AVEVA Group plc Annual Report and Accounts 2020 Governance Report and Financial Statements Governance Report and Financial Statements Online Annual Report To view our interactive Online Annual Report, and to download sections of, or the full report, please scan the QR code above or visit our website: https://investors.aveva.com/annualreport.html Strategic Report | Governance Report | Financial Statements 57 What’s inside our report Governance Report and Structure and Financial Statements This is part two of our Annual Report statistics At and Accounts. Part one consists of the Strategic Report, and covers a Glance who we are, how we create value, and how we run our business. Governance Report Pages 60–61 Chairman’s Introduction to Governance 58 Corporate Governance At a Glance 60 Board of Directors’ Biographies 62 Division of Board Responsibilities 64 Areas of Focus for the Board 66 Board Leadership, Purpose and Culture 67 Board of Directors’ Workforce Engagement 68 Nomination Committee Report 70 Biographies Audit Committee Report 74 Remuneration Committee Report 80 Other Statutory Information 109 Pages 62–63 Financial Statements Independent Auditor’s Report 116 Consolidated Income Statement 123 Consolidated Statement of Comprehensive Income 124 Consolidated Balance Sheet 125 Consolidated Statement of Changes in Shareholders’ Equity 126 Audit Committee Consolidated Cash Flow Statement 127 Notes to the Consolidated Financial Report Statements 128 Company Balance Sheet 159 Company Statement of Changes in Shareholders’ Equity 160 Pages 74–79 Notes to the Company Financial Statements 161 Statement of Group Accounting Policies 164 Full List of Addresses and Subsidiaries 169 Company Information and Advisers 172 Glossary 173 Remuneration Committee Report Pages 80–108 58 AVEVA Group plc Annual Report and Accounts 2020 Chairman’s Introduction to Governance The Board’s aim is to create robust foundations AVEVA is increasingly adopting technology in a complex world that for sustainable future success, delivering value is changing at an accelerating rate. for our employees and shareholders. Whilst the Covid-19 pandemic is causing economic uncertainty for all businesses, we are an organisation with a long-term vision and, as such, we continuously develop and review strategies to deliver real sustainable value for all our stakeholders. This will be of even greater importance in an environment where the certainties are shifting and the risks are great. During the past year the Board met many of our people working at different levels throughout the Company. This has informed our assessment of the internal talent pool, allowed us to gauge corporate culture and we gained a greater depth of insight into the challenges and opportunities affecting the Company as a whole. These engagements leave us in no doubt about the strength of AVEVA and its ability to continue to adapt to fast-changing conditions. Philip Aiken AM A resilient Board to steer AVEVA Chairman towards success Our Board composition provides clear leadership, strong governance “The world is changing and AVEVA is changing and effective decision-making to achieve our strategic goals. It includes and adapting with it. Never has it been more international business leaders and important that the Board take long-term industry professionals and brings together a wide range of backgrounds, decisions to protect and drive the future skills, experience and perspectives. creation of value for all its stakeholders.” Its composition is in line with our strategy of having a strong and robust Board ensuring that it is equipped to effectively address the changes, Highlights of the year opportunities and risks in our business. In March 2020 we announced that – Refining processes to support compliance Emmanuel Babeau would step down as Non-Executive Director, Vice Chairman with the Code of the Board and member of the Remuneration Committee, following – Completion of an external Board his resignation from Schneider Electric. evaluation In accordance with the terms of the Relationship Agreement, Schneider – Welcoming Olivier Blum to the Board Electric appointed Olivier Blum to the Board. Olivier is a highly accomplished – Approval of an all-employee share scheme executive and has in-depth knowledge and experience gained from his various – Introduction of a new Remuneration Policy strategic and operational roles within HR and Strategy. His appointment has – Focus on Company culture and workforce already proven to be of great benefit to the engagement Board and the Remuneration Committee. Peter Herweck took over as Vice Chairman Strategic Report | Governance Report | Financial Statements 59 of the Board and I thank him for taking on suppliers. In this regard, many of our these additional responsibilities. On behalf employees have enjoyed taking part in Statement of Compliance of the Board, I would like to reiterate our our Action for Good activities by going We have prepared this Annual Report thanks to Emmanuel for his commitment out into the communities in which we with reference to the Code. The Board and support during his tenure, in