Source: http://docplayer.net/21328533-Recordati-s-p-a-corporate-governance-report-and-ownership-structure-financial-year-2010.html
Timestamp: 2018-02-22 13:21:19
Document Index: 666191195

Matched Legal Cases: ['Art. 123', 'Art. 123', 'Art. 29', 'Art. 123', 'Art. 123', 'Art. 120', 'Art. 123', 'Art. 123', 'Art. 123', 'Art. 123', 'Art. 123', 'Art. 123', 'Art. 2443', 'Art. 2441', 'Art. 134', 'Art. 144', 'Art. 180', 'Art. 123', 'Art. 123', 'Art. 123', 'Art. 123', 'Art. 15', 'Art. 122', 'Art. 93', 'Art. 148', 'Art. 148', 'Art. 147', 'Art. 147', 'Art. 148', 'Art. 123', 'Art. 123', 'Art. 23', 'Art. 2365', 'Art. 154', 'Art. 181', 'Art. 115']

Download "RECORDATI S.p.A. CORPORATE GOVERNANCE REPORT AND OWNERSHIP STRUCTURE FINANCIAL YEAR 2010"
1 RECORDATI S.p.A. CORPORATE GOVERNANCE REPORT AND OWNERSHIP STRUCTURE FINANCIAL YEAR 2010 pursuant to article 123 bis of the Consolidated Finance Act and article 89 bis of Consob Issuers Regulations Approved 9 th March 2011 by the Board of Directors Website: 1
2 GLOSSARY CG Code: the Corporate Governance Code for listed companies approved by the Corporate Governance Committee in March 2006 and promoted by Borsa Italiana S.p.A. CC: the Italian Civil Code. Board: the Board of Directors of the Issuer. Issuer: Recordati S.p.A. Year: the financial year to which this Report relates. Consob Issuers Regulations: regulations governing issuers as established by Consob regulation no of 1999 (as subsequently amended). Consob Markets Regulations: regulations governing markets as established by Consob regulation no of 2007 (as subsequently amended). Report: the corporate governance report and the ownership structure that issuers are required to prepare pursuant to article 123 bis of the Consolidated Finance Act. TUF: Legislative Decree no. 58 dated 24 February 1998, (Testo Unico della Finanza) the Consolidated Finance Act. 2
3 1. THE ISSUER The Company and the Group that it leads perform research and development, production, marketing and sales of pharmaceuticals and pharmaceutical chemicals. They perform their activities in the principal European countries. The primary objective of the corporate governance system is the creation of value for shareholders, without, however, losing sight of the social importance of the activity performed and of all the stakeholders involved. The corporate governance structure of the Company is based on a conventional organisational model and therefore consists of the following corporate bodies: (i) the Shareholders Meeting, (ii) the Board of Directors, (iii) the Board of Statutory Auditors. Accounting control is delegated, in compliance with the relative legislation in force, to a firm of auditors registered in the special roll maintained by the Consob. The Board of Directors has formed two committees from among its members with consultative and proposal-making functions: the Remuneration Committee and the Internal Audit Committee, both consisting exclusively of independent directors. The Company observes the CG Code, in accordance with the procedures contained in this report. Unless otherwise indicated, the information contained in this report relates to the date of its approval by the Board of Directors (9 th March 2011). 2. OWNERSHIP STRUCTURE (pursuant to Art. 123-bis, paragraph 1 of the TUF) (at 9 th March 2011) a) Structure of share capital (pursuant to Art. 123-bis, paragraph 1, letter a) of the TUF) The subscribed and paid up share capital amounts to 26,140,644.5 and is represented by 208,507,656 ordinary shares each with a par value of as reported in the table at the end of this section. Each share entitles the holder to a proportional part of the profits allocated for distribution; Art. 29 of the By-Laws provides that the net profits on the balance sheet are to be distributed as follows: (a) 5% (five percent) to the legal reserve fund up to the amount established by the law; (b) the remainder, unless the Shareholders Meeting, as proposed by the Board, resolves to allocate funds for extraordinary reserves or for other purposes, or to postpone part or all of the distribution to all shares to successive years, to be distributed to all shares. As reported in the table below, there are no other categories of shares, nor other financial instruments that assign the right to subscribe to new share issues, with the exception of the conditions indicated below in the context of stock option plans. The document entitled Information on Recordati S.p.A.'s stock option plans distributed to the market on 17 th September 2007 and available on the Company website at the address may be consulted for information on existing stock option plans and shares issued at the service of those plans, as may pages --- and --- of the draft separate company annual report in Annex 7 and the information documents for each outstanding stock option plan also available on the company website. 3
4 STRUCTURE OF THE SHARE CAPITAL STRUCTURE OF THE SHARE CAPITAL No. Shares % of Listed/unlisted share capital Ordinary 209,125, listed shares Shares 0 0 with limited voting rights Shares with no voting rights 0 0 OTHER FINANCIAL INSTRUMENTS (conferring the right to subscribe new share issues) Listed/unlisted No. of instruments Type of shares at the service of the No. of shares at the service of the conversion/exercise outstanding conversion/exercise Convertible bonds Warrants b) Restrictions on transfer of securities (pursuant to Art. 123-bis, paragraph 1, letter b) of the TUF) The shares of the Company are freely transferable. c) Significant holdings in share capital (pursuant to Art. 123-bis, paragraph 1, letter c) of the TUF) The significant holdings, both direct and indirect, in share capital are indicated below, as results from the communications in accordance with TUF Art. 120, updated in accordance with the information available to the Company. 4
5 SIGNIFICANT SHAREHOLDINGS Declarant Shareholder Percentage (%) of ordinary share capital Percentage (%) of voting share capital FIMEI S.p.A. FIMEI S.p.A % % RECORDATI S.p.A.* RECORDATI S.p.A.* 5,2758%* 5,2758%* TORRE S.S. TORRE S.S % 3.198% FIL LIMITED (As the manager of the Fast European Fund which holds 2.70%) SCHRODER INVESTMENT MANAGEMENT LTD BLACK ROCK INC SCHRODER INVESTMENT MANAGEMENT LTD BLACKROCK ASSET MANAGEMENT IRELAND LIMITED BLACKROCK ISTITUTIONAL TRUST COMPANY NA BLACKROCK ADVISORS (UK) BLACKROCK INVESTMENT MANAGEMENT LLC BLACKROCK ASSET MANAGEMENT JAPAN LIMITED BLACKROCK ASSET MANAGEMENT AUSTRALIA LTD BLACKROCK FUND ADVISORS BLACKROCK INTERNATIONAL LIMITED 3.067% 3.067% 2.013% 2.013% 0.011% 0.011% 1.248% 1.248% 0.478% 0.478% 0.052% 0.052% 0.016% 0.016% 0.009% 0.009% 0.185% 0.185% 0.006& 0.006% TOTALE 2.010% 2.010% * Treasury stock, without voting rights in accordance with the law, as at March 8, 2011 d) Securities with special rights (pursuant to Art. 123-bis, paragraph 1, letter d) of the TUF) No securities with special rights of control have been issued. e) Share holding by employees: exercise of voting rights (pursuant to Art. 123-bis, 5
