REPORT ON THE IMPLEMENTATION OF BEST CORPORATE … · using this Report on the Implementation of...

REPORT ON THE IMPLEMENTATION OF BEST CORPORATE PRACTICES

ORGANIZACIÓN TERPEL S.A.

PRINCIPAL LEGAL REPRESENTATIVE

SYLVIA ESCOVAR GÓMEZ

LEGAL REPRESENTATIVE DESIGNATED TO SEND THE IMPLEMENTATION REPORT

OSCAR ANDRÉS BRAVO RESTREPO

REPORT PERIOD YEAR 2018

REPORT DATE JANUARY 2019

FINANCIAL SUPERINTENDENCE OF COLOMBIA

INTRODUCTION

Issuers must report the implementation of the recommendations in the new Code of Best Corporate Practices of Colombia to the Financial Superintendence of Colombia (SFC as per its acronym in Spanish) using this Report on the Implementation of Best Corporate Practices.

The purpose of this report is to inform the securities market if each issuer has implemented the recommendations in the Code or not. To that end, there are three boxes corresponding to YES, NO, and N/A (Not Applicable) in front of each recommendation, as well as a blank space to supplement your response as follows:

If the answer is affirmative, the issuer must briefly describe how such implementation has been performed. If the answer is negative, the issuer shall explain the reasons why it has not applied the same.

The N/A response can only be provided by the issuer in the cases where, due to legal reasons, it is not possible to adopt the recommendation. In this event, the issuer shall state the specific rule that prevents it from doing so.

Since some recommendations are made up of a number of specific aspects, it is worth highlighting that they shall only be deemed implemented if all of the aspects that make them up are met, unless not adopting some of said aspects is based on legal grounds, which should be stated as such.

Each recommendation has a box to indicate the date on which the issuer first implemented the same. In addition, there will be a box to record the dates on which modifications are made.

Finally, whenever, due to the nature of the issuer, it does not have the specific body referred to in the recommendation, it is understood that the recommendation refers to the body in the entity that is equivalent to the same or that acts as such.

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X

I. RIGHTS OF AND EQUAL TREATMENT TO SHAREHOLDERS Measure No. 1:

Principle of Equal Treatment.

1.1. The Company provides equal treatment to all shareholders who, within the same class of shares, are in the same conditions, which shall not be understood as access to privileged information of some shareholders with respect to others.

1.1 Measure Implemented YES NO N/A

YES. Explain briefly:

The Code of Good Corporate Governance and the financial statements of the Company are published in the above-mentioned web page. The Code of Good Corporate Governance in “number 1.3. “Shareholders’ Right to Equal Treatment.” also sets forth that “The management and administration of the business of Organización Terpel S.A. by the Board of Directors and the Legal Representative of the Company must at all times ensure the effective acknowledgement and respect of the right to equal treatment of all of the Company shareholders. The members of the Board of Directors and the Legal Representative of the Company must permanently promote that the decisions made by the different Company administration bodies ensure the shareholders’ right to equal treatment.

NO. Explain:

NA. Specify the rules that prevent you from adopting the recommendation:

Date of Implementation 2001

Dates of Modification 2015

1.2. The Board of Directors has approved a specific procedure that defines the Company practices to be in contact with different types of shareholders regarding issues such as, for example, access to information, solving requests for information, communication channels, and forms of interaction between shareholders and the Company, its Board of Directors and other Administrators.

1.2 Measured Implemented YES NO N/A

YES. Explain briefly: Article 47 in the bylaws sets forth that the Board of Directors shall “23. Consider and respond in writing the proposals submitted and clearly supported by any shareholder or group of shareholders. The Board of Directors shall respond through the Legal Representative within sixty (60) calendar days of the date of the request”. Furthermore, there are different communication channels with shareholders provided in the Code of Good Corporate Governance: “.”; 3.4. “Information Means. The information that the Company must furnish its shareholders and investors shall be available at the main office of Organización Terpel S.A. in the city of Bogotá; 5.6. “Shareholders / Investors Relations Office. The shareholder / investor relations office is aimed at generating a preference to invest in Organización Terpel S.A. by becoming familiar with the Company as well as through the quality of its information, the proper disclosure if its activities, and a permanent contact with the community of shareholders, investors, and local and international analysts. In addition, it shall act as liaison between shareholders and investors and the Company governance bodies. In general, it shall also handle their needs, requirements, and suggestions. If an investor considers that any nonconformity exists due to noncompliance with such rules, said investor must send written notice to the Corporate and Legal Issues Vice President’s Office, Investor’s Care Office, located at Carrera 7 No. 75 – 51 Oficina 13-01, in the city of Bogotá D.C, or to the following e-mail address: [email protected]. Said Office shall notify the Board of Directors at the next meeting summoned for such purpose, during which the relevant decisions shall be made, decisions which shall be notified to the requesting shareholder.; 5.7. “Web Page. Organización Terpel S.A.’s web page (www.terpel.com) is available to the different audiences. The web page shows information of interest, for both its shareholders and investors as well as for the persons interested in its activities (customers, analysts, community, journalists, providers, etc.). The Code of Good Corporate Governance and the financial statements of the Company are published in the above-mentioned web page. This procedure is also incorporated in the "Investor Service Manual" which is published in both English and Spanish, through which the company explains to the shareholders the channels to present their requests, claims and proposals, facilitating even more fluid communication , through the following link https://www.terpel.com/Global/manual-de-atencion-al-inversionista.pdf

NO. Explain:




Measure No. 2: Information on Shares.

2.1. Using its web page, the Company makes public the different types of shares issued by the Company, the number of shares issued for each class, and the number of shares held in reserve, as well as the rights and obligations inherent to each class of shares, all in a clear, accurate, and honest manner.

https://www.terpel.com/Global/manual-de-atencion-al-inversionista.pdf

https://www.terpel.com/Global/manual-de-atencion-al-inversionista.pdf

X

x



That information is shown on the Company’s web page, specifically under the tab “Shareholders and Investors”- “Corporate Governance and then “OT Capital Stock Synthesis”. Attached please find the link or direct access https://www.terpel.com/Global/Shareholders/Gobierno-corporativo/sinntesis-capital-social-de-ot-240715.pdf

NO. Explain.


Date of Implementations 20/11/2012

Dates of Modification N/A

Measure No. 3: No Capital Dilution.

3.1. Regarding operations that may result in dilution of the minority shareholders’ capital (such as an increase of capital with a waiver of the right of preference in the subscription of shares, a merger, spin-off or segregation, among others), the Company explains such operation in detail to the shareholders by means of a prior report of the Board of Directors, including the opinion of an independent external advisor with recognized soundness (fairness opinion) designated by the Board of Directors, regarding the terms of the transaction. Such reports are made available to shareholders before the Meeting within the term set forth to exercise the right of inspection.


YES. Explain briefly

NO. Explain:

No operations that resulted in capital dilution were approved for the period being analyzed. Notwithstanding, in the event that such kind of operations occur and in compliance with legislation, the Company would make available to shareholders, within the term set forth to exercise the right of inspection, all of the documents that would explain the operation in detail (for example, regarding a merger operation, the Merger Agreement and all of its annexes and other relevant information would be made available).


https://www.terpel.com/Global/Shareholders/Gobierno-corporativo/sinntesis-capital-social-de-ot-240715.pdf

https://www.terpel.com/Global/Shareholders/Gobierno-corporativo/sinntesis-capital-social-de-ot-240715.pdf

X

X

Date of Implementation N/A


Measure No. 4: Information for and Communication with Shareholders.

4.1. The Company has a corporate web page, in Spanish and English, with a link to Corporate Governance or a link to relate to shareholders and investors or the equivalent, which include financial and non-financial information on the terms proposed in recommendations 32.3 and 33.3 and which, in no case, shall include confidential information related to the Company or to trade secrets or information whose disclosure may be used to the detriment of the Company.



NO. Explain:

The Company has a corporate web page, in Spanish and English, with a section for dedicated to Corporate Governance and investors relations, which includes financial and non-financial information on the terms proposed in recommendations 32.3 and 33.3 and which, this being the main channel for the exchange of information between the Company, its shareholders and the general public.




4.2. The Company has permanent access mechanisms to be exclusively used by shareholders, such as a web page link for the exclusive access of shareholders or a shareholder and investor care or relations office, and regular briefings, among others, for them to be able to express their opinions, concerns or suggestions regarding the Company’s performance or their capacity as shareholders.



Terpel has a Shareholder Care Office through which it can be in contact by e-mail, telephone and/or in person. Likewise, regular meetings are held, and quarterly financial result presentations are made, which are actively attended by shareholders and investors. The above, pursuant to items 5.6 and 5.7 of the Code of Good Corporate Governance.

X

Likewise, during 2017, the “Investor Care Manual” was published, both in Spanish and English, by means of which the Company explains to shareholders the procedure and channels to submit their petitions, claims and proposals thus facilitating even more a fluent communication.

No. Explain:




4.3. The Company holds events to present quarterly results, aimed at its shareholders and market analysts, which may be attended face-to-face or through distance communication means (conference, videoconference, etc.).



Pursuant to item 1.4.3 of the Code of Good Corporate Governance the company has the duty to provide information on the development of the administration and results of the Company’s investments, in terms of quantity, quality, timeliness, in conditions of equality for all shareholders. Likewise, committed to the best corporate governance practices, Terpel fully complies with the strict guidelines set forth by the Colombian Stock Exchange, for which it has been granted the IR Issuer Recognition

Thus, the company organizes, through a technological platform that allows access to any shareholder and potential investor, quarterly meetings to deliver results, preparing reports, both in English and Spanish, that are published on the website of the Company, in the section “Shareholders and Investor”. It is worth mentioning that this space is active and highly participative.

NO. Explain:




4.4. The Company holds or participates in fixed income presentations, events or forums, aimed mainly at

X

X

investors in debt instruments and market analysts, during which the issuer business indicators, its liability management, financial policy, qualifications, as well as the issuer behavior regarding covenants, etc., are updated.



Since its incorporation as an issuer of securities, the Company organizes, through a technological platform that allows access to any shareholder and potential investor, quarterly meetings to deliver results, both in English and Spanish. Reports of the event are prepared and published on the website of the Company, in the section “Shareholders and Investor”. The above as provided for by item 1.4.3 of the Code of Good Governance.

Likewise, committed to the best corporate governance practices, Terpel complies with the strict guidelines set forth by the Colombian Stock Exchange regarding disclosure of information and transparency, for which the Company has been granted the IR Issuer Recognition.

Additional to the above, the Company participates in forums and events organized by market analysts and stock exchange commission agents where fixed income issuers (among others) update the issuer’s business indicators, liability management, qualifications, behavior of issuers with respect to covenants, etc.

The aforementioned can be consulted through the following link https://www.terpel.com/en/Accionistas/Relacion-con-Inversionistas/Presentaciones/Presentaciones-de-resultados-trimestrales/

NO. Explain:




4.5. The Company Bylaws provide for that a shareholder or group of shareholders who represent at least five percent (5%) of the capital may request the performance of Specialized Audits regarding issues other than those audited by the Company’s Statutory Auditor. According to its capital structure, the Company may determine a percentage lower than five percent (5%).



In fact, by means of Article Eight (8) of the Bylaws the Company has set forth the right to request the performance of Specialized Audits regarding issues other than those audited by the Statutory Auditor, whenever they are requested by a shareholder or a group of shareholders who represent at least five percent (5%) of the capital stock. Such request must be addressed to the Chairman of the Board of Directors and must

https://www.terpel.com/en/Accionistas/Relacion-con-Inversionistas/Presentaciones/Presentaciones-de-resultados-trimestrales/

https://www.terpel.com/en/Accionistas/Relacion-con-Inversionistas/Presentaciones/Presentaciones-de-resultados-trimestrales/

X

be signed by all of the interested shareholders, specifically stating the considerations and questions to be solved. The Board of Directors, through the Legal Representative, shall deliver the results of the Audit within the following sixty (60) calendar days. The management may reject the requests for audits whenever they are not clear or relate to issues that are the Statutory Auditor’s responsibility

NO. Explain.




4.6. In order to exercise said right, the Company has a procedure in writing with the details contemplated in recommendation 4.6.



NO. Explain:

Even though, Article Eight (8) of the Bylaws sets forth the right to request the performance of Specialized Audits regarding issues other than those audited by the Statutory Auditor, whenever they are requested by a shareholder or a group of shareholders who represent at least five percent (5%) of the capital stock and the most relevant aspects on the procedure for the request and processing, the Company has not considered appropriate to add an extensive procedure within the Bylaws. On the contrary, the elements of this recommendations are complemented with the provisions in subparagraph 3 of item 1.2 of the Code of Good Governance.

Therefore, despite the fact that the Company sets forth the procedure that shall be followed for the performance of these audits, due to the fact that the same is addressed in two of the corporate documents, and not only in the Bylaws, the answer is No.




Measure No. 5: Behavior of Administrators regarding operations of change or takeover related to the

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Company.

5.1. The Board of Directors and Senior Management members have expressly accepted in their Acceptance Letters or contracts that, from the knowledge of the presentation of an OPA or other relevant transactions, such as mergers or spin-offs, there will be periods during which they commit not to negotiate, directly or indirectly through a third party, the Company shares.



NO. Explain:

Given the importance of this issue for the Company, the latter has considered the inclusion of this obligation through the acceptance letters of the members of the Board of Directors and the Senior Management to be insufficient. In fact, the Code of Good Corporate Governance, in particular items 4.2.2.4, 4.2.2.5 and 5.2.2.2, by means of which sets forth the prohibitions related to the acquisition, trade or sale of the Company’s shares by individuals who are directors of the Company, either by themselves or through third parties, while they are holding their positions whenever they relate to operations associated with speculation. In the event that administrators wish to acquire, or sale Company shares not associated with speculation, they may carry out the relevant operation provided that they have obtained prior authorization, granted with the favorable vote of two thirds (2/3) of the members of the Board of Directors, excluding the vote of the requesting member.

In the cases where half plus one of the total number of members of the Board of Directors wish to sale or acquire Company shares not associated with speculation, the authorization required for such negotiation shall be granted by the General Shareholders’ Meeting with the favorable vote of the ordinary majority provided for in the bylaws, excluding the vote of the requesting members. The individual interested in carrying out the transaction shall submit a written request for authorization to the Vice President of Corporate and Legal Affairs no less than five (5) working days prior to the meeting of the Board of Directors or the calling of the ordinary or extraordinary meeting of the General Shareholders’ Meeting, when appropriate, at which it is intended that the request be considered, with at least the information detailed in item 4.2.2.5 of the Company’s Code of Good Governance.




