Cembra Money Bank : Compensation Report 2023 - Extract from the Annual Report 2023

Compensation Report

105 Compensation Report

106 Letter from the Chairperson of the Compensa- tion and Nomination Committee

108 1 Compensation at a glance

110 2 Compensation Governance

113 3 Process of determination of Board of Directors and Management Board Compensation

114 4 Board of Directors Compensation System

115 5 Management Board compensation system

122 6 Compensation awarded to the Board of Directors in 2023

125 7 Compensation awarded to the Management Board in 2023

127 8 Compensation awarded to former members of the Board of Directors and to former members of the Management Board

128 9 Shareholding and loans

129 10 Functions held by members of the Board of Directors and members of the Management Board in other companies

On 1 January 2023, the revised Swiss Company Law entered into force. Among other changes, the Ordinance against Excessive Compensation in Listed Stock Corporations was repealed and, with few changes transferred to the new law. The Compensation Report is written in accordance with the requirements of the revised Swiss Company Law, the Directive on Information relating to Corporate Governance of the SIX Exchange Regulation and the principles of the Swiss Code of Best Practice for Corporate Governance by economiesuisse. The compensation principles take into consideration the rules of FINMA Circular 2010/1 "Remuneration schemes".

Compensation Report

Letter from the Chairperson of the Compensation and Nomination Committee

Dear Shareholders,

On behalf of the Board of Directors and the Compensation and Nomination Committee ("CNC"), I am pleased to introduce the Compensation Report 2023 of Cembra Money Bank AG (hereafter referred to as "Cembra" or "the Bank"). This report outlines the compensation for Cembra's Board of Directors as well as for the members of the Management Board in 2023. It explains the underlying framework and philosophy, highlights the changes made during the reporting year and outlines how the business results impacted the variable compensation paid to the Management Board.

Compensation and Nomination Committee Activities

In the reporting year, the CNC, amongst others, has particularly focused on the following topics:

-  Compensation structure of the Management Board and Board of Directors

-  Further development of the variable compensation framework considering sustainability -  Succession planning including gender diversity

-  Nomination and assessment of candidates for the Management Board and Board of Directors

-  Objectives setting and performance evaluation based on strategic assessment and individual performance

Following Board of Directors' approval, the CNC implemented the following changes to the compensation structure for the Management Board and for the Board of Directors that were announced in the Compensation Report 2022:

-  The compensation mix for the Management Board is adjusted to give more weight to the variable compensation and the weight of the long-term incentive (LTI) is increased to 50% of the target bonus

-  The variable compensation plan for the Management Board includes shareholding requirements underpinned with a share-matching plan and the introduction of a five-year blocking period on the LTI shares vested

-  The Board of Directors is required to hold a minimum number of companies shares for a period of five years

The changes implemented are described in details in the relevant sections of this report.

The CNC is proposing a change to the Board of Directors, which, if approved by the Annual General Meeting, will increase the Board experience in the areas of technology and digitalization. Both areas are critical for Cembra's business transformation as outlined in Cembra's Strategic Plan 2022-2026. With the members proposed to the Annual General Meeting for voting the proportion of female board members will increase above the 30% threshold (50% for the mandate year 2024-2025). The Board of Diretors aims to continue to keep a 30% threshold of female board membership in the future.

There will also be some changes in the Management Board strengthening further its customer and growth focus as well as its digital transformation and technology experience.

-  Christian Stolz, Business Unit Leader Payments, will be appointed as an additional member of the Management Board following the new organisational structure with the creation of two essential business lines, Payments and Lending.

-  Sandra Babylon will join Cembra as Chief Technology Officer and member of the Management Board.

Shareholders' feedback

As in previous years, we greatly appreciated the opportunity to continue our dialogue with investors and stakeholders. At our 2023 Annual General Meeting, the shareholders expressed their support of the 2022 Compensation Report with about 85% (prior year: 75%) of the votes. This positive voting outcome development encourages us continuing the close dialogue and further development of the compensation structure and reporting. As sustainability is an increasingly important factor also in remuneration of the Management Board, additional changes to the variable compensation framework will be introduced for the new reporting year.

