Annual Report 2021

Governance and RemunerationRemuneration ReportCompensation framework for the Board of Directors

4Compensation framework for the Board of Directors

4.1 Remuneration approach

Pursuant to art. 25 of the Articles of Association, the compensation of the members of the Board of Directors (including the Chairman) is determined by the entire Board of Directors based on the proposal of the Remuneration and Nomination Committee and subject to and within the limits of the aggregate amounts approved by the general meeting. According to section 4(b) of the Organizational Regulations, the Chairman is required to abstain from the deliberation and decision-making about his or her own compensation. The compensation consists of fixed compensation elements and may comprise variable compensation elements. The fixed compensation includes a fixed base fee and fixed fees for chairmanship and memberships in Board committees or for roles of the Board of Directors as well as a lump sum compensation for expenses which are determined by the full Board of Directors based on the proposal of the Remuneration and Nomination Committee, subject to and within the limits of the aggregate maximum amounts approved by the general meeting.

Any variable compensation comprises performance-related compensation elements and financial instruments (e.g., performance stock units (PSU)) and depends on the achievement of strategic and/or financial targets set in advance by the Board of Directors over the course of a performance period defined by the Board of Directors. The compensation is awarded in cash, in form of shares in the Company and other benefits. In case the compensation is paid in whole or in part in shares or financial instruments, the Board of Directors determines the grant conditions as well as any restriction periods and forfeit conditions.

Currently, members of the Board of Directors only receive fixed compensation elements, of which at least half are payable in shares and the remainder in cash. Board members have the option to elect to be paid up to 100% of their fixed fee in shares. For Board members electing to receive more than 50% of their fixed fee in shares, the shares exceeding the 50% portion will be granted at a discount of 20% to market price.⁵ We believe that the share-based component strengthens the alignment of the Board of Directors’ interests with those of our shareholders as well as further incentivizes the members of the Board of Directors to drive PolyPeptide’s success. During the period under review, there were no payments to pension funds or similar institutions for the members of the Board of Directors.

5 The market price is the volume weighted average share price over the last five trading days prior to the quarterly payment date.

Below is an overview of the current remuneration framework for the Board of Directors.

Table 4:
Remuneration framework for the Board of Directors(in CHF)

1 Board members have the option to elect on an annual basis to be paid up to 100% of their fixed fee in shares. For Board members electing to receive more than 50% of their fixed fee in shares, the shares exceeding the 50% portion will be granted at a discount of 20% to market price (calculated based on the volume weighted average share price over the last five trading days prior to the quarterly payment date).

The cash and share compensation are paid out on a quarterly basis. The number of shares is determined by dividing each Board member’s respective share-based compensation by the volume weighted average closing share price over the last five trading days prior to the quarterly payment date (and with a discount of 20% on the shares exceeding 50% of the fixed fee, if applicable) and rounded down to the next whole number of shares. Any shares delivered to Board members in connection with their compensation are / will be blocked for a period of three years from the date of grant.

If a Board member resigns before completion of the respective term of office (i.e., mid-term), such member is entitled to the respective pro-rata compensation earned up and until the resignation date, and any compensation already received in excess of the pro-rata entitlement are to be transferred back to the Company.

In addition, in accordance with art. 25 para. 3 of the Articles of Association, the members of the Board of Directors providing consulting services to PolyPeptide in a function other than as members of the Board of Directors may be compensated in cash according to standard market rates, subject to approval by the general meeting (for further information on such compensation paid in the year ended 31 December 2021, see section 4.2 “2021 compensation of the Board of Directors” of this Remuneration Report). Furthermore, pursuant to art. 27 of the Articles of Association, expenses that are not covered by the lump sum compensation for expenses (if applicable) pursuant to PolyPeptide’s expense regulations are reimbursed against presentation of the relevant receipts. Amounts paid for expenses actually incurred do not need to be approved by the general meeting.

4.22021 compensation of the Board of Directors

The following table shows the compensation of the Board of Directors for the period from 7 April 2021 to 31 December 2021. In light of the Company’s incorporation in 2021 and its recent IPO, there are no meaningful prior year comparisons. For the current period (i.e., until the general meeting 2022), the Board did not receive a lump sum for expenses; rather any expenses incurred were reimbursed against the presentation of the relevant receipts.