6 paragraph 1, letter e) of the TUF) No shareholding system exists for employees which involves the exercise of voting rights which is different from that provided for shareholders in general. f) Restrictions on voting rights (pursuant to Art. 123-bis, paragraph 1, letter f) of the TUF) Each ordinary share gives the right to vote without any restrictions. g) Shareholders agreements (pursuant to Art. 123-bis, paragraph 1, letter g) of the TUF) The Company has no knowledge of the existence of shareholders agreements pursuant to TUF Art h) Change of control clauses (pursuant to Art. 123-bis, paragraph 1, letter h) of the TUF) The Company and some of its subsidiaries are, in relation to their business operations, parties to some licensing agreements that include a clause, which is a normal provision in international agreements, authorising the Licensor to dissolve the contracts in the event of change of direct or indirect control of the Licensee. In addition, a bond issue by the Luxembourg subsidiary, Recordati S.A. Chemical and Pharmaceutical Company, privately placed with international institutional investors and guaranteed by the Company, includes a clause, as is normal in financial operations of this type, which authorises the creditors to obtain an immediate refund if the control of the Company changes. Furthermore, the Company signed a finance agreement in 2010 with Centrobanca (Banca di Credito Finanziario e Mobiliare S.P.A) for a total of 75 million euro which, as is normal practice in financial transactions of this type, contains a clause which requires the immediate repayment of the loan if the control of Recordati S.P.A. changes. i) Authorisation for increase of share capital and acquisition of treasury shares (pursuant to Art. 123-bis, paragraph 1, letter m) of the TUF) The Board of Directors was authorized to increase share capital, pursuant to CC Art. 2443, by a Shareholders Meeting of 11 April The increase in the share capital may be performer in one or more tranches, gratuitously or by payment, for a total maximum amount of 50,000,000 within a period of no more than five years from the date of the resolution, by issuing ordinary shares and/or warrants for the subscription to such shares, to assign or to offer as an option to shareholders, with the right pursuant to the joint provisions of CC Art. 2441, last paragraph and TUF Art. 134, second paragraph, to offer subscription to the shares to Recordati S.p.A. employees or to subsidiaries of the Company in relation to the stock option plans decided by the Shareholders Meeting (and therefore with the possibility to exclude the option rights to one fourth of the new issue). To this date, the Board has not yet acted on this mandate, not even partially. That same Shareholders Meeting authorised Directors, in accordance with Art ter of the C.C. to decide the issue in one or more tranches, for a total maximum nominal amount of 80,000,000, of bonds convertible to ordinary shares, or valid warrants to subscribe to such 6
7 shares, to offer in option to shareholders within a period of no more than five years from the date of resolution, in observance of applicable law and regulations concerning the issuing of bonds, and at the same time, deciding an increase of share capital for the amount that corresponds to the nominal value of the shares to be attributed in conversion. To this date, the Board has not yet acted on this mandate not even partially. In partial implementation of the authorization conferred on the Board of Directors by the Shareholders' Meetings held on 10 April 2002, (expired on 10 April 2007), on 7 April 2004 and 27 October 2004, the Board decided some increases in the capital by payment, only partially performed and expired in 2009, at the service of the stock option plans adopted by the Company at the same time as it granted options as part of those same plans. The By-Laws do not authorize the Board to issue financial instruments of participation. In ordinary session on 13 th April 2010 a Shareholders Meeting renewed the authorisation to purchase and assign treasury shares, pursuant to CC articles 2357 et seq., until approval of the financial statements at 31 st December 2010, scheduled for 13 th April In particular, the maximum number of shares that may be acquired, after accounting for the number of treasury shares already held in the Company s portfolio, is 20,000,000, which corresponds to a total potential payment of not more than 120,000,000, at a minimum price not less than the nominal value of Recordati shares ( 0,125) and a maximum price not greater than the average of official Borsa prices during the five sessions prior to the acquisition, plus 5%. Purchases must be made on regulated markets, in observance of Art. 144bis, paragraph one, letter b), of the Consob Issuers Regulations and according to standard practices recommended by the Consob in accordance with TUF article 180. At the closing date of the Year, the Company held 10,206,105 treasury shares in portfolio, which represent % of the share capital. On the basis of that resolution, on 15 th February 2011, as disclosed to the market on that date, the Company commenced a treasury stock programme to purchase ordinary shares of Recordati to use at the service of stock option plans for employees of companies belonging to the Recordati Group already adopted by the Company and of plans that might be adopted in future, also pursuant to and for the purposes of market practices concerning the purchase of treasury stock for the constitution of share inventories permitted by the CONSOB, at the service of plans, in accordance with Art. 180, paragraph 1, letter c) of Legislative Decree No. 58/1998, with resolution No As part of the implementation of that programme, as at March 8, 2011, the Company purchased 1,007,000 ordinary shares for a total investment of 6,797,778.8 million euro. As at March 8, 2011 the Company holds n. 11,033, treasury shares in portfolio representing % of the share capital. In consideration of the expiry of the current authorisation which will occur on 13 th April 2011, the Board resolved to submit a proposal to the shareholders meeting convened to approve the 2010 annual report to renew the authorisation to purchase and assign treasury stock in order to maintain the necessary operational flexibility over an appropriate time horizon. The Directors Report on the relative item on the agenda, which will be made available within the legal time limits on the Company website and elsewhere, may be consulted for further information. 7
