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Courtesy Translation

PARMALAT • CORPORATE GOVERNANCE CODE

Approved by the Board of Directors on March 6, 2015

CONTENTS

1. General Principles

2. Function of the Board of Directors

3. Power of the Board of Directors

4. Duties and Compensation of the Board of Directors

5. Composition of the Board of Directors

6. Chairman of the Board of Directors

7. Meetings of the Board of Directors

8. Delegation of Powers and Reporting

9. Reporting Procedures, Reporting Intervals and Content

10. Management of Confidential Information and Internal Dealing Code

11 Nominating and Compensation Committee

12. Internal Control and Risk Management System

13. Internal Control, Risk Management and Corporate Governance Committee

14. Internal Auditing Function

15. Guidance and Coordination

16. Relations with Institutional Investors and Shareholders

17. Shareholders’ Meetings

18. Board of Statutory Auditors

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PARMALAT • CORPORATE GOVERNANCE CODE

This Code supplements the framework of rules that govern the duties and activities of

Parmalat’s Board of Directors. All Directors are required to comply with the Code, it being

understood that the Code was adopted by the Board of Directors as a self-regulatory measure

and, consequently, can be amended at any time by a majority of Directors, so long as it is

compliant with the basic principles expressed in the Bylaws and prompt disclosure of such

changes is provided to the financial markets and the shareholders.

1. GENERAL PRINCIPLES

The Company and its corporate governance bodies, in the course of their activities, including

transactions with other Group companies, adhere to the principles of sound corporate and

entrepreneurial management, as well as to the corporate governance principles published by

Borsa Italiana S.p.A. and those set forth in the Group’s Code of Conduct.

2. FUNCTION OF THE BOARD OF DIRECTORS

The Board of Directors has the power and the obligation to manage the Company’s businesses,

with the primary objectives of creating value for the shareholders and carrying out the Group’s

mission. In pursuit of these goals, the Board exercises an oversight function that finds its

concrete expression not only in the meetings that the Board is required to hold on a regular

basis, but also in the personal contribution that each Director brings to each Board meeting and

to the meetings of any Committees that the Board may have established. The Board of

Directors shall make available to the Committees adequate financial resources to enable them

to discharge their duties, within the limits of the budget approved by the Board of Directors.

3. POWERS OF THE BOARD OF DIRECTORS

The Board of Directors has the general power to guide and control the Company’s operations

and the handling of its businesses. The specific areas over which the Board of Directors has

exclusive jurisdiction are reviewed below. The Board of Directors has all of the ordinary and

extraordinary powers needed to govern the Company.

The Board of Directors, specifying the scope of the powers it is conveying, may:

a. appoint some of its members to an Executive Committee, to which it may delegate

some of its attributions, except for those expressly reserve for the Board pursuant to law

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and the Bylaws, and determine the Committee’s composition, powers and rules of

operation;

b. delegate some of its attributions, specifying the limits of powers that are being

delegated, to one or more of its members who are entrusted with special assignments;

however, the same person may never serve concurrently as Chief Executive Officer and

Chairman of the Company;

c. establish Committees and Commissions and determine their composition and tasks.

The Board of Directors has exclusive responsibility for:

a) reviewing and approving the strategic, industrial and financial plans of the Company

and the Group and the corporate structure of the Group headed by the Company,

periodically monitoring their implementation, and defining the Company’s corporate

governance system and the Group’s structure;

b) adopting resolutions concerning transactions (including investments and divestitures)

that, because of their nature, strategic significance, amount or implied commitment,

could have a material effect on the Company’s operations, particularly when these

transactions are carried out with related parties;

c) verifying the effectiveness of the organizational, administrative and accounting

structure of the Company and its strategically significant subsidiaries, with special

emphasis on the internal control and risk management system;

d) drafting and adopting the rules that govern the Company and its Code of Conduct, and

define the applicable Group guidelines, while acting in a manner consistent with the

principles of the Bylaws;

e) establishing an Oversight Board, as required by Legislative Decree No. 231 of June 8,

2001;

f) granting and revoking powers to Directors and the Executive Committee, if one has

been established, defining the limits of these powers and the manner in which they

may be exercised, and determine at which intervals (normally not more than quarterly)

these parties are required to report to the Board of Directors on the exercise of the

powers granted them;

g) determining whether Directors meet and continue to satisfy independence

requirements;

h) determining the attributions and powers of any General Manager it may appoint;

i) designating candidates for the offices of Chairman (unless a Chairman has been

elected by the Shareholders’ Meeting), Chief Executive Officer and/or General

Manager of strategically relevant subsidiaries, except for the subsidiaries of publicly

traded subsidiaries;

j) after reviewing proposals from the appropriate Committee and taking into account the

input of the Board of Statutory Auditors, determining the compensation of Managing

Directors and dividing among its members and the members of the Committees the

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total compensation provided for the Board of Directors, unless such allocation has

already been performed by the Shareholders’ Meeting;

k) supervising the Company’s overall performance, with special emphasis on conflict of

interest situations, reviewing the information received from the Managing Directors,

the Executive Committee (if one has been established) and the Internal Control, Risk

Management and Corporate Governance Committee and comparing periodically

actual and planned results;

l) evaluating and approving the financial reports that must be published on a regular

basis in accordance with the applicable statutes.

