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Application of corporate governance principles

In 2021, the Company applied the corporate governance principles under the name “Best Practice for WSE Listed Companies 2021” adopted by the Stock Exchange Board by resolution of 29 March 2021 and effective from 1 July 2021. In connection with the entry into force of the aforementioned set of corporate governance principles, the Company published a statement on the status of the Company’s compliance with the recommendations and principles contained in the set. The text of this statement is available on the Company’s website at www.unibep.pl (in the Investor Relations section). The full text of the applicable corporate governance principles contained in the aforementioned documents is available on the dedicated WSE corporate governance website at www.gpw.pl/dobre-praktyki2021.

The Company provides all shareholders with equal access to information about the Company, in particular by publishing current and periodic reports, which are then published on the corporate website. The Management Board of the Company constantly undertakes actions aimed at providing equal and full access of all investors to the information about the situation and events taking place in the Company.

Principles waived by the issuer

In 2021, the Company did not apply the following principles of the Best Practice: 1.3.1., 1.3.2., 1.4. 2.1., 2.2., 2.4., 3.10., 4.1., 4.3., 6.3. and 6.2. which is complied with by the Company as of the date of publication of this report.
Disclosure Policy, Investor Communications

1.3. The Company also integrates ESG factors in its business strategy, including in particular:

1.3.1. environmental factors, including measures and risks relating to climate change and sustainable development;

Although the Company has not developed a long-term development strategy in the form of a single document, it customarily includes ESG factors in its activities in order to comply with applicable regulations and given the importance of the interaction of business activities with environmental, social and corporate governance factors. The results of these activities are presented in the Company’s annually published sustainability reports.

1.3.2. social and employee factors, including among others actions taken and planned to ensure equal treatment of women and men, decent working conditions, respect for employees’ rights, dialogue with local communities, customer relations.

Although the Company has not developed a long-term development strategy in the form of a single document, it customarily includes ESG factors in its activities in order to comply with applicable regulations and given the importance of the interaction of business activities with environmental, social and corporate governance factors. The results of these activities are presented in the Company’s annually published sustainability reports.

1.4. To ensure quality communication with stakeholders on the adopted business strategy, the Company publishes on its website information concerning the framework of the strategy, measurable goals, including in particular longterm goals, planned activities and their status, defined by measures, both financial and non-financial. ESG information concerning the strategy should among others:

The Company has not developed a development strategy in the form of a single document. The business of the Company and its Group is built on five complementary segments: domestic general contracting, general contracting abroad, road and bridge infrastructure, modular construction and property development activity. In the Company’s opinion. the development of a single document containing a longterm action plan covering all the businesses of the Company and its Group would be difficult at the moment, given the current dynamically changing market situation, particularly in the construction industry environment. The Company prioritises its individual businesses and adapts its operating strategy on an ongoing basis to the dynamically changing environment.

Management Board and Supervisory Board

2.1. The company should have in place a diversity policy applicable to the management board and the supervisory board, approved by the supervisory board or the general meeting, respectively. The diversity policy defines diversity goals and criteria in areas such as gender, education, expertise, age, and professional experience, and specifies the target dates and the monitoring systems for such goals. With regard to gender diversity of corporate bodies, the participation of the minority group in each body should be at least 30%.

The Company has not adopted a diversity policy for management and supervisory board members in the form of a single document. The Company aims to ensure the versatility and diversity of its bodies, but the specific nature of the industry in which it operates makes it difficult to meet all the required criteria. Due to the location of the Company’s registered office in Podlasie, which is considered to be a melting pot of nationalities, cultures and communities, employees and members of the Company’s bodies come from different backgrounds and cultures, represent different ways of thinking and points of view and have different life and professional experiences. The Company’s policy is that any discrimination in employment, in particular on the grounds of sex, age, disability, race, religion, nationality, political beliefs, trade union membership, ethnic origin, religion, sexual orientation, etc., is unacceptable. With regard to the management and supervisory bodies, the Company explains that the composition of the Management Board and Supervisory Board of the Company is diverse in terms of education, expertise, age and professional experience, but the bodies concerned lack gender diversity in particular. There is currently one woman on the Company’s seven- member Supervisory Board, while the Management Board is composed entirely of men. As the Company recognises the need for and seeks to ensure diversity in the bodies, it will consider adopting a formal policy in this regard in the future.

