Report from the Supervisory Board

Dear shareholders,

For the first time in my role as Chairman of the Supervisory Board of BRAIN Biotech AG, I am pleased to report to you on the activities of the Supervisory Board in the 2022/23 financial year.

Following the Annual General Meeting on 8 March 2023, there was not only a change in the chair of the Supervisory Board, but we also welcomed two new members to the Supervisory Board, Christine Uekert and Dr. Florian Schnabel. After the Supervisory Board consisted of five members in the 2021/22 financial year following the departure of Prof. Dr. Bernhard Hauer, we now have six members again due to these two new additions and the departure of Supervisory Board Chairman Dr. Georg Kellinghusen, who reached the age limit. For the first time, the new Supervisory Board reflects a composition of half women and half men and its members complement each other in their areas of expertise, particularly biotechnology expertise, sector expertise as well as capital market and financial expertise.

The Supervisory Board closely supported the Management Board over the course of the past financial year. Overall, BRAIN Biotech AG continued to develop successfully in the 2022/23 financial year despite the ongoing negative effects of the war of aggression in Ukraine as well as general economic and geopolitical challenges. The revenue growth and the EBITDA targets for the year which had been communicated to the capital market were achieved. With revenue of around € 55 million, BRAIN Biotech AG exceeded the € 50 million revenue level for the first time and, excluding the costs of establishing the innovative genome editing activities (Akribion Genomics), generated positive EBITDA before exceptional items in the low single-digit-million-euro range.

The company’s medium-term targets, which were first announced to coincide with the Capital Markets Day in 2020, remain unchanged: the aim is still to double revenue and achieve an EBITDA margin of 15 % (±5 PP). The company is consistently pursuing the expansion of its product business in the BioProducts segment through organic growth and value-enhancing acquisitions. In implementing this strategy, BRAIN Biotech AG transferred the subsidiaries WeissBiotech GmbH, Biosun Biochemicals Inc. and the majority interest in Weriol Group BV (which is the holding company of Breatec BV) to the subsidiary Biocatalysts Ltd. and thereby created a uniform legal structure for the enzyme business within the BRAIN Biotech Group, which now constitutes the BioProducts segment. The focus in this area is on leveraging further synergies and on integration activities to create organic growth. The company will continue to consider further value-enhancing acquisitions in the future, insofar as they can be realized within the financial framework of BRAIN Biotech AG.

We are convinced that BRAIN Biotech AG, with its fast-growing products business, its successful market position in contract research, its investment in SolasCure Ltd., the planned spin-off of the G-dase E and G-dase M technology business under the name Akribion, as well as product innovations from the incubator, enjoys a wide range of positive development potentials.

For BRAIN Biotech AG as an industrial biotechnology company, sustainability has always played a central role – both as a basis of its business as well as in its corporate strategy and management. Accordingly, as part of its activities the Supervisory Board also deals with sustainability issues that are relevant to the company. In the previous 2021/22 financial year, its plenary meetings included detailed consultations and discussions about the company’s first ESG report. During the 2022/23 financial year, the Supervisory Board continued to advise on the further development of the report and anchored the company’s ESG objectives within the Management Board’s long-term compensation scheme.

The following report provides detailed information about the Supervisory Board’s work in the 2022/23 financial year, in other words, from 1 October 2022 until 30 September 2023. During this period, we fulfilled all of the tasks and duties incumbent upon us pursuant to the law, the company’s bylaws and the rules of business procedure for the Supervisory Board.

We continuously supervised the Management Board in its management of the business and consulted on all matters of importance for the company. In this context, the Supervisory Board was always convinced of the legality, propriety, appropriate nature and economic efficiency of the management of the company.

Collaboration between the Supervisory and Management boards

The Management Board informed the Supervisory Board regularly, promptly, and comprehensively in the form of detailed written and verbal reports on all matters relating to strategy, planning, business development, the risk position, risk trends and compliance that are of importance for the company and the Group, and consequently fully met its reporting duties to the Supervisory Board in the relevant period. The Supervisory Board and its committees were involved in all important business transactions and decisions of fundamental significance for the company. Collaboration with the Management Board was characterized in all aspects by responsible and purposeful action.