The following actions also fall under the exclusive purview of the Board of Directors, with the

restrictions applicable pursuant to law: adoption of resolutions concerning the opening and

closing of secondary offices; designation of Directors who may represent the Company;

reduction of the Company’s share capital when shareholders exercise the right to have their

shares redeemed; adoption of amendments to the Bylaws to make them consistent with new

laws; transfer of the Company’s registered office anywhere in Italy; approval of mergers in the

cases covered by Articles 2505 and 2505 bis of the Italian Civil Code and the provisions of

Article 2506 ter of the Italian Civil Code that apply to demergers.

The Board of Directors, in order to clarify the manner in which the guidelines published by Borsa

Italiana S.p.A. should be implemented, specified that, concerning issues that are exclusively

under its jurisdiction, the Board of Directors, in discharging its obligations, substantively shall:

review and approve the strategic, industrial and financial plans of the Company and the

Group, and the corporate structure of the Group headed by the Company, periodically

monitoring their implementation;

define the Company’s corporate governance system and the Group’s structure;

assess the effectiveness of the organizational and administrative structure and accounting

system of the Company and its strategically significant subsidiaries, particularly with reference

to the internal control and risk management system;

monitor and assess the overall performance of the Group’s operations, based primarily on the

information provided by the Chief Executive Officer and the Internal Control, Risk

Management and Corporate Governance Committee, and compare on a regular basis

reported results against planned results;

review and approve in advance transactions executed by the Company and its subsidiaries

when these transactions have a material impact on the Company’s strategy, income

statement, balance sheet or financial position, paying special attention to situations in which

one or more Directors may have an interest directly or on behalf of third parties and, more

specifically, to transactions with related parties; In this area, the Board of Directors established

in the Corporate Governance Code general guidelines to identify highly material transactions.

define the types of risks and risk levels that are compatible with the Issuer’s strategic

objectives.

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Lastly, at the meeting of November 9, 2012, the Board of Directors agreed to adopt as a formal

rule of conduct until the expiration of its term of office the performance of the activities that have

been placed exclusively under its jurisdiction, as explained above.

4. DUTIES AND COMPENSATION OF THE BOARD OF DIRECTORS

1 Duties of the Board of Directors

Directors bring to the Company the unique professional skills they possess and must be aware

of the tasks and responsibilities entailed by their office. Directors must act and deliberate with

full understanding of the issues at hand and with full autonomy. Directors may accept their

appointment only when they believe that they will be able to devote sufficient time to the task of

diligently discharging their duties, based on the commitments entailed by their occupation and

professional activities and the number of Boards of Directors or Boards of Statutory Auditors of

companies with shares traded on regulated markets, in Italy or abroad, or Boards of financial,

banking, insurance or other large companies on which they may be serving. Directors shall treat

as confidential any information to which they may have access through the office they hold. The

Chairman and the Managing Directors, if appointed, shall inform the Board of Directors of new

legislative or regulatory developments that affect the Company or its corporate governance

bodies.

2 Compensation of the Board of Directors

Upon the expiration of the term of office and/or the termination of the relationship with an

executive Director or a general manager, after the internal processes required to allocate or

award indemnities and/or other benefits are completed, the Company shall disclose detailed

information in this regard by means of a press release communicated to the market. The market

communication referred to in Principle 6.P.5 of the Corporate Governance Code of Borsa

Italiana shall include the following:

a) adequate information about the indemnity and/or other benefits, including the amount

involved, the payout timing—listing separately the part paid immediately and the part subject

of deferral mechanisms and differentiating between the components awarded in connection

with the service as Director and any components stemming from an employment

relationship—and any clawback clauses specifically with regard to:

- indemnity payable at end of term of office or employee severance benefits, specifying

the reason for disbursement (e.g., for expiration of the term of office, revocation of

appointment or settlement agreement);

- retention of rights related to any monetary incentive plans or plans based on financial

instruments;

- monetary or fringe benefits subsequent to the end of term of office;

- non-compete agreements, with a description of the main terms;

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- any other compensation awarded for any reason or in any form;

b) information whether the indemnity and/or the other benefits are consistent with the

guidelines provided in the compensation policy, should they be even partially inconsistent

with the abovementioned policy guidelines, and information about the deliberative

procedures applied to implement the Consob regulations governing related-party

transactions;

c) information as to whether or not mechanisms have been adopted to restrict or correct the

disbursement of indemnities when the relationship is terminated due to the achievement of

patently inadequate results and about the filing of claims for refunds of disbursed

compensation;

d) information as to whether the replacement of the terminated executive Director or general

manager is governed by a succession plan adopted by the Company and, in any case,

information about any procedures that may have been or will be adopted when replacing a

Director or general manager.

In addition, the compensation policy for executive Directors or Directors who perform special

functions shall include contractual stipulations that empower the Company to demand a full or

partial refunding of disbursed variable compensation components (or to withhold deferred

compensation amounts) determined based on data that later proved to be demonstrably

incorrect.

