Nuevolution publ : Corporate Governance Report 2018

CORPORATE GOVERNANCE REPORT

NUEVOLUTION AB (PUBL) ANNUAL REPORT 2018 91

Corporate Governance Report

GENERAL

The Board of Directors of Nuevolution AB (publ), company reg. no. 559026-4304 (the "company") hereby submits the 2018 corporate governance report in accordance with the requirements of the Swedish Annual Accounts Act (1995:1554) (Sw. årsredovisningslagen) and the Swedish Code of Corporate Governance (the "Code"). The company's shares were admitted for trading on Nasdaq Stockholm in June 2018. The company's shares were previously, since December 2015, listed on Nasdaq First North. The company's corporate governance is mainly regulated by the provisions of the company's articles of association, the Swedish Companies Act (2005:551) (Sw. aktiebolagslagen) and other Swedish legislation, the Nas- daq Stockholm Rulebook for issuers and the Code.

The corporate governance report has been reviewed by the company's auditors in accordance with the Swedish Annual Accounts Act. It does not constitute a part of the formal annual report documents.

DEVIATION FROM THE CODE

The Company has during 2018 deviated from Code rule 9.7, which requires a vesting period of no less than three years for share-price related incentive programs with the 2016/21 warrant program. This warrant program was adopted before the company applied the Code and was considered to be the best incentive program at the time of approval by the Board of Directors.

CORPORATE GOVERNANCE AT NUEVOLUTION

The governance and control of Nuevolution is divided among shareholders attending the annual shareholders' meeting, the Board of Directors and the Chief Executive Officer. An overview of the organization, governance and control is provided below.

SHAREHOLDERS

Shareholder's voting rights

Nuevolution AB (publ)'s shares carry equal voting rights and there is no limit to the number of votes our shareholders may use at a general meeting. The share capital at 31 Decem- ber 2018 was SEK 49.525 million (42.858), divided between 42,524,903 shares. The Company's market capitalization, based on the closing price at 31 December 2018, was approximately SEK 842 million (711).

Number of shareholders

Nuevolution AB (publ) had 3,219 (3,389) shareholders as per 31 December 2018. The larger shareholders, which control more than 10% of the share capital and votes, are comprised of Sunstone Capital with 20.7% of the share capital and votes, SEB Venture Capital with 20.4% of the share capital and votes and Industrifonden with 18.2% of the share capital and votes.

General meeting of shareholders

According to the Swedish Companies Act the shareholders'

92NUEVOLUTION AB (PUBL) ANNUAL REPORT 2018

meeting is the Company's ultimate decision-making body. At the shareholders' meeting, the shareholders exercise their voting rights in key issues, such as the adoption of income statements and balance sheets, appropriation of the Compa- ny's results, discharge from liability of members of the board of directors and the CEO, election of members of the board of directors and auditors and remuneration to the board of directors and the auditors.

The annual shareholders' meeting (AGM) must be held within six months from the end of the financial year in Stockholm. In addition to the annual shareholders' meeting, extraordinary shareholders' meetings (EGM) may be convened. According to the articles of association, shareholders' meetings are convened by publication of the convening notice in the Swedish National Gazette (Sw. Post- och Inrikes Tidningar) and on the Company's website. At the time of the notice convening the meeting, information regarding the notice shall be published in Svenska Dagbladet.

Shareholders who wish to participate in a shareholders' meeting must be included in the shareholders' register maintained by Euroclear Sweden on the day falling five workdays prior to the meeting and notify the Company of their participation no later than on the date stipulated in the notice convening the meeting. Shareholders may attend the shareholders' meetings in person or by proxy and may be accompanied by a maximum of two assistants. Typically, it is possible for a shareholder to register for the shareholders' meeting in several different ways as indicated in the notice of the meeting. A shareholder may vote for all Company shares owned or represented by the shareholder. Shareholders who are represented by proxy must issue a dated power of attorney for said proxy.