8 j) Management and co-ordination (pursuant to Art et seq of the CC) Although controlled by Fimei Finanziaria Industriale Mobiliare ed Immobiliare S.p.A., the Company is not subject to management and co-ordination by the same, pursuant to CC articles 2497 et seq. Fimei Finanziaria Industriale Mobiliare ed Immobiliare S.p.A. is a mere financial holding company with no operations of any kind; no procedures exist to furnish authorizations or instructions to the Company in its relations with the Parent Company and therefore the Company sets its own strategic and operating policies in full autonomy. The fully controlled Italian subsidiaries have acknowledged management and co-ordination by the Company and have fulfilled legal disclosure requirements in this respect. *** The information required by Art. 123 bis, paragraph one, letter i) of the TUF ( agreements between the Company and directors, members of the board of directors or the supervisory board, which provide for the payment of indemnities in the event of resignation, dismissal without just cause or if the contract of employment is interrupted following a public tender offer ) is given in the section on directors remuneration (Section 9). The information required by Art. 123 bis, paragraph one, letter l) of the TUF ( regulations for the appointment and replacement of directors and for amendments to the Corporate By-Laws, if different from those applicable by law in the absence of alternative provision ) are given in the section of the report on the Board of Directors (section 4.1). 3. COMPLIANCE (pursuant to Art. 123-bis, paragraph 2, letter a) of the TUF) The Company observes the CG Code, in accordance with the procedures contained in this report, which may be consulted on the website of Borsa Italiana at the address Reasons are given where the Company has decided not to follow those principles or operating criteria in the relative section of this Report. Neither the Company nor its strategic subsidiaries are subject to foreign laws that influence the corporate governance structure of the Company itself. 4. BOARD OF DIRECTORS 4.1 APPOINTMENT AND SUBSTITUTION (pursuant to Art. 123-bis, paragraph 1, letter l) of the TUF) The appointment and replacement of Directors is regulated by articles 15, 16 and 18 of the By- Laws, the text of which, last amended by the Board of Directors on 26 th October 2010 in order to make compulsory amendments to comply with Legislative Decree No. 27/2010 in implementation of the shareholders rights EU Directive, is reproduced for your information in full below: 8
9 Art. 15) The Board of Directors shall be appointed from lists of candidates presented by shareholders, according to the procedures as indicated below, in which the candidates are identified by progressive numbers. The lists, signed by the shareholders who present them, must be deposited at the registered office of the Company at least twentyfive days prior to the date of the first convention of the Shareholders Meeting, available to anyone who requests to see them and they will also be subject to other forms of publicity in accordance with laws and regulations in force at the time. Every shareholder, shareholders who participate in a significant shareholders agreement pursuant to TUF Art. 122, the parent company, subsidiaries and companies subject to joint control pursuant to TUF Art. 93, may not present or contribute to the presentation of more than one list, not even by means of another person or trustee, nor may they vote for different lists, and each candidate may be listed in only one list or will be disqualified. The subscriptions and votes expressed in violation of this prohibition will not be attributed to any list. Only shareholders individually or jointly possessing a total number of shares with voting rights representing at least 2.5% of capital stock with voting rights at ordinary meetings, or representing a lesser percentage as established by binding legislative or regulatory provisions which shall be specified in the notice of meeting, shall have the right to submit lists. The following items must be filed for each list within the respective deadlines set out above and as provided by applicable regulations: (i) statements by each candidate to the effect that each accepts candidacy and declares, assuming full responsibility, that there are no reasons preventing the candidate from being elected or rendering him unsuitable for the office, and that the candidate meets any specific requirements for the relevant office; (ii) a curriculum vitae detailing each candidate's personal and professional characteristics and indicating that the candidate may be considered independent. The specific certification demonstrating title to the necessary number of shares for the presentation of the list, issued by a legally authorised intermediary must also be deposited within the time limits set by the relative regulations at the time when the lists is deposited at the Company. Lists that are presented but are not in accordance with the provisions as above will be considered as not presented. The Board of Directors will be elected as follows: a) all of the Directors to be appointed, except one, will be selected from the list that obtained the greatest number of votes, following the progressive order in which they are listed on the list; b) the remaining director shall be the candidate placed at the number one position on the minority list, which shall not be connected in any way, even indirectly, with those who submitted or voted for the list indicated in letter a) above, which obtains the second-highest number of votes. For this purpose, lists that did not obtain a percentage of votes equal to at least half of that required for presentation of the lists as at the fourth paragraph of this article will not be considered. For the purposes of the appointment of directors as indicated at point b) above, in the event of a tie between lists, the list presented by shareholders possessing the larger shareholding, or subordinately the larger number of shareholders, shall prevail. If the candidates elected by the method as above do not include an adequate number of independent Directors with the characteristics as established for statutory auditors at TUF Art. 148, third paragraph, equal to the minimum number established by the law in relation to the total number of Directors, the last non-independent candidate, according to the progressive numbering, of the list that obtained the greatest number of votes as at letter a) of the 9