5. COMPOSITION OF THE BOARD OF DIRECTORS

1. The Board of Directors is comprised of Directors with executive powers (i.e., the Managing

Director(s), if appointed, one of whom is the Chairman when he is granted special powers,

and Directors who perform management functions within the Company) and Directors

without executive powers. The following parties also qualify as Company Directors with

executive powers: the Managing Directors of strategically significant subsidiaries and the

Chairmen of those companies when they are individually delegated management authority

or play a specific function in the development of corporate strategies.

2. Those who are called upon to serve on the Board of Directors, in the manner required by

the Bylaws, are individuals who possess special skills and are able to contribute to the

process of making fully informed and properly motivated decisions. More specifically,

Directors without executive powers must always be of sufficient number and intellectual

authority to ensure that their judgment has a significant impact on the decisions adopted by

the Board. Directors without executive powers help the Board make decisions that are in

keeping with the Company’s interests.

3. Independent Directors shall ensure that the interest of all shareholders, including both

majority and minority shareholders, is properly balanced. The assessment of the

independence of the Board of Directors is aimed at verifying that the Directors are not

parties to relationships capable of effectively impairing their independence of judgment,

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without prejudice to the obligation to comply with the provisions of laws and regulations

applicable at any given time.

4. The Board of Directors, based on the information that the individual Directors are required to

provide, checks at least annually, at the time of appointment and in connection with events

that are relevant for independence purposes, whether each Director meets the independence

requirements, taking also into account the information that the individual interest parties are

required to provide, and communicates the finding to the financial markets and the

shareholders. The Board of Directors reviews the last three reporting years when considering

employment relationships and assignments requiring Directors to have executive powers,

and the last reporting year when other business relationships are involved.

If the Board of Directors determines that a Director is no longer independent, it adopts the

appropriate resolutions with a majority of two-thirds (2/3) of the Directors attending the

meeting. Directors who have been elected as independent Directors but no longer meet the

requirements of independence are deemed to have resigned automatically and the other

Directors are required to replace them promptly.

6. CHAIRMAN OF THE BOARD OF DIRECTORS

The general provisions of the Bylaws notwithstanding, the Chairman of the Board of Directors

shall:

a) convene meetings of the Board of Directors, determining the meeting’s Agenda and, in

preparation for the meetings, transmitting to the Directors, as expeditiously as

appropriate and in any event at least two days before the meeting, based on the

circumstances, the materials required to participate in the meeting with adequate

knowledge of the issues at hand; if, in particularly urgent cases, it should be impossible

to provide the necessary information in advance as stated above, the Chairman shall

ensure that an adequately detailed review is carried out during Board meetings and that

the Board of Directors is still in a position to adopt resolutions knowledgeably and

thoughtfully.

b) supervise the meeting and the voting process;

c) handle the preparation of Minutes of the meeting;

d) ensure that there is an adequate flow of information between the Company’s

management and the Board of Directors and, more specifically, ensure the

completeness of the information that the Board uses as a basis for making its decisions

and exercising its power to manage, guide and control the activities of the Company

and the Group;

e) ensure that the Board is informed on a regular basis, as required by Article 15 of the

Bylaws;

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f) in general, ensure that the Company is in compliance with the provisions of all laws and

regulations, and with the Bylaws and the corporate governance rules of the Company

and its subsidiaries; is responsive to the regulations and conduct guidelines issued by

the entity governing the regulated market where the Company’s shares are traded, and

adheres to best industry practices.

7. MEETINGS OF THE BOARD OF DIRECTORS

1. The Board of Directors meets on a regular basis, at least once every quarter and whenever

the Chairman believes that it may be in the Company’s interest.

2. The meetings of the Board of Directors are chaired by the Chairman or, if the Chairman is

absent or incapacitated, by the Deputy Chairman, if one has been appointed, with the

support of the Secretary to the Board of Directors.

3. Each Director has the right to add items to the Agenda of an upcoming Board Meeting, and

the Board will decide if and when the item in question will be brought up for consideration.

4. The Chairman, with the agreement of the other Board members in attendance, can invite

General Managers (and executives of the Issuer or of Group companies) and other

outsiders to attend a meeting of the Board of Directors.

8. DELEGATION OF POWERS AND REPORTING

1. The Board of Directors can delegate powers to one or more of its members, determining

the purpose and scope of the powers, and may revoke those powers at any time.

However, if a Chief Executive Officer is appointed, this post may never be held by a

Director who already serves as Chairman of the Board of Directors.

2. The Board of Directors may assign special tasks to its members, defining the purpose,

scope and duration of the assignment.

9. REPORTING PROCEDURES, REPORTING INTERVALS AND CONTENT

The Delegated Governance Bodies shall report quarterly about:

a) the work done;

b) highly material operating, financial and cash flow transactions;

c) transactions entailing a potential conflict of interest, including:

intercompany transactions;

transactions with related parties other than intercompany transactions;

d) atypical or unusual transactions or any other activity or transaction that requires

communication to the Board of Statutory Auditors;

e) significant issues, insofar as they are relevant to the Company and the Group.

