Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES 2013 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Contents Introduction................................................. ........................................................... .............................. 3 Background................................................. ........................................................... ............................... 3 Structure................................................. ........................................................... ..................................... 5 Reach ..................................................... ................................................................ ................................................... 6 Code of Good Corporate Governance of the ........................................... ................... Peruvian Companies.............................................. ........................................................... ............ 7 Pillar I: Shareholders' rights ................................................ ........................................................... .... 7 Principle 1: Parity of treatment ........................................... ........................................................... .........7 Principle 2: Participation of shareholders.............................................. ........................................... 7 Principle 3: No dilution in the participation in the share capital ........................................... ............ 7 Principle 4: Information and communication to shareholders.................................... ................ 7 Principle 5: Participation in company dividends................................................... ........................... 8 Principle 6: Change or take control................................................... .............................................. 8 Principle 7: Arbitration for dispute resolution................................................... ........................ 8 Pillar II: General Meeting of Shareholders.............................................. ........................................................... .8 Principle 8: Role and competence............................................ ........................................................... 8 Principle 9: Regulations of the General Shareholders' Meeting.............................................. .................9 Principle 10: Mechanisms of convening.............................................. ........................................... 9 Principle 11: Proposals for agenda items................................................... ........................................... 9 Principle 12: Procedures for the exercise of the vote ................................................ ........................... 9 Principle 13: Delegation of votes............................................. ........................................................... .10 Principle 14: Follow-up of agreements of the General Meeting of Shareholders................................... 10 Pillar III: The Board of Directors and Senior Management ......................................... ......................................................... 10 Principle 15: Composition of the Board of Directors ........................................... ........................................... 10 Principle 16: Functions of the Board of Directors................................... ........................................... eleven 1 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Principle 17: Duties and rights of the members of the Board of Directors ................................... ..... eleven Principle 18: Regulations of the Board of Directors ................................... ........................................ eleven Principle 19: Independent Directors .............................................. ....................................... eleven Principle 20: Operability of the Board of Directors................................... ........................................... 12 Principle 21: Special committees ........................................... ........................................................... 12 Principle 22: Code of Ethics and conflicts of interest.............................................. ......................... 12 Principle 23: Transactions with related parties.............................................. ........................... 13 Principle 24: Functions of Senior Management ................................................ ........................................... 13 Pillar IV: Risk and Compliance ................................................ ........................................................... ...... 14 Principle 25: Environment of the risk management system................................................... ................... 14 Principle 26: Internal audit ........................................... ........................................................... ... 14 Principle 27: External auditors ........................................... ........................................................... fifteen Pillar V: Transparency of information ................................................ ........................................... fifteen Principle 28: Information policy ............................................ ............................................. fifteen Principle 29: Financial statements and annual report ........................................... ........................ 16 Principle 30: Information on shareholding structure and agreements between shareholders.............. 16 Principle 31: Corporate governance report ................................................ .............................. 16 Annex A ......................................................................................................................................... 17 Supplementary Principles for State-Owned Enterprises (EPE) ................................................ 17 Pillar I: Shareholders' rights ................................................ ................................................ 