Corporate Governance, April 2016

CORPORATE GOVERNANCE STATEMENT 2016

Bionor is committed to creating long term value in the best interest of its shareholders and other stakeholders. It is the company’s strong belief that through good corporate governance and transparent and consistent communication with its shareholders and other stakeholders the company will strengthen public confidence and trust.

A long term incentive scheme is put in place for the company’s CEO and Executive Management in order to ensure alignment of interests between management and shareholders. The Board of Directors has prepared a statement of Corporate Governance for 2015 in accordance with the Norwegian Code of Practice for Corporate Governance. It reports how Bionor meets the requirements and explains possible deviations from the code. The Board and Management review the principles for corporate governance annually.

Bionor aims at having high standards of conduct for the Board, Management, employees, consultants and collaborating partners. The Board acknowledges the significant responsibility of the Group in relation to its surroundings when it comes to its stakeholders and HIV-positive individuals. HIV infection is a serious disease, and the responsibility to HIV-positive individuals participating in the company’s clinical studies is particularly important to ensure.

The company has to date not defined written corporate values or ethical guidelines. In the view of the company such formal guidelines and procedures have not been required in the early stages of development and with the limited resources of the company. The company continues to evaluate the need for implementation of such written guidelines. In the case where written guidelines do not exist, the company adheres to the principles set forth in the Corporate Governance code, Norwegian law, FDA regulations and regulations by other relevant authorities to ensure equal treatment of shareholders and its ethical responsibility as a drug developer.

BUSINESS

The objectives and purposes for Bionor are defined in the company’s Articles of Association. It states that “the objectives of the company are to perform research and development, patenting, and commercialization of products in the pharmaceuticals and biotech industry, and business related thereto”. The company’s Articles of Association are available at the company’s website www.bionorpharma.com.

EQUITY AND DIVIDENDS

Equity

The Group’s equity at 31 December 2015 was NOK 66.3 million, which corresponds to an equity ratio of 68.0%. The Board aims to maintain an equity ratio that remains satisfactory in light of the company’s goals, strategy and risk profile.

Dividend policy

The Group has not paid dividends to date. It is Bionor’s belief that the return to shareholders will come as a result of successful development of the vaccine candidates, which is the company’s current focus. Bionor does not anticipate distribution of cash dividends until the company reaches the income generating stage.

MANDATES

The Board has been given the authorization by the company’s General Meeting to;

  • Increase the share capital by private placement. The Board was granted authority to increase the share capital with a maximum of NOK 6,200,000 by issue of up to 24,800,000 new shares, each at a nominal value of NOK 0.25 by the AGM in 2015. The authorization has not been utilized.
  • Increase the share capital for the use in the company’s incentive program. The Board was granted authority to increase the share capital by a maximum of NOK 3,000,000 by issue of up to 12,000,000 new shares, each at a nominal value of NOK 0.25. In 2015, 666,667 new shares were issued to cover exercise of share options in the company’s incentive program.

The authorizations are valid until the next Annual General Meeting or 30 June 2016, at the latest.

EQUAL TREATMENTS OF SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Bionor has only one class of shares and all shares have equal rights. Each share carries one vote. The company has established procedures to ensure that board members and executives report to the Board if they have any direct or indirect material interest in contracts entered into by Bionor or companies where Bionor has significant interests. There have been no major transactions with related parties in 2015.

FREELY NEGOTIABLE SHARES

The shares in Bionor are freely negotiable. No restrictions are included in the company’s Articles of Association on transferability or with regards to voting rights.

GENERAL MEETING

The company’s highest decision-making body is the General Meeting of shareholders. The company encourages shareholders to participate in the General Meetings. The General Meeting has amongst other the authority to elect representatives to the Board, appoint the company’s Nomination Committee, amend the Articles of Association and resolve changes to the share capital.

The notice of General Meeting will be sent out and is available on the company’s website no later than 21 days before the date of the General Meeting. Supporting information for the General Meeting, including the recommendations and nominations of the Nomination Committee, will be available from the company’s website not later than 21 days before the General Meeting. Shareholders, who would like to receive the supporting information by regular mail, can free of any charges order paper copies from the company.

The deadline for shareholders to give notice of their intention to attend the General Meeting is set as close to the date of the meeting as possible, and no earlier than five days before the meeting. Shareholders who are unable to attend the meeting in person may vote by proxy or give open proxies to the Chairman of the Board or such other person appointed by the shareholder. The notice of the General Meeting includes proxy forms and thorough attendance and proxy instructions.

The shareholders will have the possibility to vote individually for each proposed member of the company’s Board and Nomination Committee.

General Meetings will be opened by the Chairman of the Board, or another person appointed by the Chairman. Other Directors of the Board, the Chairman of the Nomination Committee, the auditor and the CEO shall also, as far as possible, attend the General Meeting.

