MHP SE is a Luxembourg Societas Europea (société européenne), whose shares in the form of global depositary receipts (“GDRs”) are listed and admitted to trading on the London Stock Exchange.

MHP complies with the Ten Principles of Corporate Governance approved by the Luxembourg Stock Exchange and voluntary corporate governance regime stated in the UK Corporate Governance Code.

The main aspects of the company’s corporate governance policy are described in the Corporate Governance Charter approved by the Board of Directors.

 

Corporate Governance Charter

 

May, 2012

 

1. OBJECTIVES

MHP SE ("MHP SE" or "the Company") is a Luxembourg Societas Europea (société européene), the shares in the form of global depositary receipts (“GDRs”) of which are listed and admitted to trading on the London Stock Exchange.

In drawing up this Corporate Governance Charter («Charter»), MHP SE confirms its commitment to compliance with the Ten Principles of Corporate Governance approved by the Luxembourg Stock Exchange and voluntary corporate governance regime stated in the UK Corporate Governance Code. MHP SE upholds and will practice the highest standards of ethics and integrity in its relationships with its shareholders, directors, personnel, the business community, and with other third parties including government and regulatory agencies. This Charter aims at describing the main aspects of the Company's corporate governance policy.

2. MHP SE STRUCTURE AND SUMMARY ORGANIZATION CHART
2.1. Description and core activities of MHP SE

MHP SE is a a société européene having its registered office at 5, rue Guillaume Kroll, L-1882 Luxembourg, registered with the Luxembourg Trade and Companies' Register under number B 116 838, incorporated pursuant to a notarial deed of 30 May 2006, published in the Mémorial C, Recueil des Sociétés et Associations, number 1497 of 4 August 2006. MHP SE was formed to serve as the ultimate holding company of PJSC “Myronivsky Hliboproduct” and its subsidiaries. Hereinafter, MHP SE and its subsidiaries are referred to as the “MHP”, “MHP Group” or the “Group”.

The principal business activities of the Group are poultry and related operations, grain growing, as well as other agricultural operations (meat processing, cultivation and selling fruits and producing beef and meat products ready for consumption).The Group’s poultry and related operations integrate all functions related to the production of chicken, including hatching, fodder manufacturing, raising chickens to marketable age (“grow-out”), processing and marketing of branded chilled products and include the production and sale of chicken products, sunflower oil, mixed fodder and convenience food products. Grain growing comprises the production and sale of grains. Other agricultural operations comprise the production and sale of cooked meat, sausages, beef, milk, goose meat, foie gras, fruits and feed grains.

The Group’s operational facilities, which are amongst the most technologically advanced in Ukraine, are located in different regions of Ukraine, including Kyiv, Cherkassy, Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Vinnytsia, Kherson, Sumy, Khmelnitsk regions.

2.2. Summary Organization Chart

The chart below provides a summary organization structure of the MHP Group.

3. GENERAL MEETING OF SHAREHOLDERS
3.1. Annual Shareholders Meeting

The general meeting of shareholders shall represent the entire body of shareholders of the Company. It shall have the broadest powers to order, carry out or ratify all acts relating to the operations of the Company.

The general meeting of shareholders shall meet upon call by the board of directors. Shareholders representing one fifth of the subscribed share capital may, in compliance with the law of 10 August 1915, regarding commercial companies, as amended, request the board of directors to call a general meeting of shareholders.

The annual general meeting shall be held in accordance with Luxembourg law at the registered office of the Company or at such other place as specified in the notice of the meeting, on the twenty-seventh day in the month of April at twelve noon. If such a day is a Saturday, a Sunday or a public holiday, the general meeting of shareholders shall be held the following business day at the same time.

3.2. Extraordinary Shareholders Meeting

The Board of Directors or the statutory auditor may convene an Extraordinary Shareholders Meeting. Shareholders representing one fifth of the Company’s capital may also ask the Board of Directors to convene an extraordinary Shareholders Meeting.

An Extraordinary General Meeting is held on the date and at the venue indicated in the notice convening the meeting.

4. THE BOARD OF DIRECTORS OF MHP SE
4.1. Powers and duties of the Board of Directors

The Company has adopted a unitary governance structure. As a result, the Board of Directors is the ultimate decision-making body, except for the powers reserved to the Shareholders’ Meeting by law, or as specified in the Articles of Association.

The Board of Directors should set the Company’s strategic aims, ensure that the necessary financial and human recourses are in place for the Company to meet its objectives and manage the Company. The Board of Directors should also set the Company’s values and standards and ensures that its obligations to its shareholders and others are understood and met. For that purpose, the Board of Directors resolves to take its decisions objectively and in the best corporate interest of the Company.

In addition to the powers granted to it by law and the Articles of Association, the Board of Directors has the following exclusive powers and responsibilities:

  • To approve the company’s strategy, as recommended by the Chief Executive Officer (“CEO”) and to oversee the company’s principal objectives.
  • To delegate the daily management of the Company to a member of the Board of Directors or to a third party and to appoint the CEO and approve the appointment by the CEO of the senior officers, including the Chief Financial Officer ("CFO"), and to appoint and remove the Company Secretary.
  • To appoint and dismiss members of the Board committees; to appoint and dismiss the chairmen of all Board committees.
  • To assume ultimate responsibility for the oversight of the company’s activities, working with the Audit Committee to ensure that management of the Company develops appropriate, adequate and cost-effective internal controls. To review and approve the annual and, if required, six-monthly and quarterly, Company’s stand-alone and consolidated financial statements, examine the financial position of any subsidiary of the Company if needed, and present to the annual Shareholders’ Meeting a clear and complete evaluation of the company’s financial situation.
  • To review and approve all significant judgments concerning the application of International Financial Reporting Standards (IFRS) in the preparation of the Company’s financial statements upon the recommendation of the Audit Committee.
  • To convene the Shareholders’ Meetings, including any resolutions to be submitted for approval. This covers, among other matters, resolutions relating to the allocation of annual corporate financial results, and requests to discharge the Board of Directors for their exercise of their mandates.
  • To establish the Company’s policy with respect to corporate communications, to oversee all external means of communication, it being understood that communication on behalf of the company to the outside world (after Board approval) is reserved to the Chairman of the Board (as defined in section 4.10 below) and CEO, with the right of delegation.

The Board of Directors is also vested with the following powers and responsibilities that it exercises upon recommendation from the CEO:

  • To determine the general corporate structure of the Company.
  • For key subsidiaries and affiliates, for strategic partnerships, and for companies in which the Company holds a strategic minority interest, to nominate the statutory auditors and directors to represent the company, for approval by the Shareholders’ Meeting of the company concerned.
  • To approve the annual budget and plan for capital expenditure.
  • To approve any transaction valued at more than €10 million.
  • To approve the acquisition or disposal of trademarks other than in the ordinary course of business.
  • To approve capital contributions, acquisitions, divestments, transfers/pledging of equity interests, or related guarantees, which exceed €10 million in value.
4.2. Composition of the Board of Directors

The Company shall be managed by the Board of Directors composed of at least three members, their number being determined by the general meeting of shareholders. Directors need not be shareholders of the Company.

The Board of Directors may be composed of executive and non-executive directors.

The directors shall be elected by the general meeting of shareholders for a period not exceeding six (6) years and until their successors are elected, provided, however, that any director may be removed at any time by a resolution taken by the general meeting of shareholders. The directors shall be eligible for reappointment. On appointment to the Board and to Board Committees, all new directors will receive a comprehensive induction. The induction procedure is laid out in Annex A. It will be monitored by the Chairman of the Board and organised by the Company Secretary (as defined in sections 4.10-4.11). The induction will assist directors in building a detailed understanding of how the Group works and the key issues it faces. Directors will also have the opportunity to make site visits to see the Group's operations first hand.

In the event of vacancy in the office of a director because of death, resignation or otherwise, the remaining directors elected by the general meeting of shareholders may elect a director to fill such vacancy until the next general meeting of shareholders.

Independence is assessed taking into consideration the criteria stated in Annex B.

When an independent director has served on the Board of Directors for three successive terms, the proposal to renew his mandate as independent director will expressly indicate that the Board considers that his independence as a director is preserved.

The composition of the Board of Directors will be balanced considering the respective skills, experience, background, nationality and age of each of the Board members. Adequacy of size and composition will be regularly assessed by the Board of Directors upon the initiative of the Chairman of the Board and upon recommendation of the Nominations and Remuneration Committee.

Board members undertake that they have sufficient time to exercise their duties, taking into consideration the number and importance of their other commitments.

4.3. The functioning of the Board of Directors

The Board of Directors shall meet upon call by the Chairman of the Board or any two directors, at the place indicated in the notice of meeting, the person(s) convening the meeting setting the agenda notice in writing or by telegram or telefax or e-mail of any meeting of the Board of Directors shall be given to all Directors at least ten calendar days in advance of the hour set for such meeting, except in circumstances of emergency where forty-eight hours prior notice shall suffice which shall duly set out the reason for the urgency. This notice may be waived, either prospectively or retrospectively, by the consent in writing or by telegram or telefax or e-mail of each Director. Separate notice shall not be required for meetings held at times and places described in a schedule previously adopted by resolution of the Board of Directors. The Board meetings take place at least four times a year.

Any director may act at any meeting of the Board of Directors by appointing in writing or by telegram, telefax, or e-mail another director as his proxy. The Director may not represent more than one of his colleagues.

The Board of Directors may deliberate or act validly only if at least a majority of directors are present or represented at a meeting of the Board of Directors. If a quorum is not obtained within half an hour of the time set for the meeting the directors present may adjourn the meeting to a later time and venue. Notices of the adjourned meeting shall be given by the Secretary to the Board, if any, failing whom by any Director.

Decisions shall be taken by a majority vote of the Directors present or represented at such meeting. In the event that in any meeting the number of votes for and against a resolution shall be equal, the Chairman of the Board shall not have a casting vote. In case of a tie, the proposed decision is considered as rejected.

Any director may participate in a meeting of the Board of Directors by conference call or similar means of communications equipment whereby all persons participating in the meeting can hear each other, and participating m a meeting by such means shall constitute presence in person at such meeting.

Notwithstanding the foregoing, a resolution of the Board of Directors may also be passed by unanimous consent in writing which may consist of one or several documents containing the resolutions and signed by each and every Director. The date of such a resolution shall be the date of the last signature.

