Proximus SA — Governance Information 2011

Mar 18, 2011

N° 0202.239.951

Annex 1

Activity Report of the Nomination & Remuneration Committee Year 2010

In 2010, the Nomination & Remuneration Committee had 8 meetings.

The composition of the Nomination & Remuneration Committee has remained unchanged compared to 2009. Mr. Theo Dilissen (chairman), Ms. Martine Durez, Mr. Georges Jacobs and Ms. Lutgart Van den Berghe are the members of the Nomination & Remuneration Committee.

Activities in 2010

1. Nomination & remuneration of the Board of Directors

The Committee advised the Board in connection with the renewal of the mandates of Mrs. Van den Berghe and Mr. De Smedt.

The Committee proposed to the Board to appoint Mr. Pierre-Alain De Smedt as new chairman of the Audit and Compliance Committee, in replacement of Mr. Philip Hampton.

The Committee also advised the Board in connection with the requested profile and the procedure to follow for the appointment of the new independent Director, to be nominated at the General Shareholders meeting of 2011, in replacement of Mr. Georges Jacobs.

2. Nomination & remuneration of the Belgacom Management Committee (BMC)

The Committee advised the Board in connection with the organization of the Belgacom Management Committee (BMC) and the appointment of Mr. Bart Van Den Meersche as Executive Vice President Enterprise Business Unit.

The Committee prepared for the Board the evaluation of the President & CEO and the members of the BMC.

3. Remuneration Plans

The Committee studied the impact of the law of 6 April 2010 on Corporate Governance on the short term and long term incentives of the President & CEO and the members of the BMC and proposed the needed adaptations to the Board.

The Committee further advised the Board in connection with:

• $\Box$ the key performance indicators for the performance year 2011
• a the salary increase budget for 2011
• g the Long Term and Short Term Incentive Plans for CEO, BMC, TGR (Top Group Resources) and a limited number of non-TGRs
• n the review of remuneration policies for BMC and TGR members

4. Policy on Personnel

The Committee closely followed up the HR strategy and plan for 2010, especially the social stability and the negotiations with the Unions, the competencies and performance, the employee satisfaction and the remuneration and cost control.

The Committee took note of the assessment and succession planning of the BMC and the TGR's.

5. Corporate Governance

The Committee advised the Board on the scope and the process to be followed for a new selfevaluation of the Board. The Committee prepared, together with SpencerStuart, who was appointed by the Board as external advisor, the questionnaire for this self-evaluation and made proposals with respect to an action plan, based on the report of the external advisor.

The Committee further advised the Board in connection with:

• a the Corporate Governance section of the Annual report
• the update of the Corporate Governance Charter, the Charter of the Board and of the Committees

TING

Theo Dilissen Chairman of the Nomination & Remuneration Committee

N° 0202.239.951

Annex 2

PARTICIPATIONS - BELGACOM (mandate not remunerated)

PARTICIPATIONS	MEMBERS per 31/12/2010
BELGACOM GROUP INTERNATIONAL SERVICES S.A.	R. Stewart G. Geerkens G. Kerremans P. Neyt
BELGACOM OPAL S.A.	J. Robeyns O. Moumal D. Lybaert
BELGACOM INTERNATIONAL CARRIER SERVICES (BICS) S.A.	D. Bellens R. Stewart D. Lybaert S. Alcott
TELINDUS GROUP S.A.	R. Stewart C. de Dorlodot B. Watteeuw
CONNECTIMMO S.A.	J. Joos O. Moumal P. Neyt S. Van Casteren
BELDISCOM S.A.	M. Georgis Ph. Lepage G. Van den Abeele
BELGACOM BRIDGING ICT S.A.	J-M. Courtoy Ph. Grandelet R. Tilmans
BELGACOM SKYNET S.A.	J-C. De Keyser Ph. Lepage M. Georgis
MOBILE-FOR S.A.	S. Vander Plaetse G. Geerkens K. Vervaet
FINBEL RE S.A.	O. Moumal L. Kervyn de Meerendré G. Kerremans
BELGACOM FINANCE S.A.	L. Kervyn de Meerendré O. Moumal G. Kerremans

$\bar{z}$

PARTICIPATIONS	MEMBERS per 31/12/2010
BELGACOM DEVELOPMENT S.A.	G. Kerremans
BELGACOM INVEST Sàrl	O. Moumal G. Dallemagne
SAHARA INTERNATIONAL VENTURES S.A. (Nederland)	R. Stewart G. Dallemagne S. Alcott
SCARLET S.A. (Nederland)	D. Bellens R. Stewart M. Georgis S. Alcott
TUNZ.COM	S. Vander Plaetse G. Geerkens
BGC «VENTURE» PARTICIPATIONS M-Brussels Invest(B) Pefa-Com (B) Explio (B)	D. Lybaert

N° 0202.239.951

Annex₃

Report on internal control and risk-management systems

The Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management.

