Corporate Governance Report of WABERER S INTERNATIONAL NYILVÁNOSAN MŰKÖDŐ RÉSZVÉNYTÁRSASÁG

Transcription

1 Corporate Governance Report of WABERER S INTERNATIONAL NYILVÁNOSAN MŰKÖDŐ RÉSZVÉNYTÁRSASÁG for the period between January 1, 2015 and September 14, 2015 Waberer s International Nyilvánosan Működő Részvénytársaság (hereinafter: the Company ) operated as a private company limited by shares at the time of the approval of this Corporate Governance Report by the General Meeting of the Company held on September 14, On September 14, 2015 the General Meeting of the Company under its Resolution No. 4/ resolved the change of the corporate form of private company and the transformation of the Company into a public company limited by shares, approved the currently effective Articles of Association of the Company (the Articles of Association ) and authorized the Board of Directors of the Company to submit an application with the BSE for the listing of the Company s shares in Equities Prime Market category. Pursuant to Section 3:211(1) of Act V of 2013 on the Civil Code ( Civil Code ), the Company shall be recognized as public company limited by shares as of the date when its shares are listed on a stock exchange. The Chief Executive Officer of BSE is expected to resolve the listing of the Company s shares in the BSE product list around September 25, With view to the fact that the Company is expected to be operating as a public company as of mid-october 2015, this is the first corporate governance report prepared and submitted by the Board of Directors of the Company to the General Meeting in accordance with the provisions of the Civil Code and the Corporate Governance Recommendations of BSE ( CGR ). This report was approved by the General Meeting of the Company under its Resolution No. 34/ , which resolution was published on the website of the Company ( The fundamental document regulating the operation of the Company is the Articles of Association approved by the extraordinary General Meeting held on September 14, 2015 and dated on the same day. According to Clause 3:211 (3) of Act V of 2013 on the Civil Code, the Articles of Association shall enter into effect on the date when the series A ordinary shares issued by the Company have become listed on the Budapest Stock Exchange.. Until such date the Company will be operating in accordance with its former articles of association. Since such articles of association regulated the operation of the Company as a private company, and it provided for certain issues concerning corporate governance practice differently from the Articles of Association. Consequently, the corporate governance practice described in the second part of this report, which fully complied with the legal regulations applicable to private companies, fails to comply in all respects with the recommendations specified in the CGR. However, the Company is fully committed to implementing a corporate governance practice as of the listing of its shares on the BSE, which complies to the fullest extent possible with the recommendations contained in the CGR of BSE. With view to the foregoing the General Meeting approved the Articles of Association, elected the Board of Directors comprising more members than previously during the operation of the Company as a private company, the Supervisory Board complying with the requirement of independence and comprising more members, set up the audit committee and approved the long term remuneration/incentive scheme for Board members, Supervisory Board members and executive employees, which measures will ensure that the Company complies with the recommendations set out in the CGR as of the commencement of its public operation. In order to comply with the stock exchange regulations (including the CGR), the Board of Directors of the Company provided for the engagement of a compliance officer. In addition to the 1

2 foregoing, the Company has a unit responsible for maintaining contacts with investors. ( The parts of this report describing the rules of operation of the individual organs of the Company (Board of Directors, Chief Executive Officer, Management, Supervisory Board, Auditor, Audit Committee) and the method and conditions of exercising shareholder rights were prepared based on the relevant provisions of the Articles of Association, thus they present the rules applicable to the operation of the Company as a public company limited by shares. 1. Board of Directors The Board of Directors is the managing body of the Company. The Board of Directors consists of a maximum of seven members. The members of Board of Directors shall be elected by the General Meeting for an indefinite period of time. The Board of Directors shall elect a Chairman and a Deputy Chairman from among its members, moreover, it shall also appoint the Chief Executive Officer of the Company from among its members. The Chairman of the Board of Directors and the Chief Executive Officer may be the same person and currently both positions are held by the same person. The distribution of the responsibilities and the scope and competence among the members of the Board of Directors shall be regulated in detail by the By-laws of the Board of Directors: The Board of Directors shall establish its own By-laws. The Board of Directors may make decisions on all issues and matters concerning the Company and not falling within the exclusive competence of the General Meeting In issues pertaining to the exclusive competence of the General Meeting by virtue of law, the Board of Directors shall make proposals for resolutions of the General Meeting. The Board of Directors shall represent the Company vis-à-vis third parties, before courts and other authorities. It shall be entitled to acquire rights, and undertake obligations on behalf of the Company, as well as to determine the business activity of the Company. The tasks of the Board of Directors shall include among others - the submission to the General Meeting of the annual financial statement prepared pursuant to the Accounting Act and the proposal on the distribution of after-tax profit; - the submission to the annual General Meeting of the report presenting the corporate governance practices of the Company; - preparation of a report on the management, the financial position, the business policy of the Company at least once a year for the General Meeting and quarterly for the Supervisory Board; - ensuring that the books of the Company are kept in accordance with the applicable rules; - participation in the determination of strategic guidelines and the formation of the corresponding strategy, supervision of business and financial plans, significant capital investments, acquisitions and divestments; - defining corporate objectives in consultation with the Supervisory Board and continuous supervision of the implementation thereof, notification of the Supervisory Board about implementation; - ensuring the truthfulness of financial and accounting reports; - determination of the principles for the remuneration and supervision of the activity of the management, if necessary, taking measures in order to ensure compliance with the guidelines adopted by the general meeting; - management of cases of conflict of interest, approval of the corporate code of ethics; 2

