Heidelberg Pharma : Remuneration Report 2023

CONVENIENCE TRANSLATION

(The text decisive is the one written in German language.)

Remuneration report of Heidelberg Pharma AG

for the fiscal year from 1 December 2022 to 30 November 2023 (2023 fiscal year)

compared with the fiscal year from 1 December 2021 to 30 November 2022 (2022 fiscal

year)

This remuneration report details the remuneration granted and owed to individual members of the Executive Management Board and Supervisory Board of Heidelberg Pharma AG in the 2023 fiscal year. The remuneration report meets the regulatory requirements of Section 162 of the German Stock Corporation Act (AktG).

The remuneration report below summarizes the principles used to determine the total remuneration of the Executive Management Board of Heidelberg Pharma AG and explains the structure as well as the remuneration received by the Executive Management Board members. The principles and the amount of remuneration received by the members of the Supervisory Board are also described.

There were changes to the composition of the Company's Executive Management Board and Supervisory Board in the 2023 fiscal year. Dipl.-Kfm. Walter Miller was appointed Chief Financial Officer with effect from 1 May 2023. Dr. Brady Xumin Zhao left the Supervisory Board at the end of 31 March 2023, while Dr. Yan Xia was elected as a new member at the Annual General Meeting on 25 May 2023.

After the reporting date, on 31 January 2024, Dr. Jan Schmidt-Brand stepped down as a member of the Executive Management Board as part of the retirement-related succession plan. Since then, Professor Andreas Pahl, who was Chief Scientific Officer since 2016 and has been Chief Executive Officer since 1 February 2024, and Walter Miller have been the Executive Management Board members of Heidelberg Pharma AG.

1 REMUNERATION FOR MEMBERS OF THE EXECUTIVE MANAGEMENT BOARD

1.1 Overview of the remuneration system for members of the Executive Management Board

Setting the remuneration of the members of the Heidelberg Pharma AG Executive Management Board falls under the purview of a plenary meeting of the Supervisory Board and is reviewed on a regular basis in compliance with the stipulations in Section 87 and 87a of the Stock Corporation Act as well as the recommendations of the German Corporate Governance Code. At the Annual General Meeting held on 25 May 2023, the Executive Management Board and the Supervisory Board presented in item no. 9 of the agenda the current remuneration system of the members of the Executive Management Board, which was approved in accordance with Section 120a (1) of the German Stock Corporation Act.

The remuneration system for the Executive Management Board is taken into account by the Company when concluding and extending directors' contracts.

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The remuneration paid to Executive Management Board members who were not in service for a full fiscal year is pro rated in accordance with the duration of their membership on the Executive Management Board.

The Supervisory Board takes into account the following principles when designing the remuneration system and the amount and structure of the remuneration of the Executive Management Board:

• On the whole, the remuneration of the members of the Executive Management Board contributes significantly to achieving long-term corporate development and to furthering the Company's business strategy.
• The remuneration of the members of the Executive Management Board ensures that special accomplishments are rewarded appropriately, and that failure to meet targets results in a noticeable reduction in remuneration.
• Both the amount and the structure of the remuneration of the members of the Executive Management Board conform to industry standards and take into account the size, complexity and financial position of the Company.
• The remuneration takes into consideration the respective sphere of responsibility of each Executive Management Board member, the personal accomplishments of the individual members, and the achievements of the Executive Management Board as a whole.

1.2 Components of remuneration for members of the Executive Management Board

Remuneration for members of the Executive Management Board consists of non-performance- related and performance-related components. The non-performance-related components include the annual fixed salary as well as benefits such as company cars and a pension. The performance-related remuneration components comprise short-term variable remuneration (variable annual bonus) and long-term variable remuneration (stock options).

By combining non-performance-related and performance-related components of remuneration, the Company creates an attractive incentive for existing and potential Executive Management Board members to contribute to sustained and long-term corporate development. Variable remuneration components are the essential material incentive to pursue the Company's business policy objectives. They function as motivator and reward for specific actions, for operational achievements, for strategic decisions that promote the long-term development of the Company, and for conduct rooted in a sense of responsibility.

