Declaration on corporate governance

The Management Board and Supervisory Board of BRAIN Biotech AG (hereinafter referred to as BRAIN Biotech AG or the company) are oriented towards achieving sustainable business and financial performance while fulfilling their societal responsibility. Transparency, responsibility and sustainability are the guiding values of their actions. This statement combines the corporate governance statement of BRAIN Biotech AG pursuant to Section 289f of the German Commercial Code (HGB) and the Group corporate governance statement for the BRAIN Group pursuant to Section 315d HGB. It comprises the statement of conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), relevant information about corporate governance practices, the description of Management and Supervisory boards’ working methodology, as well as the composition of their committees.

The Management Board and Supervisory Board of BRAIN Biotech AG declare that BRAIN Biotech AG has complied with the recommendations of the "Government Commission on the German Corporate Governance Code" in the version dated March 20, 2020 ("GCGC 2020") with the following exceptions since the last declaration of compliance was issued on December 20, 2021. The Management Board and Supervisory Board of BRAIN Biotech AG declare that BRAIN Biotech AG has complied with the recommendations of the "Government Commission on the German Corporate Governance Code" in the version dated June 27, 2022 ("GCGC 2022") with the following exceptions and will comply with them in the future.

If deviations only relate to one version of the Code (GCGK 2020 or GCGK 2022), this is noted within the outlined deviation.

A.5 (GCGK 2022): The management report should describe the key features of the overall system of internal control and the risk management system and should comment on the adequacy and effectiveness of these systems.

Note relating to A.5: Due to the only recent publication of the new recommendation in A.5 of the GCGC 2022 with regard to the financial year to be reported, BRAIN Biotech AG has not yet revised the management report incorporating this new recommendation. As a precautionary measure, a deviation is therefore declared and BRAIN Biotech AG plans to adjust the management report at the next financial statements accordingly.

F.2: The consolidated financial statements and the Group Management Report shall be publicly accessible within 90 days of the end of the financial year; the mandatory interim financial information shall be publicly accessible within 45 days of the end of the reporting period.

Note relating to F.2: Due to the additional financial accounting requirements as a listed company, the auditing of the financial statements lasted, and lasts, longer than 90 days, so that the audited figures cannot be published together with the annual report within the 90 days period after the financial year-end, but only post the 90 days period. Prospectively, this will also remain the case for future annual consolidated financial statements.

The publication of all financial information during the course of the year occurs regularly within two months. The Management and Supervisory Board regard this as appropriate.

Furthermore, in light of various unlisted subsidiaries and participating interests held abroad, publication of the consolidated financial statements and the Group Management Report as well as mandatory interim financial information within shorter periods would require the deployment of additional considerable financial and personnel resources. This additional effort would not appropriately relate towards the information that shareholders can expect for a company of the size of BRAIN Biotech AG. Therefore, the reporting periods desired in the Corporate Governance Code are not met.

In relation to the publication of annual and interim reports, BRAIN Biotech AG complies with statutory regulations as well as the Prime Standard Stock Exchange regulations of the Frankfurt Stock Exchange.

G.6: The variable compensation deriving from the achievement of long-term goals should exceed the share deriving from short-term goals.

Note relating to G.6: The variable Executive Board compensation is linked to medium-term and sustainable success targets. It is paid out annually pro-rata in accordance with target achievements. The stock options as part of the compensation scheme encourage the pursuit of long-term objectives. Taking into consideration the 2020 fair value for the stock option awards, option based compensation has a lower total value than variable compensation paid out in cash for the achievement of annual (interim) targets. The compensation paid through stock options may considerably exceed the value of the variable compensation paid out in cash annually if the market value of the company increases over the long term.

G.10: The variable compensation amounts granted to the member of the Management Board are to be invested by him or her predominantly in shares in the company (taking into consideration the respective tax burden), or are to be granted accordingly on a share-based basis. The Management Board member should not be able to dispose of the long-term variable grant amounts until a four-year period has expired.

