Annual report 2020/2021

Events subsequent to the balance sheet date

Consolidated financial statements (IFRS)

Further information

Group Management Report

for the financial year from July 1, 2020 to June 30, 2021

Fundamentals of the Group

Group structure

VERBIO Vereinigte BioEnergie AG (hereinafter also referred to as "VERBIO AG" or "the Company"), Zörbig is the parent holding company of the VERBIO Group (hereinafter also referred to as "VERBIO" or "the VERBIO Group").

In addition to VERBIO AG itself, the significant entities belonging to VERBIO in the reporting period were as follows:

VERBIO Bitterfeld GmbH, Bitterfeld-Wolfen/ OT Greppin, hereinafter referred to as "VEB"
VERBIO Zörbig GmbH, Zörbig, hereinafter referred to as "VEZ"
VERBIO Schwedt GmbH, Schwedt/Oder, hereinafter referred to as "VES", "VES (D)" (Biodiesel segment) or "VES (E)" (Bioethanol segment)
VERBIO Agrar GmbH, Zörbig, hereinafter referred to as "VAgrar"
VERBIO Logistik GmbH, Zörbig, hereinafter referred to as "VLogistik"
VERBIO Polska Sp. z o. o., Stettin (Poland), hereinafter referred to as "VPL"
VERBIO Pinnow GmbH, Pinnow, hereinafter referred to as "VEP"
VERBIO India Private Limited, Chandigarh (India), hereinafter referred to as "VEI"
VERBIO North America Corporation, Livonia, Michigan (USA), hereinafter referred to as "VNA"
VERBIO Nevada LLC, Nevada, Iowa (USA), hereinafter referred to as "VEN"
VERBIO Diesel Canada Corporation, Welland, Ontario (Canada), hereinafter referred to as "VDC"
XiMo Kft., Budapest (Hungary), hereinafter referred to as "XiMo"

VERBIO AG also has further shareholdings in other companies. A detailed listing of the subsidiaries included in the consolidated financial statements can be found in the notes to the consolidated financial statements under Section 2.2, "Entities included in the consolidation".

Business model

VERBIO stands for biofuel and technology. In its large-scale production plants VERBIO manufactures biofuels, biofertiliser and animal feed, disinfectant solutions as well as sterols and pharmaceutical glycerine for use as raw materials in the cosmetic/pharmaceutical and food industries. The technologies used have been developed internally by VERBIO. The Group's plant and processes are subject to ongoing further development and improvements in order to optimise existing production, and at the same time to drive forward the manufacturing of new high-value biogene products from the raw materials used in the production processes.

In Germany, sales of our products and the procurement of the necessary raw materials for their production are carried out by VERBIO AG. The products are manufactured by the Group's subsidiaries at the Group's German locations in Zörbig, Bitterfeld, Schwedt/Oder and Pinnow, as well as in Canada.

VPL and VAgrar are responsible for procuring the agricultural raw materials needed for production purposes within the VERBIO Group, and in addition they market the feedstuffs and fertiliser that VERBIO AG produces as by-products in its bioethanol and biomethane production processes.

VNA is responsible for the sale of biodiesel produced by the biodiesel plant acquired in Canada in July 2019, and for the procurement of the raw materials required for the production there.

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Currently there are further manufacturing plants under construction to produce biomethane and bioethanol in the USA and biomethane in India. The biomethane plants in India and the USA are currently in the process of launching their first production volumes.

Biodiesel, bioethanol and biomethane are sold in Europe, sales of biodiesel have also been made in North America since August 2019, and pharmaceutical glycerine and sterols are sold worldwide. The commencement of production at the foreign locations in the first half of the financial year 2021/2022 means that the marketing of biofuels will, in future, become a more international operation.

As a technology company, VERBIO is always searching for new technologies that can help it to make use of the raw materials used in the core processes and the end products, biodiesel, bioethanol and biomethane, as well as the resulting by-products. The objective of this strategy is to develop and manufacture new products in order to improve and deepen the value-added chain, and consequently improve profitability. These projects include, for example, the establishment of production and sales of plant-based ethanol speciality products and protein products for various industrial and pharmaceutical applications, as well as for use in the animal food and foodstuff industries. In addition, these development projects include the planned commercial-scale manufacture of BioLNG for the heavy goods transport sector.

VERBIO also sees further applications for ethanol, biodiesel and biomethane basic products as a result of the increasing and ever more concrete trend towards decarbonisation in other sectors such as the chemicals, steel and cement industries, as well as in the decarbonisation of the air and shipping transport sectors. There will be further applications in chemicals in particular for biomethane, the smallest renewable hydrocarbon.

The organic chemicals sector is also where the technology company XiMo is most at home. A high technology company, XiMo focusses on the development and marketing of metathesis catalysts. For VERBIO AG, in the future metathesis will offer an opportunity to manufacture other chemical raw materials using vegetable oil materials in addition to biodiesel. In the medium term the objective is to team up with XiMo to develop the catalysts and processes necessary to achieve this aim, enabling us to enter into new markets for vegetable oil methyl esters outside the biodiesel market.

Goals and strategies

VERBIO is one of Europe's leading manufacturers of biofuels, and at the same time a global commercial-scale producer of biodiesel, bioethanol and biomethane. The Group's management focusses on the use of internally-developed innovative process and production technologies, high quality products and maximising the CO2 efficiency of the products it manufactures. The basis for all our business activities and investments is meeting sustainability criteria in the production of biofuels throughout the entire value-added chain – from the procurement of raw materials, through production, and up to the sale of biofuels and by-products, while maximising CO2 savings. In this way we combine economic success with corporate responsibility and climate protection. With our advanced technologies and the closed loop concept, which incorporates raw material procurement through to the processing of by-products as feedstuffs and fertiliser products or as high-value input materials for the foodstuff and pharmaceutical industry, we make a significant contribution to strengthening agriculture in the region, and to providing sustainable mobility for the future.

We have the necessary resources to be successful and to secure a leading competitive position. In addition to flexible manufacturing plant structures, we have efficient processes and a high level of flexibility regarding the use of raw materials, for which we have the strong innovation skills and committed and qualified employees needed.

It is our objective to invest in the optimisation of existing plant and equipment and production processes in order to make cost efficiency improvements and energy savings in production, and to make further improvements in the greenhouse gas (GHG) balance of our products. By establishing new technology concepts to make further use of by-products, we are able to increase our competitiveness by developing new, climate-friendly products and entering new sales markets.

We place a particular focus on taking a leading role in the development and market launch of so-called advanced second generation biofuels. In particular, these include our technology used to obtain advanced biomethane from 100 percent straw at our biorefineries at the Schwedt/Oder and Pinnow locations. The biofertiliser that is created in this process is an important product for helping to make agriculture into a low CO2 and sustainable sector. This technology is the focus of our expansion projects in India and North America.

In India in particular our straw-biomethane technology will perform a further important role. Until now, wheat and rice straw in India's fields is

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burned after the harvest. In April and May clouds of smoke rise across the shadows of the Himalayas, spreading across the entire subcontinent and making it almost impossible to breath. The smoke is damaging to the health of millions of citizens in India's huge cities, worsening the smog already created by transport and industry. Our technology helps to alleviate this problem in two ways: first, we help the Indian economy, which is second only to China as an importer of fossil natural gas and crude oil, to become more energy independent; and second, we help to stop the burning of wheat and rice straw. This is not only an important contribution to climate protection, but also at the same time it is real development assistance for one of the most populated, and at the same time one of the poorest, countries in the world.

Biomethane from straw is, in our opinion, a global megatrend. It is the smallest renewable hydrocarbon, and it is not only climate-neutral, it is also CO2 negative because straw that is left in the field to rot or which is burned also generates large quantities of CO2 . It can be assumed that 1,000 kg of burned or rotting straw produces up to 1,500 kg of damaging climate gases such as CO2 or freely released methane.

Pleasingly, this contribution has now been recognised by the EU Commission and the Federal Government, even if the real potential effect that biomethane from straw could have on climate protection has not yet been fully reflected in current legislation.

The toll exemption in Germany that extends until the end of 2023 and a vehicle-fleet exchange programme initiated by the Federal Ministry of Transport for low-emission heavy goods vehicles – including CNG/LNG heavy goods vehicles – as well as the German Parliament's approval in May 2021 of an increase in the greenhouse gas quota from the current 6 percent to 25 percent by 2030, finally open up new growth opportunities for VERBIO in Germany and in Europe. In pursuing these opportunities, our focus is very clearly on biomethane manufactured from agricultural waste products and straw as a biofuel in the form of BioCNG and BioLNG.

All CNG/LNG vehicles can be powered with 100 percent biomethane produced using waste raw materials or straw. In our view, for the next five to ten years this is the only technically available and affordable climate-friendly long-distance alternative to classic diesel power, in particular for the heavy goods transport sector. It can be expected that the already clear trend towards exchanging fleet vehicles will continue, and that in the near future numerous further transport companies will convert at least part of their heavy goods vehicle fleets to CNG/LNG powertrains in order to benefit from the CO2 and efficiency benefits to be had from the use of biomethane fuel, as well as to make use of the cost advantage to be obtained from the toll exemptions and fleet exchange programme.

The rapid increase in registrations of CNG/ LNG heavy goods vehicles since the implementation of the first phase of the toll exemption opens up new sales and marketing potential for biomethane as BioCNG and BioLNG, and we want to make use of this opportunity.

VERBIO is also increasingly making use of CNG/LNG powertrains for long-distance goods transport purposes, and is currently in the process of converting its own fleet of almost 100 heavy goods vehicles.

However, it is not only the transport companies that carry, and increasingly also accept, responsibility here. More than this, it is the customers in all branches of industry who demand transport services and who will need to shift their focus towards low CO2 transport services. For this purpose, it is not relevant whether the customer has to bear higher costs of transport or logistics. The greenhouse gas quota system in Germany and Europe is designed so that the additional cost of more decarbonisation in transport is passed on to diesel and petrol users. The objective must be to ensure that where costs are the same, contracts are won by companies that emit less CO2 . Some companies in the automobile industry are already setting a good example here.

The ambitious increase in the greenhouse gas quota from 2022 approved by the German Parliament, in combination with the hydrogen strategy approved by the Federal Government, are contributing to a major improvement in the framework conditions for VERBIO in Germany and Europe.