3 - determination of risk management guidelines which ensure the identification of risk factors and the suitability of the internal control mechanisms, as well as the regulatory and supervisory system for the management of such risks and regulatory compliance; - determination of the mechanism for the nomination of Board members; - proposal for the remuneration of Board members; - determination of the principles and fundamental rules of management succession; - formulation of and supervision of compliance with the guidelines applicable to the transparency of the operation of the Company and the publication of significant corporate information; - continuous supervision of the efficiency and effectiveness of the corporate governance practice; - ensuring an appropriate level of contacts with shareholders with an adequate frequency. The meeting of the Board of Directors shall have a quorum if more than half of the members are present. The Board of Directors shall adopt its resolutions by a simple majority of the votes of those present, except if it is provided otherwise under the By-laws. Further rules applicable to the holding of the meetings, the scope of competence and the adoption of the resolutions of the Board of Directors are contained in the By-laws of the Board of Directors. The members of the Board of Directors may hold executive positions in business associations conducting the same activity as the Company, only if they have been authorized by the Board of Directors of the Company. Such authorization was granted to Stefan Delacher and Gerard van Kesteren members of the Board of Directors. In accordance with the provisions under Sections 2.4 and of the CGR, the majority of the members of the Board of Directors are independent and non-operative (external) members as of the date of the first trading day on the BSE. Members of the Board of Directors, their status of independence and the date of their appointment (the resumes of members are available on the Company s website): Name Status Date of appointment Géza Czakó non-independent, operative February 22, 2007 for an member indefinite term Dr. Tibor Endre Illés non-independent, non-operative February 22, 2007 for an (external) member indefinite term György Péter Waberer non-independent, operative May 5, 2011 for an indefinite member term Stefan Delacher independent, non-operative May 31, 2011 for an indefinite (external) member term Miklós Bethlen non-independent, non-operative May 31, 2011 his mandate will (external) member expire as of the commencement of the trading of the Company s Csanád Dániel non-independent, non-operative (external) member Gerard van Kesteren independent, non-operative (external) member 3 shares on the stock exchange August 1, 2013 his mandate will expire as of the commencement of the trading of the Company s shares on the stock exchange his mandate will start as of the commencement of the trading of the Company s shares on the stock exchange and is for an

4 István Lepsényi independent, non-operative (external) member Attila Chikán independent, non-operative (external) member indefinite term his mandate will start as of the commencement of the trading of the Company s shares on the stock exchange and is for an indefinite term his mandate will start as of the commencement of the trading of the Company s shares on the stock exchange and is for an indefinite term In 2015 the Board of Directors held 4 meetings, with an average participation rate of 92%. Name Number of sessions Participation rate Notes Total 4 89% Géza Czakó 4 100% Dr. Tibor Endre Illés 3 75% György Péter Waberer 4 100% Stefan Delacher 4 100% Miklós Bethlen 4 100% Csanád Dániel 3 75% Major topics of the meetings of the Board of Directors held in 2015 Ordinary meeting of the Board of Directors on February 12, Approval of the report for December; - Approval of the budget for 2015; - Discussion of the German minimum wage for 2015; - Discussion of the introduction of the ERP system. Ordinary meeting of the Board of Directors on May 27, Approval of the report for April; - Discussion of the strategic plan for the period between 2016 and 2018 and the main risks indicated therein; - Approval of the credentials of the banks arranging the initial public offering (IPO). Ordinary meeting of the Board of Directors on July 29, Fall-through of the acquisition of Wáberer Hungária Biztosító Zrt; - Discussion of the strategy for the optimization of the Company s insurance costs as from 2016 and the related measures for implementation; - Approval of the strategic plan for and the main risks contained therein; - Approval of the credentials of the banks arranging the IPO; - Approval of the schedule and structure of the IPO; - Discussion of name use agreement; - Approval of the report for June; - Discussion of the report on contracts concluded with affiliates; - Discussion of the appointment of Mr. Wáberer as Prime Minister s Commissioner. 4

