ANNUAL ACTIVITY REPORT FOR 2011 - Gamesa

AUDIT AND COMPLIANCE
COMMITTEE OF GRUPO GAMESA
ANNUAL ACTIVITY REPORT
FOR 2011
March 21, 2012

AUDIT AND COMPLIANCE COMMITTEE OF GRUPO GAMESA
Annual report on the activities of Grupo Gamesa’s Audit and
Compliance Committee for 2011, drawn up at its meeting held on
March 20, 2012 and approved by the Board of Directors of Gamesa
Corporación Tecnológica, S.A. at its meeting held on March 21,
2012 in accordance with Article 18 of Gamesa Corporación
Tecnológica S.A.’s Board of Directors Regulations and Article 11 of
Gamesa Corporación Tecnológica, S.A.’s Audit and Compliance
Committee Regulations.
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TABLE OF CONTENTS – THE AUDIT AND COMPLIANCE COMMITTEE
A- Introduction
B- The Committee’s Relevant Data - 2011
C- Composition
D- Profiles of the Committee’s Members and Secretary
E- Meetings Held in 2011 (Activities)
F- Functions Performed in 2011:
• Functions Concerning External Auditing
• Functions Concerning the Company’s Management and the Internal
Control and Risk Management Systems
• Functions Concerning Processes to Draw Up Economic and Financial
Reporting
• Functions Concerning the General Meeting
• Functions Concerning the Corporate Governance Area and Other
Functions
• Functions Concerning Internal Auditing
G- Conclusion
H- Lines of Action Foreseen for 2012
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A.- INTRODUCTION
The Audit and Compliance Committee of Gamesa Corporación Tecnológica S.A.
(hereinafter indistinctly referred to either as the “Company” or as “Gamesa”) has
drawn up this Annual Activity Report for 2011 so that it may be placed at the
shareholders’ disposal for the General Shareholders’ Meeting after its approval by
the Board of Directors, as set forth in Article 18 of the Board of Directors
Regulations and in Article 11 of the Audit and Compliance Committee’s
Regulations. It consists of a summary of the work performed by the Committee.
The Committee’s basic organizational and operational scheme is determined by
both the Corporate Bylaws (Article 43) and the Board of Directors Regulations
(Article 18). In its constant adaptation to the rules and recommendations of good
governance, it has had its own regulations since 2004.
At its own initiative and exercising the powers vested in it, the Audit and
Compliance Committee within this context proceeded to draft the revised text of its
own Regulations in 2011, which were approved by a resolution of the Board of
Directors on April 15, 2011.
The amendment of the Audit and Compliance Committee Regulations was
convenient in order to incorporate the legislative amendments that had come
about, which in turn led to the approval by Gamesa’s Board of Directors of the
Revised Text of the Board of Directors Regulations at its meeting held on
December 15, 2010. All of the above was done within the framework of continuing
to enhance the Company’s Rules of Corporate Governance by adapting them to the
most widespread trends and practices in the markets.
Following the practice that had already been put into place in preceding years,
Gamesa Corporación Tecnológica, S.A.’s Audit and Compliance Committee is
submitting and publicly disclosing its Annual Activity Report for 2011, thereby
meeting the requirements of best practices and contributing to the ratification of
the trust that has been placed on our organization by its stakeholders, particularly
the Spanish and international markets. The Report has been published since 2005,
and this is its eight edition.
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Like in preceding years, the Audit and Compliance Committee’s members have
maintained a high level of activity and dedication in 2011, as is evidenced by the
fact that they held ten (10) meetings, each of which lasted an average of between
three to four hours.
We will report on the activities performed the throughout year in this Annual
Report, which aims to summarize the activities carried out by Audit and
Compliance Committee over the entire course of the year to fulfill its obligations in
the different spheres within its competence, including among others: (i)
supervision of periodic publicly available financial and economic reporting; (ii)
overseeing relevant risks; (iii) compliance with the rules and corporate
governance; and (iv) monitoring the independence of the external auditors of
accounts.
In any case, it should be stated that setting an effective internal control system
does not in itself ensure the attainment of Gamesa Corporación Tecnológica, S.A.’s
strategic objectives. It does, however, ensure an appropriate internal control
structure that reduces the likelihood of decisions and procedures existing which are
not in line with the guidelines and criteria set by the Board of Directors.
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B.- THE COMMITTEE’S RELEVANT DATA - 2011
Meetings 10
Reports/Notices to the Board of Directors
19
Appearances of Senior Management 28
Appearances of external professionals 5
Number of notices filed before the National
Securities Market Commission on relevant
disclosures regarding the Committee’s activities
8
The Audit and Compliance Committee’s members attended all the meetings held in
2011.
A report for the Board of Directors is drawn up at the end of each meeting of the
Audit and Compliance Committee in order to bring the most significant matters and
conclusions regarding the points dealt with on the relevant agenda before the
Board. The reports and notices brought before the Board of Directors by the Audit
and Compliance Committee are the result of its analyses during the course of such
meetings. Whenever it is considered necessary, the organization’s Senior
Management, its other executives, its external auditors and other external
independent professionals are called upon to appear before a plenary meeting of
the Audit and Compliance Committee, as is the work performed by the Internal
Auditing unit, an area functionally dependent on the Committee.
Within the context of the Board of Directors’ assessment process and that of its
Committees, which began in previous years, the Audit and Compliance Committee,
at its meeting held on May 5, 2011, resolved to bring before the Board of Directors
for its approval at the Board meeting held on May 25, 2011 a report on the way it
is run in order to evaluate the quality of its work, assess the efficiency of its rules
and, if necessary, correct any aspects that turned out to be barely functional.