Shareholders who wish to have a matter brought before the shareholders' meeting must submit a written request to the board of directors. Such request must normally be received by the board of directors no later than six weeks prior to the shareholders' meeting

Annual general meeting 2018

An AGM was held on 28 May 2018 in Stockholm. A total of 19 shareholders or their proxies were present, representing 76.5 percent of the number of shares and votes. The minutes from the AGM can be found on Nuevolution's website at www. nuevolution.com. The resolutions that were passed were as follows:

Dain Hård Nevonen from Vinge law firm was elected as Chairman of the general meeting. The AGM resolved to adopt the income statement and balance sheet for Nuevolution AB (publ) and the Group1 for the financial year 1 July-31 Decem- ber 2017. Furthermore, it was resolved that the Company's results shall be carried forward and thus that no dividend shall be distributed. The AGM also resolved to discharge the Board members and the managing director from liability.

The annual general meeting resolved that the number of board members, as appointed by the annual general meeting,

should be five with no deputies. Stig Løkke Pedersen, Søren Lemonius, Lars Henriksson, Jutta Heim and Jeanette Wood were re-elected as members of the board. Stig Løkke Pedersen was re-elected as chairman of the board.

The annual general meeting resolved that the remuneration to the board of directors shall be paid in a total amount of SEK 1,320,000, to be allocated as follows. The chairman shall receive SEK 400,000, and other members, who are not employed by the company, shall receive SEK 200,000 each. The remuneration for work in the committees of the board of directors shall be distributed with SEK 50,000 to the chairman of the audit committee and SEK 25,000 to the other member, SEK 30,000 to the chairman of the remuneration committee and SEK 15,000 to the other member. Remuneration to the auditors shall be paid in accordance with approved invoices within the auditors' quotation.

The annual general meeting resolved to approve the proposed principles for appointment of the nomination committee until the general meeting resolves otherwise.

The annual general meeting resolved, in accordance with the board's proposal, to authorize the board of directors, for the period up to the next annual general meeting, to adopt deci- sions, whether on one or several occasions and whether with or without pre-emption rights for the shareholders, to issue new shares and warrants and/or convertibles with a right to subscribe/convert to shares. Issuance of shares, warrants and/ or convertibles may be possible to an amount, after any sub- scription/conversion, not exceeding 20 per cent of the total number of outstanding shares in the company before utilization of the authorization. Issues may be made with or without provisions concerning non-cash consideration, set-off or other provisions. The purpose of the authorization is to provide the board with flexibility in its work to secure that the com- pany, in a suitable way, can be provided with capital for the financing of the business, to enable a broadening of the ownership of the company, increase the liquidity in, and trading volume of, the share and to be used in strategic partnerships.

Annual general meeting 2019

The AGM 2019 is to take place on 22 May 2019 at Advokatfir- man Vinge's offices, Stureplan 8, Stockholm. Notice to attend the AGM will be published on Nuevolution's website www. nuevolution.com.

NOMINATION COMMITTEE

Companies applying the Code shall have a nomination com- mittee. According to the Code, the shareholders' meeting shall appoint the members of the nomination committee or resolve on procedures for appointing the members. The nomination committee shall, pursuant to the Code, consist of at least three members of which a majority shall be independent in relation to the Company and the Group Management. In

1Nuevolution AB (publ) and Nuevolution A/S

NUEVOLUTION AB (PUBL) ANNUAL REPORT 2018 93

of the nomination committee shall be independent in relation to the largest shareholder in terms of voting rights or group of shareholders who cooperates in terms of the Company's management.

According to the resolution at the AGM in 2018, the Nomination Committee shall comprise the chairman of the board and one member appointed by each of the three largest shareholders based on ownership of the company as of 31 October each year. Should one of the three largest shareholders refrain from appointing a member to the Nomination Committee, the right shall pass to the shareholder that, excluding these three shareholders, has the largest shareholding in the com- pany. The chairman of the board of directors shall convene the Nomination Committee. The chairman of the Nomination Committee shall be the member appointed by the largest shareholder, unless the Nomination Committee unanimously appoints another member.