5 Extraordinary meeting of the Board of Directors on September 7, Drafting proposals for resolutions for the agenda items of the extraordinary General Meeting convened in relation to the change of the corporate form and the transformation of the Company into a public company limited by shares and the listing of the Company s shares on the Budapest Stock Exchange; - Change of corporate form and the change of the Company s corporate name in relation thereto; - Listing of shares on the Budapest Stock Exchange; - Participation in the procedure aimed at the public offering and the Hungarian and foreign private placement proposed by the shareholder CEE Transport Holding BV; - Removal of Board members, providing them with an indemnification, nomination of new Board members and determination of their remuneration; - Removal of Supervisory Board members, nomination of new Supervisory Board members and determination of their remuneration; - Setting up the audit committee, election of members and determination of their remuneration; - Approval of the amended by-laws of the Board of Directors and the Supervisory Board; - Request for the authorization of the General Meeting for the signing of the issue prospectus and the declaration of liability, as well as all other further actions necessary for the public offering; - Authorization for the acquisition of treasury shares; - Approval of the Articles of Association; - Approval of the guidelines for the long term remuneration and incentive schemes for members of the Board of Directors, members of the Supervisory Board and executive employees; - Approval of the corporate governance report. During the period between the meetings of the Board of Directors the Board of Directors typically delivers written resolutions. In 2015 until September 1 the Board of Directors delivered 19 resolutions without holding a meeting. These resolutions include, among others, the following: - approval of purchases of significant value; - proposals for resolutions concerning the convening of the General Meeting and agenda items; - approval of related party transactions. 2. Chief Executive Officer The Chief Executive Officer appointed by the Board of Directors shall organize, direct, supervise and control the operation of the Company within the framework of the applicable provisions of law and the Articles of Association, and in accordance with the resolutions of the General Meeting and the Board of Directors. The competence of the Chief Executive Officer shall extend to resolving in all matters not falling within the competence of either the General Meeting or the Board of Directors. The Chief Executive Officer shall establish the work organization of the Company and make proposals to the Board of Directors on the approval of the Operational By-laws. The Chief Executive Officer shall exercise employer s rights over the employees of the Company and shall be entitled to transfer such authority to the employees of the Company. The Chief Executive Officer shall be elected by the Board of Directors from among its members. 5

6 The Chief Executive Officer of the Company as from January 23, 2007 has been György Péter Waberer. 3. Presentation of the management The Company s management is made up of the following individuals: György Péter Waberer, chief executive officer Barna Erdélyi, deputy chief financial officer Ferenc Lajkó deputy transport and freight chief executive officer The resumes of the above referenced individuals are available on the Company s website. ( Relationship between the Board of Directors and the management: The members of the senior management and the managing director of the subsidiary involved in domestic transport activities participate in an advisory capacity in the ordinary quarterly meetings of the Board of Directors, and the management prepares monthly reports for the members of the Board of Directors. The monthly management report provides information on the monthly and periodic management of the Company in a uniform, standard structure, focusing on effectiveness and the deviation of key performance indicators from the values specified for the period considered and in the business plan. The main economic data presented in the monthly management report are as follows: - Trends in the consolidated turnover of the Company; - Trends in the Company s EBITDA according to main lines of business, detailed variance analysis of deviations; - Trends in the consolidated profit or loss of the Company; - Trends in the results, key performance indicators and quality indicators of the lines of business (particularly the international and domestic segments); - Trends in the assets, financial position and indebtedness of the Company; - Trends in the results of the vehicle sale activity and impact factors of deviations. Supervisory Board The Supervisory Board consists of 6 members. Pursuant to the Articles of Association approved on September 14, 2015, the members of the Supervisory Board shall be elected by the General Meeting for the period ending on the date of the closing of the General Meeting which concludes the business year of the election, but in any case by no later than June 30. Previously the expiry date of the mandate was May 31. One third of the members of the Supervisory Board (two members) shall be the delegates of the employees. The delegates of the employees shall be nominated by the works council from among the employees, upon consulting the trade unions of the Company for their opinion. No employee may be a member of the Supervisory Board, except for membership based on the rules of employee participation. Following its election, the Supervisory Board shall elect a Chairman from among its members for the period of the supervisory board membership of the Chairman. 6

