Current reports

Report pursuant to § 29(3) of the Rules of the Warsaw Stock Exchange: information on non-compliance with some of the corporate governance rules

Current report 3/2017

The Management Board of Medicalgorithmics S.A. with its registered office in Warsaw (“Company”), in performance of the obligation arising under § 29(3) of the Rules of the Warsaw Stock Exchange, adopted by way of Resolution No 1/1110/2006 of the WSE’s Supervisory Board dated 4 January 2006, as amended, (“Rules of the Warsaw Stock Exchange”), hereby discloses to the public the information on non-compliance with the following detailed corporate governance rules set out in the “Code of Best Practice for WSE Listed Companies 2016” (“Code of Best Practice”).

I.Z.1. A company should operate a corporate website and publish on it, in a legible form and in a separate section, in addition to information required under the legislation:

I.Z.1.3. a chart showing the division of duties and responsibilities among members of the management board drawn up according to principle II.Z.1;

There is no formal division of duties and responsibilities among members of the management board within the scope of their functions, and consequently there is no such chart. In the Company’s opinion, this ensures effective and dynamic management of the enterprise.

I.Z.1.10. financial projections, if the company has decided to publish them, published at least in the last 5 years, including information about the degree of their implementation;

Not applicable to the Company. The Company has not decided to publish financial projections.

I.Z.1.11. information about the content of the company’s internal rule of changing the company authorized to audit financial statements or information about the absence of such rule;

The Company has no formal rule for changing the entity authorized to audit financial statements. On the basis of the provisions of the Company’s Articles of Association, the choice of this entity remains in the competence of the Supervisory Board, which makes a selection among entities which guarantee a high substantive level of the audit and ensure the independence principle is observed.

I.Z.1.15. information about the company’s diversity policy applicable to the company’s governing bodies and key managers; the description should cover the following elements of the diversity policy: gender, education, age, professional experience, and specify the goals of the diversity policy and its implementation in the reporting period; where the company has not drafted and implemented a diversity policy, it should publish the explanation of its decision on its website;

The Company has not developed a diversity policy. Members of the Management Board and Supervisory Board of the Company are appointed by the Supervisory Board and the General Meeting, respectively, on the basis of their

qualifications to perform certain functions. Information concerning members of the Company’s governing bodies is published in relevant current reports notifying about the appointment of the governing bodies and on the Company’s website. In addition, the Company observes the principles of equal treatment with respect to the establishment and termination of employment conditions, promotion and access to training in order to improve professional qualifications. Key managers are employed on the basis of their qualifications and experience necessary for the Company’s operations.

I.Z.1.16. information about the planned transmission of a general meeting, not later than 7 days before the date of the general meeting;

This principle is not applied because the Company does not comply with principle IV.Z.2 of the Code of Best Practice.

I.Z.1.18. information about the reasons for cancellation of a general meeting, change of its date or agenda, and information about breaks in a general meeting and the grounds of those breaks;

The principle will be applied from the date of publication of this current report to the extent in which the information will be provided to the Company by the applicant or the Company’s authority.

I.Z.2. A company whose shares participate in the exchange index WIG20 or mWIG40 should ensure that its website is also available in English, at least to the extent described in principle I.Z.1. This principle should also be followed by companies not participating in these indices if so required by the structure of their shareholders or the nature and scope of their activity.

The Company operates a website in English to a lesser extent than that described in principle I.Z.1. The Company plans to fully implement this principle in the current financial year.

II.Z.1. The internal division of responsibilities for individual areas of the company’s activity among management board members should be clear and transparent, and a chart describing that division should be available on the company’s website.

There is no formal and detailed division of duties and responsibilities among members of the management board within the scope of their functions, and consequently there is no such chart. In the Company’s opinion, this ensures effective and dynamic management of the enterprise.

II.Z.2. A company’s management board members may sit on the management board or supervisory board of companies other than members of its group subject to the approval of the supervisory board.

The principle is applied to a limited extent, i. e. taking into account the criterion of competitiveness of companies other than members of the Capital Group. The Company intends to implement this principle fully in the future.

II.Z.11. The supervisory board should review and issue opinions on matters to be decided in resolutions of the general meeting.

To ensure flexibility of operations of the Company’s Supervisory Board, the decision to review and issue an opinion on a given matter, which is the subject of a resolution of the General Meeting, is in the competence of the Company’s Supervisory Board.

III.Z.4. The person responsible for internal audit (if the function is separated in the company) and the management board should report to the supervisory board at least once per year with their assessment of the efficiency of the systems and functions referred to in principle III.Z.1 and table a relevant report.

The Company did not have a separate function of the person responsible for internal audit. The Management Board presents the Supervisory Board with an appropriate assessment on an ongoing basis. However, such an assessment is not a formal report.

IV.Z.2. If justified by the structure of shareholders, companies should ensure publicly available real-time broadcasts of general meetings.

Due to the current shareholding structure and for economic reasons, the Company does not ensure real-time broadcasts of general meetings. To the best of the Company’s knowledge, the current formula of organization of the General Meeting

meets the Shareholders’ expectations and enables proper and effective execution of rights attached to shares. If the Company becomes aware of the expectations of a wider group of shareholders with respect to the real-time broadcast of meetings, it will consider implementing such broadcasts.

IV.Z.7. A break in the proceedings of the general meeting may only take place in special cases, defined at each time in the justification of the resolution announcing the break, drafted on the basis of reasons provided by the shareholder requesting the break.

The principle will be applied from the date of publication of this current report.

V.Z.6. In its internal regulations, the company should define the criteria and circumstances under which a conflict of interest may arise in the company, as well as the rules of conduct where a conflict of interest has arisen or may arise. The company’s internal regulations should among others provide for ways to prevent, identify and resolve conflicts of interest, as well as rules of excluding members of the management board or the supervisory board from participation in reviewing matters subject to a conflict of interest which has arisen or may arise.

The Company has not introduced any specific internal regulations concerning the resolution of conflicts of interest, considering generally applicable legal regulations in this respect as sufficient.

VI.Z.4. In this directors’ report, the company should report on the remuneration policy including at least the following:

1) general information about the company’s remuneration system;

2) information about the conditions and amounts of remuneration of each management board member broken down by fixed and variable remuneration components, including the key parameters of setting the variable remuneration components and the terms of payment of severance allowances and other amounts due on termination of employment, contract or other similar legal relationship, separately for the company and each member of its group;

3) information about non-financial remuneration components due to each management board member and key manager;


4) significant amendments of the remuneration policy in the last financial year or information about their absence;

5) assessment of the implementation of the remuneration policy in terms of achievement of its goals, in particular long-term shareholder value creation and the company’s stability.

In the Directors’ Report, the Company publishes information on the amount of remuneration received by the Management Board and Supervisory Board during the reporting periods and on the incentive scheme adopted by the Company. At present, however, the Company does not publish a report on the applied remuneration policy to the extent specified in this principle.