10 paragraph above, will be substituted by the first independent candidate, according to the progressive numbering, of the non-elected candidates on the same list, or if not possible, by the first independent candidate, according to the progressive numbering, of the non-elected candidates of the other lists, according to the number of votes obtained by each. This procedure of substitution will be followed until the board of directors is composed of a number of members who have the qualifications as at TUF Art. 148, third paragraph, equal at least to the minimum legal number. If this procedure does not produce the latter result, the substitution will be effected by resolution of the Shareholders Meeting by relative majority, after presentation of candidates who possess the qualifications as cited above. If only one list is presented, all of the Directors will be selected from the same list. If no list is presented the Shareholders Meeting will decide by legal majority, without following the procedure as above. Any different or additional compulsory provisions of the law or regulations will form an exception to these provisions. Article 16) - The fees to be paid to the Board of Directors shall be established by the Shareholders Meeting for the entire period of their term, or for each financial year, and may take the form of profit-sharing. Article 18) - Unless already provided for by the Shareholders Meeting, the Board shall appoint a Chairman and may appoint a Vice-Chairman from among its members. The Board shall also appoint one or more Managing Directors from among its members. The Chairman shall have all the powers vested in him by law; in the case of his absence or inability to attend for any reason, the said powers shall be exercised by the Vice-Chairman, or in his absence, by the most senior Director. Finally, the Board shall appoint a Secretary, who need not be a member of the Board. It is also underlined that, on the basis of the By-Laws in force, the right to submit slates is only held by shareholders who, individually or together with other shareholders submitting slates, hold voting shares representing at least 2.5% of the voting capital in an Ordinary Meeting, or representing a lower percentage established by mandatory laws or regulations. In this respect in accordance with articles 144-quater and 144-septies of the Issuers Regulations and CONSOB resolution No of 26 th January 2011, the percentage of the share capital required to present lists is currently 2%. On the basis of Art. 147-ter, paragraph one of the TUF, the By-Laws also state that for the purposes of the distribution of votes among directors to be elected, no account is taken of slates that have not obtained a percentage of votes equal to at least half of that required for the presentation of slates. In order to ensure the election of at least one minority director, the By-Laws state that all the directors to be elected except for one shall be drawn from the slate which obtained the greatest number of votes in the order in which they are listed on that slate. The remaining director is the candidate placed in the number one position on the minority slate, which shall not be connected in any way, even indirectly, with the shareholders who submitted or voted for the majority slate and which obtained the majority of votes from the shareholders. In the case of a tied vote between slates, the minority director shall be drawn from the slate presented by the shareholders in possession of the greater number of shares or, secondarily, with the greatest number of shareholders. 10
11 As concerns the mechanism adopted to ensure that a minimum number of independent directors are elected in compliance with Art. 147-ter, paragraph four of the TUF, the By-Laws state that if the number of independent directors is not reached, the non independent candidate elected in last place on the majority list shall be replaced by the first independent candidate in progressive order not elected on that slate, or, if there is none, by the first independent candidate in progressive order not elected on the other slates, according to the number of votes obtained by each. Finally if this procedure does not lead to the aforementioned result, the directors shall be replaced by a resolution passed by relative majority of the shareholders' meeting upon presentation of candidates satisfying the above requirements of independence. If only one slate is presented, the By-Laws also state that all of the Directors to be elected shall be selected from that slate. If no slate is presented the Shareholders' Meeting shall decide by legal majority, without following the procedures just described. The By-Laws to not lay down any additional requirements for the independence of Directors with respect to those contained in Art. 148 of Legislative Decree No. 58/1998, because the Company adheres to the CG and the Board of Directors verifies possession of the requirements of independence in accordance with the CG and consequently when a shareholders meeting appoints Directors, the Board of Directors invites candidates to the position of Director contained on lists to declare these requirements. The table at the end of this section may be consulted for details of those directors currently in office who meet the requirements for independence in accordance with the TUF and those that are independent in accordance with the CC. The Issuer reports that it is not governed by any further laws and regulations concerning the composition of the Board of Directors. 4.2 COMPOSITION (pursuant to Art. 123-bis, paragraph 2, letter d) of the TUF) The By-Laws currently in force state that the Company is managed by a Board of Directors consisting of a number of members varying between six and sixteen. A shareholders resolution of 11 April 2008 set the number of directors elected at nine and their term of office until the date of the Shareholders Meeting convened to approve the 2010 Annual Report. The members of the Board of Directors in office at the end of the Year are indicated below. They were elected by a Ordinary Shareholders Meeting on 11 April On that occasion only one slate of candidates for the office of director was presented by the shareholder FIMEI S.p.A. The slate presented by FIMEI S.p.A. consisted of the following candidates to the Board of Directors for the years : Ing. Giovanni Recordati Dr. Alberto Recordati Sig. Andrea Recordati Dr. Federico Nazzari Dr. Mario Garraffo Independent Avv. Carlo Pedersoli Independent 11