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C.- COMPOSITION
The Audit and Compliance Committee is an internal body of the Board of Directors
made up of at least three and at most five Non-Executive Directors, one of whom
must be an Independent Director. The Board of Directors will endeavor to ensure
that the members of the Audit and Compliance Committee, and particularly the
Independent Director appointed to it, have knowledge and experience of
accounting, auditing or risk management matters.
The composition, status and offices of the Audit and Compliance Committee as of
December 31, 2011 are set out below:
Chairman: Mr. José María Vázquez Egusquiza Non-Executive Independent
Director
Members: Ms. Sonsoles Rubio Reinoso Non-Executive Nominee Director
Mr. Luis Lada Díaz Non-Executive Independent Director
Secretary: Mr. Carlos Rodríguez-Quiroga Menéndez (Non-member)
All the members of the Committee are deemed as Non-Executive Directors on the
basis of their experience, training, professionalism and efficacy, and those
classified as “Independent” meet the requirements of independence set forth in
Article 8 of the Board of Directors Regulations.
At its meeting held on December 14, 2011, Gamesa Corporación Tecnológica,
S.A.’s Board of Directors accepted the resignation tendered by Mr. Pedro Velasco
Gómez as a member of Board and of the Audit and Compliance Committee and
resolved to appoint Ms. Sonsoles Rubio Reinoso as a member of the Board’s Audit
and Compliance Committee within the category of Non-Executive Nominee
Directors after having duly received a report from the Appointments and
Remuneration Committee.
The profiles of each of the Audit and Compliance Committee’s members are set out
further below and show that each of them possesses the knowledge and expertise
needed to efficiently perform the responsibilities entrusted to them.
Gamesa Corporación Tecnológica, S.A.’s Corporate Bylaws and Board of Directors
Regulations promote the Audit and Compliance Committee’s independence by
setting forth that it should be comprised of Non-Executive Directors and above all
to fulfill the Recommendations on the Audit Committee set forth by the Unified
Code of Good Governance under the terms which appear in the Company’s Annual
Corporate Governance Report, which has been approved and published.
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D.- PROFILES OF THE COMMITTEE’S MEMBERS AND SECRETARY
Mr. José María Vázquez Egusquiza
Mr. José María Vázquez Egusquiza was born in Bilbao in the province of Vizcaya
and is currently a member of the Board of Directors and the Chairman of GAMESA
CORPORACIÓN TECNOLÓGICA, S.A.’s Audit and Compliance Committee.
He holds degrees in Industrial Metallurgy and Business Studies from the
Universidad del País Vasco and completed his studies doing several Masters in the
United States and Sweden.
His professional career has mainly taken place in the metallurgical sector. He
began his career in Babcock and Wilcox, S.A. as a materials and welding engineer
in the valve department for nuclear power plants. He then went on to hold
management positions in different business groups in the Basque Country
dedicated to the metallurgical, machine tools, shipping and construction sectors.
More specifically, he is currently the Chairman of the Bizkaia Business
Confederation (Confederación Empresarial de Bizkaia – CEBEK), the Chairman of
the Board of Directors of GIROA (Grupo Dalkia), a Director of the Bilbao Port
Authority, a member of the Strategy Committee of the IK4 Research Alliance and a
member of the Board and of the Strategy Committee of the Gipuzkoa Technical
Studies and Research Center (Centro de Estudios e Investigaciones Técnicas de
Gipuzkoa – CEIT).
He has also held the offices, among others, of Chairman of CONFEBASK’s
Industrial Policy Committee, member of the Management Board of the Spanish
Confederation of Business Organizations (Confederación Española de
Organizaciones Empresariales – CEOE), Chairman of the CEOE’s Business Board for
the Information Society, Director of the Biscay Industrial Design Centre (Centro de
Diseño Industrial de Bizkaia), member of the Executive Committee of the Spanish
Association for the Development of Welding (Asociación Española para el
Desarrollo de la Soldadura) and member of the SEOPAN Management Board.
He has been fully involved in teaching and awareness-raising activities.
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Ms. Sonsoles Rubio Reinoso
Ms. Sonsoles Rubio Reinoso was born in Segovia and is currently a member of
GAMESA CORPORACIÓN TECNOLÓGICA, S.A.’s Board of Directors, Executive
Committee and Audit and Compliance Committee.
She holds a degree in Economics and Business Studies granted by the Universidad
Autónoma de Madrid.
She subsequently did post-graduate courses at institutions like the ICEA, the IESE
or the Center for Financial Studies. Additionally, she is a qualified Quality
Assurance Officer, a Certified Internal Auditor and a Certified Fraud Examiner.
Her professional career has essentially taken place in the field of internal auditing
at companies like Repsol YPF, S.A. (1995-1999), Holcim (Spain), S.A. (1999-2008)
and Iberdrola (2008-2011). She is currently the Head of Internal Auditing of
Iberdrola, S.A.’s Renewable Energy Business.
She has been a Member of the Institute of Internal Auditors’ Steering Committee
since May 2007, the Secretary General of its Steering Committee since May 2009
and the Secretary and a Member of its Audit Committee since November 2011.
Over the course of her career, she has published articles, given lectures and taught
as a professor of the “Creation and Management of an Internal Auditing
Department” seminar since 2009.
Mr. Luis Lada Díaz
Mr. Luis Lada Díaz was born in Mieres, Asturias and is currently a member of the
Board of Directors, of the Executive Committee and of the Audit and Compliance
Committee of GAMESA CORPORACIÓN TECNOLÓGICA, S.A.