The Company Secretary appointed by the Chairman of the Board drafts minutes of each meeting reflecting the issues which were discussed, the decisions which were taken and, if any, the reservations which were voiced by dissenting directors. The minutes will be approved by the Chairman of the Board and subsequently by the Board of Directors during its next meeting. The minutes of any meeting of the Board of Directors shall be signed by the Chairman of the Board or, in his absence, by the Chairman pro tempore who presided at such meeting. Copies or extracts of such minutes which may be produced in judicial proceedings or otherwise shall be signed by the Chairman of the Board, or by the Company Secretary, or by two Directors.

4.4. Conflict of Interests

In case of an actual or perceived conflict of interest or potential conflict of interest of a director, he must inform the Board of Directors of any conflict or potential conflict and may not take part in the vote but will be counted for the purpose of the quorum. A director having a conflict on any item on the agenda must declare this conflict to the Chairman of the Board before the meeting starts.

Any director having a conflict due to a personal interest in a transaction submitted for approval to the Board of Directors conflicting with that of the Company, shall be obliged to inform the Board thereof and to cause a record of his statement to be included in the minutes of the meeting. He may not take part in the business of the meeting, but will be counted in the quorum. At the following general meeting of shareholders a special report shall be made on any transactions in which any of the directors may have a personal interest conflicting with that of the Company and will be disclosed to the shareholders of the Company.

Directors are required to notify the Chairman of the Board in advance of any potential conflicts through other directorships or shareholdings. If a conflict or potential conflict situation may arise, directors must seek disclose such potential conflict of interest to the Board of directors. The Board of Directors will assess whether in its opinion, a conflict of interest may arise and as a result whether the relevant director may participate in the voting of the transaction.

4.5. Delegation of powers

The Board of Directors may generally or from time to time delegate the power to conduct the daily management of the Company as well as the representation of the Company in relation to such management as provided for by article 60 of the law of 10 August 1915, regarding commercial companies, as amended, to an executive or other committee or committees whether formed from among its own members or not, or to one or more directors, managers or other agents who may act individually or jointly. The delegation to a member of the board of directors is subject to the prior authorisation of the general meeting of shareholders. The board of directors shall determine the scope of the powers, the conditions for withdrawal and the remuneration attached to these delegations of authority including the authority to sub-delegate.

In accordance with the above provisions, the Board of Directors shall delegate its day to day management as well as the representation of the Company towards third parties in relation with such management to the CEO.

The Board of Directors may create from time to time one or several Committees composed of Board members and/or external persons and to which it may delegate powers and roles as appropriate.

The Board of Directors may also confer special powers upon one or more attorneys or agents of its choice.

4.6. Evaluation of the Board of Directors

Periodically, the Board of Directors will undertake a formal evaluation of its own performance and that of its committees in order to assess whether (i) the Board operates efficiently, (ii) important issues are debated and prepared properly, (iii) each director makes a constructive contribution to the decision making. Such evaluation will be done by the Nominations and Remuneration Committee at the initiative of the Chairman of the Board and, if required, with the assistance of external advisors.

This performance evaluation will normally take the form of a detailed questionnaire supplemented by individual interviews with each of the Directors. If deemed necessary by the Board of Directors evaluations may be carried out by an external facilitator. The results of the evaluation will be reported to the Board. An action plan to improve both the Board of Directors and individual performance or to suggest modifications will be discussed and agreed by the Nominations & Remuneration Committee and endorsed by the Board of Directors.

4.7. Access to Management

Non-executive directors shall not intervene directly in the operations of the Company other than in exceptional circumstances and on a “needs only” basis. Non-executive directors ordinarily shall not give instructions to, or interfere with the activities of Company management and employees.

By exception to this principle, members of the Audit Committee shall at all times have full and free access to the CFO and any other officers or employees to whom they may require access in order to carry out their responsibilities. However, it is expected that either the CEO, the CFO or the director responsible for the relevant business or the Company Secretary generally would be informed in advance of such contact.

4.8. Information and professional development

The Board of Directors should ensure that directors, especially Non-Executive Directors, have access to independent professional advice at the Company’s expense where they judge it necessary to discharge their responsibilities as directors. Committees should be provided with sufficient resources to undertake their duties.

All directors should have access to the advice and services of the Company Secretary who is responsible to the Board of Directors for ensuring that Board procedures are complied with.

The Chairman of the Board is responsible for ensuring that the directors receive accurate, timely and clear information. Management has an obligation to provide such information but directors should seek clarification or amplification where necessary.

The Chairman of the Board should ensure that the directors continually update their skills and the knowledge and familiarity with the Company required to fulfil their role both on the Board and on Board Committees. The Company provides the necessary means for developing and updating its directors’ knowledge and capabilities.

The directors will only use the information they receive for the purpose of exercising their duties and must preserve the confidentiality of such information.

4.9. The remuneration of directors

The Nominations and Remuneration Committee recommends the level of remuneration for directors, including the Chairman of the Board and the CEO, subject to submission to the Board of Directors and, subsequently, to the general meeting of shareholders when it approves the annual accounts. However, no director participates in any decision relating to his own remuneration.

The Nominations and Remuneration Committee benchmarks directors’ compensation against peer companies to ensure that it is competitive. Remuneration is linked to the time committed to the Board and its various committees. Changes to these fees will be submitted to the Shareholders.

The Company is prohibited from making loans to directors, whether for the purpose of exercising options or for any other purpose (except for routine advances for business-related expenses in accordance with the company’s rules for reimbursement of expenses).

The Nominations and Remuneration Committee sets and revises, from time to time, subject to approval by the Board of Directors, the rules and level of compensation for directors carrying out a special mandate or sitting on one or more of the Board committees and the rules for reimbursement of directors’ business-related out-of-pocket expenses.

Remuneration for directors will be disclosed to Shareholders in the Annual Report in accordance with applicable laws and stock exchange rules.

The Company does not have supplementary pension and early retirement schemes for independent directors of the Board.

4.10. Chairman of the Board of Directors
4.10.1 Appointment.

The Board of Directors elects the Chairman of the Board from amongst its members meeting the criteria for an independent director. For the appointment of the Chairman of the Board, the Nominations and Remuneration Committee will prepare a job specification, including an assessment of the time commitment expected, recognizing the need for availability in the event of crises. The CEO will not be the Chairman of the Board.

4.10.2 Powers and responsibilities.

The Chairman of the Board is responsible for the proper and efficient functioning of the Board of Directors. He determines the calendar of the Board of Directors and Committee meetings and the agenda of the Board meetings after consultation with the CEO and chairs Board meetings. The Chairman of the Board will ensure that the agenda of the Board meetings will include when appropriate, the following topics:

  1. Review of the Company’s strategy as proposed by the CEO;
  2. Establishment of targets and review of proposed budget for the following fiscal year;
  3. Review of the achievement of the targets for all key officers of the company;
  4. Review of the efficiency and competence of the Board;
  5. Review of the marketing plan for the following fiscal year;
  6. Review of the capital expenditure plan for the following fiscal year;
  7. Review of performance compared with budget for the current year and with the prior year;
  8. Consideration of any material acquisitions or disposals.

He ensures that directors receive, prior to each meeting, complete and accurate information and, to the extent appropriate, a copy of any management presentation to be made at the Board meeting. The Chairman of the Board will also make sure that there is sufficient time for making decisions.

The Chairman of the Board will ensure that new directors receive a complete and tailored induction to the Company prior to joining the Board and that existing directors continually update their skills and the knowledge and familiarity with the company required to fulfil their role both on the Board and on Board committees.

The Chairman of the Board represents the Board of Directors from a public relations standpoint to shareholders and the public at large and chairs the general meeting of shareholders. The Chairman of the Board will serve as interface between the Board of Directors and major shareholders of the company on matters of corporate governance.

4.10.3. Relations between the Chairman of the Board of Directors and the CEO.

A clear separation of responsibilities at the head of the Group is maintained between the responsibility for conducting the meetings of the Board of Directors on the one hand and the executive responsibility of managing the business on the other. The CEO may not carry out the duties of the Chairman of the Board.

The Chairman of the Board of Directors takes care to ensure that the Board and the Management Board interact effectively through the intermediary of the CEO. He establishes close relations with the CEO by giving him support and advice while respecting the executive responsibilities of the CEO. For his part, the CEO provides the Chairman of the Board with all the information he requires to carry out his task.

4.11. Company Secretary

The Company Secretary shall ensure that Board procedures are complied with and that the Board of Directors acts in accordance with its statutory obligations and its obligations under the Articles of Association. The Company Secretary shall assist the Chairman of the Board in the logistics associated with the affairs of the Board (information, agenda, etc.). Both the appointment and removal of the Company Secretary should be a matter for the Board as a whole.

The Company Secretary provides dedicated support for the Board, in particular the non-executive directors and is a point of reference and support for all directors. The Company Secretary will consult regularly with directors to ensure that they receive any necessary information and will work with the Chairman, CEO and management to ensure the presentation of high-quality supporting information to the Board and its Committees. The Board may obtain information from external sources, such as consultants and other advisers, if there is a need for outside expertise, via the Company Secretary or directly.

The Company Secretary, along with the Chairman of the Board, will regularly review the Board and Company's governance processes with a view to ensuring they are fit for purpose and recommend or develop initiatives to strengthen the governance of the Company.

5. CHIEF EXECUTIVE OFFICER
5.1. Appointment

The Board of Directors appoints and removes the CEO.  

In case of dismissal of the CEO, the CEO will remain director of the Company if the CEO also holds a mandate of director of the Company.

5.2. Power and duties.

The CEO reports directly to the Board of Directors. The CEO is entrusted by the Board of Directors with the day-to-day management of the company within the strategic parameters established by the Board. He oversees the organization and efficient day-to-day management of subsidiaries, affiliates and joint ventures.

The CEO is responsible for the execution and management of the outcome of all Board decisions. He has all powers not exclusively reserved to the Board or to the general meeting of shareholders. The CEO can delegate authority for daily management to subordinate executives. Notwithstanding this delegation, the CEO will retain ultimate accountability to the Board of Directors for his actions and actions of his delegates.

More specifically, he:

  • Proposes a business strategy for the Board to approve
  • Proposed budgets and business plans for the Board to approve
  • Appoints and removes executives
  • Proposes remuneration systems
  • Reviews performance of the company and its staff
  • Takes all necessary measures to ensure achievement of the company’s goals
  • Establishes the internal decision-making process

Vis-à-vis third parties, the Company is validly bound by the single signature of the CEO of the Company or, where appropriate, by the joint signatures of any two directors, or by the joint signatures or single signature of any persons to whom such signatory power has been delegated by the Board of Directors, but only within the limits of such power. In the context of daily management, the CEO is authorised to enter into any transaction on behalf of the Company up to value of € 10 million and for such purpose to execute relevant documents or to delegate powers as appropriate.

