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Statement on observing corporate governance principles in 2008
I. The Company adopted the corporate governance principles specified in the document entitled “Dobre Praktyki Spółek Notowanych na GPW” [Good practices of listed companies], available at the Exchange website: http://corp-gov.gpw.pl. In 2008 the Company did not observe the following rules specified in the above-mentioned document:
- Rule specified in Section III item 6
RULE: “6. At least two members of the supervisory board should be independent of the company and entities related to the company. Enclosure II to the Recommendation of the European Committee of February 15, 2005 on the role of non-executive directors, or supervisory directors of listed companies and on the (supervisory) board committees applies to independence criteria to be met by supervisory board members. Irrespective of the provisions of item b) of the above-mentioned Enclosure, a person being an employee of the Company, a subsidiary or an associated entity does not meet the independence criteria referred to in the Enclosure. Moreover, in the meaning of this principle, a connection with a shareholder, excluding the independence of a supervisory board member, is understood as actual and significant connection with a shareholder with a right to exercise at least 5% of the total number of votes at a general meeting.”
COMMENT: None of the Supervisory Board members of STALPROFIL SA meets the independence criteria, all Supervisory Board members are related to Company shareholders who have a right to exercise more than 5% of the total number of votes at a general meeting. The Company has three major shareholders holding 77.5% of votes at the General Meeting. Supervisory Board Members are related to those shareholders.
The Company’s management is of the opinion that it facilitates correct and efficient implementation of the Company’s development strategy which cover the interests of all shareholder groups, and other groups connected with the Company’s business. The issuer will start to follow this principle upon obtaining information on the appointment of Supervisory Board members who meet the criteria of independence.
- Rule specified in Section III item 7
RULE: “7. At least one audit committee should function within the supervisory board. At least one member of the committee should be independent of the Company and entities related to the Company, qualified in scope of accounting and finance. In companies where the supervisory board consists of the minimum number of members required by the law, tasks of the committee may be fulfilled by the supervisory board.”
COMMENT: Since the Company does not follow the rule specified in Section III item 6, according to which at least two members of the supervisory board should be independent, the appointment of an audit committee with at least one independent member is not possible. Moreover, Supervisory Board Regulations do not provide for an internal distribution of duties between its individual members, thus the tasks of an audit committee are performed by the entire Supervisory Board. The Company may start following this rule upon receiving information on the appointment of Supervisory Board members meeting the criteria of independence.
- Rule specified in Section III item 8
RULE: ”8. Enclosure I to the Recommendation of the European Commission of February 15, 2005 on the role of non-executive directors (…) should apply to the tasks and the functioning of committees within the supervisory board”
COMMENT: According to the previous item, there are no committees within the Supervisory Board and thus the principles related to the functioning of committees, referred to in Enclosure 1 to the Recommendation of the European Commission of February 15, 2005, on the role of non-executive directors (…), were not implemented in the Company.
- Rule specified in Section IV item 8
RULE: “8. General Meeting, or the Supervisory Board should ensure that the entity authorized to examine financial statements is changed at least once every seven financial years.”
COMMENT: Company’s financial statements, including the statement for 2008, were examined by an entity acting as a chartered auditor towards the Company in a period longer than 7 years i.e. Kancelaria Porad Finansowo – Księgowych dr Piotr Rojek sp. z o.o. Company’s relation with this auditor was based on a medium-term contract for auditing Company’s financial statements effective till the audit of the annual statement for the financial year 2008 is completed. On December 22, 2008 the Company made a decision to change the auditor and appointed company Moore Stephens Katowice sp. z o.o. to audit the Company’s financial statement for 2090, thus starting from 2009, the Company will fulfill the rule specified in Section IV item 8.
II. Information on the basic features of internal control and risk management systems applied by the Company with respect to the process of preparing financial statements
Obligations related to the management of corporate risk in the Company are fulfilled by the Management Board, managers and other employees. Professional, independent and objective opinions enabling the Company to achieve its targets in scope of internal financial reporting are also presented to the Management Board by external auditors.
Internal control system applied to the process of preparing financial statements is fulfilled by the Management Board, Chief Accountant and other employees. The purpose of the internal control is to ensure compliance of the prepared statements with books, documents and effective accounting regulations, and to present the results of business activity and the property and financial situation of the Company in line with the actuality.