Personnel matters

As already mentioned, the following changes occurred to the composition of the Supervisory Board in the reporting period:

The Annual General Meeting on 8 March 2023 was required to newly elect a total of three Supervisory Board members. Dr. Georg Kellinghusen, who had been a member of the Supervisory Board of BRAIN Biotech AG since 9 March 2017 as well as its Chairman since 7 March 2019, was no longer available for re-election as he had reached the age limit for Supervisory Board members.

Christine Uekert and Dr. Florian Schnabel were elected as new members of the Supervisory Board by the shareholders and Dr. Michael Majerus was re-elected to the Supervisory Board for a second term of office. These Supervisory Board members were elected with effect from the end of the Annual General Meeting on 8 March 2023 until the end of the Annual General Meeting that will ratify the actions of the Supervisory Board for the financial year from 1 October 2025 to 30 September 2026.

Following the Annual General Meeting, the constituent meeting of the Supervisory Board of BRAIN Biotech AG elected Dr. Michael Majerus as its new Chairman. Dr. Anna Carina Eichhorn will continue to be available as Deputy Chair.

No changes occurred within the Management Board during the year under review. As of the beginning of the financial year, Michael Schneiders was appointed Chief Financial Officer for a three-year term. During the reporting year, the contract with Adriaan Moelker was extended until 2027, as planned.

The company supports new members of the Supervisory Board, especially by providing information and advice about the company, its structures, and processes, and offers support in the further training of Supervisory Board members as required, such as in the event of changes to the legislative framework.

Supervisory Board meetings

In the 2022/23 financial year, the Supervisory Board held a total of seven face-to-face meetings and seven video conferences. The committees held four face-to-face meetings, six video conferences and one conference call. The Supervisory Board members always had sufficient time to engage critically with the information submitted by the Management Board, and to contribute its own views. As part of the meetings, the information was discussed in detail with the Management Board and examined as to its plausibility. The Supervisory Board also met without the Management Board. The Supervisory Board issued its approval of specific business transactions as required by law, the company’s bylaws, and the rules of business procedure for the Supervisory or Management boards.

The individualized list of meeting attendances presented below provides additional information about the meetings of the Supervisory Board and its committees.

Overview of Supervisory Board meetings in the 2022/23 financial year

Moreover, outside the scope of meetings, the Supervisory Board members, especially myself as Supervisory Board Chairman and committee chair as well as the respective chairs of the committees, were in regular communication both with each other as well as with the Management Board. This particularly entailed consultations on questions relating to the company’s strategy, planning, business development, risk position, risk management, key sustainability topics, corporate governance and compliance. The Supervisory Board members were informed about important information at the latest as of the following plenary or committee meetings.

No conflicts of interest arose within the Supervisory Board during the reporting period.

Focus consultation areas in the plenary Supervisory Board

During the 2022/23 financial year, we on the plenary Supervisory Board concerned ourselves especially with the following topics:

• Annual financial statements for the 2021/22 financial year
• The statement of conformity and the corporate governance declaration
• Reaching the corporate targets for the 2021/22 financial year relating to developing the BioIndustrialBioScience and BioIncubator operating segments
• Risk management and internal controlling systems
• New Management Board compensation scheme taking into consideration the recommendations of the German Corporate Governance Commission (GCGC)
• Proposal for a new Supervisory Board compensation scheme to the Annual General Meeting
• Recommendation for the election of the auditor at the 2023 AGM
• Further development of the company’s strategy
• Planning and implementation of the Annual General Meeting on 8 March 2023
• Merger of WeissBiotech GmbH, Biosun Biochemicals Inc. and Breatec BV (via the majority interest in Weriol Group BV) under the management of Biocatalysts Ltd.
• Assessing and limiting impacts from the Covid-19 pandemic
• Overseeing cost optimization measures
• ESG report and sustainability topics
• Evaluation of current and future research projects
• Strategic alliances and planned partnerships
• Budget planning for the 2023/24 financial year and long-term planning for the next five years
• Accelerated development of genome editing activities including consideration of spin-off of activities
• Personnel changes at subsidiaries
• Implementation of the Supervisory Board’s self-assessment

The Supervisory Board in all cases passed specific resolutions following intensive review and discussion.