Note relating to G.10, first sentence: It should be noted: in accordance with the existing compensation scheme and the existing management contracts, variable compensation for the annually defined targets, depending on their fulfilment, is currently fully paid out in cash and no share-based granting is incorporated. The Supervisory Board is examining to further develop the Executive Management compensation scheme to incorporate a share based component for the variable compensation part on a pro-rata basis. The Supervisory Board plans to propose a revised Management Board compensation scheme for approval by the annual general meeting in March 2023 that complies with G.10, first sentence.

G.11: The Supervisory Board should have the possibility to take extraordinary developments into consideration within an appropriate framework. In justified cases, it should be possible to withhold or reclaim variable compensation.

Note relating to G.11, second sentence: The Supervisory Board has not made any arrangements for the possible claw-back of variable compensation. The Supervisory Board is examining the possibility of taking into account a so-called claw-back mechanism in the future development of the compensation scheme. The Supervisory Board plans to propose a revised Management Board compensation scheme for approval by the annual general meeting in March 2023 that complies with G.11, second sentence.

Corporate Governance at BRAIN Biotech AG

The corporate structure is oriented towards the responsible, transparent and efficient management and controlling of the company. For this reason, the company also supports the targets and principles of the German Corporate Governance Code (DCGK). The Management and Supervisory boards as well as the other management levels and employees are obligated to adhere to these principles of responsible corporate governance. The Management Board is responsible for compliance with corporate governance principles within the company.

BRAIN Biotech AG has established compliance structures in light of the company’s current size, and will further develop them in relation to growing requirements imposed by the regulatory environment and with a view to the company’s development and growth.

BRAIN Biotech AG has also established whistle-blower arrangements for potential misconduct on the part of its own employees. Employees can notify the whistle-blower office of potential misconduct, either anonymously or openly. After initial allocation, and depending on the corporate areas involved, the whistle-blower office forwards such notifications to the Management Board and/or Supervisory Board to instigate countermeasures in the instance of actual misconduct, or for archiving at the whistle-blower office if it is established that no misconduct has occurred.

Furthermore, BRAIN Biotech AG has decided to obligate its subsidiaries’ managers to comply with closed periods 30 days before the publication of the company’s results. This enables transparent communication with the respective managers in the periods preceding the publication of corporate results, and ensures that consistent governance rules apply to the individuals involved.

The purpose of BRAIN Biotech AG and of BRAIN Group is to identify, research, develop, produce and market biological, biochemical and biotechnology processes and products, especially enzymes, biocatalysts, microorganisms and other bioactive natural compounds for industrial applications at chemical companies, for the production of foodstuffs and animal feed, cosmetics and medical products, for the disposal of waste and hazardous materials, as well as to produce energy and raw materials, including the development, production and marketing of such processes and products that contain bioactive components, are based on biotechnical mechanisms, exhibit bioactive effects, or enable biotechnology applications. Within BRAIN Group, services are also rendered for the pharmaceuticals industry.

The company complies with all statutory corporate governance regulations as well as the recommendations of the German Corporate Governance Code (DCGK) – apart from the exceptions specified and justified in the statement of conformity.

As far as the DCGK recommendations are concerned, the company also intends to comply with them in the future.

The company’s bylaws can always be viewed on the company’s website at www.brain-biotech.com/investors/corporate-governance.

Transparency

The shares of BRAIN Biotech AG are listed in the Prime Standard segment of the Frankfurt Stock Ex-change. The company is thereby subject to the highest level of statutory and stock exchange law transparency regulations. In particular, BRAIN Biotech AG reports on the situation and development of the company and of the Group in both German and English in the following form:

• annual financial report for the financial year,
• interim financial report as of the first half of the financial year (6M),
• quarterly statements as of the first quarter (3M) and after the first nine months of the financial year (9M),
• quarterly analyst telephone conferences,
• corporate presentations,
• publication of corporate and IR announcements,
• publication of notifications of shareholding threshold levels,
• publication of ad hoc statements,
• publication of PR, IR and marketing releases,
• presentations at investor conferences,
• multimedia investor communications formats,
• Capital Markets Day.

