Nis Novi Sad : Belgrade Stock Exchange Questionnaire on Corporate Governance Practice

FORM	04/2 No. 1290/13

QUESTIONNAIRE

ON CORPORATE GOVERNANCE PRACTICE FOR ISSUERS

Business name of the Company:

Društvo za istraživanje, proizvodnju, preradu, distribuciju i promet nafte i naftnih derivata i istraživanje i proizvodnju prirodnog gasa Naftna industrija Srbije a.d. Novi Sad

Company		Narodnog fronta 12
Headquarters:		Novi Sad
		Republika Srbija
Company ID No.:		20084693
Company Tax ID No.		104052135

Questionnaire instructions:

oWhen answering a question, a more detailed explanation is required in addition to a YES/NO answer.

oIf a question was answered based on information gathered from a publicly available Company act, it is required to indicate the location where the act can be read (e.g. the website where the act has been published), and if it is an act which has not been published, indicate the act's full

name and number and the Company body which has adopted it.

oIf the answer is grounded on a usual corporate practice, it is required to provide a specific example to demonstrate such answer.

1.Has the Company adopted its own Code of Corporate Governance or has it applied another organisation's Code of Corporate Governance?

Answer:	Yes. The NIS j.s.c. Novi Sad Code of Corporate Governance (No.
	85/OD-od/XXVI-3a) was adopted on 27 January 2014.

website where the applicable www.nis.eu

Code is publicly available:

2.Have applicable corporate governance principles been incorporated into the Company acts and are they easily available to all stakeholders?

Answer:

The most significant acts on corporate governance, and the manner in which they have been made available.

Yes.

NIS j.s.c. Novi Sad Articles of Association, NIS j.s.c. Novi Sad Code of Corporate Governance, NIS j.s.c. Novi Sad Shareholders' Assembly Rules of Procedure, The Rules of Procedure of the Board of Directors the Board of Directors' Commissions, NIS j.s.c. Novi Sad Dividend Policy. All of the above documents are available on the Company website (www.nis.eu).

4.Does the Company publish in its annual reports the information on its business operations' compliance with the corporate governance principles or provide explanations for any departure from the principles, in line with Article 368 of the Law on Commercial Entities?

Answer:	Yes. The Corporate Governance Statement is an integral part of the
	Company's Annual Report and includes the information on
	applicable Code of Corporate Governance, the website where it is
	available, the overview of the most important corporate governance
	practices applied by the Company as well as the explanation of any
	departures from the principles prescribed by the Code. The
	Company's Annual Report is available on the Company website
	(www.nis.eu) as well as the website of the Belgrade Stock Exchange

FORM	04/2 No. 1290/13

and in the Official Registry of Information of the Serbian Securities Commission.

ASSEMBLY AND SHAREHOLDERS

5.Does a Invitation for meeting of the Shareholders Assembly include all the prescribed elements and information, including the Shareholders Day details and information on shareholders' rights to participate in the activities of the Shareholders Assembly and propose items of the agenda, with timeframe for exercising these rights, as well as the description of voting procedures, either by proxy, absentee ballot or electronically?

Answer:	Yes. The Invitation for meeting of the Shareholders Assembly
	includes:
	∙ date of publishing of the Invitation,
	∙ time and place of the meeting,
	∙ agenda of the meeting with clearly specified items on the
	agenda regarding which the Shareholders Assembly is
	proposed to pass a decision, total number of voting shares
	that have the right to vote on that decision and the majority
	required to adopt the decision,
	∙ information that materials for the Shareholders Meeting may
	be downloaded from the Company website (www.nis.eu) and
	are also available to shareholders in the Company registered
	seat,
	∙ guidance on shareholders' rights to participate in the
	Shareholders' Assembly activities and a clear and precise
	information on rules for their exercise,
	∙ notice of the Shareholders Day, explanation persons which
	are Company shareholders on that day are entitled to
	participate in the Shareholders' Assembly activities as well as
	the information on how to access the list of shareholders,
	∙ notice of shareholders right to propose items of the agenda
	and address questions with the indication of deadlines for
	exercising such rights, with a clear note that detailed
	information on the exercise of such rights is available on the
	Company website (www.nis.eu)
	∙ description of the voting procedure by shareholder proxy and
	deadlines for submitting the Power of Attorney, as well as
	the information about the way in which the company allows
	shareholders to submit notices of appointment of proxies
	electronically,
	∙ note that a Power of Attorney Form may be downloaded
	from the Company website (www.nis.eu),
	∙ description of the absentee ballot procedure and procedure
	for voting by electronic means including the information that
	an Ballot Form may be downloaded from the Company
	website (www.nis.eu) and deadlines for submission of the
	ballot.
	The contents of the Invitation for meeting of the Shareholders
	Assembly is regulated by the Shareholders' Assembly Rules of
	Procedure (No. 70/SA-od/VIII-10а dated 28 June 2016 (consolidated
	text)) which are publicly available on the Company website
	(www.nis.eu). The Invitation to shareholders for X Ordinary meeting
	of the Shareholders' Assembly was published starting from 22 May
	2018. The invitation was published on the Company website
	(www.nis.eu), the website of the Belgrade Stock Exchange
	(www.belex.rs) and the web page of the Business Entities Register
	(www.apr.gov.rs).