Control activities are conducted on a day-to-day basis as a part of responsibilities and obligations of individual employees of the Company. Financial statements, including Company’s periodic reports, are prepared in line with effective law regulations and the accounting policy adopted by the Company. Documentation approved by the Management Board for the use in the Company is as follows:
- General principles of keeping accounting books,
- Adopted methods in scope of recording, evaluation, settlement and reporting,
- List of general ledger accounts and principles of posting business transactions on the accounts,
- Principles of keeping auxiliary books, and linking them to general ledger accounts,
- List of documents being accounting books on electronic data carriers,
- Software with information on its intended use, principles of data protection, and other documentation related to data processing.
Financial statements and periodic reports are drawn up by a team led by the Chief Accountant, and are then verified by the Management Board. Any irregularities identified are corrected on a regular basis by authorized employees of the Company.
The Company’s Management Board is also responsible for the efficiency of the internal control system with respect to the process of preparing and submitting financial statements in line with the requirements arising from the Regulation of the Minister of Finance of February 19, 2009 on current and periodic information submitted by issuers of securities, and conditions of acknowledging information required under the law of a country not being an EU state as equivalent.
III. Holders of all securities offering special control rights and information on those rights. Limitations concerning the transfer of the ownership title to issuer’s securities.
4 000 000 of the shares of Stalprofil S.A, A series, are preferred registered shares i.e. one share carries five votes at the General Meeting. The table below presents the shareholders’ structure – A series shares, as on December 31, 2008.
- Rule specified in Section III item 6
RULE: “6. At least two members of the supervisory board should be independent of the company and entities related to the company. Enclosure II to the Recommendation of the European Committee of February 15, 2005 on the role of non-executive directors, or supervisory directors of listed companies and on the (supervisory) board committees applies to independence criteria to be met by supervisory board members. Irrespective of the provisions of item b) of the above-mentioned Enclosure, a person being an employee of the Company, a subsidiary or an associated entity does not meet the independence criteria referred to in the Enclosure. Moreover, in the meaning of this principle, a connection with a shareholder, excluding the independence of a supervisory board member, is understood as actual and significant connection with a shareholder with a right to exercise at least 5% of the total number of votes at a general meeting.”
COMMENT: None of the Supervisory Board members of STALPROFIL SA meets the independence criteria, all Supervisory Board members are related to Company shareholders who have a right to exercise more than 5% of the total number of votes at a general meeting. The Company has three major shareholders holding 77.5% of votes at the General Meeting. Supervisory Board Members are related to those shareholders.
The Company’s management is of the opinion that it facilitates correct and efficient implementation of the Company’s development strategy which cover the interests of all shareholder groups, and other groups connected with the Company’s business. The issuer will start to follow this principle upon obtaining information on the appointment of Supervisory Board members who meet the criteria of independence.
- Rule specified in Section III item 7
RULE: “7. At least one audit committee should function within the supervisory board. At least one member of the committee should be independent of the Company and entities related to the Company, qualified in scope of accounting and finance. In companies where the supervisory board consists of the minimum number of members required by the law, tasks of the committee may be fulfilled by the supervisory board.”
COMMENT: Since the Company does not follow the rule specified in Section III item 6, according to which at least two members of the supervisory board should be independent, the appointment of an audit committee with at least one independent member is not possible. Moreover, Supervisory Board Regulations do not provide for an internal distribution of duties between its individual members, thus the tasks of an audit committee are performed by the entire Supervisory Board. The Company may start following this rule upon receiving information on the appointment of Supervisory Board members meeting the criteria of independence.
- Rule specified in Section III item 8
RULE: ”8. Enclosure I to the Recommendation of the European Commission of February 15, 2005 on the role of non-executive directors (…) should apply to the tasks and the functioning of committees within the supervisory board”
COMMENT: According to the previous item, there are no committees within the Supervisory Board and thus the principles related to the functioning of committees, referred to in Enclosure 1 to the Recommendation of the European Commission of February 15, 2005, on the role of non-executive directors (…), were not implemented in the Company.
- Rule specified in Section IV item 8
RULE: “8. General Meeting, or the Supervisory Board should ensure that the entity authorized to examine financial statements is changed at least once every seven financial years.”
