Report of the Supervisory Committee

Chairman’s Statement

Last year was another successful year for Vesteda, as was 2016, with an excellent result of €701 million. This result was based on a strong operational performance, as well as on the continuing positive development of the Dutch residential market.

The strong, yet highly competitive, market that Vesteda operated in during 2017 required prudence on several levels. Severe competition to acquire projects was not allowed to result in any concessions in terms of returns, quality or location. Furthermore, Vesteda’s long-term business model had to be solid and not depend on the volatility of the market. The Supervisory Committee believes that Vesteda’s management has adhered to these principles when making investments or other business decisions throughout the year.

In 2016, Vesteda embarked on a path aimed at improving its organisational structure, which was successfully completed in 2017. The Supervisory Committee and its Committees closely monitored the execution of the transition to the new organisation. While reorganisations like these are never flawless, the Supervisory Committee is satisfied with the end result: one integrated company located in a new and transparent office.

The successful implementation of the new structure does not mean that there are no additional challenges ahead. In 2017, Management engaged in the process of selecting a new ERP system, and will work on the implementation of this new system throughout 2018. The Supervisory Committee and Audit Committee closely followed the selection process and we were pleased to see that Management ensured this process was solid in terms of analysing Vesteda’s ERP requirements, the functionality offered by various vendors and the eventual selection of the preferred vendor. The Supervisory Committee shall closely monitor the implementation of this new ERP system in 2018.

While the company was managing a number of major changes and projects, the Acquisitions team worked hard on expanding Vesteda’s pipeline. This resulted in various successful acquisitions, some of which, such as Kolenpark in Groningen and Punt Sniep in Diemen, had to be approved by the Supervisory Committee given the transaction size.

At Supervisory Committee level, there were a number of developments last year. In early 2017, the Supervisory Committee appointed the undersigned as its Chairman. For the sake of continuity, we proposed to the participants that they extend my tenure by one year, which they approved unanimously. In addition, the Supervisory Committee initiated a structured process to search for a new member of the Supervisory Committee, resulting in the unanimous appointment of Mr. Blokhuis. Lastly, the Supervisory Committee was pleased to propose the re-appointment of Mr. Van der Baan as CEO for another four years. We are of the opinion that Mr. Van der Baan has played an instrumental role in the recent success of and changes within Vesteda and we are pleased that the participants unanimously agreed with us.

I would like to conclude by thanking my fellow Supervisory Committee members for their commitment and diligence during 2017. Together, we would like to thank the Company’s CEO, Mr. Van der Baan, the CFO, Mr. Vervoort, the members of the Management Team and all other Vesteda employees for making 2017 another successful year.

Peter Kok

Chairman of the Supervisory Committee

Supervisory Committee

Focal Points

The main task of the Supervisory Committee is to supervise the management carried out by the manager and the general course of the fund’s business, as described in more detail in the section Corporate governance and Risk management of this report.

In exercising its duties in 2017, the Supervisory Committee and its Committees placed special emphasis on the following topics:

  • Search and extension: the process of recruiting a new member of the Supervisory Committee and reviewing the extension of the tenure of the CEO

  • Risk and assurance: the restructuring of Vesteda’s ISAE framework and risk management framework

  • IT: the review of Vesteda’s IT framework and selection of a new ERP system

  • Reorganisation: progress and impact on organisation

  • Finance and reporting: change of auditor and Business Plan

  • Organisation: recruitment processes and remuneration

The above-mentioned topics will be set out below in more detail, in addition to further matters addressed by the Supervisory Committee during the year.

Meetings and Attendance Record

The Supervisory Committee comprises Mr. Blokhuis, Mr. Copier, Mr. De Die, Mrs. Van den Herik and Mr. Kok (Chairman), all of whom are deemed independent in the sense described in the Supervisory Committee’s by-laws. Mr. Blokhuis joined the Supervisory Committee in September 2017.

In 2017, the Supervisory Committee met 16 times, 11 times in person and five times via conference call. Most of these meetings were attended by the Managing Board and 11 were attended by (members of) the Management Team. In addition, the Supervisory Committee met in the absence of the Managing Board present, among other things to perform its self-assessment and to discuss the recruitment process of the new member of the Supervisory Board and the extension of the contract of the CEO.