If the shareholder that appointed a member of the Nomination Committee is no longer one of the three largest shareholders, the member appointed by such owner shall offer to leave the committee and the shareholder that has become one of the three largest shareholders has the right to appoint a member to the committee. However, and unless special circumstances exist, no changes shall be made in the composition of the Nomination Committee if there is only a marginal change in ownership or if the change occurs later than three months prior to the annual shareholders' meeting. In the event that a member leaves the Nomination Committee before its work is completed, the shareholder who appointed the member shall appoint a new member. If this shareholder is no longer one of the three largest shareholders, a new member is appointed according to the above procedure. Shareholders who have appointed a member to the Nomination Committee have the right to dismiss such member and appoint a new member of the committee.

Changes in the nomination committee's composition shall be announced immediately. The nomination committee's term of office shall extend until a new nomination committee is appointed. The nomination committee shall perform the duty of the nomination committee in accordance with the Code.

The Nomination Committee consists of: Peter Bensson (Sun- stone Capital), Filip Petersson (SEB Venture Capital), Peter Sobocki (Industrifonden) and Stig Løkke Pedersen (Chairman of the Board of Nuevolution AB). Peter Bensson has been appointed Chairman of the committee.

The Nominating Committee shall report its work at the AGM.

AUDITORS

The external audit of the accounts of the parent company and the Group, as well as of the management by the board and the CEO, was carried out in accordance with generally accepted accounting standards in Sweden. The auditor participates in at least one board meeting per year, going through the ac-

counts for the year and leading a discussion with the directors without the CEO or any other senior executive present. Nuevolution auditors is the auditing firm EY, with Authorized Public Accountant Beata Lihammar as auditor in charge. For information regarding fees paid to the auditors, please refer to note 29 in the 2018 annual report.

THE BOARD OF DIRECTORS

The board's responsibility, duties, and delegation of duties

The Board of Directors is the second-highestdecision-making body of the Company after the shareholders' meeting. As prescribed by the Swedish Companies Act, Nuevolution AB (publ)'s Board of Directors is responsible for the Company's organization and the administration of the Company's affairs. The Board shall continuously assess the financial and operational situation of both the Company and the Group. The Board shall also ensure that the Company's organization is designed in such a manner that the bookkeeping, asset management and the Company's economic situation in general are controlled in a reassuring manner. Each year, in connection with the Board meeting following the election of the Board, and in conjunction with other Board meetings if necessary, the Board shall adopt a work plan.

Members of the Board of Directors are normally appointed by the annual shareholders' meeting for the period until the end of the next annual shareholders' meeting. According to the Company's articles of association, the members of the Board of Directors elected by the shareholders' meeting shall be not less than three members and not more than ten members with no deputy members.

According to the Code, the Chairman of the Board of Directors is to be elected by the shareholders' meeting and have a special responsibility for leading the work of the Board of Directors and for ensuring that the work of the Board of Directors is efficiently organized.

The Board of Directors applies written rules of procedure, which are revised annually and adopted by the inaugural board meeting every year. Among other things, the rules of procedure govern the practice of the Board of Directors, functions and the division of work between the members of the Board of Directors and the CEO. At the inaugural board meeting, the Board of Directors also adopts instructions for the CEO, including instructions for financial reporting.

The Board of Directors meets according to an annual predetermined schedule. In addition to these meetings, additional board meetings can be convened to handle issues which cannot be postponed until the next ordinary board meeting. In addition to the board meetings, the Chairman of the Board of Directors and the CEO continuously discuss the management of the Company.