Measure No. 6: Quotation of Companies Part of Conglomerates. 6.1. Without prejudice to the Independence of each individual Company part of the Conglomerate and to the responsibilities of their administration bodies, an organizational structure exists in the Conglomerate, which defines for the three (3) governance levels (shareholders Meeting, Board of Directors, and Senior Management) the key bodies and individual positions, as well as the relations among them, structure which is public, clear, and transparent, and enables determining clear lines of responsibility and communication, and facilitates the Conglomerate’s strategic orientation, supervision, control, and effective administration.

X

6.1 Measure Implemented YES NO X N/A


NO. Explain: The “Shareholders and Investors” section includes an organizational structure that

identifies the three (3) governance levels for each Company that is in a subordination relationship and reporting lines, etc.

The organizational structure can be consulted in the following link https://www.terpel.com/en/Estructura-corporativa/




6.2. The Parent Company and its most important Subordinates have defined a reference framework related to institutional relations by signing a public agreement approved by the Board of Directors of each of said companies, which regulates the issues stated in recommendation 6.2.



NO. Explain:

All operations carried out by the Company with related companies comply with the applicable provisions, respecting and managing any situation that may generate a conflict of interest. Likewise, all operations with related parties are presented monthly to the Board of Directors, taking advantage of possible synergies, but maintaining total transparency on these operations

Terpel has incorporated the recommendation’s items throughout various corporate documents. However, since these guidelines are not contained in a single document and are exclusively of internal knowledge and have not been published, it is not possible to answer “yes”.



https://www.terpel.com/en/Estructura-corporativa/

X


Measure No. 7: Conflict Settlement.

7.1. Except for those conflicts between shareholders, or between shareholders and the Company or its Board of Directors, which as a result of an express legal attribution must be settled before ordinary courts, the Company Bylaws include mechanisms for conflict settlement such as a direct agreement, amicable composition, conciliation or arbitration.



As provided for by Article Seventy-Two (72) of the Bylaws, controversies arising at any time, including the liquidation period, between shareholders, or between one or more shareholders and the Company by reason of the Articles of Incorporation, may be resolved: (i) through direct agreement between the parties within thirty (60) [sic] calendar days of written notice from the Party who alleges the existence of the controversy; (ii) in the event that no direct agreement can be achieved within the established term, any of the Parties may summons an Arbitration Court that will be governed by the following rules: the Court will be made up of three (3) arbitrators, designated by common agreement of the parties. If no total or partial agreement between the Parties regarding the appointment of arbitrators is reached, any of the Parties may request the Arbitration and Conciliation Center of the Bogotá Chamber of Commerce the relevant designation. The arbitrators designated shall be Colombian citizens, registered attorneys who will decide at law. Appointment of arbitrators shall be made within thirty (30) days from the date on which one of the parties gives written notice to the other of the controversies subject matter of the arbitration. The court shall operate in the city of Bogotá D.C. under the rules of the Chamber of Commerce of Bogotá. The rules of the Commercial Code will be applied in cases not foreseen.

NO. Explain:




X

X

I. GENERAL SHAREHOLDERS’ MEETING Measure No. 8:

Functions and Competence.

8.1. In addition to other functions attributed to the General Shareholders’ Meeting by the legal framework, the Bylaws expressly describe the General Shareholders’ Meeting functions stated in recommendation 8.1. and emphasize that they are exclusive and cannot be delegated.

8.1 Measure Implemented YED NO N/A


NO. Explain:

In Article Thirty-Nine (39) of the Bylaws, the Company has set forth the provisions govern the assignment of fees to members of the Board of Directors, way for their election and disposal of the Company’s assets, as non-delegable functions of the Meeting. However, since it is not enshrined in the literality of the recommendation, in this case, the answer is negative.




Measure No. 9: Rules and Regulations of the General Shareholders’ Meeting

9.1. The Company has in place the Rules and Regulations of the General Shareholders’ Meeting that regulate all issues that concern such body, from its summons to the preparation of the information that shareholders shall receive, attendance, and performance and exercise of the shareholders’ political rights, in such a manner that they are perfectly informed of all policies for carrying out the Meeting sessions.

9.1 Measure Implementation YES NO N/A

YES. Explain briefly: The Rules and Regulations are published on the web page and regulate all issues

related to holding the Shareholders Meeting (from the summons to the requirements to validly deliberate and make decisions, etc.).

The Regulations of the General Shareholders’ Meeting may be consulted at: https://www.terpel.com/Global/Accionistas/reglamento-interno-asamblea- accionistas.pdf

NO. Explain:

https://www.terpel.com/Global/Accionistas/reglamento-interno-asamblea-accionistas.pdf

https://www.terpel.com/Global/Accionistas/reglamento-interno-asamblea-accionistas.pdf

X

X




Measure No. 10: Summons of the Meeting.

10.1. To facilitate the exercise of the shareholders’ right to information, the Bylaws provide for that the ordinary General Shareholders’ Meeting must be summoned minimum thirty (30) calendar days in advance and the extraordinary meetings must be summoned minimum fifteen (15) calendar days in advance. The above without prejudice to the legal terms sets forth for company reorganizations (for example, merger, spin-off or transformation).



Article thirty-first (31) of the Bylaws sets forth that the ordinary General Shareholders’ Meeting shall be convened no less than thirty (30) calendar days in advance and for extraordinary meetings it shall be convened no less than fifteen (15) calendar days in advance.

The Bylaws of the Company can be consulted at the following link:

https://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-compilados-amarzo- 30-2017.pdf

No. Explain:




10.2. In addition to the traditional, mandatory means provided for in the legal framework, the Company ensures maximum dissemination and publicity of the summons by using electronic means such as the corporate web page, alert messages through the individualized e-mail and, even, if it so deems convenient, through social networks.



In addition to the summons being published in a newspaper with broad circulation at a national level, it is sent by e-mail to each shareholder who has registered an e-mail address. At the same time, it is published on the Company’s web page under the “Shareholders and Investors” module as well as on the Financial Superintendence of

https://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-compilados-amarzo-%2030-2017.pdf

https://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-compilados-amarzo-%2030-2017.pdf

X

Colombia web page (SIMEV).

Also, the Code of Good Corporate Governance, number 2.1.5., provides for that “Organización Terpel S.A. publishes the Meeting’s agenda and the administration proposals on its web page (…). Shareholders who register their e-mail address shall receive the agenda and the content of the proposals via e-mail.

For the maximum publicity of the AGM 2018 summon Terpel keeps it published in the following link https://www.terpel.com/Global/Accionistas/2018/convocatoria-AGA-2018.pdf

NO. Explain:




10.3. For the purpose of increasing the transparency of the decision-making process during the General Meeting, in addition to the Agenda for the meeting including each and every issue to be considered, the Company has provided for that, simultaneously with the summons or minimum fifteen (15) calendar days before the meeting, the Proposals for Agreement that the Board of Directors shall submit to the General Shareholders’ Meeting for each issue in the Agenda are made available to shareholders.



The Company’s Agendas expressly contain the matters to be submitted to the General Shareholders’ Meeting for consideration. In fact, the recommendations of the Board of Directors on these matters are recorded in the minutes, which are freely consultable by the shareholders during the period of the right to inspection.

The above is set forth in the Company Bylaws (Article 8 “Right of Shareholders. (…) 4.- The right to freely examine the books and company documents during the fifteen (15) business days before the General Shareholders’ Meeting meetings during which the balance sheets at the end of the fiscal year are examined. Furthermore, the Code of Good Corporate Governance, Chapter 1, Number 2.1.4. “Right to Inspection. Within the term for summons set forth for ordinary meetings, shareholders shall have the right to examine the books and documents that, pursuant to law, are subject to such right. Likewise, within the term for summons set forth for meetings in which the possible merger, spin-off or transformation of the Company, or the cancellation of the inscription of shares in the event that the Company negotiates the shares in the public securities market, are to be discussed, shareholders shall be entitled to review projects, as the case may be, at the Corporate and Legal Issues Vice President’s Office of Organización Terpel S. A.”; 3.4. “Information Means. The information that the Company must furnish its shareholders and investors shall be available at the main office of Organización Terpel S.A. in the city of Bogotá.

https://www.terpel.com/Global/Accionistas/2018/convocatoria-AGA-2018.pdf

https://www.terpel.com/Global/Accionistas/2018/convocatoria-AGA-2018.pdf

X

X

No. Explain.




10.4. The improper spin-off may only be analyzed and approved by the General Shareholders’ Meeting when said issue has been expressly included in the summons for the corresponding meeting.



Pursuant to the provisions in the Bylaws, “ARTICLE FIFTY-NINE. - PUBLICITY: The spin-off or merger project or the foundation for transformation shall remain available to shareholders at the offices where the administration of the Company operates at the principal place of business, minimum fifteen (15) business days before the meeting during which the corresponding proposal is to be discussed. The agenda in the summons for such meeting shall include the point referring to the spin-off, merger, transformation or cancellation of the inscription and expressly state the possibility for shareholders to exercise the right to leave. (Emphasis added).

In addition, the Bylaws in Article Thirty-Nine (39) provide for that “the General Shareholders’ Meeting’s functions are: 1.- To study and approve the reforms to the Bylaws (…)”, as is the case of the spin-off.

NO. Explain:




10.5. El The Agenda proposed by the Board of Directors includes exactly the contents of the issues to be considered, avoiding that significant issues are hidden or masked using ambiguous, generic, too general or broad mentions such as “others” or “proposals and miscellaneous”.


X

YES. Explain briefly: According to the Bylaws (Article 31) and the legislation in force (Commercial Code Articles 424 and following), “The summons shall contain the day, time, and place for the General Shareholders’ Meeting to meet, as well as the purpose of the summons (…)” NO. Explain:




10.6. In the case of modifications to the Bylaws, each article or group of articles that are substantially independent is voted separately. In every case, one article is voted separately if any shareholder or group of shareholders, representing minimum five percent (5%) of the capital stock, so requests during the Meeting, which right is previously informed to shareholders.



In fact, for the period assessed, the General Shareholders’’ Meeting voted separately each one of the articles of the statutory reform, following the best corporate practices in this agreement.

NO. Explain:




10.7. Without prejudice to the provisions in the Commercial Code Article 182, for the purpose of reinforcing and ensuring the shareholders’ right to inspection and information before the Meeting meeting, the Bylaws acknowledge the shareholders’ right, regardless of their shareholding, to propose the introduction of one or more issues to be discussed in the Agenda of the General Shareholders’ Meeting, within a reasonable limit and provided that the request for new issues is justified. The request by shareholders must be made within five (5) calendar days of publication of the summons.

X

X

X

X



NO. Explain:

Notwithstanding the above, the Bylaws provide for in “ARTICLE THIRTY-ONE. - SUMMONS: (…) Paragraph. Administrators shall enable shareholders or their representatives to exercise the right to examine the Company books and documents during the fifteen (15) business days before the meeting, during which period shareholders may request clarification and/or submit questions regarding the issues contained in the summons. The management shall respond using the same means used to submit the request until the business day before holding the Meeting meeting. The management may reject consultations not related to the summons agenda.” It is worth noting that any additional issue not included in the agenda shall be submitted to the Meeting’s consideration in the “Proposals and miscellaneous” item.




10.8. If the request is rejected by the Board of Directors, it must respond in writing the requests supported by minimum five percent (5%) of the capital stock, or a lower percentage set forth by the Company based on the degree of concentration of ownership, explaining the reasons for its decision and informing shareholders that they are entitled to submit their proposals during the Meeting pursuant to the provisions in the above-mentioned Commercial Code Article 182.



In accordance with the paragraph of Article Thirty-First (31) and item 23 of Article Forty-Seven (47) of the Bylaws, the administrators shall give a substantiated and written response to any shareholder who requests the inclusion of new items on the agenda of the meetings of the Meeting, regardless of the shareholder’s percentage of participation in the capital stock and would be instructed to make the proposal during the Meeting.

NO. Explain:


X

X X



10.9. In the event that the Board of Directors accepts the request, once the time for shareholders to propose issues according to the above recommendations has expired, a supplement to the summons to the General Shareholders’ Meeting is published minimum fifteen (15) calendar days before the meeting.



NO. Explain:

The shareholder is informed that the new issue shall be submitted to the consideration of the Shareholders’ Meeting during the meeting, when addressing the “Propositions and Miscellaneous” item. The Meeting shall deliberate and decide if it includes the proposed item once the agenda is completed and provided that the legislation so allows (depending on the type of meeting and the subject suggested).




10.10. Within the same term stated in number 10.7., shareholders may also submit new supported Proposals for Agreement regarding issues already previously included in the Agenda. As to such requests, the Board of Directors acts in a similar manner as foreseen in numbers 10.8 and 10.9 above.



X X

NO. Explain:

Shareholders may present their position on all items on the agenda during the course of the General Shareholders’ Meeting, in which they are completely free to express their opinion, complaints or suggestions.

However, in the case of an agreement between the shareholders, the procedure set forth in the Bylaws is followed: “ARTICLE SEVENTY-FOUR. - AGREEMENTS BY AND BETWEEN SHAREHOLDERS: Two shareholders or more who are not administrators of the Company, may enter into agreements by virtue of which they commit to vote in the same manner or in a determined manner in the shareholders’ assemblies. Such agreement may include a provision that enables one or more of them or a third party to represent all of them at the meeting or meetings of the General Shareholders’ Meeting. Such provision shall have an effect on the Company, the parties, the other shareholders and third parties, only when it is in writing, is delivered to the Legal Representative to de filed at the office where the Company management operates and is published in Registro Nacional de Valores y Emisores (Colombian National Record of Securities and Issuers). Otherwise, neither the Company nor the other shareholders shall respond for the noncompliance with the terms of the agreement.




10.11. The Company undertakes to use the electronic communication means, mainly the corporate web page with exclusive access to shareholders, to deliver shareholders the documents and information associated with each of the items in the Agenda for the meeting.