12 Prof. Marco Vitale Dr. William R. Gunnarsson Dr. Walter Wenninger Independent Independent Independent All the candidates listed above were elected with 118,254,933 shares in favour out of 118, shares voting (99,971%). The voting share capital represented 56,912% of the share capital of the Issuer. The personal and professional characteristics of each Director are documented in Attachment 1 to this Report along with the offices held by directors in other listed companies. The table at the end of this section and the specific indications given in section 4.6 may be consulted for an assessment of the independence of the directors in office. 12
13 Office Members In office since In Office until Board of Directors Slate (M/m)* Exec. Non Exec. Indep. according to CG Code Indep. according to TUF % ** Number of other offices *** Internal control committee **** % ** Remunerat ion Committee Chairman GIOVANNI 11.4,2008 Approval of 2010 AR M X and CEO RECORDATI Director ALBERTO 11.4,2008 Approval of 2010 AR M X RECORDATI Director MARIO 11.4,2008 Approval of 2010 AR M X X (*) X X 100 X GARRAFFO Director FEDERICO 11.4,2008 Approval of 2010 AR M X X 85,7 0 X 80 NAZZARI Director CARLO 11.4,2008 Approval of 2010 AR M X X (*) X 85,7 0 X 100 PEDERSOLI Director ANDREA 11.4,2008 Approval of 2010 AR M X RECORDATI Lead indep. MARCO 11.4,2008 Approval of 2010 AR M X X (*) X (*) 71,42 0 X 100 director VITALE Director WILLIAM 11.4,2008 Approval of 2010 AR M X X X X 80 GUNNARSSON Director WALTER 11.4,2008 Approval of 2010 AR M X X X x 100 WENNINGER (*) The Board has qualified Prof. Marco Vitale, Dr. Mario Garraffo and Avv. Pedersoli as independent, even though they have been directors of the Company for more than nine years during the past twelve, and in the case of Prof. Vitale even though he has been appointed as a professional consultant to the Company with an annual fee of 50, (evaluated a non significant amount), considering that by their specific expertise and professional commitment to constant control and stimulation of the Board, they have demonstrated that they have maintained their characteristics of independence and freedom of judgement in evaluating the operations carried out by management. For the Director Avv. Carlo Pedersoli in particular, compliance with the requirement of having been a board member in no more than nine of the last twelve years lapsed on 1 st March Further information is given in Section 4.6. * M/m are given in this column where M indicates a member elected from the majority slate and m from a minority slate. ** This column contains the percentage attendance of directors at the relative board and committee meetings (number of presences/number of meetings held during the actual period office of the person concerned). *** This column gives the number of appointments as a director or statutory auditor held by the person concerned in other companies listed on regulated markets, including foreign markets, in financial, banking or insurance companies or in large companies, as in the list contained in Attachment 1 of this document. which may be consulted. **** An X in this column indicates that the Director is a member of the committee. ** ** % ** 13
14 In this respect, on 23 rd November 2010, Dr. Federico Nazzarri resigned from the Remuneration Committee and the Board of Directors appointed Dr. Garraffo to replace Dr. Garraffo. INDICATE THE QUORUM REQUIRED FOR THE PRESENTATION OF SLATES WHEN DIRECTORS WERE LAST APPOINTED: 2% of the share capital Number of meetings held during the year in question: Board meetings: 7 Audit committee: 5 Remuneration committee: 5 Maximum number of offices held in other companies The Board of Directors has not set any general criterion for the maximum number of positions as director or statutory auditor in other companies that are considered compatible with performing duties as a director of the Company. It has done this because it feels that it is best to allow individual directors to assess this compatibility themselves. 4.3 ROLE OF THE BOARD OF DIRECTORS (pursuant to Art. 123-bis, paragraph 2, letter d) of the TUF) During the Year the Board of Directors met seven times, with sessions that lasted an average of approximately two hours, on the following dates: 11 th February 2010; 5 th March 2010; 13 th April 2010; 6 th May 2010; 28 th July 2010; 26 th October 2010 and 24 th November For the current year nine meetings are planned, and the Board has already met on 13 th January 2011 and 9 th February The promptness and completeness with which information is provided before board meetings is ensured by the Chairman with the distribution of documents relating to the items on the agenda to members a few days immediately preceding the date set for the meetings. On rare occasions it has not been possible to provide information concerning some items on the agenda until the time of the board meeting itself for reasons of confidentiality and urgency. During the course of the year the following persons attended board meetings in order to provide additional information on the items on the agenda: the Group CFO and General Manager for the co-ordination of operations (who is also the Financial Reporting Officer), the chief of Group Operational Control and Reporting, the Chief of Corporate Development and the Chief of the Legal Service and Corporate Affairs (who also acted as the Secretary to the Board). In accordance with Art. 23 of the By-laws, the Board is the corporate body endowed with the broadest powers to handle ordinary and extraordinary management of the Company and it has the right to conclude all acts that it deems appropriate in order to conduct business and to achieve the corporate purposes, excluding only those reserved by the law exclusively for the 14