In addition, the following topics and resolutions were presented:

On 21 December 2022, the Supervisory Board approved the financial statements documents for the 2021/22 financial year and concurred with the Management Board’s proposal relating to the application of unappropriated profit, after having previously clarified and discussed in depth the financial statements at its face-to-face meetings.

Committees

The Supervisory Board has formed a total of three committees to efficiently perform its work: an Audit Committee, a Nomination Committee and a Personnel Committee. Based on the respective rules of business procedure for the committees, these prepare resolutions for the Supervisory Board, as well as topics to be handled by the plenary board. The Supervisory Board’s decision-making powers are also transferred to committees where legally permissible. In all cases, the committee chairs report on the committees’ work at the subsequent plenary meeting.

Audit Committee

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. The Audit Committee regularly liaises with the auditor during the preparation and execution of the audit without the Management Board’s involvement.

Pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG), the audit committee must include at least one supervisory board member with expertise in the financial accounting area. The Audit Committee Chair, Christine Uekert, meets the statutory conditions pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG) and also possesses specialist knowledge in the area of financial auditing. In addition, she has many years of experience in the areas of finance and controlling and has held management positions, including at listed companies. In addition, a further member of the Audit Committee must have expertise in the area of auditing.

Supervisory Board Chairman Dr. Michael Majerus, also a member of the Audit Committee, has knowledge in the field of auditing as a former head of accounting and CFO at three listed companies, among others. His main areas of expertise are controlling and risk management, corporate finance, and capital markets as well as financial accounting. Moreover, he commands a broad spectrum of knowledge in compliance topics as well as in the investor relations area. In addition to the committee chair and the Supervisory Board Chairman, the Audit Committee includes Supervisory Board member Dr. Florian Schnabel.

The Audit Committee will decide concerning the approval of non-audit services by the auditing company appointed on 8 March 2023, Baker Tilly GmbH & Co. KG Wirtschaftsprüfungsgesellschaft, Düsseldorf ("Baker Tilly"), in relation to the maintenance of independence for the audit mandate.

In the 2022/23 financial year, the Audit Committee dealt, in particular, with the recommendation to the Supervisory Board concerning the election of the auditor.

In the 2022/23 financial year, the Audit Committee held three face-to-face meetings, one video conference and one conference call.

Nomination Committee

The Nomination Committee has the task of seeking suitable candidates for the Supervisory Board. As a consequence, the committee’s functions include the identification, evaluation, and nomination of individuals qualified for this office. This includes guaranteeing diversity, expertise, and independence on the Supervisory Board in order to ensure that its work is effective.

Due to the resignation of Supervisory Board Chairman Dr. Georg Kellinghusen and Supervisory Board member Prof. Dr. Bernhard Hauer, two new candidates had to be found in order to propose them for election at the Annual General Meeting on 8 March 2023.

Given this, a total of 13 people were identified for replacement or new appointments, of whom the Nomination Committee ultimately shortlisted six. Committee chair Dr. Anna C. Eichhorn then conducted interviews with these six people between August and October 2022 and subsequently presented the results to her committee colleagues. After extensive consultation, the Nomination Committee finally proposed Dr. Florian Schnabel and Christine Uekert. This proposal was welcomed and accepted by our colleagues on the Supervisory Board.

The Nomination Committee held one video conference during and one face-to-face meeting in the 2022/23 financial year. In addition to committee chair Dr. Anna C. Eichhorn, the committee also includes Dr. Georg Kellinghusen (until 8 March 2023) and Dr. Michael Majerus (since 8 March 2023).

