2015

Corporate Governance Report

AS PRFoods organises its business activities on the basis of its Articles of Association and national legal norms and, as a public enterprise, on the requirements of the Tallinn Stock Exchange, Corporate Governance Recommendations (CGR) and the principles of equal treatment of shareholders and investors. The compliance with the principles of CGR is binding on the basis of “comply or explain principle”. This report provides an overview of the governance of AS PRFoods in 2015 and its compliance with CGC. In addition, information on the general meeting of 2015, the Company’s Supervisory Board and Management Board and management principles of AS PRFoods has been provided.

CGC Article 1.3.3.

Issuers shall make participation in the General Meeting possible by means of communication equipment (Internet) if the technical equipment is available and where doing so is not too cost prohibitive for the Issuer. AS PRFoods lacks the adequate technical equipment and its acquisition would be too cost intensive for the Company. In accordance with our policy of transparency, we used in conducting the general meeting the Webinar service of Nasdaq Baltic. PRFoods provided live broadcast of Shareholder’s General Meeting and answered to the additional questions. The meeting was held in Estonian. The webinar was chaired by Indrek Kasela, Chairman of the Management Board of AS PRFoods who distributed information about the issues included in the agenda of the general meeting of shareholders and introduced the results of Q1 2015. For technical reasons, participants at the webinar were unable to exercise their shareholders’ rights (voting). The webinar was recorded and published both on the Company’s website www.prfoods.ee and in the youtube.com account of Nasdaq Baltic.

CGC Article 2.2.1

The Chairman of the Supervisory Board shall conclude a contract of service with each member of the board for discharge of their functions. The Company’s Management Board has one member and the Board Chairman is also performing the duties of the Managing Director and is responsible for the functioning of the Company’s strategic areas. A contract of the management board member has been signed with the Chairman of the Management Board.

CGC Article 2.2.7

Basic wages, performance pay, severance packages, other payable benefits and bonus schemes of a Management Board member as well as their essential features shall be published in clear and unambiguous form on website of the Issuer and in the Corporate Governance Recommendations Report. Information published shall be deemed clear and unambiguous if it directly expresses the amount of expense to the Issuer or the amount of foreseeable expense as of the day of disclosure. The Chairman of the Management Board receives remuneration in accordance with the contract of the management board member. The amount of the remuneration of the Chairman of the Management Board is established with the contract of the management board member and is not to be disclosed as agreed by the parties. The Chairman of the Management Board is entitled to receive a severance fee of up to 6 months remuneration of the member of the management board.

CGC Article 2.3.2

The Supervisory Board shall approve the transactions which are significant to the Issuer and concluded between the Issuer and a member of its Management Board or another person connected/close to them and shall determine the terms of such transactions. The transactions approved by the Supervisory Board concluded between the Issues and a member of the Management Board or another person connected/close to them are published in the Corporate Governance Recommendations Report. No such transactions took place in 2015.

CGC Article 3.1.3

The Supervisory Board shall regularly assess the activities of the Management Board and its implementation of the Issuer’s strategy, financial condition, risk management system, the lawfulness of the Management Board activities and whether essential information concerning the Issuer has been communicated to the Supervisory Board and the public as required. Upon the establishment of committees by the Supervisory Board, the Issuer shall publish on its website their existence, duties, membership and position in the organization. Upon change of the committee structures, the Issuer shall publish the content of such changes and the period during which the procedures are in effect.

CGC Article 3.2.5

The amount of remuneration of a member of the Supervisory Board shall be published in the Corporate Governance Recommendations Report, indicating separately basic and additional payment (incl. compensation for termination of contract and other payable benefits). The general meeting of shareholders of AS PRFoods is competent to elect and approve the composition of the Supervisory Board and term of office. According to the Articles of Association of PRFoods, the Supervisory Board has between three and seven members who are elected by the general meeting for a term of five years. The general meeting of shareholders has confirmed the remuneration fees of members of the Supervisory Board as follows: fee for the Chairman of the Supervisory Board 1,000 euros a month, fee for the Vice Chairman of the Supervisory Board 750 euros a month and the fee of the member of the Supervisory Board 500 euros a month. No severance fee is to be paid to the member of the Supervisory Board.

CGC Article 3.2.6

If a member of the Supervisory Board has attended less than half of the meeting of the Supervisory Board, this shall be indicated separately in the Corporate Governance Recommendations Report. In 2015, all members of the Supervisory Board attended all Supervisory Board meetings.

CGC Article 3.3.2

Members of the Supervisory Board shall promptly inform the Chairman of the Supervisory Board and Management Board regarding any business offer related to the business activity of the Issuer made to him, a person close to him or a person connected with him. All conflicts of interests that have arisen in preceding year shall be indicated in the Corporate Governance Recommendations Report along with their resolutions. Members of the Supervisory Board refrain from conflicts of interests and adhere to the prohibition of competition. The Supervisory Board and the Management Board cooperate closely in accordance with the Articles of Association and in the interests of the business undertakings and its shareholders. There were no such conflicts of interest in 2015.

