Report On Corporate Governance

AS PRFoods organises its business activities on the basis of its articles of association and national legal norms, and as a public enterprise on the requirements of the Tallinn Stock Exchange, Corporate Governance Recommendations (CGR) compiled jointly by Tallinn Stock Exchange and the Estonian Financial Supervision Authority in 2005 and the principles of equal treatment of shareholders and investors. The companies listed on the NASDAQ Tallinn Stock Exchange are obligated to publish a corporate governance report as a part of their annual report describing if and how CGR principles are followed and if not, then point out what specifically accompanied by an explanation for such a deviation.

The Group’s report on Good Corporate Governance is available on the Group’s homepage www.prfoods.ee in the Governance subsection (http://prfoods.ee/about/governance/corporate-governance-reports).

Exercise of Shareholders Rights

Every shareholder shall be ensured the right to participate in the general meeting, to speak in the general meeting on themes presented in the agenda, and to present reasoned questions and make proposals. The general meeting shall be conducted at the location of the issuer and at a reasonable time and place, ensuring that a majority of shareholders have the possibility to participate in the general meeting. In the notice calling the general meeting the issuer shall include the address to which the shareholders can send agenda questions related to the agenda. The circumstances on which the issuer withholds information and how a shareholder can file a dispute it shall also be brought out in the notice. In conformity with the principle of treating all shareholders equally a controlling stakeholder shall refrain from harming the rights of other shareholders.

On the general meeting held on 19.12.2019 two questions were asked by shareholders which were answered by the member of AS PRFoods management board Indrek Kasela. The questions and answers can be found in the minutes of the meeting and in the recording of the full general meeting the link of which is published on the homepage of the company.

Equal Rights of Shareholders in the Articles of Association

The articles of association of the issuer do not grant different types of shares with rights resulting in unequal treatment of shareholders in voting.

Agreements Between Shareholders

In case the issuer has information on agreements between shareholders on concerted exercise of shareholders rights, the information shall be available on the issuer’s homepage. The issuer has no information on such agreements being concluded.

Participation in a General Meeting in Person or by Proxy

Issuers shall facilitate the personal participation of shareholders at the general meeting but shall not make it difficult for representatives to participate in and vote at the general meeting. The issuer shall notify shareholders as precisely as possible regarding the date, time and address of the general meeting. If an issuer itself or by his employees/representatives organizes the representation of a shareholder at a general meeting, it shall do so in such a manner that the orders given by the shareholder with regard to voting are executed. The representative of the issuer shall participate in the general meeting and shall be accessible to the shareholders during the holding of the general meeting.

Calling of a General Meeting and Information to be Published

Notice calling the general meeting is available on the issuer’s homepage including the essential information to be published for passing a resolution regarding a topic on the agenda at the general meeting to shareholders, including a proposition on profit distribution, draft articles of association with remarks on the proposed amendments; essential conditions and agreements or draft contracts for issuance of securities or other transactions connected with the company (e.g., merger, sale of property etc.), information regarding candidates for supervisory board members or auditors etc., and supervisory board’s propositions on topics on the agenda. On supervisory board member candidates, the information on the candidate’s positions in boards or other management bodies of other companies shall be provided.

The notice calling the general meeting and the documents pertaining it are published on the homepage of the company both in Estonian and English languages. The minutes and recording of the general meeting are published on the homepage of the company in the language the meeting was conducted.

If shareholders make substantive proposals or proposals diverging from those of the supervisory board it will be recorded in the minutes.

Participation in a General Meeting, incl. via Means of Communication Equipment

The meeting on 19.12.2019 was held in Estonian. The meeting was chaired neither by the chairman of the supervisory board of AS PRFoods nor by a member of the management board. A member of the management board participated on the meeting.

Issuers shall make participation in the general meeting possible via means of communication equipment (the Internet) provided the technical equipment is available and it is not too costly for the issuer. AS PRFoods lacks the adequate technical equipment and acquiring it would be too costly. In accordance with the policy of transparency, the company used the Webinar service of Nasdaq Baltic in conducting the general meeting. AS PRFoods made live broadcast of shareholder’s general meeting and answered to the additional questions. Indrek Kasela presented the results of the period. For technical reasons, participants of the webinar were unable to exercise their shareholders’ rights (voting). The meeting was recorded, and the recording is accessible via the link on the Group’s website www.prfoods.ee.