The information associated with each item in the Agenda is included in the “Shareholders and Investors” section of the website as public information. In this way, Terpel guarantees that shareholders and potential investors are aware of the decisions that will be submitted to the General Shareholders’ Meeting for consideration. The above in compliance with the provisions in the Code of Good Corporate Governance that in number 2.1.5 provides for that “Organización Terpel S.A. publishes on the web page the agenda for the Meeting and the administration proposals at least (…) on advance of the date of the General Ordinary Meeting meeting. When the issue to be treated is the approval of the end-of-fiscal-period balance sheets, the summons shall be published on the web page no less than (…). Shareholders who register their e-mail address shall receive a message with the agenda and the content of the proposals.”

NO. Explain:

X

X

X

X

NA. Specify the rules that prevent you from adopting the recommendation



10.12. The Company Bylaws recognize the shareholders’ right to request sufficiently in advance information or clarifications they deem relevant, using the traditional channels and/or, when applicable, new technologies, or to submit the questions they deem necessary in writing regarding the issues included in the Agenda, the documentation received, or the public information facilitated by the Company. Regarding the term chosen by the Company to summons the General Shareholders’ Meeting, the Company determines the period within which shareholders may exercise such right.



In fact, pursuant to the provisions of Article Thirty-First (31) of the Bylaws, the shareholders or their representatives, during the fifteen (15) working days prior to the meeting of the Meeting, may request clarifications and/or present questions on the points contained in the summons. The management shall respond through the same means in which the requests were presented until the working day before the Meeting meeting is held. The administration may reject the consultations that are not related to the agenda in the summons.

NO. Explain:




10.13. The Company has foreseen that the requests for information can be rejected if, pursuant to internal procedures, such information may be qualified as: i) unreasonable; ii) irrelevant in order to become familiar with the course or the interests of the Company; iii) confidential, which shall include privileged information in the context of the securities market, trade secrets, the operations in course which good end for the company depends substantially on the secret of its negotiation; and iv) other kinds of information whose disclosure may jeopardize the Company’s competitiveness.


X X


According to the provisions in the Bylaws Article Thirty-One (31): “(…) The management may reject the requests not related to the agenda in the summons.” (emphasis added). Similarly, point 7 of the Code of Conduct states that it is not possible to provide information when it comes to strategic and / or privileged information which is defined as follows: - Strategic information: commercial, financial, operational, technical information, know how , new projects, agreements with customers and suppliers, customer records, investors, workers and litigation, among other things that Terpel can be granted, the competitive advantages, the opportunity to make known in the specific case. Privileged Information: In accordance with article 75 of Law 45 of 1990, "that information of a specific nature that has not been disclosed to the public is privileged and that if it had been, it would have been taken into account by a fairly diligent and prudent investor. negotiate the respective values. " Privileged Information may be known and / or used exclusively with the authorization of the President, a Vice President or whom they directly and expressly designate. The disclosure or unauthorized use of this may cause external damages Terpel generating legal, economic and reputational impacts. The statutes are published in the following link https://www.terpel.com/Global/Estatutos-Sociales-ORGANIZACI%C3%93N-TERPEL-Compilados-a-Marzo-30-2018.pdf and you can consult the code of Conduct in the following link https://www.terpel.com/Global/co-p-04-codigo-de-conducta-v-09-vf.pdf

NO. Explain:




10.14. Whenever the response given to a shareholder can give the same an advantage, the Company ensures access to such response to the other shareholders simultaneously according to the mechanisms established for such purpose and under the same conditions.



The “Investor Care Manual” was published, which in article 2 states that “When, at the discretion of the Company, the response to requests, claims or proposals of a shareholder may place the same in an advantage, the Company shall guarantee access to such response to the other shareholders in a manner that in accordance with the mechanisms that it has established for this purpose, and under the same economic conditions.” This manual can be consulted at the following link:

https://www.terpel.com/Global/Estatutos-Sociales-ORGANIZACI%C3%93N-TERPEL-Compilados-a-Marzo-30-2018.pdf

https://www.terpel.com/Global/Estatutos-Sociales-ORGANIZACI%C3%93N-TERPEL-Compilados-a-Marzo-30-2018.pdf

https://www.terpel.com/Global/co-p-04-codigo-de-conducta-v-09-vf.pdf

https://www.terpel.com/Global/co-p-04-codigo-de-conducta-v-09-vf.pdf

X

This manual may be consulted at the following link: https://www.terpel.com/Global/manual-de-atencion-al-inversionista.pdf

The foregoing in line with numeral 1.3 of the Code of Good Governance “Shareholders’ Right to Equal Treatment” which sets forth that “The management and administration of the business of Organización Terpel S.A. by the Board of Directors and the Legal Representative of the Company shall guarantee at all times the acknowledgement and effective respect of the right to equal treatment of all shareholders of the Company. The members of the Board of Directors and the Legal Representative of the Company shall permanently ensure that the right to equal treatment of shareholders is guaranteed in the decisions made by the different administrative bodies of the Company.”

NO. Explain:




Measure No. 11: Regulation of Representation.

11.1. Without prejudice to the limitations set forth in Commercial Code Article 185, External Circular 24 of 2010, and the rules that modify, supplement or substitute the same, the Company does not limit the shareholder’s right to be represented at the General Shareholders’ Meeting, being able to delegate his/her vote to any person, whether such person is a shareholder or not.



According to the provisions in the Bylaws “Article Twenty-Four.- REPRESENTATION: Shareholders may be represented at the General Shareholders’ Meeting meetings by granting a power of attorney in writing to individuals or legal persons as the same deems convenient, which shall state the name of the attorney, the name of the person such attorney can assign the power of attorney to, if applicable, the date or time of the meeting or meetings for which such power of attorney is granted, and, in every case, complying with legal provisions. Such powers of attorney may be sent via telefax to the Company. The powers of attorney granted abroad shall only require the formalities provided herein.”

Notwithstanding the foregoing, the Board of Directors, in a meeting prior to the Shareholders' Meeting, instructs the management to strictly comply with article 185 of the Commercial Code and External Circular Letter 24 of 2010 and is published on the Company’s website and as significant information on the website of the Financial Superintendence of Colombia (SIMEV).

X

X

NO. Explain




11.2. The Company minimizes the use of blank vote delegations, without voting instructions, by actively encouraging the use of a standard model for a representation letter that the Company itself sends to the shareholders or publishes on its web page. The model includes the items in the Agenda and the corresponding Proposals for Agreement determined according to the procedure previously established and which shall be submitted to the consideration of shareholders, for the shareholder, if he/she shall deem convenient, to state his/her vote, in each case, to his/her representative.



NO. Explain:

Despite the fact that the company publishes on its website the power of attorney models, both for natural and legal persons, and that in the same space the shareholders find the agenda to be discussed in the corresponding session of the Meeting, a document containing both guidelines has not yet been implemented.




Measure No. 12: Attendance of Persons other than Shareholders.

12.1. For the purpose of revitalizing the role of the General Meeting in the composition of the company’s will, and to make the Meeting a more participatory body, the Rules and Regulations of the Meeting of the Company require that the members of the Board of Directors and, especially, the Chairmen to the Board of Directors Committees, as well as the Company’s President, attend the Meeting to respond to the concerns of shareholders.



NO. Explain:

Although Article 12 of the Internal Regulations of the Meeting sets forth that “(...) the members of the Board of Directors, the Secretary of the Meeting, the President of the Company, the Statutory Auditor, specialized auditors who have been authorized, candidates to the elections to be decided in the respective meeting, administrative personnel required and any public authority legally authorized to do so may enter the sessions. The Chairman of the Meeting may authorize the admission of individuals when the normal course of the sessions is not affected. In this sense, the Chairmen of Committees are authorized to attend the meetings of the Meeting, but this is not a requirement as established in the recommendation.




X

X

X

II. BOARD OF DIRECTORS

Measure No. 13: Functions of the Board of Directors. 13.1. The Bylaws expressly provide for the functions that cannot be delegated to the Senior Management, including the functions established in recommendation 13.1.



NO. Explain:

The recommendation suggests that by means of Bylaws, the functions of the Board of Directors should be determined in a way that cannot be delegated to the members of the Senior Management (Vice Presidents, Managers, Directors). The answer is NO, since of the 32 activities that it is recommended to put at the head of the board in a non-delegable way, some have been delegated to the Senior Management. In addition, the recommendation does not allow this rule to be contained in documents other than the Bylaws.




13.2. Without prejudice to the autonomy of the governance bodies of the Subordinate Companies, when the Company acts as the parent company of a Conglomerate, such functions of the Board of Directors are focused on the group and are performed through general policies, guidelines or requests for information that respect the balance between the interests of the parent company and the subordinates and the interests of the Conglomerate as a whole.



The functions of the Board of Directors have a systematic approach according to the structure of the control situation (parent and subordinate companies), in every case respecting the independence of each Company associated with the performance of its management. Such recommendation is included in items 11, 12 and 18 of Article Forty-Seven (47) of the Bylaws.

NO. Explain:

X

X

X




Measure No. 14: Rules and Regulations of the Board of Directors.

14.1. The Board of Directors has approved the internal rules and regulations that regulates its organization and operation, as well as the functions and responsibilities of its members, of the Chairman and the Secretary of the Board of Directors, and their duties and rights. Such rules and regulations shall be disseminated among shareholders and are binding on the members of the Board of Directors.



The Rules and Regulations are published on the Company’s web page and provides

for the functions and responsibilities of its members, the Chairman and the Secretary.

Likewise, according to Article two of the Rules and Regulations “(…) it is applicable to

the members of the Board of Directors and is binding.”

The Internal Rules and Regulations of the Board of Directors may be consulted at the following link: https://www.terpel.com/Global/Home/reglamento-junta-directiva-

021116.pdf

NO. Explain:




Measure No. 15: Size of the Board of Directors.

15.1. The Company has made the statutory decision to not designate Deputy Members for the Board of Directors.


https://www.terpel.com/Global/Home/reglamento-junta-directiva-021116.pdf


X

X


NO. Explain

The Company Board of Directors requires that both its principal and deputy members attend all of the sessions so that there is continuity in the information and knowledge of all of the issues.




Measure No. 16: Composition of the Board of Directors 16.1. Based on the premise that, after they have been elected, all of the members of the Board of Directors act for the benefit of the Company while exercising maximum transparency, the Company identifies the origin of the different members of the Board of Directors according to the scheme defined in recommendation 16.1.



NO. Explain:

In accordance with the provisions of Article Forty-One (41) of the Bylaws, the Board of

Directors of the company is composed of 7 principal members, with their respective alternates, 25% of whom must be independent. In this order of ideas, independent and

equity (not independent) members are distinguished, without executive members since it is not considered a good practice.




16.2. The Company has established a procedure that is coordinated through the Appointment and Remuneration Committee or any other that fulfills its functions, which, through its own dynamics and the conclusions of the annual evaluations, enables the Board of Directors to achieve the objectives stated in recommendation 16.2.


X


NO. Explain

There is no procedure in the terms of recommendation 16.2.




16.3. The Board of Directors inform shareholders of the professional profiles identified as necessary, in such a manner that the different actors, mainly controlling, significant shareholders; families, groups of shareholders, and institutional shareholders, if any, and the Board of Directors itself, are able to identify the most suitable candidates.



NO. Explain:

Although the necessary professional profiles have not been designated within the Board of Directors, Article Five of the Internal Rules and Regulations of the Board of Directors indicates which are the requirements to be met by the persons designated as members of the collegiate body. Given that this document is permanently on the company’s website, controlling shareholders, significant shareholders, families, groups of shareholders and institutional shareholders are in a position to identify the most suitable candidates, a decision is taken solely by the General Shareholders’ Meeting. Likewise, the resumes of the members are published on the website.




16.4. The Company considers that the sole evaluation of the resumes by shareholders is not sufficient to determine the suitability of candidates. As a result, the Company has an internal procedure to evaluate legal

X

X

incompatibilities and inabilities and the candidate’s suitability to the needs of the Board of Directors, by evaluating a set of criteria that the operational, personal candidates’ profiles must meet, and by verifying compliance with some objective requirements to be a Board of Directors and other additional requirements to be an Independent Member.

16.4 Measure implemented YES NO N/A


NO. Explain:

For appointment of the Board of Directors, candidates are presented at the Meeting with their resumes and they certify quality of independent of those who shall be so.


Dates of Implementation N/A

Dates of modification N/A

16.5. In addition to the Independence requirements already provided for in Law 964 of 2005, the Company has voluntarily adopted a definition of independence that is more rigorous. Such definition has been adopted as reference framework through the Rules and Regulations of the Board of Directors, and includes, among other requirements that must be assessed, any type of relations or ties of the candidate to be an Independent Member with controlling or significant shareholders and their Associated Parties, in Colombia and abroad, and requires a double statement of independence: (i) a statement by the candidate aimed at the Company, its shareholders, and Senior Management members and included in the Acceptance Letter, and (ii) a statement by the Board of Directors regarding the candidate’s independence.



NO. Explain:

The Regulations of the Board of Directors adopt all the legal requirements of independence demanded by Law 964/2005.

X

X


Implementing Date: N/A


16.6. The Company, based on its internal regulations, considers that the Board of Directors, through its Chairman and with the support of the Appointment and Remuneration Committee or any person who complies with its functions, is the most appropriate body to centralize and coordinate, before the General Meeting, the process to constitute the administration body. Along those lines, the shareholders who, based on their shareholding, aspire to be part of the Board of Directors, can become familiar with the needs of the Board of Directors and suggest their aspirations, negotiate the stock equilibrium and the allocation among the different member categories, present their candidates, and accept that the expertise of their candidates be evaluated by the Appointment and Remuneration Committee before voting at the General Shareholders’ Meeting.

16.6 Measure implemented: YES NO N/A


NO. Explain:

The grids of voters with the candidates to Members of the Board of Directors, are

proposed by shareholders the day of the Meeting in which their appointment shall be

defined. Their resumes are exhibited and the capacity as independent as it

corresponds.




16.7. The Rules and Regulations of the Board of Directors provide that the evaluation of the candidates suitability is to be carried out before holding the General Shareholders’ Meeting, in such a manner that shareholders have sufficient information available (personal qualities, suitability, trajectory, experience, honesty, etc.) regarding the proposed candidates and sufficiently in advance to enable proper evaluation.


X


NO. Explain:

As a general rule, grids of candidates to members of the Board of Directors are known during the General Shareholders Meeting Meeting. Nevertheless, in case a grid has been presented before the meeting of the Meeting, it shall be included within the right of inspection together with their resumes.