COMMENT: Company’s financial statements, including the statement for 2008, were examined by an entity acting as a chartered auditor towards the Company in a period longer than 7 years i.e. Kancelaria Porad Finansowo – Księgowych dr Piotr Rojek sp. z o.o. Company’s relation with this auditor was based on a medium-term contract for auditing Company’s financial statements effective till the audit of the annual statement for the financial year 2008 is completed. On December 22, 2008 the Company made a decision to change the auditor and appointed company Moore Stephens Katowice sp. z o.o. to audit the Company’s financial statement for 2090, thus starting from 2009, the Company will fulfill the rule specified in Section IV item 8.
II. Information on the basic features of internal control and risk management systems applied by the Company with respect to the process of preparing financial statements
Obligations related to the management of corporate risk in the Company are fulfilled by the Management Board, managers and other employees. Professional, independent and objective opinions enabling the Company to achieve its targets in scope of internal financial reporting are also presented to the Management Board by external auditors.
Internal control system applied to the process of preparing financial statements is fulfilled by the Management Board, Chief Accountant and other employees. The purpose of the internal control is to ensure compliance of the prepared statements with books, documents and effective accounting regulations, and to present the results of business activity and the property and financial situation of the Company in line with the actuality.
Control activities are conducted on a day-to-day basis as a part of responsibilities and obligations of individual employees of the Company. Financial statements, including Company’s periodic reports, are prepared in line with effective law regulations and the accounting policy adopted by the Company. Documentation approved by the Management Board for the use in the Company is as follows:
- General principles of keeping accounting books,
- Adopted methods in scope of recording, evaluation, settlement and reporting,
- List of general ledger accounts and principles of posting business transactions on the accounts,
- Principles of keeping auxiliary books, and linking them to general ledger accounts,
- List of documents being accounting books on electronic data carriers,
- Software with information on its intended use, principles of data protection, and other documentation related to data processing.
Financial statements and periodic reports are drawn up by a team led by the Chief Accountant, and are then verified by the Management Board. Any irregularities identified are corrected on a regular basis by authorized employees of the Company.
The Company’s Management Board is also responsible for the efficiency of the internal control system with respect to the process of preparing and submitting financial statements in line with the requirements arising from the Regulation of the Minister of Finance of February 19, 2009 on current and periodic information submitted by issuers of securities, and conditions of acknowledging information required under the law of a country not being an EU state as equivalent.
III. Holders of all securities offering special control rights and information on those rights. Limitations concerning the transfer of the ownership title to issuer’s securities.
4 000 000 of the shares of Stalprofil S.A, A series, are preferred registered shares i.e. one share carries five votes at the General Meeting. The table below presents the shareholders’ structure – A series shares, as on December 31, 2008.
| Shareholder | Number of A series Shares |
| ArcelorMittal Poland S.A. | 1 360 000 |
| MZZ Pracowników Arcelor Mittal Dąbrowa Górnicza | 1 320 000 |
| MOZ NSZZ "Solidarność" Mittal Steel Poland S.A. | 1 320 000 |
| Total | 4 000 000 |
Stalprofil did not issue any securities offering special rights, including control rights, or those subject to limitations in scope of transferring the ownership title.
IV. Limitations as to exercising the voting right
There are no limitations whatsoever as to exercising the voting right which arises from holding issuer's shares.
V. Information on the functioning of the General Meeting, its basic powers and shareholders’ rights, as well as the manner of exercising those rights
The General Meeting of STALPROFIL SA acts in line with its Regulations available at the Company’s website (stalprofil.com.pl). Provisions of the commercial companies code, other legal acts and provisions of the Company’s Statute apply in issues not governed by the Regulations.
The basic rights of the General Meeting of STALPROFIL S.A. include passing resolutions on:
a) approving the Management Board report on the Company’s activity for a previous year, and the financial statement for the previous financial year,
b) granting the vote of approval to members of the Company bodies for the fulfillment of duties,
c) profit distribution, or the manner of covering loss,
d) appointing or recalling the Supervisory Board or its individual members, and determining the form and the amount of their remuneration,
e) amendments to the Company’s Statute, including significant changes in the Company’s business objectives, and on authorizing the Management Board to raise the initial capital up to the value of the target capital,
f) selling the company or its organized part,
g) mergers, transformations, dissolution or liquidation of the Company,
General Meeting may pass resolutions only on matters included in the agenda.
