Warsaw, November 9th 2021 20:38:49

Grupa Azoty Spółka Akcyjna

Statement of compliance by the Company with the

principles of the Best Practice for WSE Listed Companies

2021.

According to the current status of compliance with the Best Practice, the Company does not apply seven principles, i.e.: 2.1., 2.2., 2.4., 3.4.,

3.7., 4.3., 6.4.

1. DISCLOSURE POLICY, INVESTOR COMMUNICATIONS

In the interest of all market participants and their own interest, listed companies ensure quality investor communications and pursue a transparent and fair disclosure policy.

  1. Companies maintain efficient communications with capital market participants and provide fair information about matters that concern them. For that purpose, companies use diverse tools and forms of communication, including in particular the corporate website where they publish all information relevant for investors.
    The principle is applied by the Company
  2. Companies make available their financial results compiled in periodic reports as soon as possible after the end of each reporting period; should that not be feasible for substantial reasons, companies publish at least preliminary financial estimates as soon as possible.
    The principle is applied by the Company
  3. Companies integrate ESG factors in their business strategy, including in particular:
    1. environmental factors, including measures and risks relating to climate change and sustainable development;
      The principle is applied by the Company
      Company's comment: The Company has been applying the principle since the release on October 28th 2021 of the Grupa Azoty Strategy for 2021-2030.
    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.
      The principle is applied by the Company
      Company's comment: The Company has been applying the principle since the release on October 28th 2021 of the Grupa Azoty Strategy for 2021-2030.
  4. To ensure quality communications with stakeholders, as a part of the business strategy, companies publish on their website information concerning the framework of the strategy, measurable goals, including in particular long-term goals, planned activities and their status, defined by measures, both financial and non-financial. ESG information concerning the strategy should among others:
    The principle is applied by the Company
    Company's comment: The Company has been applying the principle since the release on October 28th 2021 of the Grupa Azoty Strategy for 2021-2030.
    1. explain how the decision-making processes of the company and its group members integrate climate change, including the resulting risks;
      The principle is applied by the Company
      Company's comment: The Company has been applying the principle since the release on October 28th 2021 of the Grupa Azoty Strategy for 2021-2030.
  1. 1.4.2. present the equal pay index for employees, defined as the percentage difference between the average monthly pay (including bonuses, awards and other benefits) of women and men in the last year, and present information about actions taken to eliminate any pay gaps, including a presentation of related risks and the time horizon of the equality target. The principle is applied by the Company

  2. Companies disclose at least on an annual basis the amounts expensed by the company and its group in support of culture, sports, charities, the media, social organisations, trade unions, etc. If the company or its group pay such expenses in the reporting year, the disclosure presents a list of such expenses.
    The principle is applied by the Company
  3. Companies participating in the WIG20, mWIG40 or sWIG80 index hold on a quarterly basis and other companies hold at least on an annual basis a meeting with investors to which they invite in particular shareholders, analysts, industry experts and the media. At such meetings, the management board of the company presents and comments on the strategy and its implementation, the financial results of the company and its group, and the key events impacting the business of the company and its group, their results and outlook. At such meetings, the management board of the company publicly provides answers and explanations to questions raised.
    The principle is applied by the Company
  4. If an investor requests any information about a company, the company replies immediately and in any case no later than within 14 days.
    The principle is applied by the Company

2. MANAGEMENT BOARD, SUPERVISORY BOARD

To ensure top standards of the responsibilities and effective performance of the management board and the supervisory board of a company, only persons with the adequate competences, skills and experience are appointed to the management board and the supervisory board.

Management Board members act in the interest of the company and are responsible for its activity. The management board is responsible among others for the company's leadership, engagement in setting and implementing its strategic objectives, and ensuring the company's efficiency and safety.

Supervisory board members acting in their function and to the extent of their responsibilities on the supervisory board follow their independent opinion and judgement, including in decision making, and act in the interest of the company.

The supervisory board functions in the spirit of debate and analyses the position of the company in the context of the sector and the market on the basis of information provided by the management board of the company and via the company's internal systems and functions and obtained from external sources, using the output of its committees. The supervisory board in particular issues opinions on the company's strategy, verifies the work of the management board in pursuit of defined strategic objectives, and monitors the company's performance.