17 Pillar II: The Board of Directors and Management................................... ........................................................... 17 Pillar III: Risk and compliance............................................ ........................................................... ... 18 Pillar IV: Transparency of information ................................................ ........................................... 18 Annex B ................................................ .................................................. ....................................... 19 Supplementary Principles for Family Partnerships.................................................... ................ 19 Pillar I: Shareholders' rights ................................................ ................................................ 19 Pillar II: The Board of Directors and Management................................... ........................................................... . twenty Pillar III: Risk and compliance............................................ ........................................................... ... twenty-one Pillar IV: Transparency of information ................................................ ...................................... twenty-one 2 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Introduction Background At the beginning of the 1990s, strong pressure arose to strengthen good corporate governance practices in the world, due to the fact that investors demanded greater participation in the administrative bodies of companies. However, corporate governance became of particular importance as a result of the Asian crisis at the end of the last century, as a result of which new corporate governance approaches and instruments were generated. In this context, the Organization for Economic Cooperation and Development (OECD, OECD for its acronym in English) issued its first declaration of principles in 1999, supported by advances in economic theory about agency problems and asymmetries of information. These principles, as indicated by the OECD, are evolutionary in nature and must be reviewed considering the changes that occur in the business context. Likewise, this body highlights that for companies to remain competitive in a changing world, they must innovate and adapt their corporate governance practices in order to meet the new demands and take advantage of the opportunities that arise. This statement of principles was revised and Updated in 2004. For its part, and following this trend, CAF-Development Bank of Latin America issued its first guidelines in 2004, which have been updated in 2013. The adoption of good corporate governance practices by companies, promotes a climate of respect for the rights of shareholders and investors in general; it contributes to generating value, solidity and efficiency in societies; it brings with it a better management of the risks to which they are exposed; facilitates access to the capital market; it leads to a reduction in the cost of capital, as well as greater and better access to sources of financing and long-term investment; among other advantages. Likewise, experience has shown that to the extent that there is greater transparency and information, the greater the confidence that investors develop in the markets. Good corporate governance practices help mitigate the failures that exist in financial markets due to information asymmetry. 3 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Recognizing the importance for the development of the capital market of the promotion of greater corporate transparency, as well as the described advantages of having good corporate governance practices, in 2002 a committee was formed made up of eight entities from the public and private sectors, chaired by the then National Supervisory Commission for Companies and Securities (CONASEV), today the Superintendence of the Securities Market (SMV), in order to establish principles of good corporate governance applicable to Peruvian companies. As a result of this joint effort, in July 2002 the document Principles of Good Governance for Peruvian Companies was issued, which was based on the Principles for the Governance of Companies issued by the OECD; considering the particular characteristics of Peruvian companies, their shareholding structure and the legal framework in which they developed. These principles covered, among other relevant issues, aspects related to the rights and equitable treatment of shareholders, the role of interest groups in corporate governance, communication and information transparency, and the responsibilities of the Board of Directors, constituting of this mode in an important benchmark of good practices for Peruvian companies, especially for those whose securities are subject to public offering in the stock market. In line with the issuance of the aforementioned document and following international trends, the then CONASEV took on the challenge of requiring companies whose securities were subject to public offering to disclose the degree of adherence to said principles, through their respective annual reports and prospectuses informative. More than 10 years after the Principles of Good Governance for Peruvian Companies were issued, the need to carry out their comprehensive review has been seen, taking into account the development of the legal regulatory framework that governs the stock market, the shortcomings and weaknesses that have become evident in the recent international crisis regarding the transparency of information and internal control of companies, and the advances in good corporate governance issues developed by the CAF and the OECD. In this orientation, on February 23, 2012, the Committee for Updating Principles of Good Governance for Peruvian Companies was established, which was made up of 14 institutions and business associations representing the Peruvian stock market and the business sector of the country mentioned above. , which, under the presidency of the SMV and with the financial support of CAF, have developed the new Code of Good Corporate Governance for Peruvian Companies. 