Below you will find an overview[1] of the attendance record per member of the Supervisory Committee:

Overview of attendance record Supervisory Committee

Name

Supervisory Committee

Audit Committee

Nomination & Remuneration Committee

Jaap Blokhuis

4/4

1/1

n.a.

Hans Copier

16/16

n.a.

4/4

John de Die

15/16

6/6

n.a.

Seada van den Herik

15/16

n.a.

4/4

Peter Kok

15/16

4/5

n.a.

The activities of the Supervisory Committee in 2017 are summarised in the schedule below:

Supervisory Committee (SC) activities 2017 (including Committees)
 

Q1

 

Q2

 

Q3

 

Q4

Search new member SC

Search new member SC

Q2 report

Business plan 2018-2022

Targets and bonus Managing Board and MT

Extension tenure CEO

Extension tenure CEO

Q3 report

Remuneration senior management

IT

Benchmark remuneration senior management

Private placement under EMTN programme

ISAE 3402

ISAE 3402

IT

IT/ approval ERP purchase

Report external auditor

Q1 report

MSCI

MSCI

Financial statements and allocation of net income

Hold/sell analysis and portfolio strategy

Investment proposals

ISAE 3402

Q4 2016 report

Update EMTN programme

Treasury

Treasury

Portfolio strategy

Investment proposal

Progress reorganisation

Treasury practices

Investment proposal

Progress reorganisation

Meeting newly appointed Works Council

Risk Management Framework

Progress reorganisation

Risk Management Framework

Internal Audit Plan

Tax

Treasury

Compliance

Risk Management Framework

Investment proposals

Risk Management Framework

  

Compliance

  

Compliance

      

You will find additional information on the role and functioning of the Supervisory Committee and its committees in the Corporate governance section of this annual report.

Search for member Supervisory Committee and extension tenure CEO

At the end of 2016, it was announced that the Chairman of the Supervisory Committee, Mr. De Groof, would be stepping down as per 1 January 2017, leaving a vacancy in the Supervisory Committee. The Supervisory Committee immediately started the search process for a new member. Two executive search agencies with extensive experience were invited to pitch, after which one was engaged due to the lead partner’s broad experience and network in the Dutch real estate market. The executive search agency presented a longlist which was discussed with the Chairman of the Supervisory Committee and the Corporate Secretary. The list showed a balanced representation of male and female candidates. The longlist was subsequently discussed by the entire Supervisory Committee, which selected six candidates for a shortlist, which comprised of three male and three female candidates. Three candidates were introduced to and interviewed by the Supervisory Committee. After due consideration, the Supervisory Committee resolved to nominate Mr. Blokhuis to the participants for appointment as member of the Supervisory Committee due to his knowledge of the Dutch real estate market, his experience as an executive, his background in supervisory roles and, last but not least, the personal fit with the other members of the Supervisory Committee. The participants unanimously approved the appointment of Mr. Blokhuis as per 11 September 2017.

Mr. Van der Baan was appointed as the CEO of Vesteda as per 1 January 2014 for four years. Given the upcoming expiration of his tenure, the Supervisory Committee discussed his possible reappointment and Mr. Van der Baan expressed his keen interest to stay on for a new term. Following this conversation, the Nomination and Remuneration Committee reassessed Mr. Van der Baan’s performance against the CEO profile. This profile was slightly updated in accordance with Vesteda's business plan for the coming years. It was concluded that Mr. Van der Baan’s performance, in terms of all required parameters, such as leadership and expertise, was “at target” or “excellent”. In addition, Mr. Van der Baan’s profile was held against the CFO’s profile and it was concluded that they were still complementary to each other. Mr. Van der Baan’s contract has been aligned with current legislation and Corporate Governance codes. His remuneration package has remained unchanged. The Supervisory Committee unanimously resolved to propose Mr. Van der Baan’s reappointment and the participants unanimously resolved to reappoint him for four years as of 1 January 2018.

Risk and assurance

Vesteda has chosen to submit itself to the ISAE 3402 standard for service organisations. Under this standard, the external auditor issues an assurance report with respect to the set-up and effectiveness of Vesteda’s control framework. Vesteda selects the relevant processes that are audited and included in the assurance report. Over 2016, Vesteda received a qualified auditor’s report on the implementation of the possibly too extensive set of ISAE 3402 processes, which was disappointing. At the beginning of 2017, Vesteda’s internal auditor reviewed the set-up of Vesteda’s ISAE 3402 processes, their scope and the key controls identified. As a result, a project was set up to improve Vesteda’s ISAE 3402 framework by a) executing a risk analysis, b) reducing the number of processes under the framework by selecting the most important (financial) business processes and c) focusing on a limited number of important, and improved, key controls. The Supervisory Committee was pleased with this thorough approach and the Audit Committee continued monitoring the progress throughout the year, via periodic updates from the Internal Auditor and the CFO. This approach led to receiving an unqualified ISAE 3402 statement over 2017.

