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download as PDF file RULES Contents: 1 GENERAL PROVISIONS 1.1 OBJECTIVES AND PRINCIPLES 1.2 SCOPE AND ORGANIZATION OF BUSINESS 1.3 DEFINITIONS 1.4 ABBREVIATIONS 2 MEMBERSHIP 2.1 ACQUIRING MEMBERSHIP 2.1.1 METHOD 2.1.2 PROCEDURE 2.1.2.1 Application for Membership 2.1.2.2 Post-approval procedure 2.2 ORGANIZATION, STAFF AND TECHNICAL REQUIREMENTS TO BE MET BY MEMBER FIRMS 2.2.1 ORGANIZATION REQUIREMENTS 2.2.2 STAFF REQUIREMENTS 2.2.3 TECHNICAL REQUIREMENTS 2.2.3.1 Member’s software enabling communication with the Trading System 2.2.3.2 API 2.2.3.3 Member’s Technical equipment 2.2.3.4 Costs 2.2.3.5 Location, maintenance and use of the equipment 2.2.3.6 Equipment testing 2.3 TERMINATION OF MEMBERSHIP 2.3.1 TERMINATION OF MEMBERSHIP FOR FAILURE TO MEET MEMBERSHIP CRITERIA 2.3.1.1 Permanent termination 2.3.1.2 Suspension (temporary termination of Membership) 2.3.2 TERMINATION OF MEMBERSHIP AS A SANCTION 2.4 MEMBER RIGHTS AND RESPONSIBILITIES 2.4.1 MEMBER RIGHTS AND RESPONSIBILITIES 2.4.2 TRADING 2.4.3 NOTIFICATION OF THE EXCHANGE 2.4.4 SUPERVISION OF EMPLOYEES 2.4.4.1 Access to the Trading System 2.4.5 RULES OF PROFESSION 2.4.6 SUBMISSION OF TRANSACTION RECORD DATA 2.4.7 INSIDE INFORMATION, MARKET ABUSE 2.4.8 PRESERVING REPUTATION OF THE EXCHANGE AND OTHER MEMBER FIRMS AND USING THE EXCHANGE’S LOGO 2.5 SPECIALISTS (MARKET MAKERS) 2.5.1 ORGANIZATION REQUIREMENTS ON SPECIALIST (MARKET MAKER) 2.5.2 ACQUISITION AND TERMINATION OF SPECIALIST STATUS 2.5.2.1 Acquisition of Specialist status 2.5.2.2 Termination of Specialist status 2.6 CRISIS COMMUNICATION 2.7 CLEARING AND SETTLEMENT 2.8 TRADING SUSPENSION 2.9 DISPUTES 3 MARKETS AND INSTRUMENTS 3.1 MARKETS 3.1.1 REGULATED MARKET 3.1.2 MTP 3.2 INSTRUMENTS 4 LISTING. 4.1 JOINT PROVISIONS 4.1.1 APPLICATION FOR LISTING 4.1.1.1 Content of the Application for listing 4.1.1.2 Regularity of the Application for Listing 4.1.2 PROSPECTUS AND OTHER DOCUMENTS 4.1.3 FREE FLOAT 4.1.4 INSTRUMENT AND ISSUER CHARACTERISTICS 4.2 CRITERIA FOR REGULAR MARKET LISTING 4.2.1 SHARES 4.2.1.1 Free float 4.2.2 OTHER INSTRUMENTS 4.3 CRITERIA FOR OFFICIAL MARKET LISTING 4.3.1 SHARES 4.3.1.1 Free float 4.3.2 OTHER INSTRUMENTS 4.4 PRIME MARKET LISTING 4.4.1 SHARES 4.4.2 OTHER INSTRUMENTS 5 POST-LISTING REQUIREMENTS 5.1 GENERAL REQUIREMENTS 5.1.1 FINANCIAL STATEMENTS 5.1.1.1 Entities required to submit financial statements 5.1.1.2 Content and time of publication of financial statements 5.1.2 EQUAL TREATMENT 5.1.3 PARALLEL LISTING 5.1.4 FORMAT 5.1.5 LANGUAGE 5.1.6 LIST OF INSIDERS 5.1.7 FEE 5.1.8 CODE OF CORPORATE GOVERNANCE 5.2 RESPONSIBILITIES OF ISSUERS OF RT-LISTED INSTRUMENTS 5.3 RESPONSIBILITIES OF ISSUERS OF ST-LISTED INSTRUMENTS 5.3.1 SUPERVISORY AND MANAGEMENT BOARD MEETINGS 5.3.2 ACQUISITION BY ISSUER'S MANAGEMENT AND SUPERVISORY BOARD MEMBERS 5.3.3 ACQUISITION BY THE ISSUER 5.3.4 OTHER MATERIAL FACTS 5.4 RESPONSIBILITIES OF ISSUERS OF PM-LISTED INSTRUMENTS 5.4.1 CORPORATE ACTION CALENDAR 5.4.2 ANNUAL REPORT PRESENTATION 5.4.3 ACQUISITION OF TREASURY (OWN) SHARES 5.4.4 ACQUISITION OF MAJOR EQUITY INTEREST IN OTHER COMPANIES 5.4.5 NEW SHARE ISSUANCE 5.5 RESPONSIBILITIES OF ZIFS AND ZIF MANAGEMENT COMPANIES 5.5.1 SPECIAL RESPONSIBILITIES 6 DELISTING 7 MULTILATERAL TRADING PLATFORM 7.1 ACCESS 7.2 EXCHANGE RESOLUTIONS 7.3 ADMISSION TO MTP TRADING 7.4 POST-ADMISSION REQUIREMENTS 7.5 MTP TRADING IN FINANCIAL INSTRUMENTS 7.6 MTP TRANSACTION SETTLEMENT 7.7 RISK 7.8 TERMINATION OF ADMISSION TO TRADING 8 TRADING 8.1 TYPES OF TRADING 8.2 EX-DIVIDEND AND EX INTEREST TRANSACTIONS 8.3 TRADING TIME 8.4 TRADING SYSTEM 8.4.1 MEMBER IDENTIFICATION 8.4.2 MEMBER FIRM’S TRADING SUSPENSION FOR TECHNICAL REASONS 8.5 LIABILITY OF THE EXCHANGE 8.6 ORDER BOOK TRADING 8.6.1 REGULAR TRADING 8.6.1.1 Opening session 8.6.1.2 Continuous trading 8.6.2 SPECIAL TRADING REGIME FOR PARTICULAR SHARES 8.6.3 ORDER BOOOK TRADING ORDERS 8.6.3.1 Types of Order 8.6.3.2 Order time limit 8.6.3.3 Transparency 8.6.3.4 Stating Order price 8.6.3.5 Required contents 8.6.3.6 Order deletion 8.6.3.7 Order withdrawal or amendment 8.6.4 VOLATILITY INTERRUPTION WITH VARIABLE ENDING 8.6.4.1 Volatility interruption in opening session 8.6.4.2 Volatility interruption in continuous trading 8.6.4.3 Issuer’s response 8.6.5 ORDER BOOK TRANSACTIONS 8.6.5.1 Commitment 8.6.5.2 Instruments 8.6.5.3 Price 8.6.5.4 Transaction time 8.6.5.5 Order execution priority 8.6.5.6 Exchange Fee 8.6.5.7 Finality of transactions 8.7 OFF ORDER BOOK TRADING 8.7.1 BLOCK TRADES 8.7.2 PUBLIC AUCTIONS 8.8 OTC TRANSACTIONS 8.9 CLEARING AND SETTLEMENT 8.10 SPECIALIST TRADING 8.10.1 SHARE CLASSIFICATION 8.10.1.1 Liquidity 8.10.1.2 Order book depth 8.10.1.3 Daily turnover 8.10.2 CRITERIA FOR ACQUIRING SPECIALIST STATUS 8.10.3 SPECIALIST ORDER 8.10.3.1 Minimum time 8.10.3.2 Cessation of Specialist’s daily obligations 8.10.3.3 Temporary relief 8.10.4 BID/ASK SPREAD 8.10.5 QUANTITY 8.10.6 NEWLY LISTED SHARES 8.10.7 SUPERVISION 8.10.8 DATA 8.10.9 EMERGENCY SPECIALIST 9 TRADING TRANSPARENCY 10 CONFLICT OF INTEREST 10.1 CONFLICTS OF INTEREST COMMITTEE 10.1.1 COMPETENCE 10.1.2 MEMBERS 10.1.3 RULES OF PROCEDURE 11 SURVEILLANCE 11.1 TRADING SURVEILLANCE 11.1.1 RULES AND PROCEDURES TO DETECT AND PREVENT MARKET ABUSE 11.1.2 MEASURES AND PROCEDURES TO PREVENT MARKET ABUSE 11.1.2.1 Observation segment 11.1.3 MEASURES AND PROCEDURES TO DETECT MARKET ABUSE 11.1.4 ASSESSMENT PRINCIPLES ON SUSPICION OF MARKET ABUSE 11.1.5 PROCEDURE WITH UNUSUAL ORDERS, TRANSACTIONS OR MEMBER ACTIVITIES INDICATATIVE OF MARKET ABUSE 11.1.6 MEASURES ENFORCED BY THE EXCHANGE 11.1.6.1 Transaction annulment 11.2 SURVEILLANCE OF MEMBER FIRMS 11.3 SURVEILLANCE OF ISSUERS 11.3.1 TEMPORARY TRADING SUSPENSION OF INSTRUMENT 12 DISCIPLINARY COMMITTEE 12.1 COMPETENCE 12.2 MEMBERS 12.3 DECISION-MAKING 12.4 OTHER MATTERS 13 MEASURES TO PROTECT MARKET INTEGRITY 13.1 REBUKE 13.1.1 NON-PUBLIC REBUKE 13.1.2 PUBLIC REBUKE 13.1.3 FINE 13.2 TERMINATION OF MEMBERSHIP 13.2.1 SUSPENSION OF MEMBER FIRM 13.2.2 PERMANENT TERMINATION OF MEMBERSHIP 13.3 DETERMINING SANCTION TYPE AND SIZE 14 TRANSITIONAL AND FINAL PROVISIONS 14.1 INTERPRETATION 14.2 CESSATION OF MEMBERSHIP 14.3 INSTRUMENTS AND NEW MARKET STRUCTURE 14.4 TRADING 14.5 EFFECTIVE DATE RULES 1 GENERAL PROVISIONS 1. These Rules shall be applied in complement to the laws and other applicable regulations of the Republic of Croatia which govern the issues dealt with by the Rules. 2. These Rules shall regulate the following matters: 1. scope and organization of business, 2. membership: a. admission to membership, b. suspension of membership. c. termination of membership, 3. types and methods of trading, including any provisions on the clearing and settlement systems, which Member firms may use to settle executed transactions, 4. publication of trading data, 5. financial instruments which may be traded on the Regulated market and the multilateral trading platform managed by the Exchange, including the provisions on: a. listing of financial instruments and b. temporary suspension of and removal from trading, 6. trading supervision, including disclosure and procedure in respect of market abuse. 3. Along with these Rules, other regulatory Exchange documents referred to in the Rules or adopted by the Exchange as part of its competence shall also apply. 1.1 OBJECTIVES AND PRINCIPLES 4. In the application and interpretation of these Rules, the following objectives to be achieved and the principles to be adhered to must be observed: 1. Investor protection; 2. Fair, just and transparent market; 3. Reduction of systemic risk; 4. Prevention of conflicts of interest which might arise among: a. Member firms, b. Exchange shareholders, c. issuers, d. retail investors, and e. institutional investors. 5. Attaining information balance among all market participants. 1.2 SCOPE AND ORGANIZATION OF BUSINESS 5. The Exchange shall engage in the following business activities related to the capital market trading which are regulated by the Rules: 1. Regulated market management, 2. MTP management, and 3. any tasks related to the activities set out under 1 and 2 of this Article, such as: a. publication of data related to trading, b. tasks related to the development and maintenance of the software support to trading. 6. The internal organization of the Exchange shall be defined by the Internal Organization and Job Structure Ordinance of the Zagreb Stock Exchange, Inc. 1.3 DEFINITIONS 7. For the purpose of these Rules, the following terms shall have the meaning stated below, unless it has been stipulated otherwise in particular cases in certain sections of the Rules: 1. Block trade – prearranged transaction in accordance with the provisions of ZTK; 2. Exchange – Zagreb Stock Exchange, Inc.; 3. Member firm – member of the Exchange; 4. Institutional Settlement System – clearing and settlement system through which transactions conducted on the Exchange are settled as part of the institution which organizes clearing and settlement; 5. Instrument – financial instrument which is traded on the Regulated market or the MTP managed by the Exchange; 6. Client – person or entity to which the Member firm provides services as part of its business activity; 7. Order book – part of the Trading System which contains all the Orders that have not been turned into Transactions; 8. Code of corporate governance – Code written by the Exchange and HANFA, and posted on the Exchange’s website; 9. Material fact – information of a precise nature which directly or indirectly concerns one or more Issuers of the Instruments traded on the Exchange or one or more Instruments traded on the Exchange and which is likely to have a significant influence on the prices of the Instruments or on the prices of related derivatives where such a probability of significant influence is deemed to exist if a reasonable investor would take such information into account as part of the grounds for taking investment decisions; 10. Measures to protect market integrity – measures which the Exchange is authorized to take with respect to Issuers or Member firms for the purpose of current and future protection of a fair and just market; 11. Order – instruction to sell or buy which the Member firm has entered in the Trading System of the Exchange; 12. List of insiders – list set out in Article 463 of ZTK; 13. Inside information – material fact which is not available to the public; 14. Rights – securities which entitle to specific shares and equity holdings from the portfolio of the Croatian Privatization Fund, the State Agency for Deposit Insurance and Bank Rehabilitation and the Croatian Pension Insurance Institute; 15. Rules – these Rules of the Exchange; 16. Admission to Trading – procedure which enables the start of Trading in the Instrument on the MTP; 17. Admission Fee – one-time fee payable for being admitted to membership; 18. Listing Prospectus – document to be prepared and made public by the Issuer when listing Instruments, if and when stipulated by the regulations of the Republic of Croatia; 19. Specialist (market maker) – Member of the Exchange which assumes special responsibilities with respect to substituting liquidity in particular shares by continually submitting Buy/Sell orders for the respective shares; 20. Parties to Transaction – Member firms, one of which has issued a Buy order and the other a Sell order for the Instrument via the Trading System, when such orders result in a Transaction; 21. Member Suspension – measure to prevent the Member firm from participating in Trading on the Exchange; 22. Instrument Suspension – measure to prevent trading in a particular Instrument on the Exchange; 23. Transaction – legal operation of buying/selling Instruments which results from matching Buy and Sell orders in line with the provisions of the Rules; 24. Trading – procedure of issuing Buy and Sell order and conducting Transactions in the Instruments on the Exchange or via the Trading System; 25. Trading System – electronic Trading System of the Exchange which enables: a. Issuing Orders and conducting Transactions in the Instruments; b. Distribution of particular information; c. Exchange of particular messages. 26. Listing - procedure which enables the start of Trading in particular Instruments on the Regulated market; 8. For the purpose of the Rules, fhe foregoing terms shall have the meaning stated hereinabove if capitalized. 9. In the event that companies have a monistic structure, in line with the provisions of the ZTD, the term "management" shall refer to the executive directors who are members of the management board while the terms "supervisory board" and "management and supervisory board" shall refer to the management board. 1.4 ABBREVIATIONS 10. For the purpose of the Rules, the following abbreviations shall have the meaning stated below: 1. HANFA - Croatian Financial Services Supervisory Agency 2. MTP - multilateral trading platform of the Exchange 3. PM - Prime Market; 4. SKDD - Central Depository and Clearing Company d.d, Zagreb; 5. RT - Regular Market; 6. ST - Official Market; 7. TP - Rights Market; 8. ZIF - Closed-end investment fund; 9. ZTD - Companies Act; 10. ZTK - Capital Markets Act. 2 MEMBERSHIP 11. Any investment company and credit institution set out in Article 301 paragraph (1) of ZTK may become a member of the Exchange provided that it meets the criteria stipulated by the regulations of the Republic of Croatia and these Rules. 12. Member of the Exchange is authorized to trade in the Instruments for which it is licensed by HANFA and which: 1. are listed on the Regulated market, and 2. have been admitted to trading on the MTP. 13. The Exchange may allow individual Member firms which meet the criteria stipulated by the Exchange’s documents, provisions of ZTK and of HANFA’s Ordinance to act as Specialists (market makers) in respect of particular Instruments traded on the Exchange. 14. The Exchange shall be responsible for deciding on admission to membership. 15. The Exchange shall set the following: 1. Amount of Admission fee, 2. Amount of fee charged by the Exchange in relation to the approval for the transfer of Member seats, and 3. Amount of Membership fee and accounting period for its payment (annual, semi-annual, quarterly or monthly). 16. By gaining membership of the Exchange, the Member firm agrees irrevocably to comply with the Rules and other regulatory Exchange documents. 2.1 ACQUIRING MEMBERSHIP 2.1.1 METHOD 17. Member Status may be gained solely by being admitted to Membership by the Exchange. 18. Prerequisites for acquiring membership are: 1. that the potential member holds a Member seat, and 2. that the potential member meets membership criteria. 19. Each Member firm may hold only one Member seat, except in the event of a merger or amalgamation of two or more legal persons which hold Member seats. 20. Member seat may only be acquired for the purpose of membership of the Exchange, specifically: 1. from the Exchange, or 2. from another party which acquired the Member seat earlier, subject to a prior consent of the Exchange. 21. Without prejudice to the provisions of Article 20 above, membership may also be acquired in the process of division of the legal person which holds one or more Member seats. 22. Membership may not be acquired by succession. 2.1.2 PROCEDURE 2.1.2.1 Application for Membership 23. Any person wishing to become a Member shall submit an Application to the Exchange and state the manner in which it wishes to acquire Member status. 24. Enclosed with the Application it shall submit the following documents as proof that it meets the criteria for Membership: 1. Extract from the court register; 2. Filled-out questionnaire stipulated by the Exchange; 3. Brief overview of past operations and plans for future activities on the capital market; 4. License granted by HANFA to confirm that it meets the criteria for acquiring membership of the Exchange which have been stipulated by the provisions of ZTK and other regulations; 5. Proof that it holds a Member seat or that it will procure it in a timely manner; 6. Other documents, in accordance with a special resolution of the Exchange. 25. The applicant will be informed in writing of the decision to approve or reject its Application within 30 days of its submission. 26. The Exchange resolution to reject the Application must be properly explained. 2.1.2.2 Post-approval procedure 27. Immediately, i.e. upon receiving a resolution on the Application approval, the Applicant shall: 1. sign agreements with the Exchange to regulate Membership and other relations with the Exchange; 2. pay the amount of Admission fee set in the Exchange resolution in favour of the Exchange account; 3. submit to the Exchange any documents of payment security, if and when necessary in line with Exchange documents; 4. submit to the Exchange the proof that it meets technical requirements for the use of clearing and settlement services provided by SKDD or other Institutional clearing and settlement system, in line with the provisions of ZTK and of HANFA’s and Exchange documents; 5. initiate a procedure designed to secure technological requirements for connecting to the Trading System. 28. In the event of failure by the Applicant to meet the criteria set out in Article 27 above within 7 days of receiving the resolution approving the Application, the Exchange reserves the right to rescind its decision to admit the new Member without stating the reason. 29. The Exchange will notify the potential Member upon applying, or earlier if necessary and requested by that Member, of the estimated time necessary to secure technological requirements for connecting to the Trading System, as a prerequisite for participation in the trading. 2.2 ORGANIZATION, STAFF AND TECHNICAL REQUIREMENTS TO BE MET BY MEMBER FIRMS 2.2.1 ORGANIZATION REQUIREMENTS 30. Member firms are required to meet organization requirements for the provision of investment services and the performance of investment activities and ancillary services which are stipulated by law and the ordinances passed by HANFA and/or other competent bodies. 2.2.2 STAFF REQUIREMENTS 31. The Member firm shall employ at least one licensed broker or investment adviser who has completed training for the use of the Trading System. 32. In the event that the Member firm performs Specialist (market maker) activities, the licensed broker or investment adviser of the Member firm who performs such activities shall complete special education for specialist trading activities. 2.2.3 TECHNICAL REQUIREMENTS 2.2.3.1 Member’s software enabling communication with the Trading System 33. The software enabling communication with the Trading System must be approved by the Exchange. 34. Member firms shall make sure that the software which they use in the communication with the Trading System complies with the communication protocols among computers defined by the Exchange, and that it is constantly updated in order to comply with any modifications of the protocols introduced by the Exchange. 2.2.3.2 API 35. The API (OMX X-Stream Open Application Programming Interface) is the software solution (interface) and documentation which enables the Member firm to communicate with the Exchange’s Trading System by using its own software solutions in a predefined manner, and to take certain data from or exchange certain data with the Trading System. 36. The Exchange will allow each Member firm, under the same terms and in a non-discriminatory fashion, to use the API services according to the provisions of these Rules and the agreement with the Member firm. 2.2.3.3 Member’s Technical equipment 37. The Member’s technical equipment must at any time comply with the specifications stipulated by the Exchange. Should the Technical equipment used by the Member firm fail to ensure constant and reliable communication with the Trading System, the Exchange may prevent the Member firm from connecting to the Trading System until the Technical equipment is aligned with the standards required by the Exchange. 2.2.3.4 Costs 38. Any costs related to the installation and use of Technical equipment (including the cost of communication with the Trading System) shall be paid by the Member. 2.2.3.5 Location, maintenance and use of the equipment 39. Any details related to the location, maintenance and use of the hardware, software, telecommunication and other equipment which constitutes the Trading System or enables its functioning as well as any Member obligations in respect thereof shall be defined by the Exchange. 2.2.3.6 Equipment testing 40. Prior to the start of its use as well as following any modifications, the Technical equipment must be tested. Testing shall be conducted in the manner and according to the procedures defined by the Exchange. 41. The Exchange is authorized to conduct testing of the Technical equipment and communication links. The Member firm is required to participate in the testing at the Exchange’s request. Testing may be conducted outside office hours. 42. When the Member firm requests testing by the Exchange of certain equipment or software, the costs of such testing (Exchange fee and other costs) shall be paid by the Member. The testing does not provide absolute guarantee that no problems will or may recur in the future as a result of the circumstances unforeseen in the course of testing. 43. In order to ensure trading continuity, the Member of the Zagreb Stock Exchange which uses its own interface for trading while using the API or any other service, shall leave at least one instance of the official programming interface designed for trading on the Zagreb Stock Exchange via the X-Stream TraderWorkstation application. 2.3 TERMINATION OF MEMBERSHIP 44. Membership may terminate for the following reasons: 1. Member’s cessation as a legal person; 2. Termination from Membership; 3. Voluntary resignation of Membership; 4. In other cases, if stipulated by law and other regulations. 2.3.1 TERMINATION OF MEMBERSHIP FOR FAILURE TO MEET MEMBERSHIP CRITERIA 2.3.1.1 Permanent termination 45. In the event of permanent failure by the Member firm to meet the criteria for Membership, the Management Board of the Exchange will pass a resolution to terminate Membership. 2.3.1.2 Suspension (temporary termination of Membership) 46. In the event of temporary failure by the Member firm to meet the criteria for Membership, the Management Board of the Exchange will pass a resolution to suspend Membership temporarily until such a time as the Member firm can meet the criteria for Membership again. In the course of suspension, the Member has no right to outline the fact of Membership in its correspondence or any other manner, or to use the Exchange’s logo. 47. During the temporary suspension of Membership, the Member firm shall pay to the Exchange the Membership and other fees (if applicable) according to the Exchange’s price list. 48. If the Member firm has been suspended for a period of more than 12 months, such a Member will be deemed to have ceased to meet the criteria for Membership permanently. 