Corporate Governance & Shareholders' Assembly in PLIVA

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

2. 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

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

4. Benefits Higher level of accountability and transparency • Increased public confidence in the company • Made the company itself more efficient

5. 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

6. Shareholders’ Assembly • Purpose • Role • Competencies • Procedure

7. Purpose Give an opportunity to the shareholders to exercise their rights: • gather information • meet the management • discuss and ask questions • vote  participate in decision-making process • feel like the owners

8. Role • Company performance • Management effectiveness • Major changes in company status • Distribution of profits

9. Competencies • 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

10. So, what does it look like? Preparation phase • Notification • Participation requirements • Registration procedure

11. At the meeting • Opening the meeting • Management Board presentation • Discussion • Voting • Announcement of the results

12. 2001: PLIVA Ownership Structure Shareholders a) Shareholders of the ordinary shares b) GDR Holders Share capital 2,020,940,000 HRK = 20,209,400 shares

13. 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

14. 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 b) to follow the terms and conditions of the programme

15. Investors interests • 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

16. Conclusion • The structures for increased shareholder participation are already in place • Investors needs for corporate democracy expressed through Shareholders Assembly are still developing

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