VERBIO had long demanded an increase in the greenhouse gas quota to at least 10 percent in order to achieve a decarbonisation of transport using first- and second-generation biofuels. In addition, the hydrogen strategy represents a new potential sales channel for biomethane, as this can be used to manufacture so-called green hydrogen.

When taking up growth opportunities we ensure that we are always focussed on sustainable, profitable growth, in order to offer an attractive investment to our investors, shareholders and the capital market.

The cornerstones of our strategy have been unchanged for a number of years. In our annual operative and strategic planning process we determine the key strategic issues for the following years and formulate specific objectives for the next financial year. We provide an annual outlook

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regarding the significant performance indicators for the current financial year in September of each year, when our annual report is published.

With the European Union's ambitious new objectives for decarbonising our society, the increasing numbers of industries involved (cement, steel, chemicals), and the implementation of a greenhouse gas accounting for imported industrial products (carbon border adjustment), important conditions are being fulfilled for a broad-based decarbonisation approach to our industrial society which will finally enable battle to commence in the struggle of the century against global warming.

VERBIO is very determined to play a part in shaping up to this challenge, involving its employees, its technologies and its financial resources.

Management system

VERBIO AG is a Company constituted under German law. A basic principle of German corporate law is the dual system of management, under which the Management Board and the Supervisory Board are established as separate corporate bodies with independent areas of responsibility. The Management and Supervisory Boards of VERBIO AG work together to manage and supervise the business, and their working relationship is a close and trusting one. Their objective is to create a sustained increase in the value of the Company for shareholders.

Until June 30, 2020, the Management Board of VERBIO AG consisted of four members, and since the appointment of Stefan Schreiber on July 1, 2020 it consists of five members; they have joint responsibility for the management of the Company with the objective of generating sustainable added value. The Management Board does this under its own responsibility and in the interest of the Company. The Supervisory Board has provided the Management Board with rules of procedure that, in addition to a catalogue of transactions requiring approval, also define the areas of responsibility that are assigned to individual members of the Management Board. Stefan Schreiber has Management Board responsibility for North America.

Our business dealings are directed towards profitable growth as well as technology and cost leadership in the biofuels production sector. This forms the basis on which our key performance indicators are determined.

The key performance indicator that we use to monitor profitability at Group level and at the Biodiesel and Bioethanol segment levels is EBITDA (operating result before interest, income taxes and depreciation and amortisation). In addition, analyses of gross margin, EBIT (operating result before interest and income taxes) and production-specific key data, such as production quantities and the associated capacity utilisation, are also used. Segment-specific targets are set for all the key figures described above.

The effective and efficient management of capital is a key component of the VERBIO Group's integrated controlling system. This primarily comprises the management of liquidity, equity and borrowed capital, as well as currency and interest rate management. The most important key performance indicator used for this is the measurement of net cash (cash and cash equivalents, less bank loans and other loans).

Another significant success factor is the strict control of investments. This involves the assessment of each individual project, taking into consideration the respective amortisation period and its strategic importance.

The Group's corporate-wide management and generation of reports using planning, expected and actual data is based on a reliable and meaningful financial and controlling information system.

Research and development

VERBIO's research and development (R&D) departments make an important contribution to increasing our competitiveness and to the expansion of our business by developing new innovative production technologies and transferring them to large-scale use, and by providing continuous further development and optimisation of existing production processes and plants in the Biodiesel and Bioethanol segments.

For this reason, we have continued to drive forward targeted research and development activities over recent financial years. Existing processes were further developed and optimised with short- to medium-term time horizons. At the centre of this is improving the greenhouse gas balance, i.e. reducing CO2 emissions. In addition, new research projects are being initiated in order to enable us to continue to be successful in the future and to ensure the sustainable success of the Group.

With our R&D teams, which consist of process engineers, chemists, biotechnologists, laboratory technicians and chemicals technicians, we are in a position to work on many ideas in both theory and practice.

We prepare the large-scale implementation of new processes and process improvements and analyse economic parameters such as yields, consumption, product quality etc. by performing tests in our laboratories and technical facilities. If our analysis proves that the process or process modification provides economic efficiencies, then the production process is amended accordingly.

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R&D department employees support the process of implementing technical process changes and placing them into service in production facilities. The proximity and flexibility of our production plants guarantees a quick implementation of our research results.

Participation in joint projects with public and private research institutes and universities also plays an integral role in our research and development work.

Prof. Dr. Oliver Lüdtke has been an active lecturer at the Hamburg University of Technology since 2019.

In total, EUR 6.2 million (2019/2020: EUR 5.4 million) was spent on research and development in the past financial year. Group-wide, an average of 51 (2019/2020: 44) employees worked in the research and development departments.

Research and development in the Biodiesel segment

Our processes in the Biodiesel segment are subject to an ongoing process of optimisation. The Biodiesel segment's R&D department works very closely with the production department in order to maintain and extend our competitive advantage in biodiesel production.

The focus of the activities of our R&D department in the financial year 2020/2021 was on the work done by our Hungarian subsidiary company XiMo to develop an innovative production process for basic chemicals based on rapeseed oil methyl ester (biodiesel) for use in the chemicals industry using catalysts. Parallel to this, the basic engineering work for the dimensioning of catalyst production on a commercial scale was developed.

Research and development in the Bioethanol segment

The focus of research and development work in the Bioethanol segment is to ensure that we make continuous improvements in the production process in our biorefineries. Our biorefineries are concentrated on making the most efficient possible use of the input raw materials. The high levels of integration of the individual elements in our production plants place heavy demands on the stability of the processes.

In 2020/2021 our R&D teams have continued to drive forward their efforts to make further improvements in gaining high-value products (e.g. proteins) from the raw materials used in our bioethanol refineries. In addition to this focus, work was performed in the financial year 2020/2021 on making improvements to the production of ethanol-based disinfection solutions.

We are continually observing and evaluating relevant technologies and market developments in order to secure our competitiveness and find new technological opportunities for our biorefineries.

Employees

As of June 30, 2021 VERBIO employed a total of 820 employees (June 30, 2020: 725), of whom 459 were staff (June 30, 2020: 377), 337 were production employees (June 30, 2020: 328), 23 were trainees and apprentices (June 30, 2020: 17), and 1 was a mini-job employee (June 30, 2020: 3).

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Economic and political environment

Market conditions in Germany

Biodiesel and Bioethanol

At the time of writing, statistics are available from the German Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle – BAFA) for the 2021 calendar year up until May 2021.

The BAFA statistics clearly show that the consumption of petrol-based fuels compared to the previous year only began to recover from March and April, but the volumes are still lower than the average volumes over the past five years. The total consumption from January to May 2021 was approximately –4.9 percent lower than in the same period in the previous year.

The sales of diesel fuels in the same period are approximately – 7.9 percent down on the same period in the previous year, and are significantly under the average over the past five years.

This is due to the fact that the lockdown measures that were implemented in the autumn and winter of 2020 and in the first six months of the calendar year 2021 had a significant effect on both business and on individual mobility; the consumption of petrol-based and diesel fuels from November 2020 to February 2021 inclusive represented the lowest levels seen over a five-year comparison period. Against this background, the fuels industry is concerned that a further wave of infections and an associated lockdown could act as a brake on consumption volumes in the autumn of 2021. Accordingly, companies that are obliged to fulfil quota obligations are being cautious about entering into long-term supply contracts for biofuel additives. In addition to this, the oil industry began the quota year 2021 with excess quotas carried forward of in excess of 1 million tonnes of CO2 savings, since the obligations to use additives in recent years were significantly lower than the amount of CO2 savings that were technically feasible. As a result, currently there is no need to exploit the capabilities of additives in full or to switch to fuels with a higher bio-content (B100, B20, E85). Only the E10 share was able to grow in the period described above (by approximately 3 percent), but as it only accounts for 16.7 percent (May 2021) it does not yet represent a significant market share compared to the French market, where it has a share of approximately 50 percent.

Despite the "quota buffer" the rate of fuel additive use compared to the previous year in the period from January to May 2021 for biodiesel fell by only 0.6 percent, and for bioethanol there was an increase of 0.1 percent. This was primarily due to the fact that throughout 2021 ethanol was the most inexpensive way of meeting the greenhouse gas saving obligations.

However, in volume terms this situation was a decline of almost 15 percent for biodiesel/HVO and approximately 4.6 percent for bioethanol in the period from January to May 2021 compared to the same period in the previous year.

CNG (Compressed Natural Gas)/Biomethane

The proportion of biomethane that is mixed in natural gas supplies has fluctuated widely in the period since the introduction of credits for the use of biomethane for German greenhouse gas quota purposes, and has been in decline following a peak in 2017 (449 GWh), falling in both 2018 (to 389 GWh) and 2019 (to 341 GWh). With the introduction of the 38th BImSchV, which among other things makes it possible to credit the use of fossil natural gas for greenhouse gas quota purposes, biomethane has suffered a significant setback in the transport sector. For 2020, however, a significant increase in the share of biomethane used in the transport sector can be expected as a result of the increase in the greenhouse gas quota obligation from 4 percent to 6 percent, since the share of BioCNG now represents an 80 percent share of fuel purchased at filling stations and as it is offered at more than half of all CNG filling stations. We expect this trend to continue in 2021 and accelerate from January 1, 2022.

At the end of the financial year 2020/2021 there were 881 gas filling stations in Germany. Of these, 70 were already LNG filling stations (2019/2020: 24). At 8 filling stations a 10 percent LNG mix was offered, while one filling station offered exclusively Bio-LNG. Of the 811 CNG filling stations, 538 offered 100 percent BioCNG. At 198 filling stations (2019/2020: 117) it was possible to fill up exclusively using verbiogas.

Market situation outside Germany

Excluding Germany, the European sales market for biofuels was massively weakened by the lockdowns in the various member states.

Biofuels are gaining in importance in countries with predominantly agricultural economies in Asia and South America, meaning that incentives for its use, for example tax incentives or compulsory blending requirements, are being implemented. Here the primary factor is not so much environmental concerns as interest in supporting local agriculture. The use of local raw materials will improve the local value-added chain and reduce energy imports, which will improve the trade balance. As a result, investments are being made in new local production capacity for biofuel materials, especially in South-East Asia, and jobs in the local agricultural industry are being created or protected.

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Trends in sales and raw material prices

The wholesale price of FAME in the financial year 2020/2021 was approximately EUR 173 tonne above the average for the same period in the previous year, while the price of rapeseed oil was approximately EUR 193/tonne higher than in the same period in the previous year.

