Meda AB is a public company listed on the NASDAQ OMX Stockholm exchange (Nordic Large Cap segment). Corporate governance is based on Swedish regulations and legislation, e.g., the Swedish Companies Act, Swedish Code of Corporate Governance, stock market listing agreement, and other rules and regulations.

Corporate governance report

Meda AB is a public company listed on the Nordic Large Cap list of the NASDAQ OMX Stockholm exchange. Corporate governance is consequently based on Swedish regulations and legislation, such as the Swedish Companies Act, Swedish Code of Corporate Governance, stock market listing agreement, and other rules and regulations. Meda’s auditors did not review this corporate governance report.

Annual General Meeting

Shareholders exercise their right to decide on Meda’s affairs at the annual general meeting (AGM), which must be held within six months of fiscal year-end; the AGM is normally held in early May. The AGM considers several central issues such as adoption of Meda’s income statement and balance sheet for the past year, dividend, board and auditor election, discharging the board from liability, and board and auditor remuneration.

The AGM is usually held in Solna, Sweden. A notice to convene the AGM, which contains information on the agenda and how to register attendance, is published in Svenska Dagbladet and Post- och Inrikes Tidningar, and on Meda’s web site. This notice must be published no earlier than six and no later than four weeks before the AGM.

A notice convening an extraordinary general meeting of shareholders that will not discuss changes to the articles of association must be published no earlier than six and no later than two weeks before such a meeting.

Per the Swedish Companies Act, shareholders are entitled to have their issues addressed at AGMs. To ensure that such an issue can be included in the AGM notification, Meda must have received the request to address the issue no later than seven weeks before the AGM.

At an AGM, shareholders have opportunities to ask questions about Meda and its performance for the year being discussed. Meda always aims to ensure that the board and executives attend the AGM to answer shareholders’ questions. Meda’s auditor also attends the meeting.

Shareholders can participate and vote at the AGM in person or through an authorized proxy.

2010 AGM

The annual general meeting of shareholders will be held at 5 PM on May 5, 2010 in Meda’s head offices at Pipers väg 2A in Solna, Sweden.

Nomination committee

As resolved by the AGM, Meda must have a nomination committee consisting of the board chair and one member appointed by each of the four largest shareholders.

Names of the four owner representatives and the shareholders that they represent must be published by Meda as soon as the nomination committee is appointed but no later than six months before the AGM. The largest shareholders will be contacted based on Meda’s index of registered shareholders provided by the Euroclear Sweden AB (previously VPC AB) share database as of July 31.

If any of the four largest shareholders declines to exercise the right to appoint a member to the nomination committee, then the next largest shareholder shall be given the opportunity to appoint a member.

The nomination committee’s term of office extends until a new committee is appointed. The nomination committee chairman shall be the committee member who represents the largest shareholder unless committee members decide otherwise. Committee members do not receive remuneration.

If significant change occurs in Meda’s ownership structure and a shareholder (which after this significant ownership change becomes one of the four largest shareholders) expresses the desire to be a nomination committee member, then the committee shall offer the shareholder a place on the committee by deciding (i) to replace the smallest shareholder (with the least number of votes after the change) on the committee with this shareholder or (ii) to increase the committee’s size by yet another member— but not exceed six members. Changes in the nomination committee’s composition must be announced as soon as they occur.

The committee’s task is to prepare and submit proposals to
the AGM for:

• Election of the AGM chair
• Election of board members and the board chair
• Remuneration for the board and for other committee work
• An auditor, deputy auditor (as needed), and auditors’ fees
• Policies for appointment of the nomination committee

The nomination committee may charge the company for costs that enable the committee to fulfill its obligations, such as costs for recruitment consultants and other consultants. Besides its other obligations, the nomination committee must perform the tasks required by the Swedish Code of Corporate Governance for nomination committees. The committee appointed to the 2010 AGM consists of:

• Karl-Magnus Sjölin, committee chair, Stena Sessan Rederi AB
• Bert-Ake Eriksson, Meda’s board chairman, Stena Sessan
  Rederi AB
• Eva Halvarsson, the Second Swedish National Pension Fund
• Frank Larsson, Handelsbanken Funds
• Peter Rudman, Nordea funds
• Kerstin Stenberg, Swedbank Robur funds