2.3.2 TERMINATION OF MEMBERSHIP AS A SANCTION 49. Permanent or temporary termination of membership (suspension) may be imposed on the Member, in accordance with the provisions of these Rules, as a sanction (measure to protect market integrity) for the violation of legal provisions, ordinances and these Rules. 2.4 MEMBER RIGHTS AND RESPONSIBILITIES 2.4.1 MEMBER RIGHTS AND RESPONSIBILITIES 50. The Member firm shall have the following rights and responsibilities: 1. to participate in Exchange trading; 2. to submit data do the Exchange; 3. to meets its financial and other obligations; 4. to supervise the Member’s employees; 5. to preserve the reputation of market participants; 6. to clear and settle all concluded transactions. 2.4.2 TRADING 51. Member firms have the right to participate in trading on the Regulated market and the MTP, according to these Rules and their status, except during a suspension in line with the provisions of the Rules. 52. Member firms are prohibited from executing transactions in the Instruments which have been suspended for trading by the Exchange during the entire course of suspension. Trading in the Instruments contrary to the provisions of this Article represents a grave violation of the Exchange’s Rules. 53. In executing transactions in the Instruments Member firms shall: 1. Execute transactions in accordance with the regulations of the Republic of Croatia and the Rules; 2. At the Exchange’s request without delay submit any data, documents, electronic or other records concerning each executed transaction in the Instruments which are traded on the Regulated market or the MTP, regardless of where the Transaction was executed, in the manner and scope indicated by the Exchange in its request. 54. The refusal by the Member firm to document the Transaction within the time indicated in the Exchange’s request or an unnecessary delay in doing so represents a grave violation of the Rules. 55. The Member firm shall refrain from any attempt to influence the employees and/or members of the Exchange bodies and from any other kind of influence on the impartiality of the Exchange which might put the Member firm in a privileged position with respect to other Member firms. Non-compliance with this provision represents a grave violation of the Rules. 56. The Member firm which, under an agreement with the Exchange, engages in Specialist activities shall also comply with any resolution passed by the Exchange concerning Specialist activities. 57. With regard to the sequence of Order execution and the fulfilment of other obligations arising from the Order, own Order is equal to the Order of the Client, except when it has been stipulated otherwise. This provision does not apply to the Transactions conducted by the Member firm in the Specialist (market maker) capacity. 2.4.3 NOTIFICATION OF THE EXCHANGE 58. Member firms shall provide regular notifications to the Exchange of the following: 1. any change in the a. corporate structure of the legal person – Member firm, b. management, c. ownership structure, d. employees licensed to trade on the Regulated market and the MTP 2. insolvency, 3. account blockage; 4. initiation of the bankruptcy, liquidation or restructuring proceedings; 5. litigation or arbitration proceedings of significant value; 59. At the Exchange’s request Member firms are required to submit to the Exchange other reports, data and information which are related to or might affect Exchange operations. 2.4.4 SUPERVISION OF EMPLOYEES 60. Member firms shall inform their employees who perform the activities related to Exchange trading and/or use the Trading System of the content of legal and other regulations, the Rules and other documents which regulate trading on the Exchange. 2.4.4.1 Access to the Trading System 61. Member firms shall prevent the access to and the use of the Trading System and/or user identification password, enabling the use of the system, by unauthorized persons. 62. In the event that the Member firm of the Zagreb Stock Exchange is aware of: 1. unauthorized use or revelation of the password for access to the Trading System; 2. unauthorized access to the Trading System; 3. need to deactivate or change the password for access to the Trading System, the authorized representative of the Member firm shall notify the Supervision Department of the Zagreb Stock Exchange of the situation immediately by telephone. 63. At the Member’s request, the Exchange shall immediately take steps which might include the following: 1. temporarily block access to the Trading System by the suspicious user according to the IP address or the port used in to exclude such a user from trading 2. change the user password 3. cancel all open Orders of the suspicious user 4. temporarily suspend the suspicious user 5. permanently suspend the suspicious user 6. submit reports on the concluded Transactions 64. The Member firm may take Client orders in any technologically permissible manner (in person, by telephone, fax, Internet, computer networks etc.). After the orders have been transmitted to the Exchange’s Trading System, their legality, permissibility and compliance with regulations and the Rules of the Exchange are the sole responsibility of the Member, regardless of whether the identity of the principal, characteristics of the order and other relevant circumstances have been verified by the Member’s employee or computer programme. 65. Each order sent or transmitted to the Exchange bears the code of the person who entered it in the Exchange’s Trading System. Any Member firm using an automatic system to transmit Client orders to the Exchange’s Trading System without intermediation of a physical person must apply for one or more identifier codes from the Exchange to denote the orders which have been transmitted to the Trading System in such a manner. 2.4.5 RULES OF PROFESSION 66. The Member firm shall ensure that its employees abide by the rules of profession which are stipulated in the ordinances passed by HANFA. 2.4.6 SUBMISSION OF TRANSACTION RECORD DATA 67. Member firms of the Exchange shall keep Transaction records in such a manner as to enable their prompt delivery to the Exchange at its request in the appropriate electronic form defined by the Exchange: 1. list of all or some (according to the criteria set by the Exchange) selected transactions (regardless of whether they have been executed on the Exchange or off the market) including: a. Instrument name and code, b. indication of whether it involved a purchase or a sale, c. quantity and price, d. data contained in the Order concerning each Transaction, e. Client identification (or indication that it is a proprietary transaction of the Member firm), f. settlement data, g. data on the Instruments which are owned by the Member firm with an indication, when such Instruments are held by third parties on behalf of the Member, whether they are given as collateral to secure any claim; 2. The Member firm shall also submit to the Exchange any other data on its business operations pursuant to an Exchange resolution. 2.4.7 INSIDE INFORMATION, MARKET ABUSE 68. The Member firm is forbidden to: 1. use inside information in any manner which is contrary to Croatian regulations, 2. abuse or manipulate the market. 69. Failure by the Member firm to comply with the ban set out in Article 68 above represents a grave violation of the provisions of the Rules. 2.4.8 PRESERVING REPUTATION OF THE EXCHANGE AND OTHER MEMBER FIRMS AND USING THE EXCHANGE’S LOGO 70. Member of the Exchange shall not give advice or recommendations, or issue and disseminate written material or use the media in any manner which may harm the interests and/or reputation of the Exchange. 71. Member of the Exchange is authorized to state the fact of its Exchange Membership and use the Exchange’s logo on its stationery while taking special care so as not to mislead any third persons with respect to the separate nature of the legal persons of the Exchange and the Member firm by doing so. 72. The Exchange may stipulate the details concerning the manner in which the Exchange’s logo and company name are to be used by Member firms. 2.5 SPECIALISTS (MARKET MAKERS) 73. The Exchange will grant the status of Specialist in respect of a particular share or other financial instrument to the Member firm which meets the criteria defined by relevant regulations of the Republic of Croatia and Exchange resolutions, if so stipulated by these Rules. 74. There may be more than one Specialist designated in respect of an individual share. 75. The Specialist shall submit simultaneous buy and sell orders for a particular share (Specialist order) each trading day under the terms and in the manner stipulated by the regulations of the Republic of Croatia and Exchange resolutions. 76. In the event that the Specialist has concluded contracts or agreements with the Issuer of shares in respect of which it has been designated Specialist, the Specialist shall disclose such contracts or agreements by submitting them to the Exchange in the electronic form. The Exchange will disclose these contracts or agreements to the public via the Internet, with the exception of the sections which refer to the commercial terms of the contract. The contract between the Issuer and the Specialist deems to include any subsequent amendments thereof, and all such amendments as well as the fact that the contract has expired or is no longer in force shall be notified to the Exchange, which will disclose it to the public via the Internet. 77. The Issuer must not favour the Specialist in any manner when disseminating any information related to the Issuer’s business or to the shares the Issuer has issued. 78. The Specialist which has been designated market maker in particular shares may not acquire the securities on behalf of the Issuer under its Own Share Purchase Programme. 2.5.1 ORGANIZATION REQUIREMENTS ON SPECIALIST (MARKET MAKER) 79. The Member firm which performs Specialist (market maker) activities shall establish such an organization structure as to: 1. maintain an appropriate system to enable efficient supervision of the communication between the employees who do specialist trading and the employees who do other work to prevent regular business of the Member firm (executing Client Orders and proprietary trading which does not represent specialist trading) from affecting the activities performed by the Member firm in the Specialist capacity; 2. maintain internal procedures to regulate the supervision of the employees who do specialist trading and the issue of the conflict of interest; 3. keep appropriate records related to specialist activities in line with legal provisions and other regulations; 4. enable authorized employees of the Exchange to supervise the organization structure and communication conducted by the employees who do specialist work; 5. meet other requirements of the organization structure stipulated by competent bodies. 80. The following matters shall be regulated by a special resolution of the Exchange: 1. period of time during which the Specialist is required to quote Buy and Sell Orders; 2. minimum amount at which the Specialist is required to buy or sell shares over a certain period; 3. minimum amount (size) of simultaneous Buy and Sell Orders; 4. maximum spread in the Specialist Buy and Sell Order; 5. maximum daily limit of the Specialist Order, if and when necessary; 6. other parameters with respect to the position, rights and obligations of the Specialist. 2.5.2 ACQUISITION AND TERMINATION OF SPECIALIST STATUS 2.5.2.1 Acquisition of Specialist status 81. The Member firm shall acquire Specialist status by signing an agreement with the Exchange. 82. The Member firm shall sign a special agreement with the Exchange in respect of each share which it plans to trade as a Specialist. 83. The Member firm which plans to engage in specialist trading shall submit an application for the Specialist status in which it must state: 1. the share in respect of which it plans to engage in specialist trading; 2. when it plans to begin specialist trading; 3. that, at the time it embarks on specialist trading, it will fully meet any requirements stipulated by law, subordinate regulations and regulatory Exchange documents. 84. The Exchange shall grant the Specialist status to the Member firm once it has ascertained that it meets all the criteria for engaging in specialist trading. 85. The Member firm which has acquired Specialist status in respect of a particular security may embark on specialist trading after the notification of its acquired Specialist status for the respective security has been posted on the Exchange’s website. The notification shall state the date on which the Member firm will begin to perform specialist trading activities. At least 7 days must elapse between the publication of such a notification and the date on which specialist trading in a particular security may begin. 2.5.2.2 Termination of Specialist status 86. The Specialist status of the Member firm in respect of a particular share may terminate: 1. by the Exchange resolution for failure to fulfil its obligations; 2. at the Member’s request; 3. as a result of HANFA’s decision. 87. The Specialist status of the Member firm in respect of all shares may terminate: 1. in case of failure by the Member firm to comply with the requirements stipulated for engaging in specialist trading, 2. at the Member’s request, 3. as a result of HANFA’s decision. 88. In the event that the Specialist status should cease at the Member’s request, the Member firm shall continue to perform Specialist activities for at least another 20 trading days after the Exchange has approved the request. 2.6 CRISIS COMMUNICATION 89. Each Member shall submit to the Exchange the number of the mobile telephone at which, between 8:00 a.m. and 6:00 p.m., it is possible to contact the person who is authorized to take any decisions related to crisis and emergency situations. 2.7 CLEARING AND SETTLEMENT 90. In clearing and settling the transactions conducted on the Regulated market and the MTP, Member firms are required to comply with the regulations of the Institutional settlement system through which clearing and settlement is conducted. 2.8 TRADING SUSPENSION 91. The Exchange may suspend trading in the event that due to communication system failures or for other reasons more than 15% of Member firms, excluding those suspended, are unable to establish communication. In calculating the percentage of members, it is always to be rounded up to a higher figure. 92. In that case, the Exchange shall notify: 1. HANFA and 2. market via a notification posted on the Exchange’s website, 2.9 DISPUTES 93. The Member firm and the Exchange shall attempt to resolve mutual disputes amicably and by agreement. Any disputes that cannot be resolved in such a manner will be referred to the jurisdiction of the competent court in Zagreb. 3 MARKETS AND INSTRUMENTS 3.1 MARKETS 94. The Exchange manages: 1. Regulated market 2. MTP 3.1.1 REGULATED MARKET 95. Regulated market is divided into the following segments: 1. Regular Market 2. Official Market 3. Prime Market 3.1.2 MTP 96. The Zagreb Stock Exchange manages the MTP, the full name of which is “The Multilateral Trading Platform of the Zagreb Stock Exchange". 3.2 INSTRUMENTS 97. Any financial instruments for which the Exchange has HANFA's approval or in respect of which the approval stems directly from ZTK provisions may be traded on the Regulated market: 1. shares or depositary receipts for underlying shares, 2. bonds or depositary receipts for underlying bonds, 3. commercial notes (if shares or bonds of the same Issuer are listed on the Regulated market), 4. ZIF shares, 5. structured (transferable) securities, 6. Any other financial instruments which, in accordance with the rights attaching to them, correspond to the foregoing instruments, regardless of their designation. 98. The following may be traded on the MTP: 1. any financial instruments which may be traded on the Regulated market, 2. rights, 3. treasury bills, 4. central bank bills, 5. any other financial instruments which, in accordance with the rights attaching to them, correspond to the foregoing instruments regardless of their designation. 4 LISTING 4.1 JOINT PROVISIONS 4.1.1 APPLICATION FOR LISTING 99. The Application for listing shall be submitted by the Issuer or the person authorized by the Issuer. 4.1.1.1 Content of the Application for listing 100. Enclosed with the Application, the Applicant shall submit: 1. Filled-out questionnaire stipulated by the Exchange and published on the Exchange’s website; 2. Prospectus or a statement saying that the Applicant is exercising a right to be exempted from the obligation to prepare the Prospectus; 3. Statement saying that the Applicant has fully complied with the procedure stipulated by the provisions of Croatian laws and other regulations, and that it has obtained all the necessary licences, approvals and permissions from competent regulatory bodies; 4. Copies of all decisions, approvals and permissions granted by HANFA with respect to the listing procedure, or a statement saying that no such documents exist; 5. If the Prospectus is not required at the time of listing, a document (terms of issue, informative memorandum etc.), containing at least the following data, shall be enclosed: a. Characteristics of the Instrument to be listed, b. Description of the rights and entitlements attaching to it, c. Quantity, d. Summary ownership data, e. Other data which, in the Applicant's opinion, may be relevant to the estimation of the market value of the respective Instrument; 6. For securities issues, a notary public record of proceedings of the shareholder meeting of the Issuer at which the decision to issue the securities was made; 7. For the securities issued by a local government or self-government body, a decision of the Government of the Republic of Croatia consenting to the issuance of the respective securities shall be enclosed with the application. In case of foreign Issuers, the decision passed by the competent body of the Issuer's jurisdiction is required; 8. For ZIF shares listing, a list of shareholders or holders of equity holding in the ZIF management company, outlining their respective holdings. 101. The enclosure set out in paragraph 5 of Article 100 above shall be signed and its veracity guaranteed by all the members of the Applicant's management or management board. 102. If the Exchange should request additional information, the Issuer shall deliver such information to the Exchange in the form, manner and in the time stipulated. 103. The Application shall refer to any and all outstanding Instruments of the same class. 4.1.1.2 Regularity of the Application for Listing 104. The Application for Listing shall be deemed to be regular if it is signed by an authorized person. 4.1.2 PROSPECTUS AND OTHER DOCUMENTS 105. The Prospectus and other documents, when mandatory and subject to approvals, permissions and licenses by HANFA, must be submitted to the Exchange along with relevant licences, approvals and permissions enclosed. 4.1.3 FREE FLOAT 106. When determining the percentage of shares in free float, the following shares shall not be deemed to represent free float: 1. Shares owned by the Issuer (treasury stock or own shares); 2. Shares owned by the persons controlling no less than 15% of the number of shares to be listed. 4.1.4 INSTRUMENT AND ISSUER CHARACTERISTICS 107. The Instruments being listed on the Regulated market and their issuers are subject to the criteria stipulated by the provisions of Croatian laws and other regulations. 4.2 CRITERIA FOR REGULAR MARKET LISTING 4.2.1 SHARES 4.2.1.1 Free float 108. No less than 15% of the shares to be listed must be in free float. 109. By way of exception, it is possible to list the shares even if the percentage in free float is lower than that set out in Article 108 above, if the Exchange determines that fair, regular and efficient trading in them is possible at sufficient presumed liquidity while taking into account: 1. number of shares in free float, and 2. market capitalization of the shares listed. 4.2.2 OTHER INSTRUMENTS 110. Other Instruments being listed on the Regular Market are subject to no other criteria than those stipulated by Croatian laws and other regulations. 4.3 CRITERIA FOR OFFICIAL MARKET LISTING 4.3.1 SHARES 4.3.1.1 Free float 111. No less than 25% of the shares to be listed must be in free float. 112. By way of exception, it is possible to list the shares even if the percentage in free float is lower than that set out in Article 11, if the Exchange determines that fair, orderly and efficient trading in them is possible at sufficient presumed liquidity while taking into account: 1. number of shares in free float, and 2. market capitalization of the shares listed. 4.3.2 OTHER INSTRUMENTS 113. Other Instruments being listed on the Official Market are subject to no other criteria than those stipulated by Croatian laws and other regulations. 4.4 PRIME MARKET LISTING 4.4.1 SHARES 114. Shares (including ZIF shares) are subject to all the criteria stipulated for the Official Market listing. 115. When submitting the Application, the Issuer shall enclose contracts with at least two Specialists to conduct specialized trading in the shares being listed. Such a contract shall be subject to a notice (period for contract termination by the Specialist) of at least two months. 4.4.2 OTHER INSTRUMENTS 116. Only the Issuer whose shares are already listed on the PM may list on the PM other Instruments it has issued as well. 5 POST-LISTING REQUIREMENTS 5.1 GENERAL REQUIREMENTS 117. Following the Listing, the Issuers of listed Instruments are required to disclose any material facts by means of: 1. Periodic disclosures, through which the Issuer shall disclose certain material facts at certain time intervals, and 2. Ad hoc disclosures, through which the Issuer shall disclose certain material facts immediately upon learning about them. 118. The data which are subject to mandatory disclosure under the ZTK provisions shall be disclosed to the public in the manner and within the time frame stipulated by the provisions of that Act. As to the data which, pursuant to the provisions of these Rules, need to be disclosed or made available or released to the public, the Issuer shall be deemed to have complied with its disclosure requirement if such data is posted on the Exchange’s website in the designated manner. 