In the financial year 2020/2021 the price of Bioethanol was approximately EUR 25/cbm higher than in the same period in the previous year, while wheat was trading on the MATIF at EUR 27/tonne above the previous year's price.

The following table shows the average price movements for selected raw materials and products on international markets:

Historical price trends of selected raw materials

	2019/ 2020	Q1 2020/ 2021	Q2 2020/ 2021	Q3 2020/ 2021	Q4 2020/ 2021	2020/ 2021
Crude oil (Brent USD/barrel)	52	43	44	61	69	54
Diesel FOB Rotterdam (EUR/tonne)	437	307	307	411	462	371
Biodiesel (FAME -10 RED; EUR/tonne)	841	843	884	1,058	1,270	1,011
Petrol FOB Rotterdam (EUR/tonne)	426	333	327	464	545	415
Bioethanol (T2 German Specs; EUR cbm)	590	740	571	521	626	615
Ethanol USA (CBOT; EUR/tonne)	308	286	312	371	506	368
Rapeseed oil (EUR/tonne)	786	783	855	1,017	1,257	975
Palm oil (EUR/tonne)	564	596	715	903	967	792
Soya oil (CBOT; EUR/tonne)	581	593	678	889	1,163	827
Wheat (MATIF; EUR/tonne)	183	186	208	227	220	210
Wheat (CBOT; EUR/tonne)	173	166	185	197	208	189
Sugar (EUR/tonne)	244	233	270	297	309	277

Political environment and legal framework for

Current regulatory situation in the European Union

RED II implementation satisfactory

biofuels

The measures taken by the Federal Government to implement the RED II in mid-2021, following on from difficult negotiations and discussions, can be assessed as very satisfactory (especially in view of the initial starting position). However, these are only a first step.

EU Commission "Fit for 55" package

In view of the – now increased – climate protection objectives, on July 14, 2021 the EU Commission published a package of proposals in its "Fit for 55" programme, consisting of the twelve proposed legal changes to existing regulations, directives and statutory measures. The measures are intended to meet the increased climate protection objective of greenhouse gas savings of 55 percent (net) in 2030 compared to 1990.

Specifically, among other things this means making amendments to the European emissions trading system (ETS), the Effort Sharing Regulation (ESR) and the Regulation on the Inclusion of Greenhouse Gas Emissions from Land Use, Land Use Change and Forestry.

For the ETS, an increase in the greenhouse gas reduction targets is planned from 40 percent to 61 percent by 2030. In addition, the emissions trading system will be expanded to include shipping. An important element of this is that there will be separate emissions trading for transport and buildings sectors from 2026. Here, a reduction of greenhouse gas emissions of 43 percent in these sectors by 2030 compared to 2005 will be demanded. Sustainable bioenergy (RED II criterion) has a zero emissions factor. In addition, a climate social plan with a volume of EUR 23.7 billion until 2027, and EUR 48.5 billion for the years thereafter, is planned for the years 2025– 2032 in order to soften the cost burden of the measures.

A new linear climate reduction pathway is planned for the Effort Sharing Regulation from 2023.

Further amendments affect the RED III, an energy tax directive and new fleet limits for passenger vehicles.

For RED III it is planned to increase the targets for renewable energies in 2030 from 32 to 40 percent. The energetic minimum quota for the use of advanced biofuels (Appendix IX Part A) is determined as follows: 0.2 percent in 2022,

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0.5 percent in 2025, and 2.2 percent in 2030. An excess fulfilment using advanced biofuels (Appendix IX Part A) will be credited at double for quota purposes; in practical terms, this means a doubling of quota revenues. The ceiling for cultivated biomass fuels continues to be the same as in RED II. High ILUC-risk biofuels remain frozen at the 2019 level.

Further, there will be an obligatory quota for synthetic and renewable fuels of non-biological origins (REFNBO). VERBIO is working of a process to manufacture synthetic methane (CH4) from renewable hydrogen and CO2 .

The CO2 emissions norms for passenger vehicles (fleet targets) will be increased from 37.5 percent to 55 percent, and those for light vehicles from 31 percent to 50 percent compared to the amounts targeted for 2021. A new target for 2035 will be a 100 percent CO2 reduction compared to 2021. As the proposal made by the Commission does not include credits for renewable fuels (re-examination is planned for 2026), this means that it will not be possible to power a combustion engine vehicle (a de facto ban on the combustion engine).

A decisive emphasis will be placed on the reform of energy taxation. Fuels and powertrains will in future be taxed based on their energy content and environmental performance (greenhouse gas emissions).

For competitiveness reasons a European Carbon Border Adjustment Mechanism (CBAM) will be introduced. However, this will lead to major discussions internationally.

Current legislation position in the USA and Canada

In the United States the biofuels market is governed by the Renewable Fuel Standard (RFS) programme, which was approved by Congress in 2005 and subsequently amended in 2007 and 2010 (RFS2). Legislation prescribes the use of biofuels in order to replace a portion of the total volume of fossil fuels used in the transport sector. The minimum fuel volume required is increased on an annual basis and must be fulfilled by means of both conventional biofuels (e.g. bioethanol from maize) and advanced biofuels (e.g. biomethane or diesel produced on a biomass basis). The RFS2 determined annual target volumes for the various categories of renewable fuels, while the EPA determines the annual volume obligations (mandate) for refinery operators; this is determined based on the available capacity, the sales of fuels in total and a "RFS2" target amount. In order for a fuel to be credited to the mandate it must be manufactured in accordance with an EPA-approved process, and it must demonstrate a minimum level of greenhouse gas emissions compared to oil, using the year 2005 as a basis.

Complementing this programme is the Low Carbon Fuel Standard (LCFS) which applies along the Eastern seaboard (California, Oregon, Washington, British Columbia), which is very similar to the greenhouse gas quota approach used in Germany. While in the rest of the USA and Canada the greenhouse gas balance of the biofuels is not relevant, the LCFS sets clear standards for the reduction of greenhouse gas emissions. Biofuels manufacturers (e.g. VERBIO) that are especially greenhouse gas-efficient in the production of their biofuels, meaning that they achieve a high level of greenhouse gas emissions reductions, are given a bonus, especially in California, for up to USD 200/tonne CO2 savings.

This trend appears to be spreading to the rest of the USA, so that significant improvements in greenhouse gas savings in the biggest biofuels market in the world can be expected in coming years.

The Environmental Protection Agency (EPA) announced the final RFS volume obligations for 2020 (RVO) on December 19, 2019. The RVOs for 2020 for all renewable fuels, advanced biofuels and cellulose-based biofuels are lower than the target levels according to RFS2 for 2020; however, the RVO for cellulose-based biofuels, such as, for example, biomethane from straw, has been set at higher levels than was the case in the previous year. The RVO for cellulose biofuels increased from 418 million US gallons in 2019 to 590 million gallons in 2020, an increase of 41 percent. Future volume obligations for 2021 and 2022 have not yet been determined. These are expected to be available at the earliest by the end of 2021. The RVO for 2020 for diesel based on biomass material is increased by 16 percent, from 2.1 billion gallons to 2.43 billion gallons; the volume in 2021 remains unchanged at 2.43 billion gallons. At the same time the share of other advanced biofuels was reduced by the same amount. As biodiesel and renewable diesel (HVO) need to be considered together, there has been no overall increase in the overall volume obligation for the total of the two categories in 2020. At the same time the capacities for renewable diesel (HVO) have been increased. This trend can be expected to continue in future years as more companies have announced major projects for renewable diesel.

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The implementation of the RFS in the annual volume obligations is a recurring challenge, as representatives of various interest groups have an influence on the process. The administrative challenges include, among other things, the classification of approved biofuels, the calculation of the annual quota amounts, and the rules on exemptions from the RFS for small refineries. Numerous participants have actively questioned various aspects of the RFS, which has led to great uncertainty in the markets in recent years. Until now, the Supreme Court in the USA has consistently confirmed the validity of the RFS.

For cellulose-based biofuels a target of a 44 percent share of the total for renewable fuels in 2022 is enacted in law. Accordingly, the legislation should provide for 10.5 billion gallons of cellulose-based biofuels (for example, biomethane from straw) in 2020. The EPA has fixed the target for 2020 at 590 million gallons. The deficit is due to various factors, among other things the lack of private investment, logistical challenges, technology setbacks and the lack of support from the US Federal Government. On the other hand, the deficit provides an opportunity for wellfinanced companies that are in a position to make use of technologies for manufacturing advanced biofuels on a large scale.

In Canada the government is working on a clean fuel standard, but its implementation has been postponed until 2023 due to the COVID-19 pandemic. It remains to be seen whether this process will be subject to further delays as a result of the recent announcement of new elections.

Business report and the Group's position

Results of operations

The production volume of biodiesel and bioethanol in the financial year 2020/2021 totalled 834,541 tonnes, compared with 796,411 tonnes in the financial year 2019/2020. This represents an overall capacity utilisation of 90.7 percent (2019/2020: 86.6 percent). In addition, once again a new record level of biomethane was produced in the financial year 2020/2021, with total production amounting to 794,817 MWh (2019/2020: 784,414 MWh).

The Group's sales revenues for 2020/2021 totalled EUR 1,026.0 million (2019/2020: EUR 872.4 million), exceeding EUR 1.0 billion for the first time. These figures include sales revenues from trading in biofuels of EUR 13.1 million, almost unchanged compared to the previous financial year (2019/2020: EUR 11.6 million). The increase in sales revenues is primarily due to the strong increase in the price of biodiesel over the course of the financial year. Further details are provided in the reports on the individual segments.

With framework conditions that were, primarily in Europe, comparably favourable, the Group's earnings before interest, taxation, depreciation and amortisation (EBITDA) for the biofuels business amounted to EUR 166.3 million, EUR 44.2 million ahead of the same period in the previous year (2019/2020: EUR 122.1 million).

The Group operating result (EBIT) is EUR 136.6 million, also significantly higher than in the comparative previous period (2019/2020: EUR 91.9 million). The net result is also affected by current and deferred taxes of EUR 41.8 million (2019/2020: EUR 27.2 million), and amounted to EUR 93.5 million (2019/2020: EUR 63.8 million). Based on the result for the period, earnings per share (basic and diluted) were EUR 1.48 and EUR 1.47 respectively (2019/2020: EUR 1.01 and EUR 1.01).

The reporting on the business and earnings development of the individual segments is found in the section "Segment reporting".

