corp_html/multi/AboutUs-Governance.htm

<p align="center"><b>Corporate Governance Principles</b></p>
<p>With clearly defined strategic goals, PLIVA is the leading pharmaceutical company 
  in Central and Eastern Europe.</p>
<p>Since April 1996, the company has been listed on both the Zagreb and London 
  Stock Exchanges.</p>
<p>PLIVA's vision is to be a pharmaceutical company bringing superior and innovative 
  solutions to customer needs in the global market.</p>
<p>Within the company, there is no discrimination based on nationality, culture, 
  religion or gender.</p>
<p>The continual improvement of health protection, safety and the environment 
  is an integral part of PLIVA's strategy.</p>
<p> <b>Supervisory Board</b></p>
<p>The monitoring role of the Supervisory Board of the Company is regulated by 
  legislation of the Republic of Croatia principally embodied in the Companies 
  Act. It is also regulated by PLIVA's corporate by-laws.</p>
<p>The nine members of the Supervisory Board are elected by the General Assembly 
  to 4-year terms and can be re-appointed to two additional terms.</p>
<p>The Supervisory Board elects a president and a deputy president from among 
  its members by majority open vote.</p>
<p>Members of the Supervisory Board will possess international expertise, having 
  in mind that their experience and knowledge represent significant contributions 
  to the development and reputation of the Company.</p>
<p>Upon appointment, all new members of the Supervisory Board are given a comprehensive 
  introduction to the Company's business as well as to their roles and responsibilities 
  as Supervisory Board members. In addition, all members of the Supervisory Board, 
  if needed, have access to the advice and services of the Company Secretary with 
  regard to their roles and responsibilities as members of the Supervisory Board.</p>
<p>The Supervisory Board passes resolutions by an open majority vote of all its 
  members.</p>
<p>The re-appointment of the Supervisory Board members is not automatic and is 
  given careful consideration.</p>
<p>The Supervisory Board meets four times annually.</p>
<p>The Supervisory Board should meet according to a predetermined schedule.</p>
<p>The Supervisory Board report of its annual monitoring role is attached to the 
  Company's Annual Report.</p>
<p>Any business relationship between members of the Supervisory Board and the 
  Company will be published in the Annual Report. Supervisory Board members facing 
  a conflict of interest must inform the president of the Supervisory Board immediately 
  and resign before the end of their allotted term if an irreconcilable ongoing 
  conflict of interest arises. If a one-off conflict of interest arises (other 
  than by virtue of his/her interests in shares of, or otherwise in or through, 
  PLIVA), the relevant member will be required to disclose the relevant conflict 
  of interest immediately and will be prohibited from voting on the matters in 
  relation to that from which the conflict has arisen. This will also be the case 
  where the interest at issue is that of a person related to the relevant member.</p>
<p>The Supervisory Board is provided with regular and adequately detailed information 
  about the management of the Company, so as to be able to effectively fulfil 
  its monitoring role.</p>
<p>The Supervisory Board elects the president and members of the Management Board 
  of the Company (according the PLIVA's corporate by-laws) and determines their 
  remuneration.</p>
<p>The Supervisory Board should be well informed about the work of Company auditors, 
  who are elected by the General Assembly of the shareholders.</p>
<p>The Supervisory Board should consider the Company's strategy and the results 
  of the Management Board's assessment of the Company's internal systems of control.</p>
<p>The Supervisory Board can meet to discuss its own functioning and its relationship 
  with the Management Board. This discussion should also include an assessment 
  of the Management Board. Management Board members will not be allowed to attend 
  this meeting.</p>
<p><b>Management Board</b></p>
<p>The role of the Management Board of the Company is regulated by legislation 
  of the Republic of Croatia, principally embodied in the Companies Act. It is 
  also regulated by PLIVA's corporate by-laws.</p>
<p>The main task of the Management Board is to represent the best interests of 
  the Company's shareholders taken as a whole, to ensure the growth and maintenance 
  of a successful business.</p>
<p>All members of the Management Board should have a wide range of knowledge and 
  experience which they contribute to the Management Board's deliberations.</p>
<p>The Management Board has between three and seven members.</p>
<p>The president and the members of the Management Board are elected by the Supervisory 
  Board for a 5-year term with the possibility of re-appointment.</p>
<p>The Management Board reports regularly on its work to the Supervisory Board 
  in conformance with the laws of the Republic of Croatia, principally contained 
  in the Companies Act and PLIVA's corporate by-laws.</p>
<p>The Management Board will present a balanced and comprehensible assessment 
  of the Company's position and prospects by ensuring that:</p>
<ul>
  <li>both directors and auditors explain their reporting responsibilities in 
    financial reports;</li>
  <li>interim and other price sensitive reports are balanced and understandable;</li>