Overview of the remuneration components:

Remuneration component	Assessment basis
Non-performance-related
remuneration
Fixed annual salary (fixed salary)	Fixed annual salary is paid in monthly installments
Fringe benefits	e.g. company car, pension
Performance-related remuneration
Short-term variable remuneration	Variable annual bonus
Long-term variable remuneration	Stock options

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1.3 Non-performance-related remuneration

Every Executive Management Board member receives non-performance-related, fixed remuneration. The fixed annual salary is determined for the term of the director's contract and paid in equal amounts over twelve months.

The amount of the fixed remuneration is determined based on the principles set out above. Remuneration takes into account the financial position of Heidelberg Pharma AG and the level of remuneration paid by competitors.

In addition to the base salary, members of the Executive Management Board are granted the following fringe benefits:

• Provision of a company car or BahnCard 100 for 1st class travel, up to a maximum amount (for the company car lease installment) of EUR 1,000/month
• Purchase of an accident insurance policy (death benefit €100,000, disability benefit €500,000, and payment of the corresponding insurance premiums
• Contribution to health insurance and long-term care insurance: The amount of the individual contributions equates to half of the premiums paid by the Executive Management Board member, however no higher than that maximum amount legally owed for the employer's portion of the health and long-term care insurance taking into consideration the applicable thresholds and caps for contribution calculations
• Purchase of a D&O insurance policy with a deductible corresponding to the minimum stipulated by law
• Payment of an amount of no more than €14,000 per year as retirement benefits
• Reimbursement of business travel expenses

In addition to his fixed remuneration of €285 thousand, Dr. Schmidt-Brand receives the following non-cash benefits: Under the director's contract, Heidelberg Pharma Research GmbH makes payments into a defined-contribution, reinsured pension plan. In 2023, this payment amounted to €11 thousand (previous year: €11 thousand). As in the previous year, €3 thousand were paid into a pension fund.

No non-cash benefits within the context of a pension were granted to Professor Pahl and Walter Miller in the fiscal year ended in addition to their fixed remuneration of €240 thousand and €140 thousand, respectively.

In addition, company cars were made available to both members of the Executive Management Board, Dr. Schmidt-Brand and Professor Pahl, for the entire fiscal year. The value of this non- cash benefit in 2023 was €5 thousand for Dr. Schmidt-Brand (previous year: €8 thousand) and €6 thousand (previous year: €13 thousand) for Professor Pahl. Mr. Miller does not use a company car and instead receives a monthly compensation of €1 thousand ("car allowance").

No further benefit obligations exist towards the members of the Executive Management Board.

1.4 Performance-related remuneration

In addition to non-performance-related remuneration, the members of the Executive Management Board are entitled to performance-related remuneration. This remuneration is contingent upon the achievement of personal targets and Heidelberg Pharma's performance targets. The performance-related remuneration of the members of the Company's Executive Management Board is primarily tied to long-term, sustainable and financial corporate goals of Heidelberg Pharma and refers to the achievement of milestones that are defined at the

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beginning of each fiscal year. The relationship between the achievement of targets and the variable remuneration is set in advance and may not be changed at a later date. The degree of target achievement and the associated amount of variable remuneration are assessed and determined by the Supervisory Board.

Short-term variable remuneration for the 2022 and 2023 fiscal years

The Supervisory Board sets both annual as well as uniform short-term targets for all Executive Management Board members, and also sets individual short-term targets for each Executive Management Board member. The short-term targets are weighted against one another by the Supervisory Board. As a rule, short-term targets can be achieved on a scale from 0-100%. The achievement of targets is calculated arithmetically, as applicable with a corresponding weighting of the targets (e.g., 4 out of 5 targets reached in their entirety = 80% target achievement). The level of the annual performance-based remuneration is calculated based on the degree to which targets are achieved relevant to the individual targets while taking into account the weighting assigned to this target.

Individual performance criteria and their weighting for members of the Executive Management Board were defined for the 2022 fiscal year from the following target areas: ATAC product development (weighting: 40%), licensing (weighting: 30%) and financing (weighting: 30%).

