report of the supervisory board

From a financial point of view 2010 was characterised by progress and recovery. Recovery from the financial crisis that affected our company so clearly in 2009. The first tentative signs of recovery were visible in the first few months of 2010. This brought renewed confidence after seven consecutive quarters of declining revenue. At the end of 2010 these cautious signs of an upturn were translated into revenue growth in every country in which we operate. In a number of smaller countries revenue once again exceeded pre-crisis levels. USG People was able to end 2010 with a good feeling, also knowing that the merger processes in Spain, Germany and the Netherlands have been completed, that our organisation is more effective and that its financial position is stronger. Nonetheless this is no reason to sit back and relax. In a society where developments happen so rapidly we must monitor them closely and anticipate them if possible. We remain committed to a better, more innovative, sustainable and profitable company.

From a management point of view 2010 was a turbulent year. Herman van Campenhout started as CEO of USG People in March 2010 and departed on 30 June 2010 due to a lack of chemistry. The Supervisory Board subsequently decided to appoint Rob Zandbergen as the new CEO and to transform the two-member Executive Board into a five-member board. These changes required the necessary attention of senior executives, Supervisory Board members, the Central Works Council and last but not least the company itself. At the end of 2010 we were able to conclude that the highest executive body was functioning well, steering the organisation in a direction that is clear and identifiable to our clients, candidates and internal staff. We are highly optimistic that it provides the continuity and security we had been seeking.

DUTIES

It is the duty of the Supervisory Board to monitor the policies pursued by the Executive Board. More specifically, we advise on strategic matters and corporate objectives, both on request and on our own initiative, and evaluate forecasts and actual results. We monitor the structure and operation of the internal risk management and control systems, the reporting process and budgeted and actual results. In doing so the emphasis is always on compliance with applicable laws and regulations. In the performance of our supervisory duties we take into account the corporate responsibility aspects relevant to USG People and the relations with shareholders.

Our duties included supervising the following matters:

1. The realisation of company objectives, more specifically with regard to:

• acquisitions and divestments;
• exceptional projects, including the introduction of SAP in the Netherlands;
• the progress made achieving the budget for 2010;
• adopting the budget for 2011.

It goes without saying that the realisation of these objectives is an important area of attention for the Supervisory Board. After all it is a yardstick for whether the Executive Board is taking the right measures and decisions to be able to achieve the objectives it has set. At the same time it shows whether the organisation is set up in such a way that the direction can be adjusted accurately and in time if necessary. Our conclusion is that this mechanism is functioning properly.

2. The strategy and risks connected to the company’s activities, more specifically with regard to:

• the strategy;
• the merger of brands, particularly in Spain, Germany and the Netherlands;
• innovation.

USG People placed innovation high on the agenda in 2010. Within the Supervisory Board there were various detailed discussions about the strategy and the various brands, also with regard to innovation.

3.  The structure and functioning of the internal risk management and control systems, more specifically with regard to:

• a review of the main risks;
• the outcome of audits;
• measures taken to minimise risks.

In this day and age the role of risk management and control is increasingly prominent, not in the least due to the financial crisis and tighter legislation. Extensive talks were held both in the Supervisory Board as a whole and within the audit committee in particular about financial reporting and the management and control mechanisms. We also sought information on the most recent developments in this area from external advisors.

4. The financial reporting process, more specifically with regard to:

• financing and the banking covenants;
• the share issue in March 2010;
• the corporate budget and current results, also in relation to the budgets;
• the annual accounts and annual report;
• the activities and report of the external auditor;
• the dividend policy.

Our conclusion on these matters is that the reporting process is adequate and the targets set were achieved.

5. Relations with shareholders, more specifically with regard to:

• drafting policy on (bilateral) contacts with shareholders;
• contacts between the Executive Board and shareholders;
• the appropriation of shares amongst shareholders.

