The compliance guidelines contain all of the laws and guidelines within KTM AG as well as the ethical standards and requirements codes that the Company sets for itself.
COMPLIANCE GUIDELINES FOR KTM AG
(Version from 31/12/2010)
1. Preliminary remarks
1.1. Shares in KTM AG (“KTM AG”) may be traded on the Vienna Stock Exchange, as well as within Austria on a regulated market in the sense of Section 1 para. 2 BörseG [Austrian Stock Exchange Act]. The regulations of the Austrian Financial Market Authority (FMA) concerning the basic principles for the passing on of information in companies, as well as concerning organisational measures for preventing the misuse of insider information for issuers (Regulation on Compliance for Issuers 2007) (“ECV”), apply to KTM AG. Section 12 ECV obliges KTM AG to issue internal compliance guidelines within its organisation.
1.2. KTM AG is the statutory consolidation parent company of the KTM Group. KTM AG solely exercises a holding function and has no employees. Operational activities including but not limited to the development, production and sale of sports motorcycles, as well as the development, production and sale of sports cars, are performed solely by KTM-Sportmotorcycle AG (“KTM SMC”). Furthermore, KTM SMC performs services for KTM AG in the area of finance and accounts, controlling, investor relations as well as law and tax. These services are provided to KTM AG by a legal person at KTM SMC who otherwise acts for the issuer and who regularly or on occasion has access to insider information. KTM SMC is thus defined as a person working in areas of confidentiality in the sense of Section 3 line 4 sentence 2 ECV.
2.1. These guidelines, of which the ECV is also an integral component, apply to all persons working in areas of confidentiality in the sense of Section 3 line 4 ECV.
2.2. These guidelines also apply as KTM SMC’s regulations for all employees involved in the provision of services for KTM AG and for all authorised signatories and area managers. The persons described above have a duty to acknowledge these guidelines, in writing, as regulations and to declare in writing that they are aware of the penalties associated with any misuse or improper dissemination of insider information.
2.3. The members of the board of directors and supervisory board of KTM SMC, as well as the members of the works council that exists at KTM SMC level, must each commit themselves in writing to these guidelines.
2.4. Persons working in areas of confidentiality in the sense of Section 3 line 4 sentence 2 ECV must – provided that they are not otherwise bound to silence by law or rules of conduct – each commit themselves in writing to these guidelines.
3. Areas of confidentiality
3.1. Due to its holding function, KTM AG is a single area of confidentiality. This also includes but is not limited to the board of directors and the supervisory board of KTM AG.
3.2. Each company area of KTM SMC that provides services for KTM AG in the areas of finance and accounts, controlling, investor relations as well as law and tax is also defined as an area of confidentiality within the sense of these guidelines.
3.3. Where required, further project-related areas of confidentiality within KTM AG itself or within KTM SMC must be set up by the compliance officer in coordination with the board of directors of KTM AG or in coordination with the board of directors of KTM SMC. The start, end and description of the area of confidentiality and the activity pursued therein must be established in writing and brought to the attention of the compliance officer.
4. Handling insider information
4.1. Within an area of confidentiality, insider information may only be known by those persons who are involved with processing this information as part of their duties. The number of persons involved with insider information must be kept as low as possible.
4.2. All insider information that becomes known for the first time within KTM AG or KTM SMC and which is recognised as such must be reported immediately to the KTM AG board of directors and the compliance officer.
4.3. Written documentation and external storage media, especially CD-ROMs and USB flash drives, which contain insider information must be stored in a manner that renders them inaccessible by individuals who are not involved in the processing of this insider information, the written documentation or the external storage media as part of their duties.
4.4. Electronically stored data, including electronic mail, which contains insider information must be secured in a manner that renders it inaccessible by individuals who are not involved in the processing of this insider information or data as part of their duties.
5. Passing on of insider information
5.1. Insider information must also be treated as strictly confidential towards other company areas during internal business transactions.
5.2. Insider information may therefore only be passed on from one area of confidentiality to another company area if this is required for company purposes. Such passing on of information must be limited to cases of absolutely necessity.
