Latvijas Gaze

AGM Information • May 6, 2010

APPROVED

at the Board meeting of the Joint Stock Company "Latvijas Gāze" on April 29, 2010, minutes No.15 (2010)

Report on observance of corporate governance

principles for the year 2009

	Commentary of the Joint Stock
	Company "Latvijas Gāze"
PRINCIPLE	(hereinafter – the Company)
SHAREHOLDERS' MEETING
1. Ensuring shareholders' rights and participation at shareholders' meetings
1.1. It shall be important to ensure that all the holders of shares of one category have also equal rights, including the right to receive a share of the Issuer's profit as dividends or in another way in proportion to the number of the shares owned by them if such right is stipulated for the shares owned by them.	The Company ensures observance of this principle. All 39 900 000 shares of the Joint Stock Company "Latvijas Gāze" (hereinafter – the Company) give their holders equal rights, in particular: rights to receive dividend and liquidation quota, as well as to vote in a shareholders' meeting (hereinafter – the Shareholders' meeting).
1.2. The Issuer shall prepare a policy for the profit distribution. In the preparation of the policy, it is recommended to take into account not only the provision of immediate benefit for the Issuer's shareholders by paying dividends to them but also the expediency of profit reinvesting, which would increase the value of the Issuer in future. It is recommended to discuss the policy of profit distribution at a shareholders' meeting thus ensuring that as possibly larger a number of shareholders have the possibility to acquaint themselves with it and to express their opinion on it. The information on the policy of profit distribution of the Issuer shall be included in the Report and published on the Issuer's website on the Internet.	The Company ensures observance of this principle. The project of profit distribution is developed by the Board of the Company (hereinafter – the Board), reviewed by the Council of the Company (hereinafter – the Council) and approved by the shareholders. When preparing the project of profit distribution, the Board takes into account the long-term investment program and the financial position of the Company. Information on the investment programme in mid-term and other conditions affecting the profit distribution can be found in the Annual report of the Company.
1.3. In order to protect the Issuer's shareholders' interest to a sufficient extent, not only the Issuers but also any other persons who in compliance with the procedure stipulated in legislative acts call, announce and organise a shareholders' meeting are asked to comply with all the issues referred to in these Recommendations in relation to calling shareholders' meetings and provision of shareholders with the required information.	The Company ensures observance of this principle.

1.4. Shareholders of the Issuers shall be provided with the possibility to receive in due time and regularly all the required information on the relevant Issuer, participate at meetings and vote on agenda issues. The Issuers shall carry out all the possible activities to achieve that as many as possible shareholders participate at meetings; therefore, the time and place of a meeting should not restrict the attendance of a meeting by shareholders. Therefore, it should not be admissible to change the time and place of an announced shareholders' meeting shortly before the meeting, which thus would hinder or even make it impossible for shareholders to attend the meeting.	The Company ensures observance of this principle. Place and time of shareholders' meetings is announced not later than 30 days before the planned Shareholders' meeting through all channels provided by the law and used in good practice. Place and time does not hinder shareholders from attending meetings.
1.5. The Issuers shall inform their shareholders on calling a shareholders' meeting by publishing a notice in compliance with the procedure and the time limits set forth in legislative acts. The Issuers are asked to announce the shareholders' meeting as soon as the decision on calling the shareholders' meeting has been taken; in particular, this condition applies to extraordinary shareholders' meetings. The information on calling a shareholders' meeting shall be published also on the Issuer's website on the Internet, where it should be published also at least in one foreign language. It is recommended to use the English language as the said other language so that the website could be used also by foreign investors. When publishing information on calling a shareholders' meeting, also the initiator of calling the meeting shall be specified.	The Company ensures observance of this principle. The Company announces Shareholders' meetings in compliance with the procedure provided by legislations. The information is distributed through all channels provided by the law and used in good practice.
1.6. The Issuer shall ensure that comprehensive information on the course and time of the meeting, the voting on decisions to be adopted, as well as the agenda and draft decisions on which it is planned to vote at the meeting is available in due time to the shareholders. The Issuers shall also inform the shareholders whom they can address to receive answers to any questions on the shareholders' meeting and the agenda issues and ensure that the required additional information is provided to the shareholders.	The Company ensures observance of this principle. In the announcement to shareholders, which is published, firm and legal address of the Company, venue, date and time of the Shareholders' meeting, type of the Shareholders' meeting, institution convoking the Shareholders' meeting, actions to be performed for them to participate and vote, regulations of the Articles of Association on participation of shareholders' representatives at the Shareholders' meeting, agenda of the Shareholders' meeting is specified, also denoting when and at whom shareholders can get acquainted with draft resolutions on the issues included in the agenda as well as others to be reviewed at the Shareholders' meeting.

