The report on the scope of the application of Best Practice

Based on § 29 Clause 3 of the Warsaw Stock Exchange Rules Przedsiębiorstwo Przemysłu Spożywczego PEPEES Spółka Akcyjna hereby presents the report on the non-application of detailed principles contained in Best Practice for GPW Listed Companies 2016.


Disclosure policy, investor communications 

I.Z.1.3. a chart showing the division of duties and responsibilities among members of the management board drawn up according to principle II.Z.1; 
The Company’s comments on the application of this principle.
The Company’s comments: The division of duties is described in the By-laws of the Board of Directors.

I.Z.1.9. information about the planned dividend and the dividend paid out by the company in the last 5 financial years, including the dividend record date, the dividend payment date and the dividend amount, in aggregate and per share;
The Company does not apply this principle.
The Company’s comments: The principle will be applied if the General Meeting of Shareholders adopts the resolution on payment of dividend. In the last 5 years, no dividend has been paid.



I.Z.1.10. financial projections, if the company has decided to publish them, published at least in the last 5 years, including information about the degree of their implementation; 
Not applicable.
The Company’s comments: Pepees does not publish financial projections within the meaning of § 5 Clause 1 item 25 of the Decree of the Polish Minister of Finance dated 19 February 2009 on current and periodic information to be provided by issuers of securities and conditions for recognising as equivalent the information required by the provisions of law of a country not being a member state (Journal of Laws of 2014, item 133) (‘Decree’).

I.Z.1.15. information about the company’s diversity policy applicable to the company’s governing bodies and key managers; the description should cover the following elements of the diversity policy: gender, education, age, professional experience, and specify the goals of the diversity policy and its implementation in the reporting period; where the company has not drafted and implemented a diversity policy, it should publish the explanation of its decision on its website
The Company does not apply this principle.
The Company’s comments: The Company has not developed and does not implement any diversity policy.

I.Z.1.16. information about the planned transmission of a general meeting, not later than 7 days before the date of the general meeting;
The Company does not apply this principle.
The Company’s comments: Pepees is not planning any transmission of the General Meeting of Shareholders.

I.Z.1.19. shareholders’ questions asked to the management board pursuant to Article 428 § 1 or § 6 of the Commercial Companies Code together with answers of the management board to those questions, or a detailed explanation of the reasons why no answer is provided, pursuant to principle IV.Z.13;
The Company’s comments on the application of this principle.
The principle is applied.
The Company’s comments: The aforementioned information is published in accordance with the requirements of the Decree. The Company’s reports are published on its website: Investor Relations » Current reports. The Company does not post them in a separate section of the website.



I.Z.1.20. an audio or video recording of a general meeting;
The Company does not apply this principle.
The Company’s comments: In accordance with applicable regulations, the Company draws up detailed records of general meetings of shareholders in the form of notarized minutes. In addition, by publishing required current reports and posting appropriate information on its website, the Company provides the shareholders with all relevant information concerning general meetings of shareholders. The Company believes that such principles ensure the transparency of general meetings of shareholders.


Management board, supervisory board

II.Z.1. The internal division of responsibilities for individual areas of the company’s activity among management board members should be clear and transparent, and a chart describing that division should be available on the company’s website.
The Company’s comments on the application of this principle.
The Company’s comments: The division of duties is described in the By-laws of the Board of Directors.



II.Z.2. A company’s management board members may sit on the management board or supervisory board of companies other than members of its group subject to the approval of the supervisory board. 
The Company does not apply this principle.
The Company’s comments: Conflict of interests issues are resolved in accordance with Article 380 of the Polish Code of Commercial Companies.