Performance criteria

Criteria relevant for assessment

Weighting

Performance

Target

corridor

achievement*

ATAC

product

Driving forward the HDP-101,

40%

0% - 100%

100%

development

HDP-102,HDP-103 and HDP-

104 development projects

Licensing

Signing new ATAC license option

30%

0% - 100%

100%

agreements or product

license

agreements as well as research

partnership agreements

Financing

Signing the license agreement

30%

0% - 100%

100%

and concluding the

capital

increase with Huadong

* Determined by the Supervisory Board in the 2023 fiscal year

Total target achievement:

100%

Dr. Schmidt Brand received a maximum annual bonus of €110 thousand for 2022. Prof. Pahl's maximum bonus amounted to €100 thousand. Dr. Schmidt Brand and Prof. Pahl were also paid their respective maximum bonuses for the 2022 fiscal year of €110 thousand and €100 thousand in 2023.

Executive	Bonus cap, 2022	Total target	Bonus for fiscal year 2022 paid in
Management		achievement, 2022	2023
Board member
Dr. Schmidt-Brand	€110 thsd.	100%	€110 thsd.
Professor Pahl	€100 thsd.	100%	€100 thsd.

Individual performance criteria and their weighting for members of the Executive Management Board were defined for the 2023 fiscal year from the following target areas: ATAC product development and research (weighting: 50%), licensing (weighting: 30%) and financing

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(weighting: 20%). At the time this remuneration report was prepared, the Supervisory Board had not yet made any decision on the achievement of the defined targets.

Performance criteria

Criteria relevant for

Weighting

Performance

Target

assessment

corridor

achievement*

ATAC

product

Driving

forward

the

HDP-101,

50%

0% - 100%

n/a

development

and

HDP-102,HDP-103 and HDP-

research

104 development projects and

research success relating to a

new payload

Licensing

Signing

new

ATAC

license

30%

0% - 100%

n/a

option

agreements

or

product

license agreements as well as

research

partnership

agreements

Financing

Signing

external

funding

20%

0% - 100%

n/a

agreements with investments

totaling at least €30 million

* To be determined by the Supervisory Board in the 2024 fiscal year

Total target achievement:

n/a

For 2023, Dr. Jan Schmidt-Brand's maximum annual bonus is €110 thousand. As a result, his maximum annual remuneration comprising fixed and short-term variable remuneration amounts to €395 thousand.

Professor Andreas Pahl's annual bonus is capped at €100 thousand, as in the previous year. As a result, his maximum annual remuneration comprising fixed and short-term variable remuneration for fiscal year 2023 amounts to €340 thousand.

Dipl.-Kfm. Walter Miller's annual bonus is capped at €80 thousand. As a result, his maximum remuneration for fiscal year 2023 comprising fixed and short-term variable remuneration amounts to €187 thousand.

Long-term variable remuneration

Additionally, the Executive Management Board members may receive long-term variable remuneration by way of stock options on the basis of the Company's stock option plan in place at the time they are granted. This does not require any consideration such as a cash payment from the beneficiaries. The objective is to incentivize performance that focuses on achieving stable and long-lasting success for the Company. In this case, the Executive Management Board members receive stock options that are granted either in one tranche or in multiple tranches.

The exercise price is equivalent to the average closing market price over the last 10 trading days prior to the granting of the stock options (grant date). The earliest that the Executive Management Board members can exercise the options is after the end of the vesting period of four years, which starts on the grant date of the respective subscription right. During the four- year vesting period, 1/16 of the allocated stock options will vest on a straight-line basis for each completed fiscal quarter provided that the person continues to be employed by the Company. The vested portion of stock options remains the property of the respective Executive Board member even if they leave or resign from office. In this case, any portion that has not yet vested would be forfeited without replacement.

There are two other prerequisites for exercising stock options: The average closing market price over the 10 trading days prior to the respective exercise must be 120% of the exercise price (absolute performance target). The reference price must exceed the exercise price by at

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least the same ratio by which the TecDAX (market index) on the last market trading day prior to the respective exercise period exceeds the TecDAX (market index) on the grant date.

