CODE OF CORPORATE GOVERNANCE Atlantic Grupa d.d.

Transcription

1 CODE OF CORPORATE GOVERNANCE Atlantic Grupa d.d. 1

2 CODE OF CORPORATE GOVERNANCE 1. INTRODUCTION GOALS AND BASIC PRINCIPLES PUBLIC DISCLOSURE OF INFORMATION Categories of Information which are Publicly Disclosed Basic Principles of Public Disclosure Using the Internet and the Company s Webpage Privileged (Undisclosed) Information and its Use by Insiders EQUAL TREATMENT OF SHAREHOLDERS BODIES COMPANY BODIES GENERAL ASSEMBLY Convocation of the General Assembly Special Requests Related to Reports Submitted to the General Assembly SUPERVISORY BOARD Tasks and Responsibilities Composition of the Supervisory Board Supervisory Board s Committees MANAGEMENT BOARD Tasks and Responsibilities Composition of the Management Board Membership in Supervisory Boards of Other Companies Additional Responsibilities of the Management Board of Atlantic Grupa d.d. as the Leading Company of the Concern RELATIONSHIPS OF MANAGEMENT BOARD, SUPERVISORY BOARD AND COMPANY Cooperation and Relationship between the Supervisory Board and Management Board Compensations of Members of the Management Board and Supervisory Board Reporting to Shareholders on the Ownership of Shares of the Members of Management Board and Supervisory Board Conflicts of Interest Transactions between the Company and Members of the Management Board or Supervisory Board Non-competition Obligation of Members of the Management Board and Supervisory Board with the Company INDEPENDENT EXTERNAL AUDITOR RELATIONSHIPS WITH INVESTORS STAKEHOLDERS ANNUAL QUESTIONNAIRE

3 CODE OF CORPORATE GOVERNANCE 1. INTRODUCTION GOALS AND BASIC PRINCIPLES Atlantic Grupa d.d. (hereinafter referred to as: Atlantic Grupa d.d. or the Company), as a business subject operating and developing its business in Croatian and foreign markets, is aware of the importance of responsible and ethically founded conduct of business subjects as a necessary precondition for the development of quality relationships and loyal competition between business partners, as well as for the efficient functioning of the market and the integration of Croatian economy in international flows. In that sense, Atlantic grupa d.d. is developing and working in accordance with good practice of corporate governance and with its business strategy, business policy, key internal acts and business practice strives to contribute to a transparent and efficient business activity and more quality connections with the business environment in which it operates. The goal of this Code is to set high standards of corporate Governance and business transparency of Atlantic Grupa d.d. with the purpose of facilitating the access to capital at lower cost since the clearly defined procedures of corporate governance based on the recognized international standards are one of the basic criteria for making an investment decision. Goals and principles of corporate governance of Atlantic Grupa d.d. are derived from the following principles: - business activity in accordance with existing regulations of the countries in which it performs its activities, - meeting the highest standards through the business organization and the implementation of contemporary business principles in all activities and relationships of the company in all areas of work, - implementing recognized international guidelines and their integration in its business practice and procedures. Basic principles of this Code are: Transparency of business activity; Clearly elaborated procedures for the operation of the Supervisory Board, Management Board and other bodies and structures making important decisions; Avoiding conflicts of interest; Efficient internal control; Efficient responsibility system. Any interpretation of this Code is to be governed primarily by accomplishing the given goals and by respecting the mentioned principles. 3