operate to provide direct tangible help considers that the Company has particular, he was instrumental in bringing to those individuals and organisations complied with the provisions of the about the combination of heritage AVEVA in most need. For more information Code with the following exceptions: and the Schneider Electric industrial on this and our impact on wider software business and has made a communities, please see pages 36–37. – The Nomination Committee’s significant contribution to the subsequent membership does not consist of successful integration programme. Board evaluation a majority of independent Non- During the year our Nomination Executive Directors if the Governance developments Committee oversaw an externally independence of the Chairman Throughout the year the Board has facilitated review of the effectiveness is excluded. In accordance with been mindful of the new 2018 Corporate of the Board. Although under the the Relationship Agreement with Governance Code (the Code) and the Code we were not required to have an Schneider Electric, Peter Herweck FRC’s Guidance on Board Effectiveness externally-facilitated evaluation this is the Schneider Electric-appointed and it continues to keep under review year, the Board was eager to understand member of the Nomination implementation of best practice processes. the effectiveness of the Board post the Committee. Peter is an experienced In this Report we describe how the Board combination with the Schneider Electric executive and brings diversity in and its Committees worked on behalf industrial software business and to thought and insight to the of all stakeholders, driving the culture address any areas of development. Committee’s activities. The Board necessary for AVEVA to achieve its A full report on the outcomes of the sees great benefit in having him strategic goals, and how we discharged evaluation can be found on pages 70–71. as a Committee member. our statutory duties and oversight functions. I hope this section of the report The past year has proven to the Board – Similarly, Olivier Blum, appointed will help you gain a better understanding the resilience of AVEVA, the dedication by Schneider Electric in accordance of the effectiveness of our Board and and motivation of its Executive with the Relationship Agreement, how we apply the principles of the Code. Leadership Team (ELT), and the abilities is a member of the Remuneration of its employees. On behalf of my Committee and the Committee As a result of the Code, the Board’s Board colleagues I would like to extend therefore does not consist entirely of corporate calendar has been updated and my sincere thanks to all of them. independent Non-Executive Directors. we focused on refining our purpose and Given Olivier’s senior executive values, embedding our preferred culture, Philip Aiken AM strategic and operational roles in HR engaging with stakeholders and aligning Chairman and remuneration, the Committee all these activities with our strategic 9 June 2020 values his insight and technical goals. We also continued to evolve expertise and his Committee our corporate governance reporting to membership bolsters the respond to changing requirements in the effectiveness of the Committee. UK, driven not only by the Code but also by other legislative requirements which An explanation of how the Company has now apply to large UK companies. The complied with the Code is given on the Board has been supported throughout following pages: the year by its Committees which have also taken on new responsibilities under Board Leadership, Purpose and Culture the Code. A summary of how each – page 67 Committee has approached these can be found in the specific Committee reports. Division of Responsibilities – pages 64–65 A key consideration during the past year, as part of our enhanced stakeholder Composition, Succession and Evaluation engagement activity, has been the – pages 70–73 (Nomination Committee long-term social and economic benefits Report) that we bring to local communities. We recognise that our long-term, sustainable Audit, Risk and internal control success depends upon attracting and – pages 74–79 (Audit Committee Report) developing the best talent to manage the ever-increasing complexity of Remuneration of Directors our business, and forming long-term – pages 80–108 (Remuneration relationships with our customers and Committee Report) The Financial Reporting Council (FRC) is responsible for the publication and periodic review of the UK Corporate Governance Code. This can be found on the FRC website: www.frc.org.uk 60 AVEVA Group plc Annual Report and Accounts 2020 Corporate Governance The Board has been supported throughout the year by its Committees which have also At a taken on new responsibilities under the Code. A summary of how each Committee has approached these can be found in the Glance specific Committee reports. Group Structure Chart Board Provides strategic leadership to The Board’s the Group responsibility for leading the Company towards achievement of its purpose continues to be supported by a robust governance Executive structure.