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Chairman's Corporate Governance Statement

Chairman's Statement

The Directors of Amiad Water Systems Ltd. (the “Company”) recognize the importance of high standards of good corporate governance and have chosen to adopt the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”), in line with the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognized corporate governance code, as the basis of the Company’s governance framework.

The Board believes that good corporate governance reduces risks within the business, promotes confidence and trust amongst its stakeholders and is an important part of the effectiveness and efficiency of the Company’s management framework.

The QCA Code includes ten broad principles which the Company will strive to implement in order to deliver growth to its shareholders in the medium and long-term. To see, in broad terms, how the Company complies with the principles of the QCA Code at this point in time, please refer to the table below. Further updates on the Company’s compliance with the QCA Code will be provided on an annual basis and in the Company’s next annual report. The QCA Code can be found on the QCA’s website: www.theqca.com.

Yariv Avisar, Chairman

This disclosure was last reviewed and updated on July 16, 2019

THE PRINCIPLES OF THE QUOTED COMPANY ALLIANCE (“QCA”) CODE DELIVER GROWTH

QCA Code Principle	What we do and why
1. Establish a strategy and business model which promote long-term value for shareholders	The Company is a world leader in water treatment and filtration solutions. During 2017, the Company completed a strategic process to establish a firm strategy and vision for the Company for the next few years. The Company’s strategy is explained in more detail on page 5 of its Semi-Annual Report for the financial year ended 31 December 2018. Briefly, the Company’s strategy is based on four pillars. Firstly, the Company aims to consolidate its position as market leaders, especially within the irrigation segment and the North American market. Secondly, to focus on selected activity areas in which the opportunity for success is higher. Thirdly, the Company wants to maintain an appropriate organizational structure to support the Company’s strategic goals. Lastly, the Company will invest in the growth of its business whilst creating efficiency where possible and continuing to maintain an appropriate cost control. At present the Company does not publish in detail the key challenges to the business, as their disclosure may adversely affect the Company’s activity.
2. Seek to understand and meet shareholder needs and expectations	The Company is committed to communicating openly with its shareholders and the Company actively seeks dialogue with the market. For example, Mr. Dori Ivzori (Chief Executive Officer) and Mr. Avishay Afriat (Chief Financial Officer) meet regularly with institutional shareholders and analysts to understand their thoughts about the Company and, conversely, to help them understand the Company’s business. Non-executive directors are also available to attend such meetings, subject to institutional shareholder requests. Press releases are issued throughout the year and the Company maintains a website (www.amiad.com). Additionally, the Company’s annual report, which is sent to all registered shareholders and holders of depositary interests, contains extensive information about the Company’s activities. Enquiries from individual shareholders on matters relating to their shareholdings and the business of the Company are welcomed. The Annual General Meeting is a key forum for communication between shareholders and the Board. The notice of meeting and the Company’s annual report and accounts are sent out at least 35 days before the meeting. Shareholders are encouraged to attend the Annual General Meeting to discuss the Company’s progress and any recent developments. The Board aims to maintain an appropriate level of dividend cover. Decisions regarding dividends are taken by the Board subject to applicable law and considering the Company’s performance and future objectives. Shareholders can also contact Luther Pendragon, T: +44 20 7618 9100, Mail: [email protected]
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success	The Company places significant importance on the values and vision that shape the organization in all areas of its business conduct. The Company’s Code of Ethics reflects commitment to integrity, excellence, innovation, professionalism, cooperation and top-quality customer service – all values by which the holds regular discussions on ethics issues and reports its findings to the Board. The Company’s Code of Ethics is available at: https://amiad.com/pdf2/Amiad_Code_of_Ethics.pdf The Company also values the opportunity to reach out, connect and empower its employees and the communities around it. The Company’s aim is to integrate and share its resources with the needs of the communities around it and use its knowledge and experience for that end. The Company believes in the importance of preserving the environment and ensuring that clean water sources are accessible for everyone. The Company is a strong advocate of the United Nation’s World Water Day and 2019 marked its seventh year of participation in the charity initiative. To date, the Company’s collaboration with the UN has seen it reach approximately 9,000 children which reflects the Company’s belief in its responsibility to educate future generations on the importance of water preservation. See more at: https://amiad.com/water_day2019.asp . Furthermore, the Company’s connection with “charity:water”, a non-profit organisation that brings clean and safe drinking water to people in developing nations, has seen the Company provide access to safe and clean water to over 1,930 people through its joint projects in Ethiopia, India, Malawi and Uganda. https://amiad.com/newsletter/Amiad_Water_Systems_and_charity_water/Amiad_Water_Systems_and_charity_water.html The Company maintains frequent communication with its employees and managers and its human resources team formally evaluate the performance of its employees in a constructive and beneficial manner. The Company also holds round tables with VPs to provide employees with a platform to present their thoughts and ideas. In addition to the Company’s social events, individual departments host their own social activities from time to time. The Company encourages feedback from its corporate customers through its sales personnel and account managers and, for individual customers, through its customer service teams. The Company’s marketing communications team aims to maintain a healthy dialogue between the Company and its customers through email and social media channels.
4. Embed effective risk management, considering both opportunities and threats, throughout the organization	The Board considers possible risks to the Company’s business at every Board meeting (at least 4 Board meetings are held annually). The Board is provided with reports prepared by each of the Chief Executive Officer and the Audit Committee at each meeting and these reports form the basis of its risk management analysis. As part of its role, the Audit Committee keeps under review the adequacy and effectiveness of the Company’s internal financial controls and internal control and risk management systems, monitors deficiencies in the Company (including in consultation with the external and internal auditors), and advises the Board on how to correct any such deficiencies. Both the Board and senior managers of the Company are responsible for reviewing and evaluating risk. The Company’s management team meet at least once a month to review ongoing matters, discuss budgets and forecasts and consider new risks. More information on risk management and internal control processes can be found on page 14 (for the Directors’ Report), page 23 (for the Corporate Governance Report) and page 27 (for the Audit Committee Report) in the Annual Report 2018.

MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK

QCA Code Principle	What we do and why
5. Maintain the board as a well- functioning, balanced team led by the chair	The Board is collectively responsible for promoting the success of the Company, by directing and supervising the Company’s affairs as well as formulating, reviewing and approving the Company’s strategy, budgets and corporate actions. The roles of Chairman and Chief Executive Officer are separated and are clearly defined in Section 1 of the Company’s Corporate Governance Report in its Annual Report for the financial year ended 31 December 2018. The Board considers that it has an appropriate balance between independence on one hand, and knowledge of the Company and the markets in which it operates, on the other, to enable it to discharge its duties effectively. Each of the Directors are encouraged to exercise independent judgement. The Company maintains a balanced Board with independent and non-independent directors. The independent directors of the Company at the date of this statement are as follows: Yariv Avisar (Chairman) Derek Zissman (Statutory External Director) Arik Schor (Statutory External Director) Ran Shachor The Board includes only non-executive directors. The Chief Executive Officer and the Chief Financial Officer of the Company are responsible, along with the Board, for the Company’s compliance with the AIM Rules and for providing the Board with information that the Company needs in order to comply with those Rules. The Chief Executive Officer and the Chief Financial Officer attend Board meetings when requested to do so by the Board. The Board delegates specific responsibilities to the Board committees. For full information about the Board and its committees, please see Sections 1 – 6 of the Company’s Corporate Governance Report for the financial year ended 31 December 2018.
6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities	The Audit Committee shall function as a nomination committee with respect to the appointment of any proposed new independent non-executive director to the Board and to the appointment of any proposed new member not being External Directors to the Audit Committee. Prior to approving any such appointment, the Audit Committee shall evaluate the balance of skills, knowledge and experience of the particular candidate and be satisfied as to his/her independence from the Company, its shareholders and their respective related parties. Except for Statutory External Directors, all continuing Directors stand for re-election on an annual basis. Under Israeli Companies Law – 1999, the Statutory External Directors are appointed for a term of three years and may serve a maximum term of nine years. The Directors receive frequent updates and information on the Company’s operational and financial performance and relevant information is provided to the Directors ahead of meetings of the Board. The Company Secretary supports the Chairman in addressing the training needs of Directors.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement	The Board holds an internal discussion and carries out an internal evaluation of its performance on an annual basis. The Company is considering the introduction of a periodic evaluation of Directors, for which it is yet to determine an appropriate process.
8. Promote a culture that is based on ethical values and behaviors	The Company’s Code of Ethics details the ethical values of the Amiad Group, including the values and behavior expected from its employees. The Audit Committee reviews, from time to time, the Company’s ethics and corporate culture. The recommendations of the Audit Committee are put before the Board.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board	The Company’s Corporate Governance Statement included at pages 21–25 of its Annual Report for the financial year ended 31 December 2018 explains the Company’s governance structures and why they are appropriate and suitable for the Company’s business. The Audit Committee of the Company also undertakes the role of Remuneration Committee (in accordance with the Israeli law) and Nomination Committee under terms of reference approved by the Board. The Audit Committee, in each of these roles, has access to such resources and information as it deems necessary to enable it to discharge its duties.

BUILD TRUST

QCA Code Principle

What we do and why

10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

The Company encourages communication with both its institutional and private shareholders and does its best to respond quickly to all queries received. The Company maintains contact with its shareholders through the Annual Report, company announcements, the Annual General Meeting and one-to-one meetings between the Chairman and institutional shareholders. The Chairman ensures that the views of these significant shareholders are communicated to the Board.

As referred to above, the Annual General Meeting is a key forum for communication with shareholders. Shareholders are encouraged to attend the Annual General Meeting to discuss the progress of the Company.

Chairman's Corporate Governance Statement

Chairman's Statement

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