4 2. PUBLIC DISCLOSURE OF INFORMATION Except the information which the Company is obliged to disclose in accordance with the law or other regulations, Atlantic Grupa d.d. shall, in the shortest time possible, publicly disclose and therefore give access to all interested parties, relevant information about the work and operation of the Company as well as all information about the facts and circumstances which can influence the Company s business activity Categories of Information to be Publicly Disclosed In the category of information which Atlantic Grupa d.d. shall make publicly available, there will be included: market-sensitive information (under which are specially considered those listed in the Capital Market Act and the Rules of the Zagreb stock exchange (hereinafter: Stock Exchange) in which the Company listed its securities). When publicly disclosing market-sensitive information, the Company shall primarily take account of the information content and not the form in which the information is provided. financial reports annual, semi-annual and quarterly reports, as the most important and complete source of information about the Company. Reports shall not be limited only to containing information pursuant to legal regulations and standards of financial reporting, but also shall include an understandable analysis and the Management Board s standpoint on business performance in the past period, as well as the Management Board s explanation in relation to any eventual considerable variations in relation to planned results and realized strategic goals. calendar of important events which are expected in a business year, like, for example, the foreseen date of publishing financial results, the date of holding the General Assembly of the Company, the date of paying out the dividend and similar. ownership structure, with information including: - overview of the shareholders structure with details about the number and type of shares as well as the list of the shareholders which ownership in the total Company s share capital exceeds 5%. - information on cross-shareholding which is considered as the existence of the crossshareholding relationship between two joint-stock companies when such companies are connected in a way that each of them holds more than 5% of the authorized capital stake in the other company. - information on shares and other securities of the Company owned by every individual member of the Management Board or the Supervisory Board. In addition to presenting these data in the annual financial reports, the Company shall, within 24 hours of learning of any change, through its website on the Internet and through the Stock Exchange, publicly announce every change in the amount of securities of the company held by each member of the Management Board and Supervisory Board; risk factors, i.e. main risks to which the Company is exposed, probability of realization of potential risks and the measures and plans adopted for the avoidance or decrease of those risks. candidacies and/or biographies of members of the Management Board and Supervisory Board. information on the person in charge of relations with investors. 4

5 agenda of the General Assembly and all other relevant information relating to the agenda, as well as decisions of the General Assembly and information on any eventual appeals to overturn those decisions and the establishment of their nullity (in law). all other information which can be considered market-sensitive or in any other way essential for the Company, its financial position, business results, ownership structure and management Basic Principles of Public Disclosure Atlantic Grupa d.d. shall disclose all information categories in a clear and unambiguous manner while using the expression understandable to a target group and allow equal and timely information access to all interested parties. All information which can influence the making of a decision to invest in the Company s securities shall be published immediately and simultaneously to all persons who could be interested in it, extending in equal measure to positive and negative information, with the goal of enabling the information receiver to fully understand and correctly evaluate the Company s status. Atlantic Grupa d.d. shall disclose any change relating to publicly disclosed information categories in the shortest possible period from its discovery. Information shall be disclosed in due course and shall include contents which will enable the shareholders to execute their rights with a complete and timely knowledge of all relevant facts for the making of a correct decision in the agenda of the General Assembly. The Company Management Board is responsible for the content and timeliness of disclosing all information categories Using the Internet and the Company s Webpage Apart from the method of public disclosure of information prescribed by law and the Statute, Atlantic Grupa d.d shall also perform information disclosure via its own webpage and the Internet, as well as insuring an efficient and practical exchange of information. Apart from this information, Atlantic Grupa d.d. shall on its own webpage disclose all marketsensitive information, financial reports, calendar of important events, ownership structure. Due to the equal treatment of all interested parties, Atlantic Grupa d.d. shall publish all information on its webpage in Croatian and English language Privileged (Undisclosed) Information and its Use by Insiders The use of privileged information which are not publicly disclosed is forbidden in its entirety to all persons having access to such information, since this could lead to an unfair advantage of the person holding privileged information (insider) when trading in the Company s securities, regardless whether the privileged information is being used by an insider personally or some third person on the basis of information received from an insider. 5

6 The prohibition of using privileged information relates to all shareholders, members of the Management Board, Supervisory Board, external Company advisors as well as all persons which, considering their position in or outside the Company, have access to privileged information. Because of that, Atlantic Grupa d.d. shall establish: mechanisms which shall insure that the persons possessing access to or coming in contact with privileged information are explained the nature and significance of this information and related restrictions, as well as control of the flow of privileged information and their possible misuse. 6