  <li>and financial reports are on a "going-concern" basis, including an explanation 
    of assumptions and qualifications.</li>
</ul>
<p>At least once annually, the Management Board submits a report on the Company's 
  business policy to the Supervisory Board.</p>
<p> The Management Board passes resolutions at its meetings by an open majority 
  vote of all its members.</p>
<p>The Management Board holds meetings at least once monthly.</p>
<p>The Management Board remuneration will be linked to corporate and individual 
  performance with clear criteria for the award of such pay.</p>
<p>Any real or apparent conflict of interest between any members of the Management 
  Board and the Company must be avoided. If a conflict does arise (other than 
  by virtue of an interest in shares of, or otherwise in or through, PLIVA), the 
  relevant member will be required to disclose the nature of his/her conflict 
  of interest and will be prohibited from voting on the matters in relation to 
  which it has arisen. This will also be the case where the interest at issue 
  is that of a person related to the relevant member.</p>
<p><b>Board Committees</b></p>
<p>The Supervisory Board has delegated specific powers, as set out in the terms 
  of reference to the following committees.</p>
<p><b>Audit Committee</b></p>
<p>The Audit Committee is a sub-committee of the Supervisory Board whose purpose 
  is to assist the Supervisory and Management Boards in the effective discharge 
  of their responsibilities for corporate governance, financial reporting and 
  corporate control.</p>
<p>The Audit Committee has no executive powers with regard to its recommendations 
  and does not relieve the Supervisory Board or the Directors of their responsibilities 
  for these matters.</p>
<p><b>Membership</b></p>
<p>The Audit Committee shall be composed of at least three members of the Supervisory 
  Board who are not officers or employees of the Company and are not linked in 
  any way to the external auditors, such members being chosen by the Supervisory 
  Board to serve for such term or terms as shall be determined by the Supervisory 
  Board. The Audit Committee's chairman will be chosen by its members in conjunction 
  with the chairman of the Supervisory Board.</p>
<p><b>Responsibilities</b></p>
<p>The Audit Committee shall have the following responsibilities and powers and 
  shall perform the following functions:</p>
<p><b>(a)</b> Recommend to both the Supervisory and Management Boards the engagement 
  and discharge of the firm of external auditors which performs the annual audit 
  of the Company financial statements.</p>
<p><b>(b)</b> Meet with the external auditors to review the proposed scope and 
  nature of the annual audit, and to review the results of the audit engagement.</p>
<p><b>(c)</b> Consider the amount and relationship of the audit fees.</p>
<p><b>(d)</b> Discuss with the external and internal auditors the results of the 
  audit(s) from the preceding year, including:</p>
<ul>
  <li>A review of the audited financial statements;</li>
  <li>A review of any memorandum containing recommendations for improving accounting 
    procedures and internal controls;</li>
  <li> The extent to which major recommendations made by the external auditors 
    and the Company Internal Audit department have been implemented;</li>
  <li>The adequacy of the Company's accounting principles and policies when compared 
    to the industry in general;</li>
  <li>A determination that the Company's financial statements constitute a full 
    and meaningful report to the shareholders and creditors.</li>
</ul>
<p><b>(e)</b> Review with management and the external auditors all significant 
  issues concerning litigation, contingencies, claims, assessments and all material 
  accounting issues that require disclosure in the financial statements.</p>
<p><b>(f)</b> Review the services provided by the Company's Internal Audit department 
  including: The planned scope of the internal audit programme, its objectives 
  and the staff required to attain these objectives; The activities of the Company 
  Internal Audit department during the preceding period which should be accompanied 
  by a brief summary report in writing; The working relationship between the Company 
  Internal Audit department and external auditors.</p>
<p><b>(g)</b> If requested either by members of the Audit Committee or the Company 
  Internal Audit Manager, meet with the Company Internal Audit Manager; and</p>
<p><b>(h)</b> Provide a report of Audit Committee activities and findings to the 
  subsequent Supervisory Board.</p>
<p><i>Authority</i></p>
<p>The Committee shall:</p>
<p><b>(a)</b> Oversee any investigation of activities which are within its terms 
  of reference.</p>
<p><b>(b)</b> Have the right to seek any necessary information to fulfil its responsibilities.</p>
<p><b>(c)</b> Have the right to obtain outside legal help and any professional 
  advice, at the Company's expense, which might be necessary for the fulfilment 
  of its duties.</p>
<p><b>(d)</b> Have the power to call any member of staff to be questioned at a 
  meeting of the Committee as and when required.</p>
<p> <i>Quorum</i></p>
<p>A quorum should consist of two members. All actions of the committee should 
  be subject to a majority vote with the chairman having the deciding vote. Voting 
  should be conducted verbally and the results should be recorded in the minutes. 
