Reasons and results of implementing principles of...

May 2006

www.podravka.com PODRAVKA GROUP Investor relations

Reasons and results of implementingprinciples of Corporate Governance

International Conference of the Banja Luka Stock Exchang eMay 2006

Lidija Kljaji ćHead of the President’s Office

Podravka, Croatia

May 2006


1 Podravka Group in brief

May 2006


Podravka Group in brief

One of the largest branded food company in the region The largest food company Podravka inCroatia

The secondPharmaceuticalcompany per MS

Brands

Strong distribution Covering key emergingnetwork markets

Distribution agreementswith Nestlé and Unilever Production Czech Republic,

facilities Slovakia, Poland,Slovenia

Mostly in Croatia(food, beverages

and drugs)

Vegeta is the strongest Podravka’s brand presentin more than 40 countries

Umbrella brand-symbol of quality

Rice and pulse Baby food Sweet powder products Spring water

Universal seasoning

May 2006


Vegeta in Poland

1 Lipton 11 Pudliszki 2 RMF FM 12 Jacobs3 Vegeta 13 Hortex4 Wedel 14 Blend-a-med5 Delicje Szampa ńskie 15 Nescafe6 Nivea 16 Hochland7 Adidas 17 Nokia8 Polska 18 Polsat9 Radio ZET 19 Knorr

10 TVN 20 Tymbark

• According to Young & Rubicam Vegeta is among the threebrands with the highest growth potential

• “Superbrand” award in Poland and inRussia

• Vegeta sales 2004: HRK 658 m EUR 88 m

Prof. of natural science Zlata Bartlinvented Vegeta in 1958

“Prof. Zlata Bartlfoundation” year 2002

May 2006


Podravka’s legal structure

Podravka d.d.

South EastEurope

CroatiaEast Europe

Companies, subsidiaries and representative offices by ma rket

• Sana d.o.o. (Slovenia)

• Podravka d.o.o. (Slovenia)

• Podravka d.o.o. Sarajevo (B&H)

• Podravka exp.-imp. (Maced.)

• Podravka d.o.o. Belgrade(Serbia)

• Podravka d.o.o. (Montenegro)

• Podravka d.d. (Kosovo)

• Belupo d.d.

• Danica d.o.o.

• Poni d.o.o.

• Ital-Ice d.o.o.

• Koprivnička Tiskarnica d.o.o.

• Podravka Inženjering d.o.o.

West Europe,USAand othersCentral Europe

• Podravka Internationalexport-import Sp.z.o.o. Warsaw(Poland)

• Podravka Polska Sp.z.o.o. Kostrzyn(Poland)

• Podravka InternationalKft.Budapest(Hungary)

• Podravka-Lagrisa.s.(Czech Rep.)

• Podravka Internationals.r.l.,Bucharest(Romania)

• Podravka d.d., Kiev (Ukraine)

• Podravka d.d. Moscow (Russia)

• Podravka, Riga, Latvia

• Podravka InternationalDeutschland-KONAR GmbH(Germany)

• Podravka InternationalPty.Ltd,Sydney(Australia)

• Podravka InternationalUSA,New York, USA

May 2006


PodravkaFood

PharmaBeveragesMerchandise

Food and Beverages Pharma

BA

• Spring water

• Carbonatedwater

• Deit

• Other softdrinks

• Adria

• Nestlé

• Unilever

• Seasonings-Vegeta andPodravka dishes

• Baby foodand Snacks

• Meat• Rice andpulse

• Fruit andvegetables

• Others .......

• Generic drugs

-RX

-OTC

Products

SBA

Functional organization

May 2006


2 History of Corporate Governance inPodravka

May 2006


History of Corporate Governance inPodravka

1992

State ownedcompany Podravka went throughprivatization process

Podravka becamethe joint stockcompany, majoritystake held byGovernment, 35% privatized by smallshareholders

1993 1997

Podravka introduced newArticles ofAssociationproviding certain CG principles

Majority ofshareholdings private, financial restructuring

1998

Listing on the ZSE, Articles of Associationamended in order to improve CG, EBRDacquired 10% of stake

May 2006


History of Corporate Governance inPodravka

2003 2004 2005

Internal Auditorappointed

EBRD divested itsshareholding, itsmission beingfulfilled

Development of CGEcouraged by lawin Croatia-Boardshad to state thatthey were workingaccording to the CG rules

Employeerepresentativejoined theSupervisory Board

CorporateGovernance Codeadopted

May 2006


Podravka’s Corporate Governance Code

CorporateGovernanceCode

Follows OECDPrinciples of CG,Laws, ZSE rules

and SEC

Equal treatment ofshareholders

and their rightsand duties

Rights andduties

of the Boards

Disclosure and Transparency

Corporate governance involves a set of relationshipsbetween a company’s management, its board,

its shareholders and other stakeholders.*

Source: (OECD Principles of CG, Preamble)

First OECD CG ruleswere issued in 1999, revised in 2003 andfirst internationally

accepted CG rules in2004

May 2006


3 Implementation of CorporateGovernance Code

May 2006


Company and spheres of influence

MB

Executives

Managers

Employees

ShareholdersSu

perv

isor

yB

oard

Unions

Laws

Regulations

Markets

Society’s Expectations

May 2006


Accountablity

Company: Audit committee, boards, employees

Laws and regulations: Governments, regulators, government agencies

Markets: Customers, suppliers, investors

Society: Local population, politicians, NGOs

To whom?

Who is primarily accountable? Finance Dept., Legal Dept., HR

May 2006


Accountability

Through what ?

