Zagrebačka burza d.d.

Governance Information • Feb 24, 2017

CODE OF CORPORATE GOVERNANCE

ANNUAL QUESTIONNAIRE

CONTACT PERSON AND CONTACT PHONE: Marina Selman, 01/468-6806 DATE OF QUESTIONAIRE COMPLETE: 16.2.2017

MAIN COMPANY INFORMATION: ZAGREB STOCK EXCHANGE, INC.

All the questions contained in this questionnaire relate to the period of one bussines to which annual financial statements also relate.

If question in questionnaire ask for explanation, it is needed to explain answer. All answers in questionnaire will be measured in percentage as explained in the beggining of each chapter.

COMPANY HARMONIZATION TO THE PRINCIPLES OF CORPORATE GOVERNANCE CODE

Answers to this questionnaire chapter will be valued with max. 20% of whole questionnaire valuation of company harmonization to the principles of Corporate Governance Code

Question No.	Questions	Answer YES/NO	Explanation
1	Did the Company accept the application of the Corporate Governance Code or did it accept its own policy of corporate governance?	YES
2	Does the Company have adopted principles of corporate governance within its internal policies?	YES
3	Does the Company announce within its annual financial reports the compliance with the principles of ' comply or explain'	YES
4	Does the Company take into account the interest of all shareholders in accordance with the principles of Corporate Governance Code while making decisions?	YES

SHAREHOLDERS AND GENERAL MEETING

Answers to this questionnaire chapter will be valued with max. 30% of whole questionnaire valuation of company harmonization to the principles of Corporate Governance Code

Question No.	Questions	Answer YES/NO	Explanation
5	Is the company in a cross-shareholding relationship with another company or other companies? (If not, explain)	NO
6	Does each share of the company have one voting right? (If not, explain)	YES
7	Does the company treat all shareholders equally? (If not, explain)	YES
8	Has the procedure for issuing power of attorney for voting at the general assembly been fully simplified and free of any strict formal requirements? (If not, explain)	YES
9	Has the company ensured that the shareholders of the company who, for whatever reason, are not able to vote at the assembly in person, have proxies who are obliged to vote in accordance with instructions received from the shareholders, with no extra costs for those shareholders? (If not, explain)	NO	No shareholders have contacted the Company to have proxies appointed, but this possibility will be considered in the future.
10	Did the management or Management Board of the company, when convening the assembly, set the date for defining the status in the register of shares, which will be relevant for exercising voting rights at the general assembly of the company, by setting that date prior to the day of holding the assembly and not earlier than 6 days prior to the day of holding the assembly? (If not, explain)	YES
11	Were the agenda of the assembly, as well as all relevant data and documentation with explanations relating to the agenda, announced on the website of the company and put at the disposal of shareholders on the company's premises as of the date of the first publication of the agenda? (If not, explain)	YES
12	Does the decision on dividend payment or advance dividend payment include information on the date when shareholders acquire the right to dividend payment, and information on the date or period during which the dividend will be paid? (If not, explain)	NO	The Company paid no dividend in 2016.
13	Is the date of dividend payment or advance dividend payment set to be not later than 30 days after the date of decision making? (If not, explain)	NO	The Company paid no dividend in 2016.
14	Were any shareholders favoured while receiving their dividends or advance dividends? (If so, explain)	NO	The Company paid no dividend in 2016.
15	Are the shareholders allowed to participate and to vote at the general assembly of the company using modern communication technology? (If not, explain)	NO	The Company has had a relatively low number of shareholders to date, but this possibility will be considered in the future.
16	Have the conditions been defined for participating at the general assembly by voting through proxy voting (irrespective of whether this is permitted pursuant to the law and articles of association), such as registration for participation in advance, certification of powers of attorney etc.? (If so, explain)	NO
17	Did the management of the company publish the decisions of the general assembly of the company?	YES
18	Did the management of the company publish the data on legal actions, if any, challenging those decisions? (If not, explain)	NO	There have been no actions challenging those decisions.