119. Any facts, information, documents and papers which contain data of a precise nature which directly concerns the Issuers or the listed Instruments they have issued, and which are likely to have a significant influence on the prices of these Instruments, where such a probability of significant influence is deemed to exist if a reasonable investor would take such information into account as part of the grounds for taking investment decisions, and which facts, information, documents and papers are not public knowledge, shall be disclosed to the public by the Exchange via the Internet without delay, and no later than the beginning of the next trading day. In deciding whether or not to disclose a certain fact on the Exchange’s website, if in doubt the Issuers shall consult the Exchange. 5.1.1 FINANCIAL STATEMENTS 120. The content and structure of the financial statements for particular periods to be disclosed by the Issuers of the Instruments listed on the Regulated market at certain intervals throughout the year shall be set out by HANFA in its regulatory documents. 5.1.1.1 Entities required to submit financial statements 121. The Issuers of the Instruments listed on the Regulated market shall submit the following to the Exchange: 1. Issuers of shares – annual, semi-annual and quarterly reports; 2. Issuers of corporate debt Instruments – annual and semi-annual reports; 3. Issuers of other Instruments – in line with ZTK provisions. 5.1.1.2 Content and time of publication of financial statements 5.1.1.2.1 Annual report 122. The Issuer shall prepare the annual report, disclose it to the public and submit it to the Exchange no later than four months from the last day of the business year to which it refers and ensure that it is available to the public for at least five years from the date of its publication. 123. The Issuer's annual report shall contain: 1. audited annual financial statements, 2. management report, 3. statement by the persons responsible for compiling the Issuer's annual report, listing their first and family name, position and duties with the Issuer, saying that to the best of their knowledge: a. the Issuer's annual financial statements, made by using the appropriate standards of financial reporting, give a complete and truthful statement of assets and liabilities, losses and profits, financial condition and business performance of the Issuer and any companies included in the consolidation, b. the management report contains a truthful statement of business developments and results, as well as the condition of the Issuer and any companies included in the consolidation, along with c. a description of the most significant risks and uncertainties to which the Issuer and the companies are exposed as a whole. 124. Along with the Issuer's annual report, the Issuer is required to disclose to the public in the same manner and time frame stipulated for preparing, publishing and submitting the annual reports to the Exchange the entire audit report signed by the persons responsible for auditing the Issuer's annual financial statements. 125. Provisions of Articles 122, 123 and 124 above shall apply to the Issuer required to prepare consolidated reports as appropriate. 5.1.1.2.2 Semi-annual report 126. The Issuer of shares and corporate debt Instruments shall prepare the semi-annual report for the first six months of the business year, disclose it to the public and submit it to the Exchange no later than two months from the end of the six-month period to which it refers and ensure that it is available to the public for at least five years from the date of its publication. 127. The Issuer's semi-annual report shall contain: 1. abridged set of semi-annual financial statements, 2. management interim report, 3. statement by the persons responsible for compiling the Issuer's semi-annual report, listing their first and family name, position and duties with the Issuer, saying that to the best of their knowledge: a. the abridged set of the Issuer's semi-annual financial statements, made by using the appropriate standards of financial reporting, give a complete and truthful statement of assets and liabilities, losses and profits, financial condition and business performance of the Issuer and any companies included in the consolidation, b. the management interim report contains a truthful statement of business developments and results, as well as the condition of the Issuer and any companies included in the consolidation, along with c. a description of the most significant risks and uncertainties to which the Issuer and the companies are exposed as a whole. 128. If the Issuer's semi-annual financial statements are audited, the Issuer is required to disclose the audit report to the public in the same manner and time frame. The same requirement applies in the event that an inspection into the financial statements has been conducted. If the semi-annual financial statements are not audited, or have not been inspected, the Issuer is required to make a statement to that effect in its semi-annual report. 129. Provisions of Articles 126, 127 and 128 above shall apply to the Issuer required to prepare consolidated reports as appropriate. 5.1.1.2.3 Quarterly report 130. The Issuer of shares shall prepare the quarterly report and disclose it to the public as soon as possible but no later than thirty days from the last day of the quarter to which it refers, and shall ensure that it is available to the public for at least five years from the day of its publication. 131. The provisions regulating the content of semi-annual reports apply to the quarterly report as appropriate. 132. Provisions of Articles 130 and 131 above shall apply to the Issuer required to prepare consolidated reports as appropriate. 5.1.2 EQUAL TREATMENT 133. When disclosing Inside information, the Issuers of the listed instruments shall act in such a manner as not to put any person or segment of the public in a privileged position. 134. Any information that the Issuers may present at meetings with analysts, representatives of institutional investors etc. shall be simultaneously disclosed to the public. 5.1.3 PARALLEL LISTING 135. In the event that Instruments are also listed on another Regulated market and are subject to disclosure of certain facts under the rules of that Regulated market, the same information shall also be disclosed in the Republic of Croatia and sent to the Exchange. 5.1.4 FORMAT 136. Any data and documents which are subject to disclosure in accordance with the provisions of this Chapter shall be sent to the Exchange by the Issuer electronically as a computer file in the format and manner stipulated by the Exchange. 5.1.5 LANGUAGE 137. The Issuers shall deliver any information in the Croatian language. The Issuers with the Instruments listed on the Official Market and the Prime Market shall provide the information in both Croatian and English. 5.1.6 LIST OF INSIDERS 138. The Issuer shall submit a List of Insiders at the request of the Exchange. 5.1.7 FEE 139. For the duration of the Listing, the Issuer shall pay a listing maintenance fee to the Exchange according to the Exchange price list. 5.1.8 CODE OF CORPORATE GOVERNANCE 140. The Code of corporate governance applies to any Issuer of the shares listed on the Regulated market, with the exception of ZIFs. 141. The requirement to fill out the questionnaire which is a constituent part of the Code of corporate governance applies to any Issuer whose shares are listed on the Regulated market; it shall submit the said form to the Exchange no later than the time of the annual report delivery. 142. The Issuers which are bound by the Code of corporate governance shall comply with this requirement by having the annual questionnaire which is a constituent part of the Code: 1. posted on their website 2. submitted to the Exchange for posting on the Exchange’s website. 5.2 RESPONSIBILITIES OF ISSUERS OF RT-LISTED INSTRUMENTS 143. The Issuer of the Instruments listed on the Regular Market shall deliver to the Exchange any information stipulated by laws and other regulations, as well as any change in the data published in the Prospectus and earlier disclosures. 5.3 RESPONSIBILITIES OF ISSUERS OF ST-LISTED INSTRUMENTS 144. Following the Listing, the Issuers of ST-listed Instruments shall comply with any requirements stipulated for the Issuers of RT-listed Instruments, as well as additional requirements stipulated hereunder. 145. The Issuer shall notify the Exchange and the public of: 1. date of its annual general meeting (AGM) no later than the time notification of it is sent out to shareholders, 2. resolution concerning the distribution of profits or dividend payout, as soon as it has been passed. 146. The notification of the date of the AGM shall contain any data the Issuer is required by laws and regulations to deliver to shareholders. 147. The Issuer shall submit to the Exchange any resolutions which have been passed at the AGM no later than 9:00 a.m. on the next work day. 5.3.1 SUPERVISORY AND MANAGEMENT BOARD MEETINGS 148. The Issuer shall notify the Exchange and the public of the dates of any supervisory and management board meetings no later than 5 work days prior to the meetings at which the said bodies are scheduled to decide on: 1. financial (unaudited and/or audited unconsolidated and/or consolidated) statements: a. annual, b. semi-annual, c. quarterly statement, for the first and the third quarter, 2. dividend payout; 3. capital increase; 4. adopting an Own Share Purchase Programme; 5. approving the acquisition and disposal of own shares; 149. The Issuer shall deliver to the public the resolutions passes at these meetings, as well as the documents adopted by such resolutions (financial statements, dividend resolutions etc.), if any, no later than 9:00 a.m. on the next trading day. 5.3.2 ACQUISITION BY ISSUER'S MANAGEMENT AND SUPERVISORY BOARD MEMBERS 150. The Issuer shall ensure that the Exchange is notified by 9:00 a.m. the next trading day of any acquisition or disposal of any of the Issuer’s Instruments by members of the Issuer's supervisory or management board. 151. Members of the Issuer's management and any persons closely related to them, persons who have access to Inside information concerning the Issuer (and are on the List of Insiders in the sense of Article 463 of ZTK), as well as members of the Issuer's supervisory and management board and persons closely related to them, shall refrain from acquiring or disposing of the Issuer’s Instruments for a duration of: 1. 1 (one) month prior to the release of the semi-annual report and the quarterly reports for the first and third quarter, which the Issuers shall publish in accordance with the provisions of ZTK, and 2. 2 (two) months prior to the release of the annual report. Closely related persons in the sense of the provisions of this Article shall be any persons related to the persons set out in Article 151 above in the manner described in paragraph (2) of Article 464 of ZTK. 5.3.3 ACQUISITION BY THE ISSUER 152. The Issuer shall refrain from acquiring and disposing of its own securities in the same manner and for the same duration as the members of its management and supervisory board unless it has been explicitly stipulated otherwise by the provisions of law and other regulations. 153. If the Issuer acquires Instruments as part of a published Own Share Purchase Programme, as stipulated in the ordinances passed by HANFA, the Issuer shall disclose such a programme to the public on its website and send it to the Exchange for posting on the Exchange’s website. 5.3.4 OTHER MATERIAL FACTS 154. The Issuer shall disclose to the Exchange and to the public promptly any material facts (with the exception of well-known facts and events), except the facts in respect of which it is exercising its right to delay disclosure, in which case such facts will have the status of Inside information. 155. The Exchange may ask the Issuer to confirm or deny any rumours or news concerning the Issuer other than those arising from the information which the Issuer has previously disclosed to the Exchange and to the public, and which affect or may affect the price of the Issuer’s Instruments. 156. The Exchange may ask the Issuer to disclose certain data which it may deem vital to providing complete and thorough information to the investment community. 5.4 RESPONSIBILITIES OF ISSUERS OF PM-LISTED INSTRUMENTS 157. Following the Listing, the Issuers of Instruments listed on the Prime Market shall comply with any requirements stipulated for the Issuers of ST-listed Instruments, as well as additional requirements stipulated hereunder. 5.4.1 CORPORATE ACTION CALENDAR 158. Prior to the beginning of the business year, the Issuers of PM-listed Instruments shall deliver to the Exchange and post on their website a calendar of corporate actions for the year, including: 1. disclosure dates for financial statements, 2. date of its AGM, 3. dividend payout date, as well as any change in that calendar as soon as it occurs. 5.4.2 ANNUAL REPORT PRESENTATION 159. When releasing the annual report, the management of the Issuer of PM-listed Instruments shall, after its dislosure to the public or simultaneously with it, present the annual financial statements at the conferences with interested financial analysts and representatives of the media. 5.4.3 ACQUISITION OF TREASURY (OWN) SHARES 160. In preparing a statement of the acquisition and disposal of own shares, the Issuers of PM-listed Instruments shall set out: 1. purpose and manner of acquisition and disposal, as well as quantity, 2. percentage of outstanding share capital represented by treasury shares following the acquisition, and 3. price of the acquisition. 5.4.4 ACQUISITION OF MAJOR EQUITY INTEREST IN OTHER COMPANIES 161. When acquiring major equity interest in other companies by which the said companies become subject to consolidation, the Issuers of PM-listed Instruments shall disclose the price at which they are to acquire such major equity interest. 162. If the acquisition set out in Article 161 above is performed in several steps, the Issuer shall, at the time the acquired company becomes subject to consolidation, disclose all previous acquisitions, including the price at which such acquisitions were made. 5.4.5 NEW SHARE ISSUANCE 163. When issuing new shares, the Issuer shall issue transferable securities (subscription rights) to enable the shareholders with pre-emptive rights to exercise their right to the subscription and purchase of new shares, and shall also enable trading in such securities on the MTP managed by the Exchange for at least 10 trading days prior to the first day of subscription of the new issue. 5.5 RESPONSIBILITIES OF ZIFS AND ZIF MANAGEMENT COMPANIES 164. The ZIF management company is responsible for complying with any requirements stipulated for the Issuers of the Instruments issued by the respective ZIF. 165. ZIFs are responsible for complying with any requirements stipulated for the Issuers on the market on which they are listed, as well as additional requirements stipulated hereunder. 5.5.1 SPECIAL RESPONSIBILITIES 166. The ZIF management company shall regularly submit to the Exchange: 1. Portfolio structure: at least at 31st December, 31st March, 30th June and 30th September each year (within 7 days of the said dates), or at the Exchange’s request; 2. ZIF’s net asset value per share, valuation date, according to the time schedule stipulated by relevant regulations of the Republic of Croatia; 6 DELISTING 167. Listing may terminate: 1. At the request of the Issuer or a person authorized by the Issuer, 2. by cessation of the Issuer, 3. by cessation of the Instrument, 4. by decision of competent government agencies, 5. for failure of the Issuer of the listed Instrument to meet the criteria for Listing on the respective market. 168. In case of failure by the Issuer to meet the criteria for Listing on a particular market, the Exchange may: 1. transfer the Instruments of that Issuer to the market which stipulates the criteria the Issuer can or intends to meet, 2. delist the Instrument. 169. In the event that the Issuer applies for delisting, such delisting shall occur upon expiry of a period of six months from the day on which the Exchange passes a resolution on delisting at the request of the Issuer. 170. The application for an Instrument to be delisted shall be signed by the persons who sign the Prospectus. 7 MULTILATERAL TRADING PLATFORM 7.1 ACCESS 171. The right to trade on the MTP shall be granted to Member firms of the Zagreb Stock Exchange. 7.2 EXCHANGE RESOLUTIONS 172. Any Exchange resolutions concerning the admission to trading, admission termination and other circumstances related to MTP trading shall be final. 7.3 ADMISSION TO MTP TRADING 173. Instruments may be admitted to trading on the MTP: 1. upon application by: a. Issuer, b. Member firm, 2. by Exchange resolution. 174. The following enclosures must be submitted with the Application for admission to trading: 1. Articles of Association or other relevant document currently in force; 2. Financial statements for the previous financial year (if any); 3. If these are shares or Depositary Receipts, the following data: a. Number of shares of the same class; b. Nominal value of shares (if any) or the portion of equity represented by the shares which are being listed/admitted; c. Where clearing and settlement is conducted; d. Number of votes attaching to one share; e. Other characteristics (e.g. whether the shares are participative, cumulative, whether they guarantee a dividend etc.) 4. If the Instruments being admitted are debt securities (bonds or bond certificates, treasury bills, central bank bills, commercial notes), the following data: a. Full name b. Interest rate c. Nominal value d. Size of the issue (number, nominal value) e. Who conducts clearing and settlement; f. Type of guarantee and identity of its issuer (bank guarantee, mortgage-back or other), if any; 5. In case of other Instruments, detailed description of the Instrument and the rights and entitlements attaching to it, as well as information on the Issuer; 6. Other data which may be relevant to the estimation of the market value of the respective Instruments. 175. Instruments being admitted to trading on the MTP must be: 1. dematerialised; 2. freely transferable; 3. issued in accordance with the regulations pertaining to them. 176. The Exchange shall send notification of the admission to trading on the MTP of the Instrument to its Issuer. 177. The Exchange shall release the news of the admission to trading on the MTP of the Instrument at least 5 days prior to the first day of trading in the respective Instrument. 178. After being admitted to trading on the MTP, the shares will be subject to initial trading under a special regime. 7.4 POST-ADMISSION REQUIREMENTS 179. The party which submitted the application for admission to trading on the MTP shall comply with the following requirements: 1. If these are shares or depositary receipts, it shall disclose the following: a. Invitation to the company’s AGM; b. Annual financial statements; c. Capital reduction or increase; d. Status changes of the Issuer. 2. If these are debt securities or other Instruments, it shall disclose the following: a. Any changes occurring after the admission to trading in respect of the rights or entitlements attaching to the respective security or Instrument; b. Annual financial statement (if any). Data set out in item 1, line c. and d. above are subject to disclosure by the party which submitted the application for admission to trading on the MTP within 3 days of the date such data has been entered in the court register of the competent commercial court (for the Issuer from the Republic of Croatia) or other relevant body (for foreign Issuers). 7.5 MTP TRADING IN FINANCIAL INSTRUMENTS 180. Trading on the MTP and supervision of trading on the MTP shall be conducted in the identical manner to that stipulated by these Rules in respect of the Regulated market. 7.6 MTP TRANSACTION SETTLEMENT 181. Transactions concluded on the MTP shall be settled in the identical manner to the transactions concluded on the Regulated market. 7.7 RISK 182. When investing in the Instruments which have been admitted to trading on the MTP, the following has to be taken in to account: 1. MTP represents an alternative market managed by the Exchange. Pursuant to the provisions of ZTK, the MTP does not hold the same status as the Regulated market. The Instruments which are traded on the MTP need not meet the criteria stipulated for the Regulated market. Consequently, and as a result of lower requirements set before the Issuers of the Instruments and for the Instruments which are traded on the MTP, the risk of investing in such Instruments may be greater than the risk of investing in the Instruments which are traded on the Regulated market. 2. Lower requirements which are set before the Issuers or other parties applying for admission to trading in the Instrument, as mentioned in paragraph 1 above, shall in any case assume a sufficient level of publicly available information to enable trading by all investors under the same terms. 3. Issuer of the Instrument and the party applying for admission to trading on the MTP shall assume all responsibility in respect of the foregoing paragraph, taking into account the fact that trading on the MTP is subject to the provisions of the Capital Markets Act on market abuse. 7.8 TERMINATION OF ADMISSION TO TRADING 183. Admission to trading may terminate: 1. at the request of the party which applied for admission to trading, 2. by cessation of the Issuer, 3. by cessation of the Instrument, 4. by revoking admission due to long market inactivity; 5. by decision of competent government agencies. 184. In the case described in item 1 of Article 183 above, admission to trading shall terminate 2 months after the Exchange passes a resolution on termination at the request of the party which applied for admission to trading. 8 TRADING 8.1 TYPES OF TRADING 185. Trading may be: 1. Order book trading 2. Off Order book trading 186. Order book trading may be: 1. Regular trading 2. Special trading regime 187. Off Order book trading may be: 1. Block trades 2. Public auction 188. The shares which have been listed in the Prime Market and the Official Market are always subject to the regular Exchange regime as part of the Order book trading. 