Rules of Board of Directors

Rules governing the Board of Directors of

ECM REAL ESTATE INVESTMENTS A.G.

(the “Rules”)

 

Reference to “the Board” shall mean the Board of Directors of ECM REAL ESTATE INVESTMENTS A.G.

Other terms beginning with capital letters shall be construed as those defined in the Articles of Association of the Company and the Company’s Corporate Governance Glossary of Terms.

1             Status of the Rules

1.1         These Rules should be read in conjunction with and subject to the ECM’s Articles of Association (the “Articles of Association”), to the extent not actually reflected therein.

1.2         In the event of an inconsistency between Luxembourg law and the Articles of Association, and save for mandatory provisions of Luxembourg law, the latter shall prevail. Luxembourg law shall prevail in the event of an inconsistency within the Articles of Association.

1.3         These Rules describe the principles of operation of the Board, the operation of its bodies and their mutual relationships as well as the rights and duties of their members.

1.4         The Board shall adopt the Rules by way of a resolution.

2             Functions and responsibilities

2.1         All Directors, and in particular the non-executive Directors, shall be guided by the interests of the Company and its business, such interests to include but not be limited to the interests of ECM’s shareholders and employees.

3             Composition of the Board

3.1         The Board shall have at least three but no more than seven members, of whom at least one shall be an executive Director and at least one a non-executive Director.

3.2         The composition of the Board shall be such that the combined experience, expertise and independence of the Directors meets the profile attached hereto as
Annex A and enables the Directors to fulfil their responsibilities and duties, in a manner consistent with Luxembourg law, the Articles of Association and these Rules.

3.3         When making a recommendation as to the changes to the structure, size and composition of the Board to the General Meeting of Shareholders or when co-opting members, the Board shall have regard to recommendations of the Nomination Committee. When making recommendations to the General Meeting of Shareholders, the Board shall disclose to it such recommendation.

3.4         The Board shall ensure adequate succession planning for the Board members and senior management.

3.5         The Board shall, having regard to the recommendations of the Nomination Committee, decide on the continuation in office of Directors at the end of their term of office, when they are due to be re-elected by the shareholders at the Annual General Meeting and otherwise as appropriate.

3.6         The Board shall, having regard to the recommendation of the Nomination Committee, decide, subject to approval of the General Meeting of Shareholders, on the continuation in office of any Director at any time, including the suspension or termination of service of an executive Director as an employee of the Company, subject to the law and their service contract.

4             Profile of non-executive Directors

4.1         Non-executive Directors shall have a profile that takes into account the nature of the business of the Company, its activities, the scope of agenda of its committees, and the required expertise and independence of each of them.

4.2         The non-executive Directors shall be independent within the meaning of article A.3.1. of the Combined Code on Corporate Governance, issued in June 2006. Such independence shall be determined by the Board.

4.3         The profiles of non-executive Directors shall be evaluated annually by the Nomination Committee.

5             Election and re-election

5.1         The Board shall be elected in the manner provided in the Articles of Association. The Directors shall hold office for a maximum period of three years and shall thereafter be eligible for re-election. The non-executive Directors shall on re‑election meet the independence criteria.

6             Chairman and Vice-Chairman

6.1         The Board shall appoint one of its members to act as a chairman of the Board (the ”Chairman”) and one of the non-executive Directors to act as a vice ‑c hairman and a senior independent Director (the ”Vice-Chairman” or the “Senior Independent Director”).

6.2         The Chairman shall determine the agenda of each meeting. Each Director may request the Chairman to add items to the agenda. Such requests may not be unreasonably denied.

6.3         The Chairman shall chair each meeting, monitor the proper functioning of the Board, arrange for the adequate provision of information to members of the Board and ensure there is sufficient time for decision making to take place.

6.4         The Vice-Chairman shall act as a chairman on occasion when the Chairman is absent. The Vice-Chairman shall be available to shareholders, if they have concerns which contact through the normal channels of Chairman, President or Executive Vice-President for Finance has failed to resolve or for which such contact is inappropriate.

6.5         The Chairman shall, moreover, propose to the Board appraisal of the performance of the non-executive Directors and review and recommend their remuneration.

7             Company Secretary

7.1         The Board shall appoint a company secretary (the “Company Secretary”). The Executive Vice–President for Corporate Affairs shall hold the position of the Company Secretary, if no other person shall be appointed.