6. SENIOR INDEPENDENT DIRECTOR

In accordance with the provisions of the UK Corporate Code, the Board of Directors has designated an independent non-executive director as the Senior Independent Director. The Senior Independent Director is available to shareholders if they have any concerns that they cannot resolve through the normal channels of contact or if such contact is inappropriate.

In normal times, the Senior Independent Director will provide a sounding board for the Chairman of the Board, be responsible for the evaluation of the Chairman of the Board and serve as a trusted intermediary for non-executive directors as and when necessary.

In periods of stress, he or she will work with the Chairman of the Board and other directors/shareholders as required to resolve significant issues.

7. BOARD COMMITTEES AND THEIR TERMS OF REFERENCE

The Board of Directors is assisted by two Board committees: the Audit Committee, and the Nominations and Remuneration Committee (together the “Committees”). These Committees handle business within their respective areas and present recommendations and reports on which the Board of Directors may base its decisions and actions.

However, all members of the Board of Directors have the same responsibility for all decisions made, irrespective of whether the issue in question has been reviewed by such a committee or not. Their existence does not limit the responsibility of the Board as a whole. The Committees meet to prepare matters for consideration by the Board of Directors. By exception to this principle, the Nominations and Remuneration Committee may make decisions on compensation of individual directors.

The terms of reference of each Committee are laid down by the Board. Each Committee can only validly meet and take decisions if a quorum is present or represented by proxies. All decisions by the Committee require a simple majority of votes cast. In case of a tie, the Chairman of the Committee has a casting vote.

The Committees should perform their tasks within the framework of the terms of reference that they have been given and ensure that they report regularly on their activity and on the results of their work to the Board.

Each Committee regularly evaluates its own composition, organisation and effectiveness as a collective body and makes recommendations to the Board for the necessary adjustments in its terms of reference and, where necessary, for appropriate steps to improve its performance.

Each Committee may seek expert assistance in obtaining the necessary information for the proper fulfilment of their duties. The Company should provide each Committee with the resources it needs for this purpose.

The Board may set up other committees if required.

7.1. Audit Committee
7.1.1. Composition and functioning

The Board of Directors shall appoint the chairman and members of the Audit Committee from among the independent directors. The Audit Committee will comprise a minimum of two independent directors. The chairman of the Audit Committee will not be the Chairman of the Board. The members of the Committee will have sufficient financial expertise to fulfil their role effectively. The CFO and Head of Internal Audit will attend all meetings of the Committee. The Chairman of the Board and CEO may be invited to meetings of the Committee as appropriate. The Committee shall hold as many meetings as necessary, with a minimum of four a year. In case of urgency, or for other reasons, meetings can take place by conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.

The Audit committee meets separately periodically with the Independent Auditor (réviseur d’entreprises agrées), in the absence of management, to discuss matters that the Audit Committee or the Independent Auditor believe should be discussed privately.

Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. A summary of the Audit Committee’s deliberations and recommendations shall be transmitted promptly to the Board of Directors, and will be documented in the minutes.

7.1.2. Powers and responsibilities

The Audit Committee shall assist the Board of Directors in its responsibility for oversight of (i) the integrity of the company’s financial statements, (ii) the company’s compliance with legal and regulatory requirements, (iii) the Independent Auditor’s qualifications and independence, (iv) the performance of the Independent Auditor and (v) the role and performance of the Company’s internal audit function. The Audit Committee is entitled to review information on any point it wishes to verify, and is authorized to acquire such information from any company employee. It is also authorized to obtain independent advice, including legal advice, if this is necessary for an inquiry into any matter under its responsibility. It is entitled to call on the resources that will be needed for this task. It is entitled to receive reports directly from the Independent Auditor and Internal Auditor, including reports with recommendations on how to improve the company’s control processes.

The main role and responsibilities of the Audit Committee include:

  • to monitor the integrity of the financial statements of the company, and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them;
  • to review and monitor the company’s risk management systems and controls;
  • to review and monitor the company’s internal financial controls;
  • to monitor and review the effectiveness of the company’s internal audit function;
  • to make recommendations to the Board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the Independent Auditor;
  • to review and monitor the Independent Auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
  • to develop and implement policy on the engagement of the Independent Auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.

The Audit Committee Terms of Reference are enclosed as Annex C hereto.

7.2. Nominations and Remuneration Committee
7.2.1. Composition and functioning

The Board of Directors shall appoint the chairman and members of the Nominations and Remuneration Committee from among the independent directors. The Nomination and Remuneration Committee will comprise a minimum of two independent directors.

The Board of Directors designates the Chairman of the Board or another independent director to chair the Committee. The Chairman of the Board will not chair the Nominations and Remuneration Committee when dealing with the designation of his or her successor.

When deciding on the Nominations and Remuneration Committee’s composition, the Board of Directors takes into consideration the needs and qualifications required for the optimal functioning of the Nomination and Remuneration Committee.

The members of the Nominations and Remuneration Committee will undertake trainings as appropriate to update their skills and improve their knowledge of the Company to adequately fulfil their role within the Nominations and Remuneration Committee.

Decisions of the Nomination and Remuneration Committee are taken by a majority vote and, in the event of a tie, the Chairman of the Nomination and Remuneration Committee has a casting vote.

The Nomination and Remuneration Committee shall meet at least two times a year.

After each meeting the Board of Directors will be promptly informed of discussions, recommendations and decisions, by a report of the Chairman and through the circulation of minutes.

7.2.2. Powers and responsibilities

The Nominations and Remuneration Committee is authorised to carry out its functions as well as any other functions as may, from time to time, be delegated to it by the Board of Directors. These responsibilities include all matters relating to the remuneration and benefits paid to all members of the Board of Directors, including the CEO, regardless of whether such remuneration or benefits is paid by the Company or by any other entity within the MHP group of companies. The Nominations and Remuneration Committee is also responsible for, among other things, reviewing the composition of the Board of Directors and making recommendations to the Board of Directors with regard to any changes.

The Nomination and Remuneration Committee shall make recommendations to the Board of Directors and assist with all its decisions on the remuneration and management of employees.

The main objectives of the Nomination and Remuneration Committee are to ensure that:

  1. The Company has exceptional people who occupy appropriate positions and who have incentives to achieve and are compensated for exceptional performance;
  2. The maintenance and continuous improvement of the company’s compensation policy which will be based on meritocracy with a view to aligning the interests of its employees with the interests of  shareholders;
  3. The Company develops successors for all key positions;
  4. The Company nurtures a culture of ownership, simplicity, efficiency, high ethical standards and the permanent quest to improve results;
  5. Individual goals are established to align the interests of all employees with the company’s goals and objectives set by the Board of Directors.

Some of the Nomination and Remuneration Committee’s tasks are to:

  1. Recommend to the Board of Directors the appointment or renewal of directors to be submitted for the approval of the Shareholders’ Meeting;
  2. Monitor the performance of key officers of the Company and evaluate results against stated objectives;
  3. Review remuneration and monitor performance of the Board of Directors;
  4. Approve all external hiring of key officers;
  5. Discuss culture, quality of the employees, and training needs;
  6. Review the Company’s needs for employees and ensure the existence of management depth for expansion and succession;
  7. Submit for approval to the Board of Directors the compensation packages, including but not limited to salary and long-term incentives, of the CEO and of the executive management (upon the recommendation of the CEO);
  8. Submit for approval to the Board of the Directors the Company’s overall compensation policy including its long-term incentive plan;
  9. Ensure that all relevant information on compensation at all levels of the company will be made available to the Board of Directors.

The Terms of Reference of the Nominations and Remuneration Committee are enclosed as Annex E hereto.

8. INTERNAL CONTROL AND RISK MANAGEMENT
8.1. Internal control

The control systems are designed to manage, rather than eliminate, various risks of failure to achieve the Company’s objectives and therefore are only able to provide reasonable, and not absolute, assurance against material misstatement or loss.

The Board of Directors is ultimately responsible for the Company's governance, risk management and internal control environment and processes and formally reviews their effectiveness at least annually. Risk management is a central part of regular Board review and assessment. There is a continuous process for identifying, evaluating and managing the significant risks the Company faces and the Board regularly monitors exposure to key business risks.

The annual budget and the business plan, upon which the budget is based, is reviewed and approved by the Board of Directors. Major commercial and financial risks are assessed as part of the business planning process. There is a comprehensive system of financial reporting, with monthly performance reports presented to the Board of Directors.

Executive management is responsible for the implementation and maintenance of the internal control systems, which are subject to a periodic review, and is also responsible for reviewing and monitoring the financial and business risks, risks associated with information technology, human resource management and regulatory compliance. The executive management meets regularly to review business performance, identify risks and opportunities, assess financial and other implications and agree corrective actions as necessary.

8.2. Internal audit

The internal audit function evaluates the effectiveness of the Company’s governance and risk management system, analyses the risks threatening the Company’s objectives and assesses the efficiency and robustness of the internal controls put in place to manage those risks. The results of the work by internal audit are submitted to management so that the latter can validate their adequacy to the global risk profile desired by the Company, and if necessary actions to management to increase the effectiveness of controls are put forward. Internal audit supports the Boards of Directors in their oversight role.

The fundamental principles governing the internal audit function are set out in the Internal audit terms of reference, which are enclosed as Annex D hereto.

8.3. Independent auditors

In accordance with Article 15 of the Articles of Association of MHP SA, the audit of the company's financial situation and annual financial statements is entrusted to one or more independent auditor(s). The independent auditor(s) are appointed and dismissed by the general meeting of shareholders.

MHP has rules and processes in place to assure independence of the auditors:

  • The auditors are prohibited to accomplish any engagements which are not directly linked to their responsibility to audit the financial statements and which may affect their independency;
  • The Company’s Board of Directors sets limits on the size of any non-audit services provided by independent auditors (non-audit fees limitation);
  • The Audit Committee of the Board of Directors investigates, on an annual basis, whether any services provided are incompatible with independence of the auditors.

Deloitte Audit, a member of the Luxembourg Institut des Reviseurs d’entreprises, was initially appointed as an independent auditor of MHP SA at the General Shareholders’ meeting held on 25 June 2007. The decision on a renewal of the independent auditor’s mandate is made each year at the Annual General Shareholders’ meetings.