15 Shareholders Meeting. In accordance with CC. Art. 2365, paragraph 2, the Board of Directors is also authorized to decided on the following matters: - mergers in the cases established by CC articles 2505 and 2505 bis; - establishment or suppression of secondary offices; - specification of the Directors who are entitled to represent the Company; - reduction of share capital in the event of withdrawal of a shareholder; - alignment of the By-Laws to provisions of the law and regulations; - transfer of the registered office from one municipality to another in national territory. The Board is also entitled to appoint and dismiss, following an obligatory opinion from the Board of Statutory Auditors, the Financial Reporting Officer, pursuant to TUF Art. 154-bis. The Board is also responsible, in compliance with the CG Code, for the following: - examination and approval of strategic, industrial and financial plans of the Company and the Recordati Group, the corporate governance system and the structure of the Group; - evaluation of whether the organisational, administrative and financial structures of the Company and its strategic subsidiaries, as defined herein and as configured by the responsible organs, are adequate, with particular reference to the system of internal control and management of conflicts of interest; - attribution and cancellation of mandates to CEOs and the Executive Committee, defining the extent, means and intervals (at least quarterly), with which the delegates must refer to the Board about the activities carried out in exercising their mandates; - establishment, after examination of the proposals from the Remuneration Committee, and heard the opinion of the Board of Statutory Auditors, of the remuneration of CEOs and other Directors with special mandates, as well as the division, for the individual members, of the total allotment for compensation of the Board, if the Shareholders Meeting has not already decided the matter; - evaluation of business trends, in accordance with the law and the By-Laws, especially in the light of information provided by the delegated bodies and periodic comparison of results with budget previsions; - examination and approval prior to strategic economic or financial operations of the Company and its subsidiaries, with particular attention to situations in which one or more Directors have an interest, whether personal or on behalf of third parties, and in general, to operations with related parties in accordance with the Regulations for Related-Party Transactions approved by the Board of Directors itself on 24 th November 2010; establish guidelines to identify significant operations; - conduct, once a year, an evaluation of the size and functionality of the Board of Directors and its committees and possibly indicate the type of professional figures whose presence on the Board would be useful; - communication, in the corporate governance report, of the means of application of the CG Code and in particular, of the number of Board and Executive Committee meetings held during the year and the relative percentage of participation of each Director. On the date of the approval of this Report, the Board took the following actions in relation to the above: - it studied and approved the 2011 budget of the Group; - it approved the most significant corporate provisions including update of the Organisational, management and control structures pursuant to Legislative Decree 231/01; 15
16 - it identified the subsidiaries with strategic characteristics, based principally on dimensional criteria (revenues) or evaluation of the special characteristics of the market on which the subsidiary operates (such as the orphan drugs market). The following companies are qualified as strategic subsidiaries: Laboratoires Bouchara Recordati S.a.s, Recordati Ireland Ltd., Jaba-Recordati S.A., Merckle Recordati GmbH, Innova Pharma S.p.A. and Orphan Europe SARL; - it issued a positive evaluation of the adequacy of organisational, administrative and accounting structures, with particular reference to the internal control system and management of conflicts of interest, on the basis of the information provided to the Board in specific reports and other documentation (such as organisational diagrams) presented by the manager responsible for internal control, the Internal Audit Committee, the Supervisory Authority pursuant to Legislative Decree no. 231/2001 and by the Chairman and CEO himself. On , having examined the proposals submitted by the relative committee and having obtained an opinion from the Board of Statutory Auditors, the Board of Director set the remuneration of the CEO and the other Directors who occupy particular positions and decided how the total remuneration due to the members of the board was to be distributed. Lastly, on the Board of Directors confirmed the decisions taken with regard to Directors with special positions (other than the CEO) and also approved some amendments to the Group variable remuneration incentive scheme. Finally the Board approved the 2010 targets for the Chairman and Chief Executive Officer, under the variable remuneration incentive scheme which applies to him also; - it evaluated management trends, with particular attention to the information provided by the Chairman and CEO, at the same time it compared the results with the budget previsions; - it studied and approved strategic operations of the Company and its subsidiaries in advance, when such operations were strategically significant in relation to the economic and financial welfare of the Company (with particular reference to participation in other undertakings and special drugs). The Board of Directors on November 24, 2010 approved the Procedure concerning related-party transactions available on the Company s website fixing general principle for the identification of the related-party transactions. Please refer to Section 12 of teh present Report. Consequently on that same date the Board of Directors amended the Regulations for significant transactions with related parties or when a Director has an interest in the transaction, adopted in 2008, restricting it to significant transactions or transactions in which a Director bears and interest. On the basis of the current Regulations for significant transactions with related parties or when a Director has an interest in the transaction, the following types of transactions are considered to be strategic, operating, capital or financial for the Company, reserved to the exclusive decision of the Board of Directors, except for transactions performed with or between other companies belonging to the Recordati Group (unless atypical or unusual and/or to be concluded under non standard conditions): a) assumption of financial liability of more than Euro 50 million for any single operation; b) transfer of real estate for amounts of more than Euro 25 million, where the industrial operations of the Company or its subsidiaries are conducted at the time of the transfer; c) acquisition or transfer of industrial property rights of the Company or its subsidiaries for amounts of more than Euro 25 million for any single operation; 16