5.3. The compliance officer must be notified immediately as soon as insider information is passed on from an area of confidentiality. The latter must record the information content, the name of the reporting person, the time/date that the notification was received and the time/date that the information was passed on, as well as the names of all persons who already have knowledge, or will receive knowledge, of the insider information. This obligation does not apply if the passing on of insider information is part of the existing institutionalised and predefined information flows. Institutionalised and predefined information flows must be documented in writing at KTM AG and KTM SMC and brought to the attention of the compliance officer.
5.4. In accordance with Section 48 d paras. 1 and 3 BörseG, insider information is subject to further secrecy up until its publication even after it has left an area of confidentiality. Upon leaving an area of confidentiality, the addressees of the insider information must therefore be advised that the communication contains insider information which may not be misused in the sense of Section 48 b BörseG.
5.5. The passing on of insider information to non-company persons is only permitted if this is required for company purposes, if the passing on is limited to the extent absolutely necessary and if the non‑company person – provided that he/she is not already bound to secrecy by law or rules of conduct – is bound within the framework of an agreement to treat the insider information as confidential and to not misuse it in the sense of Section 48 b BörseG (“Non-Disclosure Agreement”). Section 48 b BörseG must be observed at all times in cases where insider information is passed on.
5.6. Areas of confidentiality must be separated from other company areas via suitable organisational measures to prevent the misuse or passing on of insider information. The following technical measures in particular serve to aid this:
- Storage of written documentation and external data storage devices in locked filing cabinets
- (Automatic) securing of computers by means of passwords
- Securing of files containing insider information by means of passwords
- Change of password at least every six months
- Copy protection on storage media
- Activation of a locking function on IT systems containing programs and data with insider information when leaving the workplace, so that access to the program or data is no longer possible
- Avoidance of conversations concerning insider information
- Use of code names for confidential projects
- Marking of written documentation containing insider information with a non-removable mark “CONFIDENTIAL / INSIDER”
- Encryption programs for e-mails
- Prevention of the removal of documents containing insider information from the offices of KTM AG and KTM SMC
5.7. In case of doubt when handling insider information or during the classification of information as such, the compliance officer must be informed and his/her decision obtained before the information may be used in any way or passed on.
6. Lock-up periods and trading bans
6.1. The length of the lock-up periods, during which persons from areas of confidentiality may not place orders concerning shares in KTM AG or financial instruments derived from these shares, is set at three weeks before the planned publication of the (preliminary) quarterly figures and six weeks before the planned publication of the (preliminary) yearly figures. These lock-up periods also apply to orders founded by persons from areas of confidentiality in the name of and/or on account of a third party, or by third parties in the name of and/or on account of persons from areas of confidentiality or legal persons, establishments or partnerships acting as trusts that are directly or indirectly controlled by a person from an area of confidentiality, which were founded for the benefit of such a person or which largely fulfil the financial interests of such a person.
6.2. The compliance officer can, with the agreement of the board of directors of KTM AG, set further lock-up periods, whereby these lock-up periods can also limit the trading ban pursuant to Section 8 para. 1 ECV to a limited circle of people from areas of confidentiality or to individual areas of confidentiality. The concerned persons from the areas of confidentiality must be notified in a proper, verifiable manner of the start date and – provided that one has already been set – the specific duration of a lock-up period.
6.3. The compliance officer can grant exceptions to the trading ban during a lock-up period under the provisions set out in Section 8 para. 4 ECV. The compliance officer must document all applications concerning intended dealings in the financial instruments of the issuer during lock-up periods in accordance with Section 8 para. 5 ECV.
7. Submission of directors’ dealings reports
7.1. Reports pursuant to Section 48d para. 4 BörseG by persons from areas of confidentiality must also be submitted to the compliance officer. The latter must record the content and time/date of the report.
8. Insider record
8.1. The compliance officer must keep a record with content pursuant to Section 11 para. 2 ECV, regularly update this record and, at the request of the FMA, submit it to the latter immediately. This insider record must also include individuals who are to be appointed on an organisational or functional level to an area of confidentiality pursuant to 3.2..
8.2. The insider record must be kept for at least five years from the date of its issue or, where applicable, from the date of its last revision.