1.7. The Issuer shall ensure that at least 14 (fourteen) days prior to the meeting the shareholders have the possibility to acquaint themselves with the draft decisions on the issues to be dealt with at the meeting, including those that have been submitted additionally already after the announcement on calling the meeting. The Issuer shall ensure the possibility to read a complete text of draft decisions, especially if they apply to voting on amendments to the Issuer's statutes, election of the Issuer's officials, determination of their remuneration, division of the Issuer's profit and other issues.	The Company ensures observance of this principle. In an announcement to shareholders it is specified when and at whom shareholders can get acquainted with draft resolutions on the issues included in the agenda as well as others to be reviewed at the Shareholders' meeting. The information is available before the meeting.
1.8. In no way may the Issuers restrict the right of shareholders to nominate representatives of the shareholders for Supervisory Board elections. The candidates to the Supervisory Board and candidates to other offices shall be nominated in due time so that the information on the said persons would be available to the shareholders to the extent as stipulated in Clause 1.9 of this Section as minimum 14 (fourteen) days prior to the shareholders' meeting.	The Company ensures observance of this principle. The Company does not restrict the shareholders' rights to nominate shareholders' representatives for election in the Council. Candidates of Council members and other officials are nominated in compliance with the procedure established by the Commercial Law and the Articles of Association of the Company (hereinafter – Articles of Association).
1.9. Especially, attention should be paid that the shareholders at least 14 (fourteen) days prior to the shareholders' meeting have the possibility to acquaint themselves with information on Supervisory Board member candidates whose approval is planned at the meeting. When disclosing information on Supervisory Board member candidates, also a short personal biography of the candidates shall be published. Since the nomination of Supervisory Board member candidates has to be very careful, it is recommended that the Issues disclose the said information as soon as possible.	The Company ensures observance of this principle. Candidacies of Council members and other officials are nominated in compliance with the procedure established by the Commercial Law and the Articles of Association. The professional biography of the candidates for Council membership is published via information channels available for interested persons.
1.10. The Issuer may not restrict the right of shareholders to consult among themselves during a shareholders' meeting if it is required in order to adopt a decision or to make clear some issue.	The Company ensures observance of this principle. The shareholders' rights to debate and consult among themselves during the Shareholders' meeting are not restricted.

1.11. To provide shareholders with comprehensive information on the course of the shareholders' meeting, the Issuer shall prepare the regulations on the course of shareholders' meeting, in which the agenda of shareholders' meeting and the procedure for solving any organisational issues connected with the shareholders' meeting (e.g., registration of meeting participants, the procedure for the adoption of decisions on the issues to be dealt with at the meeting, the Issuer's actions in case any of the issues on the agenda is not dealt with, if it is impossible to adopt a decision etc.). The procedures adopted by the Issuer in relation to participation in voting shall be easy to implement.	The Company ensures observance of this principle. The course of the Shareholders' meeting of the Company is determined by the course regulations of the meeting. Draft regulations are developed before the Shareholders' meeting and approved at the Shareholders' meeting.
1.12. The Issuer shall ensure that during the shareholders' meeting the shareholders have the possibility to ask questions to the candidates to be elected at the shareholders' meeting and other attending representatives of the Issuer. The Issuer shall have the right to set reasonable restrictions on questions, for example, excluding the possibility that one shareholder uses up the total time provided for asking of questions and setting a time limit of speeches.	The Company ensures observance of this principle. Observing the rights of all shareholders, there is procedure for asking questions and shareholders' rights to speak out established in the course regulations of the Shareholders' meeting.
1.13. Since, if a long break in a meeting is announced, the right of shareholders to dispose of freely with their shares is hindered for an undetermined time period, it shall not be recommended to announce a break during a shareholders' meeting. The conditions upon which it is possible to announce a break shall be stipulated also in the regulations on the course of meeting. A break of meeting may be a lunch break, a short break (up to 30 minutes) etc.	The Company ensures observance of this principle. The Shareholders' meetings are held without announcing breaks. In case a break is planned, it will be included in the course regulations of the Shareholders' meeting, approved by the Shareholders' meeting itself.
1.14. When recording the course and contents of discussions on the agenda issues to be dealt with at the shareholders' meeting in the minutes, the chairperson of the meeting shall ensure that, in case any meeting participant requires it, particular debates are reflected in the minutes or that shareholder proposals or questions are appended thereto in written form.	The Company ensures observance of this principle. Shareholders' meetings are minuted observing the norms of the Commercial Law.

