Annual Report 2011 - T-Hrvatski Telekom

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24 Introduction • Cash management and savings initiatives of the Company, • Reports and the proposals of the Compensation and Nomination Committee of the Supervisory Board with regard to the target-setting and targetachievement of the Company and Management Board and remuneration proposals for MB Members; establishment of the new cash-based long-term incentive plan LTIP - Variable II; introduction of the Matching Share Plan following its implementation for DT Group International Business Leaders (BLT’s). Matching Share Plan is for the time being applicable only for the President of the Management Board as a member of DT Group BLT’s. In order to ensure the longterm incentive effect and orientation toward the sustained development of the company, an amount of min. 10% of the gross annual variable bonus (Variable I / Bonus) is to be invested in shares of HT (personal investment). Business Leaders have the option of voluntary increase to a maximum of 33.3% of the Variable I / Bonus. These shares are to be held for a period of at least 4 years (lock-up period). After the lock-up period of 4 years has passed, the Company will grant one additional share („matching share“) for every share acquired as part of the aforementioned personal investment. Consequently, new compensation model for the President of the Management Board (CEO) was introduced based on the above described Matching Share Plan. • Reports of the Audit Committee of the Supervisory Board • Capital Market trends and Continuing obligations of the Company following the listing of its shares on the Zagreb Stock Exchange and the listing of GDR’s representing the Company’s shares on the London Stock Exchange, • Impacts of the strong competition and a serious and prolonged downturn in the Croatian economy, the mobile tax impacts, etc to the results of the Company. In 2011, the Audit Committee of the Supervisory Board held five (5) regular sessions and discussed various issues, especially: • 2010 year-end closing of T-HT Group, • Recommendation for appointment of external auditor, • Implementation and effectiveness of internal control over financial reporting according to S-OX; S-OX 404 project in T-HT & Testing results, • Effectiveness of Corporate monitoring functions (Audit of financial statements, Internal auditing system, Risk management, Compliance system, External auditing system and Internal control system) • Implementation status of “Code of conduct” • Status of penetration testing procedures in T-HT • Implementation of new Internal Control System, • Implementation of new international audit guideline, “Specific Area policy — International cooperation on internal auditing”, • External Auditor’s Report (quarterly reports, Auditor’s Independence, Report on auditor engagement, new accounting and disclosure requirements in 2011, Management recommendation letter 2010, etc.), • Significant risks and exposures (legal framework related to DTK/ducts, consumer protection litigation status, Wholesale Line rental and Reference Interconnection Offer (RIO), New bylaw on “right of way”, etc.), • Quarterly Fraud Reports and Risk Reports for T-HT Group, • Quarterly financial results of T-HT • Reports of the compliance officer and compliance risk assessment results 2011, • Audit program 2011 execution, • Supervision over the realization of audit measures and audit reports (e.g. IT security and data protection activities, procurement processes audits, assessment of inventory count shortages, etc.), • Internal auditing program for 2012. According to the available information, Audit Committee finds that in relation to financial reporting, risk management, compliance management system, internal and external audit engagement there is no indication that internal control system does not work effectively. In 2011, the Compensation and Nomination Committee began the target-setting procedure for 2012 and also began preparing the target evaluation procedure for 2011. Changes in the Membership of the Management Board as outlined above were also covered by their Agenda as well as running the Mid Term Incentives Plans.
25 The Supervisory Board supported the Management Board in their efforts to protect the interests of HT d.d. in Bosnia and Herzegovina. Results of the examination of the Management Board report on relations with the governing company and affiliated companies thereof The Management Board submitted to the Supervisory Board the Report of the Management Board on relations with the governing company and affiliated companies thereof (Report of the Dependent Company), compiled in accordance with Articles 474 and 497 of the Companies Act and in accordance with the principles of conscientious and truthful reporting. In the opinion of the Management Board, the relationships of affiliated companies in the business (calendar) year 2011 in total, realized by contractual affiliating and other undertaken legal actions, were within the scope of ordinary business and entrepreneurial relationships, standard conditions and the application of regular prices. The Company’s auditor, PricewaterhouseCoopers d.o.o. Zagreb, reported on the results of its audit and issued the following confirmation on the audit of the above report: Report of Independent Accountants out in Article 497 of the Croatian Company Law. Management’s responsibility includes presenting in a complete and accurate manner the following information in the Related party report: all legal transactions that the Company undertook during 2011 with Deutsche Telekom AG and its affiliated entities (including description of underlying contract terms, related invoices and postings in accounting records), determining whether such transactions were carried out within the ordinary scope of business and whether HT has received a respective counteraction (ie. receipt of payment or goods/ services) for such transactions and actions without incurring any damage. Description of the subject matter and identification of the criteria The subject matter upon which we performed assurance procedures was limited to the contracts and related transactions concluded between HT and Deutsche Telekom AG and its affiliated entities for the year ended 31 December 2011 as presented in sections E and F of the Related party report. We assessed whether the information presented in the Related party report is consistent with the books and records of HT as required by Article 497 of the Croatian Company Law. Our responsibility Introduction Quote: This report is produced in accordance with the terms of our Contract dated 11 July 2011 for the purpose of reporting to the Supervisory Board and shareholders of Hrvatski Telekom d.d. (‘HT’) in connection with the relationships with the governing entity (Deutsche Telekom AG) and its affiliated entities (herein the ‘Related party report’) for the year ended 31 December 2011. Management’s responsibility Management of Hrvatski Telekom d.d. is responsible for the preparation of the Related party report in accordance with the criteria as set Our responsibility is to report on the Related party report based on our work performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements 3000 “Assurance Engagements other than Audits or Reviews of Historical Information” (“ISAE 3000”). This Standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain limited assurance whether the Related party report complies, in all material aspects, with the requirements of Article 497 of the Croatian Company Law.