Information on the fees payable to the Auditor is reproduced each year in the annual report of MHP SA.

9. COMPANY'S SHAREHOLDERS AND ITS SHARES
9.1. Share capital

The Company has a share capital of two hundred twenty-one million five hundred forty thousand euro (EUR 221,540,000) divided into one hundred ten million seven hundred seventy thousand (110,770,000) shares with a nominal value of two euro (EUR 2) each.

The share capital of the Company may at any time be increased or reduced by a resolution of the general meeting of shareholders adopted in the manner required for amendment of these articles of incorporation.
The authorized capital, including the issued share capital, is fixed at three hundred eighteen million five hundred thousand euro (EUR 318,500,000) represented by one hundred fifty-nine million two hundred fifty thousand (159,250,000) shares with a nominal value of two euro (EUR 2) each.

9.2. Share ownership

The ultimate controlling shareholder of MHP SE is the CEO of MHP SE Mr. Yuriy Kosyuk, who owns 100% of the shares of WTI Trading Limited. The principal immediate shareholder of MHP S.A. is WTI Trading Limited, which has majority voting rights in the Company through ownership of the Company’s shares (53 219 515 shares) and GDRs (1 756 861 shares). As of 31 December 2011, 57 543 561 shares out of 110 770 000 issued shares of the Company were owned by BNY (Nominees) Limited, which represents holders of the Global Depository Receipts (“GDRs). To the best knowledge of the Company, no other shareholder holds 5 % or more of the Company’s equity.

9.3. Form of shares

The shares of the Company may be in registered form or in bearer form at the option of the shareholders subject to the restrictions foreseen by law. A register of registered shares will be kept at the registered office, where it will be available for inspection by any shareholder. This register will contain all the information required by article 39 of the law of 10 August 1915 regarding commercial companies, as amended. Ownership of registered shares will be established by inscription in the said register. Certificates of these inscriptions will be taken from a counterfoil register and signed by two directors. The Company may issue certificates representing bearer shares. These certificates will be signed by two directors.

The Company recognizes only one single owner per share. If one or more shares are jointly owned or if the title of ownership to such share(s) is divided, split or disputed, all persons claiming a right to such share(s) have to appoint one single attorney to represent such share(s) towards the Company. The failure to appoint such attorney implies a suspension of all rights attached to such share(s).

Where the shares are in registered form and are recorded m the register of shareholders in the name of or on behalf of a securities settlement system or the operator of such system or, where the shares are in bearer form and held by or on behalf of a securities settlement system or the operator of such system and in each case recorded as book-entry interests in the accounts of a professional depositary or any sub-depositary (any depositary and any sub-depositary being referred to hereinafter as a "Depositary"), the Company - subject to having received from the Depositary a certificate in proper form - will permit the depositor of such book-entry interests to exercise the rights attaching to the shares corresponding to the book-entry interests of the relevant depositor, including admission to and voting at general meetings, and shall consider those depositors to be the holders for purposes described in this paragraph. The board of directors may determine the formal requirements with which such certificates must comply.

9.4. The Relationship Agreement

The Company entered into an agreement with WTI, the Company’s controlling majority shareholder, and Mr. Kosyuk, WTI’s sole beneficial shareholder (the ‘‘Relationship Agreement’’) on 9 May 2008. The Relationship Agreement provides that each of WTI and Mr. Kosyuk (together, the ‘‘Majority Shareholders’’) will, for as long as they continue to hold, directly or indirectly, at least 30% of the shares carrying voting rights in the MHP, at all times:

(a) refrain from exercising their voting rights, directly or indirectly, to elect any director of the MHP if the election of such a person would have the result that the number of the members of the Board of Directors who are not independent of the Majority Shareholders will exceed the number of the members of the Board of Directors who are independent of the Majority Shareholders by more than one person unless such election is approved at a general meeting of the MHP’s shareholders;
(b) subject to any duty of confidentiality owed to third parties, promptly provide to the MHP any information in their possession or control which the MHP reasonably requests in order to assess and meet its obligations under the Listing Rules and the laws of Luxembourg;
(c) keep confidential and not use for their own benefit any confidential information relating to the MHP or the MHP group to which they have been given access by reason of their interest in the share capital of the MHP or any role as director of the MHP;
(d) exercise any of their voting rights so as to procure, insofar as they are able to do so by the exercise of voting rights attaching to the Shares, that:
(i) the MHP and its subsidiaries are capable at all times of carrying on its business independently of the Majority Shareholders;
(ii) all transactions, agreements or arrangements entered into between a Majority Shareholder or any of their affiliates and the MHP (or any subsidiary of the MHP) are, and will be made, on an arm’s length basis and on normal commercial terms (and that any transactions, agreements or arrangements (or series thereof) with a value of more than U.S.$5 million are approved by the Independent Directors); and
(iii) no variations are made to the MHP’s articles of association that would be contrary to the MHP’s independence from the Majority Shareholders.

In addition, each Majority Shareholder has agreed that it shall not, from the date of the Relationship Agreement and till the date on which the Majority Shareholders (together with related parties) cease to hold, directly or indirectly, at least 50% of the shares carrying voting rights in the MHP (the ‘‘Restricted Period’’):

  1. carry on, set up, be employed, engaged or interested in an agricultural or food production business in Ukraine which is or is about to be in competition with any business of the MHP or any of its subsidiaries provided that, in the case of Mr. Kosyuk, his involvement in such a business is not considered by a majority of the independent directors to restrict, affect or otherwise interfere with the performance of his duties and obligations to the MHP;
  2. directly or indirectly engage in any activity which a majority of the independent directors reasonably consider may be, or become, harmful to the interests of the MHP or any of its subsidiaries, or, in the case of Mr. Kosyuk, which might reasonably be considered to interfere with the performance of his duties and obligations under his employment agreement.

The Restricted Period shall be extended to the date falling three months after the date on which the Majority Shareholders (together with related parties) cease to hold, directly or indirectly, at least 30% of the shares covering voting rights in the MHP provided that the approval of the Antimonopoly Committee of Ukraine (or a decision of the Antimonopoly Committee of Ukraine that no such approval is necessary) is obtained. Each Majority Shareholder has further agreed that if he/it becomes aware of any potential investment opportunity in the agricultural industry in Ukraine, then he/it will disclose such opportunity to the Board of Directors immediately in writing.

The Company may then investigate such investment opportunity, and each Majority Shareholder has agreed:
(a) not to make or pursue such investment opportunity;
(b) not to prevent or hinder any decision to be taken by the Board of Directors on whether or not to proceed with such investment opportunity; and
(c) to fully co-operate with and assist the MHP in any investigations it undertakes into such investment opportunity.

If the Company decides not to proceed with such investment opportunity, the Majority Shareholders have agreed not to pursue that investment opportunity without the written consent of a majority of the Independent Directors. The Majority Shareholders have also undertaken that they will not sell, transfer, dispose of or otherwise deal with any right or interest in the Shares for so long as the Relationship Agreement is in effect except where:
(a) such sale, transfer, disposal or dealing would not result in the transferee (together with its affiliates) holding directly or indirectly 25% or more of the Shares; or
(b) the relevant Majority Shareholder first procures that the transferee executes a deed of adherence undertaking to be bound by the terms of the Relationship Agreement.

Additionally, each Majority Shareholder has acknowledged that information provided to them directly or through the MHP may be unpublished, price sensitive information, and has undertaken to comply with any applicable laws, rules and regulations in relation to their dealings in the GDRs and Shares.

9.5. Information channels

Regular information channels
During the year, MHP regularly publishes information through presentations and press releases on the business, financial results and Group news. When the results are published, MHP also provides quarterly, half- yearly and annual reports followed by conference calls with the top management of the Company. All this information is available as from the time of publication on the Company’s website in the Investor Relations and Press Centre sections. It can also be obtained by e-mail on request. Contact details are disclosed on the Company’s web-site in the Contact section.

MHP’s annual reports (both operational and financial) are available in English on web-site. Hard copies of the reports can be obtained on request.

MHP’s corporate journal is published quarterly in Ukrainian and can be read both in paper and on-line (Press Centre section, Corporate Journal). It is distributed among employees and the media.

MHP’s corporate brochure is published annually in English and Ukrainian and can be read both in paper and on-line.

MHP has an intense communications programme with local and international media. Information about the Company and its enterprises is monitored daily by the Investor Relations and Communications Department.

Company web-site (www.mhp.com.ua )

The Company’s web site www.mhp.com.ua confirms its important role as a channel of information for the MHP Group among individual shareholders, institutional investors and journalists. Trilingual in English, Russian and Ukrainian the site provides rapid access to all the information concerning the life of the Group, its activities, news and MHP share prices.

Internet communications with communities (VKontakte)

The Company daily communicates with the younger generation of Ukraine regarding job opportunities within MHP enterprises and other topics such as the quality and biosecurity of its produce via the internet resource VKontakte.

10. RULES REGULATING THE BEHAVIOR AND NOTIFICATION OBLIGATIONS IN RELATION TO TRANSACTIONS IN THE COMPANY’S SHARES OR OTHER FINANCIAL INSTRUMENTS CARRIED OUT FOR THEIR OWN ACCOUNT BY THE DIRECTORS AND OTHER INDIVIDUALS WITH INSIDER KNOWLEDGE
10.1. Introduction

The law of 9 May 2006 regarding market abuses (the “Market Abuse Law”), the Ten Principles of Corporate Governance (the “Ten Principles”) of the Luxembourg Stock Exchange, and regulations of the London Stock Exchange which regulate the market on which the Global Depositary Receipts (“GDRs”) are listed, impose certain rules on insider dealing and independence of its directors of MHP S.A. as well as its staff and its affiliates.

The purpose of these Rules is to ensure that all Company’s Persons (as such term is defined in section 10.2 below) know the laws, rules and regulations on insider dealing in respect of transactions in Company’s Shares (as each term is defined in section 10.3) and at all times comply with them. Company’s Persons should also avoid the appearance of improper conduct with regard to insider dealing and market manipulation.

All Company’s Persons are individually responsible for ensuring that their conduct is at all times in full compliance with the insider dealing laws and regulations and should seek legal advice where appropriate.