Corporate responsibility and ESG

As corporate responsibility and ESG issues become more important, the Supervisory Board, the Management Board and employees are paying more attention than ever to the resultant aspects. In 2021, BRAIN Biotech AG joined the UN Global Compact as an active member. The company has now formally committed itself to the values of the world’s largest initiative for corporate social responsibility and is thereby committed to ten universal principles in the areas of human rights, labor standards, the environment and climate, and the prevention of corruption. Moreover, the company supports the German Sustainability Code (DNK) as guidelines for sustainable corporate governance. BRAIN Biotech AG published its first ESG report in June 2022 (www.brain-biotech.com/investors/esg). The data relevant to BRAIN Group were identified for the report and short- and medium-term targets were developed on this basis. As a consequence, these data and targets can also be used in the context of the Management Board compensation scheme. The ESG report was also discussed and approved by the Supervisory Board prior to publication. Adriaan Moelker holds Management Board responsibility for Corporate Responsibility and ESG. At the operational level, Michael Schneiders was responsible for the implementation of the ESG strategy as Head of Investor Relations & Sustainability during the 2021/22 financial year. In the following 2022/23 financial year, Michael Schneiders will be responsible for this task as CFO.

BRAIN Biotech AG is a public stock corporation under German law and the BRAIN Group parent company with subsidiaries in Germany, France, England, the Netherlands and the USA. It is especially subject to the regulations of the German Stock Corporation Act (AktG), and also operates the normal dual executive and supervisory structure consisting of a management board and a supervisory board. The company’s Management and Supervisory boards work together closely in the company’s interest.

The Supervisory Board consults regularly with the Management Board concerning the management of BRAIN Biotech AG, and supervises the Management Board’s activities. The Management Board involves the Supervisory Board in good time concerning all decisions of fundamental significance for the company. It coordinates the company’s strategic orientation with the Supervisory Board, and at regular intervals discusses with it the status of strategy implementation. The Management and Supervisory boards’ joint goal is to successfully implement the corporate and growth strategy that has been approved.

Management Board working methodology

The Management Board manages the company’s business according to statutory regulations, the company’s bylaws and the rules of business procedure for the Management and Supervisory boards. In this context, it is subject to the restrictions that the company’s bylaws or the Management and Supervisory boards’ rules of business procedure have established in relation to the power to manage the business, or which the Supervisory Board or the AGM determine within the scope of their powers. It informs the Supervisory Board regularly, promptly and comprehensively in the form of detailed written and verbal reports on all questions of relevance to the company relating to strategy, planning, business development, the risk position, risk management, sustainability and compliance. The Management Board prepares the separate and consolidated annual financial statements.

Pursuant to Section 7 (1) of the company’s bylaws, the Management Board consists of one or several individuals. The Supervisory Board determines the number of Management Board members. The Supervisory Board appoints the Management Board members, recalls them from office, and determines the allocation of their responsibilities. It can also appoint a Management Board Chair (CEO) and a Deputy Management Board Chair, as well as deputy Management Board members.

Composition of the Management Board

During the 2020/2021 financial year, the Management Board of BRAIN Biotech AG consisted of the following members:

All Management Board members are individually responsible for managing the business division entrusted to them; the company’s overall interest has to be taken into consideration at all times in this context. The allocation of business areas to the individual Management Board members is derived from the business allocation plan that is prepared with the Supervisory Board’s approval, and can be modified at any time with its approval.