2.1. Companies should have in place a diversity policy applicable to the management board and the supervisory board, approved by the supervisory board and the general meeting, respectively. The diversity policy defines diversity goals and criteria, among others including gender, education, expertise, age, 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 principle is not applied by the Company

Company's comment: While Grupa Azoty has not adopted formally any diversity policy document, it follows clear rules governing employment and promotion, and seeks to achieve diversity in terms of gender, education, age and professional experience of its entire workforce, including in particular members of the

governing bodies and key management staff. In its operations, the Company applies the principles of equal treatment and non-discrimination. The Company is committed to applying the above principles and to promoting and disseminating them across all of its stakeholder groups. The rules for appointment of the Management Board and for election of a Management Board member by employees are set forth in the Company's Articles of Association. The process of recruitment and selection of candidates is open and transparent. The detailed scope of qualifications required for a position of Management Board member is specified in the relevant announcement published on the Company's website on a case-by-case basis. As at July 1st 2021, the minority share metric provided for in Best Practices 2021, i.e. the minority share of no less than 30% of the Management Board and Supervisory Board, was not achieved at the Company. The key criterion to be taken into account by persons authorised to elect members of the Company's governing bodies should be securing the Company's needs, which includes ensuring diversity of education, knowledge and experience, competencies and versatility of a candidate for a given function on the company's governing bodies. Other factors, such as age, gender, nationality, ethnic origin, religion or political beliefs, should not be a decisive criterion in this respect.

  1. Decisions to elect members of the management board or the supervisory board of companies 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 principle is not applied by the Company
    Company's comment: As at July 1st 2021, the minority share metric provided for in Best Practices 2021, i.e. the minority share of no less than 30% of the Management Board and Supervisory Board, was not achieved at the Company. Persons authorised to elect members of the Company's governing bodies are guided by the criteria of securing the Company's needs and ensuring diversity of the members' education, knowledge and experience, competencies and versatility of a candidate for a given function.
  2. At least two members of the supervisory board meet the criteria of being independent referred to in the Act of 11 May 2017 on Auditors, Audit Firms and Public Supervision, and have no actual and material relations with any shareholder who holds at least 5% of the total vote in the company.
    The principle is applied by the Company
  3. The supervisory board and the management board vote in an open ballot unless otherwise required by law. The principle is not applied by the Company
    Company's comment: In line with the Company's corporate regulations, its governing bodies vote by open ballot, however a secret ballot may be ordered at the request of a Supervisory Board member and when voting on personnel matters. The Company will seek to amend the regulations to specify that the possibility of the Management Board and Supervisory Board voting by secret ballot should be limited to the situations provided for in applicable laws.
  4. Members of the supervisory board and members of the management board who vote against a resolution may have their dissenting vote recorded in the minutes.
    The principle is applied by the Company
  5. Functions on the management board of a company are the main area of the professional activity of management board members. Management board members should not engage in additional professional activities if the time devoted to such activities prevents their proper performance in the company.
    The principle is applied by the Company
  6. A company's management board members may sit on corporate bodies of companies other than members of its group subject to the approval of the supervisory board.
    The principle is applied by the Company
  7. Supervisory board members should be able to devote the time necessary to perform their duties. The principle is applied by the Company
  8. The chair of the supervisory board should not combine this function with that of chair of the audit committee of the supervisory board.
    The principle is applied by the Company
  9. Companies allocate administrative and financial resources necessary to ensure efficient functioning of the supervisory board in a manner adequate to their size and financial standing.
    The principle is applied by the Company
  10. In addition to its responsibilities laid down in the legislation, the supervisory board prepares and presents an annual report to the annual general meeting once per year. Such report includes at least the

following:

  1. information about the members of the supervisory board and its committees, including indication of those supervisory board members who fulfil the criteria of being independent referred to in the Act of 11 May 2017 on Auditors, Audit Firms and Public Supervision and those supervisory board members who have no actual and material relations with any shareholder who holds at least 5% of the total vote in the company, and information about the members of the supervisory board in the context of diversity; The principle is applied by the Company
  2. summary of the activity of the supervisory board and its committees; The principle is applied by the Company
  3. assessment of the company's standing on a consolidated basis, including assessment of the internal control, risk management and compliance systems and the internal audit function, and information about measures taken by the supervisory board to perform such assessment; such assessment should cover all significant controls, in particular reporting and operational controls;
    The principle is applied by the Company
  4. assessment of the company's compliance with the corporate governance principles and the manner of compliance with the disclosure obligations concerning compliance with the corporate governance principles defined in the Exchange Rules and the regulations on current and periodic reports published by issuers of securities, and information about measures taken by the supervisory board to perform such assessment;
    The principle is applied by the Company
  5. assessment of the rationality of expenses referred to in principle 1.5; The principle is applied by the Company
  6. information regarding the degree of implementation of the diversity policy applicable to the management board and the supervisory board, including the achievement of goals referred to in principle 2.1.
    The principle is applied by the Company

3. INTERNAL SYSTEMS AND FUNCTIONS

Efficient internal systems and functions are an indispensable tool of exercising supervision over a company.