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The information referred to above can also be provided in writing and must refer to activities and

transactions carried out during a period of time (maximum three months) following the period

(also not longer than three months) covered by the previous communication.

The abovementioned information is supplied to the Board of Directors and the Board of

Statutory Auditors.

If a Chief Executive Officer is not appointed, the abovementioned reporting requirements shall

also apply to the General Manager.

SPECIFIC REPORTING AREAS INCLUDE:

9.1 Work Performed

The information must detail the executive work performed and the progress of transactions

already approved by the Board of Directors, as well as the activities of the Committees (Internal

Control, Risk Management and Corporate Governance Committee, Nominating and

Compensation Committee and other internal Committees). Specific information must be

provided about the work performed by Directors with executive powers — with input that may be

provided by departmental staff of the Company and its subsidiaries — in the exercise of the

powers they have received, detailing the initiatives and projects undertaken.

9.2 Material Operating, Financial and Cash Flow Transactions

Information about material operating, financial and asset transactions must deal in detail with

strategic objectives, consistency with the budget and industrial plan, method of implementation

(including the financial terms and conditions involved) and development and the resulting impact

on and implications for the Parmalat Group. For the purposes of this Code, material operating,

financial and asset transactions include, in addition to those reserved for the Board of Directors

in accordance with Article 2381 of the Italian Civil Code and pursuant to the Bylaws, the

following transactions that may be executed by Parmalat or its subsidiaries:

1. placements of issues of financial instruments with a total value of more than 100 million

euros;

2. granting of loans and guarantees, investments in and disposals of assets (including real

estate) and acquisitions and divestitures of equity investments, companies, businesses,

assets and other property valued at more than 100 million euros;

3. mergers and demergers, when at least one of the parameters listed below, when

applicable, is equal to or greater than 15%:

a. total assets of the absorbed (merged) company or assets that are being

demerged/total assets of the Company (taken from the consolidated financial

statements, if available);

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b. income before taxes and extraordinary items of the absorbed (merged)

company or assets earmarked for demerger/income before taxes and

extraordinary items of the Company (taken from the consolidated financial

statements, if available);

c. total shareholders’ equity of the absorbed (merged) company or business

earmarked for demerger/total shareholders’ equity of the Company (taken

from the consolidated financial statements, if available).

4. For the purposes of this procedure, mergers of publicly traded companies and mergers

between a publicly traded company and a privately held company are always deemed

to be material operating, financial and asset transactions.

Information must also be provided about transactions that, while on their own involve amounts

lower than the threshold listed above or that trigger the exclusive jurisdiction of the Board of

Directors, are linked together in a strategic or executive project and taken together exceed the

materiality threshold.

9.3 Transactions Entailing a Potential Conflict of Interest:

a) Intercompany Transactions

Information about intercompany transactions must explain the underlying interest and the logic

justifying each transaction within the context of the Group, as well as the manner in which it is

being implemented (including terms and conditions, financial and otherwise), describing in detail

the valuation processes applied. Specific mention must be made of transactions valued at more

than 50 million euros and transactions executed on nonstandard terms, even if their value is less

than 50 million euros.1

Information must also be provided about transactions that, while on their own involve amounts

lower than the threshold listed above, are linked together in a strategic or executive project and

taken together exceed the materiality threshold.

For the purposes of this Code, intercompany transactions2 are transactions between Parmalat

or one of its subsidiaries and:

1) companies that, directly or indirectly (i.e., through nominees or intermediaries) control

Parmalat pursuant to Article 2359, Sections 1 and 2, of the Italian Civil Code and Article

93 of the Uniform Financial Code;

2) companies that, directly or indirectly (i.e., through nominees or intermediaries) are

controlled by Parmalat pursuant to Article 2359, Sections 1 and 2, of the Italian Civil

Code and Article 93 of the Uniform Financial Code;

                                                            1 For the purposes of this Code, transactions are deemed to have been executed on standard terms when the terms are the same as those that the Company applies to all other parties. 2 For the purposes of this Code, relevant acts of disposition include disposing, for or without consideration, of personal and real property and salable rights that convey economic benefits, providing goods and services, granting and receiving loans and guarantees, and entering into cooperation agreements for the exercise and expansion of the Company’s business. 

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3) companies that, directly or indirectly (i.e., through nominees or intermediaries) are

controlled by the same companies that control Parmalat pursuant to Article 2359,

Sections 1 and 2, of the Italian Civil Code and Article 93 of the Uniform Financial Code;

4) companies affiliated with Parmalat pursuant to Article 2359, Section 3, of the Italian Civil

Code and companies that exercise a significant influence over Parmalat. There is no

linkage when the connection occurs with the affiliated company of an affiliated company.

b) Transactions with Related Parties

Information about transactions with related parties, other than intercompany transactions, must

disclose the interest underlying the transactions, the manner in which the transactions were

executed (including financial and other terms and conditions) and, in particular, the valuation

methods applied. On March 7, 2014 and May 7, the Company updated the Procedure

Governing Transactions With Related Parties to comply with the requirements of Consob

Communication No. DEM/10078683 of September 24, 2010. Please consult the

abovementioned Procedure for the relevant regulations. The Procedure is available on the

Company website at the following address: www.parmalat.com Corporate Governance.