7 The majority of the members of the Supervisory Board shall be independent persons. Members of the Supervisory Board shall be considered independent, if apart from their seat on the Supervisory Board and from any relationship based on transactions conducted within the scope of the Company s ordinary activities, so as to satisfy the Supervisory Board member s personal needs, they have no other relationship with the Company. The majority of the members of the Supervisory Board have no relations whatsoever with the Company, its management and dominant shareholders. The Supervisory Board annually, prior to the corporate governance report requests its members to confirm their independent status. The members of the Supervisory Board shall take part in the work of the Supervisory Board in person. Supervisory Board members are independent of the management of the Company and shall not be bound by any instructions in performing their duties. The Supervisory Board shall establish its own by-laws, which shall be approved by the General Meeting. Supervisory Board members may not acquire any share in or become the executive officer of a business association which is engaged in the pursuit of the same economic activity as the Company s main activity. If the member of the Supervisory Board accepts a new executive office, he shall notify the Company within fifteen days of accepting such office. For the purpose of protecting the interests of the Company, the Supervisory Board shall control the management of the Company. For the purpose of exercising the foregoing activity, the Supervisory Board may inspect the documents, accounting records and books of the Company, request information from the Board of Directors and the employees of the Company, examine the bank account, petty cash, securities and goods portfolio and contracts of the Company, or have them examined by experts. The Supervisory Board shall examine the submissions presented to the General Meeting and express its opinion on the foregoing at the General Meeting. The General Meeting may resolve the approval of the annual financial statement prepared in accordance with the Accounting Act and the allocation of after-tax profits only in possession of the written report of the Supervisory Board regarding the foregoing. If the Supervisory Board is of the view that the activity of the management is contrary to the legal regulations, the Articles of Association or the resolutions of the General Meeting, or such activity otherwise prejudices the interests of the Company, the Supervisory Board shall be entitled to convene the General Meeting to discuss the issue and adopt the necessary resolutions. The Chairman of the Supervisory Board: - shall convene and chair the meetings of the board, - shall provide for the keeping of the minutes of the meetings of the board, - may participate in the meetings of the Board of Directors, - may propose the convening of the General Meeting, - shall annually submit a report to the General Meeting on the activity of the Supervisory Board and the Company. The Supervisory Board shall have a quorum if at least 2/3 of its members are present and shall adopt its resolutions by the simple majority of the votes. The detailed rules of the operation of the Supervisory Board are set out under the by-laws of the Supervisory Board: 7

8 Members of the Supervisory Board, their status of independence and the date of their appointment: Name Status Date and term of appointment Evtim Chesnovski non-independent March 28, 2014 May 31, 2015 Sándor Székely, employee delegate non-independent March 28, 2014 May 31, 2015 and April 13, 2015 May 31, 2016 Győző Lantos non-independent April 13, until the stock exchange listing Béla Sándor independent March 28, 2014 May 31, 2015 and April 13, 2015 May 31, 2016 Péter Székács independent as of the stock exchange listing until June 30, 2016 Mrs. Tiborné Losonczi independent as of the stock exchange listing until June 30, 2016 Mrs. Szalai Mária Kazuska employee delegate non-independent as of the stock exchange listing until June 30, 2016 Miklós Marján independent as of the stock exchange listing until June 30, 2016 Until September 14, 2015 the Supervisory Board held 3 meetings with a 100% participation rate and adopted all decisions with a 100% participation rate. On a single occasion the Supervisory Board adopted 2 decisions without holding a meeting in relation to the approval of the financial statement. March 10, ordinary meeting of the Supervisory Board Report in relation to the performance of the internal audit; Report in relation to the implementation of the decisions adopted at the meeting of the Supervisory Board held in the previous year; Approval of the Company s annual financial statement prepared in accordance with the Accounting Act; Information on the reorganization of the Company, outsourcing and franchise related proposals; Proposal for the 2015 work plan of the Supervisory Board; Report on the financial results of the Company for December; Report on the status of the IT system development project. June 12, ordinary meeting of the Supervisory Board Report on the implementation of the decisions adopted at the previous meeting of the Supervisory Board; Information on the Company s economic and financial condition in the first 5 months of 2015; Information on on the reorganization of the Company, outsourcing and franchise related proposals; Report on the performance of the internal audit September 9, 2015 extraordinary meeting of the Supervisory Board 8

9 Review of and giving an opinion on the agenda items of the extraordinary General Meeting convened in relation to the change of the corporate form and the transformation of the Company into a public company limited by shares and the listing of the Company s shares on the Budapest Stock Exchange. Name Number of sessions Participation rate Notes Total 1 100% Evtim Chesnovski 1 100% His Supervisory Board membership expired on May 31, He participated in the first meeting of the Supervisory Board but did not attend the second meeting, since by then his mandate had already expired. The next meeting of the Supervisory Board was attended by Győző Lantos, the member newly elected in his place. Sándor Székely 3 100% Győző Lantos 2 100% Logically, he did not attend the meeting held prior to his appointment, but participated in teh meetings held thereafter. Béla Sándor 3 100% 4. Audit Committee The General Meeting shall elect a 3 (three) member Audit Committee from among the independent members of the Supervisory Board for a period corresponding to the mandate of the individual members of the Supervisory Board. The Audit Committee was set up with view to the initial public offering of the Company s shares on the stock exchange on September 14, 2015 as of the listing of the shares on the Budapest Stock Exchange. Members of the Audit Committee, their status and date of appointment (the resumes of the members are available on the Company s website): Name Status Date of appointment Béla Sándor independent as of the stock exchange listing, for the period of his mandate as Supervisory Board member Mrs. Tiborné Losonczi independent as of the stock exchange listing, 9