Vesteda’s risk management framework was formalised in early 2014, when Vesteda applied for a license under the Alternative Investment Fund Managers Directive (AIFMD). Vesteda’s management informed the Audit Committee that it was of the opinion that the framework was due for an update. Not only was it deemed too detailed, it was also deemed to be putting too much focus on operational matters. Management was of the opinion that Vesteda’s risk management would be more effective if it were to focus on key strategic issues and also take into account the business controls and compliance measures that had been implemented in the interim. Management presented a plan to revise the risk management framework and this plan was discussed with the Audit Committee. The Audit Committee monitored the progress of this process over the year and was informed of the actions taken, such as a thorough risk management assessment at strategic level, the establishment of a Risk Committee and the drafting of a new risk management charter, which was approved by the Audit Committee. A further outline of the revised risk management framework can be found in the Risk management section of this Annual Report.

IT

In early 2017, the Internal Auditor reported to the Audit Committee that progress was being made in improving the functioning of IT within Vesteda, but that this was not yet deemed sufficient. The Internal Auditor noted that the company should devote sufficient attention to the systematic improvement of IT, not only to support the day-to-day business, but also for the successful implementation of a new ERP system and GDPR (General Data Protection Regulation (EU) 2016/679) compliance as per 25 May 2018. It was decided that IT should not only be discussed in the Audit Committee, but should also be periodically discussed in the meeting of the Supervisory Committee. In May, the Supervisory Committee discussed IT matters extensively and was given a presentation by the IT manager.

As part of the drive to improve the IT structure, Management established the need for an integrated IT system to support and connect various business processes. In line with this, management initiated a diligent process to find a suitable ERP system to replace the applications currently being used. Both the Audit Committee and the Supervisory Committee were informed periodically of the progress of this process, which included a request for proposal, demonstrations and reference visits by Vesteda’s team. The Supervisory Committee was pleased to see that Management ensured a thorough and structured process was being followed. In the fourth quarter of the year, the Supervisory Committee approved the purchase of the ERP system, which will be implemented in 2018. The Supervisory Committee will monitor the implementation, and the effects on the ongoing business, closely.

Reorganisation

In 2016, Vesteda announced a major reorganisation, which included the following measures: a) maintaining a statutory Managing Board of two managing directors (CEO and CFO) and cutting the Management Team to the Director Operations, Director Acquisitions and Director Portfolio Strategy; b) integrating tactical asset management activities and property management into one division, Operations; c) creating the Portfolio Strategy department; d) integrating financial processes and creating one Finance & Control department and e) relocating activities from Maastricht and Amsterdam to one new centralised location in Amsterdam. The Supervisory Committee closely monitored the progress of the reorganisation, the impact on staffing and employees, the discussion with the Works Council, and the issues that arose along the way.

Finance and reporting

In early 2017, the Supervisory Committee discussed the preliminary results for 2016 and audit matters with Deloitte. The 2016 financial statements and the 2016 annual report were discussed in the presence of Vesteda’s auditor. The auditor emphasized a review of the reporting with a fresh look, as it was the first review of the annual statements after taking over from EY. The auditor also indicated that the cooperation with Vesteda went well. The auditor stated that there were no material audit findings.

The Supervisory Committee discussed the performance versus the budget on a quarterly basis. The overall trend was outperformance on most line items compared to 2016 and the budget. Maintenance costs were below budget for a considerable period of the year, but ended on budget. The continuing positive revaluations of Vesteda’s property substantially exceeded the budget.

The Supervisory Committee discussed the results of the MSCI IPD/ROZ Residential Benchmark 2016. Vesteda showed an outperformance on a three-year basis. The Supervisory Committee was provided with an analysis of the results and underlying causes.

The Supervisory Committee extensively discussed Vesteda’s hold/sell analysis and its forecast for the targets set out in the business plan.