Compensation Report

Annual General Meeting 2024

You will again have the opportunity expressing your opinion on the compensation programmes through a non-binding, consultative shareholders' vote on this Compensation Report at the Annual General Meeting in April 2024. Further- more, we will ask you to vote on the maximum total compensation amount for the Board of Directors for the Annual General Meeting 2024 to Annual General Meeting 2025 term of office and on the maximum total compensation for the Management Board to be paid out in the financial year 2025.

Looking ahead, we encourage and pursue open and regular dialogue with our shareholders and their representatives, as we continue to evolve our remuneration system, with the goal of ensuring continued alignment with the strategy and performance of Cembra and the interests of our shareholders.

On behalf of the Board of Directors and the CNC, I would like to sincerely thank you again for your feedback and trust you will find this report informative.

Susanne Klöss-Braekler

Chairperson of the Compensation and Nomination Committee

Compensation Report

1 Compensation at a glance

Total compensation awarded to the Board of Directors for the term of office AGM 2023-AGM 2024

Members of the Board of Directors (BoD) only receive a fixed compensation. Two-thirds of the compensation is delivered in cash and one-third of the compensation is delivered in shares subject to a blocking period of five years.

Total compensation Board of Directors

in TCHF

Please refer to section 6 for detailed disclosure.

Total compensation delivered to the Management Board for the performance year 2023

The compensation of the Management Board consists of fixed and variable elements. Base salary and benefits form the fixed compensation and are based on prevalent market practice. Variable compensation consists of short-term and long-term elements and rewards performance against pre-determined targets as well as alignment with long-term shareholder interests. As of 31 December 2023, the Management Board was constituted of seven members, including the CEO. Please refer to section 7 for detailed disclosure.

Total compensation delivered for the performance year 2023

TCHF 5,608

Maximum aggregate compensation approved by the AGM 2022 for the year 2023

TCHF 7,472

Compensation Report

Response to feedback received during the last year

In the dialogue with our shareholders and their representatives during the year 2023, we received positive feedback on the adjustments made to the compensation framework of our Management Board and on the increased level of disclosure transparency and readability of the compensation report. This positive feedback was reflected in the substantially improved voting results at the AGM 2023. Our shareholders provided additional feedback that we aim to further incorporate. The table below sets out the main concerns raised by shareholders and the actions we have taken to address them.

Compensation Report

2 Compensation Governance

Shareholders' involvement

The shareholders are involved and have decision-making authority on various compensation matters. They annually approve the maximum amounts of compensation for the Board of Directors and for the Management Board in separate votes. We further ask our shareholders annually for their opinion and feedback on our compensation system in general via our consultative vote on the Compensation Report. In addition, the principles of compensation are governed by the Articles of Incorporation, which have been approved by the shareholders. The provision of the Articles of Incorporation on compensation are summarised below and can be found on our website (please refer to www.cembra.ch/governance under "Regulations and principles"):

-  Compensation principles applicable to the Board of Directors (art. 25c): The compensation of the Board of Directors consists of fixed compensation for services rendered as a member of the Board of Directors and - if applicable - as a committee member or a committee chairperson, which may be paid out partially in cash and partially in blocked, registered shares of the Bank.

-  Compensation principles applicable to the Management Board (art. 25d, 25h, 25i): The compensation for the Management Board consists of a fixed base salary paid in cash and a variable compensation. Variable compensation may comprise short-term and long-term elements. Compensation may be paid in cash, shares or other benefits.

- Say-on-pay vote (art. 11a): The Annual General Meeting annually approves the aggregate maximum amounts of compensation of the Board of Directors for the period until the next ordinary Annual General Meeting and the maximum compensation of the Management Board that is awarded or paid out in the business year following the Annual General Meeting. In addition, the Compensation Report is submitted to a consultative vote.

-  Additional amount for new members of the Management Board (art. 25e): The additional aggregate compensation per year for all new members of the Management Board appointed after the Annual General Meeting has approved the aggregate maximum compensation shall not exceed 30% of the last aggregate maximum compensation amount approved by the Annual General Meeting.

-  Loans, credits and pension benefits (art. 25g): The Bank may grant loans, credits, and pension benefits outside the occupational pension scheme to the members of the Board of Directors and the members of the Management Board to an extent that in total does not exceed 50% of the maximum total remuneration last approved by the Annual General Meeting. The payment of bridge or interim annuities by the Bank to members of the Management Board is possible between early retirement and the statutory retirement age.