17 d) acquisition, transfer or any other provision in relation to holdings in other companies, likewise the acquisition or transfer of companies or company branches, for amounts of more than Euro 25 million for any single operation; e) acquisition or transfer of special drugs or products in general, for amounts of more than Euro 25 million for any single operation; f) granting of real or personal guarantees for amounts of more than Euro 25 million for any single operation; g) investments and disinvestment, other than those specified at the letters above, for amounts of more than Euro 15 million for any single operation. On the basis of the procedures as above, the Board is also responsible for studying and approving both transactions in which one or more Directors have an interest, whether personal or on behalf of third parties. The Board of Directors conducted an evaluation of the size, composition and functioning of the Board and its committees. This evaluation was conducted by asking each Director to compile a questionnaire prepared by the Legal Service and Corporate Affairs Office of the Company. The results of that questionnaire were discussed in a board meeting of 13 th January The results of the evaluation were positive and potential improvements were suggested by some Directors. The Shareholders Meeting has not authorized any general or advance exception to the ban on competition as at CC Art Chairman and Chief Executive Officer 4.4 EXECUTIVE OFFICERS AND BODIES In accordance with article 24 of the By-Laws, representation of the Company shall be attributed to the Chairman of the Board of Directors or, in the event of his absence or inability to attend for any reason, to the Vice-Chairman, with sole signing authority for implementation of all resolutions of the Board unless otherwise resolved. The Chairman or, in the event of his absence or impediment for any reason, the Vice-Chairman, shall represent the Company before the law, with the power to take legal action and institute judicial and administrative proceedings at all levels of jurisdiction, including with respect to revocation and cassation proceedings, and appointing lawyers and attorneys for lawsuits. In accordance with article 25 of the By-Laws, the Board of Directors may delegate all or part of its powers and functions not only to the Chairman, but also to the Vice-Chairman and one or more executive directors and it may grant special mandates to individual Directors or managers of the Company, including the power of attorney, determining their functions and powers under the law. In accordance with article 26 of the By-Laws, the Board may also delegate all or part of its powers to an Executive Committee. On 11 April 2008 the Board of Directors appointed Ing. Giovanni Recordati not only to the position of Chairman of the Board of Directors but also to that of Chief Executive Officer with the purpose of improving the efficiency of the management of the Company. In his role as Chief Executive Officer, Ing. Giovanni Recordati has been authorised, within the limits permitted by Law, to exercise the broadest powers for the ordinary and extraordinary management of the Company, expressly including the power to appoint directors and his 17
18 agents, persons with specific duties, experts and agents of the Company in general for specific actions or types of action, with the sole, exclusive and mandatory exclusion of the following operations reserved to the Board of Directors, except for operations performed with or between other companies of the Recordati Group: a) assumption of financial liability of more than 50 million for any single operation; b) transfer of real estate for amounts of more than 25 million, where the industrial operations of the Company or its subsidiaries are conducted at the time of the transfer; c) the purchase or sale of intellectual property of the Company or its subsidiaries for amounts exceeding 5 million for each transaction; d) acquisition, transfer or any other provision in relation to holdings in other companies, likewise the acquisition or transfer of companies or company branches, for amounts of more than 25 million for any single operation; e) the purchase and sale of proprietary medicinal products and generic products, for amounts exceeding 25 million each; f) the grant of real or personal guarantees for amounts of more than 25 million for any single operation; g) investments and disinvestment, other than those specified at the letters above, for amounts of more than 15 million for any single operation. The Chairman and Chief Executive Officer also: (i) convenes the Board meetings and ensures that the members of the Board and the Board of Statutory Auditors are provided, with reasonable advance notice, excepting situations of necessity or urgency, with the documentation and information necessary to enable them to express an informed opinion about the matters submitted to their examination and approval, (ii) coordinates the activities of the Board and conducts the proceedings of Board meetings; (iii) continuously provides information about the frequent variations of the law and the regulations that govern the sector and their impact on the Company, in order to develop the awareness of all Directors in relation to the situation and dynamics of the Company. Executive Committee No executive committee has been formed. Reporting to the Board The Chairman and Chief Executive Office reported to the Board in individual board meetings on the activities performed in exercising the powers conferred on him by the Board. 4.5 OTHER EXECUTIVE DIRECTORS In addition to the Chairman and CEO, the other Directors that qualify as executives are Dr. Alberto Recordati, Dr. Andrea Recordati and Dr. Federico Nazzari. Dr. Alberto Recordati, Vice- Chairman of the Board of Directors, co-ordinates R&D and (since February 2011) Group Licensing-in activities, and he is also a director of some subsidiaries in the Group (including one of strategic importance). Dr. Andrea Recordati, the former Chief of Western Europe, has taken responsibility for the International Pharmaceutical Division and the co-ordination of 18