189. The shares in respect of which one or more Specialists have been designated are always subject to the regular Exchange regime as part of the Order book trading. 190. Only shares may be traded under a special regime. 8.2 EX-DIVIDEND AND EX INTEREST TRANSACTIONS 191. It is the exclusive duty and responsibility of the Member firm to explain to the Client any details concerning the right to a dividend or interest arising from transactions in Instruments. The Exchange shall make no price adjustments or corrections in respect of ex-dividend or ex-interest transactions. 192. The Exchange shall inform Member firms of any dividend and interest payment details in respect of the Instruments traded on the Regulated market and the MTP, if available. 8.3 TRADING TIME 193. Regular trading shall take place each work day on which trading is done (trading day) between 9:00 a.m. and 4:00 p.m. unless it has been stipulated otherwise by an Exchange resolution for a particular day. In exceptional cases, should a volatility interruption mechanism be initiated in respect of a particular share after 3:50 p.m., trading time for that share shall be extended until the end of the volatility interruption. The opening session shall take place between 9:00 and 10:00 a.m., plus a variable ending which may take 2 minutes at most. 194. Block trades may be concluded between 9:00 a.m. and 4:00 p.m. 195. Trading under a special regime shall take place between 11:00 a.m. and 1:00 p.m., plus a variable ending which may take 2 minutes at most. 196. The day and the time in which the public auction will be held shall be set by an advertisement of the principal. 197. The work days on which trading takes place (trading days) shall be defined by a special resolution of the Exchange. 8.4 TRADING SYSTEM 198. The Exchange shall use a Trading System which provides: 1. efficiency, 2. economical use, 3. functionality, and 4. investor protection. 199. The Exchange trading is conducted via the Trading System. Detailed instructions for the use and the technical description of the Trading System are the technical documents which are issued by the Exchange and do not constitute part of the Rules. 200. The Trading System consists of: 1. Computers, communication equipment and programme support (Technical equipment) which are located at Member firms, and 2. Computers, communication equipment and programme support which are located at the Exchange premises. 201. Communication among the components of the Trading System set out under 1 and 2 of Article 200 above shall take place through a data exchange network which: 1. complies with the Exchange requirements concerning bandwidth, reliability and other technical characteristics, and 2. is administered by the service provider designated by the Exchange. 202. The Trading System shall be used for: 1. Concluding Order book transactions (regular and special trading regime), 2. Concluding Off Order book transactions a. block trades, b. public auctions, and 3. Releasing data on off-Exchange transactions (OTC transactions). 8.4.1 MEMBER IDENTIFICATION 203. The Trading System creates a unique identification code to identify: 1. Member firm (and individual organizational unit of the Member firm, if necessary), and 2. broker executing business via the Trading System and the broker’s authorizations. 204. The identification code is part of the data package used for executing the Exchange transaction and transferring data to the Exchange’s electronic system; it serves to identify the Member firm which executes the transaction. 205. Any Transactions identifying a certain Member firm shall be deemed to be the transactions executed by that Member firm and shall be settled by the same Member firm. 8.4.2 MEMBER FIRM’S TRADING SUSPENSION FOR TECHNICAL REASONS 206. In the event of Trading System malfunctioning (including but not limited to by a performance overload, jeopardizing the security settings etc.) as a result of the Member firm’s inappropriate use of the trading software or programme support introduced by the Member firm for the purpose of its business, to protect the Trading System integrity the Exchange may suspend that Member firm from trading until the grounds for such a suspension have been eliminated. 8.5 LIABILITY OF THE EXCHANGE 207. The Exchange waives any liability for direct or indirect damage of any kind and/or loss of profit as a consequence of the Trading System use, regardless of whether it may have occurred as a result of the Trading System error or equipment malfunctioning or for other reasons (electrical power failure, communication breakdown etc.). 208. By using the Trading System, participants accept all the obligations and responsibilities arising from the use of the system. 8.6 ORDER BOOK TRADING 8.6.1 REGULAR TRADING 209. Regular Order book trading on the Zagreb Stock Exchange is to be conducted via the Trading System into which Member firms shall enter their Orders to be turned automatically, when possible, into Transactions according to a preset algorithm. 210. Regular Exchange trading consists of the following stages: 1. Opening session 2. Continuous trading (possibly, including volatility interruptions) 211. Specialist trading may only be conducted in the course of the continuous trading, except during the activation of the volatility interruption mechanism. 212. The holding and duration of individual stages of regular trading shall be set by the Exchange. The opening session, volatility interruption and any auctions held under the special trading regime have a variable ending, which means that the exact moment of the opening session, volatility interruption and special regime auction closing shall be set autonomously by the Trading System within a preset time (2 minutes) by using a random number generator, with no involvement of or influence by Exchange employees. 8.6.1.1 Opening session 213. The purpose of the opening session is to establish the most realistic and representative (initial) price of a particular Instrument in the trading day. 214. In the course of the opening session, Member firms shall enter their Buy/Sell Orders into the Trading System without those Orders resulting in transactions. Transactions shall be concluded at the end of the opening session at a single, so-called opening price. The opening price is calculated in three steps to determine: 1. maximum clearing volume 2. minimum residual balance 3. average price 215. The maximum clearing volume step is aimed at determining the price or prices at which the maximum volume will trade. 216. First, the cumulative buy and sell volume at each price level will be established. The cumulative buy volume at a certain price level is the buy volume quoted at that price augmented by a sum of all the volumes at higher prices. The cumulative sell volume at a certain price level is the sell volume quoted at that price augmented by a sum of all the volumes at lower prices. After that, the maximum volume which may trade at such a price will be determined. The maximum volume which will trade is the minimum cumulative buy and sell volume quoted at that price. That is how the maximum size of the volume to trade will be found. If there is only one price at which the maximum volume may trade, that will be the opening price. In case there are two or more prices at which the maximum volume may trade, step 2 will follow. 217. In determining the minimum residual balance at two or more prices to close the maximum volume, the price at which the residual balance (i.e. the volume which will not trade at the end of the opening session) is the smallest will be sought. The minimum residual balance at each price level is the difference between the cumulative buy and sell quantities. After that, the absolute value of the smallest residual balance will be sought. If there is only one price at which the minimum residual quantity may trade, that will be the opening price. In case the maximum volume producing the minimum residual balance may trade at two or more prices, step 3 will follow. 218. In calculating the average price, an average of the prices identified in step 2, i.e. those at which the value of the minimum residual volume is the smallest, will be determined. 8.6.1.2 Continuous trading 219. Any Buy/Sell orders which have not been consummated in the opening session remain in the system. 220. After trading opens, a continuous auction will follow in the course of which Member firms may continually issue new and withdraw or amend existing Buy and Sell orders, which are continually compared by the Trading System and matched whenever possible to result in Transactions. 8.6.2 SPECIAL TRADING REGIME FOR PARTICULAR SHARES 221. In certain cases the Exchange may arrange for individual shares, particularly those less liquid, to be traded under a special regime – solely in a procedure analogous to the opening session. 222. The allocation of shares listed on the Regular Market and those admitted to MTP trading under the regular and special trading regime shall be done by the Exchange each three months as a rule (or more frequently in certain cases) according to objective criteria, including the average daily turnover and the average number of transactions. Off Order book transactions shall not included in the calculations. 223. The List of shares which are traded under the special regime shall be posted on the Exchange’s website. 8.6.3 ORDER BOOOK TRADING ORDERS 224. Orders may be Buy and Sell Orders. 8.6.3.1 Types of Order 225. The Order may be: 1. Regular (Limit order) 2. Fill or Kill (FoK) 3. Fill and Kill (FaK) 4. Market order 5. Market FoK 6. Market FaK 226. Order characteristics are as follows: 1. Limit order is filled at the stated or higher price and, if it is filled only partially, the Order with the residual quantity will remain in the Trading System. 2. FoK order is filled immediately at the stated or higher price in its entirety if possible, or the entire Order will be deleted. 3. FaK order is filled immediately at the stated or higher price in as large a quantity as possible, and any residual quantity will be deleted. 4. Market order is filled at an unspecified price by matching it against any counter orders in the Trading System until the entire quantity is exhausted or there are no more orders it can be matched against, in which case the residual quantity will be deleted. 5. Market FoK order is filled immediately in its entirety regardless of the price, or the entire Order will be deleted. 6. Market FaK order behaves as the Market order. 8.6.3.2 Order time limit 227. With respect to their maximum duration, Orders may be: 1. Daily (unless filled, deleted at the end of the trading day). 2. Good until (unless filled, valid until a specific date and deleted thereafter). 3. Good until withdrawn (unless filled, valid until withdrawn by the principal). 228. The Order is valid from the time it has been transferred to the Trading System by the Member firm until it has been: 1. turned into a Transaction in its entirety, or 2. amended or withdrawn by the principal, or 3. deleted by the Exchange, or 4. deleted automatically by the Trading System due to expiry. 229. Without prejudice to the provisions of Article 227 and 228, the maximum duration of the Order in the Trading System is 1,500 days from the day the Order is entered in the Trading System, regardless of whether over that time the Order has been amended and/or partially filled. Upon expiry, the Order will be deleted automatically from the Order book by the Trading System. 8.6.3.2.1 Commitment 230. The Member firm which issues an Order to buy or sell a certain quantity of specific Instruments is required to buy or sell that quantity at the price stated in the Order or the price which is more favourable to the Member firm in case the Order is turned into a Transaction. 231. The characteristics of individual types of Orders and their mutual interaction are described in the algorithm which turns Orders into Transactions. 232. The Exchange will decide which type of the Order may be issued on individual markets. Order books for individual Instruments will be formed on each market, and each Order book may contain all or only some types of Orders, in line with an Exchange resolution. 8.6.3.3 Transparency 233. Each Order must include the volume and the price of the Instrument to which it refers (with the exception of Market orders, which have no price specified). All the Member firms which trade may see such data in the Order book. 8.6.3.4 Stating Order price 234. The price shall be stated: 1. for debt securities and Rights – as a percentage of the nominal value, 2. for shares – in admissible currencies, 3. for other Instruments – according to the nature of the respective Instruments. 8.6.3.4.1 Maximum price increment in the Order 235. To reduce the possibility of inadvertent error in entering Orders in the Trading System in order to protect market integrity and participants, the Exchange will prevent the entering of the Orders at considerably higher than market prices at which trading is done in a particular time period. 8.6.3.4.2 Accrued interest 236. The prices of interest bearing Instruments shall be stated as “clean”, i.e. net of the accrued interest. In addition to the price established in the Transaction, the seller is also entitled to the accrued interest for the period running up to the payment date. 8.6.3.5 Required contents 237. The required parts of the Order to be entered by the broker are as follows: 1. Instument volume (quantity) 2. unit price of the Instrument, 3. type of the Order, 4. indication whether it is a Buy or Sell Order, 5. in proprietary trading, indication that it is the Member firm’s own Order (except when the Order is issued by the Specialist in the market making capacity), 6. in case of trading for the account of the Client, the Order must also state the client account number or the account number of the custodian with the institutional settlement system, 7. in case of Order issuance for the purpose of buying or selling Instruments for the Clients to whom the Member firm provides portfolio management services, letter P. 8. in case of a group Order, letter S. 238. In case of an error in the Client or custodian account number, the Exchange will at the request of the Member firm amend the account number in the Transaction database. The Member firm shall enclose a copy of the Client order for entering the Order which was turned into a Transaction. The Member firm shall submit a request to amend an erroneously entered client account number or custodian account number no later than 5 minutes after the close of trading. 239. The Exchange may stipulate the minimum size of the package to be traded in respect of particular Instruments and/or particular markets or market segment. 8.6.3.6 Order deletion 240. The Exchange may delete Orders from the system under the following circumstances: 1. Trading suspension; 2. Member suspension or termination of Membership; 3. Authorization by the Member firm in case of a communication breakdown between the Member firm and the Exchange disabling access to the Trading System by the Member firm due to power failure or for other justifiable reason; 4. Order of competent government bodies; 5. Stock split and reverse stock split of Instruments; 6. Special resolution passed by the Exchange’s management board in the course of trading supervision. 241. Immediately upon Order deletion, the Exchange will notify the respective Member firm that its Order has been deleted. 8.6.3.7 Order withdrawal or amendment 242. The issuing party may withdraw or amend an existing Order in the portion which has not been consummated. Orders may be withdrawn or amended in all trading stages. 243. The Order of reduced quantity will keep the same time code whereas a new time code, identical to the time of the Order amendment, will be allocated in case of any other amendment. 8.6.4 VOLATILITY INTERRUPTION WITH VARIABLE ENDING 244. The volatility interruption shall be used in share trading only. 245. The Exchange shall set daily price thresholds in respect of each share which, when exceeded, will trigger a volatility interruption mechanism on the basis of liquidity and/or market in which the respective share is listed. 246. The volatility interruption functions according to an algorithm of the same characteristics as the opening session. 8.6.4.1 Volatility interruption in opening session 247. In the opening session, the average price weighted by the previous trading day’s volume shall constitute the reference price for monitoring the percentual price movements. 248. In the event that the theoretical opening price should exceed the maximum daily price threshold for the respective share at the time continuous trading should open, the opening session will be extended by an additional 10 minutes at most (8 minutes, plus a maximum 2 minute variable ending). 8.6.4.2 Volatility interruption in continuous trading 249. In the continuous trading, the opening price shall constitute the reference price for monitoring the percentual price movements. 250. In the event that an Order which might result in one or more Transactions exceeding the maximum daily price threshold for the respective share is entered in the Trading System, no such Transaction(s) will be concluded. Instead, a volatility interruption mechanism in the duration of 8 minutes with a maximum 2 minute variable ending will be triggered. Afterwards, the continuous auction will resume, and the price achieved in the course of volatility interruption will be set as the new reference price for monitoring the percentual price movements. 251. If the volatility interruption is initiated between 3:50 and 3:52 p.m., the variable ending will in any case begin at 4:00 p.m. In the event that the volatility interruption is initiated after 3:52 p.m., trading in the respective share will be extended for the duration of the volatility interruption. 8.6.4.3 Issuer’s response 252. The Supervision Department shall decide whether to seek explanation from the Issuer on material facts when the volatility interruption mechanism is triggered and/or price threshold exceeded. In the event that the volatility interruption is initiated more than twice consecutively due to the price movement in the same direction, the Supervision Department shall seek a response from the Issuer and, if necessary, initiate other procedures related to the supervision of the Issuer, trading and Member firms. 8.6.5 ORDER BOOK TRANSACTIONS 253. The Transaction occurs when the Trading System, according to the algorithm which sets the manner and sequence of Order matching, matches one or more Orders to sell to one or more Orders to buy the same Instrument. As the Transaction occurs, the Orders which were matched to result in the Transaction become consummated fully or partially. 254. Relevant provisions of these Rules and other regulatory Exchange documents which govern trading in Instruments are also deemed to be a constituent part of the legal transaction concluded by executing the Transaction. 255. The Member firm is prohibited from entering into the Trading System any Order or Orders which are, individually or jointly, aimed at manipulating the market if it is aware or should have been aware of it. 8.6.5.1 Commitment 256. Once the Transaction is executed, both parties are required to fulfil their obligations under the terms (Instrument, quantity, price and terms of settlement) of the deal. 8.6.5.2 Instruments 257. The Instruments which are the subject of Transaction shall be the Instruments referred to in both the Sell and the Buy order, of the quantity stated in the Order which is fully consummated. 8.6.5.3 Price 258. The agreed price of the Instruments which are the subject of Transaction shall be the price determined according to the algorithm used by the Trading System to execute Transactions in a certain trading stage on the basis of the Orders which have been entered in it. 8.6.5.4 Transaction time 259. The relevant Transaction time shall be the time recorded by the Trading System next to the respective Transaction. 8.6.5.5 Order execution priority 260. Upon entering Orders in the system, each Order will be assigned a time code (date, hour, minute, second) which corresponds to the time of its system entry. The sequence of order execution is set in such a manner that the Buy orders with a higher price and Sell orders with a lower price have execution priority. If there are more Orders at the same price level, those with an earlier time code will have execution priority. 261. Orders issued under special execution terms (FoK, FaK, Market FoK) will be executed if all terms of the execution are met in respect of the price and time but it will not be executed if special terms are not met. 8.6.5.6 Exchange Fee 262. The Member firm shall pay a fee to the Exchange in respect of any executed Transactions according to the Exchange’s service price list. 263. The fee size and method of calculation shall be defined by the Exchange's price list. 8.6.5.7 Finality of transactions 264. All the executed Transactions shall be final and binding, with no need for any subsequent confirmation by both parties involved in it. 265. Transactions may be annulled solely in the cases stipulated by the provisions of these Rules, ZTK and other regulations and Ordinances passed by HANFA. 8.7 OFF ORDER BOOK TRADING 8.7.1 BLOCK TRADES 266. Block trades shall be concluded by an exchange of messages via the Trading System. 267. Block trades may be concluded at the prices which exceed the thresholds in daily trading. 268. Minimum size of a block trade in shares depends on the average daily share turnover. 269. Minimum size of a block trade in bonds is 3 million kuna. 8.7.2 PUBLIC AUCTIONS 270. Auction is the procedure in which the seller makes an offer under predefined terms to conclude a deal by which it acquires, assigns or transfers the title or some other right to the auction item or items, and auction participants compete amongst themselves to accept the offer according to the rules of the auction. 271. Auctions shall be conducted via the Trading System. 272. Any person who in accordance with the regulations of the Republic of Croatia is not expressly excluded may be an auction participant. 273. Auction participants shall be represented by Member firms or by the Exchange. 274. Auction items may be financial instruments and equity holdings in companies. 275. For each auction the number of auction items representing a package will be determined. Package is the basic auction unit. 276. Each package may consist of one or more identical Instruments of the same Issuer or equity holdings in the same company. 