Internal Control

Preparation and organization of the Board of Directors’ work

Composition of the Board of Directors

Details of members of the Board of Directors are given in the Corporate governance chapter of the reference document.
In accordance with by-laws, at least two thirds of the directors are independent under the definition provided in the joint AFEP/MEDEF report dated October 2003 on Corporate Governance of Listed Companies and approved by the appointments committee on 14 January 2004:
“An independent director is one who has no relatio nship with Neopost, its Group or management, that might compromise freedom of judgement”.
Appended to this definition is a list of incompatible situations (employee or officer of Neopost or a Group company, customer, supplier, significant commercial or investment banker, director with close family ties with an officer, director for more than 12 years etc).
Each director’s other appointments are also detailed in the Corporate governance chapter of the reference document.

Role of the Board of Directors

The roles and tasks of the Board of Directors are described in the Corporate governance chapter of the reference document.
Details on how the Board of Directors operates, the rights, commitments and recruitment practices of its members and the real limits of their competence are defined in the by-laws. These also state the tasks and operatio ns for which approval is necessary.

Operation of the Board of Directors

In addition to the information provided in the Corporate governance chapter, it should be noted that the Board of Directors met five times during the year (the by-laws require a minimum of four meetings per financial year). The average attendance rate was 82%.

Among the topics discussed at these meetings, were the following in particular:

financial Security law: the Chairman’s 2005 report on corporate governance and internal control, analysis of IFA recommendations on corporate governance,
budgetary procedure: presentation of draft 2006 budget,
2006 outlook and quarterly results,
cash and debt positions, dividends, launch and monitoring of share buyback programmes,
observations of the audit committee,
observations of the remuneration committee (i.e. Chairman’s remuneration),
independence of members of the Board in the light of the definition in the by-laws,
composition of and regulations covering management committees,
summary of the ‘Board practices’ survey,
organisation of training for Directors and strategic review session,
three-year strategic plan (2007 - 2009),
introduction to Neopost Group activities .

Note that active disputes are presented and discussed as a matter of course at Board meetings.
Information regarding the agenda of board meetings is sent by management as soon as it is finalised and, wherever possible, several days before the meetings.

The by-laws state that the Chairman of the Board’s obligation comes with a commitment by each director to inform himself and request in good time from the Chairman the information necessary for him to understand the points on the agenda, to make himself available and devote the time and attention needed to carry out his functions.

The tasks and members of the specialist committees (audit, remuneration and appointments) are presented in the Corporate governance chapter. Regulatio ns covering these committees are in the Board of Directors’ by-laws.

Neopost has noted best practice in corporate governance, as recommended by the IFA (I nstitut Français des Administrateurs),
in its 19 October 2005 white paper “Sharing corporate governance best practice: IFA proposals”.
Many of these are already in force in the Board:

a number of committees;
a majority of directors and members of committees to be independent;
directors to have information to fulfil their duties;
directors to have the right of expression at Board meetings;
annual review by the Board of documents for shareholders;
annual review by the Board, at the proposal of the remuneration committee, of executives’ pay and directors’ fees.

The Board will carry out a detailed analysis of all these recommendations during the year.