Deutsche Pfandbriefbank : Corporate Governance Statement 2023

Corporate Governance Statement 2023

Deutsche Pfandbriefbank Group

Corporate Governance Statement

Declaration of Compliance with the German Corporate Governance Code, pursuant to section 161 of the German Public Limited Companies Act (Aktiengesetz - "AktG").

Corporate Governance Statement

The Corporate Governance Statement was not part of the audit carried out by the external audi- tors.

Declaration of Compliance with the German Corporate Governance Code, pursuant to section 161 of the German Public Limited Companies Act (Aktiengesetz - "AktG").

Since 16 July 2015, Deutsche Pfandbriefbank AG's ("pbb") shares have been listed on the Frankfurt Stock Exchange. Since that date, pbb has been subject to disclosure requirements pursuant to section 161 of the AktG. All Declarations of Compliance are available on the Company's web- site: www.pfandbriefbank.com/en/investors/mandatory-publications.html.

Pursuant to section 161 (1) sentence 1 of the AktG, the Management Board and the Supervisory Board of pbb shall declare, at least on an annual basis, that the Company has complied with, and continues to comply with, the recommendations of the Government Commission "German Corporate Governance Code" (GCGC), or which recommendations have not been (or are not being) complied with, stating reasons for any non-compliance (the concept of "comply or explain").

The last Declaration of Compliance issued by the Management Board and the Supervisory Board is dated 24 February 2023. This was already based on the version of the "German Corporate Governance Code" presented by the Government Commission on the "German Corporate Governance Code" on 28 April 2022 and published in the Federal Gazette on 27 June 2022. In this respect, the Management Board and the Supervisory Board of pbb declare that since the issuance of the last Declaration of Compliance, all recommendations of the Government Commission on the "German Corporate Governance Code" in the valid version of 28 April 2022 have been complied with and are complied with now, with the following exceptions:

Recommendation	In deviation from the three-year term of office stipulated for initial appoint-
B.3	ments in accordance with Section 11 (3) sentence 1 of the Supervisory
	Board's rules of procedure and recommendation B.3 of the GCGC, the Su-
	pervisory Board decided to appoint Mr Kay Wolf as a member of the Man-
	agement Board for a period of five years from 1 February 2024 on the rec-
	ommendation of the Executive and Nomination Committee. Both the Execu-
	tive and Nomination Committee and the Supervisory Board focused on the
	stable and long-term development of the company - particularly in light of the
	challenging real estate market development. After weighing up the corre-
	sponding opportunities and risks and on the basis of Kay Wolf's qualifications
	and experience, the Supervisory Board therefore opted for an (initial) ap-
	pointment with a term of five years.