In the fourth quarter of the year, the Managing Board consulted the Supervisory Committee on the content of the business plan for 2018-2022. The Supervisory Committee was able to provide its advice and deemed this to be a very efficient process. The Supervisory Committee supported the Managing Board’s decision to give participants the opportunity to express their views on certain strategic topics at the informal Annual Participants’ Day.

In general, the Supervisory Committee deemed the reporting of the Managing Board on ongoing issues and actions taken as proactive and adequate and had no reason to initiate further audits or investigations.

Organisation

The Supervisory Committee devoted considerable time and attention to the recruitment processes and organisational changes as described earlier. At Supervisory Committee level, the composition of the Committees of the Supervisory Committee was adjusted due to the fact that Mr. Blokhuis joined the Supervisory Committee. As part of his introduction, Mr. Blokhuis was provided with background information on Vesteda, its structure, operations and terms, and followed an introduction programme, which included meetings with executives and other staff members to learn about Vesteda.

A recurring activity of the Supervisory Committee is determining the bonuses of the Managing Board and the Management Team and setting targets for the year ahead. In terms of the 2016 bonuses, the Supervisory Committee focused on ensuring a balanced remuneration for all relevant positions eligible for the bonus schemes. With regards to the targets for 2017, the Supervisory Committee approved a revised structure, which links stronger to Vesteda’s KPIs as set out in the business plan and which gives the Supervisory Committee more discretion in assessing qualitative targets.

The Supervisory Committee also approved an amendment to the phantom share plan (to include senior staff), an updated version of the Manager Rules, a minor adjustment to the remuneration policy of the Managing Board and a proposal for an indemnity agreement, as submitted to and approved by the participants.

In light of its ‘permanent education’, the Supervisory Committee met off-site with the Managing Board and the Management Team, focusing on innovation and developments relevant for Vesteda. Members of the Supervisory Committee also attended seminars for members of supervisory boards on a broad range of topics, such as innovation and governance.

Miscellaneous

The Supervisory Committee held meetings in the absence of the management, including meetings with the risk management officer, the internal auditor and the external auditor. On various occasions, individual members of the Supervisory Committee met with senior officers of Vesteda to gain information on current matters.

The Supervisory Committee approved several investment proposals, such as, Kolenpark in Groningen, Punt Sniep in Diemen and the “Heijmans Portfolio” (which was subsequently approved by the Participants), and discussed a number of proposed investments in the pre-approval phase. In certain instances, the Supervisory Committee went on site visits to assess investment proposals.

The Supervisory Committee periodically discussed matters related to the fund’s investor relations. In view of this, the Supervisory Committee joined the Annual Participants’ Day, which was attended by a large number of representatives of the fund’s participants.

The Supervisory Committee received an annual update from the newly-appointed Compliance Officer on regulatory and legal matters related to the business. Compliance was further addressed on a quarterly basis in the Audit Committee.

The Supervisory Committee performed a self-assessment at the end of 2016. In view of the fact that a new member joined the Supervisory Committee in the third quarter of the year, the Committee decided to postpone its self-assessment over 2017 to the beginning of 2018.

On the whole, the Supervisory Committee and the Managing Board worked well together in 2017. Information was provided in a timely fashion and was clear and sufficient for the Supervisory Committee to perform its duties.

Audit Committee

The Audit Committee comprises Mr. De Die and Mr. Blokhuis and met six times in the year under review. Mr. Kok stepped down in the fourth quarter of 2017 as a member of this Committee.

The Audit Committee discussed in detail the periodic statements and the 2016 annual financial statements in the presence of the fund’s CEO, CFO and external auditor. The committee discussed key audit findings and principal assumptions, judgments and valuations, and the external auditor reported its findings. The external auditor informed the Audit Committee that final materiality had been set at €30 million and that any unadjusted differences of €1.5 million or more would be reported to the Audit Committee. The Audit Committee also assessed the independence of the auditor. The Chairman of the Audit Committee met and spoke with the external auditor on several occasions in the absence of the Managing Board, in order to remain directly informed.

In May 2017, Vesteda successfully raised €280 million from its current participants. The Audit Committee extensively discussed the set-up and timing of the equity raise ahead of this process.

The Audit Committee assessed the external auditor, Deloitte, and evaluated that the transition to this new auditor went well. The Audit Committee approved Deloitte’s Audit Plan 2017.

