Semcon : Corporate Governance Report 2021

CORPORATE GOVERNANCE REPORT.

This Corporate Governance Report has been pre-pared in accordance with Swedish corporate law and Semcon's Articles of Association. The Articles of Association regulates the alignment of the busi-ness and share capital, and how and when the notice to attend the Annual General Meeting takes place. The Articles of Association are available in full on Semcon's website semcon.com. Semcon also com-plies with applicable Swedish and foreign laws and regulations.

Application

Semcon applies the Swedish Corporate Governance Code and has no deviations to report. The current code is available at:www.corporategovernance-board.se.

General Meeting of Shareholders

The General Meeting of Shareholders is Semcon's highest decision-making body. The notice to attend must be published in the Official Swedish Gazette (PoIT), on semcon.com and in a press release. That the notice to attend has been published must be advertised in Swedish financial newspaper Dagens Industri.

At General Meetings of Shareholders, sharehold-ers have the opportunity to exercise their voting rights and, in accordance with Swedish corporate law and Semcon's Articles of Association, to take decisions concerning the composition of the Board and other central issues. Shareholders or proxies can vote for the number of shares he/she owns or represents at the meeting. Resolutions at General Meetings of Shareholders usually require a simple majority. However, a qualified majority or 9/10 ma-jority is sometimes required for some resolutions.

2021 Annual General Meeting

To reduce the risk of transmission of COVID-19, the AGM for the 2020 financial year, on Tuesday, 29 April 2021, was carried out through mandatory advance voting (postal voting). Representatives of 43 per cent of the share capital were represented, of which underlying shares held by the members of the Nomination Committee represented 36 per cent. Tore Bertilsson was elected to chair the meeting.

The AGM resolved on the following:that all of the profits at the disposal of the

meeting be carried forwardto approve remuneration to the Board and its

Chairthat the Board shall consist of five AGM-elected

membersto re-elect Jeanette Reuterskiöld, Karl Thedéen,

Eva Elmstedt and Carl Backman as Board members

and elect Carsten Browall as new Board member.

Eva Elmstedt was elected as Chair of the Boardto elect Ernst & Young AB as the registered au-diting firm until the close of next AGMto adopt updated Articles of Association where the Board of Directors, prior to a General Meeting of Shareholders, may resolve that shareholders shall be able to exercise their voting rights by post before the General Meeting of Shareholdersto introduce a long-term performance-based share savings scheme for senior executives and key employees.

As in previous years, the AGM also granted the Board authorisation to:carry out a new share issue of a maximum 1,811,253 ordinary shares in the companyacquire ordinary shares and transfer ordinary shares. Acquisitions may be made at any time for so many ordinary shares that the company holds a maximum of 10 per cent of all shares following acquisition.

Full minutes and information from the 2021 AGM are available at semcon.com.

2022 Annual General Meeting

The AGM for the 2021 financial year will be held on Friday, 29 April 2022. More information is avail-able at semcon.com.

Share structure and voting rights

Semcon has one share class, ordinary shares, with a quotient value of SEK 1 and entitles the own-er to one voting right. There were 18,112,534 (18,112,534) ordinary shares at year-end.

Shareholder structure

On 31 December, Semcon's three largest sharehold-ers were JCE Group, which owned 25.9 per cent, Nor-dea Investment Funds, which owned 8.8 per cent and Otus Capital Management, which owned 8.6 per cent. The ten largest known shareholders controlled 62.4 per cent of the capital and voting rights in the company on 31 December. Semcon had 5,530 sharehold-ers.

Nomination Committee

According to a resolution by the AGM, based on ownership statistics from Euroclear Sweden AB on 31 August for each respective year, the Chair of the Board must convene the three largest share-holders in the company in terms of votes, who each shall appoint one member to the Nomination Commit-tee. Should any of the abovementioned shareholders waive the right to nominate a member, this right

114 CORPORATE GOVERNANCE REPORT

The summary below illustrates how responsibility for management and control of Semcon AB is divided between shareholders at the AGM, the Board, auditors and the CEO according to external regulations and internal policies.

Proposals

Annual General Meeting

Election

Board

ObjectivesStrategies

Control instrumentsReports Control

will transfer to the next largest shareholder in terms of voting rights. The member nominated by the largest shareholder will serve as Chair of the Nomination Committee.