The business allocation plan included the following allocations during the 2021/22 financial year:

Adriaan Moelker (Chief Executive Officer - CEO):

• Corporate strategy
• Coordinating the individual Management Board areas and contacts with the company’s boards
• Business development of the BioScience segment
• Business development of the BioIndustrial segment
• Press and public relations work (corporate communications)
• Technology management, research and development, technological process optimization
• Personnel, purchasing
• Grants and academic partnerships
• IT, digitalization
• Product development
• Formulation and application technology
• Quality assurance
• Production scale-up
• Innovation management
• Corporate responsibility and ESG
• Registration and approval
• Patent strategy

Lukas Linnig (Chief Financial Officer – CFO):

• Management of shareholdings
• M&A
• Corporate finance
• Financial communications (IR)
• Accounting and controlling
• Compliance
• Risk management
• Legal, administration and organization, Group audit
• Occupational safety
• Business development of L.A. Schmitt
• Project to develop a genome editing platform (including BEC)

The Management Board has a set of rules of business procedure. The rules of business procedure for the Management Board were approved by the Supervisory Board and the allocation of business responsibilities was last updated in their entirety in December 2020 in accordance with the Management Board’s proposal. These particularly include regulations about the working methodology of the Management Board and the allocation of responsibilities between the Management Board members, as well as relating to collaboration with the Supervisory Board. They include a catalog of actions and legal transactions requiring Supervisory Board assent. As far as the transfer of the CFO role from Mr. Linnig to Mr. Schneiders at the beginning of the 2022/23 financial year is concerned, the Supervisory Board will adjust the allocation of responsibilities.

The Personnel Committee of the Supervisory Board is responsible for discussing long-term succession options with the Management Board. The Management and Supervisory boards agree on requirements for the appointment of successors based on the planned development for the company, which provide guidelines for the selection of candidates. The Supervisory Board endeavors to achieve a staggered duration of mandates in the future, if possible by means of mandate extensions or reappointments, thereby dispensing with the need to fill several Management Board mandates concurrently if no scheduled mandate extension occurs.

The Supervisory Board has approved an age limit of 65 years for members of the Management Board.

Management Board meetings

Management Board meetings are held as required, which is generally every three weeks. These must be convened if the company’s interests so require. Management Board resolutions are passed with a simple majority of the votes cast, unless statutory provisions prescribe another majority. If the Management Board consists of at least three members, the vote of the Management Board Chair (CEO) is decisive given an equal number of votes.

Collaboration with subsidiaries

At least once a quarter, the Management Board of BRAIN Biotech AG and the management of the subsidiaries meet in person or hold conference calls on the course of business and forthcoming developments at the subsidiaries. The subsidiaries report monthly to BRAIN Biotech AG and consult with the Management Board at short notice in the event of deviations from the planning or forecast. The Management Board reports to the Supervisory Board on reporting and coordination with the subsidiaries and, if requisite, consults with it separately on individual topics.

Management Board compensation

The compensation scheme for the Management Board, which was approved by the Supervisory Board on 11 December 2020 and approved by the Annual General Meeting on 10 March 2021, is published on the company’s website at www.brain-biotech.com/investors/compensation.

Detailed information on the compensation structure and compensation of the individual members of the Management Board and the compensation of the members of the Supervisory Board can be found in the compensation report pursuant to Section 162 of the German Stock Corporation Act (AktG), which can be downloaded from www.brain-biotech.com/investors/compensation.

Notifiable securities transactions

The Management and Supervisory board members, other individuals with management roles with regular access to the company’s insider information and who are authorized to take important business decisions, as well as certain individuals closely related to the aforementioned, are obligated by law to disclose to BRAIN Biotech AG the purchase and sale of BRAIN shares and related financial instruments, especially derivatives, from upwards of an amount of € 20,000 in the calendar year. Notifications of corresponding transactions are also published on our website at www.brain-biotech.com/investors/financial-news. For the 2021/22 financial year, the company was notified of two such securities transactions, namely by Lukas Linnig (published on 7 April 2022) and by Adriaan Moelker (published on 7 April 2022). Lukas Linnig purchased shares in April 2022 for a total purchase price of € 44,474.83. Adriaan Moelker purchased shares in April 2022 for a total purchase price of € 43,500.00.