  Copies of the minutes of the Audit Committee shall be available to the Management 
  and Supervisory Board at the subsequent Supervisory Board.</p>
<p><i>Meetings</i></p>
<p>The Audit Committee shall meet at least twice annually, at least two weeks 
  prior to the meetings of the Supervisory Board which consider the half year 
  and full year accounts. At the meeting prior to the full year accounts, it is 
  mandatory for the external Auditors to be present in person. It is anticipated 
  that the meeting to consider the annual accounts will be the principal occasion 
  for the Committee to discharge its responsibilities. The President of the Management 
  Board, the Finance Director and the Company Internal Audit Manager shall be 
  invited to attend meetings.</p>
<p>The Audit Committee may meet at other times at the request of its Chairman.</p>
<p><i>Secretary</i></p>
<p>The Company Secretary will be the secretary to the Audit Committee and shall 
  keep the appropriate minutes of issues discussed.</p>
<p><b>Remuneration Committee</b></p>
<p> As a matter of good practice, the Management Board members should not be responsible 
  for determining their own remuneration.</p>
<p>The Company's Remuneration Committee is comprised of two members of the Supervisory 
  Board and the president of the Management Board. Other persons may attend upon 
  invitation by the president or the members of the Remuneration Committee. The 
  Company Secretary or their nominee shall be the Secretary of the Committee.</p>
<p>The Remuneration Committee shall make recommendations to the Supervisory Board 
  on the Company's framework of Management Board remuneration and its cost, as 
  well as specific remuneration packages for each of the members of the Management 
  Board, including pension rights and any compensation payments in the event of 
  early termination.</p>
<p>The Remuneration Committee should ensure that performance-related elements 
  of remuneration from a significant proportion of the total remuneration of Management 
  Board members in order to keep their interests aligned with those of shareholders, 
  giving incentives for high performance levels.</p>
<p><i>Meetings and quorum</i></p>
<p>A meeting of the Remuneration Committee may be called by any member of the 
  Committee or by the Secretary.</p>
<p>Notice of each meeting confirming the venue, time and date together with an 
  agenda of items to be discussed shall be forwarded to each member of the Committee 
  not fewer than five working days prior to the date of the meeting. The quorum 
  for the Committee meeting shall be a majority of its members.</p>
<p>In the absence of the Committee Chairman, the remaining members present shall 
  elect one of their number to chair the meeting.</p>
<p>The Secretary shall keep appropriate records of all meetings of the Committees 
  with appropriate minutes of the proceedings and resolutions.</p>
<p><i>Authority</i></p>
<p>The Remuneration Committee shall:</p>
<ul>
  <li>oversee any investigation of activities which are within its terms of reference 
    and act as a court of the last resort;</li>
  <li>have the right to seek any necessary information to fulfil the above duty;</li>
  <li>have the right to obtain legal help and any professional advice which might 
    be necessary for the fulfilment of its duties;</li>
  <li> have the power to call any member of staff to be questioned at a meeting 
    of the Committee as and when requested.</li>
</ul>
<p>The Remuneration Committee should account directly to the Supervisory Board 
  for the decisions the committee reaches.</p>
<p> <b>General Assembly</b></p>
<p>The approval of the annual financial results and the policy of the Management 
  Board as well as the Supervisory Board's supervising function are separate items 
  on the agenda of the General Assembly.</p>
<p>Members of the Management Board and the Supervisory Board report to the General 
  Assembly. Shareholders' confidence in the Management Board and the Supervisory 
  Board is one of the essential prerequisites of the Company's successful performance.</p>
<p>The General Assembly of shareholders is convened in compliance with Croatian 
  law.</p>
<p>The General Assembly can pass valid resolutions only when shareholders or their 
  proxies holding shares of a nominal value exceeding 50% of the Company's total 
  share capital are present at its meeting.</p>
<p>If there is a lack of quorum, the subsequent General Assembly can pass valid 
  decisions regardless of the number of shareholders present.</p>
<p>Shareholders who represent at least one-twentieth of the share capital have 
  a right to request a General Assembly meeting to be convened by the Management 
  Board.</p>
<p><b>General</b></p>
<p>One of the most important characteristics of a successful company aiming to 
  generate value for its shareholders is its intention to elect experienced and 
