Cembra Money Bank : Compensation Report 2021 - Extract from the Annual Report 2021

Compensation Report

96 Compensation Report

97 Message from the Chairperson of the Compensation and Nomination Committee to the Shareholders

99 1 Compensation policy and guiding principles

100 2 Compensation governance

103 3 Compensation of the Board of Directors

106 4 Compensation of the Management Board

115 5 Compensation awarded to all employees

116 6 Shareholdings and loans

117 Report of the statutory auditor

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Message from the Chairperson of the Compensation and Nomination Committee to the Shareholders

Dear Shareholders

On behalf of the Board of Directors and the Compensation and Nomination Committee ("CNC"), I am pleased to introduce the Compensation Report 2021 of Cembra Money Bank AG (hereafter referred to as "Cembra" or "the Bank").

2021 was a year of significant developments for Cembra. On 1 March 2021, we welcomed our new CEO Holger Lauben- thal who succeeded Robert Oudmayer; at the Annual General Meeting on 22 April 2021, our shareholders newly elected Martin Blessing and Susanne Klöss-Braekler to the Board of Directors and Martin Blessing was thereafter appointed as new CNC chairperson succeeding Urs Baumann. On the business side, Cembra and IKEA Switzerland launched the IKEA Family credit card in April 2021; on 23 August 2021, we announced that after a successful 15-year partnership, Cembra and Migros would terminate their cooperation agreement for the Cumulus-Mastercard credit card as of June 2022; and on its Investor Day on 7 December 2021, Cembra presented its updated strategy for 2022-2026. Cembra's new strategy is presented in the Management report on page 18.

2021 financial performance

In 2021, Cembra's net income increased by 6% to CHF 161.5 million, or CHF 5.50 per share. Net revenues declined by 2%, with commission and fee income increasing by 7% following a rebound that began in the second quarter. Despite the challenging environment, the loss performance remained very strong at 0.6%, or 0.8% adjusted for a sale of loss certifi- cates. As a result, return on equity came in at 13.9%, and the Tier 1 capital ratio stood at 18.9% (see Shareholders' Letter 2021 page 6-7). Due to the announcement of the termination of the Migros partnership, total return for our shareholders was negative, at -35% in 2021.

Management Board performance

These achievements are reflected in the compensation decisions for 2021. Based on the goal framework for the Management Board and the related achievements, the total compensation for the Group's Management Board was TCHF 5,823 for 2021, as compared to the budget of TCHF 6,400 comprising the fixed compensation approved at the Annual General Meeting 2020 and the variable compensation approved at the Annual General Meeting 2021. The total compensation in the previous year was TCHF 5,074 compared to an approved total compensation of TCHF 6,400. The total compensation for 2021 was higher than for the previous year due to a higher total amount for fixed compensation because of the Bank's contractual obligations for the previous CEO for the performance year 2021. The total compensation paid to the Management Board, excluding the former CEO and the current CEO, amounts to TCHF 3,464 and is comparable to total compensation paid in 2020 (TCHF 3,494).

Compensation disclosure and shareholders' feedback

As in previous years, we greatly appreciated the opportunity to continue our dialogue with investors and stakeholders. As a result of this ongoing dialogue, we have increased the level of disclosure of our Executive Variable Compensation Plan mechanisms. We enhance the description of the scorecard for our short-term incentive programme by providing the goals and their weights individually for the CEO and each of the Management Board members. Further, we enhance the description of the payout mechanism for our long-term incentive plan.

Changes to the Management Board

Holger Laubenthal took over the function as CEO of Cembra, effective 1 March 2021, succeeding Robert Oudmayer. Both CEOs worked together during a period of transition to ensure a successful hand over of responsibilities and Rob- ert Oudmayer went on early retirement as planned at the end of December 2021. Holger Laubenthal's overall target compensation is comparable to that of the previous CEO. The compensation paid for 2021 to the departing CEO is in accordance with his contractual terms and is disclosed in section 4 of this report.

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As announced on 7 December 2021, Cembra is combining its client-facing units in the newly created Sales and Distribution division as part of its updated strategy. On 1 January 2022, Peter Schnellmann, who already worked for Cembra in leading positions from 2009 to 2018, was appointed Chief Sales and Distribution Officer and member of the Management Board. Peter Schnellmann's target compensation is in line with the compensation framework for Management Board members and will be included in the Compensation Report 2022. Daniel Frei, Managing Director B2C, and Jörg Fohringer, Managing Director B2B, stepped down from the Management Board on 31 December 2021. The two departing Management Board members will receive compensation in accordance with their contractual terms for the 6-month notice period.

Annual General Meeting 2022

You will have the opportunity to express your opinion on the compensation programmes through a non-binding, consultative shareholders' vote on this Compensation Report at the Annual General Meeting in April 2022. Furthermore, we will ask you to vote on the maximum total compensation amount for the Board of Directors for the Annual General Meeting 2022 to Annual General Meeting 2023 term of office and on the maximum total compensation for the Management Board to be paid out in the financial year 2023.

