (IFRS 7)GBL has put in place strict rules on appropriate separationof tasks and internal approval processes. Every financialtransaction requires two signatures and is reviewed regularly bythe financial department. In addition, major debt transactionsrequire the approval of the Board of Directors, which maymandate execution to GBL’s Executive Management.6.3.6.1. Counterparty default riskGBL tries to limit this risk by diversifying its types ofinvestments and counterparties, and by reviewing theirfinancial situation. In this respect, on 31 December 2011,almost all cash was held in the form of time deposits/currentaccounts with a limited number of banks. All financial contracts(EASDA, GMSLA, GMRA, etc.) are reviewed internally by thelegal officer.6.3.6.2. Liquidity riskOn 31 December 2011, gross financial debt stood at nearlyEUR 1.5 billion and was composed of amounts drawn on itscredit lines with banks and bonds traded on the market. It ispartially offset by available cash holdings of approximatelyEUR 300 million. GBL holds confirmed credit lines with variousfinancial institutions (EUR 1,800 million), of which EUR 950million were drawn at the end of December 2011. The validityof these credit lines has been extended until 2016/2017. Asa rule, GBL uses external debt to a limited extent and on aselective basis. GBL issued bonds for individual buyers in 2010and its bonds exchangeable for GBL shares, subscribed byinstitutional buyers in 2005, will mature in April 2012.6.3.6.4. Risk on derivatives activitiesGBL occasionally uses derivatives. GBL can also carryout transactions on listed shares in the portfolio using callor put options. Such transactions are based on thoroughdocumentation, are monitored periodically and manageddynamically as needed. The related risk at the end ofDecember 2011 was low in relation to the notional amounts atstake and the Company’s size.6.4. Information and communicationIn order to transmit reliable financial information toshareholders without delay, GBL has developed astandardised information flow process. It has also appliedIFRS requirements since 2000. Its valuation rules are publishedyearly in its financial report. Uniform reporting of accounts isused both upstream and downstream in GBL group in orderto ensure the consistency of data and to detect potentialanomalies. A financial calendar for this reporting is establishedevery year in consultation with the parent company and theassociated companies in terms of publications.Computerised data backup operations are organised on adaily basis and a monthly storage process prevents any totalloss of financial data. Restricted access to software (accounts,consolidation, payment and remuneration) is also applied.6.5. Supervision and monitoringSupervision is exercised by the Board through the AuditCommittee’s activities. Given the structure and nature of GBL’sactivities, there is no internal auditor’s function. This situation isassessed yearly and is deemed appropriate.The Statutory Auditor (Deloitte Reviseurs d’Entreprises) alsoreviews the internal control procedure on an annual basisfor risks related to GBL’s financial statements. This review ofinternal control forms part of the assignment of certifying GBL’sstatutory and consolidated accounts in conformity with auditstandards applicable in Belgium.More specifically, the Statutory Auditor tests on the basisof a triennial rotation plan the operational effectiveness ofinternal control of risks that are deemed critical in relation tothe financial statements. Its work consists of discussions withmembers of the organisation and tests on a limited number oftransactions.The conclusions of this work, presented in a report submittedto GBL, do not reveal any major weaknesses in internalcontrol. The report is transmitted to members of the AuditCommittee.6.3.6.3. Interest rate riskGBL’s financial debt is made up of exchangeable bondsmaturing in 2012, issued at a fixed nominal interest rate of2.95%, and 7.5-year bonds issued at a fixed rate of 4%.Amounts drawn on bank credit lines were concluded on thebasis of fixed rates in terms of the maturity sought. GBL istherefore not exposed to an interest rate risk on this debt. GBLremains attentive to rate developments and their significance inthe overall economic context.146 Annual Report 2011