KPS : Corporate Governance Statement 2022

DECLARATION ON CORPORATE GOVERNANCE PURSUANT TO SECTION 289D/ 315D OF THE GERMAN COMMERCIAL CODE (January 2022)

The Declaration on Corporate Governance pursuant to Section 289f, 315d of the German Commercial Code ("HGB") is publicly accessible at: https://www.kps.com/de/de/investor-re-lations/corporate-governance.html.

1. DECLARATION OF COMPLIANCE PURSUANT TO SECTION 161 OF THE GERMAN STOCK CORPORATION ACT

The executive board and supervisory board of a company listed in Germany must issue an annual declaration pursuant to Section 161 of the German Stock Corporation Act ("AktG") stating the extent to which they have complied with or are complying with the German Corporate Governance Kodex ("DCGK"). Furthermore, reasons shall be provided as to which recommendations of the DCKG have not been or are not being complied with. Each declaration of compliance is made available to the public for a period of five years on the Company's website at www.kps.com under the heading "Investor Relations", "Corporate Governance". The most recent declaration of compliance of both boards relating to the version of the DCGK published in the German Federal Gazette on 20 March 2020 was published in January 2022 and states the following:

Declaration by the Executive Board and the Supervisory Board of KPS AG

on the recommendations

of the "Government Committee of the German Corporate Governance Kodex"

in accordance with Section 161 of the German Stock Corporation Act

(Declaration of Compliance)

KPS AG ("Company") complies with the recommendations of the version of the German Corporate Governance Kodex dated 16 December 2019 ("DCGK") published by the Federal Ministry of Justice in the official section of the German Federal Gazette (Bundesanzeiger) on 20 March 2020 and will continue to comply with them in the future, with the following exceptions:

A.1	The executive board expressly welcomes all efforts to counteract gender discrimi-
	nation and any other form of discrimination and to promote diversity as appropriate.
	When making appointments to management positions in the Company, the execu-
	tive board is guided primarily by the competence and qualifications of the persons
	available.
A.2	In the opinion of the management, compliance with the recommendation to imple-
	ment and disclose an independent compliance management system and to imple-
	ment a whistleblowing system has not been necessary to date due to the lean hier-
	archy, the close involvement of the management in day-to-day operations and the

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	manageable number of employees at the Company. Instead, the management is of
	the opinion that the control and risk management system set up in the Company
	within the meaning of Section 91 para. 3 of the German Stock Corporation Act
	("AktG") is sufficient for the moment to ensure compliance with statutory provisions
	and other regulations and to avoid possible compliance violations.
B.1	In determining the composition of the executive board, the supervisory board pri-
	marily considers special competence and qualifications; other characteristics such
	as gender, national affiliation or other diversity aspects are only of secondary im-
	portance for this decision.
B.2	The members of the supervisory board and the executive board regularly discuss
	future appointments and long-term succession on the executive board. For the mo-
	ment, the Company does not consider any additional succession planning and its
	disclosure to be necessary in favor of a flexible personnel competence of the su-
	pervisory board.
B.3	The recommendation in B.3, according to which the initial appointment of executive
	board members should be for a maximum period of three years, was not complied
	with in the past because, in the opinion of the Company, it improperly restricts the
	supervisory board's freedom of decision. However, in the future the supervisory
	board intends to comply with this recommendation.
B.5	The supervisory board does not define an age limit for members of the executive
	board. A corresponding disclosure is therefore not made. Defining an age limit for
	executive board members is not in the interests of the Company and its sharehold-

ers, as there is no compelling link between a specific age of an executive board member and its performance.

C.1 sentence 1 to 4

In view of the size of the Company's supervisory board and the statutory requirements of the AktG, which sets out the personal requirements for serving on the supervisory board in Article 100 AktG and the duties of the supervisory board in Article 111 AktG and thus, like the DCGK, also defines the targets for the proposals for the re-election of the supervisory board, the supervisory board refrains from defining specific targets for the composition of the supervisory board and from drawing up a competence profile for the entire body and reporting on this. This also applies

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in view of Section 100 para. 5 AktG, according to which the members of the supervisory board as a whole must be familiar with the sector in which the Company operates.

C.2 No age limit was defined for membership of the supervisory board and no corre-

sponding disclosure was made, as the supervisory board is of the opinion that age does not indicate the ability of a member of a governing body to perform its duties.

C.7 sentences 1 and 2

In the opinion of the management, the added value of the specific expertise and the in-depth knowledge of the Company gained over many years by the supervisory board members Tsifidaris and Grünewald, who are operationally active in the Com- pany, outweigh the potential disadvantages of a supervisory board composed of a majority of independent members.