4 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The Code is aimed at providing an updated version that includes the best standards of good corporate governance identified at the global and local levels, applicable to the Peruvian reality, placing special emphasis on the new advances experienced in this field, especially in the dynamics of the General Meeting of Shareholders (ownership), the Board of Directors (administration) and Senior Management (ordinary management), as well as in the implementation of adequate risk management; all with the aim of promoting the establishment of reciprocal controls and that societies function efficiently. Structure The new Code presents a renewed structure, in accordance with the needs and characteristics of the Peruvian securities market and, in particular, of companies Peruvian. In its development, it addresses aspects related to corporate management and collects the contributions of the public and private sector entities that made up the Committee in charge of its drafting. Thus, through this document it is expected to contribute to promoting the implementation of best practices of good governance by companies. Peruvian. The Code of Good Corporate Governance for Peruvian Companies is divided into five pillars: a. Shareholders' rights; b. General meeting of shareholders; c. The Board of Directors and Senior Management; d. Risk and compliance; Y and. Information transparency. Likewise, two annexes of complementary principles have been included, one for State Companies (EPE) and the other for family companies, thus recognizing their relevance in the country's economic activities, especially bearing in mind that some of such companies have its securities registered in the Public Registry of the Securities Market of the SMV. Therefore, it should be emphasized that these annexes do not constitute specialized and comprehensive codes for such types of companies, but rather additional considerations that must be taken into account due to their particular characteristics and conditions. It is important to specify that the Code of Good Corporate Governance for Peruvian Companies does not cover aspects such as Corporate Social Responsibility for the management of relations with interest groups, without this implying that its importance for the sustainability of companies is not recognized. and the market in general. 5 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES reach The Code of Good Corporate Governance for Peruvian Companies pursues the objective of helping to generate a true culture of corporate governance in Peru, which improves the perception of corporations by investors, promotes business development, and contributes to the value creation in the economy Peruvian. Based on this premise, and along the same lines as the Principles of Good Governance for Peruvian Companies, it is recognized that the adoption of the Code of Good Corporate Governance for Peruvian Companies is voluntary. The company that assumes them must be able to demonstrate its adherence documented, through corporate mechanisms or documents, such as bylaws, regulations, policies or internal regulations that it maintains in force, as well as its effective application in line with the "comply or explain" principle. , recognized internationally. These principles are a guide for all corporations in the country, especially those with securities registered in the Public Registry of the Stock Market. Its voluntary implementation, reflecting its clear capacity for self-determination and self-regulation, is expected to revert to its competitiveness and sustainability. Adherence to these principles and their disclosure by the companies will, in turn, become a reference that the different interest groups will value, and that will contribute to their positioning in the capital markets of the country and abroad. It is important to keep in mind that these principles recognize practices that add to the obligations arising from current regulations. Likewise, the definitions contained in the Securities Market Law and in the regulations issued by the SMV apply, where appropriate, to the principles contained in the Code. 6 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Code of Good Corporate Governance of the Peruvian Companies Pillar I: Shareholder Rights Principle 1: Parity of treatment In its actions, the company recognizes equal treatment for shareholders of the same class and who maintain the same conditions, which in no case entails the delivery of privileged information to a group of shareholders to the detriment of the rest of the shareholders. The company does not promote the existence of classes of shares without voting rights. When there are securities with patrimonial rights other than ordinary shares, the company promotes and executes a policy of voluntary redemption or exchange of said securities for ordinary shares. Principle 2: Participation of shareholders Shareholders, depending on the nature of the shares they hold, have the right to participate and vote at General Shareholders' Meetings. The company clearly establishes in its corporate documents the method and the person responsible for registering share ownership rights, ensuring in particular that the registration of shares is administered in a safe and reliable manner, and keep permanently updated. Principle 3: No dilution in the participation in the share capital The proposals of the Board of Directors referring to corporate operations that may affect the shareholders' right to non-dilution (ie, mergers, spin-offs, capital increases, among others) are previously explained by said body in a detailed report that has the independent opinion of an external advisor of recognized professional solvency appointed by the Board of Directors, preferably with the favorable vote of the independent directors, who clearly express their total or partial acceptance of the aforementioned report and support, if applicable, the reasons for their disagreement. The reports are made available to the shareholders in a timely manner. Principle 4: Information and communication to shareholders Shareholders have the right to receive and request timely, reliable and truthful information that allows them to adequately safeguard their rights, including permanent access mechanisms to express their opinion on the development of the company. 