1. General

VPK PACKAGING GROUP NV has adopted a Corporate Governance Charter (see below).

This charter will be updated, in line with changes in the applicable legislation and the development of policy relating to corporate governance.

In implementation of the Belgian Corporate Governance Code, VPK PACKAGING GROUP NV approved the original version of the Corporate Governance Charter on 15 December 2005.
The most recent modifications were approved by the board of directors on 15 March 2010 and result from the revision of the Belgian Corporate Governance Code in 2009 that is applicable to financial years that start on or after 1 January 2009.

The charter underlines VPK PACKAGING GROUP NV’s commitment to applying the principles of the Corporate Governance Code and describes and explains the most important aspects of VPK PACKAGING GROUP’s Corporate Governance including the board of directors, the advisory committees and the executive committee.

This report, which is part of the annual report, provides factual information about the application of VPK PACKAGING GROUP’s Corporate Governance. It also contains detailed explanations of deviations from the provisions of the Belgian Corporate Governance Code.

4. Board of directors

The board of directors meets regularly, more specifically it met on 13 March, 27 May, 27 August and 16 December 2009. The rate of attendance of the directors at these meetings was 92%.
The directors received the agenda of each meeting beforehand, together with the requisite information on the subjects to be discussed.
In accordance with article 18 of the coordinated articles of association, resolutions of the board of directors are passed by a simple majority. In 2009, all resolutions were passed unanimously.
In accordance with article 19 of the coordinated articles of association, the deliberations of the board of directors were recorded in the minutes, which were signed by the members in attendance.

The role of secretary of the board of directors was taken by Mr Luc Ledegen, Sr Legal Manager VPK PACKAGING GROUP NV. He performed this role at all meetings of the advisory committees, except for the remuneration committee where the role was fulfilled by BVBA Jozef Schoonjans, represented by its permanent representative, Mr Jozef Schoonjans.

No situations arose during the 2009 financial year in which the board of directors had to apply the procedure of article 523 of the Companies Code in respect of conflicts of interest.

Similarly, no conflicts of interest arose during the course of 2009 between VPK PACKAGING GROUP NV (including its associated companies) and its directors, members of the executive committee, that fall under the conflict of interest rules of articles 523 and 524ter of the Companies Code.

5. Advisory committees

Within the structure of the board of directors, the members of the audit committee, the special committee for monitoring the Warrant Plan and the remuneration committee met regularly.

These committees were established from the desire to maintain the efficiency of decision-making, taking account of the size of business and the relatively limited size of the board of directors of VPK PACKAGING GROUP NV. It is for this reason that the Board of Directors as a whole plays the role of appointment committee.

The board of directors did not function as an appointment committee in 2009.

The members of the various committees are listed below, together with a summary of their composition, operation and authority. For more details of these committees we refer you to the charter that can be consulted above.

5.1 Special Committee for monitoring the Warrant Plan

In February 1999, the annual general meeting resolved to create a warrant plan for the benefit of executives, members of management, and the board of directors of VPK PACKAGING GROUP NV.
As a result, warrants can be allocated that provide entitlement to subscribe to a maximum of 100,000 shares, representing a maximum of 1.13% of the subscribed capital.
The object of this was to promote the long-term commitment and motivation of management and to increase and sustain the profitability of the group.

The final committee meeting was held on 16 February 2009. During the final exercise period in January 2009, 16 warrant holders exercised a total of 2,026 warrants.
This also brings the Warrant plan approved in February 1999 to a definite end. Consequently, the special committee for monitoring the Warrant Plan no longer had any
reason to exist with effect from February 2009.

Composition and operation
The special committee for monitoring the warrant plan consisted of two members
- Jean-Paul Macharis (chairman)
- Pierre Macharis

5.2 Remuneration Committee

Composition and operation
The Remuneration Committee is made up of three members, who are all independent non-executive directors. The Remuneration Committee met once in 2009.

Members
- Dirk Meeus
- BVBA ACPY, with permanent representative Bruno Accou
- BVBA DIMACOR, with permanent representative Carl Verstraelen (chairman) 

Authority
The committee has an advisory role to the board of directors. Hence, it makes general recommendations concerning pay policy and, in particular, the remuneration of the directors and auditors, as well as the members of the executive committee.

The chairman of the executive committee has the right to attend meetings of the  remunera-tion committee except when it is discussing his own evaluation.

5.3 Audit Committee

The members of the audit committee of VPK PACKAGING GROUP NV are all non-executive directors, two of whom are independent directors. Most importantly, they have the necessary skills in the field of accounting and audit given their professional activities (outside the board of directors).

The audit committee met three times during 2009 at the invitation of the committee’s chairman. The findings and recommendations of the auditor and of the internal auditor were discussed on two occasions, one of which was after the board of directors had drawn up the financial statements, the consolidated financial statements and abridged financial statements for the 2009 financial year for publication.
In the judgement of the board of directors, a discussion of the findings twice per year is sufficient.

