Corporate Governance

Corporate Governance Principles of Krka (the Company) are based on the current legal framework, internal acts of the Company and established Corporate Governance practice. Under the current legal framework the two-tier Corporate Governance system has been introduced in the Company consisting of two bodies: Management Board and Supervisory Board. Corporate Governance Principles of the Company assure the efficient dialogue with Company's shareholders that enables future growth and development of the Company.

Corporate Governance Code :

The Ljubljana Stock Exchange together with the Managers’ Association of Slovenia and the Association of Supervisory Boards’ Members prepared the Slovene Corporate Governance Code (the Code). The aim of the Code is to develop transparent and effective corporate governance in Slovenia.

The relevant Code is publicly available in Slovene and English language on the Ljubljana Stock Exchange web page .

The Company publishes the Statement of Compliance with the Code in the annual report and on its web page.

Articles of Association:

The Articles of Association, among other, regulates the following:

• share capital and increase/decrease of share capital,
• shareholders' rights,
• composition and functioning of company's bodies (Management Board, Supervisory Board and General Meeting),
• informing shareholders.

General Meeting:

In accordance with the Corporate Law, the General Meeting is the highest decision making authority of the Company. On the General Meeting the shareholders interest(s) and will is directly enacted. The General Meeting adopts fundamental and statutory decisions.

The Management Board convenes regular Annual General Meeting once a year, in the first half of the business year¹. The Annual General Meeting convocation is publicly announced at least 30 days prior to the General Meeting date.

The participation at the General Meeting is enabled to shareholders recorded in the shareholders' database held at the Central Securities Corporation, Ljubljana, on relevant shareholders record date stated in the convocation notice and who apply for the general meeting. The participation to the General Meeting is also enabled to shareholders' representatives and proxies who file appropriate Power of Attorney when applying for General Meeting attendance.

Supervisory Board:

The composition of the Supervisory Board is determined by the Articles of Association of the Company. The Supervisory Board consists of 9 members:

• 6 members are elected by the General Meeting. The President of the Supervisory Board is always elected from Supervisory Board members elected by the General Meeting.
  
• 3 members are workers' representatives in the Supervisory Board and are elected by the workers' council of the Company.

The Supervisory Board members are elected for the mandate of 4 years and can be re-elected.

In the two-tier corporate governance system the principal function of the Supervisory Board is to oversee business operations and management of the Company. Therefore, the Supervisory Board of the Company:

• appoints the Management Board for the mandate of 5 years;
  
  
• appoints the Audit Committee for preliminary verification of the Annual Report, verification of the Auditor's Report by the external auditor and for approval of mid-term and yearly program of activities as well as approval of semi-annual and annual reports of the Company’s Internal Audit. The Audit Committee is composed of 6 members of the Supervisory Board and represents continuous operating body of the Supervisory Board. The Audit Committee overlooks the business operations of the Company and the management activities of the Management Board for the purpose of supporting Supervisory Board's decision making. The functioning of the Audit Committee is governed by the Audit Committee Rules of Procedure adopted by the Supervisory Board;
  
• appoints the Nomination and Remuneration Committee that assists the Supervisory Board and prepares the proposals regarding candidate criteria and nominations for the Management Board; prepares the proposals and criteria for evaluation of the performance of the Management Board and compensation of the members; prepares the criteria for evaluation of the performance of the Supervisory Board and for compensation of the President and members of the Supervisory Board. The Committee is composed of 3 members of the Supervisory Board and represents permanent operating body of the Supervisory Board. The functioning of the Nomination and Remuneration Committee is governed by the Nomination and Remuneration Committee Rules of Procedure adopted by the Supervisory Board.
  
• verifies and confirms the Annual Report of the Company and presents the report on verification of the Annual Report to the Annual General Meeting. The Supervisory Board also presents to the Annual General Meeting its opinion regarding the Auditor's Report by the external auditor, which is enclosed in the Annual Report. Therefore, the Supervisory Board establishes weather Annual Report, with accompanying financial statements, gives a complete, true and fair view on business operations, performance and financial position of the Company for the ended business year;
  
• verifies the Management Board's proposition regarding Accumulated Profit distribution for the ended business year;
  
• proposes to the Annual General Meeting - on the basis of the presented Annual Report, the report on verification of the Annual Report and proposed resolution on Accumulated Profit distribution - to impair the discharge to the Management Board and of the Supervisory Board for the ended business year.

According to the legislative framework, it is obligatory for the Supervisory Board to meet twice within a business year i.e. once per half year period of the current business year. The Supervisory Board of the Company, however, meets at least four times within the current business year, i.e. at least once per each quarter in the current business year.

The Management Board continuously, regularly and timely prepares and presents appropriate materials (analyses, comparisons, explanations, etc.) to the Supervisory Board for the purpose of performing supervisory function of the Supervisory Board.

Management Board:

The Management Board is appointed by the Supervisory Board. The Supervisory Board represents Company's interests in relations to the Management Board.
The Management Board consists of 5 members:

• President of the Management Board, represents the Company absolutely,
  
• three members of the Management Board,
  
• Worker Director, appointed by workers' council of the Company, represents the workers' interests regarding employment and social issues. Worker Director does not have authorization for representation of the Company.

The Management Board manages the Company and makes business decisions independently and on its own responsibility. The operating procedures and assignment of responsibilities within the Management Board is governed by the Management Board Operations Regulations.
The Management Board is appointed for the mandate of 5 years and could be re-appointed by the Supervisory Board.

The Management Board is appointed for the mandate of 5 years and could be re-appointed by the Supervisory Board.