Parmalat considers a party to be a related party if the party in question:

a) directly or indirectly, through subsidiaries, nominees, a third party or otherwise:

(i) controls Parmalat, is controlled by it or is under joint control;

(ii) holds an equity interest in Parmalat that makes it possible to exercise a

significant influence over Parmalat;

(iii) exercises control over Parmalat jointly with other parties;

b) is an affiliated company of Parmalat;

c) is a joint venture in which Parmalat is a venturer;

d) is one of Parmalat’s Directors or Statutory Auditors;

e) is one of Parmalat’s General Managers;

f) is an executive with strategic responsibilities of Parmalat or its controlling company;3

g) is a member of the immediate family of one of the parties listed in letters (a) or (d) or (e)

or (f);

h) is an entity over which one of the parties listed in letters (d) or (e) or (f) or (g) exercises

control, joint control or a significant influence or in which one of the abovementioned

parties holds a significant equity interest;

i) is a supplemental, collective or individual, Italian or foreign, pension fund established for

the benefit of Parmalat’s employees or employees of any other entity related to

Parmalat.4

                                                            3 An official communication by which the direct or indirect controlling company identifies its strategic executives shall be used for this

purpose.

 4 Only funds established or promoted by the Company or funds over which the Company can exercise influence are relevant for the purposes of this Procedure. 

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The expression transaction with a related party shall be understood to mean any transfer of

resources, services or obligation between related parties, whether consideration is stipulated or

not. More specifically, transactions with related parties include commercial transactions

involving the exchange both of goods and services, financial transactions and transactions

involving non-current assets.

Therefore, transactions with related parties include:

mergers, demergers through absorption or straight non-proportional demergers, when

executed with related parties

any decision involving the award of compensation and economic benefits, in any form,

to members of administration and control bodies and to executives with strategic

responsibilities;

any collateral or guarantees provided by Parmalat for the benefit of or in the interest of

related parties.

the assumption/conveyance of obligations and commitments.

c. Atypical or Unusual Transactions and Other Transactions

Information must be provided about atypical or unusual transactions and about any other type of

activity or transaction the disclosure of which appears to be appropriate, describing the interest

underlying the transactions, the manner in which the transactions were executed (including

financial and other terms and conditions) and, in particular, the valuation methods applied.

For the purposes of this Code, atypical or unusual transactions are those transactions the

purpose or nature of which is extraneous to the Company’s regular business operations or that

raise particular issues due to their characteristics or inherent risks, the nature of the counterpart

or their timing.5

10. MANAGEMENT OF CONFIDENTIAL INFORMATION AND INTERNAL DEALING

CODE

1. The management of confidential information is handled by the Reporting Officer

appointed by the Board of Directors, who is required to apply the procedures developed

to process information internally and release documents and information about the

Company to the public, particularly when the information involves price-sensitive data.

2. The Company has adopted a Code that governs information requirements and actions

concerning transactions in financial instruments by persons who, because of their position

at the Company, have access to insider information (the Internal Dealing Code). Insider

information is information about events that could have a material impact on the operating

                                                            5 Transactions executed immediately before the closing or the start of the reporting period. 

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and financial outlook of the Company and the Group and which, when made public, could

have a material impact on the price of publicly traded Company securities.

A copy of the Internal Dealing Code is attached to this Code and is an integral and

substantive part of it.

11. NOMINATING AND COMPENSATION COMMITTEE

1. The Board of Directors shall establish internally a Nominating and Compensation

Committee and appoint its Chairman. This Committee, which must be comprised of

Directors that meet the independence requirements, including those of Article 37 of the

Regulations implementing Legislative Decree No. 58 of February 24, 1998 concerning

financial market issues. At least one Committee member must be drawn from a slate filed

by minority shareholders pursuant to the Bylaws. The Committee shall submit proposals

to the Board of Directors regarding the appointment of the Chief Executive Officer, the

General Manager and the Deputy Chairman, and the names of Directors that will be

coopted by the Board, should it be necessary to replace independent Directors, and the

names of Chief Executive Officers and Chairmen of the Group’s main subsidiaries. This

Committee also submits proposals to the Board of Directors regarding the appointment

and compensation of Directors who perform special functions and the General Manager.

A portion of the overall compensation paid to the abovementioned individuals may be tied

to the operating performance of the Company and the Group and may be based on the

achievement of specific predefined targets, determined consistent with the guidelines of

the Compensation Policy referred to in Item 2 below.

2. The Committee also submits proposals for determining the compensation policy

applicable to the Company’s Directors and executives with strategic responsibilities and

the adoption of stock option and share award plans or other financial instruments that can

be used to provide an incentive to and increase the loyalty of senior management.

3. The Committee also provides opinions to the Board of Directors regarding the Board’s

size and composition, submits recommendations about the professional competencies

that should be represented within the Board and the maximum number of Boards of

Directors and Boards of Statutory Auditors on which Company Directors and Statutory

Auditors may serve, and regarding waivers of the non-compete requirements pursuant to

Article 2390 of the Italian Civil Code.