7 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The company determines those responsible and the means by which it promptly informs and responds to shareholders' information requirements, such as corporate web pages, investor relations office, information meetings, among others. The company communicates and makes available to the shareholders the information related to with the General Meeting of Shareholders, and other complementary information that helps shareholders in their decision making. The shareholders, when appropriate, request additional reports or clarifications about the points to be discussed at the General Shareholders' Meeting. The shareholders are informed about the rules to reach a quorum, as well as about the situations that require a qualified quorum. Principle 5: Participation in company dividends The company has a dividend policy that expressly establishes the criteria for distribution of profits, which is disseminated among the shareholders, using, among other means, its corporate website. This dividend policy is subject to evaluations of defined periodicity that verify its execution. Principle 6: Change or take control The company maintains policies or agreements not to adopt anti-absorption mechanisms. In the cases of takeover bids (OPA) of company shares, the company maintains policies that recognize and enable shareholders to participate in the premium paid for acquiring control of the company. Principle 7: Arbitration for dispute resolution The company's bylaws include an arbitration agreement that recognizes that it is subject to arbitration of law any dispute between shareholders, or between shareholders and the Board of Directors; as well as the challenge of agreements of the General Meeting of Shareholders and the Board of Directors by the shareholders of the company. Said clause makes it easier for an independent third party to resolve controversies, except in the case of express legal reserve before the ordinary justice system. Pillar II: General Meeting of Shareholders Principle 8: Role and competence The General Meeting of Shareholders is the sovereign and supreme body of the company. The The statute clearly recognizes and attributes the functions of the General Shareholders' Meeting in the governance of the company and in the control of the administrators. The exclusive and non-delegable functions of the General Shareholders' Meeting are the approval of the remuneration policy of the Board of Directors, the approval of the financial statements and the appointment of the members of the Board of Directors. 8 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Principle 9: Regulations of the General Meeting of Shareholders The conditions and procedures related to the participation and the exercise of the rights of the shareholders, as well as the procedures for the appointment of the members of the Board of Directors, are specified in the Regulations of the General Shareholders' Meeting, which is binding and its non-compliance entails responsibility. Principle 10: Call mechanisms The company establishes call mechanisms that allow establishing contact with the shareholders, particularly with those who do not participate in the control or management of the company. These mechanisms include public announcements or notices, emails, the corporate website and, whenever possible, individualized communications. In addition to the call notice in which the items on the agenda are disclosed, as well as the place and time of the General Shareholders' Meeting, the company makes available to the shareholders all the information related to the items contained in the agenda of the General Meeting of Shareholders and the proposals of the agreements that are proposed to be adopted. Principle 11: Proposals for agenda items The companies include in their General Shareholders' Meeting Regulations mechanisms that allow shareholders to exercise the right to formulate proposals for items on the agenda to be discussed at the General Shareholders' Meeting. The procedures for accepting or denying such proposals are established and delimited in the Regulations of the General Shareholders' Meeting. The proposals made by the shareholders must be clear and precise so that they can be evaluated. If said proposals are denied, the shareholders who proposed them are informed of the support for such denial. Principle 12: Procedures for the exercise of the vote The company defines procedures for the exercise of the vote, in such a way that they are accessible and simple to the shareholders. The company has the mechanisms in place that allow the shareholder to vote remotely by secure, electronic or postal means, and that guarantee that the person who casts the vote is actually the shareholder. The corporate documents clearly specify that the shareholders can vote separately on those matters that are substantially independent, so that they can exercise their voting preferences separately, in particular, in the appointment or ratification of the Directors, the individual vote by each one of them 9 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES and, in the modification of the statutes, for each article or group of articles that are substantially independent. Companies allow those who act on behalf of several shareholders to cast differentiated votes for each shareholder, so that they comply with the instructions of each represented party. Principle 13: Delegation of votes The company does not limit the shareholder's right to delegate their vote. The society has procedures detailing the conditions, means and formalities to be fulfilled in situations of delegation of votes and makes a model letter of representation available to shareholders. Said document includes the data of the representatives, the issues for which the shareholder delegates his vote and, if applicable, the direction of his vote for each of the proposals. When the delegation is made to a member of the Board of Directors or Senior Management of the company, the shareholder clearly establishes the meaning of his vote; however, the representative may not exercise the right to vote corresponding to the shares represented in those items on the agenda in which there is a conflict of interest. The company establishes limits for the delegation of votes when it comes to members of the Board of Directors or Senior Management. Principle 14: Follow-up of agreements of the General Meeting of Shareholders The company, through a responsible area or official, monitors the agreements adopted by the General Shareholders' Meeting and issues periodic reports to the Board of Directors. The reports are available to shareholders. Pillar III: The Board of Directors and Senior Management Principle 15: Composition of the Board of Directors The company has a Board of Directors composed of a number of members that is sufficient for effective and participatory performance, and that enables the formation of special committees that are necessary. It is made up of people with different specialties and skills, with prestige, ethics, economic independence, sufficient availability and other relevant qualities for society, so that there is a plurality of approaches and opinions. The minimum and maximum number of directors is contained in the statute. The company avoids the appointment of substitute or alternate directors, especially for reasons of quorum. 