This remuneration component is based on the 2011, 2017, 2018 and 2023 Stock Option Plans which were adopted by the respective Annual General Meetings and can be exercised four years after issuance at the earliest.

This holding period and the underlying performance targets provide a long-term incentive to increase the Company's value. No further requirements beyond the holding period need to be met.

The Supervisory Board grants stock options based on the tasks of the respective member of the Management Board, his/her personal performance, the economic situation, the performance and outlook of the enterprise as well as the common level of the remuneration taking into account the peer companies and the remuneration structure.

The Supervisory Board determines both the members of the Executive Management Board to whom stock options are granted as well as the number of stock options to be granted in each case. Existing contractual obligations to members of the Executive Management Board must be taken into consideration where applicable; otherwise, the recipients of stock options are selected and the number of stock options are defined based on legal requirements, the resolution adopted by the Annual General Meeting and at the discretion of the Supervisory Board, taking into account the individual situation of each member of the Executive Management Board. Individual members of the Executive Management Board have no entitlement to receive stock options. There are currently no specific requirements or defined dates when stock options might be issued.

New stock options were issued in the 2023 fiscal year, with each member of the Executive Management Board being allocated 60,000 options.

Up until the 30 November 2023 reporting date, the following options were issued to the active members of the Executive Management Board:

			Stock options issued
	Maximum
	issuance to	Dr. J.	Professor	Dipl.-Kfm.
Stock option plan	Executive	Schmidt-	Total
A. Pahl	W. Miller
	Management	Brand
	Board members
2011	346,924	222.0001	90,000	0	312,000
2017	201,200	100,600	100,600	0	201,200
2018	298,100	111,525	111,525	0	223,050
2023	786,311	60,000	60,000	60,000	180,000
Total	1,632,535	494,125	362,125	60,000	916,250

1 Dr. Schmidt-Brand has now forfeited 60,000 options from the 2011 Stock Option Plan without replacement after a ten-year term, meaning that only 162,000 of the 222,000 options can still be exercised.

Total remuneration

Overall, the following fixed and variable remuneration components as well as non-cash remuneration and the grant datefair value of pre-emption rights (or the issue of stock options) for Executive Management Board members were recognized as an expense in the 2023 fiscal

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year: This presentation also includes each remuneration component's relative share of total remuneration, as stipulated by Section 162 (1) sentence 2 no. 1 AktG.

Executiv				Fixed	Short-term variable			Other	Issue of stock	Total
e	Year	remuneration	remuneration 1)	remuneration			options	remunerat
Manage								(non-cash
										ion 1) 2)
ment										benefits)
Board
member
		in €		in % of	in €		in % of	in €		in % of	in €		in % of	in €
				total			total			total			total
Dr. Jan	2023	285,000		55.0	110,000		21.2	18,570		3.6	105,000		20.2	518,570
Schmidt-
2022	285,000		73.3	82,500		21.2	21,395		5.5	0		0.0	388,895
Brand 2)
Professo	2023	240,000		53.3	100,000		22.2	5,663		1.3	105,000		23.3	450,663
r
2022	240,000		73.1	75,000		22.8	13,276		4.0	0		0.0	328,276
Andreas
Pahl
Walter	2023	140,000		46.9	46,670		15.6	7,000		2.3	105,000		35.2	298,670
Miller	2022	-		-	-		-	-		-	-		-	-

1. The exact variable remuneration is usually determined and paid in the following fiscal year. The figures shown here for the 2023 fiscal year are based on provisions that were determined on the basis of assumptions and historical data.
2. The remuneration of Dr. Schmidt-Brand refers to his work as Chief Executive Officer and Chief Financial Officer of
   Heidelberg Pharma AG and as Managing Director of Heidelberg Pharma Research GmbH. A portion of €415 thousand (previous year: €285 thousand) of the total remuneration is attributable to his work as a member of the Executive Management Board of Heidelberg Pharma AG.