MANAGEMENT AND SUPERVISORY BOARD

PLEASE PROVIDE THE NAMES OF MANAGEMENT BOARD MEMBERS AND THEIR FUNCTIONS

Ivana Gažić, President of the Management Board Tomislav Gračan, Member of the Management Board

Dubravko Štimac, Chairman Borislav Centner, Deputy Chairman Nina Tepeš, Member Ivan Tadin, Member Daniel Nevidal, Member Ljiljana Blažev, Member Dunja Babić, Member Enrique Bernardo Mariano, Member Iva Galić, Member

PLEASE PROVIDE THE NAMES OF SUPERVISORY BOARD AND THEIR FUNCTIONS

Answers to this questionnaire chapter will be valued with max. 20% of whole questionnaire valuation of company harmonization to the principles of Corporate Governance Code

Question No.	Questions	Answer YES/NO	Explanation
19	Did the Supervisory or Management Board adopt a decision on the master plan of its activities, including the list of its regular meetings and data to be made available to Supervisory Board members, regularly and in a timely manner? (If not, explain)	YES
20	Did the Supervisory or Management Board pass its internal code of conduct? (If not, explain)	YES
21	Is the Supervisory Board composed of, i.e. are non-executive directors of the Management Board mostly independent members? (If not, explain)	NO	It is a legal obligation of the Company to have one independent member and it has complied with this obligation. The Company has two independent members of the Supervisory Board.
22	Is there a long-term succession plan in the company? (If not, explain)	YES
23	Is the remuneration received by the members of the Supervisory or Management Board entirely or partly determined according to their contribution to the company' s business performance? (If not, explain)	YES
24	is the remuneration to the members of the Supervisory or Management Board determined by a decision of the general assembly or in the articles of association of the company? (If not, explain)	YES
25	Have detailed records on all remunerations and other earnings of each member of the Supervisory or Management Board received from the company or from other persons related to the company, including the structure of such remuneration, been made public? (If not, explain)	YES	All details have been published in the Annual Report.
26	Does every member of the Supervisory or Management Board inform the company of each change relating to their acquisition or disposal of shares of the company, or to the possibility to exercise voting rights arising from the company 's shares, not later than five trading days, after such a change occurs (If not, explain)	YES
27	Were all transactions involving members of the Supervisory or Management Board or persons related to them and the company and persons related to it clearly presented in reports of the company? (If not, explain)	NO	They have been published on the Exchange's website.
28	Are there any contracts or agreements between members of the Supervisory or Management Board and the company?	NO
29	Did they obtain prior approval of the Supervisory or Management Board? (If not, explain)	NO	There are no contracts.
30	Are important elements of all such contracts or agreements included in the annual report? (If not, explain)	NO	There are no contracts.
31	Did the Supervisory or Management Board establish the appointment committee?	NO
32	Did the Supervisory or Management Board establish the remuneration committee?	NO
33	Did the Supervisory or Management Board establishe the audit committee?	YES
34	Was the majority of the committee members selected from the group of independent members of the Supervisory Board? (If not, explain)	NO	There are three members: one independent Supervisory Board (SB) member, one dependent SB member and one independent member who is not an SB member.
35	Did the committee monitor the integrity of the financial information of the company, especially the correctness and consistency of the accounting methods used by the company and the group it belongs to, including the criteria for the consolidation of financial reports of the companies belonging to the group? (If not, explain)	NO	Specified activities will be implemented in the future periods.
36	Did the committee assess the quality of the internal control and risk management system, with the aim of adequately identifying and publishing the main risks the company is exposed to (including the risks related to the compliance with regulations), as well as managing those risks in an adequate manner? (If not, explain)	NO	Specified activities will be implemented in the future periods.
37	Has the committee been working on ensuring the efficiency of the internal audit system, especially by preparing recommendations for the selection, appointment, reappointment and dismissal of the head of internal audit department, and with regard to funds at his/her disposal, and the evaluation of the actions taken by the management after findings and recommendations of the internal audit? (If not, explain)	NO	Specified activities will be implemented in the future periods.
38	If there is no internal audit system in the company, did the committee consider the need to establish it? (If not, explain)	YES	The Company has an internal audit function in place.