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	Corporate Governance Statement
	Declaration of Compliance with the German Corporate Governance Code,
	pursuant to section 161 of the German Public Limited Companies Act
	(Aktiengesetz - "AktG").
Recommendation	Dr Günther Bräunig, the former Chairman of the Supervisory Board and
C.10	Chairman of the Remuneration Committee as well as of the Executive and
	Nomination Committee, was first elected to pbb's Supervisory Board in 2009
	and remained a member of the Supervisory Board until his departure at the
	end of 25 May 2023. Due to his long-standing membership of the Supervisory
	Board since 2009, he was not considered independent of the Company as a
	precautionary measure. Since Dr Günther Bräunig left the Supervisory
	Board, recommendation C.10 has been complied with again.
Recommendation	According to Section D.10 of the GCGC, the Audit Committee should also
D.10	regularly consult with the auditor without the presence of the Management
	Board. In the past financial year, there was no reason for the Audit and Dig-
	italisation Committee to meet without the Management Board. However, dur-
	ing the period in question, the Chairwoman of the Audit and Digitalisation
	Committee regularly discussed the progress of the audit with the auditor with-
	out the participation of the Management Board and reported on this to the
	Supervisory Board. The Supervisory Board also exchanged information with
	the auditor alone at the balance sheet meeting in March 2023.
Recommendation	Referring to section G.10 of the GCGC, which stipulates that long-term vari-
G.10	able remuneration components granted to Management Board members
	shall be accessible only after a period of four years, pbb hereby deviates
	from this rule. Portions of the deferred variable remuneration might be ac-
	cessible before that period. However, the following consideration should be
	taken into account in this context:
	The intention of the rules laid out in the GCGC, i.e. granting variable remu-
	neration over a multiple-year period on a sustainable basis, is considered by
	applying compulsory performance measurement and disbursement regula-
	tions pursuant to the German Regulation on Remuneration in Financial Insti-
	tutions (Institutsvergütungsverordnung - "InstVergV"), which ultimately go far
	beyond the GCGC recommendations in terms of granting remuneration on a
	long-term basis.
	Firstly, target achievement at institutional level, which is the relevant factor
	for the variable remuneration of Management Board members, depends on
	the Company's performance over three consecutive financial years.
	Secondly, pbb's disbursement structure provides for the variable remunera-
	tion to be divided into a disbursement portion and a deferral portion. The
	disbursement amount constitutes 40% of the variable remuneration, with the
	deferral portion amounting to 60%.
	50% of the disbursement amount is paid out in cash when the conditions for
	disbursement have been met. The remaining 50% is disbursed after a reten-
	tion period of one year, after the amount has been adjusted in line with the
	performance of the pbb share (sustainability component).
	The deferral period for the deferral portion is five years. In each of the five
	years following determination of the variable remuneration, the Supervisory
	Board decides, within an ex-post variable remuneration review, whether one
	fifth of the deferral portion will be granted (ex-post risk adjustment). Until the
	end of each deferral period, there is no entitlement to the relevant remuner-
	ation components. Once the deferred remuneration components become an
	entitlement, half of the respective deferral portion is paid out in cash. The
	remaining half is retained for another year, and is adjusted again in line with
	the performance of the pbb share (sustainability component).

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Corporate Governance Statement

Declaration of Compliance with the German Corporate Governance Code, pursuant to section 161 of the German Public Limited Companies Act (Aktiengesetz - "AktG").

Effective 1 January 2018, the conditions to apply clawback options for variable remuneration already paid out were contractually agreed upon with all Management Board members.

Furthermore, the recommendation in section G.10 of the GCGC stipulates that the long-term variable remuneration amounts of Management Board members shall be largely invested in company shares by the respective Management Board member, or shall be granted as share-based remuneration. Given that these stipulations no longer exclusively refer to long-term variable remuneration amounts, pbb hereby deviates from the recommendation because only half of the variable remuneration is share-based (and therefore not predominantly so).

Munich, 23 February 2024

The Management Board

The Supervisory Board

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Corporate Governance Statement

Corporate Governance Report

Corporate Governance Report

pbb is a leading European specialist bank for commercial real estate finance; with an outstanding issuing volume of just under €24 billion, it ranks amongst the largest issuers of Pfandbriefe. pbb has been listed in the Prime Standard segment of the Regulated Market at the Frankfurt Stock Exchange since 16 July 2015. Its shares are included in the SDAX®. pbb holds a General Meeting of shareholders at least once a year, giving all shareholders the opportunity to participate in shaping the development of their Company. As a significant institution, pbb is subject to the direct supervision of the European Central Bank and the Single Resolution Board.

The Bank has summarised the essential rules applicable to pbb Group in a framework on internal governance which is available not only to the Management Board and Supervisory Board, but also to all employees. Among other things, it states the composition and workflows of the Supervisory Board and Management Board and their committees, internal control guidelines, the Code of Conduct, and principles for handling conflicts of interest.

RECOMMENDATIONS OF THE GERMAN CORPORATE GOVERNANCE CODE

pbb's current as well as previous Declarations of Compliance with the German Corporate Governance Code (GCGC), pursuant to section 161 of the AktG, are permanently available on the Company's website: https://www.pfandbriefbank.com/en/investors/mandatory-publications.html.

DESCRIPTION OF MANAGEMENT BOARD AND SUPERVISORY BOARD WORKFLOWS

The Management Board informs the Supervisory Board, as well as the Supervisory Board com- mittees, regularly and in a timely manner, about pbb Group's financial situation and performance. During meetings, the Supervisory Board receives reports on the risk position, risk management, new business, the liquidity strategy, as well as on significant events which are of material importance to the assessment of the Company's position, development and management.