The notice and the minutes of the General Meeting are made available shortly after the General Meeting on Bionor’s website www.bionorpharma.com and on the Oslo Børs information system www.newsweb.no.

NOMINATION COMMITTEE

The Nomination Committee shall make recommendations to the General Meeting for candidates for the Board of Directors and the Nomination Committee in addition to recommendations for the remuneration of the Board and the Nomination Committee. The recommendations should provide justification of how it takes into account the interests of shareholders in general and the company’s requirements, and should in addition include information about each candidate’s competence, background and independence in relation to board memberships. The company has not established specific routines for obtaining shareholder proposal for candidates to the Board but the views of shareholders will be considered. The Nomination Committee aims to make the recommendation available on the company’s web site no later than 21 days before the date of the Annual General Meeting.

The Nomination Committee consists of three members. The Chairman of the committee is elected for one year, and the committee members are elected for two years on a staggered basis. Lars H. Høie, Birger Sørensen and Stig Myrseth were elected to the Nomination Committee at the Annual General Meeting in May 2015. Instructions for the Nomination Committee were approved at the ordinary General Meeting in 2012 and are available on the company’s web site.

BOARD OF DIRECTORS – COMPOSITION AND INDEPENDENCE

Bionor is focused on ensuring that the Board can operate independently and attend the common interests of all shareholders. The Board shall satisfy the company’s need for an experienced and diversified Board with the proper capacity to carry out its duties. The company’s Board of Directors is independent from the company’s Executive Management.

The Board of Directors shall according to the Articles of Association consist of three to eight board members. The term of office for each board member is two years unless the shareholders resolve a deviating term. The Chairman of the Board is elected by the General Meeting while the Deputy Chairman of the Board is appointed by the Board itself.

Bionor is not aware of the existence of any agreements or business partnerships between the Group and any third parties in which its Directors have direct or indirect interests. The General Meeting in 2015 resolved to issue shares to the board members. A total of 316,935 shares with par value NOK 0.25 were accordingly issued to the board members in 2015.

Board members are encouraged to own shares in the company, but are not part of the company’s share incentive program. Shareholdings by board members are presented in the notes to the consolidated financial statements.

WORK OF THE BOARDS OF DIRECTORS

Work of the Board

The Board of Directors’ work is described and regulated in the company’s Instructions for the Board of Directors. The Board is responsible for ensuring that the operations are organized in a proper manner and following up with Executive Management regarding the company’s strategic and financial development, to ensure the long term interests of shareholders and HIV-positive individuals.

The Board has adopted instructions, which regulate areas of responsibility, tasks, and the division of roles between the Board, its Chairman and the CEO. These instructions also contain rules governing Board schedules, notice and chairing of board meetings, decision-making, the CEO’s right and duty to disclose information to the Board, professional confidentiality, impartiality and so forth. The Board of Directors has elected a deputy chairman in order to secure the chairing of the Board in the event that the Chairman cannot or should not lead the work of the Board. The Board annually evaluates its performance and expertise, and the results of the evaluations are made available to the Nomination Committee.

In 2015, there were eight scheduled board meetings. Additional ad hoc meetings were called in connection with the company’s extensive funding activities during the second half of 2015 and changes in Executive Management. A total of 19 physical meetings and formal Board calls were conducted during 2015. The attendance in 2015 for each of the board members following the Annual General meeting in May 2015 were:

Chairman Russell G. Greig 100 %
Deputy Chairman Øystein Soug 100 %
Benedicte Fossum 95 %
Bernd R. Seizinger 92 %
Jerome B. Zeldis 95 %
Kirsten Drejer 92 %
Marianne Kock 89 %
Thomas Hofstaetter 92 %

Board committees

The Board has appointed an Audit Committee and a Remuneration Committee, and has adopted instructions for both these bodies. The Remuneration Committee consists of three board members and is appointed by the Board to assist in fulfilling its responsibilities concerning the Executive Management’s compensation and benefits, including those of the CEO. In the period May 2015 to December 2015, the Compensation Committee was chaired by Benedicte Fossum, the other members were Øystein Soug and Thomas Hofstaetter.

The Audit Committee consists of three board members. At least one has expert knowledge within accounting or auditing. The Audit Committee is a preparatory body, which supports the Board in fulfilling its responsibilities concerning Bionor’s financial reporting, auditing, and control. The Audit Committee shall recommend to the Board and the General Meeting the appointment and compensation of the company’s independent auditors. There are five scheduled audit committee meetings per year of which four meetings are related to the preparation of interim financial statements and one meeting for preparation of the annual report. In the period May 2015 to December 2015, the Audit Committee was chaired by Øystein Soug, the other members were Russell G. Greig and Bernd R. Seizinger.

The Board decided to establish an ad hoc Financial Committee in 2015 to evaluate the funding needs of the company. The Financial Committee comprised Russell G. Greig, Øystein Soug and Thomas Hofstaetter.