7.2         The role of the Company Secretary is to provide for compliance with the Rules and to contribute to a good information flow between the Board and its bodies and between senior management and non‑executive Directors.

7.3         The duties of the Company Secretary form Annex B to these Rules.

7.4         In exceptional cases the Company Secretary may appoint his/her nominee to attend a meeting of the Board or the Board committees in his/her place .

7.5         When attending a meeting of the Board or of the Board committees, t he Company Secretary shall be entitled to be accompanied by another person, unless the presence of such person would be manifestly detrimental to the interests of the Company.

7.6         The Company Secretary shall report to the Board. In particular, the Company Secretary shall report any misconduct or inactivity of a ny member of the Board and/or Board committees which disturbs the proper functioning of such committees.

7.7         The Company Secretary is authorised by the Board to request co-operation of any member of the Board, any member of the Board committee, or any employee of the Company, which is necessary to duly perform the Company Secretary’s duties. In particular, the Company Secretary is authorised to request the preparation of documentation to be distributed to participants of meetings.

7.8         The remuneration of the Company Secretary shall consist of an annual flat fee and shall be decided by the Board on the recommendation of the Chairman of the Board.

8             Meeting of the Board

8.1         The Board shall meet as often as deemed necessary or appropriate at the request of the Chairman. Any Director may request that the Chairman calls for a meeting, provided that the Chairman shall not be required to call such meeting if a meeting of the Board is already scheduled to be held within four weeks after such request.

8.2         Meetings of the Board may be held in person, by teleconference or by videoconference (or any combination of these), subject to the further rules set out in the Articles of Association of the Company.

8.3         Notices and agendas of items to be discussed during the meeting shall be provided in English at least five business days prior to any meeting and may be circulated in writing or by email.

8.4         The Board shall be permitted to invite external advisers of ECM to attend meetings.

8.5         The Company Secretary shall prepare the minutes of each meeting in English. The minutes shall be authenticated by the signatures of both the chairman of the meeting and the Company Secretary and shall be made available to each member of the Board. The minutes shall be issued as soon as possible after each meeting and in any event, not later than within two working days after such a meeting. The minutes shall be kept by the Company Secretary at the offices of ECM. The Board may decide to record a particular resolution in a separate minute; in such event the foregoing rules shall apply accordingly.

8.6         Led by the Vice-Chairman, the non-executive Directors shall meet without the Chairman present at least annually to appraise the Chairman’s performance and on such other occasions as are deemed appropriate.

9             Resolutions

9.1         Resolutions shall be validly adopted by a quorum consisting of the majority of Directors present, those present Directors to number at least three.

9.2         Resolutions shall be adopted by simple majority of the members present or represented at such meeting. In the case of an equality of votes, the Chairman shall have the right to cast the deciding vote (the “Casting Vote”). The Casting Vote shall be personal to the Chairman and will not be transferred to any other Director acting as a c hairman in the Chairman’s absence.  

9.3         In case of urgency, a written decision, signed by all the members of the Board of Directors, is proper and valid as though it had been adopted at a meeting of the Board which was duly convened and held. The Directors shall make a decision within five working days of receiving notice of a proposed resolution and such resolution will be adopted in the event that the Directors resolve unanimously in favour. Such decision may be documented in a single document or in several separate documents having the same content and each of them signed by one or several members of the Board. The adoption of a decion outside a meeting in this way must be reported at the next Board meeting.

9.4         No less than once a year, the Directors shall discuss:

9.4.1       The performance of the Board.

9.4.2       Corporate strategy; the risks of the business; internal risk management and control systems.

9.4.3       Compliance with all relevant laws and regulations; and all other matters provided by law.

9.4.4       Developments and strategy in corporate governance.

10          Information

10.1      Each member of the Board shall be entitled to equal and unfettered access to information relating to the Company and its subsidiaries. Such information may include but is not limited to the Company’s accounts, internal reports and any other information required to provide members of the Board with such information as is necessary for the performance of their duties.

10.2      The Directors shall have access to the advice and services of the Company Secretary.

10.3      The Directors, and especially non-executive Directors, shall have access to independent professional advice at the Company’s expense where they judge it necessary to discharge their responsibilities as Directors.

11          Relationship with shareholders

11.1      General meetings of shareholders shall be convened at least annually and otherwise as required by shareholders’ convening notice (or as otherwise provided for in the Articles of Association) which shall provide information on all facts and circumstances relevant to the items on the agenda.