2. Participation of members and member candidates of the Issuer's management institutions at
shareholders' meetings
	2.1. The attendance of members of the Issuer's management institutions and auditor at shareholders' meetings shall be necessary to ensure information exchange between the Issuer's shareholders and members of management institutions as well as to fulfil the right of shareholders to receive answers from competent persons to the questions submitted. The attendance of the auditor shall not be mandatory at shareholders' meetings not discussing the finances of the Issuer. By using the right to ask questions shareholders have the possibility to obtain information on the circumstances that might affect the evaluation of the financial report and the financial situation of the Issuer.	The Company ensures observance of this principle. In compliance with the Commercial Law, the Shareholders' meeting is attended by the members of the Board and, if necessary, an auditor.
	2.2. Shareholders' meetings shall be attended by the Issuer's official candidates whose election is planned at the meeting. This shall in particular apply to Supervisory Board members. If a Supervisory Board member candidate or auditor candidate is unable to attend the shareholders' meeting due to an important reason, then it shall be admissible that this person does not attend the shareholders' meeting. In this case, all the substantial information on the candidate shall be disclosed before the shareholders' meeting.	The Company ensures observance of this principle. In the cases when a candidate is unable to attend the Shareholders' meeting, all the substantial information on the candidate is available before the Shareholders' meeting.
	2.3. During shareholders' meetings, the participants must have the possibility to obtain information on officials or official candidates who do not attend the meeting and reasons thereof. The reason of non-attendance should be entered in the minutes of shareholders' meeting.	The Company ensures observance of this principle.

MANAGEMENT BOARD

3. Obligations and responsibilities of the Management Board
3.1. The Management Board shall have the obligation to manage the business of the Issuer, which includes also the responsibility for the realisation of the objectives and strategies determined by the Issuer and the responsibility for the results achieved. The Management Board shall be responsible for the said to the Supervisory Board and the shareholders' meeting. In fulfilment of its obligations, the Management Board shall adopt decisions irrespective of their personal interests or interests of the shareholders that control the Issuer and be guided by interests of all the shareholders, taking into account the common interests of the Issuer and its associated companies (or affiliates).	The Company ensures observance of this principle. Obligations, spheres of responsibility and supervision authorities (Council and Shareholders' meeting) are stipulated in the Board Regulations.

3.2. The powers of the Management Board shall be stipulated in the Management Board Regulations or a similar document, which is to be published on the website of the Issuer on the Internet. This document must be also available at the registered office of the Issuer.	The Company ensures observance of this principle. The powers of the Board are stipulated in the Board Regulations, which have been developed on the basis of the Articles of Association and in compliance with the norms of the Commercial Law. The Board Regulations are available at the Office of the Company.
3.3. The Management Board shall be responsible also for the compliance with all the binding regulatory acts, risk management, as well as the financial activity of the Issuer.	The Company ensures observance of this principle. The Board manages and controls all affairs of the Company, represents the Company and manages the property of the Company in compliance with normative acts, the Articles of Association and resolutions of the Shareholders' meeting.
3.4. The Management Board shall perform certain tasks, including: 1) corporate strategies, work plan, risk control procedure, assessment and advancement of annual budget and business plans, ensuring control on the fulfilment of plans and the achievement of planned results; 2) selection of senior managers of the Issuer, determination of their remuneration and control of their work and their replacement, if necessary, complying with the personnel policy adopted by the Issuer; 3) timely and qualitative submission of reports, ensuring also that the internal audits are carried out and the disclosure of information is controlled.	The Company ensures observance of this principle. The tasks of the Board are stipulated in the Board Regulations.
3.5. In annual reports, the Management Board shall confirm that the internal risk procedures are efficient and that the risk management and internal control have been carried out in compliance with the said control procedures throughout the year.	The Company ensures observance of this principle.
3.6. It shall be preferable that the Management Board submits decisions that determine the objectives and strategies for achievement thereof (participation in other companies, acquisition or alienation of property, opening of representation offices or branches, expansion of business etc) to the Issuer's Supervisory Board for approval.	The Company ensures observance of this principle. In the Articles of Association, the range of issues, requiring consent of the Board for settlement, is stipulated.

4. Management Board composition and requirements for Management Board members
4.1. In composing the Management Board, it shall be observed that every Management Board member has appropriate education and work experience. The Issuer shall prepare a summary of the requirements to be set for every Management Board member, which specifies the skills, education, previous work experience and other selection criteria for every Management Board member.	The Company ensures observance of this principle. Board members are nominated and elected in compliance with the procedure stipulated in the Commercial Law.
4.2. On the Issuer's website on the Internet, the following information on every Issuer's Management Board member shall be published: name, surname, year of birth, education, office term, position, description of the last three year's professional experience, number of the Issuer's or its parent companies/subsidiaries shares owned by the member, information on positions in other capital companies.	The Company organizes observance of this principle, observing the rules of the Physical entity data protection law.
4.3. In order to fulfil their obligations successfully, Management Board members must have access in due time to accurate information on the activity of the Issuer. The Management Board must have the possibility to provide objective evaluation on the activity of the Issuer. Management Board members must have enough time for the performance of their duties.	The Company ensures observance of this principle. The members of the Board are duly provided with all the necessary information and they have enough time for fulfilling their obligations. The members of the Board fulfil their obligations in compliance to what has been approved in the Board Regulations.
4.4. It is not recommended to elect one and the same Management Board member for more than four successive terms. The Issuer has to evaluate whether its development will be facilitated in the result of that and whether it will be possible to avoid a situation where greater power is concentrated in hands of one or a number of separate persons due to their long-term work at the Issuer. If, however, such election is admitted, it shall be recommended to consider to change the field of work of the relevant Management Board member at the Issuer.	The Company ensures observance of this principle. Election of Board members complies with the Commercial Law and the Articles of Association.
5. Remuneration of Management Board members
5.1. The remuneration for Management Board members shall be clearly determined and transparent. The Issuer's Supervisory Board shall revise the remuneration on a regular basis in compliance with the policy of remuneration adopted by the Issuer.	The Company ensures observance of this principle. Remuneration of the Board members is determined by the Council.