Personnel Committee

The Personnel Committee prepares personnel decisions for the Supervisory Board, especially the selection, appointment and recall from office of Management Board members, the conclusion and amendment of service contracts and pension arrangements, the compensation scheme including its implementation as part of the service contracts, target setting for variable compensation, setting and reviewing appropriate total compensation for each Management Board member, and approving the annual compensation report. In addition, the Personnel Committee passes resolutions concerning the representation of the company vis-à-vis Management Board members pursuant to Section 112 AktG, the approval of Management Board members’ other business activities pursuant to Section 88 AktG (prohibition of competition), and other ancillary activities, especially assuming supervisory board posts or positions on comparable controlling bodies outside the BRAIN Biotech Group. The Chair of the Personnel Committee is Dr. Michael Majerus (since 8 March 2023). Dr, Georg Kellinghusen had been the previous chair (until 8 March 2023). Besides the committee chair, Dr. Michael Majerus, the committee also includes Supervisory Board members Stephen Catling and Prof. Dr. Wiltrud Treffenfeldt.

The Personnel Committee held four video conferences during the 2022/23 financial year. In particular, the Personnel Committee held consultation concerning the further development of the Management Board compensation scheme, especially in relation to the recommendations of the German Corporate Governance Code (DCKG). The new Management Board compensation scheme proposed by the Personnel Committee was approved by the Supervisory Board at its meeting on 19 January 2023 and approved by the Annual General Meeting on 8 March 2023. Subsequently, the Personnel Committee submitted to the Supervisory Board proposals for amendments to the two Management Board members’ existing employment contracts to reflect the new Management Board compensation scheme. Following approval by the Supervisory Board, the amended agreements were concluded with the Management Board members with effect from 1 October 2023.

Corporate governance and the statement of conformity

At its meetings, the Supervisory Board consulted on several occasions concerning the company’s corporate governance, including requirements deriving from the German Corporate Governance Code (DCGK).

The Supervisory Board approved the current statement of conformity in December 2023, after the end of the 2022/23 financial year. The Code’s recommendations were, and are, complied with, apart from the exceptions explained in the statement of conformity. The full text of the statement of conformity as well as the corporate governance declaration by the Management and Supervisory boards of BRAIN Biotech AG Zwingenberg published on the company’s website at www.brain-biotech.de/investor-relations/corporate-governance/.

Regarding the provisions of Section 111 (5) AktG, the Supervisory Board has set itself the target of taking women into appropriate consideration in its future composition.

At its meeting on 23 September 2016, the Supervisory Board of BRAIN Biotech AG resolved that the Supervisory Board should include one woman, corresponding to a 17 % ratio. The implementation deadline for this was set at June 30, 2017. With the election of Dr. Anna C. Eichhorn to the Supervisory Board of BRAIN Biotech AG on 9 March 2017, the objective was implemented accordingly. The retention of this objective was confirmed at the meeting on 28 September 2017 for the period until 30 June 2022. Also on 28 September 2017, the Supervisory Board passed a resolution to leave the target ratio for women on the Management Board of BRAIN Biotech AG unchanged at 0 % until 30 June 2022. With the re-election of Dr. Anna C. Eichhorn and the election of Prof. Dr. Wiltrud Treffenfeldt, the set ratio was exceeded on 10 March 2021.

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. With the election of Christine Uekert at the Annual General Meeting on 8 March 2023, the ratio now stands at 50.0 %.

On 15 December 2022, the target for the composition of the Management Board was retained at 0 %, with an implementation deadline of 30 June 2027. This target was maintained on the basis that the medium to long-term planning for the Management Board assumes that the Management Board members currently in office are each scheduled for an extension when the ratio is set. 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.

Audit of the separate and consolidated annual financial statements

Auditor

The AGM on 8 March 2023 appointed Baker Tilly GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Düsseldorf (“Baker Tilly”) as auditors for the financial year ending 30 September 2023. This engagement also includes engaging the auditor for the consolidated financial statements for the financial year ending 30 September 2023. Mr. Andreas Weissinger, Diplom-Kaufmann, Wirtschaftsprüfer, has signed as the auditor responsible for the audit since the 2021/22 financial year and Ms. Marina Stumpp, M. Sc., Wirtschaftsprüfer, has signed as the auditor responsible for the audit since the 2022/23 financial year.