C.10	In the opinion of the management, Mr. Tsifidaris' extensive knowledge of the Com-
	pany and specific technical expertise outweigh any lack of independence of the
	chairman of the supervisory board.
D.1	The rules of procedure of the supervisory board are not made publicly available, as
	the Company does not consider publication to be of significant added value for
	shareholders.
D.2, D.5	From 1 January 2022, it will be mandatory for public interest entities to form an audit
	committee pursuant to Section 316a sentence 2 of the German Commercial Code
	(HGB). Pursuant to Section 107 para. 4 sentence 2 AktG, a supervisory board con-
	sisting of three members also forms the audit committee. Apart from this, no other
	committees are formed at the Company, and thus no nomination committee. The
	formation of further committees is not expedient in the case of a supervisory board
	with three members and - contrary to the case with a larger plenary body - does
	not lead to an increase in efficiency. This applies in particular in view of the fact that
	committees require at least three members.
D.7	The executive board also regularly participates in the meetings of the supervisory
	board of the Company for reasons of efficiency. However, in the case of particular
	matters for discussion, especially in connection with executive board personnel
	matters, the supervisory board shall meet without the executive board.

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F.2	The group annual reports and management reports as of 30 September of each
	business year are published within four months after the end of the relevant report-
	ing period. Financial information during the course of the year in the form of half-
	year financial reports and quarterly statements is published within two months of
	the end of the reporting period. The executive board and the supervisory board
	consider the statutory publication deadlines and the supplementary regulations for
	the Prime Standard of the Frankfurt Stock Exchange to be sufficient to inform in-
	vestors regularly and promptly.
F.5	In the past, the Company has only published the currently applicable Declaration
	on Corporate Governance on its website, as there has been no reason to date to
	publish older declarations as well. The Company will not comply with the recom-
	mendation in the future either, as the publication of outdated declarations is not
	seen as a significant added value for shareholders.
G.1 and	For each business year, the supervisory board defines specific targets for the as-
G.2	sessment of the performance-related bonus for the members of the executive
	board, which is based on a multi-year assessment. Taking into account the fixed
	compensation of the executive board and additional benefits, this results in a spe-
	cific target compensation. However, any higher total target compensation for this
	business year is subject to the supervisory board issuing stock options to a member
	of the executive board in the further course of the business year. The compensation
	system for the executive board also provides the option of defining non-financial
	performance criteria as well as financial performance criteria for performance-re-
	lated compensation in form of bonus payments based on a multi-year assessment
	basis as performance parameters. The selection of these performance criteria and
	their concrete determination is at the discretion of the supervisory board on the ba-
	sis of the executive board compensation system approved by the annual general
	meeting on 21 May 2021. This scope gives the supervisory board the necessary
	flexibility to make individual compensation decisions in response to operational
	changes and the associated incentive aspects.
G.3	For the purposes of the horizontal peer group comparison, the supervisory board
	selects a suitable peer group of companies whose market position is decisive in
	comparison with the Company. The focus is on those companies that are compa-

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	rable to the Company in terms of market capitalization, revenue and industry. How-
	ever, the supervisory board refrains from disclosing the composition of the peer
	group. For reasons of flexibility, the supervisory board rather reserves the right to
	determine an appropriate peer group only in preparation for a concrete compensa-
	tion decision, taking into account the above criteria. The early disclosure of a com-
	parative group would not do justice the fact that up to this point in time certain com-
	panies could be added to or excluded from the peer group.
G.4	In determining the appropriate compensation of the executive board, the supervi-
	sory board considers the compensation structure of the upper management of the
	KPS Group as part of a vertical (internal) comparison, but does not consider the
	ratio of executive board compensation to the compensation of the workforce as a
	whole, including the development over time. The recommendation in G.4 of the
	DCGK does not appear to be very practicable due to the particular personnel struc-
	ture of the Company as a consulting company and, moreover, is not suitable for
	ensuring that the compensation of the executive board is appropriate in every case.
G.7	According to the recommendation in G.7 of the DCGK, the supervisory board shall
	define the performance criteria for all variable compensation components for each
	executive board member for the upcoming business year, which, in addition to op-
	erational objectives, shall primarily be based on strategic objectives. There have
	been and will be some deviations from this recommendation with regard to the time
	component. The supervisory board does not make this definition prior to a business
	year, but only within the first half of the business year, as it waits for the end of the
	previous year in order to be able to define performance criteria in a reliable manner
	on the basis of the audited figures for the previous year and the associated corpo-
	rate planning.
G.10	The long-term variable compensation components are not primarily granted by the
	Company based on shares or invested in shares of the Company. In the view of the
	supervisory board, such a share-based compensation component does not offer
	any significant increase in the incentive effect for a member of the executive board

who, as one of the founders of the Company, already holds a significant stake as a shareholder. Members of the executive board can already dispose of their long-term variable compensation components before the end of four years, as the supervisory board considers a multi-year assessment basis to be sufficient for the purpose of sustainability.

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