The Nomination Committee is to present proposals to the AGM concerning:

Chair of the AGM

Chair of the Board and other Board members, re-muneration to the Board and, in certain cases, auditors, and remuneration to the Board and audi-tors

The decision concerning principles for the com-position of the Nomination Committee

nation Committee held three minuted meetings. The basis of the Nomination Committee's work has mainly been the company's strategies and priorities and an evaluation of the Board and its size and com-position. The Nomination Committee's proposal for election of Chair of the Meeting, Board members, Chair of the Board and auditors is outlined in the notice to attend the AGM, in addition to proposed remuneration to AGM-elected Board members and auditors. Furthermore, a proposal is submitted for appointing a Nomination Committee, which is published at the same time on semcon.com. Questions to the Nomination Committee can be submitted to:[e-mail]

The Nomination Committee's members will be an-nounced no later than six months prior to the AGM. Information about the Nomination Committee's mem-bers and how proposals to the AGM can be submitted is available in press releases at semcon.com and in the Interim Report for the third quarter.

2021/2022 Nomination Committee

The Nomination Committee's members in 2021/2022 consisted of Karin Dennford, JCE Group AB (Nomina-tions Committee's Chair), Mats Andersson, Nordea Investment Funds, Johan Hagberg and Eva Elmstedt, Chair of the Board of Semcon AB (co-opted member). No remuneration was paid to the members. The Nomi-

Shareholders

Nomination Committee

President and CEOGroup management

Board of Directors

The Board is ultimately responsible for the organi-sation and management of Semcon's business activ-ities. The work of the Board is regulated by the Companies' Act, the Articles of Association and the rules of procedure adopted annually by the Board.

Board structure

The General Meeting of Shareholders elects Board members and their deputies in Semcon AB. Accord-ing to the Articles of Association, the Board must consist of no fewer than three members and no more than eight members with no more than two deputies. Semcon AB's Board consists of five members elected by the AGM, three members and one deputy elected by the employees.

All of the five elected Board members, of whom three are women, are Swedish citizens. The Board's composition meets the requirements for being in-dependent set by the Swedish Corporate Governance Code and by Nasdaq Stockholm. See table on page 117.

Work of the Board

During the 2021 financial year, the Board held 16 regular meetings. The Board has adopted a number of steering documents and policies. The Board over-sees the CEO's work by continuously monitoring the business throughout the year, and is responsible for ensuring that the organisation, management and guidelines for administering the company's affairs are suitably structured and that there is an appro-priate level of internal control. Furthermore, the Board is responsible for developing and follow-ing up the company's strategies through plans and objectives, decisions regarding the acquisition and divestment of businesses, insurance issues and major investments. The Board sets out guidelines for the company's conduct in society to ensure its long-term value-adding capability. The Board also approves the interim reports and annual accounts. The work of the Board adheres to an agenda with fixed points for Board members. The Chair leads and delegates Board work and ensures that urgent mat-ters in addition to the fixed points on the agen-da are addressed. Attendance at Board meetings is presented in the table on page 117. Other salaried employees in the company take part in Board meet-ings to present reports and as secretary.

Board meetings 2021

February: Acquisition issues

February: Annual accounts and Year-end report 2020, financial report, new financial objectives, remuneration issues, CEO evaluation, internal con-trol, debriefing of audit (auditors present). March: Share-based incentive schemes

March: Annual report, proposed resolutions and no-tice to attend AGM.

April: Interim report, January-March, financial report.

April: Review of market, trends and Semcon's posi-tion, sustainability and acquisition issues. April: Statutory meeting.

May: Acquisition issues, strategic review ahead of strategy meeting.

June: Proposed dividend and notice to attend ex-traordinary general meeting.

June: Review of market, trends, sustainability and Semcon's position.

July: Interim report, January-June and financial report.

September: Follow-up and setting of strategies, decision to separate the Product Information busi-ness area and investigate a potential listing of the business area.

September: Strategy issues. September: Acquisition issues.

October: Interim report, January-September, finan-cial report, debriefing of audit (auditors pres-ent), review of sustainability targets. December: Business plans and adoption of objec-tives for 2022 for each of the business areas, ac-quisition and sustainability issues, risk review, Board evaluation.

Statutory meeting

At the statutory Board meeting in connection with the AGM, the Board adopted the rules of procedure for the Board, terms of reference for the CEO, financial reporting instructions and rules of pro-cedure for the Remuneration Committee.

Board evaluation

Board members have evaluated the Board's work, which has been summarised and made available to the Nomination Committee. The areas evaluated cover such aspects as the composition of the Board, its level of expertise, organisation, day-to-day work and working climate. In addition, the Nomination Committee conducted personal interviews with the AGM-elected Board members.

Audit Committee

Semcon has decided that the entire Board will carry out the Audit Committee's tasks. The entire Board strives to maintain close contact with the company's auditors so that it can satisfactorily monitor significant issues concerning the compa-ny's accounts, reporting procedures, management of company assets and internal control. These types of issues are therefore dealt with by the Board as a whole. To ensure that the Board's need for infor-mation is satisfied, the company's auditors report to the Board at least twice a year. Andreas Mast, the company's auditor at Ernst & Young AB, has re-ported his views over the past year on the Group's internal control and procedures for reporting and accounting, and for reviewing the January-Septem-ber interim report and annual accounts.