Belgacom has set up an internal control system based on the COSO model, i.e. the internal control integrated framework and enterprise risk management published by the Committee of Sponsoring Organisation of the Treadway Commission ("COSO"). This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring.

Belgacom's internal control system is characterized by an organization with a clear definition of responsibilities, sufficient resources and expertise and appropriate information systems, procedures and practices. Obviously, Belgacom cannot quarantee that this internal control will be sufficient in all circumstances as risks of misuse of assets or misstatements can never be totally eliminated. However, Belgacom organizes a continuous review and follow-up of all the components of its internal controls and risk management systems to ensure it remains adequate.

The integration of Belgian subsidiaries or activities of the Group in Belgacom S.A. under public law realized on 4 January 2010 required significant resources to adapt the administrative organization and internal control to the new activities, but at the same time, it also offered opportunities to further improve it.

Belgacom considers the timely delivery to all its internal and external stakeholders of complete, reliable and relevant financial information in conformity with International Financial Reporting Standards (IFRS) and with other additional Belgian disclosure requirements as an essential element of management and governance. Therefore, Belgacom has organized its internal control and risk management systems over its financial reporting in order to ensure this objective is met.

1. Control environment

1.1 Organization of internal control:

In accordance with the bylaws, Belgacom has an Audit and Compliance Committee (ACC), which consists of five non-executive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director.

All members of the ACC have sufficient expertise in financial matters to discharge their functions. Its chairman, Mr. Pierre-Alain De Smedt is competent in accounting and auditing. He is a "licenciate" in commercial and financial sciences. He occupied during his career several functions as CFO, CEO and COO. Amongst his non-executive functions he was also member of the Audit Committee of Avis Europe.

The ACC's role is to assist and advise the Board of Directors in its oversight on (i) the financial reporting process, (ii) the efficiency of the systems for internal control and risk management of Belgacom, (iii) the Belgacom's internal audit function and its efficiency, (iv) the quality, integrity and legal control of the statutory and the consolidated financial statements of Belgacom, including the follow up of questions and recommendations made by the auditors, (v) the relationship with the Company's auditors and the assessment and monitoring of the independence of the auditors, (vi) Belgacom's compliance with legal and regulatory requirements, (vii) the compliance within the organization with the Belgacom's Code of Conduct and the Dealing Code. The ACC meets at least once every quarter.

$1.2.$ Ethics:

The Board of Directors has approved a Corporate Governance Charter and a Code of Conduct "The way we do responsible business". All employees must perform their daily activities and their business objectives according the strictest ethical standards and principles, using the company values (Respect, Can do and Passion) as quiding principle.

The Code "The way we do responsible business", which is available on www.belgacom.com, sets out the above-mentioned principles, and aims to inspire each employee in his or her daily behavior and attitudes. The ethical behavior is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive.

In addition, Belgacom in general and the Finance department in particular have a tradition of a high importance to compliance and a strict adherence to a timely and qualitatively reporting.

1.3. Policies and procedures

The principles and the rules in the Code "The way we do responsible business" are further elaborated in the different internal policies and procedures. These Group policies and procedures are available on the Belgacom intranet-sites. Every policy has an owner, who regularly reviews and updates if necessary. Periodically, and at moment of an update, an appropriate communication is organized.

In the financial reporting domain, general and more detailed accounting principles, guidelines and instructions are summarized in the accounting manuals and other reference material available on the Belgacom intranet-sites. In addition, the Corporate Accounting department regularly organizes internal accounting seminars to update finance and non finance staff on accounting policies and procedures.

1.4. Roles & Responsibilities:

Belgacom's internal control system benefits from the fact that throughout the whole organization, roles and responsibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibilities, while on individual level, everybody has a clear job description and objectives.

The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to monitor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department. This department is organized by local accounting representation combined with centralized support and consolidation.

Through the local accounting representation, the accounting responsibility for the different affiliates of the same "subgroup" are centralized into one accounting team, taking into account the geographical location, which positively contributes to the accuracy and reliability of reported figures.

The accounting teams of the mother company Belgacom assume this accounting responsibility for the major Belgian companies and also provide the central support to the other accounting teams. For this centralized support, the organization is structured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expenditures, provisions & litigations, payroll, post employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group quidelines.