  independent persons as members of the Supervisory Board, as well as skilful 
  members of the Management Board in order to protect the best interest of the 
  shareholders and achieve the long-term objectives of the Company.</p>
<p>The work of the Management Board and the Supervisory Board is regulated by 
  the Company's corporate by-laws.</p>
<p>The Management and Supervisory Boards (each in its own capacity) are responsible 
  for ensuring that the Company is run with integrity, complies with legal and 
  regulatory requirements and best practice and conducts its business in accordance 
  with high ethical standards.</p>
<p>Members of the Management and Supervisory Board will not disclose confidential 
  information about the business activities of PLIVA to third parties (other than 
  to PLIVA's legal or financial advisers).</p>
<p>PLIVA has adopted a Code on Share Dealings in line with the Model Code contained 
  in the Listing Rules of the London Stock Exchange.</p>
<p>The Company complies with its Zagreb and London Stock Exchanges requirements 
  to notify shareholders or obtain their consent in relation to material transactions 
  of the Company or its subsidiaries and transactions with related parties.</p>
<p>All shareholders will be treated on an equal basis. The Company's policy is 
  to enter into dialogue with its shareholders based on a mutual understanding 
  of objectives.</p>
<p>The Company has established a strong system of regular internal control to 
  safeguard the shareholders' investment and the Company's assets involving the 
  ultimate reporting to the president of the Management Board. If there is a risk 
  of material fraud or comparable problems, the president of the Management Board 
  is obliged to notify the Supervisory Board without delay.</p>
<p>The shareholdings and options held by members of the Supervisory Board and 
  the Management Board have been conceived as long-term investments, and the data 
  on the aggregate shares and options held by each is contained in the Company's 
  Annual Report. Supervisory Board and the Management Board members must report 
  to the Company Secretary on any share acquisitions or disposals by them.</p>
<p>The remuneration of the members of the Supervisory Board is not related to 
  the financial results of the Company.</p>
<p>The Company will maintain an objective and professional relationship with its 
  auditors.</p>
<p>In conformity with the rules of the Zagreb and London Stock Exchanges, the 
  Company has undertaken to report on its results to shareholders and investors 
  on a half-year basis.</p>
<p>The Company has a system of disclosure of information which includes regular 
  reporting on events having a significant influence on the price of the Company's 
  shares in Croatia or the United Kingdom.</p>
<p>There should be a formal and transparent management remuneration policy.</p>
<p>An employee stock option plan was introduced to motivate employees to increase 
  the Company's market value.</p>
<p>The main principles of Corporate Governance in the Company will be stated in 
  the Annual Report.</p>
1	dpavlin	1.1	<p align="center"><b>Corporate Governance Principles</b></p>
2			<p>With clearly defined strategic goals, PLIVA is the leading pharmaceutical company
3			in Central and Eastern Europe.</p>
4			<p>Since April 1996, the company has been listed on both the Zagreb and London
5			Stock Exchanges.</p>
6			<p>PLIVA's vision is to be a pharmaceutical company bringing superior and innovative
7			solutions to customer needs in the global market.</p>
8			<p>Within the company, there is no discrimination based on nationality, culture,
9			religion or gender.</p>
10			<p>The continual improvement of health protection, safety and the environment
11			is an integral part of PLIVA's strategy.</p>
12			<p> <b>Supervisory Board</b></p>
13			<p>The monitoring role of the Supervisory Board of the Company is regulated by
14			legislation of the Republic of Croatia principally embodied in the Companies
15			Act. It is also regulated by PLIVA's corporate by-laws.</p>
16			<p>The nine members of the Supervisory Board are elected by the General Assembly
17			to 4-year terms and can be re-appointed to two additional terms.</p>
18			<p>The Supervisory Board elects a president and a deputy president from among
19			its members by majority open vote.</p>
20			<p>Members of the Supervisory Board will possess international expertise, having
21			in mind that their experience and knowledge represent significant contributions
22			to the development and reputation of the Company.</p>
23			<p>Upon appointment, all new members of the Supervisory Board are given a comprehensive
24			introduction to the Company's business as well as to their roles and responsibilities
25			as Supervisory Board members. In addition, all members of the Supervisory Board,
