Notice is hereby given to the holders of depository receipts in respect of shares in Vostok Nafta Investment Ltd (the ”Company”) that an Annual General Meeting of shareholders shall be held on Wednesday, 5 May 2010 at 2:00 pm at “Bygget” (formerly Fontainebleau), at Norrlandsgatan 11 in Stockholm, Sweden.
Notice to attend etc.
Holders of depository receipts wishing to attend the Annual General Meeting shall:
(1) be listed in the register of holders of depository receipts kept by Euroclear Sweden AB (formerly VPC AB) on Wednesday, 28 April 2010; and
(2) notify the Company of the intention to attend the General Meeting not later than Thursday, 29 April 2010 at 1:00 pm by mail at the address Annual General Meeting, Vostok Nafta, c/o Computershare, Box 610, SE-182 16 Danderyd, Sweden, by telephone +46 8 518 015 51, by fax +46 8 588 04 201 or by e-mail to agm2010@vostoknafta.com. The holder of depository receipts shall state his name, personal or company identification number, address as well as telephone number. If a holder of depository receipts intends to be represented by proxy, the name of the proxy holder shall be stated.
Holders of depository receipts which hold their receipts through nominees (Sw. förvaltare) must request a temporary registration of the voting rights in order to be able to participate at the General Meeting. Holders of depository receipts that want to obtain such registration must contact the nominee regarding this well in advance of Wednesday, 28 April 2010.
Voting forms will be distributed to the holders that have complied with the above requirements and the voting form must be brought to the Annual General Meeting.
Proposed agenda
1. Election of Chairman for the Meeting.
2. Preparation and approval of voting list.
3. Approval of the agenda.
4. Election of one or two persons to check and sign the minutes.
5. Resolution that the Meeting has been duly convened.
6. Presentation by the Managing Director.
7. Presentation of the annual report and the auditor’s report as well as the consolidated annual report and the consolidated auditor’s report.
8. Resolution in respect of
(a) the adoption of the profit and loss account and the balance sheet as well as the consolidated profit and loss account and the consolidated balance sheet; and
(b) the appropriation of the Company’s results according to the adopted balance sheet.
9. Determination of the number of Directors and auditors.
10. Determination of remuneration to the Directors and the auditors.
11. Election of Directors and auditors.
12. Resolution to appoint the Nomination Committee.
13. Resolution regarding remuneration principles for the senior management.
14. Resolution regarding a renewed incentive scheme for employees
15. Closing of the Meeting.
Chairman for the Meeting (item 1)
The Nomination Committee, consisting of Ian H. Lundin, Lorito Holdings (Guernsey) Ltd; Arne Lööw, The Fourth AP Fund; and Leif Thörnvall, Alecta; proposes that Per Nyberg, attorney-at-law, is elected as Chairman for the Meeting.
The appropriation of the Company’s results (Item 8b)
The Board of Directors propose that no dividend shall be paid for the financial year 2009.
Election of Directors etc. (Items 9-11)
The Nomination Committee proposes that the Board of Directors shall consist of eight Directors. Torun Litzén and Ian H. Lundin have declined re-election. The Nomination Committee proposes, for the period until the next Annual General Meeting, the re-election Al Breach, Per Brilioth, Paul Leander-Engström, Lukas H. Lundin, William A. Rand and Robert J. Sali. The Nomination further proposes the election of C. Ashley Heppenstahl and Lars O Grönstedt. The Nomination Committee proposes that the Meeting shall appoint Lukas H. Lundin to be Chairman of the Board.
Based on the above composition of the Board and on the previous composition of the Board subcommittees, the Nomination Committee proposes a total Board remuneration (including remuneration for the work within the committees of the Board) of SEK 1,490,000, allocated as follows: The remuneration to the Board shall be in total SEK 1,150,000, of which SEK 250,000 shall be allocated to the Chairman of the Board and SEK 150,000 to each of the other Directors who are not employed by the Company. The Nomination Committee proposes a total of SEK 195,000 for work within the Audit Committee, of which SEK 85,000 shall be allocated to the Chairman and SEK 55,000 to each of the other members, a total of SEK 70,000 for work within the Compensation Committee, of which SEK 30,000 shall be allocated to the Chairman and SEK 20,000 to each of the other members, and a total of SEK 75,000 for work within the Investment Committee, of which SEK 45,000 shall be allocated to the Chairman and SEK 30,000 to each of the other members. Remuneration for work within the Board’s committees shall only be paid to Directors who are not employed by the Company.