10 for the period of her mandate as Supervisory Board member Péter Székács independent as of the stock exchange listing, for the period of his mandate as Supervisory Board member The Audit Committee shall provide assistance to the Supervisory Board in supervising the financial reporting regime and in selecting and cooperating with the auditor. The Audit Committee may engage external expert(s) for the purpose of performing its tasks, as needed. The Audit Committee supervises the effeiciency of risk management, the operation of the system of internal controls and the activity of the internal audit, which tasks were performed by the Supervisory Board prior to the initial public offering of the Company s shares. 5. Criteria to be taken into consideration upon the evaluation of the performance of the Board of Directors, the Supervisory Board, the management and their individual members The Board of Directors and the Supervisory Board annually evaluate their performance and prepare a report thereon for the General Meeting. Such report is approved by the General Meeting at its ordinary session to be held on the subject of the approval of the financial statement prepared in relation to the previous business year. The positions of Chairman and Chief Executive Officer of the Company are held by the same person, however, the Chief Executive Officer does not participate in the employee incentive scheme (except for the share option exercisable in his capacity as member of the Board of Directors), thus the principle of objectivity is not breached in relation of the evaluation of his performance. The Chairman CEO is also a shareholder of the Company, therefore, in his case the sense of ownership ensures the principal motivation for the achievement of the Company s objectives. The Company has a well-structured incentive (rewarding) scheme, which extends from senior managers (except for the CEO) down to the lowest level of administration. The Company s bonus scheme contributes to several objectives: - strengthening of organizational thinking and activity - supporting the management in achieving the objectives (top-down grading and delegation) - adequate share from corporate profits (strengthening of sense of ownership) - feedback to personnel The incentive scheme primarily applies to colleagues who have a key role in the organization (executives, middle managers, specialists), the corporate portion of their bonus (Group EBITDA) is subject to their impact: in the case of senior managers this rate is generally 30-50%, while in the case of middle managers it is 20-25%. The system ensures the reconciliation of specialized field objectives and individual objectives, the manager responsible for the given field, in consultation with HR, reviews the bonus targets of all eligible colleagues. The majority of the indicators can be verified by Controlling, or be clearly measured based on various reports and statements. The bonus amounts offer true motivation, at senior management level to the extent of 40-50% (in proportion to the annual salary), at middle management level to the extent of 20-30%, while at specialist level an amount corresponding to 1or 2 months salary is paid in the case that the objectives are achieved. Bonus targets are provided in writing to each colleague concerned by their managers at the beginning of 10

11 the business year at the interview which evaluates the performance of the previous year and specifies the tasks for the next year. The bonus targets include the criteria for disqualification, as well as pro rata payment, thereby also ensuring the efficiency of the scheme. The majority of targets are specified at annual level, supplied to colleagues at the beginning of the year and paid following the closing of the business year, until April. The incentive scheme is continuously improved and clarified, at present it is characterized by the following features: - support of SMART (specific, measurable, assignable, realistic, time-related) objectives - managerial responsibility is included among the objectives (e.g. succession) - instead of varying periods a uniform monthly or annual measurement and corresponding payments - specific group and individual proposals were made, aiming at rationalization real incentives Sales personnel receive incentives within the framework of the commission system in proportion to sales, therefore they receive no bonus payments. 6. Auditor The Auditor shall be elected by the General Meeting for a definite period, but at least for a period ending on the date of the closing of the General Meeting concluding the business year of the election and approving the consolidated balance sheet, but in any case by no later than June 30. The Auditor shall be responsible for carrying out the audit according to the relevant regulations and to provide an independent audit report to determine as to whether the annual financial statement of the Company is in conformity with legal requirements, and whether it provides a true and fair view of the company s assets, financial position and profit or loss and the results of operation. Shareholders, members of the Board of Directors and members of the Supervisory Board of the Company and the family members of these persons may not serve as Auditor. An employee of the Company may not serve as Auditor during the period of his employment and for a period of three years thereafter. The Auditor may not provide any service to the Company and may not collaborate with the Board of Directors in a way that may imperil his ability to carry out his auditing duties objectively and independently. The Auditor of the Company is Ernst&Young Könyvvizsgáló Korlátolt Felelősségű Társaság (registered seat: 1132 Budapest, Váci út 20). During the period subject to this report the Auditor conducted no activity and provided no service that may imperil its ability to carry out its duties independently. 7. Presentation of the system of internal controls The members of the Supervisory Board prepare the work schedule for the internal audit in cooperation with the internal audit group, based on the identification of possible risk factors at the Company. The 11