The Bank also engages in dialogues with shareholders and their representatives on a regular basis to gather outside perspectives.

Compensation and Nomination Committee

According to the Articles of Incorporation and the Organisational Regulations (available at www.cembra.ch/corpo- rategovernance under "Regulations and principles"), the Compensation and Nomination Committee (CNC) consists of at least two but not more than four members of the Board of Directors who are elected annually and individually by the Annual General Meeting for a period of one year. At the Annual General Meeting 2023, Mrs Susanne Klöss-Braekler (Chairperson), Mr Thomas Buess, and Mr Marc Berg were elected members of the CNC. Information on the individual members of the Board of Directors including other external mandates can be found in the Corporate Governance Report on page 76. Re-election is possible.

The functions, responsibilities and powers of the CNC are specified in art. 22a of the Articles of Incorporation and comprise the following elements:

-  Nominate and assess candidates for positions to the Board of Directors and assess candidates for positions to the Management Board

-  Establish and review the compensation strategy and principles

-  Propose to the Board of Directors the maximum aggregate amounts of compensation of the Board of Directors and of the Management Board to be submitted to the shareholders' vote at the Annual General Meeting

Compensation Report

-  Annually review and make a recommendation to the Board of Directors concerning the structure and amount of the compensation for the members of the Board of Directors, the CEO, and the other members of the Management Board

-  Annually review and assess the objectives upon which the compensation of the CEO and the other members of the Management Board is based

-  Provide the Board of Directors with a performance assessment of the CEO and of the other members of the Management Board and make a recommendation on the individual compensation level of the CEO and of the other members of the Management Board together with a recommendation on the annual incentive opportunity level and the long-term incentive opportunity level

-  Recommend to the Board of Directors any employment agreements and other arrangements or provisions, and special or supplementary benefits for the CEO and the other members of the Management Board

The members of the Board of Directors shall abstain from voting when their own individual compensation is concerned.

Approval and authority levels

The following table illustrates the breakdown of decision-making authority between the CNC, the Board of Directors and the Annual General Meeting in matters related to the compensation of the Board of Directors and the Management Board:

Generally, meetings of the CNC are attended by the Chairman of the Board of Directors, the CEO and the head of human resources in an advisory capacity as guests. However, they do not take part in the section of the meetings where their own performance and/or compensation are discussed and have no voting rights. Other members of the Management Board and Board of Directors as well as other individuals may be invited if deemed necessary. The Chairperson of the CNC reports to the Board of Directors after each meeting on the activities of the CNC. The minutes of the CNC meetings are available to all members of the Board of Directors.

Compensation Report

The CNC holds meetings at least once every quarter. During 2023, the CNC held three meetings as conference calls and four meetings in person. All meetings were fully attended by all CNC members. The table below presents a high-level overview of the activities performed in each of the meetings:

Jan Feb Mar May1 Aug Oct

Compensation governance, principles and compliance

Review external stakeholders feedback on Compensation policy and disclosure

CNC charter review

Compensation report review

Company Pension Fund update

Board of Directors Compensation

Determine BoD compensation for next office term for Annual General

Meeting vote

Management Board Compensation

Executive Variable Compensation Plan - framework assessment

Performance review and bonus approval

LTI strategic assessment

Set goals and objectives for upcoming year

Individual compensation review

Determine maximum aggregated compensation amount for Annual General Meeting vote

EPS target approval for LTI 2023 - 2025

Nomination and succession planning

Recruitment for new members of the BoD2

Review BoD composition

BoD performance assessment

Nomination of BoD & CNC Members for next office term

Election of the CNC Chair

Succession planning review for MB members and their direct reports

1. Two meetings took place in May 2023
2. Ongoing activity

Role of external advisors

The CNC may decide to consult external advisors from time to time for specific compensation matters. In 2023, no external advisor was consulted. Internal compensation experts such as the head of human resources provided support and expertise.

For further governance-related information, see the Corporate Governance Report on page 75.