In addition, the Management Board members maintain continuous contact with the Chair of the Supervisory Board (and the Chairpersons of the respective committees) with regard to important developments. Regular topics of discussion during Supervisory Board meetings additionally include developments in the lending business and the overall credit policy, all lending exposures which must be reported to the Supervisory Board, risk developments, risk management, business policy, as well as market trends and developments regarding the lending business and funding.

MANAGEMENT BOARD

The Management Board conducts pbb's business under its own responsibility, and in accordance with the law, the Articles of Association, and the Rules of Procedure for the Management Board (Geschäftsordnung). Moreover, the members of the Management Board observe the internal Code of Conduct, which applies for all members of staff and is publicly available on the Com- pany's website.

During the year under review, the members of pbb's Management Board were responsible for the following portfolios:

• Andreas Arndt, CEO and until 30.11.2023 CFO
• Thomas Köntgen, Deputy CEO, Real Estate Finance and until 7.8.2023 Public Investment Finance
• Andreas Schenk, CRO
• Marcus Schulte, Treasurer and since 1.12.2023 CFO

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Corporate Governance Statement

Corporate Governance Report

Dr Pamela Hoerr was appointed as a member of the Management Board as of 17 January 2024 and Kay Wolf as of 1 February 2024. On 1 March 2024 Kay Wolf took over the role of CEO from Andreas Arndt, who retired from the Management Board at the end of 29 February 2024.

Members of the Management Board are obliged to act in the interests of pbb; they must not pursue personal interests in their decision-making. During their term of office for pbb, they are obliged to observe an extensive no-competition clause and are prohibited from exploiting opportunities available to the Company for their own benefit. Management Board members shall disclose conflicts of interest to the Chair of the Supervisory Board and to the Chair of the Management Board without undue delay, and shall inform the other members of the Management Board. No such conflicts of interest occurred during the year under review.

pbb does not grant any loans to Management Board members.

As far as pbb is aware, the members of the Management Board and their closely related parties did not hold any shares in the Company (or any financial instruments based thereon) during the year under review, to an extent that would have been reportable.

COMPOSITION AND ORGANISATION OF THE SUPERVISORY BOARD

The Supervisory Board continuously monitors the Management Board, providing it with regular advice on the management of the Company. In accordance with the Articles of Association, the Supervisory Board consists of nine members, six of which are elected by shareholders and three by employees, in accordance with the German Act to Simplify the Election of Employee Representatives to the Supervisory Board (One-Third Employee Participation Act - Drit- telbeteiligungsgesetz).

The current election periods and terms of office of the shareholder representatives on the Supervisory Board end for Hanns-Peter Storr and Susanne Klöß-Braekler at the end of the Annual General Meeting in 2025, which resolves on the formal approval for the 2024 financial year, for Gertraud Dirscherl at the end of the Annual General Meeting in 2026, which resolves on the formal approval for the 2025 financial year, and for Dr Louis Hagen and Prof Dr Kerstin Hennig at the end of the Annual General Meeting in 2027, which resolves on the formal approval for the 2026 financial year. The term of office of the court-appointed shareholder representative Karim Bohn ends at the end of the Annual General Meeting in 2024. The term of office of the employee representatives on the Supervisory Board, Georg Kordick, Olaf Neumann and Heike Theißing, end at the end of the Annual General Meeting in 2026, which resolves on the formal approval for the 2025 financial year.

On 25 May 2023 the Supervisory Board elected Dr Louis Hagen as its Chairman, and Hanns- Peter Storr as his deputy.