5.2. In determining remuneration of Management Board members and the variable part in the remuneration structure, it is recommended to peg it to previously determined long term and short-term objectives. If the variable part of remuneration is pegged only to the short-term results, it will not facilitate the interest of Management Board members in the long-term growth of the Issuer and the improvement of results. It is recommended that the amount and structure of remuneration depends on the business results of the company, share price and other events connected with the Issuer.	The Company ensures observance of this principle.
5.3. In determining the remuneration of Management Board members, the Issuer's Supervisory Board shall comply with the remuneration policy adopted by the Issuer. In assessing the work of Management Board members, the Supervisory Board shall take into account the work tasks of every Management Board member, the financial situation of the Issuer, and other indices that are considered to be important in assessing the work of Management Board members.	The Company ensures observance of this principle.
5.4. If a Management Board member gets share options that give the member the right to obtain shares of the Issuer as remuneration, the Issuer shall comply with the conditions for granting options as stipulated in the regulations of the Stock Exchange.	Such form of remuneration is not envisaged for the Board members.
5.5. When disclosing information on the total amount of remuneration paid to Management Board members of the Issuer, the Issuer, if possible, shall be asked to disclose the information on previous reporting years too, if such information has not been disclosed previously. Disclosure of information on previous years is especially important in order for investors to be able to evaluate the policy of remuneration applied to the Management Board members in the long-term and the linking of the development indices of the Issuer with the changes in the remuneration systems.	The Company ensures observance of this principle. The information is available in the Annual Report of the Company.
6. Identification of interest conflicts in the work of Management Board members
6.1. It shall be the obligation of every Management Board member to avoid any, even only supposed, interest conflicts in his/her work. In taking decisions, Management Board members shall be guided by the interests of the Issuer and not use the cooperation offers proposed to the Issuer to obtain personal benefit.	The Company ensures observance of this principle.

6.2. On the occurrence of any interest conflict or even only on its possibility, a Management Board member shall notify other Management Board members without delay. Management Board members shall notify on any deal or agreement the Issuer is planning to conclude with a person who has close relationship or is connected with the Management Board member in question, as well as inform on any interest conflicts occurred during the validity period of concluded agreements. For the purposes of these recommendations the following shall be regarded as persons who have close relationship with a Management Board member: spouses, a relative, including kinship of second degree or brother-in-law of first degree, or persons with whom the Management Board member has had a common household for at least one year. For the purposes of these recommendations the following shall be regarded as persons who are connected with a Management Board member: legal persons where the Management Board member or a closely related to him/her person is a Management Board or Supervisory Board	The Company ensures observance of this principle. The principle is included in the Board Regulations.
member, performs the tasks of an auditor or holds another managing office in which he or she could determine or affect the business strategy of the respective legal entity.
6.3. Management Board members should not participate in taking decisions that could cause an interest conflict.	The Company ensures observance of this principle.
SUPERVISORY BOARD
7. Obligations and responsibilities of the Supervisory Board
7.1. The functions of the Supervisory Board shall be set forth in the Supervisory Board regulation or a document equated thereto that regulates the work of the Supervisory Board, and it shall be published on the Issuer's website on the Internet. This document shall be also available at the Issuer's office.	The Company ensures observance of this principle. The functions of the Council are set forth in the Articles of Association and the Council regulation. The Council regulation is available at the Office of the Company.
7.2. In the Supervisory Board report appended to the Issuer's annual report, the Supervisory Board shall provide overall information on its work in the relevant year of reporting, information on the compliance with the principles of corporate governance in the business of the Issuer, as well as any other information as regarded by it to be necessary.	The Company ensures observance of this principle. The information is provided in the Council Report, which is included in the Annual Report of the Company.