7 3. EQUAL TREATMENT OF SHAREHOLDERS The rights and obligations of shareholders of Atlantic Grupa d.d. arise from the existing Croatian regulations, the Statute and this Code which is in interest of establishing an open communication with the shareholders about developing business activity and the Company s goals. To enable all shareholders to realize their rights and obligations, Atlantic Grupa d.d. shall enable the realization of equal treatment of all shareholders in the following manner: - Principle of equal treatment of shareholders, which means that the number of votes belonging to a shareholder in the General Assembly corresponds to his participation in the initial authorized capital of the Company. If more persons acquire one share, they shall realize the rights from such a share as authorized persons of an indivisible right through a mutual proxy. - Limited voting rights, which means that the Company, in a case of issuing shares without voting rights or with limited voting rights, shall publicly and in due course disclose all relevant information about the content of all rights arising from such shares, so investors would be enabled to make correct decision about the purchase of such securities. - Different types of shareholders, in which case the Company shall treat all shareholders in an equal manner and under equal conditions, regardless of the number of shares at their disposal, country of their origin or any other features. This especially concerns the obligation of equal treatment of individual and institutional investors. - Quality and timeliness of information distribution, (web, availability in business premises) which enables all shareholders the execution of their rights with a complete and timely knowledge of all relevant facts for the making of a correct decision in the General Assembly. - Changes in capital, the disposition and acquiring of its own shares and the pre-emption right of shareholders in relation to subject of decision-making, in which case the Company shall allow all shareholders to participate in the increase of authorized capital of the Company in proportion to their stakes in the present authorized capital of the Company in a form of transferable securities in which such a pre-emption right is contained, with the goal of protecting the interests of shareholders which at the moment of issuance cannot register and purchase new shares. When the Company acquires or releases its own shares (treasury shares), it shall be obligated to do so in an open market and in a manner not privileging certain shareholders or investors or shareholders groups or investors groups. The Company shall inform the public of any acquisition or disposal of its own shares (treasury shares) transaction, pursuant to the Rules of Stock Exchange; - Proxies, which means the Company shall facilitate the voting of shareholders through proxies. In that regard, the issuing of a power of attorney shall be extremely simplified and without strict formal requests, except those prescribed by law and the Statute. - Terms of participation, the Company shall encourage shareholders participation in the Assembly for which it is not allowed to set terms for shareholders, except those prescribed by law and the Statute. 7

8 - Using contemporary communication technology, which implies that shareholders shall be allowed to participate and especially vote in the General Assembly of the Company by using the means of modern communication technology. - Dividend, when paying a dividend, the Company shall not favour any particular shareholders. Each decision on paying a dividend or a dividend advance shall contain a date when the person who is the shareholder acquires the right to a dividend payment and the date or period when a dividend is to be paid. The deadline for the dividend payment shall be ninety days from the day of reaching the decision on payment, except if the Assembly has not decided differently, whereby that deadline cannot be shorter than 10 days from the day of reaching the decision on payment. The decision on paying a dividend establishing the before mentioned dates shall be published and delivered to the stock exchange at the latest 2 days from its adoption. The advance payment in the name of a dividend can be executed only with prior authorization of the Supervisory Board and cannot exceed 50% of the last year s profit. 8

9 4. COMPANY BODIES The bodies of the Company Atlantic Grupa d.d. which ensure the implementation of good practice of corporate Governance are: - General Assembly - Supervisory Board - Management Board 4.1. GENERAL ASSEMBLY The General Assembly is the decision-making body in a joint-stock company through which the shareholders at the same time participate in the supervision and control of the Company and realize their rights of voting and participating in the General Assembly. The decisions defined by law or the Statute of Atlantic Grupa d.d. which are of significant influence to the state of assets, financial position, business results, ownership structure and management of the Company shall be established exclusively in the Company Assembly by the prescribed majority of votes Convocation of the General Assembly The Company Management Board shall be obliged to convene one annual regular Assembly during every business year. The Extraordinary Assembly shall be convened when the Company s interests so demand. The Company shall be always obliged to convene the General Assembly if that is requested from shareholders who together hold stakes in size of 10% of authorized capital of the Company and state the purpose and reason for convening that Assembly. When convening the Assembly, the Company Management Board shall be obliged to set a date according to which the status of the shares register shall be established which shall be competent for the realization of voting rights in the General Assembly. That date has to be before the holding of the Assembly and can be at least 6 days before the holding of the Assembly Special Requests Related to Reports Submitted to the General Assembly - Reports Submitted by the Supervisory Board The Supervisory Board submits to the General Assembly a report in which, together with the report content prescribed by law, it shall evaluate the overall business efficiency of the Company, the performance of the Company Management Board, as well as lay out a special review of its cooperation with the Management Board. Also, the Supervisory Board shall be obliged to introduce the Assembly with any eventual existence of conflicts of interest of its members and members of the Management Board, as well as with the measures taken in that regard. 9