11.2      In conformity with the Articles of Association and as a general rule, the Chairman, the Company Secretary or any member of the Executive Committee shall chair the general meetings.

12          Matters reserved to the Board

12.1      Corporate, management and control structure
12.1.1     The Board shall determine the corporate, management and control structure of the Company and the Holding.  

12.1.2     The Board shall establish the Executive Committee; the Audit Committee; the Nomination Committee; the Remuneration Committee; and the Valuation Committee as its bodies and adopt their rules.

12.1.3     Having regard to the recommendation of the Nomination Committee, the Board shall appoint a chairman and members to each of its committees.

12.1.4     The Board shall receive reports from its committees on their activities on an annual basis.

12.1.5     The Board shall review and adopt any amendments to these Rules and rules of its committees.

12.2      Financial reporting and controls
12.2.1     The Board shall, having regard to the recommendation of the Audit Committee, put to Company’s shareholders for approval the appointment, re-appointment or removal of the external auditor.

12.2.2     The Board shall approve the quarterly, half-yearly and final results reports, having regard to recommendations of the Audit Committee.

12.2.3     The Board shall approve the annual report and accounts, including the corporate governance statement and remuneration report, having regard to recommendations of the Audit Committee.

12.2.4     The Board shall approve the dividend policy and declare interim dividend and make recommendation for the final dividend.

12.2.5     The Board shall approve any significant changes in accounting policies or practices, having regard to recommendations of the Audit Committee.

12.2.6     The Board shall approve treasury policies including foreign currency exposure and the use of financial derivatives.

12.3      Internal controls
12.3.1     The Board shall ensure maintenance of a system of internal control and risk management including:

(i)            receiving reports on, and reviewing the effectiveness of, the Company’s risk and control processes to support its strategy and objectives;

(ii)           undertaking an annual assessment of these processes; and

(iii)          approving, after having taken regard of the Audit Committee, an appropriate statement for inclusion in the annual report.

12.3.2     The Board shall review annually its own performance, that of its committees and individual Directors.

12.4      Contracts
12.4.1     The Board shall decide on any major capital project, which is a project with a total budget exceeding EUR 100 million. Decisions on such major capital projects shall not be delegated to the Executive Committee or any other Board committee.

12.4.2     The Board shall approve transactions which are material strategically or by reason of size, entered into by the Company or any subsidiary in the ordinary course of business. Such transactions are:

(i)            equity drawing exceeding EUR 10 million;

(ii)           extra equity allocation;

(iii)          loan raising, which is above approved plan;

(iv)         loan drawing exceeding EUR 10 million;

(v)          extraordinary spending within operational finance;

(vi)         purchase of assets exceeding EUR 10 million;

(vii)        all off-balance sheet commitments and collaterals.

12.5      Communication
12.5.1     The Board shall approve circulars, prospectuses and listing particulars; the approval of routine documents such as periodic circulars about the exercise of conversion rights may be delegated to the Audit Committee.

12.6      Policies
12.6.1     The Board shall approve core corporate policies, including the Code of Conduct; the Share dealing code; the Health and safety policy; the Environmental policy; the Corporate social responsibility policy; and the Charitable donations policy. Approval decisions shall not be delegated to the Executive Committee or any other Board committee.

12.7      Other
12.7.1     The Board shall approve or adopt rules of the making of political donations.

12.7.2     The Board shall approve the appointment of the Holding’s principal professional advisers.

12.7.3     The Board shall conduct prosecution, defence or settlement of litigation involving above EUR 3 million or being otherwise material to the interests of the Company.

12.7.4     The Board shall approve the overall levels of insurance for the Company, including Directors’ & Officers’ liability insurance and indemnification of Directors.

12.7.5     The Board shall not delegate any of these roles to the Executive Committee or any other Board committee.

13          Remuneration of the Company’s officials

13.1      The Board shall, following recommendation of the Remuneration Committee, put a proposal for an annual flat fee remuneration of the members of the Board to shareholders for approval at the Annual General Meeting.

13.2      The Board shall put for shareholders’ approval at the Annual General Meeting the recommendation of the Remuneration Committee on the base remuneration and annual bonus remuneration of the following individuals:

13.2.1     the President of the Company;

13.2.2      members of the Board of Directors of the Company..