Board

Board Members

Per Meda’s articles of association, the board must consist of no fewer than three and no more than 10 members, with no more than six deputies. Board members are elected annually at the AGM for the period up to the next AGM. There is no upper limit for how long a person can remain a board member, but each member is elected for one year at a time. A board secretary, who is not a board member, assists the board. Except for the CEO, no board member is part of Meda’s executive management team. During fiscal 2009, the board consisted of seven persons elected by the AGM. At the 2009 AGM, Bert-Åke Eriksson, Marianne Hamilton, Tuve Johannesson, Anders Lönner, and Anders Waldenström were re-elected as board members. Peter Sjöstrand declined re-election. Peter Claesson and Carola Lemne were elected as new board members. Bert-Åke Eriksson was appointed chairman of the board. Lawyer Christer Nordén has been the board secretary since 2003. For more information on board members, see Note 8 in the Annual Report and Meda’s web site.

Independence of board members

Per the Swedish corporate governance code, the majority of AGM-elected board members must be independent relative to the company and its management and at least two of these members must be independent relative to the company’s largest shareholders.

Bert-Åke Eriksson is the managing director of Stena Sessan Rederi AB, which is why he is not regarded as an independent board member in relation to the main owners. Peter Claesson is director of finance of Stena AB and is therefore not considered an independent board member in relation to the largest shareholders. Anders Lönner is not independent relative to the company because of his position as CEO. Marianne Hamilton, Tuve Johannesson, Carola Lemne, and Anders Waldenström are independent board members.

Board work

During fiscal 2009, the board consisted of seven persons elected by the AGM and an independent lawyer as a secretary. The board held seven meetings, of which four were regular meetings. In addition, the AGM was held in 2009.

The board conducts its work as per specific rules of procedure that are determined each year at the organizational board meeting. Every regular meeting has fixed report and decision points. The CEO also regularly provides the board with information about the company’s performance. The board makes decisions on comprehensive matters such as strategic, structural, and organizational issues as well as major investments. The board chair also plays an active role in these matters between board meetings. Meda’s auditors attend at least one board meeting per year. The board chairman and audit committee met the company’s auditors during the year without the presence of the CEO or other executive management.

Board meeting attendance in 2009:

• Peter Claesson, 4 of 4
• Bert-Åke Eriksson, 7 of 7
• Marianne Hamilton, 7 of 7
• Tuve Johannesson, 7 of 7
• Carola Lemne, 4 of 4
• Anders Lönner, 7 of 7
• Peter Sjöstrand, 3 of 3
• Anders Waldenström,7 of 7

Committee and subcommittee work

Meda’s board does not have a special remuneration committee. A small group works with issues concerning executive management remuneration, which are then resolved by the full board. Remuneration principles and employment terms and conditions for Meda’s executives are submitted to the AGM for approval.

Audit committee

The board established a special audit committee starting in fiscal year 2009. The audit committee has the following main responsibilities:

• Prepare the board’s work in assuring the quality of the
  financial statements.
• Consider issues relating to internal control of financial
  reporting and compliance.
• Monitor and evaluate external audit work.
• Follow accounting developments in areas that can affect
  Meda.

The members of the audit committee are Tuve Johannesson (chair), Bert-Åke Eriksson, and Marianne Hamilton. The Audit Committee held three meetings in 2009. Emphasis was placed on Meda’s internal controls and the external audit.

Senior executives

Responsibility for daily operations, such as ongoing investments, HR, finance, and business administration issues, lies with Anders Lönner, the CEO, and other senior executives. Meda’s other senior executives are Jörg-Thomas Dierks (chief operating officer) and Henrik Stenqvist (chief financial officer). For more Information on senior executives, see note 8 in the Annual Report and Meda’s web site.

PROPOSAL TO THE 2010 AGM—THE BOARD’S PROPOSAL
FOR POLICIES ON MEDA EXECUTIVES’ REMUNERATION

Proposal to the 2010 AGM
- The board's proposal for policies on Meda executives' renumeration

The board proposes that the AGM approve these guidelines for executives. The proposal reflects Meda’s need to be able to recruit and motivate qualified employees via compensation that is competitive in various countries. The Group’s executive management team consists of:

• Chief executive officer (CEO)
• Chief operating officer (COO)
• Chief financial officer (CFO)
• Chief scientific officer (CSO)

The board’s proposal regarding policies for remuneration/compensation and other employment terms for Meda’s executives imply that (i) Meda shall strive to offer its executives marketbased remuneration/compensation, (ii) subsequent criteria shall be based on significance of responsibilities, competence requirements, experience, and performance, and (iii) remuneration consists of:

• Fixed basic salary
• Short-term variable pay
• Long-term variable pay
• Pension benefits
• Other benefits and severance terms and conditions

The board’s proposal agrees with previous years’ remuneration guidelines and is based on initial contracts entered between Meda and its senior executives.