He holds a Telecommunications Engineering Degree from the Universidad
Politécnica de Madrid, where he is an Honorary Professor, and is also a full
member of the Royal Academy of Engineering.
After a brief spell at the Council for Scientific Research (Consejo Superior de
Investigaciones Científicas), he joined Telefónica’s Research and Studies Center in
1973 and spent most of his professional career at Telefónica. He was appointed
General Manager for Planning and Technology in 1984, a position of maximum
technical responsibility. He then went on to work for Grupo Amper between 1989
and 1993 as General Planning and Control Manager, after which he rejoined
Telefónica, holding responsibility for its Group of Subsidiaries and Associate
Companies. He was appointed as the Chairman of Telefónica Móviles Spain In
1994 and in August of 2000 went on to become a Director of Telefónica, S.A., a
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member of its Executive Committee and the Executive Chairman of Telefónica
Móviles S.A. In August 2003, he became the head of Grupo Telefónica’s
Development, Planning and Regulation Division and was the Executive Chairman of
Telefónica de España between December 2005 and July 2006.
He is currently the Director General of Ribafuerte S.L., as well as a Director of
Indra Sistemas, Telefónica I+D and Ydilo AVS. He is also a member of the Círculo
de Empresarios and of the Bankinter Innovation Foundation, and an advisor to
Telefónica, Teldat and ASSISA Inc.
He has been a member of the Governing Board and Deputy Chairman of the
Spanish Association of Telecommunications Engineers, as well as a director in a
variety of companies in the information technologies sector. Mr. Lada Díaz has
additionally received several professional and business awards.
Mr. Carlos Rodríguez-Quiroga Menéndez
Mr. Carlos Rodríguez-Quiroga Menéndez was born in Madrid. He currently holds
the offices of Member and Secretary to the Board of Directors and Non-Voting
Secretary of the Executive Committee, of the Audit and Compliance Committee and
of the Appointments and Remuneration Committee of GAMESA CORPORACIÓN
TECNOLÓGICA, S.A.
He holds a Law Degree from the Universidad Complutense de Madrid.
He is a Diploma holder of Employment Law from the Legal Practice School of
Madrid.
He has also been granted Diplomas in Comparative Industrial Relations and in
European Community Relations from the Secretariat of State for Relations with the
European Community.
He is a practicing lawyer.
Over the last few years, he has held the offices of Director or of Secretary to the
Board of Directors, among other positions, in the following companies: Audiovisual
Española 2000, S.A., Diver Karting, S.L. and Rodríguez-Quiroga Abogados, S.L. He
is likewise a Trustee of the Spain-Equatorial Guinea Foundation.
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E.- MEETINGS HELD IN 2011 (ACTIVITIES)
The meetings held throughout 2011 and the main issues dealt with in them were
as follows:
January 25, 2011:
• Risk Management and Control System: Technology risks.
• Analysis of the tax and legal situation.
• Forecast on the FY 2010 year-end.
February 22, 2011:
• External Auditors: Presentation on the work performed on the 2010
annual accounts.
• Information on the FY 2010 year-end to be filed before the National
Securities Market Commission.
• Analysis of the individual and consolidated accounts, as well as of the
management report and the allocation of profits corresponding to the
accounts to be drawn up by the Board of Directors.
• Dividend policy.
• Market presentation on the FY 2010 year-end.
• Annual Corporate Governance Report 2010.
• Summary of Internal Auditing activities in 2010, proposal for the Internal
Auditing Plan 2011 and the Committee’s Work Plan.
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March 22, 2011:
• Work in progress in wind and solar farm development and sales.
• Analysis of the Risk Management and Control System: Updating of the
risk map.
• The Audit and Compliance Committee’s Activity Report.
• Corporate Defense: Criminal Prevention and Anti-Fraud Policy.
• Proposal to amend the Audit and Compliance Committee Regulations.
April 7, 2011:
• Presentation of the bids submitted by the external auditing firms invited
to take part in the tender to appoint the auditors of accounts.
April 15, 2011:
• Risk Management and Control System: G10X Platform Business Plan.
• Sustainability report.
• Appointment proposal on the external auditors of accounts.
• Proposal to amend the Audit and Compliance Committee Regulations.
• Preliminary review of the Board of Directors’ resolutions on the agenda
for the General Shareholders’ Meeting affecting the Committee.
May 5, 2011:
• Legal surveillance and control program.
• Operational audit: Provision for wind turbine warranties.
• Reporting to be filed before the National Securities Market Commission
(CNMV) and market presentation for the first quarter of 2011.
July 21, 2011:
• Presentation by the external auditors on the work done to conduct a
limited review on the interim consolidated financial statements for the
first half of 2011.
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• Presentation on the information to be filed before the National
Securities Market Commission (CNMV) and market presentation for the
first half of 2011.
• Half-yearly report of the Legal Compliance Unit.
• Proposal to update the “Regulatory Framework Governing the
Relationships between the Audit and Compliance Committee and the
Auditors of Accounts”.
• Transaction with a significant shareholder.
September 20, 2011:
• External auditors’ presentation on the procedures they have
implemented to safeguard their independence from the organization
audited.
• Study of draft Internal Rules of Conduct Regarding the Securities
Markets and of the Code of Conduct.
• Analysis of the legal and tax situation.
November 8, 2011:
• Risk Management and Control System: Updating of the risk map.
• Audit on the obligatory information to be posted on the website.
• Reporting to be filed before the National Securities Market Commission
(CNMV) corresponding to the third quarter of 2011 and market
presentation.