Supervisory Board working methodology

The Supervisory Board has all responsibilities and rights transferred or allocated to it by law, the company’s bylaws, or in another manner. This especially includes supervising the executive management of the company, the appointment and dismissal of Management Board members, as well as the amendment, cancellation and termination of employment contracts with the Management Board members. The Supervisory Board consults regularly with the Management Board concerning the management of the company. The Supervisory Board is involved in good time in all decisions of fundamental significance for the company. The Supervisory Board has established a set of rules for its own business procedures. These include, among other matters, the working methodology and type of passing of resolutions on the Supervisory Board, as well as the tasks of the Supervisory Board committees that are formed (the Audit Committee, the Personnel Committee and the Nomination Committee). Separate sets of rules are also approved for the committees to regulate their working methodologies. All rules of business procedure are adapted regularly to reflect any modifications to the German Corporate Governance Code (DCGK).

The Supervisory Board met for a total of three face-to-face meetings in the 2021/22 financial year. In addition, 24 video conferences were held by the Supervisory Board and the committees, as well as three face-to-face meetings. The Audit Committee held one face-to-face meeting during the 2021/22 financial year. The Personnel Committee met for two face-to-face meetings and 14 video conferences during the 2021/22 financial year. The Nomination Committee held two video conferences during the 2021/22 financial year.

The Management Board participates in ordinary meetings of the Supervisory Board when invited to do so, reports in writing and orally on the individual agenda items and draft resolutions, and answers the questions of the individual Supervisory Board members. The Supervisory Board Chair has the Management Board provide regular information concerning current business, forwarding such information in an appropriate form to the entire Supervisory Board.

Supervisory Board resolutions are generally passed at face-to-face meetings of the Supervisory Board members. Absent Supervisory Board members can submit a written vote through another Supervisory Board member. This also applies for the submission of the second vote of the Supervisory Board Chair. Outside the scope of attended meetings, the passing of resolutions is permissible through votes conveyed by written, telegram, telephone, telex or modern telecommunications means (by conference call or video conference or by email, for example), if so arranged for special reasons by the Supervisory Board Chair, or, if the Supervisory Board Chair is prevented from so doing, the Deputy Supervisory Board Chair. The Supervisory Board is considered quorate if all members are convened in good time via their last provided address, and at least half of the members of which it is to consist in total participate in the passing of the resolution. Supervisory Board members also participate in the passing of a resolution if they abstain from voting. Supervisory Board resolutions are passed with a simple majority of votes submitted, unless other majorities are required by law. This also applies in the case of elections. Abstentions are not counted when determining the results of voting. Given an equal number of votes, the Supervisory Board Chair – or if the Supervisory Board Chair is prevented from so doing, the Deputy Supervisory Board Chair – decides whether a further vote is to be held at the same meeting. Given a further vote on the same matter, the Supervisory Board Chair has two votes; the Deputy Supervisory Board Chair does not have this right to a second vote.

All Supervisory Board members must disclose conflicts of interest to the Supervisory Board, including potential conflicts of interest based on advising, or being a director of, a customer, supplier, lender or other third party, whereby this list is not conclusive. In the case of conflicts of interest that are significant or not just of a temporary nature, the respective Supervisory Board members must step down from office. The Supervisory Board provides information in its report to the AGM on conflicts of interest that arise and how they are handled. No conflicts of interest arose in the reporting period.

The Supervisory Board completed a self-assessment in August 2020. In order to conduct the self-assessment, the current situation was appraised based on questionnaires, and the results of the questionnaires were discussed by the Supervisory Board. After evaluating the results, the Supervisory Board notes that it performs its activities efficiently overall. Potential improvements identified as part of the audit are taken into consideration for the future. The Supervisory Board plans to conduct the next self-assessment in the 2023 calendar year.