26			if needed, have access to the advice and services of the Company Secretary with
27			regard to their roles and responsibilities as members of the Supervisory Board.</p>
28			<p>The Supervisory Board passes resolutions by an open majority vote of all its
29			members.</p>
30			<p>The re-appointment of the Supervisory Board members is not automatic and is
31			given careful consideration.</p>
32			<p>The Supervisory Board meets four times annually.</p>
33			<p>The Supervisory Board should meet according to a predetermined schedule.</p>
34			<p>The Supervisory Board report of its annual monitoring role is attached to the
35			Company's Annual Report.</p>
36			<p>Any business relationship between members of the Supervisory Board and the
37			Company will be published in the Annual Report. Supervisory Board members facing
38			a conflict of interest must inform the president of the Supervisory Board immediately
39			and resign before the end of their allotted term if an irreconcilable ongoing
40			conflict of interest arises. If a one-off conflict of interest arises (other
41			than by virtue of his/her interests in shares of, or otherwise in or through,
42			PLIVA), the relevant member will be required to disclose the relevant conflict
43			of interest immediately and will be prohibited from voting on the matters in
44			relation to that from which the conflict has arisen. This will also be the case
45			where the interest at issue is that of a person related to the relevant member.</p>
46			<p>The Supervisory Board is provided with regular and adequately detailed information
47			about the management of the Company, so as to be able to effectively fulfil
48			its monitoring role.</p>
49			<p>The Supervisory Board elects the president and members of the Management Board
50			of the Company (according the PLIVA's corporate by-laws) and determines their
51			remuneration.</p>
52			<p>The Supervisory Board should be well informed about the work of Company auditors,
53			who are elected by the General Assembly of the shareholders.</p>
54			<p>The Supervisory Board should consider the Company's strategy and the results
55			of the Management Board's assessment of the Company's internal systems of control.</p>
56			<p>The Supervisory Board can meet to discuss its own functioning and its relationship
57			with the Management Board. This discussion should also include an assessment
58			of the Management Board. Management Board members will not be allowed to attend
59			this meeting.</p>
60			<p><b>Management Board</b></p>
61			<p>The role of the Management Board of the Company is regulated by legislation
62			of the Republic of Croatia, principally embodied in the Companies Act. It is
63			also regulated by PLIVA's corporate by-laws.</p>
64			<p>The main task of the Management Board is to represent the best interests of
65			the Company's shareholders taken as a whole, to ensure the growth and maintenance
66			of a successful business.</p>
67			<p>All members of the Management Board should have a wide range of knowledge and
68			experience which they contribute to the Management Board's deliberations.</p>
69			<p>The Management Board has between three and seven members.</p>
70			<p>The president and the members of the Management Board are elected by the Supervisory
71			Board for a 5-year term with the possibility of re-appointment.</p>
72			<p>The Management Board reports regularly on its work to the Supervisory Board
73			in conformance with the laws of the Republic of Croatia, principally contained
74			in the Companies Act and PLIVA's corporate by-laws.</p>
75			<p>The Management Board will present a balanced and comprehensible assessment
76			of the Company's position and prospects by ensuring that:</p>
77			<ul>
78			<li>both directors and auditors explain their reporting responsibilities in
79			financial reports;</li>
80			<li>interim and other price sensitive reports are balanced and understandable;</li>
81			<li>and financial reports are on a "going-concern" basis, including an explanation
82			of assumptions and qualifications.</li>
83			</ul>
84			<p>At least once annually, the Management Board submits a report on the Company's
85			business policy to the Supervisory Board.</p>
86			<p> The Management Board passes resolutions at its meetings by an open majority
87			vote of all its members.</p>
88			<p>The Management Board holds meetings at least once monthly.</p>
89			<p>The Management Board remuneration will be linked to corporate and individual
90			performance with clear criteria for the award of such pay.</p>
91			<p>Any real or apparent conflict of interest between any members of the Management
92			Board and the Company must be avoided. If a conflict does arise (other than
93			by virtue of an interest in shares of, or otherwise in or through, PLIVA), the