• Internal Rules of Conduct Regarding the Securities Markets and Code
of Conduct.
December 13, 2011:
• External Auditors: Most relevant aspects identified in their preliminary
work.
• External Auditors: Analysis of the memorandum of recommendations.
• Half-yearly report of the Legal Compliance Unit.
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F.- FUNCTIONS PERFORMED IN 2011
Without prejudice to other tasks it may be assigned with by the Board, the
Corporate Bylaws, the Board of Directors Regulations and the Audit and
Compliance Committee Regulations (hereinafter “ACCR”) set forth several basic
responsibilities for the Committee, which can be summarized as a series of
functions concerning:
External Auditing. (Art. 6 of the ACCR)
Internal Auditing. (Art. 7 of the ACCR)
Process to draw up economic and financial reporting. (Art. 8 of the ACCR)
Internal control and risk management systems. (Art. 9 of the ACCR)
Corporate Governance and other functions. (Articles. 10 and 11 of the
ACCR)
General Shareholders’ Meeting
The most significant functions/activities performed in this context by the
Committee in 2011 are summarized below:
F.1.- Functions Concerning External Auditing.
In accordance with the Committee’s internal regulations, it has been assigned
responsibilities concerning the following matters, among others:
- Proposing the appointment of the external auditors of accounts, as
well as their contracting conditions, the scope of their professional
mandate and, should it be the case, their renewal, dismissal or nonrenewal
to the Board of Directors for submission to the General
Shareholders’ Meeting.
- Ensuring the external auditors’ independence and, for such purpose,
ensuring that the Company, its group and the external auditors
comply with prevailing legislation on the provision of services other
than auditing services, the concentration constraints on the auditors’
business and, in general terms, any other rules laid down to ensure
the external auditors’ independence.
- Maintaining the relationship with the external auditors to receive
information on any matters that could place their independence at
risk and regarding any other matters connected with the performance
of the account auditing process, as well as on any other disclosures
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laid down by account auditing legislation and technical auditing
standards.
- Serving as a channel of communications between the Board of
Directors and the auditors, assessing the results of each audit and
the responses of the management team to their recommendations
and mediating in the event of discrepancies between the auditors
and the management team regarding the standards and criteria that
should apply to draw up the financial statements.
- Reviewing the contents of the audit reports before issuing them,
endeavoring to ensure that such contents and the opinions expressed
therein about the annual accounts are drafted clearly, accurately and
without qualifications.
- Ensuring that the consolidated group’s external auditors take on the
responsibility of auditing the companies that comprise it.
- Receiving written confirmation on an annual basis from the auditors
of accounts of their independence from the Company and its
reporting group, as well as information on any additional services of
any kind provided to such organizations by the external auditors or to
any company forming part of its group, along with any other
information or documents required by prevailing legislation.
- Issuing a preliminary report on the auditing of accounts on an annual
basis which expresses an opinion on the independence of the
auditors of accounts and on the possible provision of any additional
services by the auditors.
In keeping with the foregoing and in compliance with such responsibilities, the
most significant actions, among others, performed in 2011 are set out below:
- Appointment, Reappointment or Removal
1.- Within such framework and fully respecting the practices of “Good
Governance”, the Committee resolved to rotate the auditing firm and undertook to
lead this process in order to ensure the appointment process’s transparency and
equality.
A tendering procedure was chosen as the most transparent, efficient and equitable
formula in accordance with the existing internal rules set forth in the “Regulatory
Framework Governing the Relationships between the Audit and Compliance
Committee and the External Auditors of Accounts”.
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At the meeting held by the Committee on April 15, 2011, it put forward
PriceWaterhouseCoopers, Auditores, S.L. (hereinafter PwC) as the new auditing
firm for the individual and consolidated annual accounts for the period covering
2011-2013 to the Board of Directors for its subsequent submission to the General
Shareholders’ Meeting.
The Committee has played an active role aimed at overseeing the auditing firm’s
transition plan process after its appointment by the General Shareholders’ Meeting
on May 25, 2011 in order to ensure the effective rotation of auditing firms and to
maximize the opportunities offered by the process of change.
- Meetings Held with External Auditors
1.- Deloitte, S.L., the auditing firm responsible for Grupo Gamesa’s individual and
consolidated accounts for 2010, appeared before the Committee at its meeting
held on February 22, 2011 in order to present the most significant aspects and
conclusions of their auditing work regarding the aforementioned year.
2.- The interim consolidated financial statements of Grupo Gamesa as of June 30,
2011, which were filed before the National Securities Market Commission, were
subjected to a limited review by the external auditors, as were the statements of
the same period in the preceding year. The new external auditors of accounts,
PwC, appeared before the Committee at the meeting held on July 21, 2011 in
order to present the most significant aspects, conclusions and a report on the work
they had performed.
3.- The external auditors also appeared before the Committee at its meeting held
on December 13, 2011 to present the most significant aspects arising from the
preliminary stage of auditing the annual accounts for FY 2011. This involved
monitoring the external auditors’ work, receiving preliminary reports and an
overview on the external auditing process of the accounts.
4.- Fulfilling the responsibility taken on by the Committee to receive regular reports
from the external auditors on the results of their work, PwC was called upon at the
meeting mentioned in the paragraph above to appear before the Committee at its
meeting to be held on February 21, 2012 – before this Annual Activity Report was
drawn up – to submit their final conclusions on the audit conducted on the
financial statements at the year-end of FY 2011.