We are aware of the fact that shareholders are becoming more and more involved in and on behalf of our company. The Executive Board is in contact with shareholders on many occasions, meeting them regularly for example at roadshows. We greatly value the involvement of our stakeholders, one of the reasons being that it keeps us in tune with the goings-on in the various markets in which we operate. In 2010 current policy was discussed with respect to our contacts with shareholders so that the rules are clear to all parties.

6. The social aspects of business practices relevant to the company:

• corporate SR policy;
• SR objectives for the Executive Board as regards the new remuneration policy.

Social Responsibility is becoming ever more important at USG People. Within the Supervisory Board we discussed what SR can mean for USG People and how SR can be integrated into the company’s strategy. Furthermore SR is one of the non-financial indicators on which the Executive Board is judged for its variable bonus.

In addition, various discussions were held on the following subjects:

• corporate HR policy;
• the composition of the Executive Board and Supervisory Board;
• the remuneration of the Executive Board in 2011 and beyond;
• the individual remuneration of the Executive Board;
• the performance of the Executive Board and Supervisory Board, as well as the internal committees of the Supervisory Board;
• contacts with the Central Works Council.

We also visited various branches in our role as Supervisory Board.

STRUCTURE

We started the year formally consisting of four people: Marike van Lier Lels (acting chairman of the Supervisory Board from 19 October 2009 to 2 March 2010), Christian Dumolin, Joost van Heyningen Nanninga and Alex Mulder. Cees Veerman had joined the Supervisory Board on 1 December 2009 in anticipation of his appointment by the Extraordinary (General) Meeting of Shareholders with effect from 2 March. He fulfils the role of chairman of the board.

In 2010 we expressed our wish to expand the board with a financial specialist. Accordingly, Rinse de Jong joined our board on 1 September 2010 ahead of his official appointment by the Extraordinary General Meeting of Shareholders on 20 December 2010. From that date onwards the Supervisory Board has consisted of six people.

The Supervisory Board has two internal committees: the audit committee and the remuneration and appointments committee. Each committee is subject to its own internal regulations which specify its duties, responsibilities and procedures. These regulations – along with the Supervisory Board regulations – can be found on the USG People website.

Resignation rota

Cees Veerman was appointed Chairman of the Supervisory Board for a period of four years by the Extraordinary Meeting of Shareholders on 2 March 2010. He had joined the Supervisory Board on 1 December 2009 in anticipation of his appointment. Rinse de Jong is was appointed to the Supervisory Board for a period of four years by the Extraordinary Meeting of Shareholders on 20 December 2010.

At the end of 2010 the Supervisory Board consisted of six members appointed according to the following resignation rota:

meetings and PERFORMANCE

In 2010 we met five times in person and conferred five times by conference call. Each member of the Supervisory Board attended nearly every meeting and was well-prepared. Each member made an active contribution to the meetings and fulfilled their supervisory role purposefully. The company’s results were discussed at every meeting and our attention also went out to financing matters and the associated covenants. Each meeting was also used to discuss market developments in the various countries.

Cooperation with the two and subsequently five members of the Executive Board was both open and transparent. We dedicated a lot of time to composing this most senior body at USG People and its functioning was a frequent topic of discussion. In this context talks were also held between the Supervisory Board and the Central Works Council. We undertook action as soon as it became apparent that the cooperation with Herman van Campenhout was heading in another direction than initially expected. Various talks were held in an attempt to improve the situation, but both parties eventually reached the conclusion that the necessary chemistry was missing between the company and Herman van Campenhout and that a continuation of the situation would no longer be beneficial to the company. This decision was taken in due care and mutual agreement.

The external auditor, PricewaterhouseCoopers Accountants N.V., attended one of the Supervisory Board meetings.

Each meeting of the Supervisory Board was attended by every member of the Executive Board at that time. They were, of course, not present when the performance of the Executive Board was discussed.