10 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The company discloses the names of the directors, their status as independent or not, and their resumes, and informs about the other Boards of Directors that make up the directors of the company. Principle 16: Functions of the Board of Directors The Board of Directors has the function of approving and directing the corporate strategy of the company; establish objectives, goals and action plans, including annual budgets and business plans; control and supervise management; as well as being in charge of the government and administration of the company. It is the function of the Board of Directors to supervise good corporate governance practices and establish the necessary policies and measures for their best application. Principle 17: Duties and rights of the members of the Board of Directors Directors must carry out their duties with good faith, diligence, high ethical standards, due care and confidentiality, always acting with loyalty and in the interest of the society. In its performance, the Board of Directors, as a body, acts with unity of criteria and the directors exercise their functions with independent criteria. The members of the Board of Directors have the right to request the support or contribution of experts from the Board of Directors, to participate in induction programs on their powers and responsibilities, to be informed in a timely manner about the organizational structure of the company, as well as to receive remuneration for their work. effected. Directors' remuneration combines recognition of professional experience and dedication to society, with rationality criteria. Principle 18: Board Regulations The company has a Board of Directors Regulation that contains the policies and procedures for its operation, its organizational structure, as well as the functions and responsibilities of the Chairman of the Board of Directors. It is binding and non-compliance entails responsibility. The Board Regulations include formal and transparent procedures for the identification, evaluation and nomination of candidates, cases of vacancy and dismissal, and the succession of directors. These Regulations establish that the Appointments and Remuneration Committee is in charge of nominating the candidates for members of the Board of Directors, who are proposed to the General Shareholders' Meeting by the Board of Directors. Principle 19: Independent Directors The Board of Directors, within the framework of its powers to propose the appointment of directors, promotes that at least one third of the Board of Directors be made up of independent directors. Independent directors are those selected for their 11 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES professional career, honorability, sufficiency and economic independence and separation from the company, its shareholders or directors. The proposed independent director declares his or her independent status before the company, its shareholders and directors. Likewise, the Board of Directors declares that the candidate is independent, not only based on his statements but also on the inquiries he has made. Principle 20: Operability of the Board of Directors The Board of Directors has a work plan that contributes to the efficiency of its functions. The number and scheduling of the ordinary sessions allow for adequate compliance with said work plan and proper monitoring of the company's performance in its relevant aspects. The company provides its directors with the necessary channels and procedures so that they can participate effectively in Board meetings, even remotely. The Chairman of the Board of Directors ensures that the directors receive sufficient information prior to the sessions. The Board of Directors evaluates regularly and objectively, at least once a year, its performance as a collegiate body and that of its members. It is recommended that in said evaluation the methodology of self-assessment alternate with the evaluation carried out by external advisors. Principle 21: Special Committees The company's Board of Directors forms, among its members, special committees that focus on the analysis of those aspects that are most relevant to the company's performance, such as auditing, appointments and remuneration, risks, corporate governance, among others. The number of committees established depends on the size of the company and the nature of its business, with at least an Appointments and Remuneration Committee and an Audit Committee. The special committees are led by independent directors. The company allocates a budget to the special committees that allows them to decide on the eventual hiring of external advisors when they consider it necessary for the performance of their duties. The Board of Directors approves the regulations that govern each of the special committees that it constitutes. Principle 22: Code of Ethics and conflicts of interest The company has a Code of Ethics that is required of its directors, managers, officers and other employees of the company, which includes ethical and professional responsibility, including the handling of potential cases of conflicts of 12 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES interest. The company adopts measures to prevent, detect, manage and disclose conflicts of interest that may arise. The directors refrain from voting or participating