5.- As is indicated further below in this Audit and Compliance Committee Activity
Report, the external auditors appeared before the Committee at its meeting held
on December 13, 2011 to present their recommendations to improve internal
controls resulting from their work as the Group’s auditors of accounts.
6.- In addition, the Chairman of the Audit and Compliance Committee holds work
meetings throughout the year with the external auditors, whenever he may deem
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appropriate, on matters lying within the Committee’s responsibilities. The Chairman
then informs the rest of the Committee’s members about the contents of such
meetings.
- Fees for Auditing Services
The fees for financial auditing services provided to the various companies
comprising Grupo GAMESA and its subsidiaries by the principal auditors and by
other organizations related to them amounted to €1,149,000 in 2011 (€1,434,000
in 2010). Similarly, the fees paid for this same item to other auditors who took part
in auditing several of the group’s different companies amounted to €69,000
(€155,000 in 2010).
In addition, the principal auditors and other organizations linked to them provided
other accounting review and verification services for the amount of €9,000
(€17,000 in 2010), along with the provision of other professional services in 2011
to the different companies comprising the Group for the amount of €35,000
(€266,000 in 2010). Likewise, the fees paid for the services provided by other
auditors that took part in auditing the different companies belonging to the Group
for these same items amounted to €2,161,000 (€2,110,000 in 2010).
- Certifying Independence and Other Aspects
Pursuant to the provisions set forth in the Board of Directors Regulations and in
Article 6 of the Audit and Compliance Committee Regulations, “Ensuring” the
external auditors’ independence is among the functions entrusted to the
Committee by the Board of Directors. To such a purpose, it should ensure that the
Company and the external auditors comply with prevailing regulations concerning
the provision of the different auditing services, the concentration limits on the
external auditors’ business and, in general terms, all the other regulations laid
down to ensure the external auditors’ independence.
1.- Within this context, the Audit and Compliance Committee requested the
external auditors to:
* Issue a written statement on their independence from Grupo Gamesa
regarding the performance of the auditing of accounts in accordance with
prevailing legislation, and additionally a confirmation that the amount of the fees
received by the external auditors did not exceed 5% of their total income.
* Issue an additional statement that the services of any kind rendered by
the external auditors other than the auditing of accounts are in accordance with
the provisions set forth in legislation on the auditing of accounts and that they are
not involved in any kind of incompatibility.
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2.- Likewise, at the meeting held by the Audit and Compliance Committee on
September 20, 2011, the external auditors responsible for the individual and
consolidated annual accounts appeared before the Committee at the its request in
order to present any internal procedures they had implemented to safeguard their
independence from the organization being audited, any threats that may
jeopardize their independence and the security measures adopted to mitigate such
factors for the Committee’s subsequent analysis.
3.- In accordance with the internal regulations of Gamesa Corporación
Tecnológica, S.A., which are aimed at developing and enhancing Corporate
Governance rules by adjusting them to the most common trends and practices in
the markets, we would like to highlight that the Audit and Compliance Committee
issued a preliminary report on the auditing of accounts for the second year in a
row. Such report expresses a favorable opinion on the independence of the
auditors of accounts. It is attached hereto as an Annex.
4.- It should also be highlighted that, over the course of the external auditors’
different appearances, the Committee’s members actively urged the external
auditors to undertake the responsibility of auditing the companies making up the
Group as the consolidated Group’s external auditors. In this regard, once the
necessary scope of the work that would allow the principal auditors to review and
assess the work of other auditors was defined, no constraints were placed on their
responsibility concerning expressing an opinion on the consolidated annual
accounts for 2011.
F.2.- Functions Concerning the Company’s Management and the Internal
Control and Risk Management Systems
The Committee has been entrusted with the responsibility of overseeing the
efficiency of the Company’s internal control systems and their appropriateness and
integrity with regard to the business’s relevant risks, as well as setting and
reviewing of the risk map and levels the Company considers as acceptable.
The integrated risk management approach adopted by the Group involves a
process in which the Board of Directors, Senior Management and the rest of the
Group’s workforce are involved, and it is in turn integrated into the way corporate
strategy is set.
Gamesa uses a Risk/Opportunities Management and Control model across the
entire organization (divisions, departments and companies) that covers all the
geographical areas where it operates to contribute to the attainment of the
Business’s objectives, the creation of shareholder value and sustainable profitable
development.
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Within this context, the Committee regularly supervises the internal control and
risk management system in order to ensure the following are identified:
o The different kinds of risks facing the Company, including contingent
liabilities and other out-of-balance risks among the financial and
economic risks;
o The setting of the risk level which the Company considers acceptable;
o The measures foreseen to mitigate the impact of any risks identified
should they come about; and
o The information and internal control systems used to control and
manage the aforementioned risks, including contingent liabilities and
out-of-balance risks.
At its meetings held on March 22 and November 8, the members of the Audit and
Compliance Committee assessed the general risks/opportunities map, which
includes the key processes to be monitored, to ensure that the most relevant
aspects that could jeopardize the attainment of the business’s objectives are
monitored on a continuous basis, as they could affect the Company’s economic
profitability, its financial solvency, its corporate reputation, the integrity of its
employees, the environment and compliance with legislation.
The above-mentioned risk and opportunities map was updated before this Activity
Report was drawn up, as it one of the Committee’s periodic activities.
In keeping with the line of action initiated in previous years, the Group’s senior
executives were called upon to make a series of appearances before the Audit and
Compliance Committee in 2011 to provide it with an overview of the situation from
their standpoint of the specific risks facing their activities with respect of the
Company’s Strategic Plan.