During the financial year 2023, the Company's Supervisory Board comprised:

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Corporate Governance Statement

Corporate Governance Report

Name	Principal occupation	Supervisory Board memberships
Place of residence		and other directorships in 2023
Function in Supervisory Board	Functions in the Committees of the Supervisory Board
Initial appointment
Dr Günther Bräunig	Entrepreneur and former Chairman of the Manage-
	ment Board of KfW
Frankfurt/Main, Germany	Chairman of the Executive and Nomination Committee	Deutsche Telekom AG, Bonn, Germany - Member of
Chairman (until 25.05.2023)	and of the Remuneration Committee (until 25.5.2023);	the Supervisory Board (until 5.4.2023)
14.8.2009	Member of the Audit and Digitalisation Committee and of
	the Risk Management and Liquidity Strategy Committee
	(until 25.5.2023)
Dr Louis Hagen	Entrepreneur and former Chairman of the Manage-
	ment Board of Münchener Hypothekenbank eG

Starnberg, Germany	Chairman of the Executive and Nomination Committee
Chairman (since 25.5.2023)	and of the Remuneration Committee (since 25.5.2023);
Member of the Audit and Digitalisation Committee and of
25.5.2023
the Risk Management and Liquidity Strategy Committee
	(since 25.5.2023)
Hanns-Peter Storr	Entrepreneur
Schwäbisch Gmünd, Germany	Chairman of the Risk Management and Liquidity Strategy
Member; Deputy Chairman	Committee
12.5.2021	Member of the Audit and Digitalisation Committee
Karim Bohn	Chief Financial Officer of Canyon Bicycles GmbH
Augsburg, Germany
Member (since 30.11.2023)
30.11.2023
Gertraud Dirscherl	Entrepreneur
Landshut, Germany	Chairwoman of the Audit and Digitalisation Committee;
Member	Member of the Remuneration Committee and the Risk
2.2.2022	Management and Liquidity Strategy Committee
Dr Thomas Duhnkrack	Entrepreneur
Kronberg/Taunus, Germany	Member of the Audit and Digitalisation Committee and of
Member (until 15.11.2023)	the Executive and Nomination Committee (until
21.7.2015	15.11.2023)
Prof Dr Kerstin Hennig	University Professor EBS University (until 30.9.2023)
	Professor Frankfurt School of Finance & Manage-
	ment (since 1.11.2023)
Schmitten, Germany	Member of the Risk Management and Liquidity Strategy
Member	Committee
19.07.2022

LBBW Asset Management Investmentgesellschaft mbH, Stuttgart, Germany - Member of the Supervisory Board

Baader Bank AG, Unterschleißheim, Germany - Member of the Supervisory Board

BHW Bausparkasse AG, Hameln, Germany  - Member

of the Supervisory Board

Hans DEHN SE, Neumarkt i.d. Oberpfalz, Germany - Member of the Supervisory Board

DEHN SE, Neumarkt i.d. Oberpfalz, Germany - Member of the Supervisory Board

Hauck Aufhäuser Lampe Privatbank AG, Frank- furt/Main, Germany - Member of the Supervisory Board (until 28.4.2023)

DWS Grundbesitz GmbH, Frankfurt/Main, Germany - Member of the Supervisory Board

DEMIRE Deutsche Mittelstand Real Estate AG, Frankfurt am Main, Germany - Member of the Supervisory Board

Susanne Klöß-Braekler	Independent supervisory and advisory board mem-
	ber, Investor, Senior Advisor
Munich, Germany	Member of the Executive and Nomination Committee and ING-DiBa AG, Frankfurt/Main, Germany - Chairwoman
Member	of the Remuneration Committee	of the Supervisory Board
12.5.2021		Oddo BHF AG, Frankfurt/Main, Germany - Member of
		the Supervisory Board
		Cembra Money Bank AG, Zürich, Switzerland - Mem-
		ber of the Supervisory Board
Georg Kordick	Bank employee	-
Poing, Germany
Employee Representative
22.2.1990
Olaf Neumann	Bank employee	-
Munich, Germany
Employee Representative
12.5.2021
Heike Theißing	Bank employee	-
Munich, Germany	Member of the Remuneration Committee
Employee Representative
7.7.2011

The Supervisory Board has established four committees in order to perform its supervisory duties in an efficient manner: the Executive and Nomination Committee, the Audit and Digitalisation Committee, the Risk Management and Liquidity Strategy Committee, and the Remuneration Committee.