CGC Article 5.3

On the Issuers web site, among others also the general strategy directions of the Issuer as approved by the Supervisory Board shall be accessible. The Company’s Management Board believes that the strategy is part of the Company’s commercial secrets and therefore cannot be disclosed. General directions and significant issues are provided in the Management Report.

CGC Article 5.6

The Issuer shall disclose the dates and places of meetings with analysts and presentations and press conferences organized for analysts, investors or institutional investors on its website. The Issuer enables shareholders to participate at such events and makes presentations available on its website. The Issuer shall not arrange meetings with analysts and presentations organized for investors directly before dates of publishing a financial report. The Issuer shall treat all shareholders equally. Compulsory, significant and price-sensitive information is first disclosed in the information system of the Tallinn Stock Exchange and then in the websites of the Estonian Financial Supervisory Authority and the Company. In addition, every shareholders is entitled to request additional information from the Company and set up meetings. The Company’s Management Board does not consider it important to keep a logbook on timetable and agenda of meetings with various shareholders because these meetings are limited to information that is already disclosed. This rule applies on all meetings, including ones held shortly before disclosing financial reports.

CGC Article 6.2

Appointing an auditor and auditing of annual financial statements. The general meeting of shareholders of AS PRFoods held on 28 May 2015 appointed AS PricewaterhouseCoopers as the Company’s auditor for 2015. Information about the auditor is available on the Company’s website. The remuneration of the auditor will be determined pursuant to the agreement to be concluded with the auditor and the parties have agreed not to disclose the amount of the remuneration. Pursuant to the Auditing Act, the sworn auditor representing the external audit company is to be changed at least once in every seven years.

Governance principles and additional information

AS PRFoods is a public limited company and its governing bodies are the shareholders’ general meeting, the Supervisory and the Management Boards. 

General meeting

The general meeting of shareholders is the Company’s highest management body that is competent to amend and approve new Articles of Association, change the amount of share capital, remove members of the Supervisory Board or make a resolution on the termination, division, merger or restructuring of the Company, on the condition that at least 2/3 of the votes represented by shareholders at the general meeting are in favour.  
General meetings are ordinary and extraordinary meetings. An ordinary general meeting shall be convened by the management board once a year not later than within six months after the end of the financial year. The Management Board shall convene an extraordinary general meeting if the Company’s net assets fall below the limit allowed by law or if the meeting is requested by the Supervisory Board, auditor or shareholders whose shares represent at least 1/10 of the share capital. A general meeting has a quorum provided that more than one-half of the votes determined by shares are represented there. The list of persons entitled to participate at the general meeting is determined 7 days before the meeting. The annual general meeting of shareholders of AS PRFoods was held on 28th May 2015 in the Radisson Blu Hotel Olümpia. 31 shareholders attended the meeting representing 31 701,234 votes or 82.45% of the total votes represented by the all shares. Therefore the meeting was competent to pass resolutions on issues in the meeting’s agenda. The agenda of the general meeting included, in addition to approval of the annual report of FY2014 and covering of losses, reduction of the Company’s share capital, appointment of auditor for FY2015 and determining auditor’s remuneration. The Chairman of the Management Board of AS PRFoods held a presentation at the meeting. The meeting adopted the resolutions on all issues in the agenda of the general meeting according to the proposals made by the Supervisory Board. Information about the adoption of resolutions and contents were published after the end of the meeting via the information system of NASDAQ OMX Tallinn and on the website of the Company at www.prfoods.ee.

Supervisory Board

Pursuant to law, a Supervisory Board of a public limited company is a supervisory body responsible for planning the activities of a company, organizing its management and supervising the activities of Management Board.

According to the Articles of Association of PRFoods, the Supervisory Board has three to seven members elected by the General Meeting of shareholders for the term of five years. Members of the Supervisory Board elect a Chairman among themselves. Chairman of the Supervisory Board is responsible for organizing the work of Supervisory Board and has a casting vote in case of tied vote.

At the report preparation moment, the Supervisory Board of PRFoods is comprised of the following members: Lauri Kustaa Äimä (since incorporation), Kuldar Leis (elected on 29 May 2013), Aavo Kokk (elected on 5 May 2009), Harvey Sawikin (elected on 5 May 2009), Vesa Jaakko Karo (elected on 17 August 2009) and Arko Kadajane (elected on 29 May 2012). The terms of office of all the current members of the Supervisory Board will end on 29 May 2018. The Supervisory Board of PRFoods includes four independent members — Aavo Kokk, Vesa Jaakko Karo, Kuldar Leis and Arko Kadajane. The Chairman of the Supervisory Board is Lauri Kustaa Äimä and the Vice-Chairman of the Supervisory Board is Kuldar Leis.