Dates of modification: N/A

Measure No. 17: Functional structure of the Board of Directors.

17.1. The Rules and Regulations of the Board of Directors provide for that Independent Members and Equity Members must always be majority as compared to Executive Members, whose number, in case that they are part of the Board of Directors, shall be the minimum required to take care of the information and coordination needs between the Board of Directors and the Senior Management of the Company.



NO. Explain:

Regulations of the Board of Directors do not set forth executive members in the composition of said collegiate organ. As for independent members, they represent 25% according to what is set forth in Law 964/2005.




17.2. Based on the minimum percentage of twenty-five percent (25%) of Independent Members set forth by Law 964 of 2005, the Company analyzes and voluntarily adjusts, upwards the number of Independent Members,

X

X

taking into account, among others, that the number of independent members keeps a relation to the Floating Capital.



NO. Explain:

Regulations of the Board of Directors set forth that independent members that make up

the Board of Directors shall represent 25%, according to what is set forth by Law

964/2005.




Measure No. 18: Organization of the Board of Directors.

18.1. The Bylaws provide for the functions of the Board of Directors Chairman and his/her main responsibilities are established in recommendation 18.1.



Indeed, article forty-three (43) of the Bylaws gathers the functions that are

suggested in recommendation to the Board of Directors. The Bylaws may be

looked at the following link:

https://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-compilados-a-

marzo-30-2017.pdf

NO. Explain:

http://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-compilados-a-



X


Dates of Implementation 2015


18.2. The internal regulations of the Company provide for the possibility that the Board of Directors Chairman receives a differentiated treatment as compared to other members regarding both his/her obligations and remuneration as a result of the scope of his/her specific functions and his/her greater devotion of time.



NO. Explain:

According to article 26 of the Regulations of the Board of Directors, there is

differentiation regarding their functions, but not their compensation.

X

X




18.3. The Bylaws include the rules for the appointment of the Board of Directors Secretary among which those stated in recommendation 18.3



NO. Explain:

Article forty-three (43) of the Bylaws sets forth that the Board of Directors “shall have a Secretary who shall be the Corporate and Legal Issues Vice President or whomever the Board itself designates as such, but such position shall not require the person to be a Board of Directors member, in which case, he/she shall be appointed by the majority of the votes.” Notwithstanding the above, the rules provided for in measure 18.3 regarding the safeguard of independence in relation to the Company CEO are not included.




18.4. The Rules and Regulations of the Board of Directors provide for the Secretary’s functions, among which those stated in recommendation 18.4.


X

Article twenty-seven (27) of the Regulations of the Board of Directors, contains the activities of this recommendation.

NO. Explain:




18.5. The Board of Directors has constituted an Appointment and Remuneration



NO. Explain:

According to what is set forth in the Code of Good Corporate Governance article 2.2.8.2 there is a Committee of Compensation and Benefits, which functions are similar to those set forth in the recommendation, except those related to appointment of members of the Board of Directors.




18.6. The Board of Directors has constituted a Committee of Risks.

X

X



NO. Explain:

The Board of Directors has designated the Audit Committee to perform some functions related to administration and analysis of risks of the business according to what is set forth in item 4 of the Internal Regulations of the Committee. Nevertheless, there is no Committee of Risks as such.

The Internal Regulations of the Audit Committee may be seen in the following link: https://www.terpel.com/Global/Home/reglamento-comite-auditoria-buen-gob- corporativo-021116.pdf




18.7. The Board of Directors has constituted a Corporate Government Committee.



NO. Explain:

The Code of Good Corporate Governance provided for the existence of an Audit Committee whose functions, among others, are related to the follow-up and management of the good corporate governance.

https://www.terpel.com/Global/Home/reglamento-comite-auditoria-buen-gob-corporativo-021116.pdf


X




18.8. If the Company has considered that it is not necessary to constitute all of the Committees, their functions have been allocated among the existing committees or have been borne by the whole Board of Directors.



The Company has created an Audit Committee and a Compensation and Benefit Committee as support to the Board of Directors, which cover functions related to good governance, audit and compensation, and/or remuneration.

NO. Explain:




18.9. Each of the Board of Directors Committees has Internal Rules and Regulations that regulate the details of its conformation, and the issues and functions on which the Committee must work, as well as its operation, paying special attention to the communication channels between the Committees and the Board of Directors and, in the case of Conglomerates, to the mechanisms used to relate and coordinate between the Parent Company Board of Directors Committees and the Subordinate Companies Boards of Directors, if any.

X

X



Indeed, each one of the Committees has its respective Regulations governing details of its formation, matters, functions of its creation, matters, functions over which the Committee shall work on, and its operations, paying special attention to the communication channels between the Committees and the Board of Directors. Nevertheless, an exception is made that there are not Committees of Board in its Subordinated Companies.

NO. Explain:




18.10. The Board of Directors Committees are exclusively made up of Independent Members or Equity Members, by minimum three (3) members and led by an Independent Member. As to the Appointment and Remuneration Committee, Independent Members are always the majority.



NO. Explain:

Both the Audit Committee and the Compensation and Benefits Committee are made up by members of the Board of Directors. In compliance with the applicable rules to its operations, the Audit Committee has majority participation of the independent members. On the other hand, in the Compensation and Benefits Committee, both members of the Board of Directors as well as members of the administration participate in it, with the latter being a majority.


X

X



18.11. The Board of Directors Committees can obtain specific or permanent support from Senior Management members with experience regarding the issues of their competence and/or from external experts.



Permanent support of the members from Senior Management to Committees of the

Board of Directors is guaranteed through their participation in them. Indeed, the Audit

Committee assists the President and the Vice-president of Corporate Finances of the

Company, and the Committee of Compensation and Benefits assists the Vice-president

of Human Management, among others.

NO. Explain:




18.12. To conform its Committees, the Board of Directors takes into account the profiles, knowledge and professional experience of the members regarding the matter of the Committee.


X


According to the requirements set forth in the Regulations of the corresponding Committees.

NO. Explain:




18.13. Minutes are prepared of the meetings of the Committee, which copy is submitted to every member of the Board of Directors of the Company. If the Committees If the Committees are empowered to make decisions, the minutes adapt to what is demanded in articles 189 and 431 of the Commercial Code.



Minutes of the meetings of the Committees are written and they are submitted to every

member of the Board of Director complying with the requirements set forth in articles

189 and 431 of the Commercial Code, pursuant to what is set forth in item 2 of the

Regulations of the Audit Committee and to item 3 of the Regulations of the

Compensation and Benefits Committee.

NO. Explain:



X

X


18.14. Unless the applicable legal or regulatory framework requires its constitution, in the case of Conglomerates, the internal regulations provide for that the las Subordinated Companies Boards of Directors can decide not to constitute specific Committees to treat certain issues; as a result, such tasks shall be borne by the Parent Company Board of Directors Committees, but such fact shall not be seen as a transfer of the Subordinated Companies Boards of Directors’ responsibilities to the parent company.



NO. Explain:

Affiliated and subordinated Companies have chosen not to conform committees.




18.15. The main task of the Audit Committee is to assist the Board of Directors in its supervision function by evaluating the accounting procedures, in the relations with the Statutory Auditor and, in general, by reviewing the Control Architecture of the Company, including auditing the risk management system implemented by the Company.


X

YES. Explain briefly: According to the provisions in the Audit Committee Rules and Regulations, numbers 3 and 4. NO. Explain:




18.16. Members of the Audit Committee have knowledge of accounting and finance as well as of other related issues, which enables them to pronounce on the subjects that are the competence of the Committee with a sufficient level to understand their scope and complexity.



According to the provisions in the Audit Committee Rules and Regulations, number 2 “The Committee members must have the expertise that enables them to perfectly meet their functions”.

NO. Explain:




18.17. At the request of the Meeting Chairman, the Audit Committee Chairman reports to the General Shareholders’ Meeting regarding specific aspects of the work performed by the Committee, such as, for example, the analysis of the scope and content of the Fiscal Audit Report.

X

X



Pursuant to the powers of the Chairman of the General Shareholders Meeting, the President of the Audit Committee may report the Meeting on specific aspects, if the Chairman of the Meeting requires so, applying article 14 of the Regulations of the General Shareholders Meeting.

NO. Explain:




18.18. Internal Regulations of the Audit Committee grants it the functions indicated in recommendation 18.18.



NO. Explain:

The Audit Committee is responsible for several of the functions established in this recommendation. On the other hand, it complies with all the functions set forth in law 964/2005.




X

X

18.19. The main purpose of the Appointment and Remuneration Committee is to support the Board of Directors in the exercise of its decision-making and advisory functions regarding appointment and remuneration issues associated with the Board of Directors and Senior Management members, and supervise compliance with the Corporate Governance rules, by periodically reviewing compliance, recommendations, and principles (in those cases in which such function is not expressly conferred upon another Company committee).



NO. Explain:

According to items 1 and 4 of the Regulations of the Compensation and Benefits Committee, and the main purpose of the Appointments and Retributions Committee is to support the Board of Directors in exercising its functions of decisive character or of advice associated to matters of appointments and compensations of Senior Management. In terms of abiding to the rules of Corporate Government, this function has been assigned to the Audit Committee.




18.20. Some members of the Appointment and Remuneration Committee have knowledge of strategy, human resources (recruitment and selection, contracting, training, administration or personnel management), wage policy, and similar issues, with a level sufficient to understand the scope and complexity of such issues regarding the Company.


X


These functions are assumed by the Compensations and Benefits Committee, which members fully comply with these presumptions. For the 2016-2019 period, those who make up this Committee are the following Jorge Garces Jordan, Jose Oscar Jaramillo, Maria Mercedes Carrasquilla, Maria Cristina Romero and Sylvia Escovar Gómez. The resumes of the members of the Board of Directors may be seen in the following link: https://www.terpel.com/Global/Accionistas/Gobierno-corporativo/junta-directiva-2016-2019.pdf

NO. Explain:




18.21. At the request of the Meeting Chairman, the Appointment and Remuneration Committee Chairman may inform the General Shareholders’ Meeting of specific aspects of the work carried out by the Committee, such as for example follow-up on the remuneration policies of the Board of Directors and the Senior Management.



Pursuant to the powers of the President of the General Shareholders Meeting, the Chairman of the Committee may report the Meeting on specific aspects, in case the Chairman of the Meeting requires so, applying article 14 of the Regulations of the General Shareholders Meeting.

NO. Explain:


http://www.terpel.com/Global/Accionistas/Gobierno-



X

X



18.22. The Internal Rules and Regulations of the Appointment and Remuneration Committee Rules confer upon the same the functions stated in recommendation 18.22.



NO. Explain:

Although the Compensations and Benefits Committee assumes the functions of the Appointments and Compensation Committee and complies with several of the functions of this recommendation, but not all of them. NA. Specify the rules that prevent you from adopting the recommendation:



18.23. The main purpose of the Risk Committee is to assist the Board of Directors in complying with its supervision responsibilities regarding risk management.


X


NO. Explain:

The Company has constituted an Audit Committee which, pursuant to what is set forth in item 1 of the Internal Regulations of the Audit Committee, has the main function of advising the Board of Directors on compliance of its responsibilities of supervision through assessment of accounting procedures, relations with the Statutory Auditor, and, overall, review of the architecture of control of the Company, including Audit of risk management implemented by the Company and compliance with the principles of good corporate government set forth by the Law, competent authorities and by the Company itself.




18.24. At the request of the Meeting’s Chairman, the Risk Committee Chairman may inform the General Shareholders’ Meeting of the specific aspects of the work carried out by the Committee.



NO. Explain:

According to the power of the President of the General Shareholders Meeting, the Chairman of the Committee may report the Meeting on specific aspects, in case the Chairman of the Meeting requires so, applying article 14 of the Regulations of the General Shareholders Meeting.


X

X



18.25. With the adjustments that are necessary to distinguish between companies that belong to the financial sector or to the real sector of the economy, and without prejudice to the functions assigned to said committee by effective rules, the Internal Risk Committee Rules and Regulations confer upon the same the functions provided for in recommendation 18.25.



NO. Explain:

The Audit Committee assumes the functions of the Risk Committee, it complies with several functions of this recommendation, but not all of them.




18.26. The main purpose of the Corporate Governance Committee is to assist the Board of Directors in its functions related to proposals and supervision of Corporate Governance measures adopted by the Company.




This function has been expressly assigned to the Audit and Corporate Government

Committee pursuant to item 1 of the Internal Regulations of the Committee, which may

be viewed through the following link: https://www.terpel.com/Global/Home/reglamento-

comite-auditoria-buen-gob- corporativo-021116.pdf

http://www.terpel.com/Global/Home/reglamento-comite-auditoria-buen-gob-




X

X




18.27. The Internal Corporate Governance Committee Rules and Regulations confer upon the same the functions stated in recommendation 18.27.



NO. Explain:

The Audit and Corporate Government Committee complies with several of these

functions, they are not fully adopted yet.




Measure No. 19: Board of Directors Operation 19.1 The Board of Directors Chairman, assisted by the Company’s Secretary and CEO, prepares a work plan for the Board of Directors for the evaluated period, a tool that facilitates determining the reasonable number of ordinary meetings per year and their estimated duration.


X


Indeed, pursuant to item 3 of article twenty-six (26) of the Regulations of the Board of Directors, the Chairman of the Board of Directors has the function of Coordinating and planning functioning of the Board of Directors by establishing an annual working plan based on the functions assigned. In this order of ideas, on the last meeting of the Board, among other aspects, the schedule of meetings was established.

NO. Explain:




19.2. Except for the entities subject to surveillance which, due to their policy, are bound to hold minimum one (1) meeting per month, the Company Board of Directors holds from eight (8) to twelve (12) ordinary meetings per year.



At least 12 meetings are held per year, applying what is indicated in article eight

(8) of the Internal Regulations of the Board of Directors.

NO. Explain:


X

X



19.3. One (1) or two (2) meetings of the Board of Directors per year are clearly focused on defining and following up on the Company strategy.



NO. Explain:

Terpel conducts at least 12 ordinary sessions per year, in which the Board of Directors

guides, defines and monitors the Company's strategy. The President of said body makes

careful follow-up with the purpose that it is fully complied with, pursuant to the provisions

of numeral 1) of article Forty-three of the Statutes.