Composition of the Supervisory Board

Pursuant to Section 9 (1) of the company’s bylaws, the Supervisory Board of BRAIN Biotech AG consists of six members elected by the AGM. Unless the AGM approves a shorter period for the election of individual members – or for the entire Supervisory Board – the Supervisory Board members are appointed until the end of the Ordinary AGM that approves the discharge for the third financial year after the start of the period of office. The year in which the period of office starts is not included in the calculation. Reelection is permissible. When a Supervisory Board member is elected, a replacement member can be elected at the same time who moves up to the Supervisory Board if the Supervisory Board member steps down before the end of the respective period of office without a successor having been appointed. The appointment of the replacement member moving up to the Supervisory Board in this manner lapses as soon as a successor for the departing member has been appointed, although this is to occur at the latest as of the end of the period of office of the departing Supervisory Board member.

The Supervisory Board consisted of six members as of the start of the financial year under review.

Prof. Dr. Bernhard Hauer stepped down from the Supervisory Board at his own request on 31 May 2022, prior to the expiry of his regular term of office.

During the 2021/22 financial year, the Supervisory Board consisted of the following individuals:

Dr. Georg Kellinghusen, Chairman
Dr. Anna C. Eichhorn, Deputy Chair
Stephen Catling, Supervisory Board member
Prof. Dr. Bernhard Hauer, Supervisory Board member (stepped down as of 31 May 2022)
Dr. Michael Majerus, Supervisory Board member
Prof. Dr. Wiltrud Treffenfeldt, Supervisory Board member

All members of the Supervisory Board are independent in the meaning of Sections C.6, C.7 and C.9 of the German Corporate Governance Code (DCGK).

The recommendations in Sections C.4 and C.5 DCKG regarding the total number of mandates held are complied with by the Supervisory Board members.

The Supervisory Board’s competency profile and objectives are composed as follows: the Supervisory Board is of the opinion that one third of its members should cover with particular expertise the areas of entrepreneurship/new business as well as corporate finance/capital markets and the company’s sector, and that it fulfills all self-imposed requirements in the intended number, taking into account the members of the Supervisory Board reappointed in October. Moreover, the Supervisory Board regards the recruiting of a further individual with knowledge of the North American market as a relevant medium-term objective for the company. The last women’s quota set was exceeded. The Supervisory Board has set an age limit of 75 years for newly appointed Supervisory Board members. The Supervisory Board endeavors to ensure that the average age of the entire board does not rise any further in the case of new appointments, and that the board’s heterogeneity in terms of differing curricula vitae is not reduced. To date, the Supervisory Board has not set a limit for the maximum length of service. The Supervisory Board also deals extensively with sustainability issues and plans to further strengthen these competencies.

Committees

The Management Board of BRAIN Biotech AG has not formed any committees.

The Supervisory Board has formed a total of three committees to efficiently perform its work: an Audit Committee, a Personnel Committee and a Nomination Committee. The committees prepare resolutions for the Supervisory Board as well as agenda items to be handled by the plenary meeting. In all cases, the committee chairs report on the committees’ work at the subsequent meeting. The Supervisory Board also meets annually for a strategy meeting.

Audit Committee

The Audit Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):

The Audit Committee concerns itself especially with the supervising of financial accounting, the financial accounting process, the efficacy of the internal control system, the risk management system, the internal audit system, the audit of the financial statements, sustainability topics as well as compliance. The Audit Committee submits a substantiated recommendation for the election of the auditor to the Supervisory Board, which comprises of at least two candidates if the audit mandate is to be put out to tender. The Audit Committee supervises the auditor’s independence and concerns itself with services to be rendered additionally by the auditor, the award of the audit mandate to the auditor, the setting of focus audit areas, as well as arranging the auditor’s fee.

Pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG), at least one member of the audit committee must possess expertise in the financial accounting area and at least one further member must possess expertise in the auditing area. The Audit Committee Chair, Dr. Michael Majerus, meets the statutory conditions pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG) and also possesses specialist knowledge as head of financial accounting and CFO, including at three listed companies. His main areas of expertise are controlling & risk management, corporate finance and capital markets as well as financial accounting. Supervisory Board Chairman Dr. Georg Kellinghusen, who is also a member of the Audit Committee, has knowledge of financial accounting and auditing from his CFO roles at various companies and as a member of supervisory boards of public stock corporations.