13.3      The Board shall put for shareholders’ approval at the Annual General Meeting the recommendation of the Remuneration Committee on the share incentive plan of the following individuals:

13.3.1     the President of the Company;

13.3.2     members of the Board of Directors of the Company;

13.3.3     other managers of the Company;

on the condition that such plan shall have the impact on issued capital of the Company  

13.4      The Board shall, following recommendation of the Chairman, propose the remuneration of the members of the Board’s bodies to be ratified by the shareholders at the Annual General Meeting; such remuneration shall consist of annual flat fee.

13.5      Remuneration of each of the above persons, stipulated in accordance with the above at the commencement of his or her term, shall be reviewed on an annual basis. 

14          Confidentiality

The members of the Board shall be subject to the confidentiality requirements provided in the law.

15          Amendments

The Board may amend the Rules by adopting a resolution. In the event that such an amendment to the Rules requires a corresponding amendment to be made to the Articles of Association, an Extraordinary General Meeting to approve the amendment will need to be held in advance of amending the Rules.

 

Annex A 

Executive Directors’ profile

Executive Directors of the Board shall be able to judge:

• the performance of the management of the Holding and solve problems with respect to replacement and succession in a timely manner;
• the financial situation and the financial reporting process;
• general policy and strategy; and
• the structure and operations of the internal risk management and control systems.

Non-Executive Directors’ profile

Non-executive Directors should have at least one of the following:

• expertise in finance and economics;
• expertise in law;
• knowledge and experience of management and organisational issues.

 

Annex B

Core Duties of the Company Secretary

The Core Duties of the Company Secretary, as provided in Article 15 of the Articles of Association, shall be the following:

1. Board Meetings

Facilitating the smooth operation of the Company’s formal decision making and reporting machinery; organising Board and Board committee meetings; formulating meeting agendas with the President of the Company and advising management on content and organisation of memoranda or presentations for the meeting; collecting, organising and distributing such information, documents or other papers required for the meeting; ensuring that all meetings are minuted and that the minute books are maintained with certified copies of the minutes and that all Board committees are properly constituted and provided with clear rules.

2. General Meetings

Upon delegation of powers by the Board of the Company, ensuring that an annual general meeting of shareholders is held in accordance with the requirements of Luxembourg and other applicable laws and regulations and the Company’s Articles of Association; obtaining internal and external approval of all documentation for circulation to shareholders; preparing and issuing convening notices, proxies and ballot papers of meetings, and distributing convening notices, proxy forms and ballot papers; ensuring the publication formalities of the convening notices into the Luxembourg Mémorial and in Luxembourg newspapers, if required; trying to prepare Directors for any shareholder questions and helping them create briefing materials; overseeing the preparations for security arrangements. At meetings, ensuring that proxy forms, ballot papers (with the voting certificate issued by the clearing system) and an attendance list are correctly processed and that the voting is carried out accurately; co-ordinating the administration and minuting of meetings.  

4. Statutory Returns

In co-operation with the Legal Departments, ensuring the filing of information with the Luxembourg Registre de Commerce et des Sociétés to report certain changes regarding the Company or to comply with requirements for periodic filing and ensuring the publication formalities into the Mémorial and in Luxembourg newspapers, if required. Of particular importance in this regard are:

• annual returns;
• reports & statutory and consolidated accounts;
• the Articles of Association;
• notices of appointment, removal & resignation of Directors;
• change of registered office of the Company;
• resolutions in accordance with the Luxembourg law of 10 August 1915 concerning commercial companies (the “Company Law”).

6. Share Registration

D ealing with transfers , if applicable, and other matters affecting share-holdings; liaising with clearing house; dealing with queries and requests from shareholders.

9. Corporate Governance

Continually reviewing developments in corporate governance with the members of the Board; facilitating the proper induction and integration of new Directors into their role; advising and assisting the Directors with respect to their duties and responsibilities, in particular compliance with the Company Law and other applicable laws and, if applicable, the Prague Stock Exchange requirements; counselling them when preparing presentations and memoranda.

10. Non-Executive Directors

Acting as a channel of communication and information for non-executive Directors.

11. Company Identity

Stipulating rules to be observed in order that all business letters, notices and other official publications of the Company show the name and corporate form of the Company, the address of the registered office of the Company, the registration number of the Company at the Luxembourg Registre de Commerce et des Sociétés and any other information as required by the Company Law.