Trends in individual income and expense categories

Other operating income amounted to EUR 12.7 million (2019/2020: EUR 16.1 million) and primarily included grants and the release to income of deferred investment grants and subsidies (EUR 4.4 million; 2019/2020: EUR 6.2 million), electricity and energy tax rebates (EUR 3.3 million; 2019/2020: EUR 3.0 million) and gains on currency exchange of EUR 1.4 million (2019/2020: EUR 3.0 million).

The cost of materials amounted to EUR 779.5 million. Consistent with the corresponding sales revenues, this figure is higher than in the previous year (cost of materials in 2019/2020: EUR 692.6 million). Taking account of changes in inventory of unfinished and finished goods, there was a more than proportional increase in gross margin amounting to EUR 269.1 million (2019/2020: EUR 197.5 million).

Personnel expenses in the financial year 2020/2021 amounted to EUR 54.4 million, approximately 21 percent higher than in the previous year (2019/2020: EUR 44.9 million). The increase is primarily due to an increase in the number of employees as a result of the ramp-up of the new business activities. Overall, there was a further increase in the overall average personnel cost per employee. The personnel expense ratio (as a proportion of sales revenue, change in inventories and own work capitalised) was 5.2 percent, a small increase compared to the previous year (2019/2020: 5.0 percent).

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Other operating expenses amounted to EUR 46.4 million in the period (2019/2020: EUR 45.6 million). Other operating expenses primarily include the costs of repair and maintenance, outgoing freight costs and other sales costs, currency exchange losses, the cost of insurances and contributions, motor vehicle costs and legal and consultancy costs. Within this total, increases in expenses were recorded primarily for outgoing freight costs and currency exchange losses, while other expenses included in this category are largely unchanged compared to the previous year.

Depreciation in the financial year 2020/2021 included depreciation charges amounting to EUR 5.7 million (2019/2020: EUR 3.7 million) arising on right-of-use assets under leasing arrangements as a result of the application of IFRS 16. As a result, depreciation has fallen by a small amount overall compared to the previous year as substantial components of existing plant are fully depreciated and the investments made in the past two years are largely not yet written down.

The financial result amounted to EUR –1.3 million (2019/2020: EUR –0.9 million) and included interest expenses of EUR 1.4 million (2019/2020: EUR 1.6 million) less interest income of only EUR 0.1 million (2019/2020: EUR 0.7 million). The financial result includes interest expenses for interest charges on lease liabilities of EUR 0.3 million (2019/2020: EUR 0.2 million) in connection with the implementation of IFRS 16.

The increase in income tax expense (EUR 41.8 million; 2019/2020: EUR 27.2 million) corresponds to the higher profit before tax. The tax charge represented an effective tax rate of 30.9 percent (2019/2020: 29.9 percent) in the financial year 2020/2021, which is consistent with the expected rate.

Net assets and financial position

The balance sheet total amounts to EUR 678.6 thousand at June 30, 2021 (June 30, 2020: EUR 529.2 million). The increase in the balance sheet total on the assets side is due in particular to the increases in property, plant and equipment, inventories and derivatives. On the equity and liabilities side the increase primarily also reflects an increase in derivatives as well the increase in equity.

Non-current assets

Non-current assets increased by EUR 38.6 million and amounted to EUR 312.3 million at the balance sheet date (June 30, 2020: EUR 273.8 million). The increase was primarily due to further higher levels of additions to property, plant and equipment (EUR 67.7 million), offset by slightly lower systematic depreciation of EUR 23.7 million (2019/2020: EUR 24.7 million) and disposals of assets at their remaining book values of EUR 1.0 million. The carrying value of right-of-use assets under leasing arrangements, reported for the first time in the previous year as a result of the initial application of IFRS 16, is almost unchanged at EUR 16.2 million.

Current assets

Current assets amounted to EUR 366.3 million at June 30, 2021 (June 30, 2020: EUR 255.4 million), an increase of EUR 110.9 million compared to the previous year.

A further increase in the level of inventories compared to the previous year has been recorded (June 30, 2021: EUR 101.4 million; June 30, 2020: EUR 78.8 million). The increase in inventories compared to June 30, 2020 was primarily a result of higher quantities of inventories and the overall value of finished goods inventories, whereby there was an increase in inventories of biomethane quotas in particular.

There was also an increase, although a smaller one, in trade receivables (June 30, 2021: EUR 69.6 million; June 30, 2020: EUR 64.7 million). The increase primarily reflects the higher price level of biodiesel and bioethanol at the end of the year compared to the price level at the end of the previous year.

There was a significant increase in the carrying amounts of derivatives at June 30, 2021 (June 30, 2021: EUR 44.2 million; June 30, 2020: EUR 4.1 million). This was predominantly a result of the derivatives held to hedge the purchase of vegetable oils; that change in value is recognised directly in equity as a result of the accounting treatment of the derivatives as cash flow hedging instruments.

Further details of the changes in the balance of cash and cash equivalents are provided in the explanatory notes to the cash flow statement.

Equity

Equity totalled EUR 509.9 million (June 30, 2020: EUR 390.8 million). The equity ratio amounted to 75.1 percent, above the level at the previous year's balance sheet date (June 30, 2020: 73.9 percent).

Non-current liabilities

Non-current liabilities fell by EUR 3.8 million, from EUR 49.3 million at June 30, 2020 to EUR 45.5 million at June 30, 2021. While there has been a decrease in lease liabilities and other non-current financial liabilities, there was an increase in deferred tax balances.

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Current liabilities

Current liabilities have also increased compared to the end of the previous financial year (June 30, 2021: EUR 123.3 million; June 30, 2020: EUR 89.1 million). This was primarily a result of the increase in derivatives (EUR 22.5 million; June 30, 2020: EUR 3.1 million) and the increase in other current liabilities.

The change in derivatives on the equity and liabilities side (June 30, 2021: EUR 22.5 million; June 30, 2020: EUR 3.1 million) primarily reflected the result from commodity forward contracts for sales transactions, whereby these are recorded as free-standing derivatives and accordingly the change in value is reflected in the result from commodity forward contracts.

Cash flows

The cash flow from operating activities for the reporting period totalled EUR 117.2 million, significantly higher than in the previous year (2019/2020: EUR 71.7 million). This is due to the higher profit in the period; in addition, there were other effects primarily from the non-cash transactions and non-cash changes in derivative financial instruments. Offsetting these effects were significantly higher cash outflows of EUR 44.5 million (2019/2020: EUR 13.5 million) for income tax payments.

Cash outflows from investment activities in the reporting period 2020/2021 totalled EUR 46.6 million (2019/2020: EUR 87.7 million). In particular, in addition to cash outflows for investments made in property, plant and equipment (EUR 67.1 million), this total includes cash inflows from the release of term deposit accounts (EUR 20.0 million). In the previous year cash outflows for investments made in property, plant and equipment were at a similar level (EUR 68.0 million) and corresponding increases in term deposit accounts were made (EUR 20.0 million).

The cash flow from financing activities for the reporting period totalled EUR – 18.8 million (2019/2020: EUR 2.2 million). This primarily consists of the dividend payments (EUR 12.6 million; 2019/2020: EUR 12.6 million). In addition, the cash flow from financing activities is affected by the application of IFRS 16 with an amount of EUR 5.9 million (2019/2020: EUR 5.3 million) presented as a cash outflow for payment of lease liabilities.

As a result of the above, cash and cash equivalents increased by a total of EUR 51.9 million in the period July 1, 2020 to June 30, 2021. Cash and cash equivalents reported in the balance sheet at June 30, 2021 amounted to EUR 105.0 million.

Net cash

The bank and loan finance arrangements of EUR 30.0 million are more than offset by cash and cash equivalents of EUR 105.0 million and other cash balances held in segregated accounts of EUR 25.2 million, so that the reported net cash balance at the balance sheet date amounted to EUR 100.2 million (June 30, 2020: EUR 55.9 million).

Investments

Investments totalling EUR 67.8 million were made in the financial year 2020/2021 (2019/2020: EUR 66.7 million). These primarily relate to investments in property, plant and equipment of EUR 67.7 million (2019/2020: EUR 66.5 million).

The details of the investment activities in the individual segments are described in the segment reporting on the individual Biodiesel and Bioethanol segments.

Overall statement on the net assets, financial position and results of operations and comparison of actual and forecast business developments

Given the sales revenues and results of operations, the financial year 2020/2021 has been a very pleasing year overall. The EBITDA of EUR 166.3 million and the net cash position of EUR 100.2 million respectively are significantly above the original planning for the financial year 2020/2021. The forecast released in the previous year indicated an EBITDA of around EUR 130 million. For net cash the Company expected a net cash position at the end of the financial year 2020/2021 of around EUR 50 million. The original forecasts for EBITDA and for net cash at the end of the financial year were corrected at the end of the financial year by an announcement made on July 23, 2021.

The net assets and financial position continue to be very stable and sufficient to finance the Group's future activities.

The Management Board and the Supervisory Board of VERBIO AG will recommend the payment of a dividend of EUR 0.20 per qualifying share at the annual general meeting to be held on February 4, 2022, and that the remaining profit for the period shall be carried forward.

Segment reporting

Biodiesel

Once again it was possible to match the high production volumes recorded in recent financial years. In the financial year 2020/2021 the production of biodiesel exceeded 600,000 tonnes for the first time, increasing to 601,257 tonnes (2019/2020: 559,735 tonnes). With the process optimisation in the Group's German plants and

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the improvements in the production capacity utilisation at the biodiesel plant in Canada, the production capacity utilisation was 91.1 percent following 84.8 percent in the previous year. Sales also hit a new record level at 669,645 tonnes.

Sales revenues in the Biodiesel segment in the financial year 2020/2021 totalled EUR 729.9 million, following EUR 588.2 million in the financial year 2019/2020. The increase in sales revenue is primarily due to the strong increase in the average selling prices for biodiesel, with a comparatively small increase in sales volumes.

The cost of materials amounted to EUR 586.2 million (2019/2020: EUR 511.9 million), above the level of the previous year, consistent with the increase in sales. Taking into consideration the change in inventories, gross profit increased from EUR 79.8 million to EUR 148.6 million.

Personnel expenses in the financial year 2020/2021 amounted to EUR 19.7 million (2019/2020: EUR 16.2 million). The increase is primarily due to the higher average number of employees in the segment overall.

Other operating expenses totalled EUR 22.1 million (2019/2020: EUR 20.1 million). Taking into account the losses on futures transactions of EUR 17.5 million (2019/2020: EUR 1.7 million), the segment EBITDA for the period is EUR 93.2 million (2019/2020: EUR 46.1 million).