4. The Committee shall perform preparatory work for the Board of Directors regarding a

succession plan for Directors with executive powers.

5. The Chairman of the Board of Statutory Auditors and the other Statutory Auditors shall

attend the meetings of the Committee.

12. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

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1. The internal control and risk management system consists of a complex of rules,

procedures and organizational structures aimed at allowing the identification,

measurement, management and monitoring of the main risks. This system is integrated

into the most basic organizational and corporate governance structures adopted by the

Company and is fully consistent with the reference models and best practices that exist

nationally and internationally. It contributes to ensuring that the corporate assets are

protected, the corporate processes are efficient and effective, the financial information

is reliable and the laws, regulations, Bylaws and internal procedures are complied with.

2. The internal control and risk management system, as defined by the Board of Directors,

has the following defining general characteristics:

a) at the operating level, authority must be delegated in light of the nature, the

typical size and the risks involved for each class of transactions, and the

scope of authority must be consistent with the assigned tasks;

b) the organization must be structured to avoid function overlaps and

concentration under one person, without a proper authorization process, of

multiple activities with a high degree of danger or risk;

c) each process must conform with an appropriate set of parameters and

generate a regular flow of information that measures its efficiency and

effectiveness;

d) the professional skills and competencies available within the organization and

their congruity with the assigned tasks must be checked periodically;

e) the operating processes must be geared to produce adequate supporting

documents, so that their congruity, consistency and transparency may be

verified at all times;

f) the safety mechanisms must provide adequate protection of the Company’s

assets and ensure access to data when necessary to perform required

assignments;

g) the risks entailed by the pursuit of stated objectives must be identified and

adequately monitored and updated on a regular basis, and negative elements

that can threaten the organization’s operational continuity must be assessed

carefully and protections adjusted accordingly;

h) the internal control system must be supervised on an ongoing basis and

reviewed and updated periodically.

3. The Board of Directors, having heard the input of the Internal Control, Risk

Management and Corporate Governance Committee, shall:

a) define the guidelines of the internal control and risk management system,

ensuring that the main risks affecting the Company and its subsidiaries are

correctly identified and adequately measured, managed and monitored,

determining the degree to which these risks are compatible with a

management of the Company consistent with the adopted strategic objectives;

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b) assess, at least once a year, the adequacy of the internal control and risk

management system in view of the Company’s characteristics and adopted

risk profile, and the system’s effectiveness;

c) approve, at least once a year, the work plan prepared by the manager of the

Internal Auditing function with the input of the Board of Statutory Auditors and

the Director responsible for the internal control and risk management system;

d) describe in its Report on Corporate Governance the main features of the

internal control and risk management system and furnish its assessment of

the system’s adequacy;

e) evaluate, with the input of the Board of Statutory auditors, the findings

presented by the statutory Independent Auditors in their management letter, if

issued, and report concerning the main issues identified in the course of the

statutory independent audit.

4. The Internal Control, Risk Management and Corporate Governance Committee shall

provide support to the Board of Directors by:

a) assessing, together with the Corporate Accounting Documents Officer and with

the input of the Independent Auditors and the Statutory Auditors, the correct

adoption of the accounting principles their consistency of use in the preparation

of the consolidated financial statements;

b) rendering opinions concerning specific issues entailed by the mapping of the

main business risks;

c) reviewing periodic reports that assess the effectiveness of the internal control

and risk management system and the special reports prepared by the Internal

Auditing function;

d) monitoring the autonomy, adequacy, effectiveness and efficiency of the Internal

Auditing function;

e) asking the Internal Auditing function to perform audits of specific operational

areas, concurrently informing the Chairman of the Board of Statutory Auditors of

such requests.

5. The Board of Directors shall assign to one or more of its members responsibility for

instituting and maintaining an effective internal control and risk management system.

More specifically, the Director responsible for the internal control and risk management

system shall:

identify the main business risks, taking into account the characteristics of the

activities carried out by the Company and its subsidiaries, and submit them

periodically to the Board of Directors for review;

implement the guidelines defined by the Board of Directors, handling the

design, implementation and management of the internal control and risk

management system, and constantly verifying the system’s adequacy and

effectiveness;

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ensure that the system is updated in response to changes in the operating

environment and the legislative and regulatory framework;

ask the Internal Auditing function to perform audits of specific operational

areas and regarding compliance with internal regulations and procedures in

the execution of business transactions, concurrently informing the Chairman

of the Board of Directors, the Chairman of the Internal Control, Risk

Management and Corporate Governance Committee and the Chairman of the

Board of Statutory Auditors;

promptly report to the Internal Control, Risk Management and Corporate

Governance Committee (or the Board of Directors) any issues and problems

encountered in the performance of his activities or of which he has become

otherwise aware, so that the Committee (or the Board of Directors) may take

appropriate action.

13. INTERNAL CONTROL, RISK MANAGEMENT AND CORPORATE GOVERNANCE

COMMITTEE

The Board of Directors shall establish internally an Internal Control, Risk Management and

Corporate Governance Committee, which shall serve in a consulting and proposal-making

function, and shall appoint its Chairman. The Committee shall be tasked with supporting, with

an adequate preparatory activity, the assessments and decisions of the Board of Directors

regarding the internal control and risk management system, as well as those concerning the

approval of periodic financial reports.