Social Statutes: https://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-

compilados-a-marzo-30-2017.pdf




19.4. The Board of Directors approves a specific schedule of ordinary sessions, without prejudice to being able to hold as many extraordinary meetings as required.


X


On the last session of the year, the Board of Directors agrees on the date and city in

which the monthly meetings of the Board of Directors of the following year shall be

held, without prejudice to extraordinary meetings, according to the needs that arise,

pursuant to what is set forth in article eight (8) of the Regulations of the Board of

Directors.

NO. Explain:




19.5. Together with the summons for the meeting and minimum five (5) calendar days in advance, the Board of Directors members receive the documents or the information associated with each item in the Agenda, for its members to be able to actively participate and make informed decisions.



NO. Explain:

According to what is set forth in article Nine of the Regulations of the Board of

Directors, the call and information related to the items of the Agenda, shall be delivered

two days in advance. This term shall be clarified in the corporate bylaws, at the next

meeting of the General Shareholders Meeting.

Internal Regulations of the Board of Directors: https://www.terpel.com/Global/Home/reglamento-junta-directiva-021116.pdf


X




19.6. The Chairman of the Board of Directors, with the assistance of the Secretary of the Board of Directors, is the ultimate responsible party for the members to receive the information sufficiently in advance and for the information to be useful; therefore, the quality of the set of documents to be delivered (Board of Directors dashboard) must take precedence over quantity.



According to what is set forth in item 6 of article twenty-six (26) of the Regulations of the Board of Directors, the Chariman of the Board of Directors and the CEO of the Company (supported by the Secretary of the Board of Directors) are responsible for this.

NO. Explain:




19.7. The Chairman of Board of Directors is ultimately responsible for preparing the Agenda for the meetings of the Board of Directors. The Company CEO is not responsible for such task. Such Agenda is structured according to certain parameters that enable following a logical order in the presentation of issues and debates.

X

X



Pursuant to what is set forth in item 5 of article twenty-six of the Regulations of the

Board of Directors, the Chairman of the Board of Directors and the CEO of the

Company (supported by the Secretary of the Board of Directors) are responsible for

this.

NO. Explain:




19.8. The Company publishes the members’ attendance to the Board of Directors meetings and its Committees meetings in the Annual Corporate Governance Report and on the corporate web page.



NO. Explain:

The Management Report is presented every year, which contains information set forth in article 446 of the Commercial Code and articles 46 and 47 of law 222/1995.


X

X



19.9. Every year the Board of Directors evaluates the effectiveness of its work as a collegiate body, that of its Committees and its members considered individually, including the peer evaluation, as well as the reasonable nature of its internal rules and its members’ devotion and performance; thus recommending, in its case, the modifications to its organization and operation that it deems convenient. In the case of Conglomerates, the Parent Company Board of Directors requires that the evaluation process is also carried out at the Subordinate Companies’ Boards of Directors.



NO. Explain:

Although the Board of Directors constantly reviews the development of its functions and follows up on its commitments and duties, this review is not exegetically made in the terms of this measure. Nevertheless, results of the first assessment of the Board of Directors shall be delivered, with support of an external agent.

NA.Specify the rules that prevent you from adopting the recommendation:



19.10. The Board of Directors alternates the internal self-evaluation technique and the external evaluation carried out by independent advisors.


X


NO. Explain:

Although the Board of Directors constantly reviews the development of its functions and follows up on its commitments and duties, this review is not strictly made in the terms of this measure. Nevertheless, results of the first assessment of the Board of Directors shall be delivered, with support of an external agent.




Measure No.20: Board of Directors Members’ Duties and Rights

20.1. The Board of Directors Rules and Regulations complement the provisions in the regulation framework regarding the Board of Directors members’ duties and rights.



According to what is set forth in Chapter Two and Three of the Regulations of the

Board of Directors, there is compliance with this recommendation.

NO. Explain:




X

X

20.2. The Board of Directors Rules and Regulations develop the understanding of the Company regarding the Board of Directors members’ duties referred to in recommendation 20.2.



Indeed, Chapter Two of the Regulations of the Board of Directors includes every duty

indicated in this recommendation.

NO. Explain:




20.3. The Board of Directors Rules and Regulations develop the content of the Board of Directors members’ rights provided for in recommendation 20.3.



Indeed, Chapter Three of the Regulations of the Board of Directors includes every

duty indicated in this recommendation

NO. Explain:


X



Measure No. 21: Conflicts of Interest 21.1. The Company has a policy and procedure that is defined and formalized in the internal regulation for becoming aware of, and for the administration and settlement of, conflict of interest situations, either direct or indirect through Associated Parties, which may affect the Board of Directors members and other Administrators.


YES. Explain briefly: The Code of Good Corporate Governance, expressly provide for the regulation on this issue as follows:

5.2. CONFLICTS OF INTEREST. ADMINISTRATORS, LEGAL REPRESENTATIVES, AND DIRECTORS POLICY 5.2.1. DEFINITION The decisions and actions of all of the Board of Directors members and employees of Organización Terpel S.A. are always aimed at satisfying the best interests of the Company and are not caused by personal considerations. The relations of kinship, friendship or expectation regarding current or potential suppliers, contractors, customers, competitors or regulators do not affect the Company’s employees’ and directors’ independence. No employee or Board of Directors member shall participate in agreements or negotiations when he/she shall incur in a conflict of interest or when his/her relatives to the fourth degree of consanguinity, second degree of affinity and first degree of kinship by adoption have an interest. As soon as the employee is aware of the conflict of interest, he/she shall promptly notify his/her immediate superior for him/her to designate the employee who shall continue with the process, all in accordance with the Company policies in force regarding the issue. The employees who contract or negotiate with the Company as a result of a legal obligation or in order to use the goods or services that the Company provides requesting parties under normal conditions do not incur in conflict of interest. At any rate, the Board of Directors members and the Company administrators and employees shall incur in conflict of interest whenever the person who must make a decision, or carry out or omit an action, due to his/her functions, has the possibility to choose between the interest of the Company, customer, user or supplier, as the case may be, and his/her own interest of the interest of a third party, in such a manner that, if he/she chooses any of the latter two, he/she would obtain an improper pecuniary benefit and/or extra economic benefit that he/she would not otherwise receive; thus ignoring a legal, contractual, statutory or ethical duty. 5.2.2. CONFLICT OF INTEREST SETTLEMENT The Company employees act with due diligence and loyalty, by notifying the situations in which a conflict of interest exists following the confidentiality principle. All of the Company activities are governed by the values and principles stated herein, the rules of commercial ethics and good mercantile faith, the respect for laws and commercial customs, aimed at complying with the business purpose, focused on the common good and service to the community and making them a priority.

Whenever a Company employee confronts a conflict of interest, he/she must follow the procedure below. 1. Report the conflict in writing to his/her immediate superior including details on his/her situation regarding the same and the superior shall designate the employee who shall continue with the relevant process. 2. Refrain from directly or indirectly participating in the activities and decisions related to the corporate determinations regarding the conflict or cease every act when he/she is aware of the conflict of interest situation. 3. The Board of Directors members must inform the Board of Directors of the conflict of interest situation. The doubt regarding the configuration of acts that entail conflicts of interest does not exempt the Board of Directors member from the obligation to refrain from participating in the relevant activities. 4. The decisions and actions by the Organización Terpel S.A. administrators must be led by the satisfaction of the interests of the same and by the respect of the shareholders’ rights and must not be caused by personal considerations. The relations of kinship, friendship or expectation regarding current or potential suppliers, contractors, customers or competitors must not affect their independence and better judgment regarding the protection of the interests of Organización Terpel S.A. Internal Board of Directors Rules and Regulations: (…) In addition to the above and as a good governance practice, the Company Board of Directors shall Article Twenty. Conflicts of Interest. A conflict of interest exists whenever it is not possible to simultaneously satisfy two interests, namely, the interest of the Board of Directors members and the interest of the Company. In addition to complying with the duties of the Board of Directors members, which have been set forth herein, by law, in the bylaws, and in the Code of Good Corporate Governance, each Board of Directors member must analyze every situation that may entail a conflict of interest or an act of competition. The Board of Directors member’s legal duty is to notify the Board of Directors of the occurrence of a conflict of interest and provide the same with the applicable details. The existence, as well as the occurrence, of a conflict of interest or an act of competition do not exempt the Board of Directors member from the obligation to refrain from participating in the related activities. Likewise, the member shall refrain from attending and participating in the deliberations that affect issues in which he/she has a personal interest.

NO. Explain:




X

X

21.2. The procedure for managing conflicts of interest distinguishes their nature, differentiating occasional conflict of interest from permanent conflict of interest. If the conflict of interest is occasional, the applicable procedures state the rules and steps to be followed, which must be easy to be managed and difficult to be avoided by the affected party. Regarding permanent conflicts of interest, the procedure considers that, if the situation affects the whole of the Company operations, it should be understood as grounds for mandatory resignation by the affected party as it makes it impossible for him/her to perform his/her position.



NO. Explain:

No definition for permanent or occasional conflicts of interest exists, or a particular

procedure for each case has been made. The procedure to be followed is the same as

the one described on the previous section.




21.3. The members of the Board of Directors, Legal Representatives, Senior Management, and other Administrators of the Company periodically inform the Board of Directors of the direct or indirect relations between them or with other entities or structures part of the Conglomerate of which the issuer is part, or with the issuer, suppliers, customers or any other Stakeholder Groups, which could result in conflict of interest situations or affect their opinion or vote, thus building a “map of Associates Parties” for the Administrators.



NO. Explain:

According to the Code of Good Corporate Governance, the Company Managers must immediately inform of a situation that may be considered a conflict of interest. In the event that no conflict shall occur, no statement is required. Likewise, it is worth mentioning that no “map of Associated Parties” exist on the terms provided for in the recommendation.

X




21.4. The relevant conflict of interest situations, understood as those that would force the affected party to refrain from attending a meeting and/or voting at a meeting at which the Board of Directors members and other Administrators are present, are included in the public information annually published by the Company on its Web page.


X


NO. Explain:

Such information would be presented to the appropriate body, as applicable,

according to the procedure for conflict of interest settlement included in the Code of

Good Corporate Governance and the Internal Board of Directors Rules and

Regulations.




21.5. For the purpose herein, the definition of Associated Party applicable to the Company is consistent with

the International Accounting Standard nº 24 (IAS 24).



Indeed, Terpel complies with international accounting standards and presents its Financial Statements in accordance with them, particularly accepting the definition of a Related Party contained in IAS 24. NO. Explain:




X

Measure No. 22: Operations with Associated Parties

22.1. The Company has a policy that defines the specific procedure for the valuation, approval, and disclosure of operations with Associated Parties, including outstanding balances and relations among such Parties, except for those operations that have a specific regulation.



NO. Explain:

The Company does not have a policy that defines the specific procedure regarding operations with Associated Parties. Nonetheless, its Code of Good Corporate Governance provides for the regulation of: (i) the economic relations between the Company, its shareholders, administrators, and main directors; (ii) the negotiation of Company shares by administrators; (iii) the obligations regarding disclosure and duty of abstention of administrators; (iv) the policies on management of business opportunities and the use of company assets.

Likewise, a “Report of Transactions with Associated Parties” is made available to the Board of Directors, which details the transactions carried out by Terpel regarding: (i) Board of Directors members, as well as payment of their fees; (ii) loans to Company administrators and shareholders and to administrators or shareholders of subordinated companies; (iii) remuneration and benefits for key Company staff; (iv) agreements with companies whose partners are administrators, shareholders and/or relatives of close administrators and shareholders that are expected to affect or may be affected by relations with the Company; (v) dividends paid to persons acting as Company administrators and as subordinated companies administrators; and (vi) transactions between the controlling Company and/or the subordinated companies.



X


22.2. The Company’s policy related to operations with Associated Parties includes the aspects covered in recommendation 22.2.



NO. Explain:

No policy on the terms described in the recommendation exists. As explained above, the Code of Good Corporate Governance of Terpel regulates: (i) the economic relations of the Company, its shareholders, administrators, and main directors; (ii) the negotiation of Company shares by administrators; (iii) the obligations regarding disclosure and duty of abstention of administrators; (iv) the policies on the management of business opportunities and the utilization of company assets. Likewise, a “Report of Transactions with Associated Parties” is submitted to the Board of Directors on a monthly basis, which details the transactions carried out by Terpel regarding: (i) Board of Directors members, as well as payment of their fees; (ii) loans to company administrators and shareholders and to administrators or shareholders of subordinated companies; (iii) remuneration and benefits for key company staff; (iv) agreements with companies whose partners are administrators, shareholders and/or relatives of close administrators and shareholders expected to affect or be affected regarding the company; (v) dividends paid to persons acting as company administrators and as subordinated companies administrators; and (vi) transactions between the controlling company and/or the subordinated companies.




22.3 The policy provides for that the express authorization by the Board of Directors is not required for recurring associated operations characteristic of the ordinary course of business, carried out by virtue of membership contracts or general framework agreements; operations with perfectly standardized conditions, that are massively applied, and are made at market prices fixed in general by the person who act as supplier of the good or service, and whose individual amount is not relevant for the Company.

X

X



NO. Explain:

As explained above, this recommendation does not apply as no policy on the terms described exists. Notwithstanding, such transactions are in fact made at market prices.




Measure No. 23: Remuneration of the Board of Directors Members 23.1. The Company has a remuneration policy regarding the Board of Directors, approved by the General Shareholders’ Meeting and reviewed every year, which identifies all of the remuneration components that can effectively be satisfied. Such components can be fixed or variable. They may include fixed fees for being a Board of Directors member, fees for attending Board meetings and/or its Committees, and other remuneration of any kind earned in the course of the exercise, due to any cause, in cash or in kind, as well as the obligations contracted by the Company regarding pensions or the payment of insurance premiums, or other items, related to both old members and current members, as well as civil liability insurance premiums (D&O policies) contracted by the Company in favor of the Board of Directors members.