10 - Company Status Report The Company status report must be established in a clear and articulated manner, including all aspects of business activities throughout the whole year in relation to previous years and also express an accurate, complete and fair overview of assets and expenditures, financial status of the Company as well as the plan of future business activity SUPERVISORY BOARD Tasks and Responsibilities The main tasks of the Supervisory Board of Atlantic Grupa are: - appointment and dismissal of the Management Board, - supervision of the Management Board s performance in managing the Company s affairs, - submitting financial reports on performed supervision, setting strategy, approving budget. The Supervisory Board of Atlantic Grupa d.d. has competencies defined by law, the Company Statute and this Code, in the execution of which, depending on type, it realizes an active i.e. executive role, provides consent on the Management Board decisions and/or has an advisory and supervisory role. In order that the Supervisory Board would be able to successfully realize its tasks and competencies, all foundations for decision-making have to be in a consistent, mutually comparable format, transparent, documented and understandable and also delivered to members in due course which shall enable their knowledge of the subject matter on which it is deciding. The mandate of members of the Supervisory Board is not binding, which means that every member of the Supervisory Board of Atlantic Grupa d.d. performs its duty completely independently and in its own responsibility, regardless of who suggested or appointed him/her. If a member of the Supervisory Board is exposed to pressure or limitations from the majority shareholder or any other persons and which are affecting the performance of his/her duties, he/she is obliged to inform the Supervisory Board about it and, notwithstanding that, take an independent standpoint during voting, or give his/her resignation, depending on what the circumstances demand. If a member of the Supervisory Board considers that he/she or any other member are in conflict of interest in regards to decision-making in a concrete case, he/she is obliged to report this to the Supervisory Board without delay. The members of Supervisory Board shall perform their duty with the precaution of a precise and conscientious manager and shall keep the Company s business secrets confidential. A member of the Supervisory Board must be able to dedicate to his/her duties in the Supervisory Board all the time necessary for the correct and quality performance of his/her duties. 10

11 The Supervisory Board shall establish a decision on the general framework plan of its work including the list of regular sessions and information which are to be regularly and timely given to the disposition of the Supervisory Board s members. The Supervisory Board shall establish its own internal rules of operation, whereby those rules cannot limit the liberty of each individual member to act independently. None of the documents of the Supervisory Board must prevent or limit a single member from acting in accordance with the law, but, at the same time, every member shall avoid the misuse of his/her own competencies and shall always try to harmonize his/her work with the other members of the Supervisory Board Composition of the Supervisory Board The Supervisory Board of Atlantic Grupa d.d. is comprised of at least three members. The Supervisory Board shall be composed with a majority of independent members. An independent member of the Supervisory Board is considered to be a person who is: not connected to the Company, with a possible exception in regard of owning a set smaller number of the Company s shares; neither the majority shareholder nor the member of the majority shareholders group, spouse or a blood relative or a relative-in-law up to a second degree has any connection to companies affiliated with the majority shareholder; not a present or former employee of the Company or any of its dependent companies; not a spouse or a blood relative or a relative-in-law to any of the Company s Heads of Department or member of the Management Board; not receiving any other payments from the Company except the compensation for his/her work in the Supervisory Board, not including an eventual dividend; not a direct or indirect supplier or purchaser of the Company s goods and services; is not a direct or indirect supplier or purchaser of the Company s goods and/or services; is not and has not been at least for one year in a significant business relationship with the Company or its affiliates, directly or indirectly as a partner, shareholder, member of the management board or supervisory board or member of senior management of the organization, which is in a significant business relationship with the Company, which includes direct or indirect significant suppliers and/or purchasers of the goods and/or services and organizations that receive significant incomes from the Company or its affiliates. is not or ever was in the past three years a partner or employee of an audit company that provides or has provided audit services to the Company or its affiliates is not a member of the management board of another company, where any member of the management board of the company is a member of the supervisory board or has a significant relationship with the members of the management board of the company by means of participation in other organizations, bodies or companies An independent member of the Supervisory Board which holds this function for more than two mandates must judge his/her own independent status himself/herself. Members of the Company s Supervisory Board have to meet appropriate standards in regards to the education and professional experience while at least one of them must have experience in the 11