The Audit Committee received quarterly updates from the Internal Auditor and discussed in detail the topics of ISAE 3402, IT and risk management, as described above. The Internal Auditor also reported on compliance with privacy legislation in view of the fact that the General Data Protection Regulation (GDPR) is due to come into effect on 25 May 2018. The Audit Committee discussed the project that was initiated to prepare for this new legislation. The Audit Committee approved the Internal Audit Plan for 2017.

In terms of governance, the Audit Committee approved the charters of Internal Audit, Compliance and the newly established Risk Committee.

The Audit Committee discussed in more detail Vesteda’s refinancing activities in 2017 and the Supervisory Committee provided it with a mandate to do so. The Audit Committee approved the issuance of notes to the amount of €100 million under the EMTN programme and discussed the unwinding of derivatives in the context of the overall financing structure. 

The Audit Committee was periodically provided with reports drawn up by Intertrust, the mandatory depositary of the manager pursuant to the Alternative Investment Fund Managers Directive. On the basis of these reports, the Audit Committee ascertained that the content of the Intertrust reports is satisfactory.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee (“NR Committee”) comprises Mrs. Van den Herik and Mr. Copier and met four times in 2017.

At the beginning of the year, the NR Committee was engaged in the evaluation of Management’s targets for 2016. It also worked closely with management to set up a new target structure for 2017, focusing on greater connection with Vesteda’s KPIs as set out in the business plan and more discretion for the Supervisory Committee in the assessment of whether qualitative targets have been met. In doing so, the NR Committee is of the opinion that it has set up a robust system that can form the basis for the setting of targets in the coming years.

The NR Committee monitored the transition to the new organisational structure, and in particular the impact on the employees, on an ongoing basis. The NR Committee recognised that the changes had a considerable impact on certain departments, such as Finance & Control and Digital & Innovation. The Chairman of the NR Committee visited Vesteda’s Atlas location to get a sense of the atmosphere in the workplace.

The CEO and HR Director have periodically updated the NR Committee on their meetings with the Works Council, particularly in light of the reorganisation. The NR Committee was informed that the working relationship with the Works Council was constructive. The NR Committee met the newly appointed Works Council in a constructive meeting, and addressed a broad range of topics in an open and personal atmosphere.

The NR Committee reviewed certain governance topics related to organisation and remuneration in the light of the Dutch Corporate Governance Code. The NR Committee concluded that most items had already been addressed or were being addressed.

The NR Committee was presented with an analysis of the diversity of Vesteda’s workforce. Both management and the NR Committee stressed the importance of diversity and the elimination of any gender pay gaps. The NR Committee concluded that while gender diversity could be improved at Supervisory Committee and management level, the overall gender diversity and equal pay at Vesteda are adequate.

The NR Committee engaged an external consultancy firm to provide a benchmark for the remuneration of management and senior staff. It concluded that the remuneration of almost all positions was in line with the Vesteda remuneration policy and with the benchmark. Overall, remuneration should not be a reason for employees to leave Vesteda, but nor should it be the only reason that people want to work at Vesteda.

In view of succession planning, the NR Committee extensively discussed the high potentials within the organisation and the development of these high-quality employees. Additionally, the NR Committee stressed the importance of solid succession planning for senior management, both short term and longer term. The NR Committee also met with young professionals who are part of Vesteda’s trainee programme.

Meeting of Participants

Vesteda convened two regular Participants’ Meetings in the year under review. These included the annual meeting in April, in which the financial statements and the annual report were discussed and adopted, and the execution of the business plan was evaluated. In the bi-annual meeting in December, the participants discussed and approved the business plan 2018. Furthermore, Vesteda convened one extraordinary Participants’ Meetings for the appointment of Mr. Blokhuis as a member of the Supervisory Committee. The Participants were also given the opportunity to vote, via a proxy granted by Stichting Administratiekantoor Vesteda, in an extraordinary general meeting of shareholders of Vesteda Investment Management B.V. on the reappointment of Mr. Van der Baan as managing CEO. In addition, participants attended the annual informal Participants’ Day in September, during which they were both informed on the progress of the company's plans and invited to provide input on certain items.

Amsterdam, 19 March 2018

Supervisory Committee

Peter Kok, Chairman
Jaap Blokhuis
Hans Copier
John de Die
Seada van den Herik

  • 1 Attendance is expressed as the number of meetings (including conference calls) attended of the number the members were eligible to attend.