We discussed and assessed our own functioning and that of our individual members and internal committees in the 2010 year under review. The members of the Executive Board were not present at the time. The topics discussed included the presence, contributions and involvement of the members of the Supervisory Board. One of the conclusions drawn from the assessments was that the open and constructive nature of the meetings was appreciated by all members and that topics are dealt with in a critical and skilful manner. Another conclusion was that the supervisory duties of the Supervisory Board were performed by the individual members in earnest. In his capacity of chairman Cees Veerman spoke with the individual members of the Supervisory Board about their performance and concluded that they performed adequately, both individually and collectively.

The audit committee is extremely pleased with the appointment of Rinse de Jong. In view of a growing focus on risk management and tighter legislation in this area, we expect his financial expertise to improve the financial reporting process and supervision thereof even more.

The remuneration and appointments committee had an exciting and tumultuous year with many considerable challenges. Various new executives needed to be found and a great deal of time was dedicated to the new remuneration policy. The committee members fully contributed and fulfilled their duties in an excellent manner.

Best practice provisions III.2.1. and III.6.1. up to and including III.6.4. were complied with. Alex Mulder is non-independent given that he operated as CEO of USG People until 2006. There were no transactions in 2009 involving a conflict of interest on the part of any Supervisory Board member. Joost van Heyningen Nanninga is a senior partner in Egon Zehnder International, a company that was involved in the assignment to find a financial specialist for the USG People Supervisory Board in 2010. This search assignment was not carried out by Joost van Heyningen Nanninga himself, so there was no personal involvement on his part. There were no transactions in 2010 involving a conflict of interest on the part of any Supervisory Board member. Nor were there any transactions between USG People and any private individual or legal entity with a shareholding of at least ten percent  in the company.

report of the audit committee

The tasks of the audit committee include monitoring the Executive Board with respect to the operation of internal risk management and control systems, including compliance with the relevant laws and regulations and monitoring the functioning of codes of conduct. The committee’s tasks also include fiscal planning policy, the control and evaluation of the company’s financial reporting process and the application of information and communication technology. The chairman of the committee reports the main findings to the Supervisory Board.

The audit committee consisted of Christian Dumolin (chairman), Marike van Lier Lels and Alex Mulder until 20 December 2010. The appointment of Rinse de Jong altered the composition of the audit committee, after which the committee consisted of Rinse de Jong (chairman), Christian Dumolin and Marike van Lier Lels.

In 2010 the audit committee met three times in person and conferred once by conference call. All members of the audit committee attended the meetings, along with the CEO, CFO and the Corporate Director of Internal Audit. PricewaterhouseCoopers Accountants N.V. also attended the meetings. Subjects discussed during the meetings held in the 2010 include:

• the 2009 annual accounts;
• the auditor’s report for the 2009 financial year;
• the 2009 risk section;
• annual internal audit plan;
• the internal audit reports, on topics including integration processes, pensions and IT projects;
• financing and refinancing matters;
• the functioning of the audit committee;
• the reports of the external auditor;
• the assessment of the performance and functioning of the external auditor.

The audit committee made a valuable contribution to the risk section of this annual report. For a description of the main risks, please refer to that section.

At one of the meetings the committee evaluated its own performance and the performance of its individual members, and concluded that it had played a valuable and positive role in respect of its assigned duties. In the opinion of the committee, its contacts with the Internal Audit department and the Executive Board have been professional and constructive.

report of the remuneration and appointments committee

The scope of the remuneration and appointments committee’s duties includes the remuneration structure, the remuneration packages of the individual members of the Executive Board, the functioning of the individual members of the Supervisory Board and Executive Board, and the monitoring of the size and composition of the Supervisory Board. The committee is also responsible for drawing up profiles for the members of the Supervisory Board and nominating members for the Executive Board.

In 2010 the remuneration and appointments committee consisted of Joost van Heyningen Nanninga (chairman), Alex Mulder and Cees Veerman. The remuneration and appointments committee met four times in person in 2010. The meetings were also attended by the CEO at the time. The chairman of the committee reports the principal findings to the Supervisory Board.

In 2010 the remuneration and appointments committee held numerous talks with the candidates for the new Executive Board postings. Two important considerations for expanding the Executive Board were that it provides a better guarantee for continuity and the fact that a broader executive body is more knowledgeable and able to carry major decisions.