10.2. General principles

Pursuant to recommendation 5.4 of the Ten Principles, articles 8 to 10 of the Market Abuse Law and UK Corporate Governance Code any Company’s Person who has Inside Information (as such term is defined in section 10.2.1 below) on the Company or the Company’s Shares is strictly prohibited from:

  1. dealing in Company’s Shares. He/she is not allowed to use that Inside Information to acquire or dispose of, or to try to acquire or to dispose of for his/her own account or for the account of a third party, either directly or indirectly, financial instruments to which that information relates or any derivatives to which those instruments are related;
  2. disclosing Inside Information to any other person, unless such disclosure is made in the normal course of the exercise of their employment; and
  3. recommending or inducing any other person on the basis of Inside Information to acquire or dispose of Company’s Shares. This last practice is commonly known as “stock tipping”.

These prohibitions apply from the moment the Company’s Person has access to Inside Information and lasts until the business day after the Inside Information concerned has been disclosed or is no longer price sensitive.
The Company also forbids any Company’s Person to carry out speculative transactions with regard to Company’s Shares. Examples of speculative trading would be:

  1. margin buying and short selling Company’s Shares (i.e. selling Company’s Shares which the seller does not own);
  2. extending the settlement date for a transaction on the futures market;
  3. buying or selling the same security repeatedly over short periods of time; and
  4. transactions in derivative financial instruments otherwise than for hedging purpose.

It should be noted that although the Rules specifically relate to Company’s Shares, the Company also requires that all the Company’s Persons who have access to Inside Information acquired in the course of their office or employment, relating to another company which has securities listed and admitted to trading on a regulated market, to act in accordance with the same rules defined herein, when applicable, and at all times when dealing in those securities. Thus, the prohibition to deal extends to securities in such other companies.

10.2.1. What is Inside Information?

With regard to the Company, “Inside Information” means any information of a precise nature which has not been made public, relating directly or indirectly to the Company or its Shares, or financial instruments and which, if it were made public, would be likely to have a significant effect on the price of the Company’s Shares or on the price of related derivative financial instruments (see Article 1.1 of the Market Abuse Law).
The relevant tests set out below relate to four conditions, all of which need to be fulfilled in order for the information to be considered as Inside Information:

  • Is the information of a precise nature? Information of a precise nature is generally defined as meaning information consisting of a matter or event which is true or could reasonably be expected to become true in the future, which is specific enough to allow a conclusion to be drawn about its possible impact on the share price. Consequently, simple rumors are not considered to be Inside Information.
  • Has the information become public? Any information which can be deduced from publicly available information is not considered as Inside Information. Likewise, research and estimates derived from publicly available information are not Inside Information and, therefore, any transaction carried out on the basis of such research or estimates is not deemed to constitute insider dealing.

Information which has been made available to the specialized press may still be considered as Inside Information, if only a limited number of people read this particular paper or magazine. However, any information released by the Company through “Business wire” or similar services shall be considered as public information.

  • Does the information relate directly or indirectly to the Company’s Shares? In this context, it is irrelevant whether or not the transaction is completed through a stock exchange.
  • If the information became public, would it be likely to have a significant effect on the price at which the Company’s Shares are traded? Here the question is whether a reasonable investor would use the information to determine whether or not to invest in or divest from the Company. The information could have a positive or a negative impact.

In relation to the Company, the following information could be classified as Inside Information, until the information is made public. These however are only examples and are not intended to be an exhaustive list:

  • the financial results, whether full year, half-year or quarterly results;
  • any negotiation relating to any significant merger or acquisition deal;
  • a significant sale of assets or disposition of a subsidiary or business;
  • a significant purchase of assets or purchase of a company;
  • a share buyback program;
  • a proposed change in the Company’s dividend policy;
  • projections of future results;
  • the fact that earnings are inconsistent with consensus expectations;
  • a share capital increase;
  • a threatened major lawsuit, regulatory investigation or developments in respect of a filed lawsuit or ongoing investigation; and
  • liquidity issues.

In case of any doubts as to whether he/she has Inside Information, the Company’s Persons should contact the Company’s Secretary.

10.2.2. Persons covered by the Rules

These Rules apply to the following persons (the “Company’s Persons”):

  • the employees of the Company and any of its subsidiaries or any of its shareholders (the “Group”);
  • the executive officers of the Group;
  • the members of the board of directors of the Company whether they are executive of non-executive directors;
  • any person who has Inside Information notably by virtue of its:
  • membership of the administrative, management or supervisory bodies of the Group;
  • members of the management team or of the management;
  • holding in the share capital of any company of the Group (e.g. major shareholders who are in regular contact with the administrative, management or supervisory bodies of the Group);
  • access to the information through the exercise of their employment, profession or duties (e.g. employees as well as external lawyers, auditors and other consultants).

In case of a legal person or entity, the restrictions set out in these Rules also apply to any natural person who takes part in the decision to carry out the transaction for the account of the legal person or entity concerned.
Nevertheless, such restrictions shall not apply to transactions conducted in the discharge of an obligation to acquire or dispose of the Company’s Shares where that obligation results from an agreement concluded before the concerned Company’s Person held Inside Information.
Any Company’s Person who has gained access to Inside Information through one of the above means is a “primary insider”.
The above mentioned insider dealing prohibition nevertheless also applies to “secondary insiders”. Secondary insiders are any persons who have received Inside Information from the Company’s Person and who should have known that the information received is Inside Information.
These Rules continue to apply to any Company’s  Person after termination of his or her employment contract or office or other engagement with the Company, for as long as the Inside Information has not been disclosed or remains price sensitive.

10.2.3. Company’s Shares covered by the Rules

These Rules apply to any Company’s Shares being any financial instruments admitted to trading on a regulated market or for which a request for admission to trading on such a market has been made, irrespective of whether or not the transaction itself actually takes place on that market.
These Rules also cover instruments not admitted to trading on a regulated market, but whose value depends on such a financial instrument (e.g. stock options).
In relation to the Company, the following instruments are currently covered by the Rules (the “Shares”)

  • Shares issued by the Company,
  • Shares issued by the Company which are in the form of global depositary receipts (“GDRs”);
  • stock-options;
  • bonds issued by the Company or any of its subsidiaries;
  • any other security granting the right to acquire or sell financial instruments or giving rise to a cash settlement.

However, it does not apply to the Company’s Shares included in a portfolio for which a discretionary portfolio mandate has been granted in writing to a bank or to another regulated portfolio manager.

10.3. How to deal in MHP Shares

No dealing in the Company’s Shares is allowed during Closed Periods (as such term is defined in section 10.5 below).
Outside of Closed Periods, no dealing is allowed when having Inside Information.
Moreover, outside of Closed Periods, any Company’s Person who does not have Inside Information and who intends to deal in Shares must obtain prior authorization of the MHP Compliance Officer in accordance with the following procedure:

  • the Company’s Person needs to send to Company’s secretary an e-mail requesting the authorization to deal in Company’s  Shares;
  • when asking for authorization to trade, no details of the planned transaction need to be given;
  • the Company’s Person will be notified as quickly as possible and, in any case, within a maximum of one (1) business day as from the receipt of the request;
  • even if the Company’s  Person obtains the authorization to trade, the responsibility of whether he/she does trade in the Company’s Shares remains entirely his/her own;
  • if the Company’s Person does not receive any answer within the above-mentioned period of time, he/she will be deemed to be authorized to deal in Company’s Shares;
  • any permission to trade will expire at the start of the next Closed Period.
10.4. Specific information on transactions carried out by the management

Pursuant to recommendation 5.4 of the Ten Principles and article 17 of Market Abuse Law, any transactions related to Company’s Shares made by a person discharging managerial responsibilities within the Company (as defined below) or a person closely associated with this Company’s Person will need to be published on the Company’s website and notified by the relevant Company’s Person to both competent financial authorities in Luxembourg i.e. the Commission de Surveillance du Secteur Financier (the “CSSF”) within five (5) trading days of the transaction.
In addition to the above-mentioned reporting obligation, the person discharging managerial responsibilities or the relevant closely associated person shall provide the MHP Compliance Officer with the relevant information about the transaction in Company’s Shares within five (5) trading days of the transaction.
A Company’s Person discharging managerial responsibilities within the Company is a person who is:

  • a member of the Company’s administrative, management or supervisory bodies; or
  • a senior executive, who is not a member of these bodies, but has regular access to Inside Information relating, directly or indirectly, to the Company, and the power to make managerial decisions affecting the future developments and business prospects of the Company.

A person closely associated with a person discharging managerial responsibilities within the Company is:

  • the spouse of a Company’s Person discharging managerial responsibilities, or any partner of that person considered by national law as equivalent to the spouse;
  • according to national law, dependent children of the Company’s Person discharging managerial responsibilities;
  • other relatives of the Company’s Person discharging managerial responsibilities, who have shared the same household as that person for at least one year prior to the date of the transaction concerned; and
  • any legal person, trust estate or other trust, or any association without legal personality, whose managerial responsibilities are discharged by the Company’s Person discharging managerial responsibilities within the Company or in the three previous subparagraphs, or which is directly or indirectly controlled by such a person, or that is set up for the benefit of such a person, or whose economic interests are substantially equivalent to those of such person.

These disclosure obligations are interpreted strictly and do not apply to transactions made by any other person.
The information to be notified to the competent financial authorities in Luxembourg and to the MHP Compliance Officer relates to:

  • the name of the issuer concerned, i.e. the Company;
  • the name and job title of the Company’s Person disclosing managerial responsibilities within the Company or of the person closely associated with this Company’s Person;
  • the reason why the notification is made;
  • the description of the financial instrument;
  • the nature of the transaction;
  • the date and place of the transaction;
  • the price per share; and
  • the total price of the transaction.

The Company will then publish this information on its website, under “Management Disclosures”.

10.5. Closed Periods
10.5.1. Definition of Closed Periods

Although Company’s Persons are prohibited from dealing in MHP Shares whenever they have Inside Information, the Company has instituted closed periods (the “Closed Periods”), relating to the announcement of the annual, half-year and quarterly financial results.
The Closed Periods are based on the financial calendar adopted by the Board and announced at the beginning of each year.
The Closed Periods are the following:

  • thirty (30) calendar days before the publication of the annual and half-year financial results; and
  • fifteen (15) calendar days before the publication of the quarterly financial information.

Each specific Closed Period will be published on the Company’s intranet as well as on the Company’s website. Any changes thereto (as a result of changes in the financial calendar or otherwise) during the course of the financial year will be notified at once.