94			relevant member will be required to disclose the nature of his/her conflict
95			of interest and will be prohibited from voting on the matters in relation to
96			which it has arisen. This will also be the case where the interest at issue
97			is that of a person related to the relevant member.</p>
98			<p><b>Board Committees</b></p>
99			<p>The Supervisory Board has delegated specific powers, as set out in the terms
100			of reference to the following committees.</p>
101			<p><b>Audit Committee</b></p>
102			<p>The Audit Committee is a sub-committee of the Supervisory Board whose purpose
103			is to assist the Supervisory and Management Boards in the effective discharge
104			of their responsibilities for corporate governance, financial reporting and
105			corporate control.</p>
106			<p>The Audit Committee has no executive powers with regard to its recommendations
107			and does not relieve the Supervisory Board or the Directors of their responsibilities
108			for these matters.</p>
109			<p><b>Membership</b></p>
110			<p>The Audit Committee shall be composed of at least three members of the Supervisory
111			Board who are not officers or employees of the Company and are not linked in
112			any way to the external auditors, such members being chosen by the Supervisory
113			Board to serve for such term or terms as shall be determined by the Supervisory
114			Board. The Audit Committee's chairman will be chosen by its members in conjunction
115			with the chairman of the Supervisory Board.</p>
116			<p><b>Responsibilities</b></p>
117			<p>The Audit Committee shall have the following responsibilities and powers and
118			shall perform the following functions:</p>
119			<p><b>(a)</b> Recommend to both the Supervisory and Management Boards the engagement
120			and discharge of the firm of external auditors which performs the annual audit
121			of the Company financial statements.</p>
122			<p><b>(b)</b> Meet with the external auditors to review the proposed scope and
123			nature of the annual audit, and to review the results of the audit engagement.</p>
124			<p><b>(c)</b> Consider the amount and relationship of the audit fees.</p>
125			<p><b>(d)</b> Discuss with the external and internal auditors the results of the
126			audit(s) from the preceding year, including:</p>
127			<ul>
128			<li>A review of the audited financial statements;</li>
129			<li>A review of any memorandum containing recommendations for improving accounting
130			procedures and internal controls;</li>
131			<li> The extent to which major recommendations made by the external auditors
132			and the Company Internal Audit department have been implemented;</li>
133			<li>The adequacy of the Company's accounting principles and policies when compared
134			to the industry in general;</li>
135			<li>A determination that the Company's financial statements constitute a full
136			and meaningful report to the shareholders and creditors.</li>
137			</ul>
138			<p><b>(e)</b> Review with management and the external auditors all significant
139			issues concerning litigation, contingencies, claims, assessments and all material
140			accounting issues that require disclosure in the financial statements.</p>
141			<p><b>(f)</b> Review the services provided by the Company's Internal Audit department
142			including: The planned scope of the internal audit programme, its objectives
143			and the staff required to attain these objectives; The activities of the Company
144			Internal Audit department during the preceding period which should be accompanied
145			by a brief summary report in writing; The working relationship between the Company
146			Internal Audit department and external auditors.</p>
147			<p><b>(g)</b> If requested either by members of the Audit Committee or the Company
148			Internal Audit Manager, meet with the Company Internal Audit Manager; and</p>
149			<p><b>(h)</b> Provide a report of Audit Committee activities and findings to the
150			subsequent Supervisory Board.</p>
151			<p><i>Authority</i></p>
152			<p>The Committee shall:</p>
153			<p><b>(a)</b> Oversee any investigation of activities which are within its terms
154			of reference.</p>
155			<p><b>(b)</b> Have the right to seek any necessary information to fulfil its responsibilities.</p>
156			<p><b>(c)</b> Have the right to obtain outside legal help and any professional
157			advice, at the Company's expense, which might be necessary for the fulfilment
158			of its duties.</p>
159			<p><b>(d)</b> Have the power to call any member of staff to be questioned at a
160			meeting of the Committee as and when required.</p>
161			<p> <i>Quorum</i></p>
162			<p>A quorum should consist of two members. All actions of the committee should
163			be subject to a majority vote with the chairman having the deciding vote. Voting
164			should be conducted verbally and the results should be recorded in the minutes.