The systems cover the company and all areas of activity of its group which have a significant impact on the position of the company.

  1. Listed companies maintain efficient internal control, risk management and compliance systems and an efficient internal audit function adequate to the size of the company and the type and scale of its activity; the management board is responsible for their functioning.
    The principle is applied by the Company
  2. Companies' organisation includes units responsible for the tasks of individual systems and functions unless it is not reasonable due to the size of the company or the type of its activity.
    The principle is applied by the Company
  3. Companies participating in the WIG20, mWIG40 or sWIG80 index appoint an internal auditor to head the internal audit function in compliance with generally accepted international standards for the professional practice of internal auditing. In other companies which do not appoint an internal auditor who meets such requirements, the audit committee (or the supervisory board if it performs the functions of the audit committee) assesses on an annual basis whether such person should be appointed. The principle is applied by the Company
  4. The remuneration of persons responsible for risk and compliance management and of the head of internal audit should depend on the performance of delegated tasks rather than short-term results of the company.
    The principle is not applied by the Company
    Company's comment: The base pay of persons responsible for risk management and compliance as well as the head of the internal audit function is determined based on the Collective Bargaining Agreement

in effect at the Company. The amount of additional part of such persons' remuneration depends on the achievement of agreed individual targets, but also on the achievement of certain financial indicators by the Company. The Company declares an intention to take steps to implement best practices with respect to the remuneration of persons responsible for risk management, compliance and internal audit. Given the regulations currently in force which have been developed in consultation with the trade unions and which are relevant to this remuneration (the Collective Bargaining Agreement), an in-depth review would be required.

  1. Persons responsible for risk and compliance management report directly to the president or other member of the management board.
    The principle is applied by the Company
  2. The head of internal audit reports organisationally to the president of the management board and functionally to the chair of the audit committee or the chair of the supervisory board if the supervisory board performs the functions of the audit committee.
    The principle is applied by the Company
  3. Principles 3.4 to 3.6 apply also to members of the company's group which are material to its activity if they appoint persons to perform such tasks.
    The principle is not applied by the Company
    Company's comment: Given the complex structure of the Grupa Azoty Group, there is no business rationale for full application of principles 3.4 to 3.6 at all Group companies. The Company declares an intention to take steps to implement best practices in risk management, compliance and internal audit at the Group companies of material importance to its operations. However, given the nature of the Group and of the subsidiaries, as well as the regulations currently in force which have been developed in consultation with the trade unions and which are relevant to this remuneration (e.g. the Collective Bargaining Agreements), an in-depth review would be required.
  4. The person responsible for internal audit or the management board if such function is not performed separately in the company reports to the supervisory board at least once per year with their assessment of the efficiency of the systems and functions referred to in principle 3.1 and tables a relevant report.
    The principle is applied by the Company
  5. The supervisory board monitors the efficiency of the systems and functions referred to in principle 3.1 among others on the basis of reports provided periodically by the persons responsible for the functions and the company's management board, and makes annual assessment of the efficiency of such systems and functions according to principle 2.11.3.
    Where the company has an audit committee, the audit committee monitors the efficiency of the systems and functions referred to in principle 3.1, which however does not release the supervisory board from the annual assessment of the efficiency of such systems and functions.
    The principle is applied by the Company
  6. Companies participating in the WIG20, mWIG40 or sWIG80 index have the internal audit function reviewed at least once every five years by an independent auditor appointed with the participation of the audit committee.
    The principle is applied by the Company

4. GENERAL MEETING, SHAREHOLDER RELATIONS

The management board and the supervisory board of listed companies should encourage the engagement of shareholders in matters of the company, in particular through active participation in the general meeting, either in person or through a proxy.

The general meeting should proceed by respecting the rights of all shareholders and ensuring that passed resolutions do not infringe on legitimate interests of different groups of shareholders.

Shareholders who participate in a general meeting exercise their rights in accordance with the rules of good conduct. Participants of a general meeting should come prepared

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Grupa Azoty SA published this content on 15 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 November 2021 08:59:08 UTC.