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 01/01/2014)
1. Preliminary remarks
1.1. Bonds in KTM AG (“KTM AG”) may be traded on the Vienna Stock Exchange, as well as in a regulated market in the sense of § 1 para. 2 BörseG [Austrian Stock Exchange Act] inland.
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. The operational activity, especially the development, production and marketing of Sportmotorcycles as well as the development, production and marketing of so-called sports cars are taken care of solely by KTM-Sportmotorcycle AG (“KTM SMC”), KTM Sportcar GmbH (“KTM SC”) and Husqvarna Motorcycles GmbH (“HQV MC”). Further, KTM SMC performs services for KTM AG in the area of finance and accounts, controlling, investor relations as well as law and tax. The provision of these services for KTM AG involves at KTM SMC a legal person, who otherwise acts for the issuer, who regularly or on occasions has access to insider information. KTM SMC, KTM SC and HQV MC are thus defined as persons working in areas of confidentiality in the sense of § 48d para 3 BörseG.
2.1. These guidelines apply to all persons working in areas of confidentiality in the sense of § 48d BörseG.
2.2. These guidelines also apply as KTM SMC’s, KTM SC’s and HQV MC’s regulations for all employees involved in the provision of services for KTM AG and for all power of attorney holders and area managers. The above described persons have a duty to acknowledge these guidelines as regulations in writing and to declare in writing that they are aware of the sanctions linked to any misuse or improper dissemination of insider information.
2.3. The members of the board of directors and supervisory board of KTM SMC and the members of the works council at KTM SMC level have each committed themselves in writing to these guidelines.
2.4. Persons working in areas of confidentiality have – provided they are not otherwise bound to silence by law or rules of conduct – each committed themselves in writing to these guidelines.
3. Areas of confidentiality
3.1. KTM AG is due to its holding function solely an area of confidentiality. To this also belongs, in particular, the board of directors and supervisory board of KTM AG.
3.2. Likewise, in the sense of these guidelines, each company area of KTM SMC which provides services in the areas of finance and accounts, controlling, investor relations as well as law and tax for KTM AG is defined as an area of confidentiality.
3.3. Where required, further project-related areas of confidentiality in KTM AG itself or in KTM SMC must be set up by the compliance officer with the agreement with the board of directors of KTM AG or with the agreement with the board of directors of KTM SMC. The start, end and designation 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 which becomes known about for the first time in KTM AG or in KTM SMC, KTM SC and/or HQV MC and is recognised as such must be reported immediately to the board of directors of KTM AG and the compliance officer.
4.3. Written documentation and external data carriers, especially CD-ROMs and USB sticks which contain insider information, must be stored in such a manner that it is not accessible by those persons who are not involved in the processing of this insider information, written documentation or data carriers as part of their duties.
4.4. Electronically stored data including electronic mail which contains insider information is to be secured in such a manner that it is not accessible by those persons 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 be treated as strictly confidential when dealing with other company areas, including internal business traffic.
5.2. Insider information may therefore only be passed on from one area of confidentiality to another company area if it is required for company purposes. Such passing on of information must be limited to when it is absolutely necessary.
5.3. As soon as insider information is passed on from an area of confidentiality, the compliance officer must be notified immediately. The latter must record the information content, the name of the reporting person, the date the notification was received and the date 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 in KTM AG as well as in KTM SMC and brought to the attention of the compliance officer.
5.4. In accordance with § 48 d paras. 1 and 3 BörseG, insider information is subject to further secrecy up to its publication even after it has left an area of confidentiality. On leaving an area of confidentiality, the addressees of the insider information must therefore be advised that it concerns insider information which may not be misused in the sense of § 48 b BörseG.
5.5. The passing on of insider information to non-company persons is only permitted, if it is necessary for company purposes, if the passing on is limited to the extent absolutely necessary and if the non company person – provided he/she is not bound to secrecy by law or code of conduct – is bound within the framework of an agreement to treat the insider information as confidential and not misuse it in the sense of § 48 b BörseG (“Non-Disclosure Agreement”). In the case of passing on, § 48 b BörseG must be observed at all times.
5.6. Areas of confidentiality must be separated from other company areas via suitable organisation-based measures to prevent the misuse or passing on of insider information. The following technical measures serve to aid this:
- Storage of written documentation and external data carriers in locked filing cabinets
- (Automatic) securing of computers via passwords
- Securing of files containing insider information via passwords
- Change of password at least every 6 months
- Copy protection on storage media
- Activation of a locking function on IT systems which contain programs and data with insider information when leaving the workplace so that access to the program or data is no longer possible
- Prevention of conversations about 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, KTM SC, HQV MC and KTM SMC
5.7. In the case of doubt when handling insider information or the classification of information as such, the compliance officer must be informed and the latter’s decision received before the information may be used or passed on.
6. Insider record
6.1. The compliance officer must keep a record with content pursuant to § 48d para. 3 BörseG, keep it up to date regularly and at the request of the FMA submit it to the latter immediately. This insider record must also record those persons who have been appointed to an area of confidentiality in terms of 3.2. on an organisational or functional basis.
6.2. The insider record must be kept for at least 5 years from the date of its issue or where applicable from the date of its last revision.
7. The compliance officer
The board of directors of KTM AG has appointed a compliance officer. The compliance officer’s function is directly and solely responsible to the board of directors of KTM AG and is not subject in this function to any instructions from other persons working for KTM AG. In terms of his/her function as compliance officer, he/she is also free from following instruction within the framework of his/her existing employment relation with KTM SMC.
8.1. 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 major breaches.
8.2. KTM AG, KTM SC, HQV MC and KTM SMC reserve the right to assert explicitly claims for damages in the event that these guidelines are violated.
9. Declaration of duty
All persons from areas of confidentiality confirm their knowledge of and commit themselves to complying with these guidelines through submission of a pre-printed declaration (Enclosure ./1) to the compliance officer appointed according to these guidelines.
./1 Declaration to Commit
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. 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.
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."