Investments in property, plant and equipment totalling EUR 4.7 million were made in the Biodiesel segment in the financial year 2020/2021 (2019/2020: EUR 30.6 million).

1. HY 2019/ 2020	2. HY 2019/ 2020	2019/ 2020	1. HY 2020/ 2021	2. HY 2020/ 2021	2020/ 2021
330,000	330,000	660,000	330,000	330,000	660,000
280,993	278,742	559,735	307,230	294,027	601,257
85.1	84.5	84.8	93.1	89.1	91.1
199	208	208	219	224	224

Bioethanol

In the financial year from July 1, 2020 to June 30, 2021 production of bioethanol totalled 233,284 tonnes (2019/2020: 236,676 tonnes), only slightly below the amount in the same period in the previous year. On the other hand there was a slight increase in the production of biomethane in the financial year 2020/2021 (794.8 GWh) compared to the financial year 2019/2020 (784.4 GWh).

In total, the Bioethanol segment generated sales revenues of EUR 286.6 million in 2020/2021, slightly above the level in the previous year (2019/2020: EUR 275.2 million). In the Bioethanol segment the small increase in sales revenues was due to the higher average sales price, while sales volumes decreased slightly; following a sharp fall in market prices in the third quarter, market prices have increased again significantly towards the end of the financial year. The volume of trading activities remained at a relatively low level, as in the previous year (2020/2021: EUR 12.6 million; 2019/2020: EUR 9.4 million).

The cost of materials increased compared to the previous year corresponding to the change in sales revenues, increasing to EUR 187.2 million (2019/2020: EUR 174.7 million), with the consequence that the segment gross margin increased to EUR 117.1 million from EUR 116.8 million in the same period in the previous year, after taking the change in inventories into account.

Other operating income in this segment in the reporting period amounted to EUR 9.2 million (2019/2020: EUR 12.5 million), a fall compared to the previous year primarily due to the lower level of grant income.

Personnel costs amounted to EUR 29.9 million (2019/2020: EUR 24.1 million). The increase is primarily due to the higher number of employees as a result of expansion of the biomethane business.

Other operating expenses amounted to EUR 28.1 million, compared to EUR 29.2 million in the financial year 2019/2020. These primarily include freight out and maintenance costs, whereby these as well as other amounts included in other operating expenses are largely unchanged compared to the previous year.

The segment result EBITDA for the financial year 2020/2021 totalled EUR 70.6 million, in comparison with EUR 74.0 million in the financial year 2019/2020.

In total, EUR 61.1 million (2019/2020: EUR 29.6 million) was invested in property, plant and equipment in this segment. This primarily consists of investments in connection with the construction of the biomethane plants in the USA and India, as well as with the optimisation of the existing plants in Schwedt/Oder, Zörbig and Pinnow.

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Further information

Bioethanol 1. HY 2019/ 2020 2. HY 2019/ 2020 2019/ 2020 1. HY 2020/ 2021 2. HY 2020/ 2021 2020/ 2021 Production capacity (tonne) 260,000 260,000 Production (tonne) 121,795 114,881 236,676 118,396 114,888 233,284 Production capacity utilisation (in percent) 93.7 88.4 91.0 91.1 88.4 89.7 Biomethane Production capacity (tonne) 750,000 900,000 Production (tonne) 376,918 407,496 784,414 414,172 372,156 794,817 Production capacity utilisation (in percent) 100.5 98.2 95.3 92.0 82.7 88.3 Number of employees at the balance sheet date 338 340 340 371 401 401

The VERBIO AG remuneration system consists of the following Non-performance-related and Performance-related remuneration components:

For simplification purposes Claus Sauter, Prof. Dr. Oliver Lüdtke, Theodor Niesmann and Bernd Sauter are referred to as the "old" Management Board and Stefan Schreiber is referred to as the "new" Management Board.

Other

Sales revenues generated in the Other segment totalling EUR 16.7 million in the financial year 2020/2021 primarily represent revenues from transport and logistics services (2019/2020: EUR 15.8 million). The segment result amounted to EUR 0.8 million (2019/2020: EUR 0.6 million). The Other segment had 130 employees at June 30, 2021 (June 30, 2020: 119 employees).

Remuneration report

The following remuneration report presents the principles followed by VERBIO in determining the remuneration to be paid to the Management and Supervisory Board, and in addition explains the structure and amounts of remuneration paid.

Remuneration of the Management Board

In accordance with the German Stock Corporation Act in its current version as well as the respective rules in the Supervisory Board's rules of procedure, the full Supervisory Board is responsible for the determination of remuneration paid to individual members of the Management Board. According to § 120a (1) AktG in the version valid since January 1, 2020, in accordance with the Act Implementing the Second Shareholders' Directive (Gesetz zur Umsetzung der zweiten Aktionärsrichtlinie – ARUG II) issued on December 12, 2019 the annual general meeting of a public listed company shall hold a resolution on the remuneration system of the members of the Management Board on each occasion when a significant change to that system is made and no less than once each four years. In accordance with the transition rules set out in § 26j (1) EGAktG the initial resolution in accordance with § 120a (1) AktG shall be held no later than by the end of the first ordinary annual general meeting held after December 31, 2020. Due to the legal changes and in the light of the fact that the contracts of the members of the Management Board expire at the end of October 2020, the Supervisory Board approved a new remuneration system on April 1, 2020 for new Management Board employment contracts. The remuneration system in place since July 1, 2020 was approved by a majority of 90.39 percent of the shareholdings represented at the general shareholders' meeting held on January 29, 2021.

This remuneration represents compensation for all activities performed for the Company and, unless agreed otherwise, for activities performed for affiliated companies of the Company in accordance with § 15 et seq. as well as for roles performed at industry associations. The acceptance of Supervisory Board positions requires the approval of the Supervisory Board. As part of this procedure the Supervisory Board will decide if and the extent to which any remuneration shall be deduced.

1. Non-performance-related remuneration components

1.1 Fixed remuneration (basic annual salary) Each member of the Management Board receives a Non-performance-related fixed remuneration paid in twelve equal instalments.

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1.2 Other benefits In addition to a fixed salary, members of the Management Board are provided with other benefits.

These take the form of the provision of a company car that may also be used for private purposes. VERBIO AG bears all the costs of maintaining and operating company cars. In addition, the Company reimburses expenses and travel costs that are incurred by members of the Management Board in connection with performing their employment obligations based on the relevant current company guidelines. The tax burden arising on other benefits provided is borne by the respective member of the Management Board.

1.3 Loyalty bonus

The members of the "old" Management Board are awarded an additional loyalty bonus, which is awarded in lieu of a traditional pension plan arrangement.

Half of the loyalty bonus is paid in the form of VERBIO AG shares. The other half can, at the discretion of the Management Board, be paid in cash or also be paid in shares. To calculate the number of shares to be issued, the loyalty bonus to be paid in shares is divided by the weighted three-month average VERBIO share price noted in the closing auction in the Xetra trading system of the Deutsche Börse AG (or, in its place, an appropriate successor system) (Xetra share price). The last three months of the respective financial year (April to June) are relevant for the purposes of this calculation. The members of the Management Board may only dispose of the VERBIO AG shares after the termination of their respective employment contracts (vesting period).

If their employment period ends during the year, the award is made on a pro rata basis. VERBIO AG is entitled to demand the return of all or a portion of the shares awarded under the loyalty bonus of a member of the Management Board if the member's employment contract is ended as a result of gross breach of duty. However, there is no right to demand the return of shares issued to a member of the Management Board based on the exercise of an option right exercised by that member.

2. Performance-related remuneration

2.1 Annual bonus (STI)

The annual bonus for the "old" members of the Management Board amounts to 1 percent of the positive consolidated net income for the period exceeding EUR 16,000,000, whereby the total annual bonus payable to all members of the Management Board shall not be taken into consideration for this purpose. The annual bonus of a member of the "old" Management Board is limited to a maximum of half of the annual fixed remuneration (annual bonus cap).

The annual bonus of the "new" Management Board is based on weighted targets that are set annually by the Supervisory Board. The targets shall be determined by the Supervisory Board and communicated to the "new" Management Board by May 30 of each year for the Company's financial year that follows. At least three and no more than five targets must be agreed. The weighting by target is made in multiples of 10 percent of between 10 and 50 percent. The total weighting shall equal 100 percent. The financial and non-financial targets may be operating or alternatively strategic targets. For the measurement of the achievement of targets it is necessary to define fulfilment criteria in order to be able to define whether the target has been exceeded, met, partially met, or not met. The measurement of the achievement of targets results in a weighting of the respective targets based on the level of achievement (exceeded = credited twice, met = simple credit, partially met = credited by half, or not met = no credit). The annual bonus of a member of the "new" Management Board is limited to a maximum of half of the annual fixed remuneration (annual bonus cap).

The annual bonus is then calculated using the following method:

Annual bonus = 50 percent x fixed remuneration x target achievement factor

For this purpose, the target achievement factor is determined as the weighted assessment of the achievement of targets.

No bonus is payable if the target achievement factor is below 0.5.

For both "old" and "new" members of the Management Board the following applies:

The Supervisory Board can increase the annual bonus by awarding an additional, subsequent bonus awarded to recognise special performance in the reference year, where appropriate.

The annual bonus is awarded on a pro rata basis if an employment contracts ends before the end of a financial year.

2.2 Long-term bonus (LTI)

The base figure for the long-term bonus for each financial year is half of the annual fixed remuneration (reference bonus amount). The reference period is a period of three years. All members of the Management Board are awarded a long-term bonus, but there are different arrangements for determining the bonuses payable to "old" and "new" members.

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a) For the members of the "old" Management Board the following applies:

At September 30 of each year (the effective date) the reference bonus is converted into a number of fictional shares of the Company (fictional shares) for the preceding financial year by dividing the reference bonus by the weighted three-month average of the VERBIO share price in the closing auction in the Xetra trading system of the Deutsche Börse AG (Xetra price or price quoted on an appropriate successor system) (Xetra share price). The last three months of the respective financial year are relevant for the purposes of this calculation.

Three years after the respective effective date, i.e. on September 30 of the respective following year (payment year), the related fictional shares are reconverted into a sum of money such that the number of fictional shares is multiplied by the Xetra share price for the period of the last three months of the latest financial year before payment.