12 area of finances, must have high moral standards and be able to put aside time necessary for performing the function of a member of the Supervisory Board. Upon appointment, each individual member of the Supervisory Board shall introduce himself/herself with the business of Atlantic Grupa d.d., the role of the Supervisory Board in the Company s functioning and also with his/her personal rights and obligations Supervisory Board s Committees With the purpose of transparency of functioning and avoiding conflicts of interest, the Supervisory Board shall have three permanent committees: - the Audit Committee, - the Nomination and Remuneration Committee and - the Corporate Governance Committee. The Audit Committee analyses in detail the financial reports, provides support to the Company s accounting and establishes good and quality internal control within the Company. Audit Committee shall comprise of independent persons, at least of three members who possess the basics of financial and accounting issues and at least one member has to possess more experience in the matter of accounting, audit and financial management. With regard to the policies and procedures adopted within the company, the Audit Committee should: monitor the integrity of financial information of the company, particularly the accuracy and consistency of accounting methods used by the company and the group, to which it belongs, including the criteria for consolidation of financial reports of the companies that belong to the group; at least once a year, assess the quality of the internal control and risk management system, with the aim of properly identifying, publicizing and managing the major risks to which the company is exposed to; ensure effectiveness of the internal audit system, particularly by means of the development of recommendations concerning the selection, appointment, reappointment and dismissal of the head of the internal audit department, as well as the means at his/her disposal and evaluation of the management s actions with regard to the findings and recommendations of the internal audit (if the company has no internal audit function, the committee shall annually evaluate the need for establishing such function) With regard to the external auditor, the Audit Committee should: - give recommendations to the Supervisory Board regarding the selection, appointment, reappointment or change of the external auditor and the requirements for her/his engagement; 12

13 - monitor the independence and objectivity of the external auditor, in particular with regard to rotation of the authorized auditors within the audit company, as well as the fees paid by the Company for external audit services; - monitor the nature and amount of non-audit services that the Company receives from the audit company or its affiliates, where, among other things, the audit company shall provide notice of all fees paid by the company to the audit company and its affiliated entities; - develop rules about the services, which the external audit company and its affiliates may not provide to the company, which can be rendered only with prior approval of the Committee, and which may be rendered without prior approval; - consider the effectiveness of external audits and conduct of the senior management with regard to the recommendations given by the external auditor; - investigate the circumstances of the dismissal of the external auditor and make appropriate recommendations to the Supervisory Board. Duration of the Committee s mandate can be limited to a period of 4 years of the continuous mandate and/or by limiting the number of committees in which a member can be selected in other companies. The Audit Committee shall have an opened and unrestricted communication with the Management and Supervisory Boards and shall be responsible for its work to the Supervisory Board. The Management Board shall deliver to the Audit Committee timely and periodical overviews of financial reports and similar documents before disclosing this information publicly, information on changes in accounting principles and criteria, accounting procedures adopted for the majority of actions as well as every considerable variation from book-keeping and real value by individual items along with all correspondence with the Internal audit department or independent auditors. The Audit Committee shall discuss with the independent auditor the following: changing or keeping accounting principles and criteria; change of regulations; important estimates and conclusions in preparing financial reports; methods of risk evaluation and results; high-risk areas of operation; larger faults and substantial deficiencies noticed during internal supervision; influence of external factors (economic, legal and industrial) on the financial reports and audit procedures. The Audit Committee shall, also, regularly evaluate other important aspects of its relations with third parties like their professional capability and independency and, always when necessary, obtain a second opinion on the work executed by those persons. The Audit Committee shall ensure the delivery of quality information from dependant and affiliated companies and third persons (like expert advisors) considering the influence of such information to the consolidated financial reports. 13

14 The Nomination and Remuneration Committee suggests the content of contracts with the members of Management Board and the structure of their compensation and the compensation of the Supervisory Board s members. In that way, this Committee coordinates all business relations of certain members of the Management Board and the Company itself and/or its Supervisory Board as in regard of executing rights and obligations of the Management Board s members as well as in regard of their employment-legal status and other status in the Company. Members of the Nomination and Remuneration Committee shall be appointed among the independent members of the supervisory board. The Committee shall: - find and recommend to the Supervisory Board candidates, who can fill vacant positions in the Management Board and Supervisory Board, at the same time it must assess their knowledge, skills and experience and prepare a list of requirements and tasks related to each appointment and determine the time required for the performance thereof - at least once a year, assess the composition, size, membership and quality of the work of the Supervisory Board and Management Board, and make appropriate recommendations to the Supervisory Board - at least once a year, conduct an assessment of knowledge, skills and experience of the individual members of the Supervisory Board and inform the Supervisory Board - discuss issues related to planning the continuity of the Supervisory Board and Management Board - evaluate the policies of the Management Board in respect of hiring senior management personnel. The Nominations Committee is obliged to consider the proposals of the Management Board and shareholders and to confer with the President of the Management Board, who may submit to the Nomination Committee proposals, particularly regarding issues related to the members of the Management Board and senior management personnel. The Corporate Governance Committee defines a system of mechanisms for ensuring a balance between the rights of the shareholders and the needs of the management with regard to steering the Company's business and managing its operations. It provides a framework for setting the Company's goals and determining resources to achieve those objectives and monitor the performance and effectiveness thereof. The model and good corporate governance practices should ensure equal rights for all shareholders, especially, protect minority shareholders and their right of a fair return on their investment. The main responsibilities of the Committee relate to the following areas: - developing a framework for corporate governance within the Company; - the rights of the shareholders; - the equality of the shareholders; - the role of interest-group influence on the corporate governance; - disclosure and transparency; and - the liability of the bodies of the Company and prevention of conflict of interest. 14