Looking ahead, we will continue to assess and review our compensation programmes to ensure that they are still fulfilling their purpose in the evolving context in which the Group operates and that they are aligned to the interests of our shareholders. We would like to thank you for taking the time to share your views with us during the entire year and trust that you find this report informative.

Martin Blessing

Chairperson of the Compensation and Nomination Committee

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1 Compensation policy and guiding principles

Cembra's overall objective is to build on its position as a leading Swiss provider of consumer finance products and ser- vices. The success of Cembra largely depends on the quality and engagement of its employees.

The compensation policy is designed to align employees with the long-term interests of our stakeholders and is based on the following three main guiding principles:

Pay for performance in alignment with Cembra's values

We endorse a performance-oriented approach coupled with sound risk management practices. The compensation policy supports a culture that differentiates and rewards excellent performance and recognises behaviours in line with Cembra's values. Variable compensation of the Management Board is based on the achievements of Cembra's objectives as well as individual performance. In order to avoid excessive risk taking, risk metrics and behaviours are included in the performance evaluation, and the variable compensation payouts are capped.

Market competitiveness and fairness

We are committed to rewarding employees appropriately and competitively. The compensation guidelines ensure that compensation is based on the responsibilities and performance of the employees and is not influenced by gender or by non-performance-related criteria other than professional experience. In line with best practices, Cembra regularly benchmarks the compensation for the Bank's management to ensure that it is competitive and in line with market developments in order to be able to attract and retain talented executives. For the members of the Management Board, a benchmark analysis is generally conducted every two to three years.

Good governance practice

We want to ensure that our compensation practices are transparent for Cembra's stakeholders and aligned with long- term shareholder interests. We adhere to the rules set by the Ordinance against Excessive Compensation in Listed Corporations (OaEC). Furthermore, the compensation guidelines take into consideration the rules of FINMA Circular 2010/1 "Remuneration schemes".

With regards to control functions, Cembra ensures that the remuneration structure and goals for control functions are predominantly linked to the core duties of the functions. The compensation plans do not create incentives that lead to conflicts of interest with the tasks of control functions. This means in particular that the variable compensation of these individuals is not based solely or largely on financial measures and is not directly dependent on the financial performance of the business units, specific products, or transactions these individuals monitor.

Should an individual being responsible for a control function also be in charge of certain operational tasks, the compensation structure ensures that no inappropriate incentives are created.

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2 Compensation governance

2.1  Compensation and Nomination Committee

According to the Articles of Incorporation and the Organisational Regulations (available at www.cembra.ch/corporat- egovernance) as refined by further internal regulations, the functions, responsibilities and powers of the CNC essentially comprise the following elements:

The CNC supports the Board of Directors in nominating and assessing candidates for positions to the Board of Directors and in assessing candidates for positions to the Management Board, in establishing and reviewing the compensation strategy and principles, and in preparing the respective proposals to the Annual General Meeting regarding the compensation of the members of the Board of Directors and the Management Board.

The CNC annually reviews and makes a recommendation to the Board of Directors concerning the structure and amount of the individual compensation of members of the Board of Directors and any additional compensation to be paid for service as Chairperson or Vice Chairperson of the Board of Directors and as Chairperson or member of Board committees. The members of the Board of Directors shall abstain from voting when their own individual compensation is concerned.

Furthermore, the CNC annually (a) reviews and assesses the objectives upon which the compensation of the CEO and the other members of the Management Board is based; and (b) evaluates the performance of the CEO and reviews, based on the assessment of the CEO, the performance of the other members of the Management Board in the light of these objectives. Based on the performance evaluation, the CNC makes a recommendation to the Board of Directors concerning the individual compensation of the CEO. With regard to the other members of the Management Board, the CNC makes a recommendation to the Board of Directors, based on the CEO's proposal, regarding appropriate individual compensation levels as to (a) the annual base salary level; (b) the annual incentive opportunity level; (c) the long-term incentive opportunity level; (d) any employment agreements and other arrangements or provisions; and (e) any special or supplementary benefits.

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:

Decision on	Recommendation by	Review by	Approval by
Compensation policy and principles	CNC		Board of Directors
Incentive compensation plans including
share-based compensation	CNC		Board of Directors
Aggregate compensation amount of Board			Annual General Meeting
of Directors	CNC	Board of Directors	(binding vote)
Individual compensation of Chairman and
members of the Board of Directors	CNC		Board of Directors
Aggregate compensation amount of			Annual General Meeting
Management Board	CNC	Board of Directors	(binding vote)
Compensation of Chief Executive Officer	CNC		Board of Directors
Individual compensation of members of
the Management Board (excluding CEO)	CEO	CNC	Board of Directors

The 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. Re-election is possible.

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