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2018 Financial and Social Report

Statement on the Principles of Corporate Governance applied in 2018.

Corporate governance is a set of rules addressed to governing bodies of companies and their members as well as defining relations with shareholders and investors.

The set of rules covering the area of Polish financial institutions and companies listed on the Warsaw Stock Exchange (GPW) are in particular „Best Practice for GPW Listed Companies 2016” adopted by the Board of the Warsaw Stock Exchange, binding from 1 January 2016, as well as the “Principles of Corporate Governance for Supervised Institutions” adopted by the Polish Financial Supervision Authority by its resolution of 22 July 2014, which have been binding since 1 January 2015.

The application of corporate governance principles guarantees the transparency of company operations and strengthens the protection of shareholder rights, also with respect to issues not regulated by generally applicable laws.

The complete text of the document „Best Practice for GPW Listed Companies 2016” is published on the GPW website and the Bank’s website.

The most important standard of the above-mentioned Best Practice is the „comply or explain” rule, which means that a company is obliged to apply the principles stipulated in the document. However, in the event of deviation from use of a particular principle the company must clarify the causes of such conduct and make this fact publicly known in the form of a report by using the GPW Electronic Information Database.

Like in previous years, in 2018 the Bank observed the principles contained in Best Practice. As regards recommendation IV.R.2 item 2 and 3, regarding ensuring for the shareholders the opportunity to participate in a General Meeting of Shareholders (hereinafter, also “General Meeting” or “GMS”) with the use of real-time bilateral electronic communication where shareholders may take the floor during a General Meeting of Shareholders from a location other than the General Meeting and exercise, in person or through a plenipotentiary, their voting rights in the course of the GMS  – in the Bank’s opinion – the implementation of this rule during a General Meeting carries with itself technical and legal risks to the correct and efficient conducting of a General Meeting. Avoiding these risks constitutes a bigger value for the shareholders than the implementation of the rule from part IV, Recommendation IV.R.2, item 2 of Best Practice. The Bank, ever since 2008, has been providing real-time online broadcasts of the proceedings of General Meetings, in accordance with the requirement specified in part IV, Recommendation IV.R.2 item 1 of Best Practice. Meanwhile, the Bank does not rule out the possibility of ensuring to the shareholders real-time bilateral communication during the proceedings of General Meetings in future, should factual or legal circumstances change.

Guided by the principle of transparency of its actions in shaping corporate and investor relations as well as the highest quality of communication with shareholders, the Bank complied with the principles of Best Practice in 2018. The confirmation of employing the recommendations contained in Best Practice is the document “A statement on the company’s compliance with the corporate governance recommendations and principles contained in Best Practice for GPW Listed Companies 2016” published on the Bank’s website.

The Bank as a financial institution has been subject, since the beginning of 2015, also to the „Principles of Corporate Governance for Supervised Institutions” referred to at the outset, which are available on the website of the Polish Financial Supervision Authority and on the Bank’s website.

The Bank’s Management Board and the Supervisory Board took resolutions on the application of the Principles, with the exception of those stipulated in:

1) § 8 sect. 4 – principle mandating the provision of the possibility to actively electronically participate in a meeting of a decision-making body,

2) § 16 sect. 1 and § 24 sect. 1 – principles concerning the holding of meetings of the Bank’s governing bodies (Management Board and Supervisory Board) in the Polish language.

With reference to lack of the possibility to actively electronically participate in a GMS, the position of the Management Board and Supervisory Board repeats the statement made with respect to the principle existing in Best Practice – as referred to above.

The knowledge of the English language by members of the Management Board enables full mutual understanding and a proper level of communication during meetings. Moreover, the practically implemented principle of holding meetings of the Supervisory Board both in Polish and in English, with the assurance of essential assistance of an interpreter, also ensures mutual understanding and a proper level of communication.

The General Meeting in its resolution passed on 21 May 2015 expressed a positive opinion regarding the position of the Management Board and Supervisory Board of the Bank about the scope of application of the Principles. At the same time the GMS in the aforementioned resolution regarding the principles addressed to the shareholders stated that it is of the view that exercising them should remain within the framework of generally applicable legal regulations, and whenever the Management Board or the Supervisory Board, acting within their powers, submit matters covered by these principles, requesting a consideration of specific matters by the GMS, then they will be considered taking into account the circumstances of such submission. In successive years General Meetings accepted the assessment of employing the Principles and assessment of the manner of carrying out the information duties relating to the employment of Best Practice.  Likewise, in 2018 the General Meeting by its Resolution of 26 March 2018 accepted the assessment of compliance with the Principles and of the manner of carrying out the information duties regarding the compliance with Best Practice, as performed by the Supervisory Board in the Report on activities of the Supervisory Board of Bank Millennium S.A. in 2017. The Bank’s Supervisory Board by its Resolution No 2/2018 of 1 February 2018 found that the Bank had correctly implemented the Corporate Governance Principles for institutions supervised by the Polish Financial Supervision Authority.

During the reporting period the Bank for the eleventh consecutive time (starting from 2008) was included in the group of companies in the GPW RESPECT Index – Central and Eastern Europe’s first index of socially responsible companies. In its 2018 edition the Index comprised 31 companies from among all the companies listed on GPW. The companies included in the Index operate on the basis of best standards of corporate governance, information policy and investor relations, including ecological, social and employee issues.