Report
Expert Corporate Governance Service (ECGS)
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Proxy Report - 08/03/2018

General: B.R.A.I.N. Biotechnology Research and Information Network AG is one of Europe's leading technology companies in the field of industrial biotechnology, the core discipline of Bioeconomy. The Company identifies previously untapped, efficient enzymes, microbial producer organisms or natural substances from complex biological systems that can be put to industrial use. BRAIN's business model is based on two pillars – BioScience and BioIndustrial. BioScience comprises its frequently exclusive collaboration business with industrial partners. BioIndustrial comprises the development and commercialisation of the Company's own products and active product components.
The Company has issued 18,055,782 shares. As of 30 September 2017, MP Beteiligungs-GmbH held 34.7%, DAH Beteiligungs-GmbH held 9.1% and 'founders and management' held in total 7.7% of the Company's shares.
In financial year 2016/2017, total revenues amounted to EUR 24.1m (+5.77%), EBIT amounted to EUR -9.4m (previous year: EUR -13.8m) and net loss attributable to the shareholders of B.R.A.I.N. Biotechnology Research and Information Network AG amounted to EUR -9.6m (previous year: EUR -14.7m).
Item 4: We reommend to oppose the discharge of the Chairman of the Supervisory Board's Personnel Committee, Dr. Ludger Müller, due to our concerns over the current remuneration system for the Management Board and the fact that it has not yet been put up to shareholder approval. Furthermore, we note the insufficient attendance of Supervisory Board members Dr. Holger Zinke and Dr. Matthias Kromayer in financial year 2016/2017. As the discharge is proposed in a bundled resolution, we recommend shareholders to oppose the discharge of the Supervisory Board as a whole.
Item 5: We recommend to oppose the election of Dr. Rainer Marquardt to the Supervisory Board due to our concerns over the insufficient independent representation on the Board.
Item 6: The Company shall be authorised until 7 March 2023 to increase the share capital by up to EUR 9,027,891 (50% of the share capital) by issuing shares against contributions in cash and/or in kind. The total shares issued while disapplying preemptive rights under the proposed authorisation may reach up to 50% of the share capital which significantly exceeds our guidelines according to which we accept a maximum potential dilution of 10%. We recommend opposition.
Item 7: Approval is sought for an investment agreement to be concluded between the Company and Hessen Kapital II GmbH. It is planned that Hessen Kapital II GmbH shall render a cash contribution of EUR 3.0m as a typical silent partner in the Company's assets. The invested capital is to be utilised exclusively for the co-financing of research expenses. An annual fixed payment and an annual profit participation are planned as investment fees. We consider that possible alternatives to the conclusion of the investment agreement have not been sufficiently examined and/or are not adequately disclosed by the Company. Furthermore, we consider the annual fixed compensation of 6%, which may be increased up to 8% in certain cases, to be relatively high. Given the amount of the cash contribution to be rendered (EUR 3.0m) and the duration of the silent partnership (until 31 March 2028) we consider the investment agreement not to be in the best interest of the Company. We therefore recommend shareholders to oppose the approval of the investment agreement.

Underlying
Brain Biotechnology Research and Information Network AG

BRAIN Biotechnology Research and Information Network AG is a Germany-based industrial biotechnology company, which is active in two segments: The BioSciences segment comprises research and development activities related to replacing classical chemical and industrial processes with biotechnology processes, and the BioIndustrial segment focuses on the development of own products for both companies and consumers. The Company develops drugs, bioactive natural compounds and enzymes for customers in the chemical and pharmaceutical industries, as well as in the food and cosmetics industries. It offers research and development collaboration, as well as strategic partnerships and exclusive licensing agreements through all phases of enzyme and biological compound discovery to application development and production. The Company's product portfolio includes EvoSolution, METAGENOME, BRAINzyme, LIL, ABEL, CompActives and BioCompActives.

Provider
Proxinvest
Proxinvest

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Analysts
Expert Corporate Governance Service (ECGS)

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