Compensation Report

3 Process of determination of Board of Directors and Management Board Compensation

To assist decision-making on the compensation of the Board of Directors and Management Board, benchmarking studies are carried out periodically. The compensation practices of comparable companies are analysed in order to assess market practices and competitive compensation levels and structures. The results of the benchmarking studies are taken into account in setting the fee structure and levels for the Board of Directors as well as the compensation structure and levels for the CEO and the other Management Board members.

The CNC also considers other factors it deems relevant in its judgement such as Cembra's performance, the environment in which Cembra operates, individual performance of the members of the Management Board.

Further details of the benchmarking analyses and the peer groups of companies are provided below.

Benchmarking and peer group

Benchmarking and peer group for Board of Directors Compensation

The CNC regularly reviews the compensation of the Board of Directors as well as the peer group used for benchmarking studies. The most recent benchmarking was conducted in 2022 by the Company's independent advisors of HCM International Ltd, to assess the market competitiveness of the compensation of the members of the Board of Directors in terms of structure and quantum. The peer group consisted of financial institutions listed in Switzerland with comparable governance arrangements to take account of industry specifics that may affect the supervisory mandate of the Board of Directors. The difference in size of the companies in the peer group was normalised through a regression analysis to ensure a congruent comparison. This general approach has remained unchanged since 2015, thereby establishing stability in approach and comparability over the years. The final comparison group consisted of 18 companies:

Peer group for Board of Directors compensation benchmarking purpose in 2022

The next peer group review is planned for 2024.

The guiding principles for the fee structure are as follows:

-  For all members of the Board of Directors, total compensation shall be at or below the market benchmark; and -  The internal pay equity ratios between the Chairman of the Board of Directors, the Vice Chairman of the Board of

Directors and the ordinary Board of Directors members shall be maintained at comparable market level.

Following the review conducted in 2022, the basic fees were adjusted and minimum shareholding requirements were introduced as from the office term 2023, while the committee fees stayed unchanged. Further details on the compensation system for the Board of Directors are provided in section 4 of this report.

Benchmarking and peer group for Management Board Compensation

The compensation of the Management Board is reviewed annually considering among other elements, compensation benchmark information provided by an independent consulting firm. The benchmark analysis is typically performed every two years and generally also includes a review of the applied peer group. The latest benchmark analysis was performed in 2022 by Willis Towers Watson considering a peer group of 15 companies based in Switzerland and Liech- tenstein that are comparable in size and industry sector. The peer group was set so that Cembra is positioned around the market median in terms of revenue, market capitalisation and headcount and comprises the following companies:

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Peer group for Management Board compensation benchmarking

The total direct compensation on target shall be positioned between the median and the upper quartile of the market benchmark. The benchmark analysis assisted the review of the compensation structure conducted in 2022 and supported the decision-making on the changes implemented in 2023.

4 Board of Directors Compensation System

Compensation principles of the Board of Directors

To underpin their independence in their supervisory duties, the members of the Board of Directors receive only fixed compensation and no variable elements nor pension benefits. Reasonable cash expenses that occur in the discharge of their duties are reimbursed as incurred. The compensation is delivered partially in cash and partially in blocked shares to strengthen the alignment with shareholders' interests.

The fee structure for the members of the Board of Directors consists of an annual fixed compensation for services on the Board of Directors ("basic fee") and additional fees ("committee fees") for serving on committees of the Board of Directors. The Chairman of the Board of Directors receives only a basic fee and is not compensated for any additional work on committees.

One-third of the compensation is delivered in Cembra Money Bank AG shares blocked for a period of five years during which they cannot be sold, transferred or pledged. Should the Board member not stand for re-election at the Annual General Meeting, the initial blocking period will be lifted, but the shares will remain blocked until the earlier of two years after such date or the regular expiry of the blocking period. In case of death, disability or change of control, the blocking period may be lifted immediately.

Structure of the Board of Directors compensation

1 The Chairman of the Board of Directors is not eligible for additional committee fees

The pay structure (basic and committee fees), pay mix (cash or equity) and levels of compensation have been set up in 2015 and reviewed in a benchmarking study conducted in 2022 by the Company's independent advisors of HCM International Ltd as described in chapter 3 of this report. At the AGM 2023, the shareholders approved an increase to the basic fee for the members of the Board of Directors and for the Chairman of the Board.