in matters that could represent a conflict of interest. The Board of Directors is responsible for monitoring and controlling possible conflicts of interest that arise in the Board of Directors. The members of the Board of Directors and Senior Management are prohibited from receiving loans from the company or from any company in its economic group, provided that it is not a financial institution, unless they have prior authorization from the Directory. The company appoints a person responsible for monitoring compliance with the Code of Ethics, who keeps an orderly record of breaches of the provisions established in said code and responds directly to the general manager. The Board of Directors or the General Management promote and approve training programs for compliance with the Code of Ethics. The company has mechanisms that allow complaints to be made corresponding to any illegal or unethical behavior, guaranteeing the confidentiality of the complainant. When the complaints are related to accounting aspects or when the General Management or the Financial Management are involved, said complaints are presented directly to the Audit Committee. Principle 23: Transactions with related parties The Board of Directors establishes policies and procedures for the assessment, approval and disclosure of certain operations between the company and related parties, including intra-group operations, as well as for knowing the direct or indirect commercial or personal relationships that the directors maintain among themselves, with society, with its suppliers or customers, and other interest groups. In the case of operations of special relevance or complexity, the intervention of independent external advisors may be considered for their assessment. Principle 24: Functions of Senior Management There is separation between the administration or government exercised by the Board of Directors, the ordinary management in charge of Senior Management and the leadership of the general manager, through a clear policy of delimitation of functions. The appointments for the positions of general manager and chairman of the Board of Directors fall to different people. The Senior Management has sufficient autonomy to carry out the assigned functions, within the framework of policies and guidelines defined by the Board of Directors, and under its control. The Senior Management acts according to the same principles of diligence, loyalty and confidentiality that the Board of Directors maintains. 13 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The General Management is responsible for the risk management system, in the event that there is no Risk Management, as well as for complying with and enforcing the policy of timely delivery of information to the Board of Directors and its directors so that they adopt duly informed decisions and keep abreast of the main facts that concern society. The Board of Directors evaluates, on an annual basis, the performance of the General Management based on well-defined standards. The Appointments and Remuneration Committee approves the remuneration and incentive system for Senior Management. The remuneration of Senior Management has a fixed and a variable component, which take into consideration the results of the company, based on a prudent and responsible assumption of risks, and the fulfillment of the goals outlined in the respective plans. Pillar IV: Risk and Compliance Principle 25: Environment of the risk management system The Board of Directors approves a comprehensive risk management policy in accordance with the size and complexity of the company; defines the corresponding roles, responsibilities and reporting lines; and promotes a risk culture within the company, from the Board of Directors and Senior Management to the employees themselves. In the case of economic groups, this policy reaches all the companies that make up the group and allows a global vision of the critical risks. The General Management periodically supervises the risks to which the company is exposed and informs the Board of Directors of them. The comprehensive risk management system allows the identification, measurement, administration, control and monitoring of risks. The company's Board of Directors is responsible for the existence of an internal and external control system, as well as for supervising its effectiveness and suitability. For this purpose, it constitutes an Audit Committee. Principle 26: Internal audit The internal auditor performs auditing tasks exclusively, has autonomy, experience and specialization in the issues under his evaluation, and independence for the monitoring and evaluation of the effectiveness of the risk management system, and must observe the principles of diligence, loyalty and reserve required of the Board of Directors and Senior Management. Its functions include the permanent evaluation that all the financial information generated or registered by the company is valid and reliable, as well as the verification that the regulatory compliance function is exercised effectively. 14 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The internal auditor reports directly to the Audit Committee on its plans, budget, activities, progress, results obtained and actions taken. The internal auditor reports organizationally to the Board of Directors, so his appointment and removal corresponds to the Board of Directors at the proposal of the Audit Committee. Principle 27: External auditors The external financial audit performs evaluations on the effectiveness and operability of the internal control system, especially with the purpose of evaluating the risk that there may be errors in the company's financial information. The General Shareholders' Meeting, at the proposal of the Board of Directors, appoints the audit firm or the independent auditor, who maintain clear independence from the company. The company maintains a renewal policy for its independent auditor or audit firm. The work team of the audit firm rotates at most every five years, in case said policy establishes longer renewal terms. In the case of economic groups, it is recommended that the external auditor be the same for the entire group, including the off-shore subsidiaries. The Board of Directors may agree to hire the audit firm or the independent