15 4.3. MANAGEMENT BOARD Tasks and responsibilities The Management Board of Atlantic Grupa d.d. manages the business affairs of the Company independently and in its own responsibility and makes decisions exclusively in its own judgement. When managing the Company s business activities, the Management Board performs activities defined by law, the Statute of Atlantic Grupa d.d. and other internal acts, in accordance with the provisions of this Code. The existence of conformity or instruction of other Company bodies does not preclude the responsibility of the Management Board for the management of business activities with the precaution of a conscientious manager. The Management Board is always bound to act exclusively in the interest of the Company and its shareholders, taking into account the interests of employees and wider community, with the goal of increasing the Company s value. Each member of the Management Board shall continually, accurately and without delay, report to the President of the Management Board about all important developments from his/her competency, essential for the evaluation of the current situation and development, and the Company s management. Members of the Management Board shall strive toward the outmost possible independency in relation to certain shareholders, shareholders groups or stakeholders and must be aware that, once appointed, they are responsible to all shareholders of the Company. If a member of the Management Board is exposed to undue pressure or limitations from shareholders or members of the Supervisory Board which are affecting the performance of his/her duties, he/she is obliged notwithstanding to take an independent position during voting, or making the decision, or give his/her resignation, depending on what the circumstances demand. The Management Board cannot transfer its authorities of managing the Company to any other Company body. Giving the full power of attorney (Cro. and Ger. prokura) is not considered to be a transfer of authorities of managing the Company s business activities. The activities of the Management Board, its scope of work and rules of procedure shall be prescribed by the internal procedural rules of the Management Board, with the goal of clarifying its authorities and duties. Members of the Management Board can, when there is such a need, request advices from experts (legal advisors, tax and human resources experts) so as to gain certain advices on important issues. The Management Board is responsible for the implementation and efficiency of the decisions it is making. 15

16 Members of the Management Board are liable in solidarity for damages occurred as a result of violating their duties unless thy can prove that they performed their duties honestly and conscienceously Composition of the Management Board The Management Board of Atlantic Grupa is comprised of one to ten members, this including the President of Management Board and its members. The methods of cooperation between the members of Management Board shall be established by the Statute or internal rules of the Management Board approved by the Supervisory Board. Upon comprising the Management Board, it has to be strived for the Management Board s members having different experiences, education and character, including: experience in business management, developed organizational skills; experience in recognizing and controlling risks and handling crisis situations; understanding of accounting and finances; understanding the areas of the Company s activities; understanding national and international markets; interconnection of all interests within the Company; with his/her personal features contributing to the realization of the Company s goals; being familiar with the good practice of corporate Governance; having a strategic vision. Along with fulfilling the given terms, the President of Management Board must have a reputation of the recognized and good manager in a wider economic environment Membership in Supervisory Boards of Other Companies For a membership in supervisory boards of other companies, the member of the Management Board of Atlantic Grupa d.d. has to receive prior consent from the Supervisory Board, whereby the member of the Management Board cannot be at the same time a member of supervisory board in more than 7 companies. In that sense, the function of the president of supervisory board of any other company counts as a membership in two supervisory boards Additional Responsibilities of the Management Board of Atlantic Grupa d.d. as the Leading Company of the Concern The Management Board of Atlantic Grupa d.d as the leading Company of the Concern is responsible for strategic management and long-term success of the whole Concern and through the membership in supervisory boards of daughter companies oversees their business activities and the Group s investments in daughter companies. 16