For what? Actions of staff, policies, procedures, company practi ces, recruitment, retention policies, practices and perform ance

Corporate Governance Code,Ethical Code

Standardization of processes

Laws, rules and practices

Constant monitoring

Gathering and processing information

External stakeholders

Internal stakeholders

May 2006


Rights and duties of Shareholders

Rights and Duties

• Secure methods of shareownership registration

• Free transfer of sharesand dividend payout withinresonable time

• Regular and timelydelivery or access to relevant reliableinformation on Podravka

• Participate and vote at regular and extraordinaryGA in person or by proxy

• Place the items on theagenda and raise issues at the GA in compliance withlaw, AA of Podravka

• Approval of annualconsolidated fin. reports

• Distribution of Podravka’s profit

• Recall and appointment ofSB members

• Recall and appointment ofexternal auditor

• Adopting and amending ofthe Art.of association at the GA in person or byproxy

• Adopting of all decisionsthat GA is authorised to deliver

Regulated by:

Relevant CroatianRegulations

(Croatian Companies Act, SEC,

Stock Exchange Rules)

Articles of Association ofPodravka d.d.

Corporate GovernanceCode

Legaldept.

Investorrelations

Companysecretary

Financedept.

Corporatecommunic.Delivered by:

May 2006


Shareholders enjoyan equal positionin the Company

under equal terms

Voting right

(one share one vote)

Procedures for theorganization and work

of Podravka d.d.General Assembly

provides equal treatmentof shareholder voting

Share dealingsare forbidden to personsthat within Podravka d.d.

have access to privileged informationwithin ‘close period’

Shareholder equality principle

May 2006


Management Board and Supervisory Board– rights and duties

Line Management Business Unit Management

Executive Management

Owners

Shareholders

Supervisory Board

Management Board

Recall and appointmentof SB members

Responsible for reporting to shareholdersMonitor compliance with law,monitoring of Internal control,reporting consistency...

Develop strategy, report to SB onresults and other relevant information,organise accounting and financial control,provide management supervision...

Recall and appointmentof MB members

The MB in cooperation withthe SB provides strategicguidelines as well as efficient supervisionof management operations.The MB and the SB are responsibleto the shareholders and to the company.

May 2006


• Overall company goals

• Appointments in the MB and SB

• The remuneration policy of the MBand management

• The appointment of auditors

• Business operations of particularsectors

• Main risk factors

• Significant employee orstakeholder related issues

• Transactions with related parties

Disclosure and transparency

Mandatory disclosure Occasional informingAccounting

Controlling

Treasury

LegalDepartment

External Audit

Internal Audit

Companysecretary

InvestorRelations

CorporateCommunications

• Financial and business reportsunder regulations of the Repub.of Croatia (quarterly)

• Public disclosure of marketsensitive information inaccordance with the Rules ofthe ZSE

Podravka d.d. strive to provide shareholders with acce ss to reliable, up-to-date and consistent information

in a regular, timely and uniform manner

May 2006


4 Positive impacts achieved

May 2006


The benefits of a good CG

Customer preference in doing business with you

Your ability to charge premiums for products and services

Sharehold support for your organization in times of controv ersy

Your company’s value in the financial market

Positive impact on share price

Better corporate reputation

May 2006


Additional value for the brands

Vegeta ‘Superbrand’

2004 in Poland

2005 in Russia

Podravka ‘Superbrand’

2005 in Slovakia

May 2006


Communication to consumer-important stakeholder

‘Silver apple’ for outdoorpromotion “Mild or hot?”The reward from Moscow InternationalAdvertising Festival is a acomplishment ofcontinuous effort in building strongPodravka image as a modern andcontemporary Company

Acording to the survey with leadingeconomy journalists in thecountry,Podravka is rated to beamong the companies with thebest PR in Croatia

Coolinarika.com has beenrewarded with WorldSummit Award – HrvatskaCoolinarika.com represente Croatia at the World Contest in Tunis incopmetition with 167 statesRed Dot Essen, Moscow,

Menlo Park USA, Opatija

Numerous design awards for AnualReport

Corporate SocialResponsibility status

Podravka has been rewared forthe greatest achievement inInternet Technology in Croatia

May 2006


Podravka’s reputation in SEE

3,4

3,6

3,7

3,7

3,8

3,8

3,8

3,9

4,0

4,2

4,2

4,2

4,2

4,2

4,2

4,2

4,3

4,3

4,6

3,6

3,3

3,8

4,1

4,7

4,3

3,4

4,0

3,8

3,7

4,2

3,7

4,2

3,4

3,9

3,5

3,8

4,0

4,1

4,5

4,2

3,4

4,0

3,9

4,2

4,0

4,3

3,8

4,3

4,2

4,2

4,2

4,3

4,6

3,5

Agrokomerc

Agrokor

Maggi

Kolinska

Vispak

Knorr

Lura

Aleva

Dr Oetker

Vitaminka

Centroproizvod

Alkaloid

Eta

Agroplod

Podravka

Droga

Takovo

Vindija

Nestle

Total CRO SLO B&H S&MN MAC

Source: Prizma, CATI (Computer Assisted Telephone Interviewing), 2004.

May 2006


Inclusion of PODR-R-A in SETX- Wiener Börse Index

• On February 15, 2006 Podravka’s ordinary share isincluded in Wiener Börse Index called SETX (South-East Europe Traded index)

• The primary selection criterion is the marketcapitalization of in the form of capitalized free floatbesides that there are other criteria like liquidity, marketinterest and availability of prices

Source: Wiener Börse ‘Rules for the SETX’

May 2006


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