auditor to perform other services other than those of the audit of accounts, which will be reported to the General Shareholders' Meeting, including the percentage of the billing that said services represent on the billing of the audit. The Audit Committee supervises the work of the audit firm or the independent auditor, as well as compliance with the rules of legal and professional independence. Pillar V: Transparency of information Principle 28: Information Policy The Board of Directors establishes in the respective corporate document an information policy for shareholders, investors, other interest groups and the market in general, with which it defines in a formal, orderly and comprehensive manner the guidelines, standards and criteria that will be applied in the management, collection, preparation, classification, organization and/ or distribution of information generated or received by society. The information policy covers everything that could influence the economic decisions of its users, such as the objectives of the company, the list of members of the Board of Directors and Senior Management, the shareholding structure, the description of the economic group to which belongs and the financial statements, among others. 15 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The Board ensures that the information is sufficient, truthful and delivered in a timely and equitable manner. The company maintains an investor relations office responsible for responding to requests for information, both from shareholders and the general public. In the same way, the information provided is subject to supervision by an area or authority empowered for this purpose within the company. Principle 29: Financial statements and annual report The company prepares its financial statements in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and which are in force internationally. The Board of Directors approves the company's annual report once a year, which provides, among other aspects, opinions or observations on its financial performance, relevant risk factors, significant events for the company, relations with related parties and the effects of provisions or agreements of the General Meeting of Shareholders. Principle 30: Information on shareholding structure and agreements between shareholders The company discloses the ownership structure, considering the different classes of shares and, if applicable, the joint participation of a certain economic group. The company reports on the agreements or pacts between shareholders, including cases in which control proportionally greater than that derived from the shareholding could be exercised, as well as those associated with possible changes in the company's internal or statutory rules. Principle 31: Corporate governance report The company discloses the standards adopted in matters of corporate governance in an annual report, the content of which is the responsibility of the Board of Directors, following a report from the Audit Committee, the Corporate Governance Committee, or an external consultant, if the case. 16 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Annex A Complementary principles for Companies of State Property (EPE) Pillar I: Shareholder Rights Principle E1: Share Transfer Regime The EPE's share transfer regime is clearly determined, includes the share sale mechanism and its valuation rules, and is public knowledge. In any share transfer process, the EPE ensures a transparent execution of the operation, ensuring, equally, the rights of all shareholders. When the transaction may lead to the State ceasing to be the owner of the EPE, sufficient information is disclosed to the market on the fundamentals and implications, as well as on the conditions and characteristics of the operation to be carried out. Principle E2: Equitable treatment of shareholders The EPE has a policy for equitable treatment of shareholders, with the Board of Directors being responsible for its approval. Likewise, said policy approved by the Board of Directors, as well as its compliance, is reported to the General Shareholders' Meeting. Pillar II: The Board of Directors and Management Principle E3: Conflict Resolution The EPE has a general conflict resolution policy, which it applies to its different interest groups, and incorporates its mechanisms into the contracts it enters into with third parties when the evaluation of its cost-benefit so suggests. This principle prevails over principle 7 of this code. Principle E4: Election of Directors The process of electing the members of the Board of Directors is transparent, for this purpose the profiles on the characteristics or competencies sought are disclosed, as well as the rules and conditions applicable for the nomination, evaluation and appointment of the aforementioned members. Similarly, the causes and mechanisms for the dismissal of directors are determined and are public knowledge. 17 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Principle E5: Composition of the Board of Directors The SOE favors the integration of the Board of Directors with independent members who come from the private sector, do not have political ties with the Government and lack management or ownership relationships with the different public entities related to the SOE. Principle E6: Code of Ethics The Board of Directors, as part of its task of monitoring the application of the Code of Ethics, promotes and supervises its compliance. Pillar III: Risk and compliance Principle E7: Risk management system The SOE has an effective comprehensive risk management system that allows for the timely identification and evaluation of the risks faced by the SOE in its different processes. The Board of Directors is responsible for dictating the policies on said system and for monitoring its application. As part of this system, the EPE identifies, evaluates and establishes measures for the administration or control of the different risks it faces. Pillar IV: Transparency of information Principle E8: Disclosure of information The EPE incorporates the following aspects within the information that it regularly disseminates: a) The objectives it maintains. b) The indebtedness policy applied, if applicable. c) The transactions it has carried out with other SOEs, which it records as part of its financial statements. d) Orders received from your sector or from another State entity. e) The main risk factors faced. f) The policies and regulations issued by the parent company. 