The long-term bonus for each reference year is limited to an amount that is double the fixed remuneration (long-term bonus cap).

The Supervisory Board is entitled to replace monetary payments and instead grant the Management Board member the respective number of fictional shares in place of such payments. The Supervisory Board is entitled to exercise the substitution right for all fictional shares of a specific year; if the right is exercised the Supervisory Board can only exercise the power uniformly for all fictional shares attributable to the that year. If shares are allocated to the Management Board member, the member is only permitted to sell them after the expiration of a vesting period of a further period of one year after the allocation, but not before the end of the members' employment contract. VERBIO AG shall ensure compliance with this provision. The long-term bonus cap does not apply to the exercise of the substitution right.

The reference bonus is calculated on a pro rata basis if an employment contract ends before the end of a financial year.

The due dates for payment and vesting periods continue to apply for a long-term bonus that is not yet paid by the date that an employment contract ends. This ensures that the reference period of three years and a vesting period of a further period of one year on the issue of shares are also applied to periods subsequent to the end of an employment contract.

b) For the members of the "new" Management Board the following applies:

At September 30 of each year (the effective date) the reference bonus amount is converted into a number of fictional shares of the VERBIO North America Corporation (fictional VNA shares) for the preceding financial year by dividing the reference bonus by the weighted three-month average of the fictional price of the VERBIO North America Corporation shares (fictional VNA share price).

The fictional VNA share price is calculated as follows:

• The EBITDA multiple for VERBIO AG is calculated. For this purpose, the weighted threemonth average VERBIO share noted in the closing auction in the Xetra trading system of the Deutsche Börse AG (or, in its place, an appropriate successor system) (Xetra share price) for the period from April to June of the financial year is multiplied by the total number of VERBIO AG shares and divided by the EBITDA generated by VERBIO AG in the financial year.

The fictional VNA share price is calculated by multiplying the EBITDA of VNA by the VERBIO AG EBITDA multiple divided by the equity of VNA, plus the borrowings provided to VNA by VERBIO AG (or any of its subsidiaries). All of the data used for the purposes of the calculations are based on the financial year and on the June 30 balance sheet date of the financial year, respectively.
The reference bonus amount is then divided by the fictional VNA share price to calculate the number of fictional VNA shares.

Three years after the respective effective date, i.e. on September 30 of the respective following year (payment year), the related fictional VNA shares are reconverted into a sum of money such that the number of fictional VNA shares is multiplied by the fictional VNA share price for the payment year. This is calculated using the methodology described above using the data for the financial year ended before the payment year.

The long-term bonus for each reference year is limited to an amount equal to the fixed remuneration (long-term bonus cap).

No long-term bonus is awarded if the employment contract of the member of the "new" Management Board is ended prematurely or in case of non-temporary leave of absence.

Other contractual payments

Remuneration on contact termination

The employment contracts entered into with the members of the Management Board provide for limits on termination payments in cases when the Management Board activity is prematurely ended when such termination is not based on a termination of the employment contract on acceptable

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Further information

important grounds. Under these provisions, termination payments may not exceed the amount of two years' salary (based on the total remuneration for the preceding financial year and where applicable on the expected total remuneration for the current financial year) (termination payment cap) and the remuneration for the remaining period to maturity under the employment contract. In addition, there is a further overall upper limit on termination payments for the "old" Management Board of EUR 1,500,000. Further, the employment contracts of the members of the Management Board provide for payment of the member's fixed remuneration should the member be temporarily unable to perform their duties for reasons that are beyond their control; such payments are to be made for a period of up to six months but not, however, beyond the end of their employment contract. In the case of the death of a member of the Management Board their widow and children under 25 years of age are, as joint beneficiaries, entitled to continued payment of the fixed remuneration for the month in which the death occurs and the three months thereafter, but not, however, beyond the end of their employment contract.

"Change of Control"-provisions

In the event of an early termination of Management Board activity resulting from a change in control, the Management Board member has a one-off special right of termination, and on exercising this right the member may make a claim for a termination payment that is calculated by capitalisation of the expected total remuneration for the remaining contract term. However, this amount may not exceed the amount of three years' remuneration consisting of the fixed and variable contractual components.

Total remuneration

The total remuneration of members of the Management Board in the financial year 2020/2021 amounted to EUR 5,195 thousand (2019/2020: EUR 3,042 thousand). Thereof, EUR 3,219 thousand (2019/2020: EUR 1,541 thousand) relates to the fixed salary portions including other remuneration components, and EUR 1,976 thousand (2019/2020: EUR 1,501 thousand) pertains to the variable remuneration components.

The members of the Management Board were awarded the following remuneration in the financial year 2020/2021:

Remuneration awarded for the reporting year

EUR (thousands)	Claus Sauter 2020/2021	Prof. Dr. Oliver Lüdtke 2020/2021	Theodor Niesmann 2020/2021	Bernd Sauter 2020/2021	Stefan Schreiber 2020/2021
Fixed remuneration	768	700	700	700	300
Other remuneration	15.3	1.5	8.1	15.7	10.1
Variable remuneration (annual bonus)	234	200	200	200	150
Variable remuneration (long-term bonus)	236	202	202	202	150
Plan/plan duration	Fictive shares 11 07/2020–06/2024	Fictive shares 11 07/2020–06/2024	Fictive shares 11 07/2020–06/2024	Fictive shares 11 07/2020–06/2024	Fictive shares 11 07/2020–06/2024
Total remuneration	1,253	1,104	1,110	1,118	610

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Further information

On January 29, 2016 the annual general meeting of VERBIO Vereinigte BioEnergie AG approved a resolution to the effect that the details of the remuneration and other agreed and paid benefits for each member of the Management Board shall not be disclosed for a period of five years, i.e. for the annual financial statements for the financial years from 2015/2016 to 2019/2020 inclusive, either in the Company's annual financial statements or in the consolidated financial statements. Accordingly, the remuneration report does not include disclosure of the remuneration attributable to individual members of the Management Board for the previous year.

The actual amounts paid to the members of the Management Board in the reporting period (payment amounts) were as follows:

Actual amounts paid in the reporting year

EUR (thousands)	Claus Sauter 2020/2021	Prof. Dr. Oliver Lüdtke 2020/2021	Theodor Niesmann 2020/2021	Bernd Sauter 2020/2021	Stefan Schreiber 2020/2021
Fixed remuneration	468	400	400	400	300
Other remuneration	15.3	1.5	8.1	15.7	10.1
Variable remuneration (annual bonus)	210	180	180	180	0
Variable remuneration (long-term bonus)	908	760	760	760	0
Plan/plan duration	Fictive shares 6 and 7 07/2015–06/2020	Fictive shares 6 and 7 07/2015–06/2020	Fictive shares 6 and 7 07/2015–06/2020	Fictive shares 6 and 7 07/2015–06/2020
Total remuneration	1,601	1,342	1,348	1,356	310

Group management report

Remuneration report

Events subsequent to the balance sheet date

Consolidated financial statements (IFRS)

Further information

In addition, there is remuneration payable and shares that have been awarded in previous years under variable remuneration arrangements with the Management Board which have not yet been paid or issued:

Remuneration payable and shares awarded in previous years which have not yet been paid or issued

EUR (thousands)	Claus Sauter 2020/2021	Prof. Dr. Oliver Lüdtke 2020/2021	Theodor Niesmann 2020/2021	Bernd Sauter 2020/2021	Stefan Schreiber 2020/2021
Fictive shares 8
Number of shares awarded	44,607	38,235	38,235	38,235	0
Underlying share price (EUR/share)	14.99	14.99	14.99	14.99	–
Value fictive shares 8	669	573	573	573	0
Fictive shares 9
Number of shares awarded	27,784	23,815	23,815	23,815	0
Underlying share price (EUR/share)	15.83	15.83	15.83	15.83	–
Value fictive shares 9	440	377	377	377	0
Fictive shares 10
Number of shares awarded	23,596	20,225	20,225	20,225	0
Underlying share price (EUR/share)	15.44	15.44	15.44	15.44	–
Value fictive shares 10	364	312	312	312	0
Total number of shares	95,987	82,275	82,275	82,275	0
Total share value	1,473	1,262	1,262	1,262	0

Group management report

Remuneration report

Events subsequent to the balance sheet date

Consolidated financial statements (IFRS)

Further information

Remuneration of the Supervisory Board

The amounts of remuneration payable to members of the Supervisory Board are determined by the annual general meeting and governed by § 14 of the Company's articles of association.

In accordance with the revised § 113 (3) AktG, following the amendments introduced by the Act Implementing the Second Shareholders' Directive (Gesetz zur Umsetzung der zweiten Aktionärsrichtlinie – ARUG II) issued on December 12, 2019, the annual general meeting must hold a resolution on the remuneration of the Supervisory Board no less than once each four years. Such a resolution may consist of a confirmation of the existing remuneration. Accordingly, the Management and Supervisory Boards will re-examine the remuneration of the Supervisory Board on a regular and ongoing basis and present resolutions for the shareholders' approval to the annual general meeting in accordance with § 113 (3) (1) and (2) AktG at least every four years.

The current system of remuneration for meetings of the Supervisory Board and in particular the amounts thereof are based on the resolution approved at the annual general meeting held on January 31, 2020. In order to ensure congruency with the resolutions on the remuneration of the members of the Management Board, a proposal to approve the remuneration of the members of the Supervisory Board was presented to the annual general meeting held on January 29, 2021. The resolution was approved by a majority of 98.60 percent of the votes exercised.

The system of remuneration for members of the Supervisory Board provides for a solely fixed remuneration with no performance-related variable components and no share-based remuneration. A solely fixed remuneration for members of the Supervisory Board is recommended by the German Corporate Governance Code in its recommendation G.18 Sentence 1.

According to this, at the end of the business year each Supervisory Board member receives annual fixed remuneration of EUR 45 thousand. The Chairman of the Supervisory Board receives twice this amount, and the Vice-Chairman receives one and a half times this amount. This makes allowance for the greater time obligations of the Chairman and Vice-Chairman of the Supervisory Board in accordance with the recommendations in G.17 Sentence 1 of the German Corporate Governance Code.

The members of the Supervisory Board were paid remuneration of EUR 202.5 thousand for their activities in the financial year 2020/2021 (2019/2020: EUR 202.5 thousand).