More specifically, several appearances took place in 2011, which are described
below:
Date
Date Department Presentation
January 25 Manager of the Tax Area Analysis of the tax situation
January 25 Legal Area Analysis of the legal situation
January 25
January 25
Chief Technology Officer
General Manager of Management Control
Technology risks
Forecast of the FY 2010 year-end
March 22 General Manager of Internal Auditing Work in progress on the promotion and sale of wind farms
March 22
March 22
April 15
May 5
B.R.C.and Internal Auditing Manager
Chief Legal Counsel
Sales and Projects
General Manager of Internal Auditing
Risk control and management system. Risk map
Criminal prevention and anti-fraud policy
Risk control and management system. New Business Plan platforms
Operational audit: Provision for wind turbine warranties
September 20 Manager of the Tax Area
Analysis of the tax situation
September 20 Legal Area
Analysis of the legal situation
November 8 B.R.C.and Internal Auditing Manager Risk control and management system. Risk map
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The Managers of the Tax and Legal Areas appeared before the Committee at its
meetings held on January 25 and September 20, 2011 to inform it of any tax and
legal aspects identified as potential risks for the Group, along with their
occurrence, impact and evolution.
In addition, as indicated above, the external auditors appeared before the
Committee at its meeting held on December 13 in order to present and assess
their internal control recommendations arising from their auditing work and the
management team’s responses.
F.3.- Functions Concerning Economic and Financial Reporting
Overseeing the process used to draw up financial reporting on the Company and
its Group and the integrity of such information, as well as reviewing the
information that the Company periodically and/or obligatorily discloses to the
markets and to their supervisory bodies with the necessary thoroughness to ensure
its accuracy, reliability, sufficiency and clarity are among the most important
functions entrusted to the Audit and Compliance Committee.
The Committee additionally ensures that periodic financial reporting is drawn up
with the same accounting criteria as the annual financial reports. To such a
purpose, it considers the appropriateness of proceeding with a limited half-yearly
review of such reporting by the external auditors, safeguards compliance with legal
requirements and ensures that generally accepted accounting standards are
properly applied, informing the Board of Directors of any significant changes in
accounting criteria.
Its work provides an additional safeguard and foresees any risks that could lead to
the existence of future qualifications resulting from non-compliances with
accounting criteria in the external auditors’ audit report.
For this reason, the activities performed in 2011 included the following, among
others:
1.- The Audit and Compliance Committee holds regular recurrent work meetings
with the General Managers of the Management Control and Internal Auditing Areas
in order to make a preliminary assessment of the economic and financial
information that will be disclosed to the markets and regulatory bodies. At its
meetings held on February 22, May 5, July 21 and November 8, the Audit and
Compliance Committee supervised the different presentations made to the market,
as well as the reporting filed before the National Securities Market Commission.
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2.- One of the Audit and Compliance Committee’s responsibilities is to supervise
and assess any especially critical processes in the preparation of financial
reporting.
That is why the Manager of Internal Auditing and the General Management of the
Group’s Management Control Area appeared before the Committee at its meetings
held on March 22, May 5, and November 8 in order to set out the most significant
accounting standards applied, as well as any assumptions and estimates made that
had a significant effect on the financial statements.
3.- In addition, opinions were interchanged with the external auditors of accounts
on several occasions in 2011 concerning the application of several accounting
standards under both Spanish and international rules.
F.4.- Functions Concerning the Corporate Governance Area and Other
Functions
- General Shareholders’ Meeting.
Article 43 of Gamesa Corporación Tecnológica, S.A.’s Corporate Bylaws sets forth
the Audit and Compliance Committee’s basic responsibility of informing the General
Shareholders’ Meeting about any matters shareholders may broach at the meeting
concerning the matters that lie within its competence.
At the 2011 General Shareholders’ Meeting, the Annual Activity Report of the Audit
and Compliance Committee was placed at the shareholders’ disposal as in
preceding years. The aim of this is to promote the accountability of the activities
performed during 2010.
The Chairman of the Audit and Compliance Committee attended the Gamesa
General Shareholders’ Meeting held on May 25, 2011. The shareholders did not
raise any questions lying within the Committee’s competence.
For its part, Article 21.3 of Gamesa Corporación Tecnológica, S.A.’s General
Shareholders’ Meeting Regulations sets forth the possibility of the Audit and
Compliance Committee’s Chairman reporting or making clarifications in any of the
circumstances laid down by the Law, so as to respond to requests for information
made by shareholders at the General Meeting.
The General Shareholders’ Meeting’s documents remain at the disposal of all
shareholders and the general public on the Company’s website in the “Investors
and Shareholders” section. The contents of such documents comply with the
requirements laid down by Act 26/2003 of July 17 – otherwise known as the
“Transparency Act” –, Ministerial Order ECO 3722/2003 of December 26 and
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Circular 1/2004 of the National Securities Market Commission (CNMV) of March 17,
which was amended by Circular 4/2007.
This eight edition of the Audit and Compliance Committee’s Activity Report will be
made available to shareholders at the General Shareholders’ Meeting to be held in
2012.
- The Audit and Compliance Committee’s Self-Assessment
As in previous years, this Committee issued a report aimed at assessing the way it
functions and the quality of its work in accordance with the internal regulations of
Gamesa Corporación Tecnológica, S.A. and in keeping with best practices on
corporate governance. This report allows the Committee to correct any aspects
that may have turned out to be barely functional.
The conclusions set out in this report were debated and unanimously approved by
all the members of the Committee at its meeting held on the May 5, 2011. It was
then brought before the Board of Directors for its consideration and approved by
means of a Board resolution on May 25, 2011.