The remuneration policy applicable to the Executive Board expired on 31 December 2010. Accordingly the remuneration and appointments committee spent a great deal of time developing a new remuneration policy from 1 January 2011, taking into account the provisions of the Corporate Governance Code and other matters.

The remuneration policy and any material amendments to it are subject to approval by the General Meeting of Shareholders. How this policy is translated to individual packages – including the exact level of remuneration for members of the Executive Board – is the responsibility of the Supervisory Board, subject to the approved terms of the policy.

principle features of the 2010 remuneration policy

The shareholders have approved the remuneration policy that applied to the members of the Executive Board for the period from 1 January 2008 to 31 December 2010. The policy is aimed at attracting and retaining good management for a publicly listed, internationally operating company. We aim to set a policy which is in line with market practice, and one of the things we look at when determining the remuneration packages is peer group performance. This peer group consists of direct competitors of USG People and is used mainly to determine the relative performance of USG People and the allocation of shares. In addition, USG People looks at the 'labour market reference group' when setting its remuneration policy. USG People uses this group principally to compare the composition of the Executive Board's remuneration package and to establish competitive remuneration levels both nationally and internationally. The peer group consists of companies listed on the AMX and AEX indices.

We are of the opinion that the current level of remuneration is sufficient to attract experienced directors with the drive and sustained commitment to add value to USG People. In its remuneration policy USG People strives to strike a balance between the operating results in the short term and sustainable value for the company over the long term. In doing so it seeks to enhance shareholder value. We also aim to ensure that the remuneration of the Executive Board is in the right proportion to the rest of the senior and executive management of USG People.

Remuneration of the Executive board in 2010

The remuneration policy that applied to the Executive Board in 2010 consists of five components: a fixed salary, a variable short-term bonus, a variable long-term bonus, a pension contribution deducted from gross wages and a car and other emoluments. The variable long-term bonus is better known at USG People as the Unique Share Plan.

In 2010 the remuneration of the Executive Board therefore consisted of the following five components:

a)  Fixed salary
In 2010 the fixed salary of the CEO was set at € 700,000 in the case of Herman van Campenhout and € 625,000 in the case of Rob Zandbergen, respectively. Herman van Campenhout fulfilled the position of CEO from 3 March to 1 July 2010 and he joined the Executive Board on 16 February 2010 in anticipation of his formal appointment. He received a fixed salary of € 262,500 for his period of employment. Rob Zandbergen has fulfilled the position of CEO since 1 July 2010, for which he received a fixed salary of € 312,500.

In 2010 the fixed salary of the CFO was set at € 502,500 in the case of Rob Zandbergen and € 350,000 for Leen Geirnaerdt. Rob Zandbergen fulfilled the position of CFO until 1 July 2010, for which he received a fixed remuneration of € 251,250. Leen Geirnaerdt fulfilled the position from 1 November 2010, for which she received a fixed remuneration of € 58,333.

From 10 July 2009, Rob Zandbergen also fulfilled the position of acting CEO until 3 March 2010. His fixed salary for the position of CFO (€ 502,500) was therefore supplemented until 3 March 2010 on a pro rata basis to the salary applying to former CEO Ron Icke, who left the company in 2009. Rob Zandbergen did not receive any further supplementary fixed salary for fulfilling the position of acting CFO from 1 July 2010 to 1 November 2010.

In 2010 the fixed salary for the COO positions was set at € 400,000. Hans Coffeng and Eric de Jong fulfilled the position of COO since 1 July 2010. Accordingly both have received a fixed salary of € 200,000.

The fixed salary of the CCO was set at in 2010 € 325,000 in 2010. Albert Jan Jongsma fulfilled the position of CCO from 1 July 2010 and received a fixed salary of € 162,500.

b)  Variable short-term bonus
USG People applies a variable bonus system for the remuneration of the Executive Board which is calculated using a matrix that includes revenue, EBITA and (average) DSO.