2.2. 1.1.   Decisions to elect members of the management board or the supervisory board of the company should ensure that the composition of those bodies is diverse by appointing persons ensuring diversity, among others in order to achieve the target minimum participation of the minority group of at least 30% according to the goals of the established diversity policy referred to in principle 2.1.

The Company has not developed a diversity policy in the form of a single document, but in the interest of the stability and effectiveness of the Company’s operations, those who make decisions on the appointment of members of the Management Board or the Supervisory Board of the Company in practice seek to ensure that the composition of those bodies is diverse.

2.4. The supervisory board and the management board vote in an open ballot unless otherwise required  by law.

The Company’s corporate documents contain provisions on the need to use secret ballot in selected cases. In the Company’s opinion, such a voting method allows free decision-making on personnel matters.

Internal Systems and Functions

3.10. A company traded on the WIG20, mWIG40 or sWIG80 index has its internal audit function reviewed at least once every five years by an independent auditor appoint- ed with the participation of the audit committee.

Not applicable. The Company is not currently traded on any of the specified indices.

General Meeting and Shareholder Relations

4.1. The company should enable its shareholders to participate in a general meeting by means of electronic communication (e-meeting) if justified by the expectations of shareholders notified to the company, provided that the  company is in a position to provide the technical infrastructure necessary for such general meeting to proceed.

To date, the Company has not held a general meeting by means of electronic communication (e-meeting). The Company’s shareholders have not raised such expectations. In the event that shareholders raise an expectation to ensure participation in a general meeting by means of electronic communication (e-meeting), and provided that the Company is in a position to provide the technical infrastructure necessary for such general meeting to proceed, the Company intends to apply Principle 4.1.

4.3. The Company provides a public real-life broadcast of the general meeting.

The Company believes that the cur- rent method of informing the interested parties about the course of the general meeting (publishing the content of adopted resolutions and information about votes against, etc.) ensures transparency of the Company’s operations and protects the rights of shareholders. The Company also informs that if there is any interest on the part of shareholders in recording the course of the General Meeting in audio/video format, the Management Board of the Company will consider taking steps towards the introduction of this principle.

Remuneration

6.2. Incentive schemes  should be constructed in a way necessary among others to tie the level of remuneration of members of the com- pany’s management board and key managers to the actual long-term standing of the company measured by its financial and non-financial results as well as long-term shareholder value creation, sustainable development and the company’s stability.

In 2021, the Company did not apply this principle, giving the following justification:

The Company has an incentive scheme  under  which  members  of the Management Board of the Company and Group companies and their key managers may purchase own shares bought back by the Company under the terms and conditions set by the Supervisory Board, as authorised by the general meeting. The scheme makes the ability to purchase shares in the Company conditional on the fulfilment of the allocation criteria adopted by the Supervisory Board for the relevant assessment year, including in particular set financial targets of the Company and its Group. The Company, recognising the appropriateness of considering non-financial factors and multi-year criteria in shaping the variable remuneration of the Management Board and key managers, will consider applying the  principle in the future.

As of the date of publication of this report, the Company already applies this principle, as notified in EBI Report 1/2022 dated 20 January 2022 with the following commentary:

The Company has an incentive scheme under which members of the Management Board of the Company and Group companies and their key managers may purchase own shares bought back by the Company under the terms and conditions set by the Supervisory Board, as authorised by the general meeting. The scheme makes the ability to purchase shares in the Company conditional on the fulfilment of the allocation criteria adopted by the Supervisory Board for the relevant assessment year, including in particular the set financial targets of the Company and its Group, and from 2022 onwards also the assessment of non-financial criteria in the ESG area.

6.3. If one of the company’s incentive schemes includes a stock option programme for managers, the implementation of the stock option programme should depend on the achievement by beneficiaries, over a period of at least three years, of predefined, realistic financial and non-financial targets and sustainable development goals adequate to the company, and the share price or option exercise price for the beneficiaries cannot differ from the value of the shares at the time when such programme was approved.

The Company, recognising the appro- priateness of considering non-financial factors and multi-year criteria in shap- ing the variable remuneration of the Management Board and key managers, will consider applying the  principle in the future.