Covering of net loss was a separate agenda item on the general meeting and a separate resolution was passed.

Responsibility Areas of Management Board Members

The responsibility areas of the management board members are approved by the management or supervisory board. The chairman of the supervisory board has concluded a contract of service with a member of the management board. The company’s management board has one member who performs the duties of the managing director and is responsible for the functioning of the company’s strategic areas, including integration of internal control and management processes with the company’s accounting procedures, both daily and periodical. The member of the management board shall not be at the same time a member of more than two management boards of an issuer and shall not be the chairman of the supervisory board of another issuer (unless the issuer is a group company). The AS PRFoods’, a holding structure void of everyday operational business activities, management consists of one member most efficiently corresponding to the needs of managing the company. Management bodies of subsidiaries active in fish farming, processing and sales have up to four members matching the business specifics and needs of the subsidiaries.

Remuneration Principles of Management Board Members

Basic wages, performance pay, severance packages, other payable benefits and bonus schemes of a management board member as well as the essential features of these shall be published in clear and unambiguous form on the homepage of the issuer and in the CGR report. Information published shall be deemed clear and unambiguous if it directly expresses the amount of expense to the issuer or the amount of foreseeable expense as of the day of disclosure. The chairman of the management board receives remuneration in accordance with the contract of the management board member. The remuneration and its principles are revisited once a year. The amount of the remuneration of the chairman of the management board is established with the contract of the management board member and is not to be disclosed as agreed by the parties. There are no bonus systems, i.e. no options, no retirement programmes, etc. in place for remuneration of the member of the management board. The management board member is entitled to receive a severance fee of up to 6 months remuneration.

Significant Transaction of a Management Board Member with the Issuer

The supervisory board shall approve the transactions, which are significant to the issuer and concluded between the issuer and a member of its management board or another person connected/close to them and shall determine the terms of such transactions. The transactions approved by the supervisory board concluded between the issuer and a member of the management board or another person connected/close to them are published in the CGR report. No such transactions have taken place during the past financial year.

Control Executed by the Supervisory Board over the ManageMENT and the Issuer

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

Disclosure of Remuneration to Members of Supervisory Board

The amount of remuneration of a member of the supervisory board shall be published in the CGR report, indicating separately basic and additional payment (incl. compensation for termination of contract and other payable benefits). The general meeting of shareholders of AS PRFoods is competent to elect and approve the composition of the supervisory board and their term of office. According to the articles of association of AS PRFoods, the supervisory board consist of three to seven members who are elected by the general meeting for a term of three years. The general meeting has confirmed the remuneration fees of members of the supervisory board as follows: fee for the chairman 1,000 euros a month, fee for the vice chairman 750 euros a month and the fee of the member 500 euros a month. No severance fee is to be paid to the member of the supervisory board.

Attendance at Supervisory Board Meetings by the Members of Supervisory Board

If a member of the supervisory board has attended less than half of the meetings of the supervisory board, this shall be indicated separately in the CGR report. In 2019/2020, all members of the supervisory board attended all supervisory board meetings (six meetings in total).

Conflict of Interests Situations

Members of the supervisory board shall promptly inform the chairman of the supervisory board and management board regarding any business offer related to the business activity of the issuer made to him, a person close to him or a person connected with him. All conflicts of interests that have arisen in preceding year shall be indicated in the CGR report along with their resolutions. Members of the supervisory board refrain from conflicts of interests and adhere to the prohibition of competition. The supervisory board and the management board cooperate closely in accordance with the articles of association and in the interests of the business undertakings and its shareholders. There were no such conflicts of interest in 2019/2020.

Information on the Issuer’s Homepage

On the issuer’s homepage, among others the general strategy directions of the issuer as approved by the supervisory board are disclosed. General directions and significant issues are provided in the Management Report.