REMUNERATION OF THE BOARD OF DIRECTORS

Bionor’s General Meeting determines the Board’s remuneration on the basis of recommendations from the Nomination Committee. Remuneration should be reasonable and based on the Board’s responsibilities, work, time invested, and the complexity of the enterprise. The remuneration is considered to be consistent with the level for comparable companies. The remuneration is a fixed annual amount. In connection with the changes to the Board by the AGM in 2015 it was decided to offer each board member to subscribe new shares valued at NOK 100,000 and NOK 200,000 for the Chairman at a subscription price equaling par value (NOK 0.25) as part of the remuneration for the next year. The company encourages the board members to own shares in the company. Board members may on an ad hoc basis perform special assignments for the company in addition to their directorships, if viewed to be in the best interest of the company and the shareholders. Such assignments are subject to a resolution by the Board. In 2015, no board member performed special assignments for the company.

REMUNERATION OF THE EXECUTIVE MANAGEMENT

The Group has established guidelines for 2015 for the remuneration of its Executive Management approved by the AGM 13 May 2015. The main principles are presented in note 20 to the consolidated financial statements, which also provides details of remuneration paid to individual members of the Executive Management in 2015.

The amended guidelines for 2016 will be presented and resolved separately at the Annual General Meeting in 2016. The company’s current compensation scheme is divided into three parts and comprises a fixed salary, a performance-related bonus (capped based on fixed salary), and a share option scheme.

RISK MANAGEMENT AND INTERNAL CONTROL

Bionor’s Board of Directors is responsible for ensuring that the company’s risk management and internal control systems are adequate in relation to the regulations governing the business.

The company’s systems and procedures for risk management and internal control are intended to ensure efficient operations, timely and correct financial reporting, as well as compliance with the legislation and regulations to which the company is subject. The Board will annually review the company’s main risk and control procedures. The Board reviews through the Audit Committee the company’s internal control of the financial reporting.

The inherent risk to the business is failure to develop a vaccine candidate. Bionor is still in early stages of clinical development and pharmaceutical product development is subject to a number of risks. Results seen in early stages of development might not reproduce in later stages.

Information and communication

The company has established guidelines for investor relations and reporting of financial information. Communication is based on transparency and equal treatment of all shareholders. The main objective with the company’s investor relations is to ensure that the financial markets and all shareholders have access to sufficient information about the company to facilitate a pricing of the company’s share that reflects the underlying value of the company. Share price sensitive information shall be accurate, relevant and correct, and the company shall ensure that such information is distributed to all shareholders in a timely manner.

The company complies with current rules and market practices, including the requirement for equal treatment. All stock exchange announcements and press releases are made available on the company’s website at www.bionorpharma.com. Stock exchange announcements are also available at www.newsweb.no. The company will arrange open investor webcasts or presentations in connection with its annual and quarterly reporting, and other major company events. Presentations and webcasts to investors in connection with the annual and quarterly reports will be made available on the company’s website. Important events affecting the company will be reported immediately.

Take-overs

The company is dedicated to treating all shareholders equally and to protecting the interests of all shareholders in the event of take-over bids or restructuring. In the case of a take-over the company will comply with relevant legislation. The Board’s responsibility in case of a take-over is to ensure the equal treatment of shareholders and ensure that there are no unnecessary interruptions to the company’s operations. The Board will further ensure timely communication to all shareholders and the market regarding the bid and any discussions with the bidder. The Board will not seek to prevent or obstruct a take-over bid, thereunder but not limited to issuance of shares under authorizations granted by the General Meeting, unless special circumstances occur and such prevention is in the best interest of shareholders. If a take-over bid is received, the Board will seek third party evaluation of the bid and timely communicate its view of such bid to the shareholders. The Board will provide its statement regarding the bid and the views of the board members on a timely basis and otherwise in compliance with legal requirements.

Auditor

The auditor is appointed by the General Meeting and is independent of Bionor Pharma ASA, its Board of Directors and its Executive Management. The auditor shall annually in writing confirm to the Board that he/she satisfies established requirements for independence and objectivity. In addition, the Audit Committee also monitors the independence of the auditor.

The auditor participates in at least one board meeting and one meeting with the Audit Committee per year. The auditor will present an annual plan to the Board for the implementation of audit work.

The auditor has a minimum of one meeting per year with the Board without the presence of the Executive Management. Other audit related services rendered by auditor to the Group is very limited and the Board has not found it necessary to establish separate guidelines for use of such services. Whenever necessary, the Board will meet with the auditor to consider the auditor’s views on the Group’s accounting principles, risk areas, internal control routines and so forth.

Auditor’s fees, presented in note 20 to the consolidated financial statements in the Annual Report 2015 are stated for the relevant categories of auditing and other services. The auditor’s fee is decided by the company’s General Meeting.

Oslo, 31 March 2016