The Committee initiated the process aimed at assessing its activities in 2011 before
this Activity Report was drawn up.
- Conflicts of Interest and Transactions with Shareholders Holding
Significant Stakes
According to the Corporate Bylaws, one of the Audit and Compliance Committee’s
basic responsibilities consists of reporting on any transactions that involve or could
potentially involve Conflicts of Interest or any transactions with Shareholders
holding a significant stake. It is also responsible for approving any transactions
that involve a Conflict of Interest or transactions with a Shareholder holding a
significant stake, whenever it is requested to do so by the Board’s Chairman.
For these purposes, the Audit and Compliance Committee assessed the proposals
put forward by Management concerning transactions with a shareholder holding a
significant stake at its meetings held on July 21 and December 13. It issued
favorable reports and subsequently brought them before the Board of Directors.
It should also be pointed out that the Director and Committee member until
December 14, 2011, Mr. Pedro Velasco Gómez, did not take part in any Audit and
Compliance Committee meetings at which resolutions concerning transactions with
Iberdrola, S.A. and/or companies belonging to its Group (Transactions with
Shareholders Holding Significant Stakes) were deliberated on or approved. He
therefore did not take part in the deliberations, voting, decision-making or
execution of the relevant resolutions.
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- Supervision of the Legal Compliance Unit
The Audit and Compliance Committee’s responsibility includes overseeing
compliance with the Internal Code of Conduct Regarding the Securities Market,
with the Board of Directors Regulations and, in general terms, with the Company’s
rules of governance, as well as putting forward the proposals needed for their
improvement.
The Audit and Compliance Committee is particularly responsible for receiving
information from the Legal Compliance Unit regarding the aforementioned matters
and, if necessary, issuing reports on disciplinary matters to members of the
Company’s Senior Management and Executives for not complying with their
Corporate Governance obligations and/or the Internal Code of Conduct Regarding
the Securities Market, as well as resolving any questions the Legal Compliance Unit
may raise concerning Corporate Governance and its compliance pursuant to the
Internal Code of Conduct Regarding the Securities Market.
In accordance with the provisions set forth in Article 17 of the Internal Code of
Conduct Regarding the Securities Market, the Legal Compliance Unit should
periodically submit a report to the Committee on the application of such rules and
the decisions adopted to put them into practice on at least a half-yearly basis.
Fulfilling this mandate, the Manager of the Legal Compliance Unit appeared before
the Audit and Compliance Committee at its meetings held on July 21 and
December 13 to inform the Committee about the compliance levels of confidential
operations and the registration of securities. A computer solution developed in
previous years is available aimed at the “Automation of the Procedure on
Confidential Operations and the Registration of Securities”.
In this regard, the Audit and Compliance Committee monitors any qualifications
thus observed throughout the year in order to ensure they are suitably corrected.
In addition, Gamesa Corporación Tecnológica, S.A.’s Code of Conduct lays down
that the Legal Compliance Unit should assess and draw up an annual report on the
level of compliance with the aforementioned Code, which should be filed before
the Audit and Compliance Committee.
The Audit and Compliance Committee may receive notices of any breaches from
the Legal Compliance Unit, and it issues the instructions or adopts any measures
that may be necessary.
More specifically, the Manager of the Legal Compliance Unit informed the Audit
and Compliance Committee about the Code of Conduct’s level of compliance at his
appearances before the Committee on July 21 and December 13.
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Furthermore, the Legal Compliance Unit is entrusted with implementing and
monitoring the legal surveillance and control program, whose function essentially
consists of safeguarding and mitigating any risks arising from the application of the
legislation on the different sectors to the Company and its Group.
More specifically, the Manager of the Legal Compliance Unit informed the Audit
and Compliance Committee about the effective implementation of the program and
its results at his appearances before the Committee on July 21 and December 13.
Lastly, with respect of the Company’s ethics and compliance plans, the Chief Legal
Counsel set out the work carried out concerning the corporate defense program at
his appearance on March 23, 2011. He presented a proposal for a Criminal
Prevention and Anti-Fraud Policy and a positive report was issued thereof prior to
its subsequent approval by the Company’s Board of Directors at its meeting held
on March 24, 2011.
- Annual Corporate Governance Report and Sustainability Report
The 2010 Annual Corporate Governance Report was approved and ratified by the
Audit and Compliance Committee at its meeting held on February 22, 2011. The
Committee unanimously resolved to approve the report and submit it to the Board
of Directors’ consideration, which approved it at its meeting held on February 23,
2011. It was the subject of a relevant disclosure filed before the National Securities
Market Commission in accordance with prevailing legislation.
At its meeting held on April 15, the Audit and Compliance Committee examined the
wording given to the matters lying within its competence contained in the Gamesa
Sustainability Report 2010. The Committee likewise resolved to approve such
matters and bring them before the Board of Directors.
In order to verify the information and contribute to the principle of transparency,
the Spanish Standardization and Certification Association (Asociación Española de
Normalización y Certificación – AENOR) was commissioned to conduct an
independent review of the sustainability report, which received such association’s
conformity.
- The Company’s website
Act 26/2003 on Transparency, which was implemented through Order
ECO/3722/2003 and Circular 1/2004 of the National Securities Market Commission
of March 17, lays down the minimum obligatory reporting contents that the
websites of listed companies should contain. As in the previous years and in
compliance with the mandate issued by the Committee, the Internal Auditing
Department conducted a website audit in 2010 to ensure the minimum legally
required contents were met.
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The findings of the aforementioned internal website audit on the “Investors and
Shareholders” section were presented to the Audit and Compliance Committee at
its meeting held on November 8 2011 and deemed to be satisfactory.