Draft resolutions to be passed by the General Meeting, and other important materials should be presented to shareholders together with justification and an opinion of the Supervisory Board if such opinion is necessary, prior to the General Meeting to enable the General Meeting to read the materials and assess them.
Chairman of the General Meeting should ensure that resolutions are formulated in a way enabling each person entitled to vote, who does not agree with the subject of the resolution, to challenge the resolution. Person challenging a resolution shall have a possibility to briefly justify their claim.
A participant of the General Meeting shall have a right to one address and one reply with respect to each item of the agenda and each organizational matter.
Members of the Supervisory Board and the Management Board, as well as the Company's chartered auditor should provide the participants of the General Meeting with explanations and information on the Company, to an extent corresponding to their competences, and in a scope necessary to decide on issues discussed by the General Meeting.
The following have a right to participate in the General Meeting with a right to vote:
a) shareholders holding registered shares provided that they have been entered into the shares ledger at east one week prior to the date of the General Meeting,
b) shareholders holding bearer shares provided that they present the Company’s Management Board with shares at least a week prior to holding the General Meeting and they do not collect them until the Meeting is finished. Shareholders may, instead of shares, present certificates on depositing shares (with a notary public, broker’s office, etc.), including the number of shares and a statement that shares will not be issued before the General Meeting is finished,
c) shareholders’ proxies providing that a prior written power of attorney was presented.
A share carries only one vote at the General Meeting. In case of preferred shares issued by the Company before January 1, 2001, one share carries five votes at the General Meeting.
VI. Description of principles followed with respect to amending the Company’s statute, appointing, recalling members of the management and their rights, as well as the functioning of managing, supervisory or administrative bodies, and their committees.
The Company does not follow any other specific principles concerning amendments to the statute that would differ from the principles specified in the commercial companies code. Supervisory Board expresses its opinion on each amendment to the statute which is then approved by the Company’s General Meeting.
The Management Board consists of two to four members appointed for a term of office lasting five years by virtue of a resolution passed by the Supervisory Board. Resolutions on recalling or appointing individual members of the Management Board are passed by the qualified majority of votes i.e. 5/7 of votes present, in the presence of at least six members of the Supervisory Board.
The Supervisory Board consists of seven members appointed by virtue of a resolution of the General Meeting for a joint term of office lasting five years.
The Management Board and the Supervisory Board of STALPROFIL S.A. act in line with their regulations available at the Company’s website. The Supervisory Board Regulations do not provide for internal distribution of duties between individual members of the Supervisory Board, and thus no committees function within the Supervisory Board.
VII. Composition of the Company’s managing and supervisory bodies, as well as changes thereto recorded over the last financial year.
On May 9, 2008 the Annual General Meeting of Stalprofil S.A. made changes in the composition of the Company’s Supervisory Board through the appointment of the new Supervisory Board consisting of: Marcin Gamrot, Jerzy Goinski, Jerzy Podsiadło, Tomasz Ślęzak, Jacek Zub.
On July 17, 2008, the General Meeting of company Stalprofil S.A. passed a resolution on supplementing the composition of the Supervisory Board up to seven persons through the appointment of the following two new Supervisory Board members: Jarosław Kuna, Gaetan Stiers
Composition of the Supervisory Board as on December 31, 2008:
• Jerzy Podsiadło, Supervisory Board Chairman,
• Jacek Zub, Supervisory Board Vice Chairman,
• Marcin Gamrot, Supervisory Board Member,
• Jerzy Goinski, Supervisory Board Member,
• Jarosław Kuna, Supervisory Board Member,
• Gaetan Stiers, Supervisory Board Member,
• Tomasz Ślęzak, Supervisory Board Member.
In view of the fact that the term of office of the former Management Board expired, the Supervisory Board appointed a new Management Board for the next five-year period on May 9, 2008.
Composition of the Management Board of STALPROFIL S.A. as on December 31, 2008:
• Jerzy Bernhard, Management Board President, General Director,
• Zdzisław Mendelak, Management Board Vice President, Commercial Director,
• Henryk Orczykowski, Management Board Vice President, Business Development Director,
• Sylwia Potocka-Lewicka, Management Board Vice President, Financial Director.