165			Copies of the minutes of the Audit Committee shall be available to the Management
166			and Supervisory Board at the subsequent Supervisory Board.</p>
167			<p><i>Meetings</i></p>
168			<p>The Audit Committee shall meet at least twice annually, at least two weeks
169			prior to the meetings of the Supervisory Board which consider the half year
170			and full year accounts. At the meeting prior to the full year accounts, it is
171			mandatory for the external Auditors to be present in person. It is anticipated
172			that the meeting to consider the annual accounts will be the principal occasion
173			for the Committee to discharge its responsibilities. The President of the Management
174			Board, the Finance Director and the Company Internal Audit Manager shall be
175			invited to attend meetings.</p>
176			<p>The Audit Committee may meet at other times at the request of its Chairman.</p>
177			<p><i>Secretary</i></p>
178			<p>The Company Secretary will be the secretary to the Audit Committee and shall
179			keep the appropriate minutes of issues discussed.</p>
180			<p><b>Remuneration Committee</b></p>
181			<p> As a matter of good practice, the Management Board members should not be responsible
182			for determining their own remuneration.</p>
183			<p>The Company's Remuneration Committee is comprised of two members of the Supervisory
184			Board and the president of the Management Board. Other persons may attend upon
185			invitation by the president or the members of the Remuneration Committee. The
186			Company Secretary or their nominee shall be the Secretary of the Committee.</p>
187			<p>The Remuneration Committee shall make recommendations to the Supervisory Board
188			on the Company's framework of Management Board remuneration and its cost, as
189			well as specific remuneration packages for each of the members of the Management
190			Board, including pension rights and any compensation payments in the event of
191			early termination.</p>
192			<p>The Remuneration Committee should ensure that performance-related elements
193			of remuneration from a significant proportion of the total remuneration of Management
194			Board members in order to keep their interests aligned with those of shareholders,
195			giving incentives for high performance levels.</p>
196			<p><i>Meetings and quorum</i></p>
197			<p>A meeting of the Remuneration Committee may be called by any member of the
198			Committee or by the Secretary.</p>
199			<p>Notice of each meeting confirming the venue, time and date together with an
200			agenda of items to be discussed shall be forwarded to each member of the Committee
201			not fewer than five working days prior to the date of the meeting. The quorum
202			for the Committee meeting shall be a majority of its members.</p>
203			<p>In the absence of the Committee Chairman, the remaining members present shall
204			elect one of their number to chair the meeting.</p>
205			<p>The Secretary shall keep appropriate records of all meetings of the Committees
206			with appropriate minutes of the proceedings and resolutions.</p>
207			<p><i>Authority</i></p>
208			<p>The Remuneration Committee shall:</p>
209			<ul>
210			<li>oversee any investigation of activities which are within its terms of reference
211			and act as a court of the last resort;</li>
212			<li>have the right to seek any necessary information to fulfil the above duty;</li>
213			<li>have the right to obtain legal help and any professional advice which might
214			be necessary for the fulfilment of its duties;</li>
215			<li> have the power to call any member of staff to be questioned at a meeting
216			of the Committee as and when requested.</li>
217			</ul>
218			<p>The Remuneration Committee should account directly to the Supervisory Board
219			for the decisions the committee reaches.</p>
220			<p> <b>General Assembly</b></p>
221			<p>The approval of the annual financial results and the policy of the Management
222			Board as well as the Supervisory Board's supervising function are separate items
223			on the agenda of the General Assembly.</p>
224			<p>Members of the Management Board and the Supervisory Board report to the General
225			Assembly. Shareholders' confidence in the Management Board and the Supervisory