277. Auction parameters will determine 1. auction item, 2. quantity of auction items, 3. starting price, 4. auction type (with a variable or fixed closing), 5. increment of price change (tick) and 6. other quantifiers or data relevant to the course of the auction. 278. The seller shall be responsible for setting auction parameters and for their accuracy. 279. Auction parameters are a constituent part of the advertisement announcing the auction. The advertisement shall be published in at least one daily newspaper available in the entire territory of the Republic of Croatia no later than 7 days prior to the auction date. 280. In the time set for entering Buy orders the representative of the buyer shall enter bids according to the following parameters: 1. Buy orders must be "fill or kill" (FoK); 2. price increment – solely for the auction tick size; 3. quantity must be that defined by the advertisement; 4. minimum starting bid price must correspond to the tick size; 5. if the starting price exceeds the tick, it must be a multiplier of the auction tick. 281. If the starting price exceeds the tick, the Member firm which represents a potential buyer must enter in the system as the Buy order (bid) at least the starting price or the starting price augmented by the auction tick or else a multiplier of the auction tick. 282. If the Member enters a bid price which is lower than the starting price, it shall amend the Order in accordance with the provisions or Article 281 above. 283. In the event that only the Orders which are contrary to the provisions of the previous article are entered, the auction will be invalid and the Member firms which caused the auction to fail will commit a grave violation of the Exchange’s Rules by entering such Orders. 284. In the course of bidding, representatives of the buyer may enter their bids specifically: 1. for the auction with a fixed closing: between 11:00 and 12:00 a.m. 2. for the auction with a variable ending: from 11:00 a.m. until the auction closes, where the auction closing time will be set autonomously by the Trading System between 12:00 and 12:15 by using a random number generator, with no involvement of or influence by Exchange employees. 285. Ask price shall be entered by the Exchange, and the Order shall be a market order and FoK. 286. The quotation of ask prices by the Exchange is possible only after the time for bid entry has expired. By 1:00 p.m. at the latest the Exchange shall: 1. enter the ask price (if the course of the auction produced valid bids), or 2. pronounce the auction invalid, in the event that no bids entered during the auction were valid, or else 3. pronounce the auction failed (if it produced no bids at all). 287. The best bid will be selected by the Exchange’s computer system by closing the Sell order against the most favourable Buy order. 288. After the auction closes, auction results will be disseminated to all Member firms of the Exchange via the Trading System and posted on the Exchange’s website. 289. The Exchange may request that the Members firms, which represent participants of a public auction, present collateral to be determined by the Exchange in agreement with the seller, to secure the fulfilment of their obligations arising from the legal transactions concluded at auctions. 290. The Exchange and its employees waive responsibility and liability for any direct or indirect damage and/or loss of profits as a consequence of the inability to participate in the auction due to communication difficulties or for other reasons over which the Exchange has no influence. 8.8 OTC TRANSACTIONS 291. Off-Exchange (OTC) transactions conducted by the Member firm may be reported to the Exchange for the purpose of disclosure to the public via the Trading System. 292. The Member firm shall conclude an agreement with the Exchange on the disclosure of OTC transactions and undertakes to disclose any such transactions via the Exchange’s Trading System. 293. Any OTC transactions conducted by the investment company which is not a Member firm of the Exchange shall be reported to the Exchange for the purpose of disclosure to the public. 294. The investment company which reports an OTC transaction shall be responsible for the accuracy of data concerning the reported Transaction. 8.9 CLEARING AND SETTLEMENT 295. In clearing and settling the transactions concluded on the Regulated market and the MTP, Member firms shall comply with the rules and regulations of the Institutional settlement system through which clearing and settlement is conducted. 8.10 SPECIALIST TRADING 296. Specialist trading shall be done in respect of shares. 8.10.1 SHARE CLASSIFICATION 297. For the purpose of classification in Specialist trading, shares are divided into classes depending on liquidity. 298. Share classification shall be conducted every three months on the basis of trading data for the past three months. 299. The table with a new share classification shall be disseminated by the Exchange via the Internet 7 days prior to the start of its application. 8.10.1.1 Liquidity 300. The liquidity of a share shall be determined on the basis of: 1. average daily turnover in the respective share, and 2. average depth of the Order book. 301. If the shares meets the Order book depth requirement but does not meet the average turnover requirement, if will be relegated to the lower class than that in which it would be on the basis on the Order book depth. 302. Daily values of the Order book depth shall be calculated each trading day. 303. Specialist Orders shall not be taken into account when calculating the Order book depth. 304. Numerical criteria for the classification of shares, taking into account other circumstances, shall be set by the Exchange. 8.10.1.2 Order book depth 305. The Order book depth (ODB) is a liquidity indicator which measures the change in the price of the security upon entering ask and bid market prices in the amount set, taking into account market and other circumstances, by the Exchange management. 306. The ODB (Croatian abbreviation: DKP) shall be stated in basis points (100 basis points = 1%), and calculated according to the following formula: where: • M = (K+P)/2 • M = theoretical price; • P = best ask; • K = best bid; • P' = best ask after entering the market Buy order in the amount set by the Exchange management; • K' = best ask after entering the market Sell order in the amount set by the Exchange management. 8.10.1.3 Daily turnover 307. For the purpose of calculating the liquidity of a particular share, daily turnovers in kuna, excluding block trades and OTC transactions, shall be taken into account. 8.10.2 CRITERIA FOR ACQUIRING SPECIALIST STATUS 308. Any Member firm which meets the criteria stipulated by this guideline, the Exchange rules, regulations passed by HANFA and law, and which concludes a special agreement with the Exchange may be designated Specialist in respect of an individual share. 8.10.3 SPECIALIST ORDER 309. The Specialist is required to quote simultaneous bid and ask for the share in respect of which it was designated Specialist on each trading day, where these will be deemed valid if: 1. the bid/ask spread is equal to or smaller than the required maximum, 2. the bid and ask refer at any time to the securities volume which is equal to or larger than the required minimum, and if 3. the bid and ask are simultaneous. 310. The Specialist order will be valid only if all the three foregoing requirements are met. 311. The term simultaneous referring to the bid and ask in Specialist Orders concerns the time period in which both the Buy and the Sell order meeting the requirements set out under 1 and 2 of Article 309 are active in the Exchange’s Trading System. 8.10.3.1 Minimum time 312. The Member shall keep a valid Specialist order of each trading day quoted for at least 60% of the time in which continuous trading takes place, except as stipulated in Article 313 hereunder. 313. The calculation of the time in which the Specialist order is to be quoted shall not include the following: 1. duration of trading suspension in a particular share, regardless of whether the suspension is technical or prompted by other reasons, 2. duration of the opening session, closing and volatility interruption, or 3. time period in which the Specialist cannot trade due to technical reasons over which it has no influence, starting from the time it notifies the Exchange of the inability to trade until the cause of the trading disruption is eliminated. 8.10.3.2 Cessation of Specialist’s daily obligations 314. The duty of the Specialist in respect of a particular share on a certain day shall cease upon expiry of the minimum time as defined by Article 313 above. 315. The minimum time in which the Specialist order is to be quoted shall not include the time in which: 1. the bid/ask spread is larger than the maximum spread required, and/or 2. the volume on the buy and/or sell side is smaller than the minimum required. 316. In calculating the time in which the Specialist order was quoted, only the time in which valid Specialist Buy and Sell orders are simultaneous will count. 8.10.3.3 Temporary relief 317. The Specialist may apply to the Exchange seeking a temporary relief from its obligations with an explanation (e.g. if due to a natural disaster and similar circumstances it may become impossible to make a realistic estimate of the share value, in case of a mandatory takeover bid or if a takeover was initiated etc.). 318. If the application is submitted by 2:00 p.m., the Exchange is required to review it and announce by 4:00 p.m. whether it will be granted or not. If the application is submitted after 2:00 p.m., the Exchange must review it and announce by 10:00 a.m. the next trading day whether it will be granted or not. 319. The Exchange may grant temporary relief from Specialist obligations upon application for a maximum period of 30 days, which in justifiable cases may be extended. 320. The Exchange will promptly inform the public via the Trading System and the Internet of: 1. application by a particular Specialist for temporary relief from its obligations, and 2. granting or denying the respective Specialist’s application for relief from its obligations. 8.10.4 BID/ASK SPREAD 321. The maximum bid/ask spread is the difference between the prices of simultaneous Buy and Sell orders of a single Specialist. 322. The maximum bid/ask spread in the Specialist order shall be determined, taking into account market and other circumstances, by the Exchange management. 323. The maximum spread shall be expressed in absolute terms in kuna. 324. The maximum spread in absolute terms shall be calculated by the Exchange once a month for each share which has a designated Specialist, by multiplying the maximum spread in percentage terms for each share class with the average price on the last trading day of the previous month, according to the following formula: S(i) = Limit(i) * P(i) where: • i = share ticker • S(i) = spread of share “I” expressed in kuna • Limit(i) = maximum spread expressed as a % of the share class to which share "i" belongs • P(i) = average price of share “i” on the last day of the previous month 325. The share spread in absolute terms shall be stated in kuna (without lipa) and always rounded to a higher figure. 8.10.5 QUANTITY 326. The minimum buy and sell quantity in the Specialist order (minimum Order amount) shall be determined, taking in to account market and other circumstances, by the Exchange management. 327. The minimum share quantity to be quoted by the Specialist on the buy and the sell side shall be stated in pieces. The Exchange will calculate the number of pieces corresponding to the minimum Order value once a month, according to the following formula: Q(i) = Limit(i)/P(i) where: • i = share ticker • Q(i) = minimum quantity of share "i" expressed in pieces • Limit(i) = minimum Order value expressed in kuna for the share class to which share "i" belongs. • P(i) = average price of share “i” on the last day of the previous month 328. The minimum number of pieces of individual shares in the Specialist Order shall be rounded up to the whole number according to the following principle: Minimum quantity Q(i) from the previous step will be rounded up to the next multiplier of 10. The exception is 25*P(i)>Limit(i), which will be rounded up to the next multiplier of 2. 329. The minimum number of pieces of individual shares in the Specialist Order calculated in this manner once a month shall be sent by the Exchange to Specialists and posted on the Exchange’s website. 8.10.6 NEWLY LISTED SHARES 330. As regards newly listed shares, for which it is impossible to calculate the liquidity parameters necessary for allocation in a certain class, the Specialist shall comply with the Order requirements as if they referred to the share of the average liquidity corresponding to the respective market segment. 331. Upon expiry of a month, the shares shall be classified and obligations of the Specialist aligned with such a classification. 8.10.7 SUPERVISION 332. The Exchange shall monitor the fulfilment of each individual Specialist’s obligations. 333. The Exchange shall monitor the fulfilment of Specialist’s obligations on a daily and a monthly basis. 334. In the course of a single month the Specialist shall not: 1. fail to fulfil its daily obligations for more than 2 trading days (not consecutive); 2. have valid specialist Orders quoted less than 60% of the total trading time in the respective month. 335. In the event of failure by the Specialist to fulfil its obligations described in Article 334 above: 1. if will forfeit its Specialist status and will not be able to ask to be reinstated as Specialist for the next 6 months, and 2. will be liable for paying the fee difference for the turnover realized as Specialist in the previous 20 trading days. 336. For failure by the Specialist to fulfil its obligations the Exchange may, in addition to the foregoing, impose one of the sanctions envisaged by these Rules. 337. The Member firm which has been designated Specialist for the first time will be tolerated, in the run-in period of the first month, to quote the Specialist Orders only 45% of the trading time on each day of the month. 8.10.8 DATA 338. The Exchange will release statistical data related to the operations and fulfilment of the obligations of individual Specialists on its website each month. 8.10.9 EMERGENCY SPECIALIST 339. In the event that the Specialist should forfeit its status due to extraordinary circumstances (bankruptcy, being banned from business or having its status terminated by the Exchange for failing persistently to fulfil its obligations etc.), to protect market confidence in the share in respect of which it performed specialist trading, the Exchange may designate an emergency Specialist for a period not exceeding 2 months and grant it greater privileges for that period than those stipulated by these Rules. 9 TRADING TRANSPARENCY 340. Trading transparency on the markets managed by the Exchange represents a vital prerequisite for the existence of a fair, transparent and just market. 341. In order to achieve trading transparency, the Exchange will disseminate data on: 1. transactions which have been concluded and 2. Orders transmitted to the Trading System but which have not resulted in transactions (market depth). 342. Data set out in Article 341 above will be disseminated through 1. public media 2. Internet 3. companies distributing data on exchange trading 4. Member firms in the manner to enable maximum availability of such data to the investment public and anyone interested under reasonable commercial terms. 10 CONFLICT OF INTEREST 343. Capital market participants: 1. Exchange 2. Exchange shareholders 3. Member firms 4. Issuers 5. Members of various bodies and employees of the entities set out in 1 - 3 above 6. Stakeholders of the persons set out in 1 - 3 above (e.g. as shareholders, unit holders or in some other manner) shall, in the event of a conflict of their own interests with those of other participants, or for the purpose of maintaining a fair, just and transparent market, act in such a manner as to first and foremost protect market interests. 10.1 CONFLICTS OF INTEREST COMMITTEE 344. In case of suspicion as to the existence of a conflict of interest due to which a certain person set out in paragraphs 1 - 6 of Article 343 above might not act in the manner described in that Article, the Exchange will institute proceedings before a Conflicts of Interest Committee, which will determine whether the conflict of interest exists and, if it exists, recommend to the Exchange how to avoid possible negative consequences of such a conflict. 10.1.1 COMPETENCE 345. The Committee has an advisory role. The Committee: 1. issues recommendations or opinions to the Exchange’s management with regard to the measures and procedures for avoiding and/or resolving conflicts of interest, which might have a negative impact on: a. business of the regulated market, b. persons which participate in trading on the regulated market, c. regular fulfilment of Exchange obligations 2. issues opinions on concrete cases of possible conflict of interest at the Exchange’s request. 10.1.2 MEMBERS 346. The Committee shall consists of 5 (five) members, of whom 1 (one) is an Exchange representative, 2 (two) represent Member firms (of which at least one must at the same time be an Exchange shareholder, if possible), 1 (one) is a representative of investors and 1 (one) represents issuers of Official or Prime Market shares. 347. Committee members shall be appointed by the Exchange management board for a period of one year. The mandate of Committee members will begin on the day a resolution on their appointment is passed, provided that the appointed person accepts membership of the Committee. 10.1.3 RULES OF PROCEDURE 348. The procedure of appointing Committee members and other issues related to its work shall be regulated by the Rules of Procedure of the Committee. Any decisions, conclusions, opinions and recommendations of the Committee shall be posted on the Exchange’s website. 349. The Rules of Procedure of the Committee shall be passed by the Exchange. 11 SURVEILLANCE 350. The exchange shall supervise 1. Trade on the markets which it manages 2. Member firms 3. Issuers with respect to the obligations such persons must fulfil as regards the matters regulated by these Rules. 11.1 TRADING SURVEILLANCE 351. Trading shall be supervised on any market, MTP, and in respect of any type of financial instruments. 352. Trading shall be supervised by: 1. monitoring and analyzing the entering of Buy and Sell orders and conclusion of Transactions via the Exchange’s Trading System on any market and in respect of any financial instrument listed on the Exchange; 2. monitoring and analyzing other data and information (public media announcements, including the Internet, etc.) which may be of significance for the creation of Transactions and for the terms under which they are concluded; 3. suspending Trading when it is obvious that it may no longer be conducted on an equal footing or is not founded on justified information – all investors shall have equal access to information concerning the financial instruments being traded; 4. monitoring and analyzing requests for Transaction Trade cancellation; 5. taking action to prevent and detect market manipulation or abuse in accordance with the rules and procedures stipulated by these Rules and ZTK provisions. 353. Trading surveillance will be conducted with the assistance of programme tools which allow queries to the database as well as a systematic collection and evaluation of trading statistics and data related to trading to facilitate the necessary investigative proceedings. 11.1.1 RULES AND PROCEDURES TO DETECT AND PREVENT MARKET ABUSE 354. In order to verify whether Exchange Trading is conducted in a fair and regulated manner and detect any potential action indicative of market abuse, the Exchange shall implement measures and procedures aimed at: 1. preventing market abuse 2. detecting market abuse. 355. Provisions of this chapter shall apply to Member firms of the Exchange, in the course of controlling their actions while: 1. managing trading orders 2. executing Members’ on-Exchange Transactions via the Trading System in proprietary trading and trading in behalf of the clients account. for the account of their clients. 11.1.2 MEASURES AND PROCEDURES TO PREVENT MARKET ABUSE 356. Procedures to prevent market abuse are in particular: 1. systematic collection and evaluation of trading statistics and data; 2. education of financial market participants on the subject of market abuse; 3. taking measures in cases of price and/or information asymmetry on the Exchange. 11.1.2.1 Observation segment 357. The Exchange may place Issuers’ shares and other financial instruments in a special observation segment in order to draw the attention of the investment public to the need for increased monitoring of the circumstances revelant to trading in the respective financial instrument. 358. Any financial instrument or Issuer finding itself in certain specific circumstances which require disclosure to investors may be the subject of surveillance. 359. The monitoring period in respect of listed financial instruments may be of predetermined duration. The reason for placing financial instruments in a special segment lies in different situations related to the Issuer. 360. A list of Instruments and/or Issuers placed in a segment which is subject to monitoring, along with the reasons for monitoring will be posted on the Exchange’s website. 361. The Issuer or the Instrument may be placed in a observation segment in the following circumstances: 1. if the Issuer fails repeatedly to fulfil its obligations stipulated by the provisions of these Rules which regulate Issuer’s responsibilities, or delays their fulfilment, 2. if the Issuer is undergoing a takeover bid or the bidder has disclosed its intention to publish the takeover bid for the Issuer; 3. if the Issuer is undergoing division or merger; 4. in case of unconfirmed market rumours which may have a significant effect on the price movement of the Instrument; 5. if significant management or supervisory board or management board or AGM decisions are due; 6. in case of any other circumstances which may lead to significant uncertainty in determining the value of the Instrument. 