Table 5:
Compensation of the Board of Directors (7 April 2021 – 31 December 2021)

CHF	Position	Cash compensation	Share-based compensation 1	Total (cash and shares)	Social security contributions	Total compensation

Peter Wilden	Chairman	56,250	182,346	238,596	16,546	255,142
Patrick Aebischer	Vice-Chairman, Lead Independent Director	37,500	121,519	159,019	8,993	168,012
Erik Schropp 2	Member	–	–	–	–	–
Jane Salik 3	Member	52,500	52,363	104,863	–	104,863
Beat In-Albon	Independent Member	33,750	109,422	143,172	8,007	151,179
Philippe Weber 4	Independent Member	13,500	134,729	148,229	10,271	158,500
Total Board of Directors 5		193,500	600,379	793,879	43,817	837,696

1 The number of shares due quarterly for each Director is the fair value at grant date determined by dividing each Board member’s respective share-based compensation by the volume weighted average share price over the last five trading days prior to the quarterly payment date and rounded down to the next whole number of shares. For Board members electing to receive more than 50% of their fixed fee in shares, the shares exceeding the 50% portion are granted at a discount of 20% to the volume weighted average share price over the last five trading days prior to the quarterly payment date.

2 Erik Schropp, as representative of Draupnir Holding B.V. (one of the Company’s significant shareholders, see section 1.2 “Significant shareholders” of the Corporate Governance Report 2021), waived all compensation for his Board duties for the term of office from the EGM 2021 to the general meeting 2022. However, Mr. Schropp received an IPO Recognition Bonus granted and funded (or reimbursed, as the case may be) by Draupnir Holding B.V. (as selling shareholder) for services rendered on the board of PolyPeptide Laboratories Holding B.V. (the Group’s predecessor holding company). For detailed information on the IPO Recognition Bonus, see section 6 “IPO Recognition Bonus” of this Remuneration Report.

3 Jane Salik also received separate compensation for her role on the Executive Committee up and until 17 August 2021. The total separate compensation paid for her services on the Executive Committee during the period 1 January 2021 to 17 August 2021 is included in the compensation disclosed in the table presented in section 5.2.2 “2021 aggregate compensation of the Executive Committee” of this Remuneration Report. Ms. Salik also received an IPO Recognition Bonus granted and funded (or reimbursed, as the case may be) by Draupnir Holding B.V. (as selling shareholder). For detailed information on the IPO Recognition Bonus, see section 6 “IPO Recognition Bonus” of this Remuneration Report.

4 Philippe Weber is a Partner at Niederer Kraft Frey AG (NKF), which acted as legal adviser to PolyPeptide in connection with its IPO and other ongoing legal matters. For the year ended 31 December 2021, the Group paid CHF 122,559 to NKF for legal services in relation to ongoing legal matters (other than in relation to the IPO), well within the CHF 1 million limit approved by the EGM 2021.

5 One member of the board of directors of PolyPeptide Laboratories Holding B.V. (the Group’s predecessor holding company), who subsequently was not elected to the Board of the Company, received an IPO Recognition Bonus granted and funded (or reimbursed, as the case may be) by Draupnir Holding B.V. (as selling shareholder). For detailed information on the IPO Recognition Bonus, see section 6 “IPO Recognition Bonus” of this Remuneration Report.

For the term to the general meeting 2022, the EGM 2021 approved a maximum aggregate amount of fixed compensation for the Board of Directors of CHF 1.6 million (including social security costs, etc.). The table below shows the reconciliation between the compensation that has been / will be paid / granted for the respective term of office and the maximum aggregate amount approved by the shareholders:

Table 6:
Compensation approved and compensation paid / to be paid / granted for the members of the Board of Directors

	Total compensation granted	Maximum aggregate amount available	Status

EGM 2021 to AGM 2022	CHF 1,120,867 1	CHF 1,600,000	Approved EGM 2021

1 The amount represents an estimate for the term of office from EGM 2021 to the general meeting 2022. The final amount will be disclosed in the Remuneration Report 2022. The amount is calculated as an estimate for the six members of the Board of Directors elected at the EGM 2021, of which one member (Erik Schropp) waived his compensation for his Board duties for the current term of office.

Importantly, the amount of compensation granted for the period referenced in the table above does not include the IPO Recognition Bonus that Erik Schropp and Jane Salik received following the successful IPO granted and funded (or reimbursed, as the case may be) by Draupnir Holding B.V. (as selling shareholder). For detailed information on the IPO Recognition Bonus, see section 6 “IPO Recognition Bonus” of this Remuneration Report.

In addition, with reference to art. 25 para. 3 of the Articles of Association, for the period from the EGM 2021 until 31 December 2021, the Group paid CHF 122,559 to Niederer Kraft Frey AG (NKF), where Philippe Weber (Director) is a Partner, for legal services in relation to ongoing legal matters (other than in relation to the IPO), well within the CHF 1 million limit approved by the EGM 2021. The final amount for the period between EGM 2021 to the general meeting 2022 will be disclosed in the Remuneration Report 2022.

4.3Loans, credits and related-party compensation

In accordance with art. 28 of the Articles of Association, no loans or credits were directly or indirectly granted or outstanding as at 31 December 2021 to current or former members of the Board of Directors or to persons closely associated with current or former members of the Board of Directors.

In addition, during the period under review no compensation, which was not at market terms or standards, was directly or indirectly paid or granted to persons closely associated with current or former members of the Board of Directors.