FORM	04/2 No. 1290/13

6.Is the Invitation for meeting of the Shareholders Assembly, with all relevant explanations and information submitted to the Stock Exchange for the purpose of publishing in the regulated market, i.e. MTP Belex, immediately after its sending (publishing) to shareholders?

Answer:

Specify whether and how long following the sending of the Invitation to shareholders it was submitted to the Stock Exchange for the purpose of publication in 2018.

Yes.

The Invitation X Ordinary meeting of the Shareholders' Assembly was published on the NIS j.s.c. Novi Sad website on 22 May 2018 and on the day of the publication was submitted to the Belgrade Stock Exchange j.s.c. and the Serbian Securities Commission.

7.Are the materials for the meeting of the Shareholders Assembly available on the Company website?

Answer:

Specify how the materials for the meeting of the Shareholders Assembly are available to the shareholders, if they are not available on the Company website

Yes. The materials for the meeting of Shareholders Assembly are available on the Company website (www.nis.eu), where they can be downloaded in whole, and they are also available in the Company's seat - in the premises of NIS j.s.c. Novi Sad Office for Minority Shareholders Affairs.

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8.Has the Company established some of legally prescribed options for online participation in the Assembly activities, and if so, in which manner?

Answer:	Yes. Starting from 2014 the Company has provided the possibility for
	the Company's shareholders to vote by electronic means before the
	meeting by delivery of the ballot form signed with a qualified
	electronic signature.

9.Does the Company publish adopted decisions and minutes of the meetings, immediately, i.e. within prescribed deadlines, after the meeting?

Answer:

Specify in which manner the Company ensured shareholders' and public notification of these issues in 2018.

Yes. The Company has published all decisions adopted at the X Ordinary meeting of the Shareholders' Assembly, as well as other relevant documents (Voting Commission Reports on Voting Results and Minutes) within deadlines specified under the Law following the meeting of the Shareholders Assembly.

The Company has published the above decisions, Minutes and other documents on its website (www.nis.eu) in the "Shareholders' Assembly Decisions" section, within the section intended for investors and shareholders, which could have been accessed from the Company web site home page.

The following news: "NIS holds 10th Annual General Meeting" was published on the website in the News section and also submitted to the Belgrade Stock Exchange and Serbian Securities Commission with an overview of the most important decisions adopted at the X Ordinary Meeting of Shareholders Assembly, and the Company press release was sent to all major Serbian medias.

Also the following decisions were submitted to the Belgrade Stock Exchange and Serbian Securities Commission on 25 June 2018: Decision on Adopting Annual Report for 2017, Decision on Profit Distribution for 2017, dividend payment and determining of retained earnings of NIS j.s.c. Novi Sad, Decision on Adoption of Financial Statements for 2017, Decision on Adoption of Consolidated Financial Statements for 2017 and decisions on adoption of reports of the independent auditor on audit of Financial and Consolidated Financial statements and Annual report of the Company for 2017.

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10.What materials, decisions and other relevant documents related to the Shareholders' Assembly, if any, are also prepared and published in English?

Answer:	Yes. All decisions, materials and other published documents related
	to the activities of the Shareholders' Assembly are also prepared and
	published in English and can be found on the Company website
	(www.nis.eu).

11.Has the Company adopted the Shareholders' Assembly Rules of Procedure and does this or other Company act set forth rules and procedures which ensure that shareholders are provided with timely answers to all relevant questions concerning the Assembly?

Answer:

Specify whether the Company has ensured and in which manner that all shareholders are continuously provided with information on all applicable rules and procedures.

Yes. The Company has adopted the Rules of Procedure of Shareholders Assembly of NIS j.s.c. Novi Sad (No. 70/SA-od/VIII-10a dated 28 June 2016 (consolidated text)) which, among other things, regulates the right of a shareholder to ask questions, receive answers and submit proposals.

The NIS j.s.c. Novi Sad Shareholders' Assembly Rules of Procedure is available on the Company website (www.nis.eu) in the section intended for investors and shareholders. Explanation of the procedure for asking questions, receiving answers and submitting proposals was also a part of the Invitation for the X Ordinary meeting of Shareholders' Assembly of NIS j.s.c. Novi Sad.

