Dedicated to Health Corporate Governance and the Shareholders’ Assembly in PLIVA Barbara Majcen OECD Corporate Governance Roundtable Bucharest, September 2001

 1 Corporate Governance in PLIVA  Corporate Governance policy has been developing since PLIVA became a joint stock company (1993) and its listing on the LSE and ZSE (1996)  These Principles of Corporate Governance were adopted by the Management and Supervisory Boards in 1999  This was a first in Croatia, especially the introduction of separate governance committees

 2Origins  The Croatian Corporation Act (based on the German model)  Rules of Stock Exchanges (Zagreb and London)  Recommendations from various expert consultants  Our own experience

 3Benefits Higher level of accountability and transparency  Increased public confidence in the company  Made the company itself more efficient

 4 The main principles  Generation of shareholder value  Equal treatment of the shareholders  Election of experienced and independent persons as members of the Supervisory Board and skilful management  Clear division of the competencies and responsibilities between the boards  Performance in accordance with legal regulations and high ethical standards  Management of shareholder expectations

 5 Shareholders’ Assembly  Purpose  Role  Competencies  Procedure

 6Purpose Give an opportunity to the shareholders to exercise their rights: Give an opportunity to the shareholders to exercise their rights: gather informationgather information meet the managementmeet the management discuss and ask questionsdiscuss and ask questions vote  participate in decision-making processvote  participate in decision-making process feel like the ownersfeel like the owners

 7Role  Company performance  Management effectiveness  Major changes in company status  Distribution of profits

 8Competencies  Annual reports  Management and Supervisory Board activities and performance  Supervisory Board appointment / dismissal  Appointment of the Company’s Auditor  Change of Articles of Association  Increase and decrease of share capital  Share buy-back  Merger  Acquisition (class 1 and take-over)  Distribution of profits

 9 So, what does it look like? Preparation phase  Notification  Participation requirements  Registration procedure

 10 At the meeting  Opening the meeting  Management Board presentation  Discussion  Voting  Announcement of the results

 : PLIVA Ownership Structure Share capital 2,020,940,000 HRK 2,020,940,000 HRK = 20,209,400 shares = 20,209,400 shares Shareholders a) Shareholders of the ordinary shares a) Shareholders of the ordinary shares b) GDR Holders b) GDR Holders

 12 PLIVA’s GDR Programme  PLIVA GDRs representing 20% of one ordinary share (1 share = 5 GDRs)  PLIVA’s Depository: Bankers Trust Company (BTC)  BTC as the Depository is the legal owner, while GDR holders are the beneficial owners

 13 Participation of GDR holders in SA  BTC as the legal owner has a role to:  receive the notice of shareholders meeting  pass this information onto GDR holders  grant the proxy for voting, unless it is instructed otherwise by the GDR holders  After reviewing the materials, GDR holders have the options: a) to decide to vote on the agenda  cancel or convert their GDRs into ordinary shares, or GDRs into ordinary shares, or b) to follow the terms and conditions of the programme

 14 Investors interests Transparency in disclosure Transparency in disclosure Following LSE rules on communication Financial reporting Press releases Road shows, conference calls, video conferences In-house presentations and meetings Internet web page Shareholder value Shareholder value

 15Conclusion  The structures for increased shareholder participation are already in place  Investors needs for corporate democracy expressed through Shareholders Assembly are still developing

Dedicated to Health Corporate Governance and the Shareholders’ Assembly in PLIVA OECD Corporate Governance Roundtable Bucharest, September 2001