Remuneration of the Supervisory Board 2020/2021

EUR (thousands)	Alexander von Witzleben	Ulrike Krämer	Dr.-Ing. Georg Pollert	Dr. Klaus Niemann	Total remuneration
			until 28.01.2021	from 29.01.2021
Fixed remuneration 2020/2021	90.0	67.5	26.1	18.9	202.5
Total remuneration 2020/2021	90.0	67.5 €	26.1	18.9	202.5

Group management report

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Outlook, opportunity and risk report

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In addition, the Company compensates the member of the Supervisory Board for expenses appropriately incurred in connection with the performance of their duties. The Supervisory Board members who were in office in the 2020/2021 financial year were reimbursed with a total amount of EUR 2 thousand (2019/2020: EUR 4 thousand) for cash outlays.

No other remuneration was paid or benefits granted to members of the Supervisory Board in the financial year 2020/2021 for services rendered personally, in particular for consulting or referral services. In the previous financial year (the financial year 2019/2020) the Company paid remuneration amounting to EUR 5 thousand to the Supervisory Board member Ulrike Krämer for consultancy work performed personally under an ongoing consultancy agreement. The agreement was not prolonged beyond June 30, 2020.

Other

The Company has entered into a financial loss/ liability group insurance (so-called D&O insurance) for members of its corporate boards and its key management personnel. The insurance covers the legal liability in the event that claims for financial losses are made against this group of individuals in connection with their activities. Accordingly, the insurance also covers the members of the Management Board and the Supervisory Board. The D&O insurance provides for a deductible for Management Board members of at least 10 percent of the damage, up to one and a half times the fixed annual remuneration, and is thereby in compliance with § 93 (2) (3) German Stock Companies Act (Aktiengesetz – AktG).

The legal regulations covering the liability of Supervisory Board members of a stock company are neither restricted nor expanded by this concluded declaration of obligation. The provisions of the German Corporate Governance Code are accordingly fully complied with.

Events subsequent to the balance sheet date

Significant events subsequent to the balance sheet date

There have been no significant events subsequent to the end of the financial year.

Outlook, opportunity and risk report

Report on expected developments

The following report provides the outlook of the VERBIO Management Board regarding the future course of the business and describes the expected development of significant economic and industry-specific conditions. It represents the knowledge of the Management Board at the time of its preparation, acknowledging that actual developments may differ significantly either positively or negatively from this outlook, due to the occurrence of risks and opportunities as described in the risk and opportunity report. This is particularly applicable in the light of the current COVID-19 pandemic and the resulting significant effect on the economic framework conditions, even though in recent weeks the situation appears to be gaining more stability and it appears that the pandemic may soon be overcome as a result of the ongoing vaccination programme.

VERBIO does not intend to and does not undertake, except as required by legal disclosure requirements, any obligation to update any forward-looking statements contained in this report, nor to adapt them to events or developments after the publication of this Group management report.

Market and industry development

The Management Board continues to see the biofuels market as a growth market, particularly the market for second generation biofuels. In particular, this includes the biomethane manufactured from straw by VERBIO and the biodiesel produced from waste and residue materials. A stable business, and a sustainable business development in the biofuels sector, including the contribution to results from conventional biofuels such as biodiesel and bioethanol, are dependent on reliable framework conditions. The Federal Emissions Protection Act with its fixed GHG quota currently offers a fixed framework on which the business plan going forward is based. The increase of the GHG quota from 6 percent to a nominal 25 percent by 2030 represents a multiple of the market demand and is a change which VERBIO has demanded since its initial public offering in 2006.

Trends in raw material prices

The World Agricultural Supply and Demand Estimates (WASDE report) issued by the United States Department of Agriculture (USDA) on July 12, 2021 estimates that worldwide wheat production for the season 2020/2021 (opening inventories plus harvest) will be 1.0826 billion tonnes (WASDE issue 614, page 8).

In doing this the USDA reduces the estimated production figures shown in its last report for the current business year to 792.40 million tonnes.

Total grain production was estimated to be 2.7953 billion tonnes, meaning that the correction made in January was reversed. These figures included 792.4 million tonnes (2019/20: 763.49

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million tonnes) of wheat and 1.1948 billion tonnes of maize (previous year: 1.1164 billion tonnes) (WASDE issue 614, page 23).

The closing inventories of grain were estimated to be 814 million tonnes in December 2020; in the July report these were only 776.86 million tonnes. These figures included 291.68 million tonnes of wheat (December 2020 report: 316.50 million tonnes).

The estimates for the worldwide consumption of wheat for 2021/2022 will increase to 790.89 million tonnes, after 784.95 million tonnes in 2020/2021 and 748.29 million tonnes in the 2019/2020 season. It is estimated that inventories of maize at the end of 2021/2022 will be 291.18 million tonnes compared to 279.86 million tonnes (2020/2021 estimate) (WASDE issue 614, page 23).

The price development in the calendar year 2021 was characterised by markets giving an impression of firmness. In May 2021 wheat reached USD 284/tonne on the Chicago exchange, its highest level since February 2013 (source: Reuters).

US maize was traded at USD 304/tonne in May 2021; these levels were also last reached in February 2013.

In its report dated July 12, 2021, the USDA expects worldwide oilseed production for 2020/2021 to total 600.2 million tonnes (January 12, 2021: 594.48 million tonnes). Harvest forecasts for 2021/2022 were increased to 635.41 million tonnes; in June the USDA was at 632.86 million tonnes.

The production of oilcake is estimated to increase from 353.57 million tonnes in the 2020/2021 harvest to 365.54 million tonnes in 2021/2022, and vegetable oil production is estimated to increase from 231.87 million tonnes in 2019/2020 to 239.51 million tonnes in 2021/2022. The consumption of vegetable oils (WASDE

issue 614, page 10) is expected to continue to increase to 207.78 million tonnes in 2020/2021 and to 213.34 million tonnes in 2021/2022, and the consumption of meal is expected to increase from 349.25 million tonnes in 2021/2022 to 357.99 million tonnes.

The supply of soya beans is expected to be good with an expected harvest of 363.57 million tonnes worldwide for the harvest year 2020/2021. The estimates for the harvests in the USA and Brazil are 112.55 million tonnes and 137 million tonnes respectively, while the estimated harvest for this year in Argentina has been reduced to 46.5 million tonnes from an original forecast of 50 million tonnes made in January 2021. Compared to its January 2021 forecast the USDA has increased its forecast for the expected amount of closing inventories for soya significantly (WASDE issue 614, page 28). In January only 84.32 million tonnes were expected for the season 2021/2022; in July 2021 the USDA increased the expected quantity to 94.49 million tonnes.

Oil World anticipates a continued tight market situation for rapeseed oil (Oil World, No. 30/64). The availability of canola in Canada in the cultivation year 2021/2022 will be approximately 4.2 million tonnes lower than in the previous year, and as much as 6.2 million tonnes lower than two years ago. This has led to a significant premium for canola compared to soya beans of USD 192/ tonne in the period from July 1 to July 29, 2021. Rapeseed oil processing in Europe is estimated to be 22.2 million tonnes in the current 2021/2022 season, approximately 400 thousand to 500 thousand tonnes lower than in the previous year. Oil World estimates the rapeseed harvest in the European Union member states will be 16.73 million tonnes.

Sales price trends

The short- and medium-term crude oil price is, to a significant degree, dependent on the political stability of oil-extracting countries and their readiness to reduce the quantities of oil produced, as well as the global economic trend with its associated demand. Further waves of infections as a result of the COVID-19 pandemic could result in lockdown measures being taken and consequently a substantial reduction in demand pattern, which is currently still in the process of recovery.

A recovery of the world economy would result in a significant increase in demand, whereby it will be increasingly difficult for publicly listed oil companies to make investments in fossil oil extraction and processing. The massive public criticism of the oil companies makes it easier for the OPEC countries to maintain their oil production discipline without losing market share, as was the case in the past.

While worldwide inventories were at a fiveyear high at the start of the COVID-19 pandemic, inventories are currently at the lower end of the scale.

A price increase driven by increased demand and lower supply of fossil raw material and fuels has led to higher prices and increased the competitiveness of biofuels in general.

The introduction of the GHG quota since January 1, 2015 led to a reduction in the use of biofuels for blending purposes. This is a result of the good CO2 efficiency properties of biofuels, which are significantly better than the lawmakers had expected. The greenhouse gas reduction has become a significant price determinant factor.

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The oil industry buys the fuels shown to have a high level of reduction in order to be able to use the smallest possible quantity of biofuels to reduce greenhouse gas emissions. With the increase in the quota obligation from 4.0 percent to 6.0 percent from January 1, 2020, there was an increase in demand for biofuels with high levels of greenhouse gas savings.

However, the lockdown measures have caused a temporary sharp decline in the demand for fuel, which in turn will reduce the need for biofuels for the whole of the calendar year 2021.

Developments in political framework conditions in the European Union

It can be assumed that the proposals made by the EU Commission under the heading "Political environment and legal framework for biofuels" described in the report on economic position will be subjected to further intensive discussions. It could take up to two or three years before decisions and resolutions are made by the EU Council and the European Parliament.

Discussion points will also certainly concern the ways of meeting the higher targets using the potential methods available under the RED II/RED III requirements, and the role that needs to be given to biofuels for this purpose. Just as important is the question of availability, i.e. the competing uses for green electricity, e.g. for electro mobility, e-fuels and the numerous applications discussed in the hydrogen strategy; these will be decisive issues in the question of determining realistic fulfilment options.

In addition to the question of the costs of softening the impact and consequences on economic growth, there are, among other things, the following important matters that will need consideration:

How, and to what extent, should the targets be fulfilled by the use of biofuels?
What realistic and commercially viable trends for alternative fuels will be acceptable?
How should the statement concerning the end of the combustion engine and the use of fossil fuels be interpreted in the light of the discussion concerning hybrid powertrains?
What options are planned for existing vehicle fleets?

It also remains to be seen what stance the European Parliament and the European Council will take. The German position will be decided by the composition of the future federal Government following the parliamentary elections to be held on September 26, 2021. In any case it can be expected that, in general, the coming years will see a transitional phase that will be a continuation of the status quo.

Developments in the political environment in the USA

The Renewable Fuel Standard (RFS) programme in its current form is due to end in 2022. By the end of 2021 or early 2022 there should be an announcement explaining any adjustments to the rules for the determination of the annual quotas (RVOs) for the individual types of biofuels after 2022. The EPA will continue to follow the programme under the current rules. The scope of these adjustments will also be based on the RFS that currently applies, i.e. there are minimum and maximum limits for the individual types of biofuels. Essentially it is expected that the current rules will be carried forward after 2022. A fundamental change to the rules is not expected until there is a new RFS; however, it is not expected that a new RFS will be approved in the medium term. The current government has not made any clear statements on the future of renewable fuels (RFS3), and a due date for this has not yet been fixed.