The following overview shows the stock options held by members of the Executive Management Board during the year under review and changes in these holdings, as well as the portion of staff costs per beneficiary attributable to these stock options:

	Executive Management		1 Dec. 2022		Additions		Expiry / Return	Exercise	30 Nov. 2023
	Board member
				Number		Number		Number	Number	Number
	Dr. Jan Schmidt-Brand		374,125		60,000		0	0		434,125
	Professor Andreas Pahl		302,125		60,000		0	0		362,125
	Walter Miller		0		60,000		0	0		60,000
	Total		676,250		180,000		0	0		856,250
	Executive Management Board		Expense in the 2023	Fair value of all stock options
	member		statement of		held1
				comprehensive income
				acc. to IFRS 2
				in €			in €
	Dr. Jan Schmidt-Brand		89,205		638,120
	Professor Andreas Pahl		85,411		536,600
	Walter Miller		54,449		105,000
	Total		229,065		1,279,720

1 As of the respective issue date.

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No option rights were held by former Executive Board members at the 30 November 2023 reporting date, nor was any expense recognized for them.

The following figures applied to the previous period:

Executive Management Board		1 Dec. 2021		Additions	Expiry /		Exercise		30 Nov.
member					Return				2022
		Number		Number	Number		Number		Number
Dr. Jan Schmidt-Brand	434,125		0	60,000		0		374,125
Professor Andreas Pahl	302,125		0	0		0		302,125
Total	736,250		0	60,000		0		676,250
Executive Management Board		Expense in the 2022 IFRS	Fair value of all stock options
member		statement of	held1
		comprehensive income
		in €			in €
Dr. Jan Schmidt-Brand				67,241			606,248
Professor Andreas Pahl				66,074			488,787
Total				133,316			1,095,035

1 As of the respective issue date.

1.5 Other remuneration arrangements

Penalty and clawback regulations

There is no option to reclaim variable remuneration components (known as penalty and clawback regulations arrangements). As a result, no such reclaims were made.

Maximum remuneration

The remuneration for members of the Executive Management Board is capped. This defined maximum remuneration amount was not exceeded by any members of the Executive Management Board during the period under review.

The maximum remuneration can be achieved if, in addition to payment of the fixed remuneration (fixed annual salary and retirement benefit commitments), the following conditions in relation to the variable remuneration components (short-term bonus and stock options) are met for the fiscal year:

• The Executive Management Board concerned has achieved 100% of their target in terms of short-term variable remuneration.
• The remaining stock options from the 2023 Stock Option Plan are issued to the members of the Executive Management Board.
• One Executive Management Board member receives 100% of the remaining stock options from the 2023 Stock Option Plan, i.e. 606,311 shares).
• The issue price of the stock options roughly corresponds to the current stock market price of the Company's shares, i.e. approximately €3.50.
• The stock market price of the Company's shares increases by 100% during the four- year waiting period.
• All of the various performance targets of the Stock Option Plan have been met and remuneration is not capped under the provisions of the Stock Option Plan.

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If all of the requirements listed above are met, the hypothetical maximum remuneration for the Executive Board member in question is €2,543,089 per annum.

Contract termination benefits

In the event of the termination of an Executive Management Board member's service for the Company, there is no contractual entitlement to a settlement.

The Executive Management Board's director's contracts do not contain any special termination rights or any severance benefit entitlements in the event of a change of control.

2 REMUNERATION FOR MEMBERS OF THE SUPERVISORY BOARD

In accordance with the Company's Articles of Association, the members of the Supervisory Board receive a fixed remuneration of €15,000 for each full fiscal year of service on the Supervisory Board. The Chairman of the Supervisory Board receives a fixed remuneration of €35,000 and the Vice Chairmen receive €25,000. Supervisory Board remuneration is paid in four equal installments on the last day of February and on 31 May, 31 August and 30 November of each fiscal year.