7.3. The supervision carried out by the Supervisory Board over the work of the Management Board shall include supervision over the achievement of the objectives set by the Issuer, the corporate strategy and risk management, the process of financial accounting, Management Board's proposals on the use of the profit of the Issuer, and the business performance of the Issuer in compliance with the requirements of regulatory acts. The Supervisory Board should discuss every of the said matters and express its opinion at least annually, complying with frequency of calling Supervisory Board meetings as laid down in regulatory acts, and the results of discussions shall be reflected in the Supervisory Board's report.	The Company ensures observance of this principle. The Council meetings are held regularly, in compliance with the procedure established by the Commercial Law and the Council regulation.
7.4. The Supervisory Board and every its member shall be responsible that they have all the information required for them to fulfil their duties, obtaining it from Management Board members and internal auditors or, if necessary, from employees of the Issuer or external consultants. To ensure information exchange, the Supervisory Board chairperson shall contact the Issuer's Management Board, inter alia the Management Board chairperson, on a regular basis and discuss all the most important issues connected with the Issuer's business and development strategy, business activities, and risk management.	The Company ensures observance of this principle. The principle is included in the Articles of Association.
7.5. When determining the functions of the Supervisory Board, it should be stipulated that every Supervisory Board member has the obligation to provide explanations to the Issuer in case the Supervisory Board member is unable to participate in Supervisory Board meetings. It shall be recommended to disclose information on the Supervisory Board members who have not attended more than a half of the Supervisory Board meetings within a year of reporting, providing also the reasons for non-attendance.	The Company ensures observance of this principle.
7.6. The supervision carried out by the Supervisory Board over the Management Board shall be especially important in spheres where the possibility that interest conflicts might occur is large: appointment of Management Board members, determination of the remuneration of Management Board members, and audit of the Issuer. To facilitate a more efficient work of the Supervisory Board and the division of work duties among its members, the Supervisory Board may establish separate committees (audit, nomination (appointment), remuneration and other committees).	The Company ensures observance of this principle. Work of the Council is regulated by the Articles of Association and the Council regulation.

7.7. Prior to making a decision on establishing a committee, the Supervisory Board should assess the possible benefits and the planned costs of its work, if any. The Supervisory Board itself shall determine the structure and the number of committees which the Supervisory Board consider to be required to optimise its work. The Supervisory Board shall inform the Issuer's shareholders on establishing a committee, inform on it in the Report, and publish information on it on the Issuer's website on the Internet.	No committees have been composed.
7.8. If a decision is taken to establish one or more committees, the work of the committees may be financed only within the Supervisory Board budget approved by the shareholders' meeting. Assignment of individual tasks to committees may in no way be considered as an assignment of the functions of the Supervisory Board. Supervisory Board committees do not substitute the Supervisory Board and their decisions should be treated as recommendations. The establishment of committees does not release the Issuer's Supervisory Board from the responsibility for the decisions taken. The task of committees shall be to prepare proposals for Supervisory Board decisions, while the final decisions are taken by the Supervisory Board.	No committees have been composed.

8. Supervisory Board composition and requirements for Supervisory Board members

8.1. The Issuer shall require every Supervisory Board	The Company ensures observance of
member as well as Supervisory Board member candidate	this principle in compliance with the
who is planned to be elected at a shareholders' meeting that	Physical entity data protection law. The
they submit to the Issuer the following information: name,	information is distributed through all
surname, year of birth, education, office term as a	channels provided by the law and used
Supervisory Board member, description of the last three	in good practice.
year's professional experience, number of the Issuer's or its
parent companies/subsidiaries shares owned by the member,
information on positions in other capital companies. The said
information shall be published also on the Issuer's website
on the Internet, providing, in addition to the said information,
also the term of office for which the Supervisory Board
member is elected, its position, including also additional
positions and obligations, if any.

8.2. When determining the requirements for Supervisory Board members as regards the number of additional positions, attention shall be paid that a Supervisory Board member has enough time to perform his or her duties in order to fulfil their duties successfully and act in the interests of the Issuer to a full extent.	The Company ensures observance of this principle. Requirements for the Council members and candidates are determined in compliance with the Commercial Law and the Articles of Association.
8.3. In establishing the Issuer's Supervisory Board, the qualification of Supervisory Board members should be taken into account and assessed on a periodical basis. The Supervisory Board should be composed of members whose knowledge, opinions and experience is varied, which is required for the Supervisory Board to fulfil their tasks successfully.	The Company ensures observance of this principle. The Council is composed in compliance with the Commercial Law and the Articles of Association.
8.4. Every Supervisory Board member in his or her work shall be as possibly independent from any external circumstances and have the will to assume responsibility for the decisions taken and comply with the general ethical principles when taking decisions in relation to the business of the Issuer.	The Company ensures observance of this principle.
8.5. It is impossible to compile a list of all the circumstances that might threaten the independence of Supervisory Board members or that could be used in assessing the conformity of a certain person to the status of an independent Supervisory Board member. Therefore, the Issuer, when assessing the independence of Supervisory Board members, shall be guided by the independence criteria of Supervisory Board members specified in the Annex hereto.	The Company ensures observance of this principle. The Council members are nominated for election at the Council and act in compliance with the rules of the Commercial Law, according to which the Council members are independent and non-amenable in the process of making decisions.
8.6. It shall be recommended that at least a half of Supervisory Board members are independent according to the independence criteria specified in the Annex hereto. If the number of Supervisory Board members is an odd number, the number of independent Supervisory Board members may be one person less than the number of the Supervisory Board members who do not conform to the independence criteria specified in the Annex hereto.
8.7. As independent shall be considered persons that conform to the independence criteria specified in the Annex hereto. If a Supervisory Board member does not conform to any of to the independence criteria specified in the Annex hereto but the Issuer does consider the Supervisory Board member in question to be independent, then it shall provide an explanation of its opinion in detail on the tolerances permitted.

