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Corporate governance

Photocure is committed to good corporate governance

The Norwegian Code of Practice for Corporate Governance is intended to support listed companies by facilitating regulation of the division of roles between shareholders, the board of directors and the management more comprehensively than is required by the relevant legislation.

Observance of the recommendations is based on the “comply or explain” principle. Photocure’s board of directors and management has resolved as a main principle to follow the recommendations of the Norwegian Corporate Governance Code of 23 October 2012 to the extent not considered unreasonable due to the company size and stage of development. Explanations are provided of non-conformance to the code if not fully implemented.

Photocure’s compliance with the Code is detailed in this report and section numbers refer to the Code’s chapters.

1. Implementation and reporting on corporate governance
Photocure intends to comply with the Norwegian Code of Practice for Corporate Governance.  This statement of compliance with the code is presented in the company’s annual report and on the company website.

Photocure’s value base constitutes a key premise for the company’s corporate governance.

Non-conformance with the recommendation: Photocure has established core values, but has due to the company’s development stage so far not developed guidelines for corporate social responsibility.

2. Business
Photocure’s business is clearly defined in the company’s articles of association. The company’s goals and strategies are presented in the annual report.

Non-conformance with the recommendation: None.

3. Equity and dividends
Photocure’s equity is appropriate to the company’s goals, strategy and risk profile. The company’s mandate to increase the capital and to purchase own shares is tied to defined purposes and limited in time to the next General Meeting.

Non-conformance with the recommendation: Photocure is focusing its resources on building a speciality pharma company and the board of directors will recommend payment of dividends in line with the company’s results, financial position and outlook. The company has, due to its level of development, uneven revenue streams and net cash flows, and does not expect to pay recurring dividends until justified by recurring cash flows.

4. Equal treatment of shareholders and transactions with related parties
Photocure has only one class of shares. If the board of directors proposes that the existing shareholders’ pre-emptive rights be waived in the case of share capital increases, the waiver will be based on the common interests of the company and the shareholders. The reasons will be made public in a stock exchange disclosure in connection with the capital increase.

All material transactions between the company and shareholders, members of the board of directors, key employees or parties closely associated with same are to be assessed by an independent third party. Members of the board of directors and the management are obliged to notify the board of directors if they have any material interest – directly or indirectly – in any agreement entered into by the company. The board of directors will report in the annual report any transactions with related parties.

Non-conformance with the recommendation: None.

5. Freely negotiable shares
All shares are freely negotiable with no form of restriction on negotiability.

Non-conformance with the recommendation: None.

6. General Meetings
It is the responsibility of the board of directors to ensure that as many shareholders as possible have the opportunity to exercise their rights by participating in the General Meetings of the company, and that the General Meetings are an effective forum for both shareholders and the board of directors.

The chairperson of the board of directors, the CEO and CFO are present at the Annual General Meeting, along with the nomination committee and the company auditor. Shareholders who are unable to participate themselves may vote by proxy and a person can also be appointed to vote for the shareholders as a proxy.

Notice of the meeting and relevant documents, including the proposal of the nomination committee, are made available on the company website three weeks in advance of the meeting. Notice of the meeting is sent to all shareholders individually, or to their depository banks, three weeks in advance of the meeting. The notice of meeting includes information regarding shareholders’ rights, guidelines for registering and voting at the meeting. The company provides information on the procedure for representation at the meting through proxy, nominates a person to vote on behalf of the shareholders and to the extent possible prepare a form which allows separate voting instructions for each matter.

Non-conformance with the recommendation: Photocure being a small company and with directors living in different countries has encouraged directors to attend, but has for both cost and convenience reasons so far not required all directors to attend the General Meeting.

7. Nomination committee
As stipulated in its articles of association, the company has a nomination committee that consists of three members. The nomination committee is elected annually by the General Meeting and is to be composed in such a way as to ensure broad representation of shareholder interests.

The nomination committee's duties are to propose candidates for election to the board of directors and to propose fees to be paid to the board members. The Nomination Committee are required to justify their recommendations.

Non-conformance with the recommendation: None.