The Committee shall be comprised exclusively of Independent Directors, with at least one of its

members drawn from a minority slate filed pursuant to the Bylaws. The Chairman of the

Company and the members of the Board of Statutory Auditors shall be invited to attend

Committee meetings. When appropriate in light of the items on the meeting’s agenda, the

Internal Control, Risk Management and Corporate Governance Committee and the Board of

Statutory auditors shall meet in joint session.

More specifically, the Internal Control, Risk Management and Corporate Governance

Committee:

a) shall verify the adequacy and correct implementation of the internal control system,

assist the Board of Directors in defining the guidelines of the internal control system and

support the Director responsible for the internal control and risk management system, if

one has been appointed, in defining the system’s tools and implementation procedures;

b) shall support the Board of Directors in performing the tasks described in Article 17,

Letters d) and k), of the Bylaws;

c) taking into account the provisions of Article 19 of Legislative Decree No. 39 or January

27, 2010 and with the input of the Board of Statutory Auditors, shall review the findings

presented by the Independent Auditors in their report and management letter in

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accordance with their function of providing consulting support and making

recommendations to the Board of Directors;

d) shall assess, together with the Company’s Corporate Accounting Documents Officer

and with the input of the statutory Independent Auditors and the Board of Statutory

Auditors, the correct use of the accounting principles and, in the case of groups, their

consistent use in the preparation of the consolidated financial statements;

e) shall render opinions about specific issued concerning the identification, assessment

and monitoring of the main business risks;

f) shall review the reports concerning the assessment of the internal control and risk

management system prepared by the Internal Auditing function;

g) shall monitor the autonomy, effectiveness and efficiency of the Internal Auditing function

and approve its annual plan;

h) at its discretion, may ask the Internal Auditing function to perform audits of specific

operational areas and concurrently communicate this information to the Chairman of the

Board of Statutory Auditors;

i) shall evaluate, with the input of the Chairman of the Board of Directors and the Board of

Statutory Auditors, recommendations for the appointment and dismissal of the Internal

Auditing manager submitted to the Board of Directors by the Director responsible for the

internal control and risk management system (if appointed), and shall render an opinion

about his compensation, consistent with Company policies;

j) shall report to the Board of Directors at least semiannually (in conjunction with the

approval of the annual and semiannual reports) on the work done and the adequacy of

the internal control and risk management system;

k) shall support the Board of Directors in its periodic assessment (at least once a year) of

the adequacy, effectiveness and actual implementation of the internal control system,

for reporting purposes in the annual Report on Corporate Governance, and of the key

elements of the internal control system, as well as for the purpose of providing an

overall assessment of the system;

l) shall perform the additional tasks assigned to it by the Board of Directors, specifically

with regard to relationships with the Independent Auditors;

m) shall perform the functions required by the provisions governing related-party transactions

and the corresponding procedure adopted by the Board of Directors (hereinafter referred

to as the Procedure), all of the above being cited here by reference;

n) shall render opinions regarding amendments to the Procedure and may submit to the

Board of Directors recommendations to amend or integrate the Procedure;

o) shall monitor compliance with and the periodic updating of the rules of corporate

governance, including those concerning guidance and coordination issues pursuant to

Article 2497 and following articles of the Italian Civil Code;

p) shall perform any other activity deemed useful for and consistent with the performance

of the tasks assigned to it.

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Lastly, the Internal Control, Risk Management and Corporate Governance Committee shall

perform the function of the Committee for Related-party Transactions, in accordance with the

corresponding Procedure.

14. INTERNAL AUDITING FUNCTION

The Board of Directors, acting upon a proposal by the Director responsible for the internal

control and risk management system and with the favorable opinion of Internal Control, Risk

Management and Corporate Governance Committee and the input of the Board of Statutory

Auditors, shall:

appoint, confirm and dismiss the Internal Auditing manager;

ensure that he is provided with sufficient resources to discharge his duties;

define his compensation, consistent with Company policies.

The manager of the Internal Auditing function is the party responsible for monitoring the internal

control and risk management system to verify if it is operational and adequate.

More specifically, the manager of the Internal Auditing function shall:

a) verify, both on an ongoing basis and in response to specific requirements, consistent

with international standards, the implementation and suitability of the internal control

and risk management system, through an audit plan approved by the Board of Directors

and based on a structured process to analyze and prioritize the main risks;

b) have no responsibility for any operational area, reporting directly to the Board of

Directors;

c) have access to any information that may be useful for discharging his duties;

d) prepare periodic reports containing adequate information about his activities, the

methods by which risks are being managed and compliance with plans defined to

contain risks; these periodic reports shall also provide an assessment of the suitability

of the internal control and risk management system;

e) promptly prepare reports concerning highly material events;

f) submit the reports referred to in letters d) and e) above to the Chairmen of the Board of

Statutory Auditors, the Internal Control, Risk Management and Corporate Governance

Committee and the Board of Directors, and to the Director responsible for the internal

control and risk management system;

g) within the scope of the audit plan, test the reliability of the information systems,

including the accounting systems.