11.1.3 MEASURES AND PROCEDURES TO DETECT MARKET ABUSE 362. Measures and procedures which may be used to detect market abuse include in particular: 1. monitoring trends and detecting major deviations in price movement or turnover of individual financial instruments; 2. monitoring trends and detecting major deviations in the frequency of Orders, their presence in the Order book and execution through Transactions; 3. monitoring and analyzing price formation in individual stages of trading in certain financial Instruments; 4. monitoring the procedure of Trade cancellation; 5. monitoring the connection between disclosure by the Issuers of financial instruments and turnover and price movements prior to and after disclosure; 6. monitoring the connection between the publication of market research by Member firms or related persons and their trade in individual Instruments prior to and after the release of such research to the public; 7. conducting surveillance of Member firms of the Exchange. 11.1.4 ASSESSMENT PRINCIPLES ON SUSPICION OF MARKET ABUSE 363. In determing whether the activities of the Member firm or another person are such as to give rise to suspicion of market abuse, in addition to the circumstances set out by the provisions of ZTK and the ordinances passed by HANFA, the Exchange shall take in to account in particular: 1. whether the activity affects market liquidity and efficiency; 2. whether the activity enables timely and appropriate reaction by all market participants to new market conditions, created by such activity; 3. whether the activity presents a risk to the market integrity; 4. structural characteristics of the market, type of financial instrument, characteristics of the respective market participants; 5. significant changes in the market environment, including but not limited to the rules of trading; 6. HANFA’s opinions and recommendations concerning the detection and prevention of market abuse. 11.1.5 PROCEDURE WITH UNUSUAL ORDERS, TRANSACTIONS OR MEMBER ACTIVITIES INDICATATIVE OF MARKET ABUSE 364. In case of identifying unusual Orders, transaction or activities which indicate the possibility of market abuse (extraordinary events), the trading supervisor will, depending on the particular case: 1. seek Issuer’s response, if necessary; 2. seek Member firm’s response, if necessary; 3. request delivery of necessary trading documents by the Member firm; 4. perform analysis of historical data related to Orders and Transactions; 5. send collected documents and a description of circumstances constituting the Extraordinary event to HANFA. 11.1.6 MEASURES ENFORCED BY THE EXCHANGE 365. In order to preserve market integrity, protect investors and ensure fair and regular market activities, in the event that a Buy or Sell order was issued or Transaction concluded in the manner which might give rise to the effects contrary to the regulations of the Republic of Croatia or Exchange’s Rules, the Exchange has the right as part of surveillance to: 1. order the Member firm to withdraw the issued Order, 2. delete the issued Order, 3. cancel the on-Exchange Transaction; 4. inspect records and documents of the Member firm which the Exchange deems necessary for conducting surveillance; 5. impose one of the measures envisaged by the Rules on the Member firm; 11.1.6.1 Trade cancellation; 366. The Exchange may cancel the Transaction to protect: 1. public interest 2. investors 3. fair and regular performance of market activities. 367. The Exchange shall have the right to annul the Transaction: 1. which may lead to a distorted view of the market with respect to the price and quantity of the Instrument; 2. which is a result of an obvious error in entering Order parameters into the Trading System. 368. The Exchange will cancel any Transactions at the written request of authorized bodies. 369. The Transaction may be cancelled solely by the Exchange or persons authorized by law to do so. 370. The Transaction resulting from: 1. opening procedure, in which the opening price (initial price of a particular financial Instrument on the respective trading day) is determined; 2. volatility interruption procedure (price at the end of the volatility interruption) may not be cancelled. 371. Trade cancellation does not preclude the obligations arising from it in respect of the Exchange. 372. In case that it cancel the Trade, the Exchange will notify the parties to the Transaction, HANFA and the public promptly of the annulment on the Exchange’s website. 373. The Exchange will cancel any Transaction within 15 minutes of learning of possible reasons for the annulment, and no later than 15 minutes after trading closes. 11.1.6.1.1 Placing wrong Order entry parameters 374. The Exchange may cancel any Transaction it deems necessary for maintaining a fair and regular trading environment and for protecting investor and public interest under the circumstances in which one or several elements of the Transactions (e.g. Instrument price or quantity or Instrument ticker) are obviously wrong. 375. The Exchange shall annul the Transaction as soon as the circumstances giving rise to the annulment arise, and shall notify the parties to the Transaction of the Trade cancellation without delay. 376. The Exchange will not cancel the Transaction resulting from an erroneous entry of the Order price if the respective Order results in the Transaction within the current normal trading range, and has no characteristics described in Article 377 hereunder. 377. It is deemed necessary to cancel the Transaction which may cause a significant and an illogical change in the total view of the trading activity, in particular in the following circumstances: 1. if it deviates considerably from the predominant market price prior to the time of Transaction; 2. is such a change is sudden and of extraordinary nature, causing a movement of the highest or lowest (daily) price. 378. In assessing the circumstances set out in Article 377 above, the Exchange will take into account: 1. current market circumstances; 2. trading activity; 3. volatility, and 4. size of the Transaction. 379. Irresponsible or negligent conduct by either Transaction party which may lead to the Trade cancellationrepresents a violation of these Rules. 380. The party which becomes aware that the Transaction was concluded on the basis of erroneous Order entry shall send notification of the fact within 10 minutes of its execution (but no later than 5 minutes after continuous trading closes). 381. As soon as it receives notification from the Member firm or becomes aware of the irregularity itself, the Exchange shall send notification via the Trading System that the particular Transaction is being verified, which means that it may be cancelled. 382. The Exchange shall send notification of the Trade cancellation via the Trading System and post it on the Exchange’s website. 383. In Trade cancellation, the Exchange shall take particular care not to create a distortion in the market in view of already released trading data. The Transaction which sets the closing price on a certain trading day may be reviewed only under exceptional circumstances. 11.2 SURVEILLANCE OF MEMBER FIRMS 384. Supervision of Member firms represents monitoring of whether they fulfil their obligations stipulated by the Rules; it refers primarily to the monitoring and detection of violations of the following provisions of the Rules: 1. rules of trading, 2. rules to prevent and detect market abuse set out in this chapter of the Rules, 3. meeting the criteria for membership. 385. The Exchange employees authorized by the Exchange in writing shall have the right to supervise the Member firm by inspecting all the books and records kept by the Member firm in respect of its business operations. Member firms are required to provide access by the persons authorized by the Exchange to their business premises, books and records and other documents which may be necessary for conducting surveillance. 386. The Surveillance set out in Article 385 above is subject to no previous notice. 387. The persons authorized to conduct surveillnce of the Member firm are also authorized, without additional powers, to seek and obtain necessary data and explanations directly from the auditors of the Member firm. 388. Any data obtained in the course of surveillance according to the provisions of this Article by the persons conducting supervision, with the exception of any data concerning proven irregularities which have been confirmed by the Exchange, are confidential and shall not be disclosed to third parties. This provision does not apply to the notifications to HANFA or reporting to other competent government agencies. 11.3 SURVEILLANCE OF ISSUERS 389. The Exchange shall supervise the compliance of the Issuer’s conduct with the provisions of these Rules of the Exchange, in particular as regards: 1. Delivery of financial reports within the time frame stipulated by ZTK and these Rules; 2. Delivery of invitations to and resolutions of the AGM stipulated by ZTK and these Rules; 3. Delivery and/or disclosure of other data which are subject to delivery and/or disclosure pursuant to provisions of ZTK and these Rules. 11.3.1 TEMPORARY TRADING SUSPENSION OF INSTRUMENT 390. The Exchange shall suspend trading in a particular Instrument: 1. as a result of decision by the competent government body; 2. in case the suspension may be necessary for the purpose of implementing a certain change related to the Instrument which is the responsibility of the Institutional clearing and settlement system; 3. in the event of failure by the Issuer to comply with the provisions of the Rules in the section which sets out its post-listing requirements. 12 DISCIPLINARY COMMITTEE 391. The Exchange shall appoint members of the Disciplinary Committee from the list of proposals submitted by Member firms and Issuers. 392. In the event that, as a result of conducted supervision, the Exchange imposes certain sanctions on the Issuer or Member firm, the Exchange’s management shall seek the opinion of the Committee on the particular case, unless the Committee has already issued an opinion on an identical case. 12.1 COMPETENCE 393. The Committee is the body which: 1. prepares advice, recommendations and opinions related to concrete cases of disciplinary measures which the Exchange may take against Issuers and Member firms, 2. may initiate supervision procedure, and 3. recommends improvements in the surveillance procedures conducted by the Exchange and in the system of measures taken by the Exchange to protect market integrity. 394. The advice, recommendation and opinion prepared by the Committee at the request of the Exchange shall be prepared by the Committee within 30 days of the respective request, and in case of failure the Exchange shall take action regardless of the absence of requested opinion, advice or recommendation. 395. The Committee member who, for some reason, has a conflict of interest in performing any activities in the competence of the Committee shall be excused from participating in the Committee activities when it decides on the matter which gives rise to that conflict of interest, either at his/her own initiative or at the initiative of a Committee or Exchange member. Such an exemption of the member shall be decided by the Committee, with the member concerned not having a vote. 12.2 MEMBERS 396. Committee members shall be prominent experts from the economic, legal or financial profession. At least 4 Committee members shall have special expertise in the field of the capital market. 397. The Committee shall consist of 7 members. Committee members shall be appointed by the Exchange’s management board for a term of 2 years, with: 1. one member from the ranks of arbitrator on the list of the Permanent Arbitration Court of the Croatian Chamber of Economy; 2. one member being a professor at the Faculty of Economics and Business; 3. one member being a professor at the Faculty of Law 4. one member being proposed by the Association for Business and Intermediation on the Financial Markets within the Croatian Chamber of Economy; 5. one member being proposed by the Association of Pension Fund Management and Pension Insurance Companies; 6. one member being proposed by the Association of Investment Fund Management Companies; 7. one being a member of the Exchange’s management. 12.3 DECISION-MAKING 398. The Committee may take its decisions only if at least five members attend the meeting. 12.4 OTHER MATTERS 399. Other matters related to the work of the Committee shall be defined by the Rules of Procedure passed by the Exchange. 13 MEASURES TO PROTECT MARKET INTEGRITY 400. In case of any violations of the provision of the Rules by the Issuer, the Exchange’s management may impose one of the following sanctions: 1. Non-public rebuke 2. Public rebuke 3. Fine 4. Delisting 401. The Exchange’s management may impose one of the following sanctions on the Member firm: 1. Non-public rebuke 2. Public rebuke 3. Fine 4. Termination of membership which may be: a. temporary (suspension) b. permanent 402. Fine, suspension of a pre-determined duration and termination of membership as sanctions may be suspended for a period of up to two years at most. In that case, the enforcement of the respective measure is subject to a repeated violation of the Rules by the Member firm in that period. 13.1 REBUKE 13.1.1 NON-PUBLIC REBUKE 403. Non-public rebuke shall be imposed in case of lesser violations of the Rules. 13.1.2 PUBLIC REBUKE 404. Public rebuke shall be imposed on the Member firm in the event that the Exchange decides that the non-public rebuke would not sufficiently affect the conduct of the respective Member firm or Issuer. 405. Public rebuke may be imposed on the Member firm as a separate measure only once. 406. The next and any other subsequent rebuke shall be imposed on the Member firm cumulatively, along with a fine. 13.1.3 FINE 407. Fine may be imposed for grave or repeated violations of the Rules, and is mandatory in case of the second non-public or public rebuke. 408. The amount of fine shall be set according to the following criteria: 1. up to 150,000 kuna, when imposed along with a rebuke; 2. up to 300,000 kuna, when imposed as a separate measure for a grave violation of the Rules or along with a suspension; 3. up to 600,000 kuna, when imposed for a particularly grave violation of the Rules. 409. In setting the amount of fine payable by the Member firm, the Exchange shall take into account the likely effect of the fine on the future conduct of the Member firm or Issuer as well as the size and the financial strength of the respective Member firm or Issuer. 13.2 TERMINATION OF MEMBERSHIP 13.2.1 SUSPENSION OF MEMBER FIRM 410. The Member firm shall be suspended (its right to conclude transactions on the Exchange revoked for a certain period of time): 1. due to a grave violation of the Rules (as a sanction); 2. in case of illiquidity or evident risk of settlement default (as a cautionary measure) 3. in the event that the Member firm temporarily fails to meet the criteria for membership. 411. Suspension may be imposed: 1. for a pre-determined period of time – up to a maximum of three months, or 2. until the reasons for suspension have been eliminated. When imposed in such a manner, suspension shall be accompanied by a fine. 412. In case of suspending the Member firm, the respective resolution shall state the duration of suspension and whether it will be lifted under certain circumstances as well as the procedure to determine if such circumstances have arisen. 413. In the event that the Member firm has been suspended pending the elimination of irregularities in its business operations or conduct which gave rise to the suspension, and the circumstances for its lifting do not occur even upon expiry of 6 months from the day this measure was imposed, the Exchange shall also impose a mandatory additional fine. If the circumstances envisaged for the lifting of suspension do not occur even after another three months have expired, this will represent a particularly grave violation of the Rules, prompting the Exchange to terminate the membership of such a Member firm. 414. For the duration of suspension, the Member firm is required to adhere to all the Exchange’s regulatory documents and to regularly fulfil any obligations to principals (Clients), other Member firms and the Exchange arising out of such documents. 13.2.2 PERMANENT TERMINATION OF MEMBERSHIP 415. Permanent termination of membership as a sanction shall be imposed: 1. in cases of particularly grave violations of the Rules, or 2. in case of repeated violations of the Rules, if the Exchange decides that other measures have proven insufficient to avert the Member firm from further violations. 13.3 DETERMINING SANCTION TYPE AND SIZE 416. In determining the type of sanction to be imosed on the Member firm/Issuer for violating provisions of the Rules and setting the amount of fine and the duration of suspension, the Exchange shall take into account any circumstances related to the violation as well as any previous non-compliance by the Member firm/Issuer with regulatory Exchange documents. 417. In the course of the procedure which precedes the imposition of the sanction, the Exchange will allow the Member firm/Issuer to present in writing its view of the circumstances which gave rise to possible violations of the Rules. 418. In the course of the procedure which precedes the imposition of the sanction, the Exchange or the person or persons authorized by the Exchange in writing may: 1. Interview any individuals who, in the Exchange’s opinion, may provide information relevant to the assessment of the circumstances related to possible violations of the Rules; 2. Conduct surveillance of the Member firm in accordance with the provisions of the Rules. 419. Any persons authorized to represent the Member firm, as well as the members of its management and employees shall heed the summons to the interview, answer any questions and submit any documents which may be requested from them by the Exchange in relation to the subject of the interview. Any action to the contrary represents a grave violation of the Rules. 420. The violation of the Rules of the Exchange may be minor, grave or particularly grave. 421. In the assessment of the gravity of violations, the Exchange shall take into account in particular: 1. Material damage incurred; 2. Damage to the reputation of: a. the Exchange, b. Member firm, c. Investors. 3. Damage to the public perception of confidence in the market; 4. Frequency of violations of the Rules; 5. Other circumstances which may affect the assessment of the gravity of violations. 14 TRANSITIONAL AND FINAL PROVISIONS 14.1 INTERPRETATION 422. The authentic interpretation of the provisions of these Rules shall be provided in writing by the Exchange upon written request of any party or at its own initiative. The titles of individual sections of the Rules serve only to facilitate navigation through the text. The guidelines to help the implementation of the Rules shall be issued by the Exchange. 423. Prior to providing the interpretation, the Exchange may request additional explanations or clarifications from the person asking for it. The Member firm seeking interpretation is required to supply the said explanations through an authorized representative. The representative of the Member firm shall supply additional explanations orally at the Exchange premises or in another location designated by the Exchange, or in writing. 14.2 CESSATION OF MEMBERSHIP 424. The Member firm whose membership has ceased shall keep its Member seat. 14.3 INSTRUMENTS AND NEW MARKET STRUCTURE 425. The Instruments which were traded on the Parallel Market and the Rights Market shall be included in trading on the MTP which is managed by the Exchange. 426. The Instruments which, in accordance with the provisions of paragraphs (5) and (6) of Article 592 of ZTK, have been included in the Regulated market shall be deemed listed in the Official or in the Regular Market, with no need for additional payment of any listing fees. 427. Issuers of the Instruments which, in accordance with the provision of paragraph (6) of Article 592 of ZTK, have been listed in the Regulated market shall conclude an appropriate listing agreement with the Exchange by 30th September, 2009. 14.4 TRADING 428. Chapter 8 (with the exception of Section 8.10) of these Rules shall apply as soon as the Exchange, in collaboration with the provider of the Trading System, establishes technical prerequisites for the implementation of Chapter 8. 14.5 EFFECTIVE DATE 429. These Rules shall take effect on 20th July, 2009 (taking into account the provisions of Article 428 above). By taking effect, these Rules derogate the Rules of the Zagreb Stock Exchange which are in force at the time of approval of these Rules (Old Rules), except for the matters which are regulated by its Chapter 8 (with the exception of Section 8.10) of these Rules, to which relevant provisions of the Old Rules shall apply until the circumstances described in the previous article arise. CONTENTS:
1. INTRODUCTION – OBJECTIVES AND BASIC PRINCIPLES 2.1. PRICE SENSITIVE INFORMATION 2.3. ANNUAL, SEMI-ANNUAL AND QUARTERLY REPORTS 2.4. CALENDAR OF IMPORTANT EVENTS 2.5.2. Cross-ownership of shares 2.5.3. Shares in the ownership of the Members of the Management Board and Supervisory Board 3.1.1. Equal treatment of shareholders 3.1.1.1. Confirmation of "one share - one vote" principle 3.1.1.2. Limitation of voting rights 3.1.1.3. Election or appointment of the Supervisory Board members 3.1.1.4. Different types of shareholders 3.1.3.1. Right to participation at the General Assembly 3.1.5. Conditions of participation 3.1.7. Requests related to reports to be submitted to the General Assembly 3.1.7.1. Reports submitted by the Supervisory Board 4.1. INDEPENDENT EXTERNAL AUDITOR
CODE OF CORPORATE GOVERNANCE
The elementary media for public announcement of records are the web pages of the Company on Internet. As price sensitive information are particularly regarded these stated as such in the Securities Market Act, and the rules of the stock exchange on which the companies' securities have been listed. At public announcement of the price sensitive information the company is obliged to primarily take account of the content of records, and not of the form in which they are given. The Company is obliged to prepare its financial statements in compliance with the International Financial Reporting Standards (IFRS) taking thereby into the account the contemporary international tendencies in financial reporting, as also the market requirements. The company has to announce its financial statements also on its web site on Internet.