The Issuer’s Meetings with Journalists and Analysts

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

Auditor of the Issuer

The supervisory board shall make available to shareholders information on a candidate for auditor, including information on their business connections and regarding its independence specifying also why the agreement with the current auditor is to be terminated or a judgment on the auditor’s work in case the auditor auditing the company shall be reappointed. Indrek Kasela commented on auditor’s work at the general meeting, details of which can be read in the minutes of the meeting and the recording of which is published on the homepage. The general meeting of shareholders of AS PRFoods held on 19.12.2019 appointed KPMG Baltics OÜ as the Group’s auditor for the financial year of 2019/2020.

Pursuant to the contract with the auditor, the auditing company’s service entails auditing procedures of consolidated annual report (incl. annual reports of subsidiaries).

The remuneration of the auditor is determined by the agreement. Pursuant to the Auditing Act, the sworn auditor representing the external audit company is to be changed at least once in every seven years.

Governance Principles and Additional Information

AS PRFoods is a public limited company and its governing bodies are the shareholders’ general meeting, the supervisory and the management board.

General Meeting

The general meeting of shareholders is the Group’s highest governing body competent to amend and approve new articles of association, change the amount of share capital, recall members of the supervisory board and resolve on dissolution of the company, decide on division, merger or restructuring of the company, provided least 2/3 of the votes represented by shareholders at the general meeting are in favour. General meetings are ordinary (OGM) and extraordinary (EGM) meetings. An OGM shall be convened by the management board once a year not later than within six months after the end of the financial year. The management board shall convene an EGM if the Group’s net assets fall below the limit allowed by law or if the meeting is requested by the supervisory board, auditor or shareholders whose shares represent at least 1/10 of the share capital. A general meeting has quorum when more than half of the votes determined by shares are present. The list of persons entitled to participate at the general meeting is determined 7 days before the meeting.

The AGM of shareholders of AS PRFoods was held on 19.12.2019 in Tallinn. 14 shareholders or their authorised representatives collectively representing 27,379,671 votes or 72.66% of the total votes attended the AGM. Thus, the meeting was authorized to adopt resolutions on issues on the agenda. The member of the AS PRFoods management board on the meeting. The agenda of the meeting included the approval of the annual report for the 2018/2019 financial year, deciding on covering of the loss, and appointing the auditor including determining the auditor’s fee. The chairman of the management board of AS PRFoods held a presentation. The meeting adopted the resolutions on all issues on the agenda of the AGM according to the proposals made by the supervisory board. Information on the adoption of resolutions and contents were published after the end of the meeting via the information system of NASDAQ Tallinn and on the homepage of the Group at www.prfoods.ee.

Supervisory Board

Pursuant to law, a supervisory board of a public limited company is a supervisory body responsible for planning the activities of a company, organizing its management and supervising the activities of the management board. According to the articles of association of AS PRFoods, the supervisory board has three to seven members elected by the general meeting of shareholders for the term of three years. Members of the supervisory board elect a chairman from among themselves. Chairman of the supervisory board is responsible for organizing the work of supervisory board and has a casting vote in case of tied vote.

As of the date of the report, the supervisory board of AS PRFoods is comprised of the following members: Lauri Kustaa Äimä (since incorporation), Kuldar Leis (elected on 29 May 2013), Aavo Kokk (elected on 5 May 2009), Harvey Sawikin (elected on 5 May 2009), Vesa Jaakko Karo (elected on 17 August 2009) and Arko Kadajane (elected on 29 May 2012). The terms of office of all the current members of the supervisory board will end on 10 December 2022. The supervisory board of AS PRFoods includes four independent members — Aavo Kokk, Vesa Jaakko Karo; Kuldar Leis and Arko Kadajane. The chairman of the supervisory board is Lauri Kustaa Äimä and the vice-chairman of the supervisory board is Kuldar Leis.

The meetings of the supervisory board are held when necessary but no less frequently than once per quarter. During the financial year there were six supervisory board meetings. The meeting of the supervisory board has a quorum when more than half of the members participate.

In addition to the meetings, the supervisory board adopted resolutions without convening a meeting if it was necessary. The management board informed the supervisory board on a regular basis of the operations and financial status of AS PRFoods and the supervisory board provided the management board with necessary directions and support in conducting the everyday business activities of the company. In case a contract of service with a member of the supervisory board expires or is terminated prematurely, the Group will not incur a higher liability to pay a benefit than prescribed by the law. As at the end of the financial year, the Group’s supervisory board members owned directly and indirectly 3.74% of the Group’s shares (30.06.2019: 3.74%).