Members of a Supervisory Board committee are paid a flat fee of €3,000, while chairpersons of such committees are paid €7,000 per fiscal year and committee. In each case, remuneration is limited to activities on a maximum of two committees. Over and above this individual limit, the maximum amount paid by Heidelberg Pharma AG for committee activities of all Supervisory Board members combined is capped at €54,600 per fiscal year. If this cap is not sufficient to cover all memberships and chairmanships of Supervisory Board committees, it is distributed proportionally among all committee members and chairpersons in line with the above provisions, unless the Supervisory Board unanimously resolves a different regulation.

An additional allowance is paid for attendance at a maximum of six Supervisory Board meetings in each fiscal year. Meeting chairpersons are paid a flat fee of €3,000 and all other members €1,500 each per meeting. Supervisory Board members who attend meetings by telephone or virtually receive only half of the allowance. This allowance must be paid with the Supervisory Board member's fixed remuneration. Members of Supervisory Board committees do not receive an attendance allowance for committee meetings.

The remuneration paid to Supervisory Board members who were not in service for a full fiscal year is pro rated in accordance with the duration of their membership on the Supervisory Board.

The Supervisory Board members do not receive variable remuneration, nor are they granted options or similar rights. Supervisory Board members are not entitled to a settlement if their membership ends.

In the 2023 fiscal year, the members of the Supervisory Board were paid remuneration of €197,208 (previous year: €190,175) plus reimbursement of travel expenses.

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The table below shows the individual remuneration.

Supervisory	Board		Fixed remuneration	Attendance	Committee	Total
member		Year			allowance	fee		remunerati
									on
				in % of		in % of			in % of
			in €	total	in €	total	in €		total	in €
		2023	35,000	70.7	7,500	15.2	7,000		14.1	49,500
Professor Christof Hettich	2022	35,000	66.7	10,500	20.0	7,000		13.3	52,500
		2023	25,000	65.8	3,000	7.9	10,000		26.3	38,000
Dr. Georg F. Baur		2022	25,000	62.1	5,250	13.0	10,000		24.8	40,250
		2023	25,000	73.5	6,000	17.6	3,000		8.8	34,000
Dr. Mathias Hothum	2022	25,000	70.4	7,500	21.1	3,000		8.5	35,500
Dr. Friedrich von Bohlen	2023	15,000	83.3	3,000	16.7	0		0.0	18,000
und Halbach		2022	15,000	60.6	3,750	15.1	6,017		24.3	24,767
		2023	15,000	69.0	3,750	17.2	3,000		13.8	21,750
Dr. Birgit Kudlek		2022	15,000	54.9	6,750	24.7	5,579		20.4	27,329
Dr. Dongzhou Jeffery Liu	2023	15,000	71.4	3,000	14.3	3,000		14.3	21,000
2022	2,500	49.2	2,250	44.3	329		6.5	5,079
Dr. Yan Xia (from 29 May	2023	7,708	77.4	2,250	22.6	0		0.0	9,958
2023)		2022	-	-	-	-	-		-	-
Dr. Brady Xumin	Zhao	2023	5,000	100.0	0	0.0	0		0.0	5,000
(until 31 March 2023)	2022	2,500	52.6	2,250	47.4	0		0.0	4,750

3 COMPARISON OF ANNUAL CHANGES IN REMUNERATION

AND THE COMPANY'S EARNINGS PERFORMANCE

In accordance with Section 162 (1) sentence 2 no. 2 AktG, the following table compares the annual change in remuneration for members of the Executive Management Board and the Supervisory Board, the earnings performance of Heidelberg Pharma AG and the average remuneration paid to employees on a full-time equivalent basis for the last five fiscal years.

Remuneration for members of the Executive Management Board and the Supervisory Board corresponds to total remuneration in accordance with Section 162 (1) sentence 1 AktG.

The sales revenue and net profit/loss for the year of Heidelberg Pharma AG (acc. to HGB) and the Heidelberg Pharma Group (acc. to IFRS) are used to determine earnings performance.

The average remuneration paid to employees on a full-time equivalent (FTE) basis relates to employees of the Heidelberg Pharma Group, not including the Executive Management Board. On average, there were 97 such employees for the 2023 fiscal year. This average

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