Personnel Committee

The Personnel Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):

The Personnel Committee concerns itself mainly with personnel matters relating to the Management Board. In particular, it plays a preparatory role for the Supervisory Board in the selection, appointment and recall from office of Management Board members, the agreeing and supplementation of Management Board contracts and pension arrangements, setting the compensation scheme for Management Board members and its implementation in the Management Board contacts, target setting for the variable compensation, setting and reviewing the appropriateness of overall compensation of the individual Management Board members, and approving the annual compensation report. It also submits recommendations for resolutions. Moreover, the Personnel Committee can pass resolutions on the Supervisory Board’s behalf in relation to the following matters: certain legal transactions with Management Board members (e.g. in the meaning of Section 112 of the German Stock Corporation Act [AktG]), and approving Management Board members’ outside activities pursuant to Section 88 AktG, especially where Supervisory Board mandates outside BRAIN Group are accepted.

Nomination Committee

The Nomination Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):

The Nomination Committee submits appropriate candidates to the Supervisory Board for it to propose to the AGM for election.

Remarks concerning the working methodology of the Management Board, the Supervisory Board, and the committees in the financial year are also presented in the report by the Supervisory Board, which is included in the annual report of BRAIN Biotech AG.

Dialog with investors

The Supervisory Board discussed the suggestion contained in Number A.6 of the German Corporate Governance Code (DCGK), and was in favor of the Supervisory Board Chairman being available to respond to investors’ questions relating specifically to the Supervisory Board. The Management Board of BRAIN Biotech AG also welcomes this move.

Supervisory Board compensation

Pursuant to Section 14 (1) of the company’s bylaws, all Supervisory Board members receive not only reimbursement of their outlays but also a fixed annual payment of € 15,000.00. The Supervisory Board Chair receives twice this amount, and the Deputy Supervisory Board Chair receives one and a half times this amount. Supervisory Board members who have not been Supervisory Board members for a full year of service receive the aforementioned compensation pro rata temporis to the level of one twelfth for each month of service they commence. Moreover, all members of the Supervisory Board receive an attendance fee of € 1,000.00 for each meeting of the Supervisory Board and its committees in which they participate, and an attendance fee of € 500.00 for participating in a conference call of the Supervisory Board or its committees. The chairs of the Supervisory Board committees also receive an annual payment of € 15,000.00.

The company has taken out D&O (directors & officers) insurance cover for the Supervisory Board members. No deductible was arranged for Supervisory Board members.

Detailed information about the Supervisory Board members’ compensation can be found in the compensation report pursuant to Section 162 of the German Stock Corporation Act (AktG), which can be downloaded at www.brain-biotech.com/investors/compensation.

At its meeting on 23 September 2016, the Supervisory Board of BRAIN Biotech AG passed a resolution whereby the Supervisory Board should include one woman, corresponding to a 17% ratio. The deadline for implementation was set at 30 June 2017. This objective was implemented on 9 March 2017 when Dr. Anna C. Eichhorn was elected to the Supervisory Board of BRAIN Biotech AG. The retention of this goal was confirmed at the meeting on 28 September 2017 for the period until 30 June 2022. In the context of the replacement of Supervisory Board members in accordance with Section 104 (2) Clause 1 of the German Stock Corporation Act (AktG), the proportion of women on the Supervisory Board increased to 33% with the appointment of Prof. Dr. Treffenfeldt. Also on 28 September 2017, the Supervisory Board passed a resolution to leave the ratio for women on the Management Board of BRAIN Biotech AG unchanged at 0% until 30 June 2022. On 15 December 2022, the Supervisory Board increased the target for the composition of the Supervisory Board to 33%, with an implementation deadline of 30 June 2027. On the same day, the target for the Management Board was left at 0%. This target was maintained on the basis that the medium- to long-term planning for the Management Board assumes that the members of the Management Board in office in the 2022/23 financial year are scheduled for an extension of their periods of office. Setting a different ratio would stand at variance with this medium- to long-term planning. In the event of an increase in the number of members of the Management Board, this objective would require review, as would be the case if the Management Board members in office in the 2022/23 financial year did not renew their service contracts. On the basis of a decision made during the 2021/22 financial year, the new CFO for the 2022/23 financial year was appointed from a selection of internal candidates. Priority was given to replacement by internal candidates as not only were suitable internal candidates available, but also to ensure as rapid and straightforward a handover as possible.