Distribution between basic salary and variable pay must be in proportion to the executive’s responsibility and authority levels. Note 8 in the Annual Report states policies for the CEO’s employment conditions.

Short-term variable pay is performance-based—partly on Group profit and partly on individual qualitative parameters. Variable pay may not exceed 45% of an executive’s total annual remuneration.

Long-term variable pay consists of participation in a synthetic warrants program. The cost is also limited by a ceiling; for executives, it may not exceed SEK 6 million.

Other benefits primarily consist of leasing cars. Pension premiums are paid at an amount based on the ITP supplementary pension plan or equivalent systems for employees abroad.Pensionable salary consists of basic salary and variable salary.

Severance pay for termination of employment (when the company gives notice) together with salary during the notice period amounts to between one and two years’ salary. The board shall prepare for and resolve issues concerning executives’ remuneration. If sufficient reason exists, the board has the right to deviate from the above remuneration principles for executives.

Auditors

The auditors’ task is to audit Meda’s annual report, accounting, and administration of the company by the board and CEO on behalf of the shareholders. Auditors are elected by the AGM every four years. The 2008 AGM re-elected PricewaterhouseCoopers AB as Meda’s auditor until the 2012 AGM. Göran Tidström, certified public accountant, was appointed principal auditor.

Internal control report

Background

Per the Swedish Companies Act and Swedish Code of Corporate Governance, the board is liable for internal controls. This report was prepared as per clause 10.5 of the Swedish Code of Corporate Governance, so it is limited to internal control of financial reporting. The internal control report is not part of the annual report, and Meda’s auditors did not review the internal control report.

Review

A consequence of Meda’s fast expansion in recent years is the need to work systematically with internal controls. To provide the board with a platform for determining levels of internal management and control, Meda continuously reviews and analyzes its management processes and internal controls based on the five principles of the COSO framework (internal environment, risk assessment, control activities, information and communication, and monitoring).

The review resulted in an annual action plan for developing internal controls. For 2009, this meant further strengthening documentation and communication concerning internal controls and following up compliance with internal regulations and policies. In addition, in 2009 Meda started strengthening controls around the new facilities in eastern Europe. The company has prepared an action plan for 2010.

Internal Control Environment

Meda’s organization is designed to enable rapid reactions to increasingly dynamic market conditions. Operational decisions are made on the company level, while decisions on strategy, acquisitions, and general financial issues are made by Meda’s board and Group management. Internal controls for Meda’s financial reporting are built on these premises.

The company’s internal control environment is the basis for internal controls of financial reporting. The internal environment consists of the organizational structure, work practices and procedures, decision paths, authority and responsibility— plus attitudes and values documented and communicated in governing documents. Examples of these governing documents are Meda’s Business Conduct Guidelines, Approval Policy, and Internal Control Standards.

Risk assessment

Risk assessments are done on the income statements and balance sheets for materiality, complexity, and fraud risks. This risk assessment is done on the Group and company levels and results in a risk-level classification for various processes. Identified risks are countered by clear division of responsibilities and work as well as internal guidelines for accounting and reporting.

Control activities

Appropriate control activities are developed at the Group and company levels to manage the principal risks related to financial reporting identified during the risk assessment. These control activities include both general and more specific controls designed to prevent, detect, and correct errors and discrepancies.

The Group’s central business and finance department analyzes financial information that each Meda business division submits monthly. This includes rigorous analyses and controls of prominent items in the accounts.

Information and communication

To inform, instruct, and coordinate financial reporting within the Group, the central business and finance department has formal information and communication channels for instructions and policies.

Monitoring

At Meda, monitoring is an ongoing process. Analyses of internal control environment, risk assessment, and control activities are done regularly throughout the year and result in an annual action plan for improving internal controls. Based on results of this process, the board can make decisions on corrective measures for shortfalls and evaluate the need to introduce a special review plan (internal audit). The board’s continued determination is that there is presently no motivation for establishing such a plan.