12 internal audit prepares its report for the Supervisory Board on the examination conducted based on the work schedule and the proposed risk management procedures. The above described control activity will be taken over by the Audit Committee as from the stock exchange listing of the Company s shares. 8. Overview of the method of exercising shareholder rights Shareholders shall be entitled to exercise shareholder rights vis-à-vis the Company in possession of the shares, on the basis of the certificate of ownership, following their entry into the register of shareholders. No certificate of ownership is required for the exercising of shareholder rights if entitlement is verified by way of the shareholder identification procedure. The Company accepts the certificate of deposit issued by KELER Zrt., as depository, or issued based on the certificate of KELER Zrt. as verification of the ownership title of the share. Shareholders whose name was not entered into the register of shareholders, and shareholders who acquired their shares in violation of the regulations on the transfer and acquisition of shares shall not be entitled to exercise the rights attached to the shares vis-à-vis the Company. The register of shareholders shall be kept by KELER Központi Értéktár Zrt. pursuant to the mandate granted by the Board of Directors. Any shareholder who has been formally identified must be registered in the register of shareholders upon request made to the keeper of the register. In accordance with the provisions under Section 3:246(3) of the Civil Code, the keeper of the register of shareholders may refuse to comply with the request of a formally identified person if such person has acquired his shares in violation of the regulations on the transfer of shares set out by law or the Articles of Association. Registered shareholders must be deleted from the register of shareholders upon their request. Each shareholder shall be entitled to participate in, request information from and make comments and proposals, as well as vote at the General Meeting, if holding shares with voting rights. Each share of the Company shall carry one vote. Shareholders may exercise their voting rights only if they have performed their capital contribution. Shareholders shall be entitled to receive a share from the Company s profit that is available and has been ordered for distribution by the General Meeting in the percentage in proportion with the nominal value of their shares. Dividends shall be paid to the shareholders that are listed in the register of shareholders at the date of the shareholder identification relating to the dividend payment date announced by the Company. The date of the shareholder identification relating to the dividend payment date cannot be earlier than the fifth trading date following the general meeting resolving on the dividend payment. Dividends may be paid by means other than cash. Shareholders shall be entitled to receive dividends based on the capital contributions they have already paid up. The Company shall pay dividend to the shareholders by way of bank transfer as of the date specified by the relevant resolution of the General Meeting. Dividend payment shall start on the date set forth in the resolution of the General Meeting resolving on the approval of the financial statements and the allocation of after tax profit. However, at least ten business days shall elapse between the date of the first publication of the communication of the resolution of the General Meeting on the amount of dividend to be paid and the date of commencement of dividend payment. Shareholders of the Company who control at least 1% of the voting rights may exercise minority rights. The detailed rules applicable to the exercise of shareholder rights are contained in the Articles of Association: 12

13 9. Overview of the rules applicable to the convening and conducting of the General Meeting The supreme body of the Company is the General Meeting. Shareholders are entitled to exercise their rights at the General Meeting in person or through a proxy. Only those shareholders or shareholder proxies may attend the General Meeting who were entered into the register of shareholders by no later than on the second business day preceding the date of commencement of the General Meeting. The invitation to the General Meeting shall be published at the places of publication specified in the Articles of Association thirty days prior to the first day of the General Meeting. The General Meeting shall have a quorum if it was convened in accordance with the relevant rules and regulations, and if the shareholders representing more than 50% of the registered capital of the Company are present. If the General Meeting fails to have a quorum within one (1) hour from the time designated for commencement thereof, the Chairman of the General Meeting shall announce the date of the reconvened General Meeting as set out in the invitation to the General Meeting. The reconvened General Meeting may be called for a date following the date of the original General Meeting by not less than at least ten (10) days and not more than twenty-one (21) days. The reconvened General Meeting may be held at the same venue, or any other venue specified in the invitation to the General Meeting. The reconvened General Meeting shall have a quorum for the issues on the original agenda irrespective of the voting rights represented by those present. The General Meeting adopts its resolutions by a simple majority of the votes considered upon the establishment of a quorum, except for the matters indicated by the law and specified in Paragraphs (a)-(d) of Section of the Articles of Association, in respect of which the General Meeting adopts its resolutions by a three-quarters majority of the votes. Each share having a nominal value of EUR 0.35 shall carry one vote. Each shareholder must cast all of his votes in the same way. The detailed rules applicable to the convening and conducting of the General Meeting are contained in the Articles of Association: Overview of the Company s disclosure and insider trading policies When making any disclosures the Company shall proceed in compliance with the effective legal regulations and the stock exchange rules. Accordingly, the notifications, notices to shareholders and announcements of the Company shall be published on the website of the Company ( on the website of the BSE, in the cases specfied by law in the Company Gazette. The Company is committed to fair trading of publicly traded securities. In respect of issues concening insider trading the Company shall at all times comply with the effective legal regulations and the stock exchange rules. 11. Remuneration Statement Remuneration of the members of the Board of Directors, the Supervisory Board and the management a) Remuneration of the members of the Board of Directors, social and other benefits: Prior to the initial public offering of the Company s shares the members of the Board of Directors received no remuneration. Simultaneously with the approval of this report the General Meeting resolved that the members of the new Board of Directors set up with view to the change of the Company s corporate form shall receive an annual fee in the amount of EUR 50,