The Management Board is composed exclusively of men at present. For the first management level below the Management Board, the Management Board of BRAIN Biotech AG passed a resolution to set a 14% target for participation by women and determined that this goal should be implemented by 30 June 2017. This target was reached with a level of 14 % on 30 June 2017.

As a consequence, the Management Board of BRAIN Biotech AG has set the target for the proportion of women at the first management level below the Management Board at 14%, with a deadline for implementation by the end of 30 September 2020. With the end of the implementation period mentioned above, the proportion of women at the first management level was reached. The Management Board has approved a 20% ratio of women by 30 September 2025 for the first management level below the Management Board in the meaning of Section 76 (4) AktG.

Considering the management matrix structure established within the company, especially including command and reporting lines between Management Board and subordinated levels, as well as taking into consideration the company’s size, only one management level exists below the Management Board in the meaning of Section 76 (4) AktG.

The shareholders exercise their co-management and controlling rights at the Shareholders’ General Meeting (the Annual General Meeting/AGM), which is chaired by the Supervisory Board Chair pursuant to the company’s bylaws. Each share in BRAIN Biotech AG grants one vote. Shareholders can exercise their voting rights at the AGM itself, or have it be exercised by an authorized representative of their choosing or by a company proxy. The Management Board is authorized to ensure that shareholders who do not attend the AGM can also participate in the AGM and exercise their rights wholly or partly by way of electronic communications (online participation), or to issue their votes without participating in the meeting by way of written or electronic communications (postal option). The Management Board is also authorized to set the specific arrangements relating to the scope and procedure for online participation and postal voting. These are to be announced in the convening document for the AGM. All shareholders are entitled to participate in the AGM, to speak on the respective agenda items, and to request information about the company’s affairs, where such information is required in order to arrive at an objective assessment of an agenda item.

The sixth public Annual General Meeting of BRAIN Biotech AG was held for the second time as a virtual Annual General Meeting on 9 March 2022 in Offenbach. The invitation for the AGM was published in good time in the German Federal Gazette (Bundesanzeiger) pursuant to statutory regulations, including the agenda with the proposed resolutions of the management and of the Supervisory Board as well as the terms for participating in the AGM and the exercising of voting rights, among other matters. All reports and documents required by law were available on the website of BRAIN Biotech AG from the date when the AGM was convened. Directly following the AGM, BRAIN Biotech AG published the attendance and voting results on its website. Four out of five items on the agenda were submitted to the vote at the AGM. All of the proposed resolutions were accepted given an attendance of the share capital of BRAIN Biotech AG of 63.72 %.

The unaudited quarterly financial statements as of 31 December 2021 (3M) and 30 June 2022 (9M) as well as the unaudited half-year financial report (6M) as of 31 March 2022 and the consolidated financial statements for the financial year ending 30 September 2022 were prepared in accordance with Section 315e (1) of the German Commercial Code (HGB) and International Financial Reporting Standards (IFRS). The separate financial statements of BRAIN Biotech AG for the 2021/22 financial year were prepared in accordance with the regulations of the German Commercial Code (HGB), and the German Stock Corporation Act (AktG).

Zwingenberg, December 2022

Management Board and Supervisory Board