19 licensing-out activities since February 2011 and he has also filled the position of Managing Director of some strategic subsidiaries. On 13 th April 2010, the Board of Directors conferred powers on the Director Dr. Federico Nazzari, until the date of the approval of the annual report for the year ended 31.12,2010, necessary for performing the following activities both in the interest of the Parent Company and in the interest of subsidiaries: a) supervision, development, co-ordination and management of activities and relations with institutions, such as, for example, external relations and public relations in general, participation in congresses and cultural and scientific activities and publications of a general and institutional nature; b) management of relations with Farmindustria and the co-ordination, in general, of all activities with sector associations in which the Group is present; c) management of relations with persons and institutions in the business, scientific, academic and political spheres; d) management of relations with public administrations and central, peripheral and local government institutions with particular reference to those with responsibilities for health, the environment and economics; e) assisting the Chairman and Chief Executive Office with other projects and special assignments as required. These are activities of an institutional nature, which, as such, are not strictly management functions. During the course of meetings of the Board of Directors, the Chairman and Chief Executive Officer gives necessary information on the affairs of the Company and the Group, which includes information on the most important changes in legislation and regulations in the sector and their impact on the Company. No additional specific initiatives were necessary to increase the Directors knowledge of the company and its dynamics, considering, moreover, that all members of the Board have a deep knowledge of Company and the Group, either because of the many years in office or great experience acquired working in the sector. 4.6 INDEPENDENT DIRECTORS On that occasion the Board confirmed its previous assessment concerning the relationship between the Company and Prof. Vitale, attributable to a professional engagement worth 50, annually, considering the relationship cited as not significant for the purposes of independence in consideration of the small quantitative nature of the engagement. Furthermore, the Board of Directors decided not to include the requirement relating to a Director holding office for more than nine of the last twelve years among those pursuant to the CG on the basis of which the assessment of the independence of Directors is performed. This is because, with precise reference to Prof. Vitale, Dr. Garraffo and from March 2010, Avv. Pedersoli, the Board considered that because of their specific expertise and professionalism and for their constant work in supervising and stimulating the Board they have demonstrated that they have maintained their characteristics of independence and freedom of judgement in assessing the work of management intact. Furthermore, the Board of Directors noted that the continuation of a Director in office for more than nine years should not in itself be considered 19
20 a negative requirement for qualification as independent if the other requirements of the CG are satisfied. This is because great experience of the specific affairs of the issuer, the stature and professionalism of the persons considered, the absence of interests and significant relations with the Company constitute a value to be considered positively and such as to consider their capacity to judge freely and without bias to be untarnished. The Board of Statutory Auditors verified that the criteria and procedures of evaluation adopted by the Board to evaluate the independence of its members were implemented correctly. The independent directors, at and before the beginning of meetings of the Board of Directors, verified each time the absence of any specific matters that might be significant in relation to their roles as independent Directors. 4.7 LEAD INDEPENDENT DIRECTOR Considering the existence of the situation in which the same person holds the offices of Chairman and CEO, in compliance with the CG Code, the Board has designated independent Director Prof. Vitale to be the lead independent director, to guide the independent Directors, with particular reference to the independent Directors, in order to improve the activities and functioning of the Board. The lead independent director collaborates with the Chairman in order to ensure that the Directors receive complete and timely information, and is also authorised to convene special meetings of the independent Directors only, at his own discretion or at the request of other Directors. 5. CONFIDENTIALITY OF CORPORATE INFORMATION Following amendments to TUF introduced by Law no. 62/2005 (EC Law 2004) on matters of market abuse, in 2006 the Board of Directors approved the proposal of the Chairman and CEO for Internal regulations for handling confidential information (to substitute an internal procedure for the management and external communication of information and confidential documents, adopted in 2001 in accordance with the Corporate Governance Code in force at the time). These regulations govern the internal management and external communication of information about Recordati S.p.A. and its subsidiaries, with particular reference to confidential and significant information (meaning information that could become confidential, but does not yet have the characteristics of specificity as defined at TUF Art. 181), and the institution of a specific register of the persons who have access to the information as above, a Register of persons who have access to confidential information, in accordance with Art. 115 bis of the TUF. In particular these regulations establish the obligations of confidentiality of all persons who have access to significant and confidential information; identify the persons responsible for evaluating the significance of the same information; establishes the rules for access to the same information by persons outside of the Company; establishes some principles and rules for the management of documents and correspondence containing significant or confidential information; establishes the methods of communicating confidential information, and other information about the Company. 20