For the Executive Board this bonus amounts to a maximum of 0.2% of the company’s operating result before amortisation. This 0.2% is divided into two components: 0.1% is calculated over the company’s actual operating result before amortisation (EBITA) and 0.1% is linked to the targets set in the budget for the year in question. The actual allocation of the bonus is set at a maximum of 100% of the fixed gross annual salary of the CEO and 55% of the fixed gross annual salary for the other members. The targets relating to the operating result are set annually by the Supervisory Board.

c)  Variable long-term bonus, Unique Share Plan
The variable long-term bonus system was set for the three-year period from 2008-2010, with the targets established annually by the Supervisory Board using a separate matrix. The determining factors in this matrix for calculating the number of shares to be granted are revenue, revenue growth and targeted EBITA.

If the annual targets are met, the shares are conditionally granted. If the director concerned is still employed by the company after three years have elapsed, the shares are unconditionally granted and released to the director. A bonus of 25% is awarded if the shares granted after three years under this share plan are held until the end of 2013. The purpose of this last provision is to further increase the director’s commitment to the company. A precondition is that the director in question is still employed by the company at that time.

d)  Pension contribution
The members of the Executive Board receive a gross pension contribution of 20% of their fixed salary. Rob Zandbergen receives a supplementary pension contribution for the period during which he was acting CEO.

e)  Car and other emoluments
The members of the Executive Board have a lease car at their disposal suitable to their position. The members of the Executive Board do not receive a fixed allowance for representation expenses. Any business-related representation expenses are claimed and reimbursed.

The individual remuneration of the members of the Executive Board in 2010 was as follows:

Option rights

No share options are held by members of the Executive Board.

Loans

No loans have been granted to members of the Executive Board.

Appointment

The members of the Executive Board are appointed by the Supervisory Board. Best practice provision II.1.1. of the Corporate Governance Code states that directors are to be appointed for four years. Under the Code, reappointment on each occasion can be for a maximum period of four years.

The General Meeting of Shareholders previously approved the proposal of USG People to deviate from the Code on this point. The possibility was also left open to deviate from this provision in future cases. The grounds for doing so lie in the fact that at USG People the members of the Executive Board often come from within the company’s own ranks, and long-term employment relationships with the company are commonplace. By offering the members of the Executive Board a term of employment of only four years, the company incurs the risk that potential board members will decline to accept the position, which would not be in the company’s best interests.

The new members who were appointed to the Executive Board in December 2010 all come from within the company’s own ranks but agreed to a term of employment of four years. In view of the wish to align the terms of employment of the Executive Board members as much as possible, the principle terms of employment applying to Rob Zandbergen will be harmonised with those of the other directors. Rob Zandbergen has agreed to be appointed for a period of four years so that best practice provision II.1.1 is no longer deviated from with effect from 1 January 2011.

Notice and dismissal

A notice period of three months has been agreed for the members of the Executive Board and six months for the company. The payment upon termination of the contract of employment for a reason not attributable to the person will not exceed the amount of one year’s salary, calculated over the fixed component of the remuneration. The gross pension contribution is counted as part of the fixed component of the remuneration. USG People considers it desirable to reserve the right to make an additional payment equivalent to the six-month notice period. If the maximum of one year’s salary for a member of the Executive Board dismissed during the first term of their employment is manifestly unreasonable, the person becomes eligible for a termination payment of not more than twice their annual salary, including pension contribution. If the company terminates the contract of employment for reasons attributable to the person, the company will not be obliged to make any payment whatsoever.

The previous remuneration policy did not stipulate a change-of-control provision. In the event the contract of employment is terminated as a result of an acquisition of the company, resulting in a change of control, the new remuneration policy stipulates the payment upon termination will amount to two times the fixed gross annual salary, including pension contribution, and one twelfth of this fixed gross annual salary, including pension contribution, for every year of employment with USG People. This payment upon termination will, however, not exceed three times the fixed annual gross salary, including pension contribution.