In addition, a maximum amount of SEK 1,300,000 (approximately USD 180,000) is proposed to be allocated to the Board for remuneration of Namdo Management for management and investor relations services rendered. Namdo Management is a company controlled by Chairman of the Board Lukas H. Lundin.
Finally, it is proposed that the Company’s auditors Pricewaterhouse-Coopers AB be re-elected until the end of the next Annual General Meeting and remunerated upon approval of their invoice.
Nomination Committee (item 12)
The Nomination Committee proposes a procedure for appointing the Nomination Committee for the purposes of the Annual General Meeting in 2011, as per the following:
A Nomination shall be established consisting of representatives from the three largest shareholders in the Company. The ownership shall be based on the shareholding statistics from the Swedish central securities depository Euroclear Sweden AB (formerly VPC AB) as per the last business day in August 2010. The names of the members of the Nomination Committee shall be announced as soon as they have been appointed, which shall take place no later than six months prior to the Annual General Meeting in 2011. In case of a material change in ownership prior to completion of the work to be performed by the Nomination Committee, it shall be possible to change the composition of the Nomination Committee. The Nomination Committee’s mandate period extends up to the appointment of a new Nomination Committee. The Nomination Committee shall appoint a Chairman among themselves. If the representatives cannot agree upon appointment of Chairman, the representative representing the shareholder with the largest number of votes shall be appointed as Chairman. The Nomination Committee shall prepare proposals for the following decisions at the Annual General Meeting in 2011: (i) election of the Chairman for the Meeting, (ii) election of Directors, (iii) election of the Chairman of the Board of Directors, (iv) remuneration to the Directors, (v) election of the Company’s auditors and (vi) compensation to the Company’s auditors, and (vii) proposal for how to conduct the nomination process for the Annual General Meeting in 2012.
Remuneration principles for the senior management (item 13)
The Board of Directors proposes that the General Meeting resolves to approve the following management remuneration principles etc. The remuneration to the Managing Director and other members of the senior management shall consist of fixed salary, variable remuneration, other benefits and pension benefits. Except for the Managing Director, the senior management currently includes two individuals. The total remuneration shall correspond to the prevailing market conditions and be competitive. The fixed and variable remuneration shall correspond to the respective individual’s responsibility and authority. The variable component should, in the first instance, be covered within the parameters of the Company’s option plan and shall, where payable in other instances, be subject to an upper limit in accordance with market terms and specific objectives for the Company and/or the individual. The period of notice of termination of employment shall be three to six months in the event of termination by the member of the senior management. In the event of termination by the Company, the total of the period of notice of termination and the period during which severance compensation is payable shall not exceed 12 months. Pension benefits shall be either benefit-based or contribution-based or a combination thereof, with individual retirement ages. Benefit-based pension benefits are conditional on the benefits being earned during a pre-determined period of employment. The Board of Directors shall be entitled to deviate from these guidelines in individual cases should special reasons exist.
Resolution regarding a renewed incentive scheme for employees (item 14)
The Board of Directors proposes that the General Meeting resolve to approve the adoption of an incentive scheme in Vostok Nafta Investment Ltd (the “Company”) entitling present and future employees to be allocated call options to acquire shares represented by Swedish Depositary Receipts in the Company (“Options”).
Principal Conditions and Guidelines
- The exercise price for the Options shall correspond to 120 percent of the market value of the Swedish Depositary Receipts at the time of the granting of the Options.
- The Options may be exercised during an exercise period of one month starting three years from the time of the granting.
- For employees resident outside of Sweden, no premium shall be paid for the Options and the Options may only be exercised if the holder is still employed within the group at the time of exercise.
