Contents PART I. THE BOARD OF DIRECTORS AND ITS MEMBERS... 2 PART II. OPERATIONAL RISK MANAGEMENT... 5 PART III. INTERNAL AUDIT FUNCTION... 6 PART IV. INVESTOR RELATIONS... 8 PART V. REMUNERATIONS... 10 ANNEX I 1
PART I. THE BOARD OF DIRECTORS AND ITS MEMBERS COMPOSITION OF THE BOARD OF DIRECTORS 1. The Board is composed of five to seven (7) executive and non executive members. At least three members are non executive out of whom two members at least, are independent. The executive members are dealing with the daily management issues while the non executive members are responsible for the progress of all corporate issues. Among the non executive members independent members are appointed as well, at least two of whom are responsible for supervising the corporate activities. The members of the Board are chosen by professionally rewarding people who have experience, according to the criteria of the educational level and integrity. Thus, these members by inference are able to have an impartial overview and state an objective opinion on corporate matters. 2. During their tenure the independent non executive members may not own more than 0.5% of the share capital of the company or have any relation of dependence to the company or people that are connected to the company in any way when the member: is (according the law 3016/2002 or has been employee, executive officer or chairman of the Board of Directors of the company or subsidiary within the last three years, receives or has received within the last 12 months prior to the appointment of any other compensation except for the remuneration as member of the Board, which has been approved by the General Meeting of Shareholders, has (according the law 3016/2002 or had within the last year significant business relationship with the company or subsidiary of the company as a major client, provider or consultant or as a partner, shareholder, or member of the Board or a senior executive of a legal person who has this kind of affiliation with the company or subsidiary, 2
has been within the last three years a regular auditor of the company or subsidiary partner or employee providing a full audit of the company or subsidiary, has (according to the law 3016/2002) second degree affinity or marital relation with a non independent member of the Board, executive officer,director or major shareholder of the company or subsidiary, controls directly or indirectly through people connected with each other over 10% of the voting rights of the company or represent a significant shareholder of the company or the subsidiary, has been for more than twelve years on the board since the date of the first choice. 3. Nominations for the Board of Directors are audited by the Nomination Committee. This Committee ensures the efficiency and transparency of the process for the selection of board members. Responsibilities of the Committee: establishes the criteria and procedures for selecting and appointing members of the Board. evaluates at times the size and the composition of the Board and submits the proposals for review on the required profile, evaluates the current balance of qualifications, knowledge and experience in BoD and following this evaluation describes clearly the role and qualifications required to fill vacancies, identifies and selects the candidates, submits to the Board the proposals for the election of the BoD members. The Nomination Committee has at least three (3) to ten (10) members, non executive in their majority. The Committee is chaired by an independent non executive member. 3
Board Committees The Board of Directors has appointed three committees, a Remuneration Committee, an Audit Committee and a Nomination Committee. The Remuneration Committee is composed of the chairman of the BoD as well as an independent non executive member. The Audit Committee is composed of two independent non executive members and one independent member. The Nomination Committee should ensure the efficiency and transparency of the process for the selection of the BoD members. For the responsibilities of this committee see above. 4
PART II. OPERATIONAL RISK MANAGEMENT RISK MANAGEMENT The Board should maintain an effective internal control system for identifying and managing the major risks. Hence, the Board should appoint at least a -member operational risk management committee which will review regularly the effectiveness of the risk management control system. This committee is working in cooperation with senior executives of the company who are dealing with managing the strategic and core functions of the risks that the company faces. 5
PART III. INTERNAL AUDIT FUNCTION INTRODUCTION The Board of Directors also establishes the Internal Audit service which is an independent authority in order to ensure the proper operation of the company pursuant with the business goals, policy and procedures. The Internal Auditors are independent, are not under the hierarchy of any other unit of the company and they are supervised by the BoD. The Internal Audit service managerially reports to the Chief Executive officer and operationally to the Audit Committee of the BoD. Members of the BoD, managers or relatives of the above cannot be appointed as Internal Auditors. The company should notify the Capital Market Commission of any changes in the people or the organizing of the the internal audit within ten (10) working days after the change. The internal Audit service examines and evaluates the adequacy and effectiveness of the structure of the internal audit systems as well as the quality of the systems effectiveness in achieving the specific objectives of the Company. The main objective of Internal Audit is to provide the confirmation to the shareholders regarding the achivevement of the specific objectives of the company. The internal auditor works in accordance with independency, objectivity and confidentiality. He is also fully compliant with the International Standards for the Professional Practice of Internal Auditing, as well as with the policies and the procedures of the company. The Internal Audit Service has full access to all the files and data, employees, places and activities of the company, data which is necessary for the implementation of the project audit. The internal audit service is completely responsible for preserving the confidentiality of this data. The Board members should cooperate and provide information to the Internal Auditors and make easy in general their work by all means. The internal Audit diffuses the 6
responsibility of the auditee as the quality of the decision cannot be checked. It can be checked though the decision, the execution of the decision as well as the result of the decision. Responsible for the core of the project remains the auditee. PRINCIPLES OF THE INTERNAL AUDIT, QUALIFICATIONS AND RESPONSIBILITIES OF THE AUDITORS Article 4 Organizational independence of internal audit Head of Internal Audit: He is appointed by the BoD. The BoD approves the articles of Association under which the Internal Audit works. Reports operationally to the BoD and the Audit Committee of the Board. reports administratively to the Chief Executive officer of the company. Specifically the Board of Directors: Approves all the decisions regarding the appointment or the elimination of the Head of Internal Audit. Approves the Internal Audit Charter Operation. Approves the annual compensation of the Head of Internal Audit. Within the framework of functional reference the BoD as well as the Audit Committee: Receive notifications from the Head of Internal Audit on the results of internal Audit functions as well as other matters which the Head of Internal Audit considers most important. The Head of Internal Audit participates in private meetings with the Audit Committee without the presence of the directors whenever he believes it s necessary to preserve the independency. 7