Remuneration issues

Remuneration Committee

The number of members on Semcon's Remuneration Com-mittee is to be at least two, including the Chair. The Remuneration Committee is to hold at least two ordinary meetings every financial year and oth-erwise when necessary. The current Remuneration Committee consists of Eva Elmstedt, Chair of the Board (Chair of the Remuneration Committee), Carl Backman, Board member, and Jeanette Reuterskiöld, Board member.

Remuneration to the Board

Remuneration to the Board is decided by the AGM following proposals by the Nomination Committee. The AGM decided that remuneration to the Board in

2021/2022 should be SEK 625,000 (625,000) for the Chair and SEK 290,000 (290,000) for each of the other Board members not employed by the company. No special fees are to be paid for work on Board committees.

Remuneration to the CEO and senior executives

The AGM decides on remuneration principles and other employment guidelines for the CEO and senior executives who report to him. The Board decides on remuneration to the CEO.

The CEO's remuneration and benefits are present-ed in Note 9, page 77. Senior executives' remuner-ation is proposed by the CEO and approved by the Board. All senior executives in Group management are entitled to a fixed salary, which can be sup-

plemented with a variable salary of no more than nine months' salary based on how well they meet their targets. The fixed salary is adjusted to conditions in the market. Remuneration guidelines include the individuals, who during the time the guidelines applied, were part of Group management. The Board has the right to deviate from the guide-lines if there is just cause to do so in special circumstances. Senior executives' remuneration and benefits are presented in Note 9 on page 77.

Auditors

Ernst & Young AB was elected as the company's audi-tor by the 2021 AGM until the 2022 AGM. The compa-ny's auditor in charge is Andreas Mast (born 1979). His other audit assignments include Ellos, Vicore Pharma, Fristads and Jeeves.

The auditors' interaction with the Board is described above. In addition to auditing, Ernst & Young also provides Semcon with advice on account-ing issues. All services provided in addition to the statutory auditing service are checked spe-cially to ensure there is no conflict of interest or disqualification issue. No senior executive at Semcon has held any position at Ernst & Young over the past five years. Semcon's remuneration to auditors and purchase of services in addition to auditing is presented in Note 8 on page 76.

Group management

In 2021, Group management consisted of the CEO, CFO, General Counsel, Director Corporate Communi-cations and Marketing and the business area pres-ident for Product Information, see pages 122-123. Group management holds regular meetings led by the CEO. The meetings follow an agenda and are minuted. In addition to these meetings, a number of meetings are held with the business area management teams when Group management are present along with other employees of the Group. Group management strivesto maintain close contact with every business area in order to support and provide help and the tools to enhance efficiency and in relation to market-ing, business development and internal exchange of knowledge.

Business areas

Semcon's business activities were organised into two business areas in 2021. Semcon's organisation is characterised by far-reaching decentralisation, according to which every unit is highly independent and is granted extensive powers. In addition to continuous contacts, Group management's follow-up of the business areas is carried out mainly in the form of monthly internal debriefings by business area presidents, controllers and business area management teams.

Authorisation and decision-making procedure

The Group has an authorisation and decision-making procedure that clearly regulates powers at every level in the company, from individual employees to Semcon's management. The areas regulated include contract levels, processing of quotes/tenders, investments, rental and lease contracts and over-heads. The organisation of an assignment or project varies according to its size, location and complex-ity. Semcon is certified and applies quality and environmental management systems according to ISO 9001:2015 and ISO 14001:2015, which are reviewed on a regular basis by external auditors.

Further information about corporate governance

The following information is available at semcon. com:

More in-depth information about internal control instruments, such as the Articles of Association and Code of Conduct

Information from Semcon's AGMs from 2005 and on-wards (notices to attend meetings, minutes, etc.)

Composition of the Board of Directors

Elected	Attendance
Karl Thedéen	Member	2016	16 of 16
Jeanette Reuterskiöld	Member	2016	16 of 16
Eva Elmstedt	Chair	2019	16 of 16
Carl Backman	Member	2019	16 of 16
Carsten Browall	Member	2021	10 of 10
Mats Sällberg	Employee representative	2014	16 of 16
Lars-Ove Jansson	Employee representative	2018	16 of 16
Maria Svedinger-	Employee representative	2020	15 of 16
Andersson

*Carl Backman is not independent of major shareholders.

A presentation of Board members is available on pages 120-121.

Dependent No

No No Yes* No

Audit Committee YesRemunera-

Yes Yes Yes Yes Yes Yes Yes

tion Committee No

Yes Yes Yes No No No No