17 Accordingly, the Management Board of the leading Company shall insure an appropriate cooperation with the Concern, taking account of the timely and quality information exchange between the companies of the Concern. 5. RELATIONSHIPS OF MANAGEMENT BOARD, SUPERVISORY BOARD AND COMPANY 5.1. Cooperation and Relationship between the Supervisory Board and Management Board The Supervisory Board and Management Board of Atlantic Grupa d.d. are bound to fully cooperate in the best interest of the Company and to mutually discuss and reach the agreement on strategic guidelines of the Company s business activity. Accordingly, the meetings of the Supervisory Board must be attended by all members of the Management Board, except when the Supervisory Board discusses the issues that are directly related to the Management Board or any members thereof, particularly, when discussing the dismissal, liability or compensation for the work of the members of the Management Board. The Management Board of Atlantic Grupa d.d. is obliged to report to the Supervisory Board in due time and in its entirety about all facts and circumstances which can be of influence to the business activity, financial position and the Company s assets status or its daughter companies, and provide access to all necessary information and records required for the performance of their competencies. The Supervisory Board is obliged to ensure the existence of a long-term plan of succession in the Company, particularely at Management Board level, to ensure a careful and timely appointment of successors to any individual member of the managing Company s staff. The Supervisory Board shall also include in this process the members of the managing staff. The President of the Supervisory Board is responsible for establishing a calendar of regular annual sessions and for convocation of extraordinary sessions, whenever the need arises. The frequency of the sessions will be determined in accordance with the needs of the Company, but at least once a quarter. These sessions should be held frequently enough to ensure the effectiveness of the Supervisory Board, but should not be more frequent than once a month in order to avoid undesirable interference with the management of the Company. To ensure efficiency and effectiveness of the Supervisory Board meetings, it is necessary to provide the relevant documents to all members of the Supervisory Board on time Compensations of Members of the Management Board and Supervisory Board Compensation of members of the Management Board and Supervisory Board of Atlantic Grupa d.d. shall adequately reflect the time, effort and experience related to their functions and shall be established in such a manner as not to jeopardize their ability to make decisions in the best interest of the Company and its shareholders. 17

18 Detailed information on all compensations and other acceptances from the Company or persons affiliated with the Company of each individual member of the Management Board and Supervisory Board, including the structure of that fee, shall be publicly disclosed. Members of the Supervisory Board willcan be compensated for their work and that fee shall be established by shareholders at the General Assembly at the suggestion of the Management Board or the Compensation Committee. Members of the Management Board shall be paid according to their work and that compensation shall be established by the Company s Supervisory Board. The Company should publish a statement on the Management Board and the Supervisory Board compensations policy as part of the annual report. The Management Board compensation policy should be always available at the Company's Website on the Internet. The Statement on compensation policy should primarily contain the Company's policy regarding the compensations for the Management Board for the coming business year and, if appropriate, for the next years, as well as an overview of the application of the compensation policy in the previous year. It is particularly important to emphasize any significant changes in relation to the compensation policy in comparison with the previous year. The statement on the compensation policy should contain the following parts: - explanation of the relative share and the importance of the fixed and variable components of the compensation - sufficient information on efficiency criteria, the fulfillment of which gives the right to acquire stock options, shares or another form of variable compensation - sufficient information about the relationship between the amount of the compensation and the performance - basic indicators and reasons for awarding annual bonuses or benefits of non-monetary nature - a summary review of contracts with the members of the Management Board, which should include information on contract duration, notice periods and, particularly, severance payments. Any form of compensations to the members of the Management Board and the Supervisory Board, which consists of stock options or other rights to acquire shares, or if the compensation is based on the price of the Company shares, should be approved by the General Assembly before coming into force. This approval concerns the principles of the compensation, rather than the approval of specific compensations to any individual members of the Management Board and Supervisory Board. Compensation to the Management Board s members shall consist of: fixed part which is unchangeable and independent to business results; variable part which is conditioned by business results in a certain business year; Compensation to the Management Board s members can also consist of share options and similar instruments which have the effect of long-term stimulations. 18

19 When setting the size and appropriateness of compensations to the Management Board s members, the following shall be specially taken in account: the scope of competencies of an individual member of the Management Board; personal successfulness in business performance; the size and financial status of the Company; the economic environment in which the Company operates; the Company s successfulness in relation to other companies of the same business activity; the fulfilment of strategic and annual plans; compensations to members of management boards in affiliated companies. All types of compensations to the members of the Management Board and Supervisory Board, including options and other benefits of the Management Board, should be publicized by itemizing for each individual in the report of the Company. The statement on the compensation to the members of the Management Board shall contain the following elements of each member of the Management Board, who has performed this duty in the year, to which the statement applies: - the total amount of the salary, regardless whether already paid or not; - compensations or benefits received from affiliated companies - compensations in the form of profit sharing or bonus, as well as the reasons why they were paid - any additional compensations paid to the members of the Management Board for the work they performed for the Company outside the usual scope of duties of the member of the Management Board - a compensation paid or to be paid to a former member of the Management Board in connection with the termination of her/his appointment in the course of the year, to which the statement applies - the total estimated value of non-monetary benefits, which are considered a compensation, but not listed in the preceding paragraphs - with regard to the compensation in shares or stock options or other forms of compensation based on acquisition of shares, it is also necessary to show the following: o the number of options or shares granted by the Company in the year, to which the statement applies, as well as the conditions for their use o the number of options exercised in the year, to which the statement applies, as well as for each of them, the number of shares and the price at which it was exercised or the value of shares included in the distribution to the members of the Management Board at the end of the year o the number of shares not exercised at the end of the year, the price at which they may be exercised, date and the main terms and conditions for their execution o any change related to the change of the conditions for exercising the existing options, which occurred in the company in the course of the year, to which the statement applies, 19