Certain operational segment of the Internal Auditing function may be entrusted to a party

outside the Company, provided such party meets adequate professionalism, independence and

organization requirements.

15. GUIDANCE AND COORDINATION

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The Board of Directors, comforted by an authoritative legal opinion, verified that the fact of being

subject to another party’s guidance and coordination was compatible with the restrictions placed

on the Company by the Composition with Creditors.

In addition, based on the abovementioned legal opinion, the Board of Directors determined that

the existence of another party’s guidance and coordination must be verified based on the

concrete modalities by which the Company’s activities are carried out. In this respect, there are

basically three propositions accepted by the Board of Directors.

The first one is that the law, anticipating a responsibility for “abuse” of guidance and

coordination allows the power of interference by the controlling shareholder (and/or the

consolidating shareholder) also with regard to management activities—and not just at

Shareholders’ Meetings—of the subsidiary/consolidated company.

The second one is that the exercise of guidance and coordination activity can be inferred both

from the existence of a power-right stemming from the Bylaws or a contract and from its

concrete exercise, i.e., irrespective of whether or not there is a formal stipulation to that effect.

The third one is that the exercise of guidance and coordination activity cannot be inferred from

occasional or sporadic acts, requiring instead “the exercise of a systematic and constant

plurality of oversight acts capable of having an impact on a company’s management decisions.”

The Board of Directors, while taking into account that—specifically with regard to the

development of strategic planning guidelines—the Lactalis Group operates transversally vis-à-

vis the individual companies of which it is comprised, concluded that it was reasonable to

identify BSA S.A., which is the company at the apex of the Lactalis Group corporate pyramid, as

the entity formally exercising the guidance and coordination activity.

16. RELATIONS WITH INSTITUTIONAL INVESTORS AND SHAREHOLDERS

The Company’s stated objective is to maintain and develop a constructive dialog with its

shareholders and institutional investors based on an understanding of roles that each must play.

To achieve this objective, the Company has established a special Department charged with

handling relations with the Italian and international financial community on behalf of the entire

Group. This Department has been provided with adequate professional and technical resources.

Under no circumstances can a dialog with institutional investors occasion the disclosure of

material facts before they are communicated to the financial markets.

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17. SHAREHOLDERS’ MEETINGS

1. The Company shall encourage and facilitates the largest possible attendance by its

shareholders of Shareholders’ Meetings, providing shareholders with all of the

information and documents needed to attend the Meeting easily and with sufficient

knowledge.

2. The Board of Directors may ask the Shareholders’ Meeting to approve Regulations to

ensure the orderly and efficient progress of Ordinary and Extraordinary Shareholders’

Meetings and guarantee the right of each shareholder to request the floor and discuss

the items on the Agenda. The abovementioned Regulations may address such issues

as the maximum time allotted to each speaker, the order in which shareholders must

speak, the voting method used, the presentations of Directors and Statutory Auditors

and the powers of the Chairman, which include the power to settle or prevent the

occurrence of conflicts during the Meeting.

3. If there are significant changes in the value of the Company’s capital stock or its

shareholder base (i.e., the number of shareholders), the Board of Directors can submit

motions to amend those sections of the Bylaws that deal with the ownership

percentages needed to initiate certain actions or exercise the protective rights available

to minority shareholders.

4. Through the Notice of the Shareholders’ Meeting, the Directors may ask the

shareholders who control the Company to disclose to the public, sufficiently in advance,

any motions that they may be planning to submit to the Shareholders’ Meeting

regarding topics that are not the subject of a specific motion filed by the Board of

Directors.

18. BOARD OF STATUTORY AUDITORS

1) Statutory Auditors shall act autonomously and independently of everyone, including the

shareholders who elected them.

2) Statutory Auditors shall be selected among candidates who can qualify as independent

also based on the criteria set forth in this Code with regard to Directors. The Board of

Statutory Auditors shall verify compliance with said criteria after the election and

annually thereafter, listing the results of the verification process in the Report on

Corporate Governance with modalities consistent with those used for Directors.

3) Statutory Auditors shall accept their appointment if they believe they can devote

sufficient time to the diligent performance of their duties.

4) Any Statutory Auditor who, directly or on behalf of third parties, may have an interest in

a specific transaction executed by the issuer shall promptly and exhaustively inform the

other Statutory Auditors and the Chairman of the Board of Directors about the nature,

terms, origin and scope of his interest.

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5) Within the scope of their activities, Statutory Auditors may ask the Internal Auditing

function to perform audits of specific operational areas or Company transactions.

6) The Board of Statutory Auditors and the Internal Control, Risk Management and

Corporate Governance Committee shall exchange on a timely basis information

relevant to the performance of their duties.

7) Statutory Auditors are required to treat as confidential the documents and information

they receive in the performance of their duties and must comply with the procedures

adopted by the Company with regard to the release of documents and information.

8) As a rule, Statutory Auditors are responsible for monitoring the modalities applied to

actually implement the corporate governance rules of the codes of conduct adopted by

the Company.