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Corporate Governance Statement

Corporate Governance Report

The committees comprised the following members in the 2023 financial year:

The members of the Executive and Nomination Committee are:

Dr Günther Bräunig (Chairman) (until 25 May 2023), Dr Louis Hagen (Chairman) (since 25 May 2023), Susanne Klöß-Braekler and Dr Thomas Duhnkrack (until 15 November 2023)

The members of the Audit and Digitalisation Committee are:

Gertraud Dirscherl (Chairwoman), Dr Günther Bräunig (until 25 May 2023), Dr Thomas Duhnkrack (until 15 November 2023), Dr Louis Hagen (since 25 May 2023) and Hanns-Peter Storr

The members of the Risk Management and Liquidity Strategy Committee are: Hanns-Peter Storr (Chairman), Dr Günther Bräunig (until 25 May 2023), Gertraud Dirscherl, Dr Louis Hagen (since 25 May 2023) and Prof Dr Hennig

The members of the Remuneration Committee are:

Dr Günther Bräunig (Chairman) (until 25 May 2023), Dr Louis Hagen (Chairman) (since 25 May 2023), Gertraud Dirscherl, Susanne Klöß-Braekler and Heike Theißing

The Executive and Nomination Committee concerns itself with strategic and current issues affecting the Group, as well as with matters concerning the Management Board, for which it prepares corresponding proposals for the plenary meeting. It also advises the Supervisory Board, both regularly and event-driven, regarding issues of Management Board personnel and succession planning, the individual specifications of Management Board contracts, and submits corresponding recommendations to the Supervisory Board. To ensure long-term succession planning for the Management Board, the Executive and Nomination Committee regularly concerns itself, in cooperation with the members of the Management Board, with the further development of the respective skills profiles, and carries out potential analyses of new candidates when required. These activities are based on the internal Suitability Policy, and on pbb's Guideline on Fostering Diversity. In addition, the committee prepares the annual evaluation of the effectiveness of the work of the Management Board, the Supervisory Board and its committees. This includes the ongoing evaluation of individual and collective suitability, which forms the basis from which to identify any need for action. Moreover, it deals with the implementation of the under-represented gender quota for pbb's Supervisory Board and Management Board, and makes proposals for the succession of Supervisory Board members to be elected by shareholder representatives.

The Audit and Digitalisation Committee is concerned with all accounting and digitalisation issues, as well as with the audit of pbb and pbb Group. It is responsible for the preparation, and monitors the audit, of the Annual Financial Statements and Consolidated Financial Statements, the interim reports, as well as the reports submitted by Internal Audit and the external auditors regarding internal and external audit findings. Moreover, the Audit and Digitalisation Committee discusses the impact of current regulatory issues with the Management Board; it concerns itself with the mandate for the external auditors and their audit plan, independence and fees. Furthermore, the Audit Committee submits proposals for the appointment of external auditors to the Supervisory Board, and prepares the Supervisory Board's proposals for the election of external auditors to the Annual General Meeting. The Audit and Digitalisation Committee is also responsible for monitoring the effectiveness of the internal control system and of key controls implemented; it receives regular reports on current litigation, Compliance issues, data protection and IT security, notable accounting issues, as well as the audit plan established by Internal Audit and its implementation. In addition, the Audit and Digitalisation Committee also addresses issues relating to digitalisation and advises the Management Board and the Supervisory Board in this regard. The Digital Advisory Board, comprising external experts, supports the committee; the bodies meet at least twice a year to discuss current developments relating to digitalisation. Via the committee chair, every

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Corporate Governance Statement

Corporate Governance Report

member on the Audit and Digitalisation Committee may obtain information directly from the Heads of those central units within the Company that perform the duties concerning the Audit Committee pursuant to section 107 (3) sentence 2 of the AktG.

The Risk Management and Liquidity Strategy Committee supports the Supervisory Board's supervision of risk management and liquidity management; it concerns itself with the risk strategy, reviews the Management Board's risk reporting, and is involved in the credit approval process to the extent laid down in the Rules of Procedure. The committee also regularly discusses new business developments as well as the liquidity and funding status; it looks at all types of risks associated with the banking business, such as credit, market, liquidity and operational risks, taking the Group's risk-bearing capacity into account. The committee also concerns itself with the syndication business, foreclosures and development financings, with write-downs of financial assets affected by impaired creditworthiness, the reporting of own funds in accordance with the German Solvency Regulation, country limits, asset/liability management, and the results of supervisory audits. In addition, it deals with individual loans requiring approval under the Rules of Procedure for the Management Board, with new business, regular re-submissions and approvals for change applications.