8.8. The conformity of a person to the independence criteria specified in the Annex hereto shall be evaluated already when the Supervisory Board member candidate in question has been nominated for election to the Supervisory Board. The Issuer shall specify in the Report who of the Supervisory Board members are to be considered as independent every year.
9. Remuneration of Supervisory Board members
9.1. If remuneration is paid to a Supervisory Board member for the tasks fulfilled by him or her, it shall be stipulated in the Issuer's remuneration policy.	The Company ensures observance of this principle. Remuneration for the Council members, in compliance with the Commercial Law, is determined by the Shareholders' meeting.
9.2. When examining the Supervisory Board's report, it shall be recommended to assess also the work of the Supervisory Board at the current shareholders' meeting. Shareholders shall assess the work of the Supervisory Board based on the Supervisory Board's report and other information provided by the Supervisory Board available to shareholders and which allows assessing the quality and usefulness of the tasks performed by the Supervisory Board. If the work of the Supervisory Board is assessed, the assessment shall include an assessment on the Supervisory Board composition, its work organisation, and the ability to act as a united entity, as well as an assessment on the competence of every Supervisory Board member. Also the efficiency of the work of every Supervisory Board member and Supervisory Board committees, if any, shall be assessed. When deciding on the remuneration of Supervisory Board members, shareholders shall take into account the assessments made.	The Company ensures observance of this principle.
9.3. The total amount of the remuneration of Supervisory Board members shall be disclosed by the Issuer in the Report. The Issuer shall be obliged to disclose the total amount of the remuneration paid to Supervisory Board members, as well as specify separately the amount of the wage paid to Supervisory Board members and the variable part of the remuneration, if any, paid to Supervisory Board members. The variable part of remuneration shall mean any payments other than wage paid to Supervisory Board members, e.g.: remuneration paid depending on the financial results of the Issuer (premiums), share options that give the right to the Issuer's shares, participation in pension plans etc.	The Company ensures observance of this principle.
9.4. When determining the remuneration of Supervisory Board members and planning the variable part in the remuneration structure, it usually should be pegged to the	The Company ensures observance of this principle. No variable part has been planned in remuneration of the Council

previously determined short- and long-term objectives.	members.
9.5. When disclosing information on the total amount of remuneration paid to Supervisory Board members, the Issuer shall be asked, if possible, to disclose the information on previous reporting years too, if such information has not been disclosed previously. Disclosure of information on	The Company ensures observance of this principle. The information is available in the Annual Report of the Company.
previous years is especially important in order for investors to be able to evaluate the policy of remuneration applied to the Supervisory Board members in the long-term and the linking of the development indices of the Issuer with the changes in the remuneration systems.

10. Identification of interest conflicts in the work of Supervisory Board members
10.1. It shall be the obligation of every Supervisory Board member to avoid any, even only supposed, interest conflicts in his/her work. When taking decisions, Management Board members shall be guided by the interests of the Issuer and not use the cooperation offers proposed to the Issuer to obtain personal benefit.	The Company ensures observance of this principle.
10.2. On the occurrence of any interest conflict or even only on its possibility, a Supervisory Board member shall notify other Supervisory Board members without delay. Supervisory Board members shall notify on any deal or agreement the Issuer is planning to conclude with a person who has close relationship or is connected with the Supervisory Board member in question, as well as inform on any interest conflicts occurred during the validity period of concluded agreements. For the purposes of these recommendations the following shall be regarded as persons who have close relationship with a Supervisory Board member: spouses, a relative, including kinship of second degree or brother-in-law of first degree, or persons with whom the Supervisory Board member has had a common household for at least one year. For the purposes of these recommendations the following shall be regarded as persons who are connected with a Supervisory Board member: legal persons where the Supervisory Board member or a closely related to him/her person is a Management Board or Supervisory Board member, performs the tasks of an auditor or holds another managing office in which he or she could determine or affect the business strategy of the respective legal entity.	The Company ensures observance of this principle.

10.3. A Supervisory Board member who is in a possible interest conflict should not participate in taking decisions that might be a cause of an interest conflict.	The Company ensures observance of this principle.