9. The compliance officer
9.1. The board of directors of KTM AG has appointed a compliance officer, whose duties and tasks are derived from Section 13 ECV. The compliance officer is directly and solely responsible to the board of directors of KTM AG, and within this function does not follow instructions from other persons working for KTM AG. In terms of his/her function as compliance officer, he/she is also free from following instructions within the framework of his/her existing employment relationship with KTM SMC.
9.2. The annual activity report pursuant to Section 13 para. 4 line 3 ECV must be presented to the supervisory board by the compliance officer within five months from the end of the business year and submitted to the FMA via suitable means.
10.1. Violations of these guidelines may lead to consequences under civil or employment law. Consequences under employment law may extend from a simple instruction or warning, to dismissal in the case of repeated or particularly severe violations.
10.2. KTM AG and KTM SMC expressly reserve the right to assert claims for damages in the event that these guidelines are violated.
11. Declaration of Duty
11.1. All persons from areas of confidentiality confirm their acknowledgement of and commit themselves to complying with these guidelines by submitting a pre-printed declaration (Appendix ./2) to the compliance officer appointed according to these guidelines.
./1 Regulation on Compliance for Issuers (ECV)
./2 Declaration of Duty
COMPLY OR EXPLAIN
Since the Code became effective in 2002, the rules have successively been adapted to the legal changes in Austria. KTM implemented the amendments given in the revised and updated versions of the Code immediately, although the company would only have been required to do so at a later date.
ln addition to the mandatory L Rules (legal requirements), KTM AG complies with all the C Rules (comply or explain) in the Austrian Code of Corporate Governance as amended in January 2012 with the following restrictions:
C Rule 18 (Internal auditing as a separate functional unit reporting to the Executive Board)
As the company is not large enough, it does not comply with the rule of setting up a separate internal auditing functional unit.
C Rule 26 (Supervisory Board mandates in stock corporations that do not belong to the group)
Due to Stefan Pierer's functions as Chief Executive Officer and co-owner of CROSS Industries AG, the exercise of three Supervisory Board seats (3 of them in Chairman positions) are required in stock corporations that do not belong to the group.
C Rule 31 (fixed and performance-linked Executive Board remuneration)
This rule is not complied with, as publication of the total Executive Board remuneration broken down into fixed and variable parts is deemed adequate information for the shareholders.
C Rules 39, 41, 43 (setting up of nomination and remuneration committees)
With the exception of an Audit Committee (L Rule 40), no other committees have been set up, because the Supervisory Board only consists of four shareholder and two employee representatives, and thus setting up additional committees would not improve the efficiency of the Supervisory Board's work.
C Rule 49 (disclosure of contracts with companies in which a Supervisory Board member has a financial interest)
The company and its subsidiaries are advised on legal matters by Saxinger, Chalupsky & Partner Rechtsanwälte GmbH (SCWP). Ernst Chalupsky, partner in SCWP, works as attorney and general manager. Ernst Chalupsky was discharged from the Supervisory Board in April 2011. In November 2007, KTM AG signed an agreement with Bajaj Auto Ltd., where Rajiv Bajaj is the managing director, covering joint projects to develop new engine and vehicle platforms for small street motorcycles.
C Rule 53 (independence of Supervisory Board members)
Concerning the independence of Supervisory Board members, the Supervisory Board of KTM AG follows the guidelines given in Annex I of the Austrian Code of Corporate Governance. According to these guidelines, all members of the Supervisory Board of KTM AG except Rudolf Knünz shall be regarded as independent.
C Rule 83 (Report of the Annual Auditor on the risk management functionality)
This rule is not complied with, since the company-specific risk management is established on the affiliated-companies-level and thus, the risk management is part of the investment management due to the holding function.
Compliance Regulation for Issuers
KTM AG applies the provisions of the Compliance Regulation for Issuers of the Austrian Financial Market Authority (FMA) to all Supervisory Board members. The Compliance Guidelines for KTM AG are to be found on the website (http://company.ktm.com/investor-relations/corporate-governance/governance-system.html).
"This statement does not constitute a claim under Article 860 Austrian General Civil Code (ABGB) or pledge of use under Article 880 (a) ABGB. Where legally permissible, liability on the part of the company or its executive bodies or Group companies or their executive bodies arising from failure to comply with the provisions of the Austrian Code of Corporate Governance as amended from time to time is excluded."