8. Composition and independence of the board of directors
The board of directors consists of six members. The composition of the board of directors of Photocure is designed to ensure that it can attend to the common interests of all shareholders, and that it meets the company’s requirements for expertise, capacity and diversity, and function as an effective collegial body.

The members of the board of directors are elected for one year terms and presented on the company website. The Chairman and the members of the board of directors are elected by the General Meeting. All board members are considered to be independent from the company’s day-to-day management, main shareholders and material business connections.

Non-conformance with the recommendation: None.

9. The work of the board of directors
The board of directors prepares an annual plan for its work, which comprises goals, strategy and implementation. The board of directors performs an annual review of its work and required competences.

The board of directors has established an audit committee and a remuneration committee for the thorough and independent handling of cases involving financial reporting and remuneration to key employees. The board of directors has established instructions for the committees and the President & CEO.

In matters where the chairman of the board of directors is or has been actively involved, another board member will chair the meeting.

Non-conformance with the recommendation: None.

10. Risk management and internal controls
It is the responsibility of the board of directors to ensure that the company has sound internal controls and systems for risk management that are appropriate in relation to the extent and nature of the company’s activities. Significant risks include strategic risks, financial risks, liquidity risks and operational risks including risks related to development of products. The company’s significant risks are assessed on an on-going basis and at least once a year by the board.

The company’s finance function is responsible for the preparation of the financial statements and to ensure that these are prepared and reported according to applicable laws and regulations and in accordance with IFRS. The Audit Committee performs reviews of the quarterly and annual financial statements with special focus on transaction types, which includes judgments, estimates or issues with major impact on the financial statement. In additional to the quarterly and annual reporting, the board of directors receives monthly financial updates. Management controls are performed at a senior level in the company.

The board of directors performs an annual review of the company’s internal control systems and risk areas.

Non-conformance with the recommendation: None.

11. Remuneration of the board of directors
The remuneration of the board of directors is to reflect the board’s responsibility, expertise and time commitment, as well as the complexity of the company’s activities. The remuneration of the board of directors is not linked to the company’s profits, and share options are not granted to members of the board.

Non-conformance with the recommendation: None.

12. Remuneration of executive personnel
The board of directors has established guidelines for remuneration of the key employees of the company, and said guidelines are presented to the General Meeting. Performance-related remuneration is linked to value creation for the shareholders over time, and is based on quantifiable factors which the employees in question can influence.

The board will propose to the General Meeting 2013 that the option program shall include a minimum exercise price 10% above stock price at grant, as well as a cap on the size of remuneration which share options can bring.

Non-conformance with the recommendation:  The share option scheme is currently not combined with direct ownership of the underlying shares as the option programs so far has given limited pay-outs.

13. Information and communications
The company’s reporting of financial and other information is based on openness and takes into account requirements for equal treatment of all investors. The company publishes a financial calendar on an annual basis, including dates of release of interim reports and dates for general meetings. All press releases and stock exchange notifications are posted on the company’s website at the same time as it is sent to the shareholders.

The chairperson of the board chair and the CEO are authorised to speak on behalf of the company, and delegate such authority as is appropriate in relevant cases.

Non-conformance with the recommendation: None

14. Company take-overs
The board of directors will not attempt to influence, hinder or complicate the submission of bids for the acquisition of the company's operations or shares, or prevent the execution thereof. The board of directors will help ensure that shareholders are treated equally. If a take-over offer is made, the board of directors will obtain a valuation from an independent expert and issue a recommendation as to whether shareholders should accept the offer.

Non-conformance with the recommendation: None.

15. Auditor
On an annual basis, the auditor presents to the audit committee the main features of the plan for the performance of the audit work. The auditor also participates in meetings of the board of directors that deal with the annual financial statements and, at least once a year, carries out a review of the company’s procedures for internal control in collaboration with the audit committee. In addition, the external auditor meets with the board of directors, without Photocure management being present, at least once per year.

Non-conformance with the recommendation: None.


Last updated by the Board of Directors 24 April 2013

Last updated:  13.05.2013
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