10.5.2. Trading restrictions during Closed Periods

During the Closed Periods:

  • no Company’s Person is allowed to deal irrespective of whether he/she has access to Inside Information (e.g. no transaction order can be given);
  • any order given before the start of the Closed Period cannot be cancelled or modified. However, irrevocable orders with a limit price, given before the start of the Closed Period, may be executed during the Closed Period.

The Closed Periods end on the day after the publication of the financial results.
If the Company’s Person considers that he/she needs to deal in Company’s Shares during a Closed Period, he/she will request a waiver to the above prohibition by sending an e-mail to the MHP Compliance Officer, with a copy of the request being sent to the MHP Chief Financial Officer, explaining in detail the reasons for the request.
The Company’s Person will be notified of the decision within five (5) business days. Only if such approval has been obtained, may he/she trade in the relevant Company’s Shares.

Any Company’s Person who has access to the annual, half-year or quarterly financial results before these dates (in particular staff involved in the preparation of the accounts) will need to refrain from dealing in Company’s Shares as soon as he/she has access to this information.

10.6. Sanctions

Insider dealing, market manipulation or stock tipping are criminal and administrative offences and anybody found guilty of such an offence will, depending on the seriousness of the offence, face a fine and/or a prison sentence.

In addition to these sanctions, any Company’s employee could have his/her employment contract terminated and other disciplinary action taken. A member of the Company’s Board of Directors who has infringed these Rules would be expected to resign or otherwise removed.

10.7. Establishment of lists of individuals having access to Inside Information

The Company has an obligation to keep a list of all permanent insiders. Permanent insiders are MHP Persons with regular access to Inside Information about the Group in their capacity as member of the Company’s Board of Directors or of management of a Group company or as a Company’s employee.
This list of permanent insiders will be maintained by the Company’s secretary who will communicate the list to the competent financial authority, i.e. the CSSF in Luxembourg or UKLA upon the regulator’s request.
Any Company’s Person whose name is added to the list will be notified by the MHP Compliance Officer.
The Company also has an obligation to keep a list of occasional insiders. This list will cover people who have access, from time to time, to Inside Information, because they will work on a specific transaction, which could lead to Inside Information. Such list will be maintained by the relevant project manager in charge of the project.

ANNEX A. New Board members induction procedures

The induction procedures for new Board members should be considered under four headings:

  1. Communication of written information about the Company
  2. Acquaintance with the Company and its people
  3. Meeting Board colleagues
  4. Understanding the Company’s main external relationships 

1. Communication of written information

Upon appointment to the Board, the Company Secretary is to provide the new Director with following written materials:

Annual reports covering the last three years of operations
Materials describing the Company’s products
Minutes of the previous year’s Board Meetings
The Company’s statutes and structure
Terms of reference of the Board Committees
The Corporate Governance Charter
List and CV’s of Directors
Key performance indicators

 

2. Acquaintance with the Company and its senior managers

As soon as possible after his/her nomination, the Company Secretary will, in coordination with the Chairman of the Board, organize a visit of the new Director to the Headquarters of the Company and its main production sites.
During this visit, a meeting should be organized with the CEO, the CFO, Company Secretary and with other available members of the senior management.

 

3. Meeting Board colleagues

The Chairman will make sure that the new Director is given the opportunity to communicate informally with his colleagues, outside the strict context of Board meetings. Moreover, it is the Chairman’s responsibility to make sure that the new Director is given all required information about the Company as well as access to its people.

 
4. Understanding the Company’s main external relationships

To the extent the information required has not been obtained in the written materials or during interviews with senior Management, the Company Secretary and the CFO will be required to brief the new Director on following topics:

  • Company advisors and auditors
  • Major customers
  • Major suppliers
  • Regulatory constraints (national, E.U.)
  • Major shareholders
  • Shareholder relations policy
 
ANNEX B. Criteria of independence in relation to the board of directors of the Company

According to Recommendation 3.1 of the Ten Principles, every board should have a sufficient number of independent directors.
To be considered an independent director in the sense of Recommendation 3.5 of the Ten Principles (an “Independent Director”), a person who is a member of the administrative, management or supervisory bodies of the Company must not have any significant business relationship with the Company, close family relationship with any executive or any other relationship with the Company, its controlling shareholders or executives that is liable to create a conflict of interest which could impair the independence of her/his judgment.
Company has therefore drawn up a list of the criteria for assessing independence on the basis of the above. To this end, the Company has made use of the independence criteria appearing in Annex II of the European Commission Recommendation of 15 February 2005 on the role of non-executive directors of listed companies and on the committees of the board which are, on an evolving basis and taking into account that assessment of the independence of any particular director should be based on substance rather than form.
The criteria for assessing independence of a Director are the following:

  1. For a period of five years preceding his or her appointment, an Independent Director may not have held office or served as, manager, Chief Executive Officer, executive of the Company or an associated/affiliated company.
  2. An Independent Director may not have sat on the board of directors of the Company in any capacity more than four successive mandates without that period exceeding twelve years.
  3. An Independent Director will not receive, or has not received, significant additional remuneration from the Company or an associated/affiliated company apart from a fee received as director. Such additional remuneration covers in particular any participation in a share option or any other performance-related pay scheme; it does not cover the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent in any way on continued service).
  4. Neither an Independent Director, nor his or her spouse, or the person, with whom he or she lives under a common law marriage, or an immediate family member or a relative up to two removes, may exercise control within the meaning of article 1 (1) of Council Directive 83/349/EEC over the Company . If these persons do not exercise control over the Company within the meaning of article 1 (1) of Council Directive 83/349/EEC, the rights in the Company when added to those held by the companies controlled by the Independent Director may not trigger control of the Company within the meaning of article 1 (1) of Council Directive 83/349/EEC; lastly, the transfer deeds for these shares or the exercise of the rights attached to them may not be subject to any contractual agreements or unilateral commitments to which the Independent Director has subscribed.
  5. An Independent Director may not be a director of a company in which the Company directly or indirectly holds a position as director.
  6. An Independent Director is not or may not represent in any way the controlling shareholder(s) or one directly or indirectly controlling, via company he controls, more than 10% of the share capital of the Company.
  7. An Independent Director may not, or has not had within the last financial year, a significant business relationship with the Company or an associated/affiliated company, either directly or as a partner, shareholder, director or senior employee of a body having such a relationship. Business relationships include the situation of a significant supplier of goods or services (including financial, legal, advisory or consulting services), of a significant customer, and of organizations that receive significant contributions from the Company or its group.
  8. An Independent Director is not, or has not been within the last three (3) years, partner or employee of the present or former external auditor of the Company or an associated/affiliated company.
  9. An Independent Director may not be a managing director in another company in which an executive or managing director of the Company is director, and not to have other significant links with directors of the Company through involvement in other companies or bodies.
  10. An Independent Director is independent if he or she has no relations of any kind whatsoever with the Company, a company affiliated to the Company or the management of the Company, which might compromise the exercise of his or her freedom of judgment. He or she may not maintain any relations with any other company which might call into question his or her independence.

The Independent Director undertakes:

  1. to maintain in all circumstances his independence of analysis, decision and action;
  2. not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and
  3. to clearly express his opposition in the event that he finds that a decision of the board of directors may harm the Company. When the board of directors has made decisions about which a director has serious reservations, he should draw all the appropriate consequences from this.

If he were to resign, he should explain his reasons in a letter to the Chairman of the Board (or to the Board of Directors).

ANNEX C. Audit Committee Terms of reference
1. Purpose
1.1. The purpose of the Committee is to monitor the integrity of the Company's financial statements, to review its accounting policies and procedures, to keep under review its internal financial control and risk management systems and its compliance with statutory requirements, to appoint and monitor the internal auditor, to appoint and monitor the external auditors and to consider any matters raised by them.
 
2. Membership
2.1. The Committee shall be appointed by the Board, on the recommendation of the Nomination and Remuneration Committee in consultation with the Chairman of the Audit Committee, and shall comprise at least 2 Directors, each of which shall be an independent non-executive Director.
 
2.2. The Board shall appoint the Committee Chairman, who shall be an independent non-executive Director (but not the Chairman of the Company) with recent and relevant financial experience, and determine the period for which he or she shall hold office.
 
2.3. If a regular member is unable to act due to absence, illness or any other cause, the Chairman of the Committee may appoint another independent non-executive Director of the Company to serve as an alternate member.
 
2.4. The external auditor and internal auditor may be invited to attend meetings of the Committee and the Chief Executive, Finance Director and Financial Controller may be invited by the Committee Chairman to attend as observers.
 
3. Secretary
3.1. The Company Secretary or their nominee shall act as the Secretary of the Committee.
 
4. Quorum
4.1. The quorum necessary for the transaction of business shall be 2 members. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.
 
5. Meetings
5.1. The Committee shall meet prior to publication of the quarterly and full year results of the Company and at such other times (to coincide with Board meetings or otherwise) as the Chairman of the Committee shall require.
 
5.2. In exceptional circumstances, the Chairman may decide to hold meetings by video-conference or teleconference.
 
6. Notice of Meetings
6.1. Meetings of the Committee shall be convened by the Secretary of the Committee at the request of the Chairman of the Committee or any of its members or at the request of any officer of the Company or external or internal auditors if they consider it necessary.
 
6.2. Unless otherwise agreed, 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 and any other person required to attend no fewer than 5 working days prior to the date of the meeting.
 
7. Minutes of Meetings
7.1. The Secretary shall minute the proceedings and resolutions of all meetings of the Committee.
 
7.2. The Secretary should ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly. If any conflicts of interest exist with a particular member of the Committee on any particular issue, then such member of the Committee shall not participate or vote on the issue that gave rise to such conflict of interest.
 
7.3. Minutes of Committee meetings shall be circulated promptly to all members of the Committee and, following the approval of the Committee, to all other members of the Board and external auditors.
 
7.4. The Chairman of the Committee shall keep the Board advised as appropriate of matters resolved, recommended or reviewed by the Committee.
 
8. Annual General Meeting
8.1. The Chairman of the Committee shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee's activities.
 
9. Authority

The Committee is authorised:

9.1. to seek any information it requires from any employee of the Company in order to perform its duties;
 
9.2. to call any employee to be present at a meeting of the Committee as and when required; and
 
9.3. to obtain, at the Company's expense, outside legal, financial or other professional advice on any matters within its terms of reference. The Committee shall have full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations. If a decision is made to engage such advisers, the Committee shall have the sole authority to retain and terminate them and to approve their fees and other retention terms.
 