X

NO. Explain:

No policy exists that is reviewed annually and includes all of the elements stated in the recommendation, for example, insurance policies, remuneration for old members, premiums, pensions, etc. However, the Shareholders Meeting approves the fixed remuneration for the Board of Directors members, based on their attendance to the meetings of the corporate body during the year. Article Twenty-four in the Internal Board of Directors Rules and Regulations and Article 2.2.2 in the Code of Good Corporate Governance provide for: “2.2.2. REMUNERATION OF THE BOARD OF DIRECTORS MEMBERS The Board of Directors members shall be remunerated according to the system of fees and compensations approved by the General Shareholders’ Meeting. The remuneration of the Board of Directors members shall be proportionate to the time devoted by each one to the activities typical of the Board of Directors, and to their participation at the Board meetings and the special Board internal committees.” Likewise, Article Thirty-nine in the Bylaws provides for: “The General Shareholders’ Meeting functions (…) 7.- Appoint and remove Board of Directors members, Principal and Deputy Statutory Auditor, and set their tasks.”




23.2. If the Company adopts remuneration systems by recognizing a variable component associated with the good progress of the Company in the mid and long term, the remuneration policy incorporates limits on the amount that may be allocated to the Board of Directors and, if the variable component is related to the Company benefits or other management indicators at the closing of the fiscal year evaluated, the eventual exceptions included in the Statutory Auditor report that could reduce the fiscal year results must be taken into account.


X

NO. Explain:

No policy on the terms of the recommendation exists. Notwithstanding, as mentioned above, the Meeting approves the remuneration of the Board of Directors. To date, the Board does not have a variable remuneration.




23.3. Equity Members and Independent Members of the Board of Directors are expressly excluded from the remuneration systems that incorporate options on shares or a variable remuneration associated with the absolute variation of the quotation of the share.



NO. Explain:

No policy on the terms of the recommendation exists. Notwithstanding, as mentioned above, the Meeting approves the remuneration of the Board of Directors. To date, the Board does not have a variable remuneration.




X

X

23.4. For each period evaluated, within the framework of the remuneration policy, the General Shareholders’ Meeting approves a maximum cost of the Board of Directors for all of the remuneration components approved.



NO. Explain:

As was explained above, a remuneration policy has not been implemented. Nevertheless, the Shareholders' Meeting approves the professional fees for the members of the Board, but only when their attendance.




23.5. Shareholders are aware of the effective total cost of the Board of Directors during the evaluated period, which includes all of the remuneration components related to the Board of Directors members as well as the reimbursement of expenses. Such cost is published on the Company’s web page as with the level of disaggregation and detailed approved by the Board of Directors.



In fact, such information is available in the Management Report

that is presented to the General Shareholders’ Meeting on an annual basis, and is published on the Company’s web page.

NO. Explain:

X




Measure No. 24: Company’s CEO and Senior Management.

24.1. The Company’s governance model establishes an effective separation between the management or governance of the company (represented by the Board of Directors) and the Ordinary Course of business (for which the Senior Management, led by the Company’s CEO, is responsible).


YES. Explain briefly: In fact, Terpel’s corporate scheme separates the Board of Directors members appointed by the General Shareholders’ Meeting from the Company’s CEO, who functions as the Company’s Legal Representative and to whom the Board of Directors has assigned the function of managing the Company in the ordinary course of business. The Company’s CEO is responsible for directly appointing the vice presidents (Senior Management) and close team, as well as for setting their remuneration. As a result, the Senior Management is independent from the Board of Directors. This issue is broadly regulated by the Bylaws, the Code of Good Corporate Governance, and specific regulations. The most relevant rules are as follows: BYLAWS “ARTICLE FORTY-NINE.- CHIEF EXECUTIVE OFFICER - LEGAL REPRESENTATION AND JUDICIAL LEGAL REPRESENTATION: The Company shall have a Chief Executive Officer who shall be its Legal Representative. The CEO shall be responsible for the administration and management of the corporate business subject to law, to these bylaws, to the General Shareholders’ Meeting and the Board of Directors rules and regulations and resolutions. The CEO shall have four (4) deputies who shall replace him/her in his/her absolute, temporary or accidental absences. (…) ARTICLE FIFTY-TWO.- POWERS OF THE CHIEF EXECUTIVE OFFICER, THE JUDICIAL LEGAL REPRESENTATIVE, AND THE DEPUTIES: The Chief Executive Officer shall have the functions and attributions characteristic of the position and especially the following: 1. To judicially and extra-judicially represent the Company before associates, third parties and all types of judicial and administrative authorities, being able to appoint agents to represent it as the case may be; 2. To formalize the agreements and resolutions of the General Shareholders’ Meeting and the Board of Directors; 3. To perform and enter into acts and contracts aimed at complying with the Company purposes. However, the CEO shall require previous authorization by the Board of Directors to enter into any act or contract of an amount over the equivalent of One Million Dollars (USD 1,000,000). This provision does not include the acquisition or sale of products derived from oil and gas, which shall not require the authorization by

the Board of Directors regardless of the amount of such acquisitions and/or sales. 4. To summons the General Shareholders’ Meeting and the Board of Directors pursuant to the provisions hereof; 5. To submit the balance sheet for each fiscal year, the management report, and the other annexes and reports covered by the Commercial Code Article 446, to the General Shareholders’ Meeting and the Board of Directors; 6. To submit to arbitration or to settle the controversies of the Company with third parties, subject to the limitations set forth in number 3 above; 7. To appoint and remove employees of the Company whose appointment or removal is not the responsibility of the General Shareholders’ Meeting or of the Board of Directors; 8. To delegate certain functions characteristic of his/her position within the limits set forth in the bylaws; 9. To supervise the collection and investment of the Company’s funds; 10. To ensure that all of the Company’s employees strictly perform their duties, including the systems for the disclosure and control of the financial information, and to make the General Shareholders’ Meeting or the Board of Directors aware of the inconsistencies or serious misconduct that may occur related to this issue; 11. To certify that the financial statements and other relevant reports for the public do not contain faults, inaccuracies or errors that prevent from getting to know the real equity situation or the operations of the Company; 12. To perform the other functions assigned by law, the General Shareholders’ Meeting, and the Board of Directors. PARAGRAPH: The Judicial Legal Representative shall be exclusively responsible for the functions provided for in the paragraph of Article Forty-nine hereof and number one hereof. Code of Good Corporate Governance “2.3.2. PERFORMANCE OF THE LEGAL REPRESENTATIVE FUNCTIONS The Legal Representative of Organización Terpel S.A. shall perform his/her functions and responsibilities of administration and management of the corporate business of the Company pursuant to the provisions in the bylaws, in the Code of Good Corporate Governance, and the rules that regulate the same. In addition to such principles, the Legal Representative management shall take into account: 1.- That he/she must ensure the integrity of the accounting systems and the financial statements of the Company, including the implementation of due control systems. 2.- The organization of the structure and instruments required to notify the relevant information related to the progress of the Company business; 3.- The delivery of the information required for the proper performance of the functions and the making of decisions corresponding to the Board of Directors; and 4.- The adoption of the relevant measures for the control authorities of the Company to have the information required to perform their functions available.”

NO. Explain:




X

X

24.2. In general, the Board of Directors policy is to delegate the Ordinary Course of business to the Senior Management team, focusing its activity on the general functions of strategy, supervision, governance, and control.



Pursuant to the provisions above and to the provisions in the Bylaws, the Code of Good Corporate Governance, and the Rules and Regulations. The Bylaws specifically state that the CEO shall be responsible for shall be responsible for “(…) the administration and management of the corporate business subject to the law, these bylaws, and the General Shareholders’ Meeting and the Board of Directors rules and regulations and resolutions “ (Article Forty-nine). However, the Board of Directors is fully authorized to participate in the business / decisions / operations as it may determine.

Article Forty-seven of the Bylaws provides that the Board of Directors shall perform the functions below, among others, that prove such intent: “2.- To cooperate with the CEO in the administration and management of the corporate business, as well as to delegate the functions it deems convenient to the CEO or any other employee (…)

; 7.- To advise the CEO when the he/she so requests regarding legal actions that must be initiated or continued; (…) 17.- To ensure the strict compliance with all of the provisions included herein and those issued for the good operation of the Company, and make the decisions required for the Company to be able to meet its purpose, for which the Meeting or other Company body is not responsible (…)”.

NO. Explain:




24.3. As a general rule, Senior Management members are identified, evaluated, and designated directly by the Company's CEO given they are his/her direct collaborators. Alternatively, the Company may choose that the Senior Management members are designated by the Board of Directors according to a proposal by the Company CEO. Regardless of who makes the final designation, candidates to hold key executive positions in the Company are analyzed and evaluated by the Appointment and Remuneration Committee of the Board of Directors, which shall give its opinion.


X


NO. Explain:

As a general rule, Senior Management members are appointed by the Company's CEO, such provision is not mandatory. The General Shareholders’ Meeting, the Board of Directors and/or the CEO may choose for members to be appointed by any other body when they so deem convenient and no proposal by the CEO shall be required. Likewise, it is worth mentioning that the powers of the Board of Directors provided for in its internal rules and regulations do not include the evaluation of senior management members, therefore, such power has not been delegated to any committee.




24.4. The Company has a clear policy regarding the delegation of functions approved by the Board of Directors and/or a scheme of authorities that enables becoming familiar with the level of empowerment of the Company CEO and other Senior Management members.



Article Twenty-Two (22) of the Bylaws classifies the management, administration and audit bodies of the company, each has been assigned with the corresponding functions, having a clear definition of their functions, scope and powers for the best compliance of the company's vision. Likewise, the Company has appointed legal representatives, judicial legal representatives, and general attorneys exist with limitations and power schemes clearly defined.

It is worth mentioning that Terpel’s Bylaws set limits to their legal representatives’ power to contract, who must request the express authorization by the Board of Directors to enter into business or agreements of an amount over USD 1,000,000.

NO. Explain:

X

X




24.5. The Board of Directors, through the Appointment and Remuneration Committee, or whoever performs its functions, leads the evaluation of the Company’s CEO performance and is familiar with the evaluations of the other Senior Management members.



NO. Explain:

The Company’s CEO evaluation is carried out by the Board of Directors

Chairman. Likewise, the evaluation of the Senior Management members

is usually performed by the Company’s CEO.




24.6. The Company has a remuneration policy related to the Company’s CEO and the other Senior Management members, approved by the Board of Directors, which identifies the remuneration components that can effectively be satisfied, tied to the compliance of long-term objectives and to risk levels.



X

NO. Explain:

The compensation of the Senior Management is defined by the Company’s CEO pursuant to market standards. In addition, the CEO’s compensation is defined by the Board of Directors Chairman based on market standards. Finally, the variable remuneration scheme is approved by the Compensation and Benefits Committee, if applicable.

The Code of Good Corporate Governance provides for:

2.3.3. LEGAL REPRESENTATIVE’S REMUNERATION The remuneration of the Legal Representative’s shall be set pursuant to the authorization by the Board of Directors.




24.7. If the Company’s CEO includes a fixed component and a variable component, its technical design and means of calculation this prevent the variable component to surpass the maximum limit established by the Board of Directors.



NO. Explain:

The Board of Directors has not established limits on the terms provided for in the recommendation.




X

X

III. CONTROL ARCHITECTURE

Measure No. 25: Control Environment.

25.1. The Board of Directors is the ultimate responsible party for the existence of a sound control environment inside the Company, adapted to its nature, size, complexity, and risks, in such a manner that it meets the provisions in recommendation 25.1.



NO. Explain:

Terpel understands that, although the Board of Directors has delegated the functions related to the compliance and review of the control environment in the Audit Committee, the Board is ultimately responsible for the existence of the control environment within the company, a power exercised by through said delegated body.

Within society, knowledge of business risks is promoted from the perspective of each area, empowering each vice president and its managers, who are directly responsible for identifying, evaluating, managing, monitoring and reporting the risks to which they are exposed. exposed. This management is evaluated through the implementation and execution of the audit plan, approved by the Audit Committee. The results of these evaluations are presented quarterly to the Audit Committee.

It is important to mention that although Terpel has mechanisms that guarantee a solid control environment, it is working to formalize it with the rigor required by the survey's




25.2. Regarding Conglomerates, the Parent Company’s Board of Directors shall promote the existence of a Control Architecture with a consolidated, formal scope, which covers all of the Subordinated companies, establishing responsibilities related to the policies and guidelines on the issue at the conglomerate level and defining clear reporting lines that enable having a consolidated view of the risks for the Conglomerate and taking control measures.


X

Yes. Explain briefly:

No. Explain:

The Board of Directors monthly reviews the organizational environment of its affiliates and subsidiaries, companies that follow the internal policies of Organización Terpel, such as its Code of Good Corporate Governance and the Code of Ethics, among others. Likewise, each company develops and manages its own risk, based on each section leader according to their risks and needs. Additionally, the Audit Committee and the Internal Control Department conduct an annual audit plan that includes Terpel and all of its subordinates, which is presented to the Board of Directors.

For their part, Terpel's Board of Directors is the only competent body to authorize any operation above USD 1 million, thus reducing the risk considerably, maintaining control and a general policy for all of its subsidiaries, according to the provisions in Article Forty-Seven of the above-cited Bylaws (sections 16 and 18).

Finally, the company acts as a parent company of the corporate group, continuously directing the management of all of its subordinates and evaluating on a monthly basis the performance of its subordinates. The above situation, in addition to being included in the trade registry, is also published in our web page at "Corporate Structure" within the Corporate Governance Chapter and was disclosed to the stock exchange in due course, through the Relevant Facts mechanism of the Superintendency of Finance.

• Bylaws : https://www.terpel.com/Global/estatutos-

sociales-organizacion-terpel-compilados-a-marzo-30-2017.pdf

• Corporate Structure: https://www.terpel.com/en/Estructura-

corporativa/




Measure No. 26: Risk Management. 26.1. The Company’s risk management objectives are those contemplated in recommendation 26.1.


https://www.terpel.com/Global/estatutos-sociales-organizacion-terpel-compilados-a-marzo-30-2017.pdf






X


NO. Explain:

Within the framework of culture, philosophy and risk policies of the company, the risks are managed both at the level of Terpel as well as its subordinates (countries), a process that is led by the Board of Directors at its monthly meetings, through its Audit Committee and by the Internal Control Department. Additionally, the most relevant guidelines regarding risk management for each segment of business or activity, are identified and continuously monitored by each business leader. as mentioned above. In this sense, each vice presidency and its managements are the ones directly responsible for identifying, evaluating, managing, monitoring the risks to which they are exposed, and presenting them to the Board of Directors when necessary.




26.2. The Company has a map of risks understood as a tool to identify and follow up on the financial and non-financial risks for the same.