The consolidation of all different legal entities into the Consolidated Financials Statements of the Belgacom Group is realized centrally. The consolidation department defines and distributes information relating to the implementation of accounting standards, procedures, principles and rules. It also monitors changes in regulations to ensure that the financial statements continue to be prepared in accordance with IFRS, as adopted by the European Union. The monthly instructions for consolidation set forth not only the schedules for preparing accounting

information for reporting purposes, but also includes detailed deadlines and items requiring particular attention, such as complex issues or new internal quidelines.

1.5. Skills & Expertise:

Adequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient headcount, but also the adequate skills and expertise. These requirements are taken into account in the hiring process, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University.

For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as senior staff have to participate mandatory. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business product & services.

2. Risk analysis

Belgacom believes that Risk Management is fundamental to corporate governance and the development of sustainable business. The Group has adopted a risk philosophy that is aimed at maximising business success and shareholder value by effectively balancing risk and reward.

The objective of Risk Management is not only to safeguard the Group's assets and financial strength but also to protect Belgacom's reputation.

The Group's Enterprise Risk Management (ERM) covers the full spectrum of risks ("potential adverse events") and uncertainties that Belgacom could encounter. Belgacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of company strategic development objectives. It seeks to maximise value for shareholders by aligning risk management with the corporate strategy, assessing the emerging risk from regulation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM is reviewed and updated every year since 2006. This risk assessment and evaluation takes place as an integral part of Belgacom annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the ACC.

Financial Reporting - new transactions and new upcoming standards

It is the responsibility of the Corporate Accounting department to follow-up on the evolution in area of new upcoming standard (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analyzed.

For every new type of transaction (e.g. new product, new employee benefit), an in depth analysis from a financial reporting and tax point of view is mandatory performed. In addition, the development requirements for thefinancial systems are timely defined and compliance with internal and external standards is quaranteed. Emphasis is on the development of preventive controls and setting up reporting tools that enable a posteriori controls.

On a regular base, the ACC is informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials.

3. Risk mitigation factors and control measures

3.1. General risk mitigation factors and control measures

Belgacom mitigation response strategies depend on the nature of the risk and may often combine various actions, including insurance, increased vendors SLA'S/ liabilities, credit scoring, risk avoidance or active risk management through people, processes and systems.

The cost of risk mitigation is considered in determining response strategies. Certain risks are consciously accepted based on their potential limited impact on the Belgacom organization and/or their low level of materiality. Risk such as political, economic, requlatory are beyond Belgacom control and mitigation is limited to responsive actions to limit their impact.

For every important transaction which is submitted to the Belgacom Management Committee or Board of Directors, the risk & uncertainties triggers and the necessary mitigation actions to be taken are reported, as well as the potential accounting impact on the Belgacom Financial Statements

3.2. Detailed and structured Financial Statement Closing Process

Clear roles and responsibilities in the Closing Process of the Group Financial Statement have been defined. During the monthly, quarterly, half-yearly and annual financial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and quidelines.

For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail cross-divisional preparatory meetings, deadlines for ending of specific processes, exact date and hours when IT sub-systems are locked, validation meetings and reporting deliverables.

For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analyzed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analyzed by more underlying operational drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends. Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials.

4. Information and Communication

4.1. Financial reporting IT systems

The accounting records of the Company and most of its affiliates are kept on large integrated IT systems. Operational processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used.

The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors.

4.2. Effective Internal communication

Most of the accounting records today are kept under IFRS as well as local GAAP. In general, financial Information delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication.

4.3. Reporting and validation of the financial results

The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the affiliates, a validation meeting is organized with the accounting and controlling responsible. On Belgacom Group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with historical figures, as well as budgetactual and forecast-actual analysis. Validation requires (absences of) variances to be analyzed and satisfactorily explained.

Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the ACC (quarterly).

5. Supervision and assessment of internal control

The effectiveness and efficiency of the internal control is regularly assessed in different ways and by different parties:

• Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indicators and monitoring of those.
• In order to have an objective review and evaluation of the activities of each organization department, Belgacom's Internal Audit department conducts regular audits across the company' operations. The independence of Internal Audit is ensured via its direct reporting line to the Chairman of the ACC. Audit assignments performed may have a specific financial processes scope but will also assess the effectiveness and efficiency of the operations and the compliance towards the applicable laws or rules.
• The ACC reviews the quarterly interim reporting and the specific accounting methods. The main disputes and risks facing the Group are considered, the recommendations of internal audit are followed-up, the compliance within the company with the Code of Conduct and Dealing Code is regularly discussed.
• Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an external audit. In general, this audit includes an assessment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolidation. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the ACC.