10. Duties
10.1. Financial Reporting
10.1.1. The Committee shall review and monitor the integrity of the Company's financial statements, including annual and quarterly reports, announcements of results and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and judgements which they contain.
 
10.1.2. The Committee shall review the Annual Report and Accounts, discuss the financial statements with management and its external auditors and make recommendations to the Board with respect to the accounting statements contained therein.
 
10.1.3. The Committee shall also discuss generally with management the types of information to be disclosed, and the type of presentation to be made, to analysts and rating agencies.
 
10.1.4. The Committee shall review and challenge where necessary:
10.1.4.1. the consistency of, and any changes to, accounting policies on a year to year basis;
 
10.1.4.2. the methods used to account for significant or unusual transactions;
 
10.1.4.3. whether the Company has made appropriate estimates and judgements, taking into account the views of the external auditor;
 
10.1.4.4. clarity of disclosure in the Company’s financial reports: and
 
10.1.4.5. all material information presented with the financial statements, such as operating and financial reviews and corporate governance statements
 
10.2 Internal Control and Risk Management

The Committee shall:

10.2.1. 1keep under review and report to the Board on the effectiveness of the Company's financial reporting and internal control policies, and procedures for the identification, management and reporting of risks. In such review and report, the Committee shall consider any appropriate issues raised in any internal control reports and any disclosures with respect to deficiencies in the internal controls or any fraud by any employee having a significant role in the Company's internal controls. The Committee shall also review the internal control report required to be included in the Company's Annual Report and Accounts pursuant to applicable listing rules, legislation and best practice.
 
10.2.2. review the Company's policies and procedures for the identification, management and reporting of non-financial risks, and shall review reports on the risk management process delivered to it by management.
 
10.2.3. carry out an annual review and report to the Board on the effectiveness of the risk assurance process.
 
10.3. Internal Audit

The Committee shall:

10.3.1. monitor and review the effectiveness of the Company’s internal audit function in the context of the Company’s overall risk management system;
 
10.3.2. approve the appointment and removal of the head of internal audit;
 
10.3.3. consider and approve the remit of the internal audit function, ensure it has adequate resources to enable it to perform its function effectively, and ensure it has adequate standing and is free from management or other restrictions;
 
10.3.4. agree the annual internal audit plan;
 
10.3.5. review all reports from the internal auditor;
 
10.3.6. monitor management’s responses to the recommendations of the internal auditor;. and
 
10.3.7. meet the head of internal audit at least once a year, without management being present, to discuss their remit and any issues arising from the internal audits carried out. In addition, the head of internal audit shall have the right of direct access to the Committee and to the Chairman of the Board.
 
10.4. External Audit

The Committee shall:

10.4.1. Subject to any shareholder approvals required by relevant legislation or the Company's Articles of Association, the Committee shall be solely and directly responsible for, and approve, the appointment, re-appointment, compensation and oversight of the Company's external auditors. This does not preclude the Committee from obtaining the input of management.
 
10.4.2. The Committee shall meet with the external auditors at least twice each year. At part of at least one such meeting, Executive Directors of the Company shall not be present. The Committee shall consider any reports provided by the external auditors and shall review with the external auditors any audit issues and management's response to such issues.
 
10.4.3. The Committee shall keep under review the relationship with external auditors including:
10.4.3.1. the independence and objectivity of the external auditors and adequacy of the audit procedures undertaken, the scope of any disclosed relationships or services and the appropriateness of partner rotation practices and take appropriate action to ensure the continuing independence of the auditors;
 
10.4.3.2. the consideration of audit fees as well as any other fees which are payable to the auditors in respect of non-audit activities; and
 
10.4.3.3. discussions with the external auditors concerning such issues as compliance with accounting standards and any proposals which the external auditors have made vis-a-vis the Company's internal auditing standards.
 
10.4.4. The Committee shall conduct a review every three years of the service provided by the external auditors and, subject to the outcome of this review, may consider re-tendering external audit services.
 
10.4.5. The Committee shall approve in advance all non-audit work to be performed by the external auditors. Such pre-approval requirement may be delegated to one or more members of the Committee. The pre-approval decisions of any such member shall be presented to the full Committee at each of its scheduled meetings.
 
10.5. Other Matters
10.5.1. The Committee shall assist the Board in overseeing compliance with all legal and regulatory requirements and shall give due consideration to the requirements of the UK Listing Authority's Listing Rules.
 
10.5.2. The Committee shall oversee any investigation of activities which are within its terms of reference and resolve any disputes that may arise between the external auditors and the Company.
 
10.5.3. The Committee at least annually should review its own performance and terms of reference to ensure it is operating at maximum effectiveness. The Board should also review the Committee's effectiveness annually.
 
11. Complaints Procedures
11.1. The Committee shall ensure that appropriate procedures are established, and shall evaluate the effectiveness of such procedures, for the receipt, retention, and treatment of complaints received by the Company relating to accounting, internal accounting controls, or auditing matters of the Company.
 
11.2. The Committee shall also establish procedures to ensure that submissions by Company employees arising from the Company's whistleblowing policy including those relating to questionable accounting or auditing matters utilised by the Company be treated confidentially and anonymously and are reported to the Committee. It shall ensure that any issues relating to business ethics are reported to it.
 
ANNEX D. Internal Audit terms of reference

The Internal Audit Terms of Reference (the “Terms of Reference”) defines the internal audit activity’s purpose, authority and responsibility. The Terms of Reference established the internal audit activity’s status within MHP S.A. and its subsidiaries (collectively referred to herein as the “Company”), authorize access to records, personnel, and physical properties relevant to the performance of the internal audit function duties, and define the scope of the internal audit activities.

The Company has a Board of Directors (the “Board”), which assigns audit oversight to an Audit Committee of at least 2 independent directors. The Audit Committee’s role and responsibilities are defined in the Audit Committee’s terms of reference.

1. Definition of internal audit
1.1. Internal Audit is an independent, objective assurance and consulting activity designed to add value and improve the Company’s operations. It helps the Company accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes.
 
1.2. While Internal Audit primarily provides independent and objective assurance to management and the Board, it may also provide consulting services at the request of the Board, subject to the availability of skills and resources. The nature of consulting services to be provided comprises the range of services provided to assist management in meeting objectives of the Company. The nature and scope of work may include facilitation, process design, training, advisory services, project reviews and fraud- and irregularity-related work, but this list is not exhaustive.
 
1.3. The functions performed by Internal Audit are referred to as internal auditing and internal auditing activities as contextually appropriate.
 
2. Definition of control environment
2.1. The risk management and control environment reflects the attitude of and actions taken by the Board, management and other parties within the Company to identify, assess and manage risk and to provide reasonable assurance that the established business objectives and goals will be achieved within an agreed risk profile. This comprises the Company’s policies, procedures and operations in place to:
  • ensure that the Company’s programs, plans and objectives are achieved
  • identify, assess and manage the risks to achieving the Company’s objectives
  • facilitate policy and decision making
  • ensure economical, effective and efficient use of resources
  • ensure compliance with established ethical standards, policies, procedures, laws and regulations
  • ensure that significant legislative or regulatory issues impacting the Company are recognized and addressed properly
  • safeguard the Company’s assets and interests from losses of all kinds, including those arising from fraud, irregularity or corruption
  • ensure the integrity, reliability and timeliness of financial, managerial and operating information, accounts and data, including internal and external reporting and accountability processes
 
2.2. The control environment includes the following elements:
  • Integrity and ethical values
  • Board’s tolerance of risk
  • Management’s philosophy and operating style
  • Organizational structure
  • Delegation of authority and responsibility
  • Human resources policies and practices
  • Competence of personnel
 
3. Scope of  work and responsibilities
3.1. The scope of Internal Audit includes all of the Company’s operations, resources, services and responsibilities in relation to other bodies, and no department or business unit of the Company is exempt from audit and review.
 
3.2. Internal Audit responsibilities include but are not limited to:
  • Examining and evaluating the adequacy of the Company’s risk management and governance processes
  • Appraising the reliability, accuracy and timeliness of information provided to stakeholders
  • Establishing the effect and extent of compliance with statutory and regulatory requirements, standards, policies and procedures
  • Determining the extent to which the Company’s assets are properly accounted for and safeguarded
  • Appraising the economy, efficiency and effectiveness with which resources are employed
  • Coordinating with the work of external auditors for audit planning and assisting the external auditors as required
  • Working in partnership with other bodies to secure robust internal controls that protect the Company’s interests
  • h)  Evaluating specific operations at the request of the Board, Audit Committee or management and working with the Head of Security to investigate any instances of fraud, irregularity or corruption.
 
4. Independence and accountability
4.1. Internal Audit shall be independent of the activities subject to internal auditing.
 
4.2. The Head of Internal Audit reports functionally to the Audit Committee and administratively to the Chief Financial Officer.
 
4.3. The Head of Internal Audit shall have open and direct access to the Audit Committee, the Board and management.
 
4.4. The Head of Internal Audit will communicate and interact directly with the Audit Committee, including in private sessions with the Audit Committee members without management present.
 
4.5. All decisions regarding the performance evaluating, appointment, or removal of the Head of Internal Audit shall be approved by the Audit Committee.
 
4.6. Internal Audit is authorized to have unrestricted access to all company activities, records, property and personnel. Any restriction to these accesses imposed by any employee or management of the Company, which prevents the Internal Audit from performing its duties, will be reported immediately to the Chief Executive Officer, Chief Financial Officer or directly to the Audit Committee, based on circumstances as determined by the Head of Internal Audit.
 
4.7. The Head of Internal Audit has the authority and responsibility for the documentation and communication of specific policies and procedures to guide the internal auditing activities.
 
4.8. Internal auditors shall not assume any ownership of systems under audit and shall not be given any responsibility for any aspects of work subject to audit.
 
4.9. Internal auditors shall exhibit the highest level of professional objectivity in gathering evaluating and communicating information about the activity or process being examined. Internal auditors shall make a balanced assessment of all the relevant circumstances and not be unduly influenced by their own interests or by others in forming judgment.
 
4.10. The Board of Directors is ultimately responsible for establishing and monitoring the risk tolerance of the Company. The establishment and monitoring of risk management and control processes will be the responsibility of the Audit Committee, acting on behalf of the Board.
 
4.11. Management is responsible for the Company’s internal control structure, and is also responsible for adopting one or more internal control framework(s) to serve as the basis for designing, monitoring, and evaluating its internal control structure.
 