- New Revised Text of the Audit and Compliance Committee
Regulations
As a consequence of the legislative amendments which have come about and the
approval by Gamesa’s Board of Directors of the Revised Text of the Board of
Directors Regulations at its meeting held on December 15, 2010, it became
necessary to amend certain articles of the Audit and Compliance Committee
Regulations. In order to do so and after the appropriate analysis by the Directors,
the members of the Committee drew up a report justifying the amendments at its
meeting held on April 15, 2011 and brought it before the Board of Directors.
Given that a thoroughgoing change of the Regulations was made, such
amendment was deemed as the approval of a revised text of the Gamesa Audit
and Compliance Regulations.
Continuing with the process of revising and updating the Company’s internal
regulations, the drafts which updated the Internal Rules of Conduct Regarding the
Securities Markets and the Gamesa Code of Conduct were brought before the Audit
and Compliance Committee at its meeting held on September 20, 2011. After the
relevant contributions were made by the Committee’s members at its meeting held
on October 8, such drafts were brought before the Board of Directors, which
approved both texts at its meeting held on November 10, 2011.
F.5. Functions Concerning Internal Auditing
According to the Audit and Compliance Committee Regulations, the Internal
Auditing Department hierarchically reports directly to the Board of Directors and,
on its behalf, to the Board’s Chairman. However, it functionally depends on the
Audit and Compliance Committee. The main function of this Department is to
inform, provide advice and report directly to the aforementioned Committee about
any aspects concerning the internal control system, financial reporting and any
issues lying within the Committee’s competence as regards external auditing, the
annual Corporate Governance Report, the annual Corporate Social Responsibility
Report, third-party transactions that may involve a conflict of interest and
transactions with shareholders holding significant stakes, etc.
The Manager of Internal Auditing attends all of the Audit and Compliance
Committee’s meetings as a guest and appeared before it several times throughout
2011, some of which have already been mentioned in this Annual Activity Report.
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As a result, the Audit and Compliance Committee has had access to, reviewed and
approved the most relevant reports issued by Internal Auditing Department’s
Management, which place special emphasis on aspects connected with financial
reporting and internal control, as well as on monitoring the implementation of any
recommendations proposed by either the internal or the external auditors.
Subsequently, but before this Activity Report was drawn up, the Manager of
Internal Auditing submitted the findings of the Annual Internal Auditing Activity
Plan for 2011 and the Annual Plan Proposal for 2012, which sets out activities
related to the economic situation’s risks as priority lines of work linked to financial
reporting risks. Within this context, the Audit and Compliance Committee sets its
own Work Plan for 2012.
********************************************************
All the aforementioned activities of the Audit and Compliance Committee
throughout the ten meetings it held in 2011 were aimed at making a contribution
to the basic principles adopted by the Board of Directors that lie behind the
functions entrusted to the Committee, which include:
• The efficient functioning of the internal control system for relevant risks
• The reliability of financial reporting
• Compliance with policies, procedures, rules and legal provisions
• Good Corporate Governance
All of the above is aimed at reasonably ensuring the attainment of the objectives
set by the organization in order to preserve the value of its assets and,
consequently, the value of its shareholders’ investment by providing shareholders,
stakeholders and the markets in general with the maximum guarantees.
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G.- CONCLUSION
The Audit and Compliance Committee deems that is was reasonably informed of all
the issues within its sphere of competence in 2011 and therefore considers that it
satisfactorily fulfilled the responsibilities assigned to it by the Corporate Bylaws, the
Board of Directors Regulations and its own Regulations.
The Committee maintained direct ongoing contact and collaborated with the
Group’s different Divisions, the Legal Compliance Unit and the Internal Auditing
Area, as well as with the external auditors of accounts.
The process aimed at selecting the external auditors of accounts and the
subsequent proposal for the appointment of the auditors of accounts, the
monitoring of their work, the review of their conclusions and the assessment of
their independence have rigorously complied with the strict policies laid down on
such matters. The auditors of accounts’ positive conclusions regarding both the
consolidated annual accounts and interim consolidated financial statements as of
June 30, 2011 endorse the suitability of the financial reporting and internal control
systems for relevant risks.
Lastly, the Committee considered that the Company strictly complied with the rules
and recommendations of good governance.
H.- LINES OF ACTION FORESEEN FOR 2012
New challenges and opportunities face the Committee in the performance of its
functions and responsibilities in 2012. It will therefore keep up the same pace of
activity it has had to date. In this regard, the schedule of meetings set for 2012
includes around ten meetings.
The current economic climate will require special attention to be placed on
financial risks, which will be dealt with preferentially in the Audit and Compliance
Committee’s scheduling.
Likewise, the lines of action foreseen for 2012 will have an incidence on overseeing
the process of drawing up financial and economic reporting.
As a especially relevant function, the Committee will continue to ensure that the
Group and the external auditors of accounts fulfill prevailing rules on the provision
of services other than auditing, the constraints placed on the auditors’ business
and, in general terms, any other rules set to ensure the external auditors’
independence, requesting them to issue the relevant report to the Committee
expressing an opinion on such independence.
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On the basis of its contribution to the Company maintaining a high level of
monitoring regarding the best practices of corporate governance, the Audit and
Compliance Committee, as in previous years, has established as one of its priorities
the ongoing adaptation to and fulfillment of any recommendations set forth on
such matters
The Audit and Compliance Committee’s work and efforts, which are disclosed
throughout this Annual Report, are the best guarantee offered to shareholders
regarding the responsibilities that have been entrusted to it.
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