20 - any loan (including outstanding debt and interest rate), advance payment or a guarantee for the benefit of the members of the Management Board by the Company s affiliates that are included in the consolidated financial report Reporting to Shareholders on the Ownership of Shares of the Members of Management Board and Supervisory Board Every member of the Management Board is obliged to inform the Supervisory Board, i.e. every member of the Supervisory Board is obliged to inform the Company on all changes in regards to his/her ownership of the Company s shares at the latest the next working day after the occurrence of such a change with the Company s obligation to publicly disclose such a change in the shortest period possible Conflicts of Interest Conflict of interest exists with the Supervisory Board s member or with the Management Board s member who is not neutral in relation to the subject of decision-making or it can be assumed from the fact of his affiliation to other companies, persons or affairs that he/she can have interests which are not at the same time necessarily the interests of the Company and this can influence the making of a decision on the grounds of interests or tendencies which are not necessarily coinciding with the Company s interests. Members of the Supervisory Board or Management Board cannot make decisions on the basis of personal interests or on the basis of interests of persons with whom they have close relations Transactions between the Company and Members of the Management Board or Supervisory Board All transactions in which the members of Supervisory Board or Management Board, or persons affiliated with them, and the Company or persons affiliated with it, are participating in shall be market-based, especially in relation to deadlines, interests, guarantees, etc and shall be clearly stated in the Company s reports. Such transactions shall be confirmed through an independent evaluation by experts independent in relation to participants of a concrete transaction. All contracts and agreements between the member of Supervisory Board and the Company shall be approved beforehand by the Supervisory Board and the essential elements of such contracts or agreements must be included in the annual report Non-competition obligation of members of the Management Board and Supervisory Board with the Company Members of the Supervisory Board or Management Board cannot, in their own or somebody else s account, personally or through third persons, perform transactions from the activities performed by the Company as well as advise persons who can be considered as competition to the Company. 20

21 Members of the Management Board also cannot have a significant share in companies which can be considered as competition to the Company, and members of the Supervisory Board are obliged to publicly disclose the size of their share and all changes in the shares of companies which can be considered as competition to the Company. 6. AUDIT AND THE MECHANISMS OF THE INTERNAL CONTROL 6.1. Independant external auditor Atlantic Grupa d.d. is aware of the significance and role of the audit for the successfulness of corporate Governance and for the legality and transparency in the Governance of all business processes in the Company. Atlantic Grupa d.d. is bound to have independent external auditors as an important instrument of corporate conduct, so to ensure that financial reports adequately reflect the real status of the Company as a whole. An auditor which is not affiliated with the Company by ownership or interest and is not providing, alone or through affiliated persons, any other services to the Company shall be considered as the independent external auditor. Independent external auditors are obliged to, in a clearest possible manner and without any doubt, express their opinion whether the financial reports prepared by the Management Board adequately reflect the status of capital and the financial status of the Company as well as results for a certain time period. The plan of work with independent external auditors is established by the Audit Committee which also suggests the compensation for the auditor s work. The Audit Committee is obliged to submit to the Supervisory Board proposals and recommendations during the selection of independent external auditors, the extension of cooperation or the discontinuation of cooperation with the auditors. Independent auditors are obliged to directly inform the Audit Committee on the following issues: discussion on the main accounting policy, important misgivings and significant defects in the internal control and procedures, alternative accounting procedures, non-agreement with the Management Board, risk evaluation, and possible fraud or misuse analyses. Procedures implemented by the audit company have to reflect their independency and objectivity, especially if, within the framework of the same audit company, employees are providing other professional, especially consulting services. The Audit Committee has to be acquainted with all services provided by the company of independent auditors, as well as on fees for those services 21