- For employees resident in Sweden, the employees may elect either of the following alternatives:
a) No premium shall be paid for the Options and the Options may only be exercised if the holder is still employed within the group at the time of exercise (same as for employees resident outside of Sweden); OR
b) The Options shall be offered to the employee at a purchase price corresponding to the market value of the Options at the time of the offer. The Options shall be fully transferable and will thereby be considered as securities. This also means that Options granted under this option (b) are not contingent upon employment and will not lapse should the employee leave his or her position within the group.
- Options may be issued by the Company or by other group companies.
Preparation and Administration
The Board of Directors, or a designated committee appointed by the Board of Directors, shall be authorized to determine the detailed terms and conditions for the Options in accordance with the principal conditions and guidelines set forth above. The Board of Directors may make necessary adjustments to satisfy certain regulations or market conditions abroad. The Board of Directors shall also be authorized to resolve on other adjustments in conjunction with material changes affecting the group or its business environment, which would mean that the described conditions for the incentive scheme would no longer be appropriate.
Allocation
The incentive scheme is proposed to include granting of not more than 2,000,000 options. Allocation of Options to the Managing Director shall not exceed 1,000,000 Options and allocation to each member of the executive management or to other key employees shall not exceed 400,000 Options.
The allocation of Options shall be decided by the Board of Directors or by the Compensation Committee, taking into consideration, among other things, the performance of the employee and his or her importance to the group. Specific criteria to be considered include the employee’s ability to manage and develop the existing portfolio and to identify new investment opportunities and evaluate conditions of new investments as well as return on capital or estimated return on capital in investment targets. The employees will not initially be offered the maximum allocation of Options and a performance-related allocation system will be maintained since allocation of additional Options within the mandate given by the General Meeting will require fulfillment of stipulated requirements and targets. The Compensation Committee shall be responsible for the evaluation of the performance of the employees. The outcome of stipulated targets shall, if possible, be reported afterwards.
Directors who are not employed by the group shall not be able to participate in the scheme.
Bonus for employees resident in Sweden under option (b)
In order to stimulate the participation in the scheme by employees resident in Sweden electing option (b) above, the Company intends to subsidize participation by way of a bonus payment which after tax corresponds to the Option premium. Half of the bonus will be paid in connection with the purchase of the Options and the remaining half at exercise of the Options, or, if the Options are not exercised, at maturity. In order to emulate the vesting mechanism offered by the employment requirement under option (a) above, the second bonus payment is subject to the requirement that the holder is still an employee of the group at the time of exercise or maturity, as the case may be. Thus, for employees in Sweden who choose option (b), the participation in the scheme includes an element of risk.
Dilution and costs
In the event all 2,000,000 Options are fully exercised, the holders will acquire shares represented by Swedish Depositary Receipts corresponding to a maximum of approximately 2 percent of the share capital. The proposed number of Options is expected to meet allocation requirements for the next couple of years, also taking into account possible future recruitment needs.
The total negative cash flow impact for the bonus payments described above is estimated to approximately SEK 20,000,000 over the life of the incentive scheme, provided that all Options are offered to employees resident in Sweden, that all such employees choose to purchase the Options under option (b) above, and that all Option holders are still employed in the group at the time of exercise or maturity of the Options.
Other costs for the incentive scheme, including fees to external advisors and administrative costs for the scheme are estimated to amount to approximately SEK 250,000 for the duration of the Options. Social security contributions in respect of Options granted to employees resident outside of Sweden are deemed to be insignificant.
Purpose
The purpose of the proposed incentive scheme is to create conditions that will enable the Company to retain and recruit competent employees to the group as well as to promote long-term interests of the Company by offering its employees the opportunity to participate in any favourable developments in the value of the Company. The Board of Directors is of the opinion that the adoption of an incentive scheme is particularly justified given the absence of any variable bonus scheme for the employees in the Company.
Special Majority
Approval of the incentive scheme requires support by shareholders representing at least two thirds of the shares represented at the meeting.
Miscellaneous
The annual accounts, auditors’ report and complete proposals under item 13 and 14 above will be available at the Company’s office at Hovslagar-gatan 5 in Stockholm, Sweden and at its website www.vostoknafta.com.
Stockholm in April 2010
E. ÖHMAN J:OR FONDKOMMISSION AB
THE BOARD OF DIRECTORS OF VOSTOK NAFTA INVESTMENT LTD