Page 1 and 2: Annual Report 2011
Page 3 and 4: 3 Operating Statistics Key operatio
Page 5: Content 5 2 3 7 8 10 12 16 21 22 28
Page 8 and 9: 8 Letter To Shareholders Introducti
Page 10 and 11: 10 Corporate Profile Introduction A
Page 12 and 13: 12 Investor Information Economic en
Page 14 and 15: 14 Dividend proposal for the 2011 f
Page 16 and 17: 16 Management Board Introduction Br
Page 18 and 19: 18 Introduction Branka Skaramuča M
Page 20 and 21: 20 Introduction As a result of the
Page 22 and 23: 22 Supervisory's Board Report Intro
Page 26 and 27: 26 Summary of the work performed Re
Page 28 and 29: 28 Corporate Governance Code Compli
Page 30 and 31: 30 Introduction Currently the Manag
Page 33 and 34: II. Business review 2011 Croatian T
Page 35 and 36: 35 first 10 months of 2011 against
Page 37 and 38: Regulatory Environment 37 Croatian
Page 39 and 40: Group's Strategy 39 T-HT Group Miss
Page 41 and 42: Organization of the Group 41 T-HT G
Page 43 and 44: 43 Blended ARPU decreased by 11.0%
Page 45 and 46: 45 additional products: naked bitst
Page 47 and 48: 47 Transport Layer DWDM (Dense Wave
Page 49 and 50: 49 Data and IT Security The protect
Page 51 and 52: 51 Corporate Responsibility III. Co
Page 53 and 54: 53 Code of Conduct T-HT’s Code of
Page 55 and 56: 55 Culture Museum of Contemporary A
Page 57 and 58: 57 Full time employees by education
Page 59 and 60: 59 with direct investments into ext
Page 61: 61 In 2011, Iskon was the official
Page 64 and 65: 64 Group Financial Performance Fina
Page 66 and 67: 66 Financial Review 2011 Terminal e
Page 69 and 70: Consolidated financial statements 3
Page 71 and 72: Independent auditor’s report 71 T
Page 73 and 74: Consolidated statement of financial
Page 75 and 76:
Consolidated statement of cash flow
Page 77 and 78:
Notes to the consolidated financial
Page 79 and 80:
79 IAS 39 Financial instruments: Re
Page 81 and 82:
81 two types of joint arrangement:
Page 83 and 84:
83 substance of the tax), the Group
Page 85 and 86:
85 Impairment losses relating to go
Page 87 and 88:
87 k) Leases Leases in which a sign
Page 89 and 90:
89 provided that there are no unful
Page 91 and 92:
91 · Statement of comprehensive in
Page 93 and 94:
93 Revenue — by geographical area
Page 95 and 96:
95 7 Other expenses Maintenance ser
Page 97 and 98:
97 The deferred tax asset of the Gr
Page 99 and 100:
99 The intangible assets of the Gro
Page 101 and 102:
101 Included within assets under co
Page 103 and 104:
103 The movement in investments in
Page 105 and 106:
105 14 Available-for-sale financial
Page 107 and 108:
107 At 1 January Charge for the yea
Page 109 and 110:
109 At 1 January Service costs reco
Page 111 and 112:
111 23 Legal reserves Legal reserve
Page 113 and 114:
113 27 Contingencies At the time of
Page 115 and 116:
115 The main transactions with rela
Page 117 and 118:
117 29 Financial risk management ob
Page 119 and 120:
119 Year ended 31 December 2011 Cro
Page 121 and 122:
121 electronic communications netwo
Page 123 and 124:
123 the achievement of two share va
Page 125 and 126:
125
Page 127 and 128:
127 FINANCING 75 Pojmovnik FRAME RE
Page 129:
129 SUPERVISORY BOARD 7, 9, 14, 18,
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Annual Report 2011 - T-Hrvatski Telekom

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