Termination arrangement for Herman van Campenhout

The parties agreed the following termination allowance for Herman van Campenhout:

The termination allowance of € 1,290,000 (excluding any additional costs) consists of:

The remuneration and appointments committee is of the opinion that this termination allowance is reasonable in its entirety, taking into account the short period of employment, the fact that various rights with his former employer were waived and the sudden loss of income.

In connection with the final taxation on the termination arrangement USG People paid an amount of € 177,000, bringing the entire amount paid by USG People to € 1,467,000. The amount of € 177,000 was paid to the tax authorities.

RemuneratiON OF THE SUPERVISORY BOARD IN 2010

The remuneration of the chairman and members of the Supervisory Board is set at € 50,000 and € 35,000 per year, respectively. From 1 January 2010 all members of the internal committees receive € 5,000 per year for their involvement in these committees. In 2009 the persons chairing the internal committees received € 5,000 per year while members of the internal committees received € 3,000 per year, but in view of the time involved it was decided to harmonise these amounts. All members of the Supervisory Board also receive an annual expense allowance of € 2,000.

In 2010 the individual remuneration of the members of the Supervisory Board was as follows:

No share options are held by members of the Supervisory Board.

No loans, advances or related guarantees have been granted to members of the Supervisory Board.

principal features of the remuneration policy for 2010 and beyond

During 2010 we discussed the remuneration policy and what it what it should look like from 1 January 2011. Provisions will apply to all directors with regard to their term of employment, the claw back clause and the ultimum remedium provision, in accordance with the provisions of the Dutch Corporate Governance Code. Furthermore, part of the variable remuneration of the Executive Board will be based on non-financial indicators which are relevant to the creation of long-term value for the company.

The remuneration policy as from 1 January 2011 will be submitted to the General Meeting of Shareholders for approval. More details of this remuneration policy can be found in the remuneration report.

approval of annual accounts, dividend proposal and discharge

As stipulated in the Articles of Association, the Supervisory Board submits the annual accounts as drawn up by the Executive Board to the General Meeting of Shareholders for adoption. The annual accounts have been audited and received an unqualified auditor’s report. To read the report from PricewaterhouseCoopers Accountants N.V. please refer to the independent auditor's report.

In view of the results achieved in 2010 the Executive Board proposes to distribute a dividend of € 0.16 per share, in cash or in shares. This proposal is explained in more detail in the financial section, under 'dividends'. We, the Supervisory Board, support this proposal.

We propose that the General Meeting of Shareholders adopt the annual accounts, approve the dividend proposal, and approve the discharge of the members of the Executive Board in respect of their management activities as well as the discharge of the Supervisory Board in respect of its supervision of these management activities.

in conclusion

2010 was a year in which a great deal of time and effort was dedicated to the internal organisation. The introduction of the new management structure gives us every confidence that USG People will be able to continue the positive trends in 2011. A great deal of attention will be paid to new developments, changing markets, our role in society and innovation. In 2011 we will also focus even more on the world around us – without losing sight of what our organisation is all about: people.

We would like to take this opportunity to thank Rob Zandbergen for his willingness to fulfil the positions of CEO and CFO for a large part of the year, as well as for the highly successful way he was able to combine the positions. This was no easy feat in a year in which USG People was faced with many challenges and we are truly grateful to him.

We are pleased that the new composition of the Executive Board brings a great deal of knowledge and know-how about flexible employment in general, and about USG People in particular. We are convinced that the Executive Board will perform its duties with the enthusiasm and drive needed to make it a wonderful and successful year. We wish them all the best.

In conclusion we would like to thank all employees for their exceptional contribution to USG People in 2010. Turbulent times call for that extra bit of effort and flexibility and our employees have shown that they possess these qualities. So we would like to take this opportunity to thank them for this exceptional contribution.

Almere, 3 March 2011

The Supervisory Board
Cees Veerman (chairman)
Christian Dumolin
Joost van Heyningen Nanninga
Rinse de Jong
Marike van Lier Lels
Alex Mulder