The meetings of the supervisory board takes place according to necessity but not less often than once in every three months. The meeting of the supervisory board has a quorum provided that more than one-half of the members of the supervisory board participate at the meeting. In 2015, the Supervisory Board held four meetings. All members of the Supervisory Board attended all meetings.

In addition to the meetings, the Supervisory Board adopted resolutions without convening a meeting if it was necessary. The Management Board informed the Supervisory Board on a regular basis of the operations and financial status of PRFoods and the Supervisory Board provided the Management Board with necessary directions and support in conducting the everyday business activities of the company. If the contract of service of a member of the Supervisory Board expires or is terminated before due term, the Group shall not incur a higher liability to pay a benefit than what is prescribed by law. As at the end of 2015, the Company’s Supervisory Board members owned directly and indirectly 3.94% of the Company’s shares (2014: 4.05%).  

Management Board

The Management Board is the management body of the Company that represents and manages the Company according to the law and provisions of the Articles of Association. The Management Board is required to act in the most financially-appropriate manner. According to the Articles of Association, the Management Board of AS PRFoods consists of 1 (one) to 4 (four) members. The members of the Management Board shall be elected by the Supervisory Board for 3 (three) years.

The competence of the Supervisory Board includes the election of the Chairman of the Management Board, on the latter’s proposal, appointment and recalling of members of the Management Board. A member of the Management Board may represent the Company in all legal transactions. The Management Board of AS PRFoods consists of one member. According to the Supervisory Board, from 2 February 2015 the only member of the Management Board has been Indrek Kasela. In its day-to-day management, the Company’s Management Board is independent and adhere to the best interests of all shareholders, thereby ensuring the Company’s sustainable development in accordance with the set objectives and strategy. Moreover, the Company’s Management Board is responsible for ensuring functioning internal control and risk management procedures in the Company.

The competence and powers of the Management Board are regulated by the Commercial Code and provided in the Company’s Articles of Association. No other exceptions or agreements have been made or entered into. The Chairman of the Management Board receives remuneration according to the contract of service and is additionally entitled to receive severance benefit for up to 6 months’ remuneration of the member of the Management Board. The member or Chairman of the Management Board have no pension-related rights. The Chairman is responsible for organising business operations on the Group level and also fulfils the tasks of the Managing Director. In subsidiaries, the responsibility for adhering to business practices lies on the local management. As at the end of 2015, the Company’s Management Board member owned by direct and indirect holdings a total of 0.11% of the Company’s shares (2014: 2.74%). More detailed information about the education, career, membership in management bodies of business undertakings and shareholdings in AS PRFoods of members of the Supervisory Board and Management Board are provided on the Company’s website. 

Supervisory and Management Boards of Subsidiaries

The Chairman or Management Board member of a subsidiary is appointed by the Supervisory Board of the subsidiary. Below is a list of Supervisory Boards and Management Boards of subsidiaries that are 100% owned by AS PRFoods as at 31 December 2015.

Company Management Board Supervisory Board
Saaremere Kala ASMargus Rebane (Chairman), Pekka Pentti Olavi LahtinenIndrek Kasela (Chairman), Kuldar Leis, Lauri Kustaa Äimä
Vettel OÜAivar Jõgi (Chairman), Mairi Paiste, Pekka Pentti Olavi LahtinenIndrek Kasela (Chairman), Lauri Kustaa Äimä, Margus Rebane
GourmetHouse OÜMargus Rebane (Managing Director) 
Heimon Kala OyIndrek Kasela (Chairman), Pekka Pentti Olavi Lahtinen (Managing Director), Pirkko Kemppainen (Substitute Member) 
Överumans Fisk AbMargus Rebane (Chairman), Pekka Pentti Olavi Lahtinen (Substitute Member) 

Additional management bodies and special committees

The Company has regulated the necessary procedures with rules and there has been no practical need to set up additional management bodies. In 2010, acting on the requirement provided in the Auditors Activities Act, the Company’s Supervisory Board set up an auditing committee in the Company with a task to monitor and analyse processing of financial information, efficiency of risk management and internal control, the process of auditing of consolidated annual financial statements and the independence of the auditing undertakings and the auditor representing the auditing company under the law, as well as to submit to the Supervisory Board proposals and recommendations in issues prescribed by law. Since September 2010, the members of the committee have been Supervisory Board member Aavo Kokk (Chairman) and Mairi Paiste who is member of the Management Board of Vettel OÜ.  

Information management

As a listed company, AS PRFoods adheres to the principles of openness and equal treatment of investors. The information required in the stock exchange rules and regulations is published regularly according to due dates, while the Company adheres to the principle not to publish forward-looking forecasts. Instead, it publishes and comments factual information. For timely notification of investors and the public, the Company operates a website that contains all stock exchange announcements and financial reports. 

Auditors

In accordance with the resolution of the general meeting of shareholders from 28 May 2015, the audits of AS PRFoods in 2015 will be conducted by AS PricewaterhouseCoopers.