Article 16 Internal Auditor access to books and records The Internal Audit Service has full access to all files and data, employees, places and activities of the company, data which is necessary for the implementation of the project audit. The internal audit service is completely responsible for preserving the confidentiality of this data. The Board members should cooperate and provide information to the Internal Auditors and facilitate in general their work by all means. Restrict access to the above may constitute limitation of the Internal audit operational framework and it is applied what has been metioned in the relevant point. AUDIT COMMITTEE Article 39 Audit Committee. The principle of the Committee. To help the Council in meeting its supervisory role regarding the financial reports, the Internal Audit System, the Internal Audit procedures as well as the procedures for checking the company s compliance with the laws, regulations and the internal operational policy. PART IV. INVESTOR RELATIONS The Investor Relations Department is responsible for direct and equal information for all shareholders and their service on the exercise of their rights. In particular, it must notify shareholders on their obligations of routine updating of the Company, as presented to the regulations of AIM Italia where companies of small and medium capitalization fall under, such as: the payment of dividends, new share issuance transactions, registration, resignation and conversion period for the exercise of the rights or changes in the initial time frame (eg. extension of time for exercising the right). 8
provide information about the ordinary and extraordinary general meetings and decisions. the acquisition and disposal of treasury shares or possible cancellation of any of these. the keeping and updating of the Company's share register, by contacting the AIM stock market in Milan. Disclosure of Information (price sensitive and non price sensitive information) This section of the company is responsible for monitoring the obligations of the company to the capital market and the stock exchange of Milan. In particular the office for company release is responsible for: Company s compliance with disclosure requirements as set out by the capital market commission of Milan. The company s contact with the responsible authorities of the Stock Exchange and the Capital Market Commission of Milan. Below there are described the obligations of the company to the relevant bodies which are monitored by the corporate announcements department. Liabilities of the company to the Capital Market Commission of Milan They are kept necessarily by the company and the AIM Italia rules for companies stand for her as they apply in any occassion. 9
PART V. REMUNERATIONS LEVEL AND STRUCTURE OF REMUNERATIONS The Board will establish a remuneration committee consisting exclusively of nonexecutive and independent members of the Board under the chairman. The committee should consist of at least three (3) members and the chair should be an independent non-executive board member. The duties of the Remuneration Committee are: The proposals to the Board on the remuneration of each executive member, including bonus and incentive-based remuneration related to the distribution of shares. The examination and submission of proposals to the Board concerning the overall size of the annual variable (ie excluding salary) compensation in the business. Remuneration disclosures The report of the remuneration of the Board will be included in the corporate governance statement and for each corporate use, should include: Policy and principles of the Company for the remuneration development of executive board members. The evaluation method of performance and calculation of the remuneration variable of executives, including quantitative and qualitative criteria taken into account. The main elements of the employment contracts of executives, including the duration of the contract The total remuneration paid to each member of the Board for his services to the Company and affiliated companies, broken down into salary, bonus 10
compensation and retirement, and a description of the type and amount of other allowances or benefits granted. 11
ANNEX I Instructions for preparing corporate governance statement The company for each corporate use will need to: 1. Include a special section of the annual management report, corporate governance statement, which contains, in conjunction with the provisions of Law 3873/2010: Notification of the voluntary compliance of the company with this Code. 2. Include the corporate governance statement in conjunction with Law 3873/2010 and the Code: Brief description of how the Board of Directors operates and information on: i. the number of Board meetings and the frequency of participation of each member in these meetings ii. the number of Board committee meetings and frequency of participation of each member in these meetings iii. brief description of the composition and operating conditions of work and responsibilities of board committees and a description of matters discussed at meetings iv. description of how performance evaluation of the Board and its committees Information for members of the Board, such as the following: i. determination of the President, Vice President (if any), the CEO and members of Board Committees and their Chairmen ii. determination of non-executive members that the Board considers independent and, where necessary, an explanation of the reasons that support this position iii. brief CVs of each member of the Board iv. length of Board tenure (including the end date) 12
v. reference to external professional commitments of Board members (including professional obligations as non-executive directors in other companies and nonprofit organizations) Information on risk management and internal audit: i. description of the main elements of risk management and internal audit ii. statement of the Board in relation to the conduction of an annual review of the corporate strategy, key business risks and audit control systems iii. if the statutory auditor or audit firm provide non-audit services to the company, evaluation of the impact that can this have on the objectivity and effectiveness of the statutory audit, taking into account the provisions in Law 3693/2008. Information on the remuneration of Board members. Towards this end will be incorporated in the corporate governance statement the report of the remuneration of Board members, in accordance with Annex I and the rules of the Code. 13