The annual report should certainly be announced in the English language, too, whereas the annual, semi-annual and quarterly reports should be accessible to shareholders on a daily basis to get an insight into it at the headquarters of the Company, as also on the company’s website on Internet.
The company has to publicly announce and update the list of shareholders at least twice a month.
The company is obliged to publicly announce records on cross-ownership of shares. It will be considered that there is a cross-ownership of shares relationship between two joint stock companies when these companies are related in such a manner that each of them owns more than 5% of shareholding in the other company.
The Company is obliged to present in the annual report the records on shares and other securities of the company in the ownership of each of the members of the Management Board or the Supervisory Board. Apart from presenting these records in the annual report, the company is obliged, within the term of 48 hours from learning of the change, to publicly announce on its web pages on Internet or through the stock exchange each change in quantity of the company’s securities hold by a single member of the Management Board or the Supervisory Board. The Management Board of the Company is obliged to timely establish and in an appropriate manner publicly announce the records on main risks to which the company has been exposed, as for example political risks, economic risks, activity risks and similar, as also the assessment of probability of potential risks occurrence. The company is obliged to announce in a clear and unambiguous manner all records which might be deemed price sensitive in relation to the company, its financial position, operating results, ownership structure and management. All information which might have some influence on decision making on investment in securities of the company have to be announced immediately and simultaneously to all persons who might be interested therein, including to the equal extent both positive and negative information, with the objective to enable the information receiver to acquire complete understanding and correct assessment of the company’s situation. The use of preferred information (publicly unannounced price sensitive information) has to be absolutely forbidden to everyone to whom such information are available, considering the fact that it could lead to an unfair advantage of the person managing the preferred information (the informed person) at trading securities of the company, regardless of whether the insider being informed uses the preferred information or some third party based on information received from the insider. The use of preferred information relates to all shareholders, members of the Management Board, members of the Supervisory Board, external advisors of the company, as also all persons who with regard to their positions in the company and outside the company, are deemed to be persons to whom the preferred information are available. The company is obliged to establish:
3. BODIES OF THE COMPANY 3.1.1. Equal treatment of shareholders 3.1.1.1. Confirmation of "one share – one vote" principle The voting right has to include all shareholders of the company in the manner that the number of votes belonging to them in the General Assembly equals the number of shares they hold, regardless of class of shares.
If the company issues non-voting shares, i.e. shares with limitations on voting rights, it is obliged to publicly and timely announce all relevant records on the content of all rights resulting from such shares in order to enable the investors to make the right decision on purchase of these securities.
The members of the Supervisory Board have to meet corresponding standards with regard to education and professional experience, they need to have high moral standards and be in a position to invest the time necessary to exercise the function of the Supervisory Board member. All candidacies for members of the Supervisory Board being elected at the Assembly have to be publicly announced on web pages of the company on Internet latest on the date of announcement for convocation of the General Assembly at which they will be elected, as also proven by adequate records (for example: a CV) for making the right decision on election. The same obligation of public announcement of records also exists at appointment of the Supervisory Board members not being elected by the General Assembly of the company.
The company is obliged to act in the same manner and under the same conditions to all shareholders, independently from the number of shares they hold, country of their origin and their other characteristics. This relates in particular to the obligation of equal treatment of individual and institutionalized investors. The management is obliged to provide to shareholders a good quality data dissemination (using thereby modern information technology, especially including Internet) in the manner enabling shareholders to exercise their rights with complete and timely knowledge of all facts important for making the right decision on the agenda of the General Assembly. The company is obliged to make possible to all shareholders participation in increase of the share capital of the company in proportion to their shares in the up-to-then share capital, and thus in form of the transferable securities containing pre-emption right, in order to protect the interests of the shareholders who at the time of issuance may not register and buy new shares. The intention of new shares issuance has to be publicly announced at least 10 days prior to the day set as the date for establishing the status in the register of shares which will be relevant for determining which shareholders are entitled to pre-emption right at acquisition of newly issued shares as mentioned in the prior item. When the company acquires or disposes the own shares (treasury stocks) it is obliged to perform it in the open market and in a manner not favoring single shareholders or investors or groups of shareholders, i.e. investors. The company is obliged to make the voting easier to the shareholders through their proxies. To that extent, giving a power of attorney should be simplified to the uttermost and without strict formal requirements. The company will to the shareholders of the company who due to any reason whatsoever are not in a position to make it themselves, with no special costs for these shareholders, provide proxies who are obliged to vote in compliance with their instructions. The Management Board of the company is obliged to convene one annual regular Assembly in the course of each business year. 3.1.3.1. Right to participation at the General Assembly At convocation of the General Assembly the Management Board of the company is obliged to set the date in relation to which the status in the register of shares will be established that will be relevant for realization of voting rights at the General Assembly of the Company. That date has to be prior to holding the General Assembly and may be at the most 7 days prior to holding the General Assembly. Each decision on dividend payment or dividend advance payment has to include the data on which the person being the shareholder acquires the right to payment of dividend, and the date or period during which the dividend, i.e. dividend advance will be paid. The date on which the person being the shareholder acquires the right to dividend payment has to be at least 10 days upon the date of decision on dividend payment. The date of dividend payment has to be at least 12, and at most 30 days upon the date of decision making. The period of dividend payment must not last longer than 10 days. At payment of dividend it has not been permitted to favor single shareholders. The decision on dividend payment setting the above stated dates has to be announced and submitted to the stock exchange latest 2 days upon its making. The agenda, as also all relevant data and documentation with explanations relating to the agenda, have to be announced on the company’s website on Internet, and at disposal of shareholders in the company's premises on the date of the first public announcement of the agenda, in order to enable shareholders to take their position with regard to issues on the agenda on time. The company will announce the agenda and relevant data and documentation on web sites of the company and in the English language.
The company must encourage participation of shareholders at the General Assembly, so the shareholders have not been permitted to set conditions for participation or use voting rights (with no regard whether the same have been permitted in compliance with the law or the Articles of Association) as for example advance registration of participation, certification of powers of attorney, and similar. The decisions having a significant influence on status of assets, financial position, operating results, ownership structure and management of the company will be made exclusively at the General Assembly of the company by the stipulated majority of votes.
3.1.7.1. Reports submitted by the Supervisory Board The Supervisory Board submits to the General Assembly the report in which, apart from the content of report defined by law, it is obliged to evaluate the overall efficiency of the company’s operating, work of the company’s management, as also to present the special reference to its cooperation with the Management Board. Also, the Supervisory Board is obliged to make the Assembly acquainted with the possible existence of conflict of interests on the side of some of its members and members of the Management Board, as also with the measures undertaken with regard thereto.
The report on status of the company has to be prepared in a clear and easy-to-survey manner; it has to include all aspects of business activities during the whole year in relation to the preceding years, and to state the exact, complete and fair review of the assets and expenditures, the financial position of the company, as also the outline of the future operating.
It should be made possible to shareholders to participate and especially to vote at the General Assembly using modern communication technology devices.
The Management Board of the company is obliged, at its earliest convenience, to publicly announce decisions of the General Assembly, as also data on possible action to challenge these decisions. 3.2.1. Tasks and responsibilities The main tasks of the Supervisory Board are appointment and withdrawal of the Management Board, supervision of the Management Board’s activities in managing business of the company, and submission of reports on the completed supervision. The mandate of the Supervisory Board members is not binding, which means that every member of the Supervisory Board performs his/her duties entirely independently and at his/her own responsibility, independently of who proposed or appointed him/her. The Supervisory Board members should perform their duty with diligence of an orderly and conscientious businessman and keep business secret of the company. The Supervisory Board should make decision on the master plan of its activities which should include the list of regular meetings and records to be regularly and timely put at disposal of the Supervisory Board members. The Supervisory Board should pass its internal code of conduct, taking into account that it should not put limits on every member’s latitude for independent action. None of Supervisory Board’s documents must prevent or put limit on a single member while acting in compliance with the law, but at the same time every member should avoid abuse of these powers and should always make efforts to adjust his activities with the other members of the Supervisory Board. Supervisory Board of the company should be composed by the majority of independent members who are not in business, family and other relations with the company, majority shareholder or group of majority shareholders or members of the Management Board or the Supervisory Board of the company or the majority shareholder. The independent member of the Supervisory Board will be considered a member who: • has not been related to the company, with the possible exception with regard to a certain small number of shares in the company, is not a majority shareholder, nor it represents the majority shareholder or the group of majority shareholders, nor is he the member of the group of majority shareholders, a spouse, or a bloodline relative or an in-law to the second level of any person from the before mentioned group, or has any relationship with the companies related to majority shareholder; • is not a member of the Management Board of the company or any of its dependent or with it associated companies for at least five years; • is not an employee of the company, or of any of its dependent or with it associated companies for at least three years; • does and did not receive other significant payment from the company except the remuneration for activities in the Supervisory Board, not counting a possible dividend (which especially relates to participation in bonuses and other types of remuneration which depend on company's business results, such as options on stocks, but does not relate to earnings as result of pension scheme for the previous service in the company); • is and was not in duration of at least one year in the significant business relation with the company or with it associated companies, directly or indirectly as partner, shareholder, member of the Management Board or the Supervisory Board or a member of the high management of the organization being in the significant business relationship with the company, which also includes significant indirect or direct suppliers and/or buyers of goods and/or services of the company (including also the financial, legal, advisory and consulting services) and organizations receiving significant receipts from the company or with it associated companies, • is not, neither it was in the last three years, a partner or an employee of an audit company which renders or was rendering audit services to the company or with it associated companies; • is not a member of the Management Board of the other company in which some of the members of the company's Management Board is the member of the Supervisory Board, nor it has significant relations with the members of the company's Management Board through participation in other organizations, bodies or companies, • is not a member of the Supervisory Board for more than 12 years • is not a spouse or s bloodline relative or an in-law to the second level to any of the members of the Management Board of physical persons who are at the positions stated in the prior items. The independent member of the Supervisory Board executing this function for more than two mandates, should submit the written statement confirming his independent status.
The Supervisory Board and Management Board are obliged to entirely co-operate in the best interest of the company, and to discuss together the strategic guidelines of the company’s business. In that sense, the members of the Management Board are also obliged to be present at the Supervisory Board meetings, except when the issues are being discussed by the Supervisory Board concerning directly the Management Board or some of the Management’s members; especially when it is being discussed on withdrawal, responsibility or remuneration for work of the Management Board members. The Supervisory Board is obliged to ensure the existence of the master succession plan in the company, thus ensuring a careful and timely appointment of the successors for any single member of the company management. This process should also include the members of the management.
The member of the Supervisory Board should be in a position to devote to his duties in the Supervisory Board all time necessary for correct and high-quality filling a post. The members of the Supervisory Board should be paid according to contribution to company's efficiency, whereas such remuneration should be determined at the proposal of the Management Board or the Remuneration Committee, if it exists, by the shareholders at the General Assembly, and the same should be stipulated in the Articles of Association of the company. The remuneration to the members of the Supervisory Board should: • adequately reflect the time, effort and experience in relation to their functions in the Supervisory Board and Committees; • provide adequate impetus which would balance the interests of the Supervisory Board members with the shareholders’ interests; • be determined in the manner not to endanger the capabilities of the Supervisory Board members to make decisions in the best interest of the company and its shareholders. It is recommendable to determine the remuneration for a Supervisory Board member based on the same hourly wage as used for the Management Board members, including bonuses and privileges in proportion to a real time related to their function. The remuneration to the Supervisory Board members should include as follows: • the fixed part which is unchangeable and does not depend on operating results, except if the operating results of the company are such that the payment of the fixed remuneration would be unjust and in large disproportion with operating results; • the variable part which is influenced by operating results in the certain past or future period;
Each member of the Supervisory Board is obliged to inform the company on all changes with regard to his ownership of shares of the company latest on the next business day after occurrence of such change, whereas the company is obliged to publicly announce such change within the shortest possible time. A conflict of interests exists for the member of the Supervisory Board who is not neutral in relation to subject of decision making, or it may be assumed based on his connection with the other companies, persons or businesses that he might have interests which are not at the same time necessarily also the interests of the company, and may make influence on decision making based on the interests or preference which do not necessarily correspond with the interests of the company. The members of the Supervisory Board are not permitted to make decisions based on personal interests or based on interests of persons with whom they have close relationship.
All transactions in which the members of the Supervisory Board take part, or the persons related to them and the company or the persons related to it, should be on a market bases, especially with regard to terms, interests, warranties and similar, and should be clearly stated in the company’s reports. Such transactions should be confirmed by independent estimate of the experts being independent in relation to the participants of the subject transaction. Members of the Supervisory Board must not for their or others’ account, personally or through third persons conclude businesses from the activities being performed by the company, as also advise persons who might be considered as competitive with the company. Members of the Supervisory Board are obliged to publicly announce the volume of shares and all changes of the shares in the companies which might be considered as competitive with the company.
The Supervisory Board should priory approve all contracts or agreements between the member of the Supervisory Board and the company, whereas important parts of all such contracts or agreements should be included in the annual report. If some member of the Supervisory Board considers that there is on his side or on the side of the other member a conflict of interest with regard to decision making on a particular issue he is obliged to immediately inform the Supervisory Board on that. The committees of the Supervisory Board must have at least three members. Exceptionally in case of companies having the small Supervisory Board (less than seven members) the committees may have two members. The Supervisory Board is obliged to stipulate in detail the mandate and the authorities of the committees it establishes. The persons who are not the members of the committees participate at the committees' meetings only at the committee's invitation. The committee may invite some experts or employees of the company at its meetings or request their presence. The committees have to regularly inform the Supervisory Board on its work and results. Once a year the company has to prepare and make publicly available the report on work, composition, number of meetings and the presence at the meetings of the Supervisory Board's committees. The president of each committee must have the possibility of direct communication with the shareholders. The situations in which such communication is necessary should be stated in the act by which the Supervisory Board stipulates the mandate and authorities of the committee. The Supervisory Board has to establish the following committees: In case of smaller companies with the smaller number of the Supervisory Board members, it may be justified that the functions related to appointment and remuneration are executed by one committee (Appointment and Remuneration Committee).