226			Board is one of the essential prerequisites of the Company's successful performance.</p>
227			<p>The General Assembly of shareholders is convened in compliance with Croatian
228			law.</p>
229			<p>The General Assembly can pass valid resolutions only when shareholders or their
230			proxies holding shares of a nominal value exceeding 50% of the Company's total
231			share capital are present at its meeting.</p>
232			<p>If there is a lack of quorum, the subsequent General Assembly can pass valid
233			decisions regardless of the number of shareholders present.</p>
234			<p>Shareholders who represent at least one-twentieth of the share capital have
235			a right to request a General Assembly meeting to be convened by the Management
236			Board.</p>
237			<p><b>General</b></p>
238			<p>One of the most important characteristics of a successful company aiming to
239			generate value for its shareholders is its intention to elect experienced and
240			independent persons as members of the Supervisory Board, as well as skilful
241			members of the Management Board in order to protect the best interest of the
242			shareholders and achieve the long-term objectives of the Company.</p>
243			<p>The work of the Management Board and the Supervisory Board is regulated by
244			the Company's corporate by-laws.</p>
245			<p>The Management and Supervisory Boards (each in its own capacity) are responsible
246			for ensuring that the Company is run with integrity, complies with legal and
247			regulatory requirements and best practice and conducts its business in accordance
248			with high ethical standards.</p>
249			<p>Members of the Management and Supervisory Board will not disclose confidential
250			information about the business activities of PLIVA to third parties (other than
251			to PLIVA's legal or financial advisers).</p>
252			<p>PLIVA has adopted a Code on Share Dealings in line with the Model Code contained
253			in the Listing Rules of the London Stock Exchange.</p>
254			<p>The Company complies with its Zagreb and London Stock Exchanges requirements
255			to notify shareholders or obtain their consent in relation to material transactions
256			of the Company or its subsidiaries and transactions with related parties.</p>
257			<p>All shareholders will be treated on an equal basis. The Company's policy is
258			to enter into dialogue with its shareholders based on a mutual understanding
259			of objectives.</p>
260			<p>The Company has established a strong system of regular internal control to
261			safeguard the shareholders' investment and the Company's assets involving the
262			ultimate reporting to the president of the Management Board. If there is a risk
263			of material fraud or comparable problems, the president of the Management Board
264			is obliged to notify the Supervisory Board without delay.</p>
265			<p>The shareholdings and options held by members of the Supervisory Board and
266			the Management Board have been conceived as long-term investments, and the data
267			on the aggregate shares and options held by each is contained in the Company's
268			Annual Report. Supervisory Board and the Management Board members must report
269			to the Company Secretary on any share acquisitions or disposals by them.</p>
270			<p>The remuneration of the members of the Supervisory Board is not related to
271			the financial results of the Company.</p>
272			<p>The Company will maintain an objective and professional relationship with its
273			auditors.</p>
274			<p>In conformity with the rules of the Zagreb and London Stock Exchanges, the
275			Company has undertaken to report on its results to shareholders and investors
276			on a half-year basis.</p>
277			<p>The Company has a system of disclosure of information which includes regular
278			reporting on events having a significant influence on the price of the Company's
279			shares in Croatia or the United Kingdom.</p>
280			<p>There should be a formal and transparent management remuneration policy.</p>
281			<p>An employee stock option plan was introduced to motivate employees to increase
282			the Company's market value.</p>
283			<p>The main principles of Corporate Governance in the Company will be stated in
284			the Annual Report.</p>