DISCLOSURE OF INFORMATION
11. Transparency of the Issuer's business
11.1. The structure of corporate governance shall be established in a manner that ensures provision of timely and exhaustive information on all the substantial matters that concern the Issuer, including its financial situation, business results, and the structure of owners.	The Company ensures observance of this principle. Two employees of the Company have the responsibility of due preparation and distribution of important information.
11.2. The information disclosed shall be checked, precise, and unambiguous and prepared in compliance with high quality standards.	The Company ensures observance of this principle. The Company prepares and checks in compliance with high quality standards and discloses precise information.
11.3. The Issuers should appoint a person who would be entitled to contact the press and other mass media on behalf on the Issuer, thus ensuring uniform distribution of information and evading publication of contradictory and untruthful information, and this person could be contacted, if necessary, by the Stock Exchange and investors.	The Company ensures observance of this principle. The Company has a press secretary who is entitled to contact the media, the Exchange and investors.
11.4. The Issuers should ensure timely and compliant with the existing requirements preparation and disclosure of financial reports and annual reports of the Issuer. The procedure for the preparation of reports should be stipulated in the internal procedures of the Issuer.	The Company ensures observance of this principle. The Company publishes financial reports in compliance with the requirements set by the laws.
12. Investor relations
12.1. The main objectives of the IR are the provision of accurate and timely information on the business of the Issuer to participants of finance market, as well as the provision of a feedback, i.e. receiving references from the existing and potential investors and other persons. In the realisation of the IR process, it shall be born in mind that the target group consists not only of institutional investors and finance market analysts. A greater emphasis should be put on individual investors, and more importance should be attached to informing other interested parties: employees, creditors and business partners.	The Company ensures observance of this principle.

12.2. A number of channels shall be used for the information flow in the IR. The IR strategy of the Issuer shall be created using both the possibilities provided by technologies (website) and relations with mass media and the ties with the participants of finance market. Considering the development stage of modern technologies and the accessibility thereof, the Internet is used in the IR of every modern company. This type of media has become one of the most important	The Company ensures observance of this principle. A separate section for the IR goals has been created on the website of the Company.
means of communications for the majority of investors.
12.3. The basic principles that should be observed by the Issuers in preparing the IR section of their websites:	The Company ensures observance of this principle in a separate section of the Company's website dedicated to the IR goals.
1) the IR section of website shall be perceived not only as a store of information or facts but also as one of the primary means of communication by means of which it is possible to inform the existing and potential shareholders;
2) all the visitors of the IR section of website shall have the possibility to obtain conveniently all the information published there. Information on websites shall be published in all the foreign languages in which the Issuer normally distributes information so that in no way would foreign investors be discriminated, however, it shall be taken into account that information must be disclosed at least in Latvian and English;
4) it shall be recommended to consider a solution that would allow the existing and potential investors to maintain ties with the Issuer by using the IR section of website – submit questions and receive answers thereto, order the most recent information, express their opinions etc.;
5) the information published on websites shall be updated on a regular basis, and the news in relation to the Issuer and its business shall be published in due time. It shall not be admissible that outdated information that could mislead investors is found on websites;
6) after the website is created the creators themselves should assess the IR section of the website from the point of view of users – whether the information of interest can be found easily, whether the information published provides answers to the most important questions etc.

12.4. The Issuer shall ensure that at least the following	The Company ensures partial
information is contained in the IR section of website:	observance of this principle. The
	Regulations of the Board and the
	Council of the Company mentioned in
	Article 7 are available at the Office of
	the Company.
1) general information on the Issuer - history of its
establishment and business, registration data, description of
industry, main types of business;
2) Issuer's Report ("comply or explain") on the
implementation of the principles of corporate governance;
3) number of issued and paid financial instruments,
specifying how many of them are included in a regulated
market;
4) information on shareholders' meetings, draft decisions to
be examined, decisions adopted – at least for the last year of
report;
5) Issuer's statutes;
7) Issuer's Management Board or Supervisory Board
regulation or a document equated thereto that regulates its
work, as well as the Issuer's remuneration policy and the
shareholders' meeting procedure regulation, if such has been
adopted;
8) description of the tasks of Supervisory Board committees,
if such have been established,
as well as information on the work performed by the
committees;
9) information on present Issuer's Supervisory Board and
Management Board members (on each individually): work
experience, education, number of the Issuer's shares owned
by the member (as at the beginning of year; the information
shall be updated as required but at least annually),
information on positions in other capital companies, and the
term of office of Management Board and Supervisory Board
members;
10) Issuer's shareholders which/who own at least 5% of the
Issuer's shares; and information on changes of shareholders;
11) financial reports and annual reports of the Issuer
prepared in compliance with the procedure specified in legal
acts and the Stock Exchange regulations;

12) Any other information to be disclosed by the Issuer, e.g. information on any substantial events, Issuer's press releases, archived information on Issuer's financial and annual reports on previous periods etc.