The majority of the members of the Appointment Committee have to be appointed from the independent members of the Supervisory Board. The Appointment Committee is obliged to: • find and recommend the to Supervisory Board the candidates who may fill the empty posts in the Management Board and the Supervisory Board, at which their knowledge, skills and experience have to be assessed, the list of requirements and activities relate to each appointment prepared, and the time for the performance thereof estimated, • at least once a year evaluate the composition, size, membership and quality of work of the Supervisory Board and the Management Board and to prepare the appropriate recommendations for the Supervisory Board, • at least once a year prepare the evaluation of the knowledge, skills and experience of the individual members of the Supervisory Board, and inform on that the Supervisory Board, • analyze problems related to planning of the continuity of the Supervisory Board and the Management Board, • analyze the policy of the Management Board on employment of the high management. The Appointment Committee is obliged to analyze the proposals of the Management Board and shareholders and to take advice from the President of the Management Board who may submit proposals to the Appointment Committee, especially with regard to issues related to the members of the Management Board and high management.
The majority of members of the Remuneration Committee have to be appointed mostly from the independent members of the Supervisory Board. The Remuneration Committee is obliged to: • propose to the Supervisory Board the policy of remuneration of the Management Board which has to relate to all types of remuneration, and especially to the fixed part of remuneration, the variable part of remuneration which is connected to the business efficiency, pension scheme and severance pay. In case of variable part of remuneration related to the business efficiency the proposal has to include the recommendations for determination of objective criteria of efficiency evaluation whereby the remuneration to the Management Board has to be adjusted to the long-term interests of shareholders and the objectives of the company set by the Supervisory Board, • propose to the Supervisory Board the remuneration for single members of the Management Board, in compliance with the company's remuneration policy and evaluation of a single director's activity, • propose to the Supervisory Board the appropriate form and content of the contract with the members of the Management Board, • follow the amount and structure of remuneration to high management and give general recommendations to the Management Board with regard to that, • with regard to the incentive part of remuneration to the Management Board, in case it consists of options on stocks or other arrangements based on acquisition of shares analyze general policy of such type of remuneration and propose to the Supervisory Board appropriate solutions, as also analyze records published on that in the annual report, prior to publication, • to take advice at the very least from the President of the Supervisory Board and the President of the Management Board on their understanding related to the remuneration of the members of the Management Board. The Supervisory Board has to establish the Remuneration Committee which proposes the content of the contracts with the members of the Management Board, and their remuneration and the remuneration of the members of the Supervisory Board. The Supervisory Board should establish the Audit committee for the purpose of detailed analysis of financial statements, offering support to the company’s accounting, and establishing good and high quality internal control in the company. The audit committee has to be composed in the manner that the majority is made of independent members of the Supervisory Board. • follow the integrity of the financial information of the company, and especially the correctness and consistency of the accounting methods used by the company and the group to which it belongs, including the criteria for consolidation of financial reports of the companies belonging to the group; • at least once a year assess the quality of the internal control and risk management system, with the objective to identify and publicly announce in the appropriate manner the main risks to which the company has been exposed (including also the risks related to compliance with regulations), as also to manage them in the adequate manner; • ensure the efficacy of the internal audit system, especially through preparing the recommendations at selection, appointment, repeated appointment and dismissal of the head of internal audit department and with regard to resources at his disposal, and the evaluation of the management's actions on the occasion of findings and recommendations of the internal audit (if there is no internal audit function in the company, the Committee is obliged to make once a year the assessment of the need for establishment of such function). With regard to the external auditor the Audit committee should: • give to the Supervisory Board the recommendations related to the selection, appointment, repeated appointment and change of the external auditor and on terms and conditions of his engagement, • supervise independence and objectivity of the external auditor, especially with regard to rotation of the authorized auditors within the audit company and the remunerations the company is paying for external auditor's services, • follow the nature and the quantity of services which are not the auditing, and are received by the company from the audit company or from with it related persons, whereby is, among others, the audit company obliged to submit the information on all remunerations which the company is paying to the audit company and to with it related persons, • prepare the rules on which services the external audit company and with it related persons may not render to the company, which services it may render only with the prior consent of the Committee, and which services it may render without the prior consent, • analyze the efficacy of the external audit and actions of the management with regard to recommendations made by the external auditor, • examine the circumstances related to dismissal of the external auditor and make adequate recommendations to the Supervisory Board. The duration of the Audit Committee mandate may be time-limited to 4 years of a continuous mandate and /or by limiting the number of committees in which a member may be elected in other companies. The Audit Committee should have an open and unlimited communication with the Management Board and Supervisory Board and be responsible for its work to the Supervisory Board. The external and internal auditors need to have the possibility of direct communication with the Audit Committee. The Management Board should submit to the Audit Committee timely and periodic presentations of financial statements and related documents prior to public announcement of these records, records on changes in accounting principles and criteria, accounting procedures accepted for the majority of activities, as also each important deviation between the book and real value by single items, as also all correspondence with the internal audit department or independent auditors. The Management Board is especially obliged to inform the Audit Committee on methods used for booking the significant and unusual transactions and business events in case the book-keeping of such events may be approached in different manners. It is necessary to pay special attention to existence and justifiability of the companies' activities in off-shore centers and through special purpose companies. The Audit Committee should discuss with the independent auditor as follows: The Audit Committee should provide submission of high quality information by dependent and associated companies, as also third persons (such as expert advisors), with regard to the influence of such records on consolidated financial statements.
President of the Supervisory Board is obliged to define a calendar of regular annual meetings and convening extraordinary meetings whenever the need therefore appears. The frequency of holding the Supervisory Board meetings has to be determined in compliance with the needs of each specific company. These meetings should be held often enough to provide efficacy of the Supervisory Board's work, but not more often than once a month, in order to avoid undesirable interference in the activities of managing the company. In order to ensure efficacy and successfulness of the Supervisory Board meetings it is necessary to deliver the relevant documentation to all members of the Supervisory Board on time. The minutes of the Supervisory Board meetings have to be written in clear terms, whereas all decisions made should be recorded with voting results, stating how a single member has voted.
Each member of the Supervisory Board is obliged to inform the company on membership in the Supervisory Boards of other companies. The member of the Supervisory Board must not be a member of the Supervisory Board in the other company which might be considered competitive with the company.
The company should, in compliance with its needs and possibilities, encourage and enable permanent improvement and education of the Management Board and Supervisory Board members with the aim to re-establish and improve their knowledge and capabilities. The Supervisory Board is obliged to prepare every year the evaluation of its work in the past period. Such evaluation includes, in particular, evaluation of contribution and competency of each member, as also of the joint activities of the committee, evaluation of the activities of committees established by the Supervisory Board, and evaluation of the reached in comparison with the target objectives of the company.
3.3.1. Tasks and responsibilities The Management Board of the company manages the company activities independently and at its own responsibility, and makes all decisions exclusively at its own judgment. The existence of the consent of other bodies of the company does not exclude the responsibility of the Management Board for performing business with diligence of an orderly and conscientious businessman. The Management Board s obliged to always act exclusively in favor of the company and the shareholders, keeping account on interests of employees and the wide community, with the aim to increase the company's value. The Management Board may not transfer its powers to manage company’s business to any other body of the company. Giving procuration will not be considered as transfer of authorities to manage companies business. The Management Board activities should be defined by the rules of procedure the of Management Board, in order to clarify powers and obligations. The rules should include the following issues: The Management Board of the company should consist of several members, one of whom will be appointed for the president of the Management Board. The statute or the rules of procedure of the Management Board, approved by the Supervisory Board, should define the manner of co-operation among members. The members of the Management Board should be focused on managing business of the company, and should, aside from conditions prescribed by law, also meet other conditions in compliance with the requirements of the position of the Management Board’s member in a certain company, which might be defined by the Articles of Association of the company or decision of the Supervisory Board. At composing the Management Board it should be aimed at members of the Management Board having various experience, education and character, including: Each member of the Management Board should permanently, exactly and without delay report to the President of the Management Board on all important events from his authority, significant for assessment of the current situation and development, as also management of the company. The members of the Management Board should aim at the largest possible independence in relation to individual shareholders, groups of shareholders or other stakeholders, as they also have to be aware that, once appointed, they are accountable to all shareholders of the company. If a member of the Management Board is put under severe strain or restrictions by shareholders or partners by which the influence is being made on him performing his duties, he is obliged, in spite of that, to take an independent position at voting, or to resign, depending on what the circumstances force to be done. The company has to announce the statement of the policy of remuneration of the Management Board and the Supervisory Board as part of the annual report. The statement of the policy of remuneration of the Management Board has to be constantly announced on the web pages of the company on Internet. The statement of the policy of remuneration has to, first of all, include the policy of the company with regard to remuneration of the Management Board for the next business year, and if appropriate, for the following years, as also the overview of the manner in which the policy of remuneration of the Management Board was applied in the past year. It is especially necessary to point out the significant changes in relation to remuneration policy in comparison with the past year. The statement of remuneration policy should include the following parts: • the explanation of the relative portion and the importance of the fixed and variable components of remuneration, • sufficient information on efficiency criteria on the fulfillment of which the entitlement to acquisition of options on stocks, shares or other form of variable part of remuneration has been based, • sufficient information on connection between the amount of remuneration and efficiency, • basic indicators and reasons for award of annual bonuses or benefits which are not cash, • summery overview of contracts with the members of the Management Board which has to include the records on duration of contracts, notice periods and especially severance pays. Every type of remuneration to the members of the Management Board and the Supervisory Board which consists of options on stocks or other entitlements to acquisition of shares or if the remuneration has been based on the price of shares of the company, has to be approved prior to becoming effective by the General Assembly of the Company. This approval relates to remuneration principles, and not to approval of remuneration to single members of the Management Board of the Supervisory Board. The members of the Management Board should be paid according to their work, whereby such remuneration will be defined by the Supervisory Board of the Company. The remuneration to the Management Board's members should: The detailed records on all earnings and remunerations which each member of the Management Board receives from the Company must be publicly announced in the annual report of the Company.
Methods of determining the amount and adequacy of remuneration should take into account elements such as: All forms of remuneration to the members of the Management Board and the Supervisory Board, including options and other benefits of the Management Board should be publicly announced by detailed items and persons in the annual report of the company. The statement of remunerations to the members of the Management Board must include the following elements on each member of the Management Board who filled this post in the year to which the statement relates: • total amount of the salary, with no regard to whether it has been really paid out or not yet, • remuneration or benefits received from associated companies, • remuneration of form of participation in profit or bonuses and the reasons why they were paid out, • any other additional remunerations paid out to the members of the Management Board for activities they performed for the company outside the usual scope of duties of the Management Board's member; • compensation paid out or that should be paid out to the former member of the Management Board in relation to cease of exercising the function during the year to which the statement relates; • the total estimated value of non-cash benefits which are deemed to be remuneration, but not listed in the prior items, • with regard to remuneration in shares or options on stocks or other forms of remuneration based in acquisition of shares, it is necessary to present also the following: - the number of options or shares approved by the company in the year to which the statement relates and the terms and conditions for their use; • each loan (including the balance of debt and the interest rate), advance payment or a guarantee in favor of the members of the Management Board from the with the company associated companies included in the consolidated financial statement. The Management Board bears the responsibility for the implementation and efficacy of decisions it makes. The members of the Management Board will be solidary responsible for damages resulted as consequence of breach of their duty, except if they prove to have fairly and conscientiously performed their duties.
Each member of the Management Board is obliged to inform the Supervisory Board of the company on all changes with regard to his ownership of company shares latest on the next business day following occurrence of such change with the company being obliged to publicly announce such change within the shortest possible term. The conflict of interest exists for the member who is not neutral with regard to subject of decision making and may make influence on decision making based on the interests which are different from the interest of the company. The members of the Management Board must not make decisions based on personal interests or based on interests of persons with whom they have close relation.
All transactions in which the members of the Management Board take part or the persons related to them and the company or with it related persons should be on a market bases, especially with regard to terms, interests, warranties and similar, and should be clearly stated in the company’s reports. All such transactions should be confirmed by independent estimate of the experts being independent in relation to participants of the subject transaction. The members of the Management Board must not for their or others’ account, personally or through third persons be in competition with the company in any manner. The members of the Management Board also must not have a significant portion in the companies which might be considered as competitive with the company.
For membership in the Supervisory Board of other companies, the member of the Management Board should get the prior consent by the Supervisory Board of his company, taking into account that the member of the Management Board must not be at the same time the member of the Supervisory Board in more than 7 companies. Within the meaning of the ban from the prior sentence, the function of the President of the Supervisory Board will be counted as membership in two Supervisory Boards.
The Management Board of the parent company of the concern is responsible for strategic Management Board and long-term efficiency of the entire concern, and supervises through membership in Supervisory Boards of daughter companies their operating and investments of the group in daughter companies. As the consequence thereof, the Management Board of the parent company should the ensure adequate cooperation within a concern, taking care of timely and high quality exchange of information between the companies of the concern.
The Management Board is obliged to inform the Supervisory Board on time and integrally on all facts and circumstances which might make influence on business, financial situation and state of the company’s property, i.e. its daughter companies. The Management Board and the Supervisory Board are obliged to always reach the agreement with regard to strategic guidelines of the company and implementation of that strategy. The Management Board is obliged to make possible to its members and members of the Supervisory Board a simple and timely approach to all facilities and premises of the company, records, files and all other documents necessary for performing their duties.
The company is obliged to have independent external auditors as an important instrument of corporate governance, with regard to the fact that their fundamental function is to make sure that the financial statements adequately reflect the real situation of the company in its entirety. An auditor will be considered to be an independent external auditor who has not been, in terms of ownership or interests, related with the company and does not render, by himself or through related persons, any other services to the company. The independent external auditors are obliged, in an as clear as possible manner and unambiguously express their opinion on whether the financial statements prepared by the Management Board adequately reflect the status of capital and financial situation of the company, as also results for a certain period of time. The Audit Committee is obliged to determine the work plan with the independent external auditors, and to propose the remuneration for auditor’s work. The Audit Committee is obliged to submit to the Supervisory Board proposals and recommendations at selecting independent external auditors, prolongation of co-operation and termination of co-operation with the auditors. The independent auditors are obliged to report directly to the Audit Committee on the following issues: The procedures being undertaken by the audit company should reflect their independency and objectiveness, especially if within the same audit company the employees render also other professional, especially advisory, services. The Audit Committee should be acquainted with all services rendered by the independent audit company, as also with remunerations for these services in order to prevent any doubt in independency of auditors and avoid possible conflict of interests. In case of occurrence of circumstances showing the possibility of endangering auditors’ independency the Supervisory Board is obliged to make recommendations to the Assembly to engage new business advisors or auditors. The company is obliged to publicly announce amounts of remunerations paid to independent external auditors for the performed audit, as also for other services rendered. The task of the internal auditors is the supervision of internal control, as also examination of compliance with the regulations, guidelines and instructions. The internal auditors submit the report on their results directly to the Audit Committee i.e. the Supervisory Board of the company. The Supervisory Board is obliged to approve the annual work plan of internal auditors, to analyze their results and supervise implementation of their recommendations. If the service of internal audit is rendered by external associates, not in any case this may be the independent external auditors of the company. The Audit Committee and the Supervisory Board should efficaciously participate in planning the activities of internal auditors. The President of the Management Board has been entrusted with the task to establish the internal supervision system to structure and supervise the course of exact, specific and complete records on organization of the company, such as the records on compliance with the financial, business and legal obligations which might present a significant risk for the company. The internal auditor should analyze and examine the efficacy of such system at least once a year.
The Management Board of the company is obliged to make available to investors balanced records relating to both positive and negative sides of the company’s operating, in order to enable the investors to understand and judge the situation of the company in the proper way, and based on records gathered in such way, to make decision on their investments. The investors should always have the possibility to request in written form and timely receive all relevant records from the Management Board of the Company or from the person in the company responsible for relations with the investors. The Management Board of the company, thereby, is not permitted to give information or to answer the questions raised only as meeting their obligation, but it should also voluntarily give information and, if the Management Board considers it to be serving the purpose and necessary to understand the answer, even exceeding the requested volume, with regard to the fact that the high quality exchange of information, especially when spontaneous, clear and quick, leads to an atmosphere of trust between investors and the company’s body. The Management Board of the company should periodically, and in case of the expressed interest, also hold special conferences with investors. The company is obliged to, through the own Internet page, ensure efficaciously and practical exchange of information by Internet. The company is obliged to announce on the own web site all information which it otherwise must publicly announce in compliance with the law or the Articles of Association. Apart form these information, the company is obliged to announce on its website all price sensitive information not being part of the preferred information, financial statements, calendar of important events, ownership structure, CV's of the members of the Management Board and Supervisory Board, and records on contact person entrusted with investors relations. For the reason of equal treatment of all shareholders, regardless of the country of origin, the company has to announce all records it announces on its web page on internet in the Croatian and in the English language. To the extent of this Code, the stakeholders are considered to be the persons taking over certain direct or indirect risks in relation to the company and with regard to the company. Apart form shareholders, the stakeholders are also, among others, employees, buyers, beneficiaries of company’s services, suppliers, creditors, local community and bodies of the state authorities. The Management Board of the company bears the responsibility for transparent and high quality relationship of the company and the stakeholders, which is also responsible to take care of the company respecting all rights of stakeholders based on the law and the fair business practices. No one should suffer from negative consequences if he/she points to the competent authorities or bodies in the company at inadequacy in application of rules or ethical norms within the company. In its annual report, as also on its web pages the company is obliged to state within the defined form (annual questionnaire) whether it held to all recommendations stated in this Code. This Code and its recommendations are based on a principle "comply or explain", i.e. if the company departs from or does not apply some of the recommendations of this Code, it has to give the explanation in the annual questionnaire why it came to nonapplication or departure. The annual questionnaire makes the integral part of this Code.
CODE OF CORPORATE GOVERNANCE ANNUAL QUESTIONNAIRE
• determined by the decision of the General Assembly: 39. Have the detailed records on all remunerations and other earnings from the company or from the with the company related persons of each individual member of the Supervisory Board of the company, including the structure of such remuneration, been publicly announced? (If not, why?) (If yes, where?) • concluded on the market basis (especially with regard to terms, interests, guarantees and similar)? (If not, why and which?)
• total amount of the salary, with no regard to whether he/she has actually been paid out or not (If not, why?) 58. Did every member of the Management Board informe the Supervisory Board of the company on all changes with regard to his/her ownership of the shares latest the next business day upon occurrence of such change with the obligation of the company to publicly announce such change in the shortest possible term? (If not, why?)
62. Are the members of the Management Board the members of the Supervisory Boards of other companies? (If yes, state the names of these members of the Management Board, the firms of the companies in which they are the members of the Supervisory Boards, and the functions they fill in these Supervisory Boards).
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