II.Z.3. At least two members of the supervisory board should meet the criteria of being independent referred to in principle II.Z.4. 
The Company does not apply this principle.
The Company’s comments: Decisions concerning the selection of members of the Supervisory Board are made by the General Meeting of Shareholders. The Company’s Board of Directors do not have any influence on such appointments and do not have information on the independence of the members of the Supervisory Board. In the Company's opinion, such a method of selecting members of the Supervisory Board properly protects the interests of the Company’s shareholders. As a result, the Company declares non-compliance with this principle. However, the Chairman of the Audit Committee meets the independence criteria set forth in the Act of 7 May 2009 on registered auditors and their self-government, registered audit companies and on public supervision.

II.Z.4. Annex II to the European Commission Recommendation 2005/162/EC of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board applies to the independence criteria of supervisory board members. 
Irrespective of the provisions of point 1(b) of the said Annex, a person who is an employee of the company or its subsidiary or affiliate or has entered into a similar agreement with any of them cannot be deemed to meet the independence criteria. In addition, a relationship with a shareholder precluding the independence of a member of the supervisory board as understood in this principle is an actual and significant relationship with any shareholder who holds at least 5% of the total vote in the company.
The Company does not apply this principle.
The Company’s comments: Cf. comment to II.Z.3. 

II.Z.5. Each supervisory board member should provide the other members of the supervisory board as well as the company’s management board with a statement of meeting the independence criteria referred to in principle II.Z.4. 
The Company does not apply this principle.
The Company’s comments: Cf. comment to II.Z.3. 

II.Z.10.3. an assessment of the company’s 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;
The Company’s comments on the application of this principle.
The Company’s comments: The principle will be applied starting from the financial statements for 2016. 

II.Z.10.4. an assessment of the rationality of the company’s policy referred to in recommendation I.R.2 or information about the absence of such policy.
The Company’s comments on the application of this principle.
The Company’s comments: The principle will be applied starting from the financial statements for 2016. 


Internal systems and functions

III.Z.4. The person responsible for internal audit (if the function is separated in the company) and the management board should report to the supervisory board at least once per year with their assessment of the efficiency of the systems and functions referred to in principle III.Z.1 and table a relevant report.
The Company does not apply this principle.
The Company’s comments: In Pepees, there is no separate internal audit function.




General meeting, shareholder relations

IV.Z.2. If justified by the structure of shareholders, companies should ensure publicly available real-time broadcasts of general meetings.
The Company does not apply this principle.
The Company’s comments: Cf. comment to IV.R.2

IV.Z.12. The management board should present to participants of an ordinary general meeting the financial results of the company and other relevant information contained in the financial statements to be approved by the general meeting.
The Company does not apply this principle.
The Company’s comments: In the opinion of the Board of Directors, there is no need to present and discuss results. Members of the Board of Directors are present at General Meetings of Shareholders and are ready to answer shareholders’ questions.


Conflict of interests, related party transactions

V.Z.6. In its internal regulations, the company should define the criteria and circumstances under which a conflict of interest may arise in the company, as well as the rules of conduct where a conflict of interest has arisen or may arise. The company’s internal regulations should among others provide for ways to prevent, identify and resolve conflicts of interest, as well as rules of excluding members of the management board or the supervisory board from participation in reviewing matters subject to a conflict of interest which has arisen or may arise.
The Company does not apply this principle.
The Company’s comments: The Company’s practice does not show that such regulations are necessary.


Remunerations 

VI.Z.4. In this activity report, the company should report on the remuneration policy including at least the following:
1) general information about the company’s remuneration system;
2) information about the conditions and amounts of remuneration of each management board member broken down by fixed and variable remuneration components, including the key parameters of setting the variable remuneration components and the terms of payment of severance allowances and other amounts due on termination of employment, contract or other similar legal relationship, separately for the company and each member of its group;
3) information about non-financial remuneration components due to each management board member and key manager;
4) significant amendments of the remuneration policy in the last financial year or information about their absence;
5) assessment of the implementation of the remuneration policy in terms of achievement of its goals, in particular long-term shareholder value creation and the company’s stability.
The Company does not apply this principle.
The Company’s comments: The reports present the remuneration of each member of the Board of Directors and of the Supervisory Board, but the remuneration policy is not described.