Management Board

The management board is the management body of the company that represents and manages the company according to the law and provisions of the articles of association. The management board is required to act in the most financially appropriate manner. According to the articles of association, the management board of AS PRFoods consists of one to four members. The members of the management board shall be elected by the supervisory board for three years. The competence of the supervisory board includes the election of the chairman of the management board, on the latter’s proposal, appointment and recalling of members of the management board. A member of the management board may represent the company in all legal transactions. The Management Board of AS PRFoods consists of one member. According to the supervisory board, from 2 February 2015 the only member of the management board is Indrek Kasela. In its day-to-day management, the company’s management board is independent and acts in the best interests of all shareholders, ensuring thereby the company’s sustainable development in line with the set objectives and strategy. Moreover, the company’s management board is responsible for ensuring functioning internal control and risk management procedures in the company.

The competence and powers of the management board are regulated by the Commercial Code and by the company’s articles of association with no deviating exceptions or agreements made or entered into. The chairman of the management board receives remuneration according to the contract of service and is additionally entitled to receive severance benefit for up to 6 months’ remuneration. Nor a member neither the chairman of the management board has any pension-related rights. The chairman is responsible for organising business operations on the Group level and also fulfils the tasks of a managing director. In subsidiaries, the local management ensures adherence to business practices. As at the end of the financial year, the Group’s management board member owned via direct and indirect holdings a total of 4.17% of the Group’s shares (30.06.2019: 4.12%). More detailed information about the education, career, membership in management bodies of business undertakings and shareholdings in AS PRFoods of members of the supervisory board and management board are provided on the Group’s homepage.

Supervisory and Management Boards of Subsidiaries

Below is a list of supervisory boards and management boards of subsidiaries that are 100% owned by AS PRFoods as at 30 June 2020.

Company

Management Board

Supervisory Board

Saaremere Kala AS

Indrek Kasela, Christopher Charles Leigh

Kuldar Leis, Lauri Kustaa Äimä, Emil Metsson

Vettel OÜ

Indrek Kasela, Jarkko Tapani Alho, Dagni Viskus, Raivo Polding

Heimon Kala Oy

Indrek Kasela, Margus Rebane, Jarkko Tapani Alho

 

Överumans Fisk AB

Margus Rebane

 

JRJ & PRF Ltd

Indrek Kasela, Vesa Jaakko Karo, Christopher Charles Leigh, Louise Victoria Leigh-Pearson, Anna Crona

 

John Ross Jr. (Aberdeen) Ltd

Indrek Kasela, Christopher Charles Leigh, Victoria Louise Leigh-Pearson

 

Coln Valley Smokery Ltd

Indrek Kasela, Christopher Charles Leigh, Victoria Louise Leigh-Pearson

 

OÜ Redstorm

Margus Rebane, Riho Kilumets

 

 

Additional Management Bodies and Special Committees

The Group has regulated necessary procedures with guidelines and there has been no practical need to set up additional management/governing bodies. In 2010, the Group’s supervisory board set up an auditing committee to monitor and analyse processing the financial information, efficiency of risk management and internal controls, the process of auditing of consolidated annual financial statements, the independence of the auditor representing the auditing company under the law, and to submit to the supervisory board proposals and recommendations in issues prescribed by the law. Since November 2017, the committee is chaired by Aleksander Zaporožtsev, the members of committee are since 2010 Aavo Kokk and Mairi Paiste. During the financial year, the audit committee had four meetings.

Implementing Divercity Policy

The management of AS PRFoods considers a well-functioning working environment on all levels of the Group important. To achieve and maintain it the Group employs people of different gender, national background and experiences.

Information Management

As a listed company, AS PRFoods adheres to the principles of openness and equal treatment of investors. The information required within the stock exchange rules and regulations is published regularly in accordance to the set terms, whereas the Group employs the principle of not publishing forward-looking statements. It publishes and comments factual information only. For timely notification of investors and the public, the Group operates a website that contains all stock exchange announcements and financial reports.


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