14 b) Remuneration of the members of the Supervisory Board and the Audit Committee, social and other benefits: Prior to the initial public offering of the Company s shares the members of the Supervisory Board received no remuneration. Simultaneously with the approval of this report the General Meeting resolved that the members of the new Supervisory Board set up with view to the change of the Company s corporate form shall receive an annual fee in the amount of EUR 10,000, while those members of the Supervisory Board, who are also members of the Audit Committee shall also receive an additional (on top of the fee received as Supervisory Board members) fee in the amount of EUR 20,000. c) Other incentive schemes: Simultaneously with the approval of this report the General Meeting delivered a resolution on the guidelines for the long term remuneration and incentive schemes for members of the Board of Directors, members of the Supervisory Board and executive employees, which document is available on the Company s website 14

15 REPORT ON COMPLIANCE WITH THE CORPORATE GOVERNANCE RECOMMENDATIONS As part of the Corporate Governance Report, the Company states by completing the following tables the extent to which it has implemented the recommendations and proposals set out in the sepcified sections of the Corporate Governance Recommendations issued by Budapesti Értéktőzsde Zrt. ( CGR ) in its own corporate governance. Level of compliance with the Recommendations The company specifies whether it has applied the relevant recommendation or not, and if not, it describes briefly the reasons why a particular recommendation has not been implemented. A The Board of Directors has ensured that shareholders have access, in a timely manner, to the information required for exercising their rights. A The Company follows the "one share one vote" principle. A A The Company ensures that owners may participate in the General Meeting of the subject to fulfillment of the same conditions. Only those issues are put on the agenda of the General Meeting which have been precisely defined and described. The proposals for resolution comprised the recommendation of the Supervisory Board and included a detailed explanation of the effects that the decision. A Shareholders comments and additions to the agenda items were published no later than two days before the General Meeting. Prior to the initial public offering of the Company s shares proposals for the General Meeting and shareholders comments and additions to the agenda were available for inspection at the secretariat of the chief executive officer, preparatory materials were published, only if so requested by any of the shareholders. A Comments made in respect of the agenda items of the General Meeting were available to the shareholders no later than at the time of registration. 15

16 Written comments made on the agenda items were published two business days prior to the General Meeting. Prior to the initial public offering of the Company s shares the comments made on the agenda items were available for inspection at the secretariat of the chief executive officer, preparatory materials were published, only if so requested by any of the shareholders. A A A The election and recall of executive officers took place by way of a separate resolution in respect of each person. The scope of responsibilities of the Board of Directors include those specified in Section The Board of Directors held meetings at pre-determined regular intervals. The Supervisory Board held meetings at pre-determined regular intervals. The by-laws of the Board of Directors provide for the conducting of meetings that cannot be planned in advance and the adoption of resolutions by means of electronic communications devices. The by-laws of the Supervisory Board provide for the conducting of meetings that cannot be planned in advance and the adoption of resolutions by means of electronic communications devices. A The Supervisory Board of the Company has a sufficient number of independent members to insure impartiality. The above referenced clause on sufficient number of independent members will become effective upon the initial public offering of the Company s shares. 16

17 A The Supervisory Board requested at regular intervals (in relation to the annual CG report) its members considered to be independent to confirm their independent status. The above referenced provision will become effective upon the initial public offering of the Company s shares. A The Company published on its website its guidelines concerning the independence of the Supervisory Board and the applied criteria of independence. The above referenced clause on independence will become effective upon the initial public offering of the Company s shares. The criteria for independence are included in the by-laws of the Supervisory Board approved simultaneously with this report, which by-laws will be published on the website. A Members of the Board of Directors notified the Board of Directors (the Supervisory Board / Audit Committee), if he/she (or a person who is closely related to him/her) had any material personal interest in any transaction of the Company (or any of its subsidiaries). A Transactions concluded between board and management members (and the persons related thereto) and the Company (or its subsidiary) were conducted in accordance with the regular business practices of the Company, but on the basis of stricter rules of transparency than is customary in the course of regular business practices. Transactions, specified in Section 2.6.2, which depart from regular business practices and the conditions thereof were accepted by the Supervisory Board (Audit Committee). A A The board member informed the Supervisory Board / Audit Committee (Nomination Committee), if he/she was requested to act as a member on the board or in the management of a company which is not a member of the company group. The Board of Directors established its guidelines for information flow within the Company, as well as the management of insider information and supervised compliance therewith. The referenced guidelines will be adopted upon the initial public offering of the Company s shares, by the Board of Directors elected simultaneously with this report. 17

