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.
Zwingenberg, December 2022
For the Supervisory Board of BRAIN Biotech AG:
Dr. Georg Kellinghusen, Supervisory Board Chairman
For the Management Board of BRAIN Biotech AG:
Adriaan Moelker, Chief Executive Officer
Note: The statement of conformity was published on the Internet in December 2022 and will not be updated during the year.