The Remuneration Committee monitors whether remuneration systems for the Management Board and for the Bank's employees are appropriate, and prepares the corresponding Supervisory Board resolutions. Furthermore, it deals with the Remuneration Report, the agreement of targets for Management Board members, as well as examining and identifying staff that have risk-taking functions.

OBJECTIVES FOR THE COMPOSITION AND SKILLS PROFILE CRITERIA REQUIRED FOR A SUPERVISORY BOARD APPOINTMENT, AND THEIR IMPLEMENTATION

In accordance with recommendation C.1 of the Code, the Supervisory Board has defined specific objectives for its composition and resolved upon a profile of skills and expertise for the entire Board in its Rules of Procedure. Details are available on the Bank's website. In addition to these documents, the Supervisory Board has introduced a catalogue of criteria for new Supervisory Board members, which takes into account Company-specific and professional requirements. Fur- thermore, the Supervisory Board adopted a guideline on the hiring process and suitability check for Management and Supervisory Board members as well as for key personnel (Suitability Policy). This Policy summarises and further specifies the relevant rules - for example regarding the ongoing evaluation of individual and collective suitability. A guideline on fostering diversity in the Management Board and Supervisory Board supplements the Suitability Policy.

The Supervisory Board and the Executive and Nomination Committee take into consideration the composition objectives and requirements for the selection process and nomination of candidates for the Supervisory Board stipulated in its diversity concept. When proposing candidates for election to the Annual General Meeting, the objectives, including the profile of skills and expertise criteria along with the diversity concept, were taken into account. In the Supervisory Board's opin- ion, it meets the specified composition objectives and fulfils the profile of skills and expertise as well as the diversity concept in its current composition. The members of the Supervisory Board possess the professional and personal qualifications deemed necessary. In addition to the requirements for each individual member, the Supervisory Board considers its members to meet the qualifications required for the Supervisory Board as a whole as follows:

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Corporate Governance Statement

Corporate Governance Report

personal suitability

initial appointment

independence

no overboarding1

diversity

gender

year of birth

education

professional skills2

business model / real estate know-how

international business experience, esp. Eu- rope and USA

capital market experience

technology / digitalisa- tion inkl. IT-security and data protection

accounting expert

audit3

risk management inkl. climate and environmental risks

sustainability4

compliance and internal audit

legal / Corporate Governance

Dr Louis	Hanns-	Karim	Susanne	Gertraud	Prof Dr	Heike	Georg	Olaf
Klöß-	Kerstin
Hagen	Peter Storr	Bohn	Dirscherl	Theissing	Kordick	Neumann
Braekler	Hennig
2023	2021	2023	2021	2022	2022	2011	1990	2021
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x	x	x
male	male	male	female	female	female	female	male	male
1958	1959	1971	1964	1958	1964	1960	1960	1976
		Diploma in	Diploma in		Diploma in
Banker,	Banker,	business	business	Economist,	business	Laywer	Banker	Laywer
Laywer	Economist	administra-	administra-	Auditor	administra-
		tion	tion		tion
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x		x
x	x	x	x	x	x	x		x
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x		x
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x	x	x
x	x	x	x	x	x	x		x

As a general rule, more than half of the shareholder representatives on the Supervisory Board shall be independent, in the Supervisory Board's opinion, from the Company, its Management Board and any controlling shareholders. The Supervisory Board shall also not include more than

• according to § 25d Abs. 3 KWG

• Criteria met, according to a self-assessment of the supervisory board. The cross equals to "medium" or "high" for the compe- tence on a basis of their knowledge, experience and trainings to comprehend matters and make informed decisions.
  3 according to § 100 Abs. 5 AktG and inkl. reporting on sustainability
  4 Especially environment, social responsibility and good corporate governance

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