NO. Explain:

Within the culture, philosophy and risk policy framework of the company, risk maps are prepared both at the level of Terpel as well as its subordinates (countries), a process led by the Internal Control Department.


X

X



26.3. The Board of Directors is responsible for defining a risk management policy , as well as for setting maximum exposure limits for each identified risk.



NO. Explain:

The entire Board of Directors and through its Committees defines the risks and the maximum exposure limits.




26.4. The Board of Directors is aware of and periodically supervises the effective exposure of the Company to the maximum defined limits of risk and suggests actions for correction and follow-up in the event that deviations exist.



NO. Explain:

The Board of Directors performs these activities through the Audit Committee that is the body in charge of being aware of the effective exposure of the Company to the various risks defined at each section or segment by their leaders, on the terms set forth in their rules and regulations, as well as through the Statutory Auditor while performing the audit task. It is worth mentioning that said Committee holds meetings every three months (or

X

X

special meetings are held when required) and its reports and decisions are recorded in its minute book.

According to Chapter 2 of the Audit Committee Rules and Regulations “The reports recorded in the minutes shall be presented to the Board of Directors minimum once (1) a year or less frequently if the Board so requests. The Company Secretary General shall summons the Committee meetings minimum five (5) days in advance.”




26.5. Within the framework of the risk management policy, the Senior Management owns the processes and is responsible for risk management, that is, identifying, evaluating, measuring, controlling, monitoring, and reporting risks, by defining methodologies and ensuring that risk management is consistent with the strategy, the defined risk policy, and the maximum limits approved.



NO. Explain:

Even though the Senior Management is in charge of managing risks based on each section. Each business or segment responsible party must determine and manage its own risks and report them by virtue of their obligations as managers, work is underway to ensure that these measures are immersed in the risk management policy.




26.6. The Company has a policy regarding the delegation of risks, approved by the Board of Directors, which establishes the risk limits that can be directly managed at each level of the Company.


X


NO. Explain:

No formal policy for the delegation of risks exists which has been approved by the Board of Directors on the terms described in the recommendation. Notwithstanding, each person who leads or runs each business segment manages risks according to his/her knowledge and experience, while disclosing relevant information pursuant to the organizational culture.




26.7. Regarding Conglomerates, risk management must be at a consolidated level in such a manner that it contributes to the cohesion and control of the companies that are part of the company.



NO. Explain:

Terpel promotes the cohesion of the practices by implementing controls in charge of the Board of Directors of the parent company, particularly related to the amount of operations. Respecting the levels of independence of Associated Companies, the Audit Committee performs its functions, among which are: “2. To annually review, along with the Statutory Auditor, the Organizational Control Manager, and the Corporate and Legal Issues Vice President, the results of the supervision of compliance with the policy on conflicts of interest and good governance and to inform the Board of Directors.”


X

X



26.8. If the Company has a complex, diverse structure of business and operations, the position of Chief Risk Officer (CRO) exists ) who shall have competence at the level of the Conglomerate if these are integrated companies under situations of control and/or business group.



NO. Explain:

No CRO exists at the level of conglomerate based on the definition of business group. However, an Internal Audit Manager does exist who performs his/her functions by establishing a risk plans with audit focus inside the Company (more at the level of processes, which includes the processes related to entities under the control of Terpel, at all times respecting the independence of the affiliated companies.)




Measure No. 27: Control Activities.

27.1. The Board of Directors is responsible for ensuring the existence of an appropriate internal control system , that is adapted to the Company and its complexity and is consistent with the current risk management.



NO. Explain:

The Board of Directors is responsible for ensuring the existence of an appropriate internal control system, through the performance of the functions of the Audit Committee that is formed by members of the corporate body. The Audit Committee is required to present periodic reports to the Board of Directors regarding the activities carried out and the decisions made.

X

According to Chapter 2 of the Audit Committee Rules and Regulations: “The main function of the Audit and Good Corporate Governance Committee (hereinafter the “Committee”) is to advise the Board of Directors of Organización Terpel S.A. (hereinafter the “Company”) in complying with its surveillance and control responsibilities. The Committee’s functions and responsibilities are approved by the Board of Directors.

The Audit and Good Corporate Governance Committee shall supervise the compliance with the internal audit program that must take into account the business risks and fully evaluate all of the processes and procedures of the Company, and must also ensure that the preparation, presentation, and disclosure of the financial information is in accordance with the applicable Law, by providing a communication channel between the Statutory's Auditor’s Office, the Organizational Control Manager’s Office, the management, and the Board of Directors, and must in addition monitor the compliance with the principles of Good Corporate Governance set forth by both competent authorities and the Company itself.”

Also, Chapter 4 in the same Rules and Regulations, regarding “Permanent Activities”, provides for that the Audit Committee must:

“1. Supervise compliance with the internal audit program that must take into account the business risks, integrally evaluate all of the Company sections and the internal control reports. (…) 9. Along with the management, the Statutory Auditor’s office, and the Organizational Control Manager, investigate on the significant dangers and risks and evaluate the actions taken by the management to minimize such risks. 10. Periodically report to the Board of Directors on the significant results of the activities carried out.

It is important to mention that although Terpel has mechanisms that guarantee a solid control environment, it is working to formalize it with the rigor required by the survey's recommendations.




27.2. The Board of Directors is responsible for supervising the effectiveness and suitability of the internal control system, a function that can be delegated to the Audit Committee, but the Board shall continue to be responsible for its supervision.


X


NO. Explain:

The Board of Directors periodically supervises the Audit and Good Corporate Governance Committee that must present periodical reports on its functions to the Board. According to the Audit and Good Corporate Governance Committee Rules and Regulations Chapter 2 “The reports recorded in the minutes shall be presented to the Board of Directors minimum once (1) a year or less frequently if the Board so requests (…).”




27.3. The self-control principle is applied and required in the Company, understood as the “ability of the persons who participate in the different processes to consider control as an inherent part of their responsibilities, fields of action, and decision-making”.



In fact, the principle of self-control is applied in the Company as a key element for risk management. As mentioned above, each segment / section leader performs the function of managing risks and carry out control in his/her section as an inherent function of his/her mandate.

The company has a culture, philosophy and risk policy leaded by the Board of Directors through the Audit Committee and executed by the Internal Audit Department of the Company, who exercise their functions within the business group framework.

Likewise, according to the provisions in the Audit and Good Corporate Governance

Committee that is included in our web page, they are “1. OBJECTIVES. (…) in general,

the review of the company's control architecture, including the audit of the risk

management system (…) and the principles of good corporate governance established

by the Law, the competent authorities and the company itself”.

Additionally, within the management framework of that Committee, the Audit Management will present Management Reports on a yearly basis and will develop annual audit plans at a country level whose objective es to “(…) Protect the Internal Control System of the Organization through the review of internal processes as well as those of its subsidiaries, following a work methodology defined to meet that objective.” Together with the above, such Area works “(…) together with the different areas of the Organization in monitoring action plans defined from the audit works, which are defined by the owners of the processes, who, in the end, are the ones who will carry out its implementation".

This culture and philosophy, is in practice executed by the corresponding risk matrix for internal use.

• Regulation of the Audit and Good Corporate Governance Committee:

https://www.terpel.com/Global/Home/reglamento-comite-auditoria-buen-gob- corporativo-021116.pdf

NO. Explain:




Measure No. 28: Information and Communication.

28.1. The Company’s culture, philosophy, and risk policy , as well as the approved exposure limits, are communicated downwards and horizontally, in such a manner that the whole organization considers the risks and control activities in its actions.




X

X



The Company communicates the culture and philosophy of risks at the different levels. Each section and/or segment leader is responsible for managing the risk in the relevant section based on his/her knowledge and experience.

NO. Explain:




28.2. The Company has an escalation information report mechanism (towards the Board of Directors and the Senior Management) that is truthful, understandable, and complete, in such a manner that it supports and enables informed decision-making and risk management and control.



In fact, the Company facilitates the escalation information reporting, through the empowerment that has been granted to each leader of area and segment, who manages and facilitates the risk management and makes reports to the Senior Management who in turn send them to the Board of Directors, as the case may be. Likewise, there are different mechanisms to make informed decisions within the different corporate bodies. The Board of Directors, as well as the legal representatives, Committees and Statutory Auditor are responsible for presenting detailed reports of their performance within the Company. The foregoing, according to sections 10, 17 of article forty-seven (47), section five (5), of article fifty-two (52), of subsections a) to h) of item B of article fifty-five (55), among others. For verification, the links of the aforementioned documents are attached: - Numeral statuses 10, 17 of article Forty-Seventh (47), numeral five (5) of the fifty-second article (52), sub-literals of a) to h) of literal B of article Fifty-fifth (55) https: / /www.terpel.com/Global/Estatutos-Sociales-ORGANIZACI%C3%93N-TERPEL-Compilados-a-Marzo-30-2018.pdf

X

- Code of Good Corporate Governance - https://www.terpel.com/Global/codigo-de-buen-gobierno-corporativo-nueva-28-06-0217.pdf - Internal Regulations of the Board of Directors article Fourteenth https://www.terpel.com/Global/Home/regulación-junta-directiva-021116.pdf

NO. Explain:




28.3. The communication and information reporting mechanism of the company allows: i. for Senior Management to involve the company as a whole stressing its responsibility for the risk management and definition of controls and ii. for the company's personnel to understand its role in the risk management and control identification, as well as its individual contribution in relation to the work of others.



As explained above, internal mechanisms exist for reporting situations, reporting suspicious operations related to money laundering and financing of terrorism, and risk management along with the Company Organizational Internal Audit’s Office.

NO. Explain:




28.4. Internal lines exist for anonymous reporting or “whistleblowers”, which enable employees to

X

X

anonymously report illegal or unethical behaviors or that could violate the risk management culture and controls in the Company. The Board of Directors of the Company shall receive a report on such issues.



NO. Explain:

There are channels to report different events in a confidential manner, for employees, suppliers, customers, etc. Nevertheless, there is no report to the Board of Directors regarding these complaints.




Measure No. 29: Monitoring the Control Architecture.

29.1. In the company, the Board of Directors, through the Audit Committee, is responsible for supervising the effectiveness of the different Control Architecture components.



Yes. The Board of Directors, through the Audit Committee, is responsible for supervising the different components of the Company control system. According to the Audit and Good Corporate Governance Committee Rules and Regulations: “(…) The main function of the Audit and Good Corporate Governance Committee (hereinafter the “Committee”) is to advise the Board of Directors of Organización Terpel S.A. (hereinafter the “Company”) in complying with its surveillance and control responsibilities. The Committee’s functions and responsibilities are approved by the Board of Directors. The Audit and Good Corporate Governance Committee shall supervise compliance with the internal audit program that must take into account the business risks and integrally evaluate all of the processes and procedures of the Company, and must also ensure that the preparation, presentation, and disclosure of financial information is in accordance with applicable Law, by providing a communication channel between the Statutory Auditor’s Office, the Organizational Control Manager’s Office, the management, and the Board of Directors, and must in addition monitor compliance with the principles of Good Corporate Governance set forth by both competent authorities and the Company itself.”

X

NO. Explain:




29.2. In the company, the monitoring task aimed at ensuring the effectiveness of the Control Architecture, mainly involves the internal audit with the cooperation of the Statutory Auditor in relation to issues characteristic of his/her competence and particularly regarding the financial information generated by the Company.


YES. Explain briefly: In fact, the monitoring task involves both the internal audit section and the Statutory Auditor. The Audit Committee functions are set forth in the Audit Committee Rules and Regulations and the Statutory Auditor’s functions are provided for in the bylaws. Audit Committee Rules and Regulations “(…) The Audit and Good Corporate Governance Committee shall supervise compliance with the internal audit program that must take into account the business risks and integrally evaluate all of the processes and procedures of the Company, and must also ensure that the preparation, presentation, and disclosure of financial information is in accordance with applicable Law, by providing a communication channel between the Statutory Auditor’s Office, the Organizational Control Manager’s Office, the management, and the Board of Directors, and must in addition monitor compliance with the principles of Good Corporate Governance set forth by both competent authorities and the Company itself. (…)” Bylaws

ARTICLE FIFTY-FIVE B) - FUNCTIONS: The Audit Committee’s functions are as follows: a) To supervise compliance with the internal audit program that must take into account the business risks and integrally evaluate all of the Company sections as well as the internal control reports; b) To ensure that the preparation, presentation, and disclosure of financial information is in accordance with applicable Law; c) To give an

X

opinion on the financial statements of the Company before submitting them to the Board of Directors and to the General Shareholders’ Meeting; d) To consolidate the information of the issuer’s control bodies in order to present the information to the Board of Directors; e) To give an opinion on the possible operations intended to be carried out with associated parties; f) To request the reports it deems convenient for the appropriate performance of its functions; g) To establish its own rules and regulations; h) The other functions provided for in the Bylaws and by Law.”

NO. Explain:




29.3. The Company’s internal audit function has an Internal Audit Statute, approved by the Audit Committee, which expressly states the scope of its functions in this matter, and which should include the issues in recommendation 29.3.



NO. Explain:

Despite the fact that there are internal documents that define the functions of the Audit Committee, there is no internal audit statute that has been approved by said committee which would include all of the issues presented in the recommendation.




X

X

29.4. The maximum authority responsible for the internal audit is professionally independent from the Senior Management of the Company or Conglomerate that hires it, as its operation depends exclusively on the Audit Committee.



NO. Explain:

The Organizational Control Manager is responsible for managing the internal audit

and he/she in turn reports to the Company CEO.




29.5. The Board of Directors of the company is responsible for appointing and removing the internal audit responsible party, after the proposal by the Audit Committee, and the removal or resignation is communicated to the market.



NO. Explain:

No. According to what was stated above.




X

X

29.6. The Company’s or Conglomerate’s Statutory Auditor is clearly independent from them, a capacity that must be declared in the corresponding audit report.



The Statutory Auditor of Terpel is always an external, independent third party. According to the terms in Article Fifty-three and following in the Bylaws: The Statutory Auditor is a public accountant elected by the General Shareholders’ Meeting for a period of one (1) year; being completely independent in accordance with article 44 of the bylaws because “The Statutory Auditors cannot be the partners of the Company, its parent companies or subordinated companies, their spouses or relatives to the fourth degree of consanguinity, first degree of kinship by adoption or second degree of affinity, or co-partners of the administrators and directors, the cashier, auditor or accountant of the same Company who perform any other positions therein or in its subordinate companies.”