Baker Tilly audited the separate annual financial statements for the financial year from 1 October 2022 to 30 September 2023, prepared by the Management Board in accordance with the financial accounting regulations of the German Commercial Code (HGB), the management report of BRAIN Biotech AG, and the compensation report in accordance with Section 162 AktG. The auditor Baker Tilly awarded an unqualified audit certificate. Pursuant to Section 315e HGB, the consolidated financial statements of BRAIN Biotech AG for the financial year from 1 October 2022 to 30 September 2023 and the Group management report were prepared on the basis of International Financial Reporting Standards (IFRS), as applicable in the European Union. Both the consolidated financial statements and the Group management report also received unqualified audit opinions. The compensation report received an unqualified audit opinion for its formal audit. Moreover, the auditor found that the Management Board has set up an appropriate information and supervision system that is suitable in its design and utilization to identify developments at an early juncture that jeopardize the company as a going concern.

Review by the Supervisory Board

The documents for the financial statements and the audit reports were discussed extensively at the Audit Committee meeting on 13 December 2023 and at the Supervisory Board meeting on 14 December 2023. The auditors Baker Tilly reported on the main findings of their audit. It also provided information about its findings on internal control and risk management in relation to the financial accounting process and was available to respond to additional queries as well as to provide further information. The review of the separate and consolidated financial statements by the Audit Committee was reported upon in detail by the Chairman of the Supervisory Board on behalf of the Chairwoman of the Audit Committee at the plenary meeting. Following in-depth review and discussion of the separate financial statements, the consolidated financial statements and the management report, the Supervisory Board raised no objections against the submitted documents. The Supervisory Board consequently concurred with the Audit Committee’s recommendation and approved the result of the audit by the auditor. By way of resolution on 14 December 2023, the Supervisory Board then approved the separate and consolidated annual financial statements of BRAIN Biotech AG for the 2022/23 financial year. The separate annual financial statements of BRAIN AG have been adopted as a consequence.

Report on the review of the dependent companies report pursuant to Section 314 AktG

Furthermore, the Supervisory Board reviewed the report prepared by the Management Board on relationships with affiliates pursuant to Section 312 (1) AktG for the period of dependency between 1 October 2022 and 30 September 2023 (“dependent companies report”) and discussed it extensively with the Management Board as well as with the auditor which additionally audits the dependent companies report.

The auditor reported in detail on the main points of its audit. In this context, the Supervisory Board concerned itself in depth with the report by the auditor on the audit of the dependent companies report. The discussion led to no grounds for reservations.

The auditor issued the following audit opinion relating to the dependent companies report:

“In accordance with the audit and appraisal incumbent upon us, we confirm that

• the actual disclosures presented in the report are correct,
• and that for the legal transactions listed in the report, the consideration rendered by the company was not inappropriately high,
• there are no circumstances in the measures listed in the report that indicate a significantly different assessment than that of the Management Board.”

Following the conclusive result of the extensive review of the dependent companies report by the Supervisory Board, the Supervisory Board states that no reservations are to be expressed (Section 314 (3) AktG) against the Management Board statement which follows the report concerning relationships with affiliates (concluding statement pursuant to Section 312 (3) Clause 1 AktG).

Thank you from the Supervisory Board

Personally, as well as on behalf of the Supervisory Board and the company, I would first like to thank my predecessor in office, Dr. Georg Kellinghusen, for his many years of service to BRAIN Biotech AG in various functions, as a member of the Management Board and as CFO during the IPO phase, and as a member and Chairman of the Supervisory Board. Dr. Kellinghusen has made a significant contribution to the transformation process at BRAIN Biotech AG, not least by appointing a new member to the Management Board and by supporting the Management Board in developing the profitable growth strategy.

In particular, the Supervisory Board would like to thank the members of the Management Board as well as all employees of the BRAIN Biotech Group for their further commitment and outstanding personal contribution during the 2022/23 financial year. We look forward to working with you as we continue on our path of profitable growth.

Zwingenberg, 14 December 2023

BRAIN Biotech AG
The Supervisory Board

Dr. Michael Majerus
Supervisory Board Chairman