12.Has the Company clearly defined its dividend policy and the procedures and deadlines for its distribution?

Answer:	The Company has adopted its Dividend Policy which is available to
	shareholders on the Company website (www.nis.eu), and it governs
	a long-term corporate policy concerning dividend payment to
	shareholders, dividend amount compared to net profit, factors
	affecting dividend payment and dividend payment method.
	The Company has defined procedures regarding payment of
	dividends and the rights of shareholders to receive dividends by
	Company Standard SD-10.02.09 - The realization of the rights of
	shareholders to receive dividends, which was adopted on 13
	November 2014.
	In accordance with the law, the deadline for dividend payment is
	determined by the decision of the Shareholders' Assembly on the
	payment of dividends and it can not be longer than 6 months from
	the date of adoption of this decision.

13.Has the Company issued shares in the previous year with restriction on shareholders' option to buy new emissions of the Company shares?

Answer:No.

14.Has the Company established its mechanism for prevention and settlement of possible conflicts between its shareholders and the company?

Answer:

Specify how shareholders have been notified of these procedures

Yes. The Company has a three-member Commission for Minority Shareholders Complaint Settlement, working according to the relevant internal act of the Company (Instructions for the work of the Commission for resolving complaints of minority shareholders number UP-10.02.13-001 version 2.0 dated 13 August 2018), that governs the procedures for addressing the Commission, working procedures at its meetings, obligations and responsibilities of its members and other issues of relevance to the work of the Commission.

Information relevant to minority shareholders of the Company relating to the objectives of the Commission for Minority Shareholders Complaint Settlement, the contents of the complaint and the procedure for filing the complaint are available on the

FORM	04/2 No. 1290/13

Company's website (www.nis.eu).

Also, on the Company's website, in the section for investors and shareholders, shareholders are informed about the procedure for contacting the Service for minority shareholders by mail (e-mail address: [e-mail]) or by telephone info-service ([phone]) that is exclusively dedicated for minority shareholders, through which minority shareholders can receive all necessary information regarding their rights and regarding the settlement of complaints of minority shareholders.

15.Is comprehensive information on the proposed nominees available to the Shareholders' Assembly when selecting Board members, particularly the information on any relations to the Company, affiliated parties, competitors and main business partners of the Company?

Answer:	Yes. For the purpose of the election of new members of the Board of
	Directors, candidates must complete a questionnaire containing
	questions for the candidates regarding the possible existence and
	nature of the relationship with the Company, the related parties of
	the Company and companies with competing activities. By
	completing the given questionnaire candidates make a statement in
	relation to the above-mentioned issues and state their involvement
	in other companies or organizations (regardless of whether these
	companies or organizations are major business partners of the
	company or not).

16.Are shareholders' enabled to exercise their rights to unrestricted participation in the Shareholders' Assembly activities and decision-making?

Answer:	Yes. There are no restrictions on the right to participate in the
	activities and decision-making of the Shareholders Assembly, except
	when it comes to possibility of personal participation.

Specify the conditions governing shareholders' participation in the Assembly (e.g.: number of shares in their possession)

The shareholders owning shares on the Shareholders Day (tenth day prior to the Shareholders Meeting) are entitled to participate in the Shareholders' Assembly activities. The shareholders may execute this right in person, by proxy, by voting by means of absentee ballot or by electronic means in line with the Law on Commercial Entities and corporate acts.

A shareholder that owns on the Shareholders Day minimum 0.1% of the total number of Company shares, i.e. 163,060 shares, that is, a shareholders proxy representing minimum 163,060 NIS j.s.c. Novi Sad shares, is entitled to personally participate in the NIS j.s.c. Novi Sad Shareholders' Assembly activities, which is due to the fact that the Company has a large number of shareholders (around 2.1 million) and in such circumstances a census is a necessity so as not to risk efficiency and rationality in terms of planning and organising meeting of the Shareholders Assembly.

The shareholders that own individually less than 0.1% of the total number of NIS j.s.c. Novi Sad shares are entitled to participate in the Shareholders' Assembly activities by a joint proxy or vote by absentee ballot or by electronic means before the Shareholders Assembly meeting in line with the Law on Commercial Entities and Company acts.

BOARD OF DIRECTORS AND EXECUTIVE DIRECTORS

17. Which governance system has the Company set up?

one-tier system - Board of Directors

(indicate Board members details, with the following indications: executive, non-executive and independent directors, and the

One-tier governance structure. The Board of Directors is comprised of the following members:

-Vadim Yakovlev, Non-executive Director, Chairman of the Board of Directors;