NO. Explain:




29.7. If the Company acts as the Parent Company of a Conglomerate, the Statutory Auditor is the same for all of the companies, including off-shore companies.


X


In fact, the General Shareholders’ Meeting elects a Statutory Auditing firm for both

Terpel and its subordinated companies.

Along those lines, the Code of Good Corporate Governance Article 2.4.1.2 provides for that: “The Statutory Auditor must be a recognized firm that complies with the requirements of Law and the Bylaws. To the extent possible, the Statutory Auditor must be the same for the subordinated companies of Organización Terpel S.A. Organización Terpel S. A. and its subordinated companies cannot contract services other than auditing services with the Statutory Auditor. The rotation of the individuals who perform the auditing function shall be agreed to be of five (5) years.”

NO. Explain:




29.8. The Company has a policy for the designation of the Statutory Auditor, approved by the Board of Directors and disseminated among Shareholders, which includes the statements in recommendation 29.8.



The Company has a formal policy for the designation of the Statutory Auditor, who shall

be designated annually by the Shareholders’ Meeting during its ordinary meeting, on the

terms set forth in Articles Fifty-three and Fifty-four in the Bylaws, in the Code of Good

Corporate Governance and in accordance to the provisions in the Commercial Code

regarding this issue.

These documents can be consulted at https://www.terpel.com/Global/codigo-de-buen-

gobierno-corporativo-nueva-28-06-0217.pdf (Code of Good Corporate Governance)

and https: // www .terpel.com / Global / Statutes-Social-ORGANIZACI%C3%93N-

TERPEL-Compiled-to-March-30-2018.pdf (Statutes)

NO. Explain:

X

X




29.9. For the purpose of avoiding a close association between the Company and the Statutory Auditing firm and/or their work teams and of maintaining their independence, the Company sets forth a maximum contracting term ranging from five (5) to ten (10) years. Regarding the Statutory Auditing, an individual not associated with a firm, the maximum term of contracting is five (5) years.



NO. Explain:

The Company has a policy regarding the maximum terms of association with the Statutory Auditing firm. Pursuant to the provisions in Article Fifty-three in the Bylaws of Terpel, the Statutory Auditor is elected by the General Shareholders’ Meeting for periods of one (1) year, being able to be indefinitely re-elected or freely removed before the expiration of the term. The Statutory Auditor may have up to seven (7) Alternates who shall replace him/her in his/her absolute or temporary absences. Pursuant to Article 2.4.1.2 of the Code of Good Corporate Governance: “The Statutory Auditor must be a recognized firm that complies with the requirements of Law and the Bylaws. (…) The rotation of the individuals who perform the auditing function shall be agreed to be of five (5) years.”.




29.10. Within the maximum contracting term, the Company encourages the rotation of the partner of the Fiscal Auditing firm assigned to the Company and their work teams in the middle of the period, but at the end of the period the rotation of the firm must be performed.


X


NO. Explain:

Despite that the regulations about the Statutory Auditor regarding this matter did not include promoting the rotation of the partner of the Statutory Audit firm, throughout the years, the designated partner has been effectively rotated.




29.11. In addition to the effective prohibition for not contracting professional services other than those included in the financial audit itself with the Statutory Auditor and the other functions included in the effective rules and regulations, the Company (sic) such limitation to the persons or entities associated with the Statutory Auditing firm, among which the companies of its group as well as the companies in which there is a high coincidence of partners and/or administrators with those in the Statutory Auditing firm.



The Company does not contract services with the fiscal auditing firm other than those set forth for the external auditing pursuant to “Article 2.4.1.2 of the Code of Good Corporate Governance: “ (..) Organización Terpel S. A. and its subordinated companies cannot contract services other than auditing services with the Statutory Auditor."

NO. Explain:




X

29.12. The Company discloses in its public information the total value of the contract with the Statutory Auditor as well as the proportion represented by the fees paid by the Company as compared to the total income of the firm related to its statutory auditing activity.



NO. Explain:

No specific publication on this issue exists. Nonetheless, the appointment of the Statutory Auditor by the General Shareholders Meeting is disclosed to the market as relevant information. Likewise, the total expenses of the Company (which include Statutory Audit expenses) are included in the Financial Statements approved by the Meeting, published on the web page and submitted to the Superintendency of Finance Colombia on a quarterly basis. The ratio represented by the payment made to the Statutory Auditor as compared to other fees perceived as a result of his/her activity with third parties is unknown.




X

V. TRANSPARENCY AND FINANCIAL AND NON-FINANCIAL INFORMATION Measure No. 30:

Information Disclosure Policy.

30.1. The Board of Directors has approved an information disclosure policy, which, at a minimum, identifies the information covered in the recommendation.



NO. Explain:

There are guidelines that include the information disclosure policy included in the Good Corporate Governance Code and the Conduct Code of the Company. Code of Good Corporate Governance: “3.1. INFORMATION POLICY Organización Terpel S.A.’s policy sets forth the supply of information in due time, regarding its activities, projects, results of its operations, and financial situation. The Board of Directors members and its Legal Representative must be especially careful when handling and disposing of the information that comes to their knowledge and which is considered the kind of information deemed as reserved and confidential, mainly regarding aspects associated with its activities as investor. The Organización Terpel S.A. administrators are legally and contractually bound to use the information they have access to, exclusively for the benefit of the corporate operations of the Company. The information of Organización Terpel S.A. is classified as 1.- General and 2.- Confidential. The former is the information of general use, not classified as confidential or that is not part of trade, commercial or professional secrets of The Company. The latter refers to the material whose utilization and disposal corresponds to the Company administrators, including the communications or material that entail a risk to its activities.” 3.2. SUPPLY OF INFORMATION The Company shall supply the general information that must be disclosed to its shareholders, the public at large and the securities market, according to the standards related to information established by the public securities market policy, in a complete, truthful, timely manner and in accordance with professional criteria and practices regarding its preparation. The Company may request the Financial Superintendence of Colombia authorization for a Relevant Information event not to be disclosed upon the terms and conditions provided for in 1995 Resolution 400 Article 1.1.2.20 of the Securities Superintendence of Colombia and the rules that modify or substitute the same”.

Code of Conduct

(…) “7. MANAGEMENT OF INFORMATION

CHARACTERISTICS OF INFORMATION The information may be classified as reserved and general, according to the following definitions:

The reserved information is any information whose disclosure is not authorized and whose use and disclosure corresponds to the management of TERPEL and includes, but without limiting to, the communications or material that contain this type of information. In turn, it is subdivided in:

a) Strategic information: all information that is commercial, financial, operational, technical, know how, new projects, agreements with clients and suppliers, records about clients, investors, employees and litigation, among others, that could give TERPEL competitive advantages, whose opportunity for disclosure will be assessed in each specific case.

b) Privileged information: According to article 75 of Law 45 of 1.990, "privileged information is any information of specific nature that has not been made known to the public and that if made known, a fairly reasonable investor would have taken it into account diligently and prudently when negotiating the corresponding securities".

- Information is considered specific if it indicates a series of circumstances that arise or that are reasonable or a fact that has arose or that it is reasonably expected that could arise, when that information is sufficiently specific as to conclude about the possible effect that such circumstances of facts could produce about the price or quote of one or several securities.

- Information is considered such that a reasonable investor would take into account, all information that in the event that is becomes public, would influence or could influence the price or quote of one or several securities. Likewise, information that a reasonable investor would take into account could include, without limiting therein, the following: i) information that is directly related to the structuring, emission and placement processes of securities in the primary market; ii) information that is directly related to the company reorganization processes such as mergers, demergers, acquisitions, transfers, assignment of assets, liabilities and contracts, and winding-up of companies; iii) information that is required to be disclosed to the market as relevant information, in accordance with Article 5.2.4.1.5 of Decree 2555 of 2010 or any laws that compliment or replace them; iv) risk classifications.

- Privileged Information can be known and/or used exclusively with the authorization of

the President, one Vice President or whomever they directly and expressly designate. Any unauthorized disclosure or use of such privileged information could cause external harm to TERPEL, generating legal, financial and reputational impacts.

General information shall be such information that is not included in any of the above definitions, and over which the managers and employees of TERPEL and its subordinates, shall maintain prudence in its use and custody.

(…) RESPONSIBLE The Vice President of Corporate and Legal Affairs or, in its absence, the Legal Industry Affairs Manager and/or Director of Legal and Corporate Affairs, shall determine the use to be given to the information classified as

X

Privileged and will ensure the compliance of the provisions in these Instructions




30.2. Regarding Conglomerates, the disclosure of information to third parties is done in an integral,

transversal manner, and refers to the group of companies, which enables external third parties to form an opinion based on the reality, organization, complexity, activity, size, and governance model of the Conglomerate.



Terpel currently complies with the legal requirements regarding the disclosure of information of its controlled Companies. In the light of Colombian legislation, the companies that have subsidiaries must present the financial situation, the results of operations, and changes in equity, among other information in a consolidated manner (as if they were one sole body). Likewise, the Board of Directors receives a monthly report on the transactions carried out by and between the associated parties. The financial statements and transactions with associated parties are public information found on the web page. Likewise, the Management Report includes an extensive chapter that explains the information regarding associated parties. NO. Explain:



X

X


Measure No. 31: Financial Statements. 31.1. In the event that there exist exceptions in the Statutory Auditor's report, such exceptions and the actions that the Company suggests to solve the situation shall be subject to a statement before the shareholders gathered at the General Meeting by the Audit Committee Chairman.



NO. Explain:

If such a situation arises, the exceptions shall be presented by the Statutory Auditor himself/herself to the General Shareholders’ Meeting during its meetings, not by the Audit Committee Chairman. Also, in the event that there are exceptions, the management would be in charge of presenting the corresponding actions.




31.2. When the Board of Directors considers that it must maintain its criterion regarding the Statutory Auditor’s exceptions and/or emphasis paragraphs, such a stance is appropriately explained and justified by means of a written report to the General Meeting, specifying the content and scope of the discrepancy.



NO. Explain:

When the Board of Directors considers that it must maintain its criterion regarding the Statutory Auditor’s exceptions and/or emphasis paragraphs, such a stance is appropriately explained and justified by means of a written report to the General Meeting, specifying the content and scope of the discrepancy.

X

X




31.3 Operations with or between Associated Parties, including operations between Conglomerate companies, which, based on objective parameters such as volume of the operation, percentage over assets, sales or other indicators, are qualified as material by the Company, are included in detail in the public financial information and off-shore operations are also mentioned.



This information is specifically included in the Company’s Management Report. Likewise, it is disclosed in the cases in which it must be disclosed to the public market due to its nature as relevant information.

NO. Explain:




Measure No. 32: Information to the Markets.

32.1. Within the framework of the information disclosure policy, the Board of Directors (or the Audit Committee), adopts the measures required to ensure that all of the financial and non-financial information on the Company, required by the legislation in force, is transmitted to the financial and capital markets, in addition to all such information that is deemed relevant for investors and customers.


X


Terpel complies with this obligation pursuant to the provisions in the Code of Good

Corporate Governance. The Board of Directors took the required measures when it

approved the Code and when it defined the responsibilities related to the disclosure of

information.

NO. Explain:




32.2. Terpel has a friendly web page on which it is easy to navigate and access information, thus it is simple for the user to access the information associated with or related to the Corporate Governance.



Terpel has a friendly web page on which it is easy to navigate and access information. Article 5.7 in the Code of Good Corporate Governance states:

a. WEB PAGE. Organización Terpel S.A.’s web page (www.terpel.com) is available to the different audiences. The web page shows information of interest, for both its shareholders and investors as well as for the persons interested in its activities (customers, analysts, community, journalists, providers, etc.). The Code of Good Corporate Governance and the financial statements of the Company are published in the above-mentioned web page.

NO. Explain:



X

X


32.3. The Company’s web page includes, at least, the links covered in recommendation 32.3.



NO. Explain:

The Company has included links to the information stated in the recommendation

on its web page, except for the Annual Corporate Governance Report, the Board of Directors Committees Reports, and copies of the past five (5) Código País surveys completed.




32.4. The supports used by the Company to communicate information to the markets in general, are documents that can be printed, downloaded, and shared.



In fact, the information to the markets is disclosed on the web page and it can be

printed, downloaded, and shared.

NO. Explain:


X

X



32.5. If the Company is a large, complex company, it annually publishes on the web page an explanatory report on the organization, methods, and procedures of the Control Architecture implemented for the purpose of supplying correct, safe financial and non-financial information, and safeguarding the company assets and the efficiency and security of its operations. The information on the Control Architecture is supplemented by a risk management report.



NO. Explain:

Even though a report is made every year with respect to the company's control architecture, this is not made known to the public.




Measure No. 33: Annual Corporate Governance Report.

33.1. The Company prepares a Corporate Governance Report on an annual basis. The Board of Directors is responsible for its contents, upon the review and favorable report by the Audit Committee. Such Report is presented along with the rest of the documents for the closing of the fiscal year.



X

NO. Explain:

The Company does not present a Corporate Governance Report on an annual basis. However, it does present an annual Management Report that includes relevant issues related to Terpel’s Corporate Governance. Article 5.3 in the Code of Good Corporate Governance states:

“5.3. ANNUAL REPORT TO SHAREHOLDERS Pursuant to the legal provisions and the bylaws, the CEO’s Office and the Board of Directors of Organización Terpel S.A. annually present a management report on the previous fiscal year to the General Shareholders’ Meeting, which includes the financial information, the main operating and administrative activities, and the result of the investments in other Companies, as well as the main projects to be developed during the current year. The above-referred report includes a detailed chapter on Good Corporate Governance.”




33.2. The Annual Corporate Governance Report of the Company is not a mere transcription of the Corporate Governance rules, included in the Bylaws, internal regulations, and codes of good governance or other corporate documents. Its purpose is not to describe the Company’s governance model, but to explain the reality of its operation and the relevant changes during the fiscal year.



NO. Explain:

Not applicable pursuant to the above measure.




X

33.3. The Company’s Annual Corporate Governance Report contains information related to the closing of the fiscal year, which describes the manner how the Corporate Governance recommendations adopted by the Company were met during the year as well as the main changes carried out.

The structure of the Company’s Annual Corporate Governance Report is in line with the scheme contemplated by recommendation 33.3.



NO. Explain:

Not applicable pursuant to the above measure.




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