As of 31 December 2018, the Company's Board of Directors consists of five ordinary members elected by the sharehold- ers' meeting,

94NUEVOLUTION AB (PUBL) ANNUAL REPORT 2018

The Board has established two working committees, the Audit Committee and the Remuneration Committee, in accordance with the recommendations in the Swedish Corporate Governance Code. Further the Board has established a Scientific Committee to support the Board.

Audit committee

The Audit Committee is a sub-committee of the Board and does not release the Board from any responsibility or liabili- ty. The Board has the overall and ultimate responsibility, and retains its sole right, to resolve the more important matters within the framework of the Committee.

The Committee shall perform the tasks set out in the Swedish Companies Act, applicable EU rules and regulations and the Swedish Corporate Governance Code. This includes, among other things, acting on instructions from the Board, to:

•monitor the Company's financial reporting, evaluate its auditing and submit recommendations and proposals to ensure the integrity of the reporting

•monitor the efficiency of the Company's internal con- trols, regulatory compliance and risk management, in general as well as, in particular, in respect of the financial reporting

•continuously meet with the Company's auditor and keep itself informed regarding the audit of the annual report and group accounts and the conclusions from the quality control carried out by the Supervisory Board of Public Accountants (Sw. Revisorsinspektionen)

•inform the Board and the nomination committee of the outcome of the auditor's audit and explain how the au- dit contributed to the integrity of financial reporting and what the role of the Committee was in that process

•review and monitor the impartiality and independence of the auditor and, in conjunction therewith, pay special attention to whether the auditor provides the Company with services other than auditing services (and approve, where applicable, guidelines for the purchase of such non-audit services)

•assist in conjunction with the preparation of proposals to the annual shareholders' meeting's resolution regard- ing election and remuneration of the auditor, including administering the selection procedure

The Audit Committee is to comprise not less than two Board members appointed by the Company's Board of Directors. The majority of the Members of the Committee shall be independent of the Company and its executive management. At least one of the Members who are independent of the Company and its executive management is also to be independent of the Company's major shareholders. At least one of the Members shall have accounting or auditing competence. The Members may not be employed by the Company.

At 31 December 2018, the Audit committee consisted of Lars Henriksson as Chairman of the Committee and Stig Løkke Pedersen as Member of the Committee. Both members are independent of the Company, as well as its executive management and major shareholders.

The Committee shall hold at least four ordinary Committee meetings during each financial year. The meetings shall be held in connection with the publication of the Company's interim reports. In 2018, the Committee met four times, and both members were present at all meetings.

Remuneration committee

The Remuneration Committee is a sub-committee of the Board and does not release the Board from any responsibility or liability. The Board has the overall and ultimate responsi- bility, and retains its sole right, to resolve the more important matters within the framework of the Committee.

The duties of the Committee are, acting on instructions from the Board, to:

•prepare the Board's decisions on issues concerning prin- ciples for remuneration, remunerations and other terms of employment for the executive management

•monitor and evaluate programs for variable remunera- tion, both ongoing and such that have been completed during the year, for the executive management

•monitor and evaluate the application of the guidelines for remuneration to the executive management estab- lished by the annual shareholders' meeting, as well as the current remuneration structures and remuneration lev- els in the Company

The Remuneration Committee is to comprise not less than two Board members appointed by the Company's Board of Directors. The members of the Committee are to be independent of the Company and its executive management. Howev- er, the Chairman of the Board may chair the Committee.

At 31 December 2018, the Remuneration committee consisted of Søren Lemonius as Chairman of the Committee and Stig Løkke Pedersen as Member of the Committee. Søren Lem- onius and Stig Løkke Pedersen are both independent of the Company and its executive management. In 2018, the Committee met four times, and both members were present at all meetings.

Scientific committee

The Scientific Committee is a sub-committee of the Board and does not release the Board from any responsibility or li- ability. The Board has the overall and ultimate responsibility, and retains its sole right, to resolve the more important matters within the framework of the Committee.

NUEVOLUTION AB (PUBL) ANNUAL REPORT 2018 95