18 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Annex B Supplementary Principles for Family Partnerships1 Pillar I: Shareholder Rights Principle F1: Family governance structure and family protocol Family companies have a clearly defined governance structure that is appropriate to the family reality, which is reflected in the family protocol. The family protocol contains the vision, mission, values, conditions and rules in the form of economic and professional relationships between the family, shareholders and society, including the limitations associated with such interrelation; the measures to prevent, detect, manage and disclose the conflicts of interest that arise; and the possible roles of family members in the formation and distribution of functions within the governing bodies of society. In aspects of property, the family protocol indicates, among other aspects, the shareholding policies for family members; the rules to apply when family members transfer their shares; as well as resolution mechanisms of controversies that the members of the family will apply among themselves when it comes to interests related to society. The family protocol establishes the period in which it is revised to adapt it to the needs and changes of the family and society. Principle F2: Family Assembly There is a Family Assembly whose main function is to guide and reconcile the positions of family members related to ownership or management of the company, establishing policies to preserve long-term common interests. The Family Assembly meets at least once a year to inform, analyze and deliberate on the main aspects of common interest associated with the performance and perspectives of society, as well as to know or make decisions related to the family protocol and its different components. All members of the Family Assembly have the same rights and a single vote, regardless of their shareholding in the company or their family ties. In cases where special conditions are considered to be a member of the Family Assembly, they are incorporated into the family protocol. 1 As a reference for the concept and scope of a Family Business, the definition of the IFC (International Finance Corporation) is taken, incorporated in its IFC Manual for the Governance of Family Businesses: “A family business will be that company where the majority of the votes are in hands of the controlling family, including the founder(s), who seeks to transfer the company to his descendants.” 19 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES Principle F3: Family Council Family companies have a Family Council, a body in charge of being the main link between the family and the Board of Directors and Management of the company. As such, it is mainly focused on coordinating the execution of the agreements adopted by the family, regarding society; participate in the election of family members who will be proposed to assume directive or managerial responsibilities in the company; resolve possible conflicts that arise; and, in particular, to subscribe to and monitor the application of the family protocol, promoting its knowledge and dissemination. In addition, it guides and advises the Family Assembly, as well as serving as a consultative body for the Board of Directors. This Council is elected by the Family Assembly and is made up of family members or their representatives. Its conformation and structure is subject to well-defined rules, in accordance with the provisions of the family protocol. It meets with due frequency during each annual exercise. Pillar II: The Board of Directors and Management Principle F4: Management In aspects of management, the family protocol indicates, at least, the participation policies and the limitations to be observed by the members of the family in the direction and management of the company. In particular, it establishes the criteria to promote equitable treatment between family members and those who do not belong to the family, insofar as they perform Board of Directors, Senior Management or administration functions in general. Likewise, preference is given to the selection of directors and officers based on skills, without being relevant to this their status as a member of the family. In the same way, the family protocol stipulates the conditions and characteristics to present candidates as part of the succession plan in the Board of Directors and the Management of the members of the Family, as well as the criteria to propose candidates to the Board of Directors, who should preferably be independent. . Principle F5: Independence and operations with like-minded people The family protocol, for the purposes of direction and management, establishes the scope of the definition of independence, based on that applied by the company and, if applicable, expanding the limitations with respect to other degrees of kinship by blood or affinity with the family. 20 Machine Translated by Google CODE OF GOOD CORPORATE GOVERNANCE FOR PERUVIAN COMPANIES The family protocol regulates the conditions under which spouses and blood relatives or by affinity of family members participate as employees, contractors or clients of the company. Pillar III: Risk and compliance Principle F6: Transactions between the company and family members The family protocol stipulates the conditions and mechanisms by which the Family Council is regularly informed about the operations or transactions carried out by family members with society. In the same way, it establishes the rules by which some of these operations require prior knowledge or approval of the Family Council, as well as the manner and opportunity in which they will be informed to all family members and shareholders who do not belong to the family. . Pillar IV: Transparency of information Principle F7: Channels of communication with the family The Family Council determines, in accordance with what is indicated in the family protocol, the communication channels necessary to keep all members of the family informed about the business, the strategy, the challenges and the general direction in which the family is moving. society. 21