INTERNAL CONTROL AND RISK MANAGEMENT

13. Principles of the Issuer's internal and external control

13.1. To ensure successful operation, the Issuer shall control its work on a regular basis and define the procedure of internal control.	The Company ensures observance of this principle. Work control has been ensured – independent and objective work of internal audit, independent work of external audit and auditor.
13.2. The objective of risk management is to ensure that the risks connected with the commercial activity of the Issuer are identified and supervised. To ensure an efficient risk management, it shall be necessary to define the basic principles of risk management. It is recommended to characterise the most essential potential and existing risks in relation to the business of the Issuer.	The Company ensures observance of this principle. Risk exploration and evaluation has been performed.
13.3. Auditors shall be granted access to the information required for the fulfilment of the auditor's tasks and the possibility to attend Supervisory Board and Management Board meetings at which financial and other matters are dealt with.	The Company ensures observance of this principle. Auditor is granted access to all necessary and its required information.
13.4. Auditors shall be independent in their work and their task shall be to provide the Issuer with independent and objective auditing and consultation services in order to facilitate the efficiency of the Issuer's business and to provide support in achieving the objectives set for the Issuer's management by offering a systematic approach for the assessment and improvement of risk management and control processes.	The Company ensures observance of this principle. The work of auditor is independent and it provides an independent and objective audit report
13.5. It shall be recommended to carry out an independent internal control at least annually in order to assess the work of the Issuer, including its conformity to the procedures approved by the Issuer.	The Company ensures observance of this principle. Every year, an independent internal control is carried out by an independent auditor company and the internal audit of the Company, assessing the work of the Company and conformity to the approved procedures.

13.6. When approving an auditor, it is recommended that the	The Company ensures observance of
term of office of one auditor is not the same as the term of	this principle. The term of office of the
office of the Management Board.	auditor is not the same as the term of
	office of the Board. Every year, the
	shareholders make a decision upon
	hiring a particular auditor, who acts till
	the next Shareholders' meeting.

14. The Issuer's auditing committee
14.1. The functions and responsibilities of the Auditing	The Company ensures observance of
committee should be laid down in the regulations of the	this principle as from 2010.
committee or an equivalent document.
14.2. In order to ensure effective operation of the Auditing	The Company ensures observance of
committee, it is recommended to have at least three	this principle as from 2010.
members with sufficient knowledge in accounting and
preparing financial accounts, as one of the main activity
areas of the Auditing committee is issues related to the
Issuer's financial reports and control.
14.3. All members of the Auditing committee must have	The Company ensures observance of
access to information on the methods of accounting used	this principle as from 2010.
by the Issuer. The Management Board informs the
Auditing committee on the methods used when assessing
significant and extraordinary transactions where different
methods of evaluation may be applied, as well as ensures
that the Auditing committee has access to all information
stipulated by the legislation.
14.4. The Issuer must provide the possibility for the	The Company ensures observance of
Auditing committee to obtain from the Issuer's officials,	this principle as from 2010.
Management Board members and other employees the
information necessary to ensure the operation of the
committee, as well as the rights to perform independent
investigation in order to reveal infringements in the
Issuer's operation.
14.5. The Auditing committee makes decisions within its	The Company ensures observance of
terms of reference and accounts for its operation to the	this principle as from 2010.
Shareholders' meeting.

REMUNERATION POLICY
15. Remuneration policy of the Issuers.
15.1. The Issuers are called on to develop a remuneration policy in which the main principles for the determination of remuneration, possible remuneration schemes and other essential related issues are determined. The preparation of the remuneration policy should be made a responsibility of the Issuer's Supervisory Board, which during the preparation of a draft policy must consult with the Issuer's Management Board. The remuneration policy or its most significant parts shall be published like any other essential information the activity of the Issuer.	The Company ensures observance of this principle.

15.2. Schemes of variable remuneration that include Issuer's shares or share options as remuneration as well as any essential amendments thereto should be examined also at Shareholders' meetings, adopting the relevant decisions, if necessary. Considering the aforementioned, shareholders should be provided with all the necessary information prior to the meeting.	The Company ensures observance of this principle.
15.3. Remuneration schemes that include Issuer's shares as remuneration may theoretically cause loss to the Issuer's shareholders because the share price might drop due to a new issue of shares. Therefore, prior to the preparation and approval of this type of remuneration, it shall be required to assess the possible benefits or losses.	The Company ensures observance of this principle. The Company does not envisage schemes of remuneration where shares are provided as remuneration.
15.4. When preparing the remuneration policy, the Issuer shall be obliged to disclose information on how the Issuer plans to ensure the amount of shares to be granted in compliance with the approved remuneration schemes – whether it is planned to obtain them by buying on a regulated market or by issuing new shares.	The Company ensures observance of this principle. The Company does not envisage schemes of remuneration where shares are provided as remuneration.