Members
- BVBA DIMACOR, with permanent representative Carl Verstraelen (chairman)
- Denis Zenner
- Dirk Meeus

The audit committee has an advisory role to the board of directors. The audit committee’s role is to assist the board of directors in its supervisory duties in respect of the internal control systems at VPK PACKAGING GROUP NV and its domestic and foreign subsidiaries in the broadest sense, including internal controls of financial reporting.

The role of the audit committee is determined by legal provisions, supplemented by the instructions of the board of directors, and is described in the corporate governance charter.

6. Executive committee

The transfer of authority from the board of directors to the executive committee, as resolved upon on 24 March 2003, was approved by the extraordinary general meeting of 30 May 2003.

In practice, the following areas fall under the authority of the executive committee:

• development of strategy and long-term objectives, which are submitted to the board of directors for approval;
• execution of strategy (translation into plans, firming up objectives);
• monitoring budgets and adjusting investment plans;
• control and coordination of the various activities and subsidiaries within the group;
• managing internal control;
• coordination of the business unit managers;
• identifying and realising group synergies;
• developing new activities within the core activities;
• proposing potential acquisitions to the board of directors.

The executive committee met an average of twice per month during 2009. All members were present at all meetings.

There were no transactions between VPK PACKAGING GROUP NV and the members of the executive committee that conflicted with the interests of VPK PACKAGING GROUP NV.

The board of directors’ meeting of 11 March 2010, in accordance with the general provisions concerning the executive committee, and based on the supervision of the executive committee’s main activities until 31/12/2009, granted a discharge to the members of the executive committee.

Day-to-day management

In accordance with article 23 of the coordinated articles of association, the board of directors charged Jean-Paul Macharis and Pierre Macharis, who both hold the title of managing director, with the day-to-day management of the company.

In accordance with the provisions of article 23 of the coordinated articles of association, business unit managers have been appointed who are responsible for their business units as profit centres. Within specified budgets, they have full responsibility, together with their staff, for their income statements.

Budgets for ROI targets, investments and intra-group supplies are set annually at group level.

7. Remuneration report

This report gives practical information about the remuneration policy carried out in the 2009 financial year and refers for the procedures relating to the development of a remuneration policy and the setting of the remuneration level to appendix 1 of VPK PACKAGING GROUP’s corporate governance charter.

7.1 Remuneration for directors:

For the 2009 financial year, each director received a fixed salary, which was not performance-related, of € 2,500 (not including VAT) per meeting of the board of directors at which he was effectively present.
Where in addition, he is a member of the audit committee, the director received a fixed remuneration of € 5,000 (not including VAT) regardless of the number of meeting of the audit committee that take place in a financial year.
A member of the remuneration committee is entitled to an additional remuneration of
€ 1,000 (not including VAT) per meeting of the committee at which he is effectively present.

The board of directors will propose to the general meeting to keep the remuneration unchanged for the 2010 financial year.

7.2 Remuneration of the members of the Executive Committee:

The executive directors and the most important members of management are rewarded for their management activities by means of a fixed salary and a variable bonus, with ceiling, which is based on their individual performance and the financial results of VPK PACKAGING GROUP NV and its subsidiaries.

Where a member of the executive committee is also an executive director, account is taken of the remuneration he receives in that capacity.

In 2009, the total gross remuneration of the six members of the executive committee working in VPK PACKAGING GROUP NV on 31/12/2009, including the fixed and variable remunera-tion for their management activities in VPK PACKAGING GROUP NV and its subsidiaries, was € 1,519,000. The fixed portion of this amounted to € 1,374,000, and the variable portion was € 145,000. Total remuneration paid to non-executive directors was € 71,000.

7.3 Additional information

VPK PACKAGING GROUP NV has not given any advances, loans or guarantees to directors, managers or supervisory bodies.

The composition of the executive committee remained unchanged in 2009. At the start of 2010 Mr Piet Van Acker resigned his mandate in the framework of an early retirement scheme. The settlement was drawn up in accordance with legal and customary norms, and took account of his role and responsibilities within VPK PACKAGING GROUP NV. Mr Piet Van Acker was business unit manager Paper and was also responsible within the executive committee for the Corrugated Board UK business unit.

No contractual arrangement was agreed on or after 1 July 2009 with the chairman of the executive committee or any other member of the executive committee that provides for compensation for loss of office that is higher than an amount equal to the basic and variable remuneration over 12 months.

No shares, share options or other rights to acquire shares were granted to the managing directors or members of the executive committee in 2009.

9. Statutory auditor

Grant Thornton, Lippens & Rabaey BVCV, the Belgian Member Firm of Grant Thornton International, represented by Mr Stefaan Rabaey, whose registered office is at Lievekaai 21, 9000 Ghent, was reappointed as auditor for a period of three years at the ordinary general meeting of 25 April 2008. The mandate ends at the 2011 annual general meeting.

During the 2009 financial year, remuneration paid to the statutory auditor and associated parties amounted to € 119.900 (not including VAT), exclusively for the statutory audit. Moreover, the auditor and associated parties charged fees amounting to € 3.250 (not including VAT) for other audit assignments and € 24,09 (not including VAT) non-audit services.