18 The Board of Directors established its guidelines for insider trading of securities and supervised compliance therewith. The referenced guidelines will be adopted upon the initial public offering of the Company s shares, by the Board of Directors elected simultaneously with this report. A The Board of Directors formulated remuneration guidelines for the remuneration and evaluation of the performance of the Board of Directors, the Supervisory Board and the management. The Supervisory Board formed an opinion on the remuneration guidelines. The guidelines on the remuneration of the Board of Directors and the Supervisory Board and amendments thereto were approved by the General Meeting as a separate agenda item. A A A The Board of Directors evaluated its performance in respect of the given business year. The Supervisory Board evaluated its performance in respect of the given business year. The supervision of the performance of the management and the determination of its remuneration falls within the competence of the Board of Directors. The framework of and changes to benefits due to the members of the management and different from what is customary were approved by the General Meeting as a separate agenda item. A The General Meeting approved the principles of share-based remuneration schemes. Prior to the decision of the General Meeting concerning share-based remuneration schemes the shareholders were provided with detailed information (at least as described in Section 2.7.4) 18

19 A The Company has prepared a Remuneration Statement and presented it to the General Meeting. The Remuneration Statement contains the remuneration of individual members of the Board of Directors, the Supervisory Board, and the management. A The Board of Directors or the committee operated thereby is responsible for the supervision and control of the Company s entire risk management. The Board of Directors verifies the efficiency of risk management procedures at specific intervals. The Board of Directors took the necessary steps to identify key risk areas. A The Board of Directors formulated the principles of the system of internal controls. The system of internal controls established by the management ensures the management of risks the Company is exposed to and the achievement of the Company s objectives. Prior to the initial public offering of the Company s shares the system of internal controls was developed by the Supervisory Board in cooperation with the internal audit. A A When developing the system of internal controls the Board of Directors took into consideration the criteria specified in Section The management is responsible for establishing and maintaining the system of internal controls. 19

20 A The Company developed and independent internal audit function, which reports to the Audit Committee / Supervisory Board. The internal audit group reported at least once to the Audit Committee / Supervisory Board about the operation of risk management, internal control mechanisms and corporate governance functions. A The internal audit activity is carried out by the internal audit function on the basis of the mandate given by the Audit Committee / Supervisory Board. Internal audit is organisationally separate from operative management. A The internal audit plan was approved by the Board of Directors (Supervisory Board) upon the recommendation of the Audit Committee. In the course of the operation as a private company limited by shares, the Company was not under the obligation to establish an Audit Committee. A The Board of Directors prepared a report for shareholders on the operation of internal controls. In the course of the operation as a private company limited by shares, the Company was not under the obligation to prepare a report for shareholders on the operation of internal controls. The Board of Directors developed its rules of procedure regarding the receipt and processing of reports on the operation of internal controls and the preparation of its own report. In the course of the operation as a private company limited by shares, the Company was not under the obligation to comply with such requirement. A The Board of Directors identified the key deficiencies of internal controls and reviewed and re-evaluated the relevant activities. 20

21 A A The Board of Directors, the Supervisory Board and the Audit Committee were notified in each case when the auditor s assignment, by its nature, may have incurred considerable expenditure, may have given rise to a conflict of interest or may have had any other material impact on business operations. The Board of Directors notified the Supervisory Board of any assignment given to the economic operator providing audit services or an external audit expert in connection with an event which has material impact on the operation of the Company. The Board of Directors specified in advance in a resolution the events which may be considered to have a material impact on the Company s operation. In the course of the operation as a private company limited by shares, the Company was not under the obligation to comply with such requirement. A The Company published on its website the tasks delegated to the Audit Committee, and the objectives, rules of procedure and composition (indicating the name, brief resume and the date of appointment of the members) of the committee. The Audit Committee was set up with view to the initial public offering of the Company s shares on the stock exchange, simultaneosuly with the approval of this report. A A The Company published on its website the tasks delegated to the Nomination Committee, and the objectives, rules of procedure and composition (indicating the name, brief resume and the date of appointment of the members) of the committee. The Company published on its website the tasks delegated to the Remuneration Committee, and the objectives, rules of procedure and composition (indicating the name, brief resume and the date of appintment of the members) of the committee. In the course of the operation as a private company limited by shares, the Company was not under the obligation to comply with such requirement. A The Audit Committee / Supervisory Board supervised the efficiency of risk management, the operation of the system of internal controls and the internal audit activity. 21