4.12. Accountability for responding to the advice and recommendations of Internal Audit lies with management, who either accepts and implements the advice or formally rejects it. Audit advice and recommendations shall be given without prejudice to the right of Internal Audit to review the relevant policies, procedures and operations at a later date.
 
4.13. Internal Audit shall not serve as a substitute for management control. It is recognized that repetitive audits, audits required by management, and audits that take on more of a monitoring function rather than an assessment may not be commensurate with objectivity. The Head of Internal Audit shall disclose to the Audit Committee any and all requested, proposed, and performed activities that are deemed as not taking the form of an objective internal audit activity, for their acceptance or rejection.
 
4.14. The Head of Internal Audit will confirm to the Audit Committee, at least annually, the organizational independence of the internal audit activity.
 
5. Reporting
5.1. On at least an annual basis, or more frequently if the need arises, the Head of Internal Audit requests approval of the following matters from the Audit Committee:
  • Terms of reference for Internal Audit
  • Internal Audit Strategy
  • Internal Audit’s annual plan
  • Internal Audit resources.
 
5.2. In addition, the Head of Internal Audit will report at least annually to the Audit Committee on:
  1. The annual report of the Head of Internal Audit including results of quality assurance and performance management processes
  2. The adequacy of management’s response to advice and recommendations
  3. Arrangements made for cooperation with external auditors
 
5.3. On a quarterly basis the Head of Internal Audit provides directly to the Audit Committee summary reports in respect of:
  • Progress against approved Audit Strategy
  • Projects undertaken during the period
  • Implementation of recommendations
 
6. Risk assessment and planning
6.1. Internal Audit uses a risk model to logically identify key risks within the Company, and presents the risk model to the Audit Committee and the Board to receive input and feedback. As part of the process, Internal Audit will receive direction and input from the Audit Committee and the Board as to the risks deemed most important to the Company taking account of both the probability of occurrence and the magnitude of the risk if it should occur.
 
6.2. Internal Audit develops an annual audit plan based on the risk assessment, and presents the audit plan to the Audit Committee for their review, input, and approval. The audit plan is continuously risk-based, and not coverage-based, and optimal audit plans continuously evolve in response to shifting perceptions and outcomes of risk.
 
7. Reporting accountabilities and follow-up
7.1. A written report shall be prepared for every internal audit assignment. The report shall be agreed with the Head of Internal Audit before it is issued to the responsible management.
 
7.2. Management shall be asked to provide written responses to issues in a diligent and timely manner, generally within 14 days, although this period can be extended by agreement. The written responses must describe actions planned in relation to each recommendation. If the recommendation is not accepted by the manager, a full written justification must be provided. The Head of Internal Audit shall be responsible for assessing whether the manager’s response is adequate.
 
7.3. The Head of Internal Audit shall provide the Audit Committee with a copy of the summary from any audit report together with details of any High and Medium priority recommendations, identification of the person responsible for implementation of each recommendation, and any disagreements with management that remain unresolved.
 
7.4. Progress on implementation of all agreed High and Medium priority recommendations shall be reported to the Audit Committee until action is completed.
 
7.5. Internal Audit shall have procedures in place to ensure that reported conclusions and opinions are supported with adequate, competent, and sufficient internal audit work.
 
7.6. The Audit Committee shall approve the conceptual framework pertaining to follow-up audit procedures. Internal Audit shall have procedures in place to track, monitor, and evaluate the status of internal control issues with a tracking mechanism and with consideration to the risk of each issue and the cost and benefit of various audit procedure alternatives.
 
8. Competence
8.1. Internal Audit shall be appropriately staffed in terms of number, grades, qualification levels and experience, having regard to its core objectives. The Audit Committee shall determine the minimum amount of relevant training required for the Internal Audit staff, and shall exercise its authority to require personnel changes at any level to the Internal Audit.
 
8.2. Internal Audit resources may be supplemented from time to time by outsourcing as necessary or desirable to ensure adequate resources and expertise are available to meet the audit plan. The Head of Internal Audit has authority to contract such external resources within the approved annual budget; any commitment in excess of the annual budget must be approved in advance by the Audit Committee.
 
8.3. Internal Audit shall have documented procedures in place that deliver appropriate supervision, coaching, performance appraisals, and training to the Internal Audit staff.
 
8.4. The Head of Internal Audit shall continuously and annually review the general level of compliance with the function’s policies and procedures and annually present the results of these reviews to the Audit Committee. The reviews shall take the form of a condensed internal self-assessment and shall be based on key attributes determined by the Audit Committee.
 
8.5. At least annually, the Head of Internal Audit shall communicate to management and the Audit Committee on the internal audit activity quality assurance and improvement program, including results of ongoing internal assessments and external assessments conducted at least every five years.
 
9. Fraud
9.1. Managing the risk of fraud is the responsibility of management. Audit procedures alone, even when performed with due professional care, cannot guarantee that fraud will be detected. Internal Audit does not have responsibility for the prevention or detection of fraud.
 
9.2. Internal Audit shall be competent to assess the risk of fraud for the purposes of continuous audit planning and project planning and scoping and shall be alert in their work to risks and exposures that could allow fraudulent actions.
 
9.3. Management is responsible for all investigations of suspected fraud, but may request Internal Audit and/or the Head of Security to undertake or assist in such investigations. Management shall report to the Audit Committee any and all instances of fraud reasonably believed to have occurred and of a significance expected to be greater than de minimis. Management shall provide regular updates to Internal Audit for all suspected and actual incidences of fraud, whether or not investigations are conducted.
 
10. Confidentiality
10.1. Internal Audit staff shall be aware of the strict confidentiality of audit work. Information arising from audit work shall under no circumstances be discussed openly or with persons not directly involved in the audit.
 
10.2. Internal Audit shall hold data and information obtained during the course of its audit activities with due care and the appropriate level of confidentiality. The Head of Internal Audit shall have authority to grant, limit, and restrict access to work papers and records.
 
10.3. Confidential information obtained in the course of internal auditing shall not be used to effect personal gain.
 
11. Standards of audit practice
11.1. The Internal Audit activity is governed by the Code of Ethics (the “Code”) and the International Standards for the Professional Practice of Internal Auditing (the “Standards”) as promulgated by the Institute of Internal Auditors (“IIA”). While these Terms of Reference are not intended to fully reiterate the Code and the Standards, it is intended to be consistent with the IIA Standards and should be interpreted in a manner consistent with those standards. IIA Code and Standards not directly incorporated into these Terms of Reference shall nonetheless be fully and appropriately applicable to the Company’s Internal Audit. The Company’s Internal Audit also considers guidance from industry practices and other relevant sources as deemed appropriate and reasonable in relation to the Company’s needs.
 

 

ANNEX E. Nominations and Remuneration Committee terms of reference

The Board Nomination and Remuneration Committee is a Committee of the Board of MHP SA from which it derives its authority and to which it regularly reports.

The principal purpose of the Committee is to:

  • Insure the company has exceptional people who occupy appropriate positions and who have incentives to achieve and are compensated for exceptional performance
  • Set the over-arching principles and parameters of Remuneration Policy across the Company;
  • Review the company’s needs for employees and guarantee the existence of management depth for expansion and succession
1. Constitution, meetings etc

Membership. The Committee will comprise at least three independent non-executive Directors of the Company. The Chairman of the Company may also serve as a member. When deciding on the Nominations and Remuneration Committee’s composition, the Board takes into consideration the needs and qualifications required for the optimal functioning of the Nominations and Remuneration Committee.

Chairman. The Board designates a Non-Executive Director amongst the members of the Nominations and Remuneration Committee to chair it. The Chairman of the Committee can be the Chairman of the Board. The Chairman will not be authorized to chair the Nominations and Remuneration Committee when dealing with the designation of his or her successor.

Quorum. At least two members. Decisions of the Nominations and Remuneration Committee are taken by a majority vote and, in the event of equality of votes, the Chairman of the Committee has a casting vote.

Meetings. Meetings will be held, at least two times a year.
The Chairman of the Committee and the Chairman of the Company or the Chief Executive may each convene meetings of the Committee at any time to consider any matters falling within these terms of reference.

Secretary. The secretary of the Company, shall act as Secretary to the Committee and attend all meetings. The Secretary to the Committee should ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration of issues.

Support. the Committee will be supported by the Company Human Resources Director, who shall have independent access to the Chairman of the Committee, as well as by the CFO when needed.

Minutes.  will be circulated to all directors and attendees as appropriate by the Secretary to the Committee and reports made to the Board following each meeting of the Committee by the Chairman of that meeting of the Committee.

Disclosure:

  • The members of the Committee will be listed in the annual report to shareholders of the Company
  • The Chairman of the Committee, or a chosen member, will be prepared to answer questions at the annual general meeting of the Company which relate to any matter within the remit of the Committee.
  • A summary of agreed remuneration practices will be included in the Annual Report and Accounts of the Company.
2. Responsibilities of the Committee

Nominations:

In relation to the Board of Directors:

  • Recommend to the Board the appointment or renewal of Directors to be submitted for the approval of the Shareholders’ Meeting
  • Review remuneration and monitor performance of the Board of Directors
  • Make recommendations to the Board in respect of the necessary skills and experience required to improve the functioning of the Board.

In relation to Company executives and employees:

  • Insure the company has exceptional managers who occupy appropriate positions.
  • Monitor the performance of key officers of the Company and evaluate results versus stated objectives;
  • Evaluate culture, quality of the employees;
  • Monitor training needs and programmes to improve employee effectiveness
  • Make sure the company develops successors for all key positions;
  • Develop a culture of ownership, simplicity, efficiency, high ethical standards and the permanent quest to improve results

Remuneration:

  • Oversee the development and approval by the Board of the company’s overall compensation policy including its long-term incentive plans;
  • Insure that top managers are incentivised to achieve and are compensated for exceptional performance;
  • Establish and regularly revisit exterior benchmarks to insure that remuneration levels are competitive;
  • Oversee the maintenance and continuous improvement of the company’s compensation policy with a view to aligning the interests of employees with the interests of shareholders;
  • Make sure individual goals are established to align the interests of all employees with the company’s goals and objectives as set by the Board;
  • Submit for approval to the Board the compensation packages, including but not limited to salary and long-term incentives, of the CEO and of the Executive Management;
  • Approve all external hiring of key officers;
  • Ensure that all relevant information on compensation at all levels of the company will be made available to the BoardThe Committee may recommend to the Board any amendments to these Terms of Reference.