39	Did the committee monitor the independence and impartiality of the external auditor, especially with regard to the rotation of authorised auditors within the audit company and the fees the company is paying for services provided by external auditors? (If not, explain)	NO	Under the CMA, the Company may not have the same auditors for more than 7 years, and the Company has complied with this provision in its operations. A rotation of auditors within the audit company is not supervised. As to the fees, bids by several audit companies are collected every year and reviewed by the SB before putting forward a proposal for a resolution to appoint auditors at the Annual General Meeting. The matter will be taken under review in the future period.
40	Did the committee monitor nature and quantity of services other than audit, received by the company from the audit company or from persons related to it? (If not, explain)	NO	The committee will implement specified activities in the future periods.
41	Did the committee prepar rules defining which services may not be provided to the company by the external audit company and persons related to it, which services may be provided only with, and which without prior consent of the committee? (If not, explain)	NO	The committee will implement specified activities in the future periods.
42	Did the committee analyse the efficiency of the external audit and actions taken by the senior management with regard to recommendations made by the external auditor? (If not, explain)	NO	Specified activities will be implemented in the future periods.
43	Did the audit committee ensur the submission of high quality information by dependent and associated companies, as well as by third parties (such as expert advisors)? (If not, explain)	NO	The committee will implement specified activities in the future periodss.
44	Was the documentation relevant for the work of the Supervisory Board submitted to all members on time? (If not, explain)	YES
45	Do Supervisory Board or Management Board meeting minutes contain all adopted decisions, accompanied by data on voting results? (If not, explain)	YES
46	Has the Supervisory or Management Board evaluated their work in the preceding period, including evaluation of the contribution and competence of individual members, as well as of joint activities of the Board, evaluation of the work of the committees established, and evaluation of the company's objectives reached in comparison with the objectives set?	NO	The assessment of Supervisory Board work did not include an evaluation of the contribution and competences of each SB member. Those will be considered in the future.
47	Did the company publish a statement on the remuneration policy for the management, Management Board and the Supervisory Board as part of the annual report? (If not, explain)	NO	The Company has no remuneration policy for the administration, Management Board or Supervisory Board.
48	Is the statement on the remuneration policy for the management or executive directors permanently available on the website of the company? (If not, explain)	NO	The Company has no remuneration policy for the administration, Management Board or Supervisory Board.
49	Are detailed data on all earnings and remunerations received by each member of the management or each executive director from the company published in the annual report of the company? (If not, explain)	NO	Details of total remuneration received by members of the Management Board have been published.
50	Are all forms of remuneration to the members of the management, Management Board and Supervisory Board, including options and other benefits of the management, made public, broken down by items and persons, in the annual report of the company? (If not, explain)	NO	The Company will consider making these public in the future.
51	Are all transactions involving members of the management or executive directors, and persons related to them, and the company and persons related to it, clearly presented in reports of the company? (If not, explain)	YES
52	Does the report to be submitted by the Supervisory or Management Board to the general assembly include, apart from minimum information defined by law, the evaluation of total business performance of the company, of activities of the anagement of the company, and a special comment on its cooperation with the management? (If not, explain)	YES

AUDIT AND MECHANISMS OF INTERNAL AUDIT

Answers to this questionnaire chapter will be valued with max. 20% of whole questionnaire valuation of company harmonization to the principles of Corporate

Governance Code
	Question No.	Questions	Answer YES/NO	Explanation
	53	Does the company have an external auditor?	YES
	54	Is the external auditor of the company related with the company in terms of ownership or interests?	NO
	55	Is the external auditor of the company providing to the company, him/herself or through related persons, other services?	YES	The 2016 audit will be performed by KPMG, according to the AGM resolution. That company has also been retained to provide consultancy services on the SME Growth Market project.
	56	Has the company published the amount of charges paid to the independent external auditors for the audit carried out and for other services provided? (If not, explain)	NO	The Company will consider publishing it in the future.
	57	Does the company have internal auditors and an internal audit system established? (If not, explain)	YES

TRANSPARANCY AND THE PUBLIC OF ORGANIZATION OF BUSINESS

Answers to this questionnaire chapter will be valued with max. 20% of whole questionnaire valuation of company harmonization to the principles of Corporate

	Governance Code
	Question	Questions	Answer
	No.		YES/NO	Explanation
	58	Are the semi-annual, annual and quarterly reports available to the shareholders?	YES
	59	Did the company prepar the calendar of important events?	YES
		Did the company establish mechanisms to ensure that persons who have access to or
	60	possess inside information understand the nature and importance of such information and	YES
		limitations related to it?
	61	Did the company establish mechanisms to ensure supervision of the flow of inside
		information and possible abuse thereof?	YES
		Has anyone suffered negative consequences for pointing out to the competent authorities or
	62	bodies in the company or outside, shortcomings in the application of rules or ethical norms	NO
		within the company?
	63	Did the management of the company hold meetings with interested investors, in the last
		year?	YES
	64	Do all the members of the management, Management Board and Supervisory Board agree
		that the answers provided in this questionnaire are, to the best of their knowledge, entirely	YES
		truthful?