Corporate governance

In the first half of 2010, the Board of Director met eleven times, the Supervisory Board met three times and the Audit Committee (now being a standalone governing body) met once.

An Ordinary General Meeting of Telefónica O2 Czech Republic was held on 7 May 2010. The supreme governing body of Telefónica O2 Czech Republic approved the financial statements of the company and the group consolidated financial statements for 2009 both prepared in accordance with International Financial Reporting Standards (IFRS) and audited by the audit firm Ernst & Young Audit, s.r.o., which gave both sets of financial statements its unqualified opinion. The General Meeting approved a proposal by the Board of Directors for the distribution of profit, including a payment of dividends. The proposal was based on a rigorous analysis of the company’s performance in the past period, the current balance sheet situation and the projected future earnings of the company, including a cash flow generation estimate. The amount of the dividend also fully corresponds with the long-term policy of the Board of Directors to focus investment on high-growth potential areas; any surplus cash is not retained by the company and is paid out to the shareholders. The shareholders approved a payment of dividends from the profit for 2009 in the amount of CZK 12,388,795 thousand, and from a part of the retained earnings from previous periods in the amount of CZK 494,801 thousand, which together represented CZK 12,883,596 thousand and translates into a dividend of CZK 40 per share before tax.

The General Meeting approved a proposal by the Board of Directors to amend the company’s Articles of Association in the wording which had been proposed. The changes, by and large, were motivated by the changes in the legislation, in particular the Commercial Code and the Capital Market Undertakings Act. These relate principally to the ways in which shareholders may exercise their rights, and some rules of organisation of general meetings.

Changes in the personnel composition of the governing bodies of the company in the period January–March 2010 are described in the 2009 Annual Report (section Corporate Governance). Anselmo Enriquez Linares resigned from his office at the Supervisory Board meeting held before the General Meeting (7 May 2010). In his stead, the shareholders elected María Eva Castillo Sanz, an independent member of the Board of Directors of Telefónica, S.A., who, by decision of the General Meeting, also became a member of the Audit Committee. The General Meeting had already passed the decision to recall Ángel Vilá Boix from the body. The shareholders confirmed by vote the Supervisory Board membership of Alfonso Alonso Durán, Ángel Vilá Boix, Luis Lada Díaz and Guillermo José Fernández Vidal, whose respective tenures were to expire in June. The résumés of all members can be found on the company’s website (section About Us).

The General Meeting approved the conclusion of a contract for the performance of office of a member of the Supervisory Board between the company and the new Supervisory Board member, María Eva Castillo Sanz, and the re-elected members Alfonso Alonso Durán, Ángel Vilá Boix, Luis Lada Díaz and Guillermo José Fernández Vidal, and a contract for the performance of office of an Audit Committee member between the Company and María Eva Castillo Sanz.

The organigram of executive macrostructure Telefónica O2 underwent several changes as opposed to the situation published in the Company’s 2009 Annual Report; an independent Marketing division was established, which, from 1 May 2010, assumed all marketing-related activities, which had previously been performed by individual commercial units; an independent Strategy and Product Development division was also established. The new organisation unit now incorporates the department of Sponsorship and Interactive Partnership. Jiří Dvorjančanský became Director, Marketing Division (his résumé can be found on the Company’s website, section About Us). From 1 September 2010, the divisions catering to corporate and strategic accounts, respectively, will be merged into one unit to be led by František Schneider, formerly Director, Corporate and SME Division. David Šita, Director, Strategic Account Division, leaves the Company on the same date to continue his career outside the Telefónica Group. Again on the same date, Jose Perdomo, who has been at the helm of the Consumer Division, is transferring to a newly established unit Global New Services in the parent Telefónica, S.A.; Global New Services was established as part of the new operating model of the Telefónica Group. Jose Perdomo will be in charge of eHealth, healthcare and assistance services powered by modern telecommunication technology.

All principal information and documents about the corporate governance of Telefónica O2 are available to shareholders and other stakeholders on the Company’s website.

The situation in subsidiary and affiliated companies did not incur any changes during the first half of 2010 against the situation described in the 2009 Annual Report, with the exception of Telefónica O2 Slovakia, whose registered capital was increased by means of a pecuniary contribution to EUR 240,000 by decision of the Telefónica O2 in May.