The previous US administration made generous use of permitted exceptions to the annual quota increases for small refineries. The fall in the demand for biofuels resulting from the use of the exceptions weakened margins for almost all types of biofuels through to the end of 2020. In the meantime, the EPA has restored confidence in the market by revoking exceptions that had been issued earlier, which has resulted in some improvements to the margins seen in the past.

Political environment in Canada

In Canada the use of renewable fuels in the biofuels market reflects the interests of the individual provinces, whereby British Columbia is regarded as the leading province for this purpose. Other significant provinces such as Ontario and Quebec have expressed an interest in supporting the continued development of renewable fuels; however, changes in the provincial governments have led to uncertainty and to a delay in the use of energy from renewable sources.

In 2016 the Canadian Federal Government announced a national Clean Fuel Standard (CFS) that was intended to achieve annual greenhouse gas savings of up to 30 million tonnes by 2030. The plan was aimed at an increase in the use of fuels with lower CO2 emissions, whereby there are separate requirements for liquid, gas and solid fossil fuel types.

The authority responsible for the implementation of the CFS, Environment and Climate Change Canada, has announced a delay in the original time schedule as a result of the COVID-19 pandemic. First, regulations to reduce emissions from

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liquid fuels will be prepared and these are expected to be implemented in December 2022; further regulations for gas and solid fuels will follow thereafter.

Overall the implementation of the CFS is making slow progress; any acceleration of this is not to be expected. Many market participants expect that the planned elections at federal level could lead to additional uncertainty and associated delays.

Future development of the VERBIO Group

The ongoing optimisation and expansion of the Group's existing production equipment, and the investments necessary to achieve this, are part of VERBIO's business strategy. This practice is also being continued in the challenging environment of the past financial year, and will continue to be a feature of protecting the Group's future.

A significant component of protecting the Group's future is also the development of processes to manufacture basic chemicals for use in the chemical industry using vegetable oils and biodiesel as raw materials. For the Bioethanol segment too, VERBIO is working on promising projects to increase its value-added as well as on new applications for chemical processes. These products will make further progress to making VERBIO independent of the biofuels market and increase profitability.

In view of the ambitious decarbonisation in transport objectives, some of which have been implemented in practice, and the newly created markets in industry, a significant growth in the market for low CO2 raw materials and products in the years through to 2030 can be expected. VERBIO will be active in addressing this market growth with the expansion of existing production capacity for advanced biofuels in the form of new plants at both greenfield and brownfield locations.

Overall assessment of the expected development

The GHG quota system that came into effect in Germany from January 1, 2015 was implemented well by VERBIO, and the Company has used this opportunity to create an impressive success story. In almost every financial year the Group has achieved further new record levels of sales volumes and reported record results, and this was again the case in the financial year 2020/2021 just ended.

The Management Board also expects that the VERBIO production equipment in both segments will see a good level of plant utilisation in the financial year 2021/2022 just started. Sales revenue levels are very much dependent on the market prices of raw materials and biofuels and on the volume of trading transactions for biogene fuels entered into on a case-by-case basis. Based on current sales volumes and raw material prices as well as the planned production capacity usage and the uncertainties described, the Management Board expects to achieve an EBITDA for the financial year 2020/2021 of around EUR 150 million. Net cash at the end of the financial year will fall by approximately EUR 50 million as a result of the high levels of investment, which will be financed from the Group's own resources. This forecast is made subject to the proviso that the continued course of the COVID-19 pandemic does not continue to have a significant negative effect on the market for biofuels.

Risk and opportunity report

Risk management system

VERBIO's commercial success is affected by the smooth running and continuous operation of its production facilities, optimal raw material procurement logistics, and its sales and marketing activities and quality, including the greenhouse gas reductions achieved by the products it manufactures. Additional critical factors affecting the results of business operations are the trends in raw material and sales prices and associated achievable production margins, as well as the conditions in the economy as a whole, and the statutory quota, regulatory and energy tax policy environment. All of these processes and influencing factors are subject to opportunities and risks that are capable of affecting VERBIO's existence, growth and corporate success. The consideration of risks and the exploiting of opportunities thus serve to safeguard the company and to increase its competitiveness.

Risk strategy and risk policy

In accordance with § 91 (2) AktG the Management Board is required to take appropriate measures, in particular the creation of a monitoring system, to ensure that developments that could threaten the ability of the Company to continue as a going concern are identified at an early stage. This provision is supplemented for listed companies by § 317 (4) of the German Commercial Code (Handelsgesetzbuch – HGB). In order to identify and manage company-specific risks and opportunities at an early stage, the Management Board of VERBIO has implemented a Group-wide risk management system.

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As part of its engagement to perform the statutory audit of the annual financial statements and the Group's consolidated financial statements pursuant to § 317 (4) HGB, the auditor examines whether the risk early warning system is suitable for the purpose of identifying risks and developments that could threaten the ability of the Company to continue as a going concern on a timely basis. The VERBIO risk early warning system is in accordance with statutory requirements and complies with the German Corporate Governance Code (DCGK).

Organisation of the risk management system

VERBIO's risk management system ensures that existing risks are systematically recognised, analysed, evaluated and reported on a timely basis. The risk management system ensures that all organisational units and processes are included in the risk management process, thereby ensuring that all risks are identified, evaluated and communicated.

The entire risk management process is evaluated and carried out by a risk manager tasked with the ongoing implementation, coordination and improvement of the process.

Responsible individuals are assigned to each risk area to be responsible for the monitoring of risks in their area, including the responsibility for reporting when the early warning system threshold limits are exceeded. For this purpose, each company of the VERBIO Group has named a risk officer, who is known as a "reporting station" and who ensures compliance with periodic and/or ad hoc reporting.

The risk reporting (issue of ad hoc and/or periodic reports) is carried out using risk reporting sheets on a half-yearly basis, with the subsidiaries' management and the other responsible employees defined within the reporting process reporting to the Group's risk manager on predetermined reporting dates. The reporting includes all risks that exceed specified materiality limits that are expected to have an effect on the net assets, financial position and results of operations. These materiality limits are set by the VERBIO Management Board and approved by the Supervisory Board, and are adjusted over time if required by changes in the reference values.

This information forms the basis for the Group risk report, which is provided to the Management Board by the risk manager in a summarised form on a quarterly basis, together with a risk map. If risks requiring immediate action arise outside the periodic reporting of significant risks, these are addressed promptly and informally to the risk manager, and the Management Board is informed immediately.

The risk management system is adjusted according to the changing external environment and the resulting internal organisational structures on an ongoing basis, most recently in the fourth quarter of 2014/2015 with adjustments to the risk classes, the risk categories and the assessed probability of occurrence, in order to better reflect the market conditions and numerical values and wording that was appropriate to VERBIO's current situation; more details are presented in the next section. References to compliance requirements implemented by VERBIO were added to the risk handbook in the financial year 2017/2018. A comprehensive inventory of risks was made on a cyclical basis in the second half of the last financial year 2019/2020; this was done in individual meetings held by the risk manager with those responsible for reporting risks, or by telephone due to the requirements to reduce the level of social contacts. In accordance with the Company's two-year cycle, a further such inventory is due to be performed at the end of the coming financial year 2021/2022. In addition, all risk managers at the subsidiaries and at the holding company report on a half-yearly basis (in written form using the risk management documentation form) to the Group risk manager. The Group risk manager combines the reports and reports on the aggregate risk position and the presentation of the risks included in the report – whether they are new risks or risks whose reporting has been amended – directly to the Management Board.

Further, VERBIO uses additional instruments to identify and avoid risks. These include a unified and process-orientated quality management system (QMS), the systematic implementation of work safety practices, and systematic complaints management.

Risks

Risk assessment

The characteristics "probability of occurrence" and "risk category" are used for risk assessment purposes. Based on the corporate goals, the risks are then categorised as low, medium, high

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statements (IFRS)

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or very high dependent on their potential financial damage. The following assessment measurements are used:

Probability of occurrence	Description
x ≤ 5 %	Very low
5 % < x ≤ 25 %	Low
25 % < x ≤ 50 %	Medium
x > 50 %	High


Risk category	Description
Low	x <= EUR 1 million
Medium	EUR 1 million < x <= EUR 5 million
High	EUR 5 million < x <= EUR 15 million

Based on the recommendations of the German Accounting Standards Board of the German Accounting Standards Committee e.V. (GASC) regarding the reporting of opportunities and risks, VERBIO Group's risks were categorised under opportunity and risk factors as follows: market and sales, procurement, environment, tax and commercial law, production and technology, finance, human resources, organisation, legal, regulations and compliance, and other events.

The analysis below describes all the (significant) corporate risks and opportunities identified for the VERBIO Group that, from today's perspective, could affect the net assets, financial position and results of operations.

Corporate risk	Probability of occurrence	Risk category (measurement prior to the effect of risk avoidance measures)
Market and sales
Sales-side risks	High	High
Biofuel Sustainability Regulation and the Federal Emissions Protection Act	Low	Medium
Procurement
Risks of raw material purchasing	Low	Low
Environment
Risks due to contaminated sites and other building, land and environ mental risks	Very low	Low
Tax and commercial law
Risks of non-compliance with ongoing tax obligations	Very low	Low
Risks from tax audits	Low	Low
Production and technology
Production and technology risks	 Medium	Very high
Finance
Financial and liquidity risks	Very low	Medium
Interest and exchange rate risks	Very low	Medium
Risks from derivatives	Low	Medium
Credit and default risks	Very low	Medium
Risks from impairment of assets	Low	Low
Legal rules and regulations
Regulatory risks	Medium	High
Risks from legal disputes	Low	Low
Other risks
IT risks	 Mediuml	 High
Pandemics	High	High
Personnel (new)
Risks from personnel management	Medium	Low

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There are no risks that threaten the ability of VERBIO and its subsidiaries to continue as a going concern as of the balance sheet date or the date of preparation of the consolidated financial statements.

Market and sales

Sales-side risks

A considerable sales and margin risk for VERBIO results from a potential inflow of biodiesel, bioethanol, and waste and residual products such as UCOs (Used Cooking Oils) that are offered to the market at dumping prices, and that could lead to a massive distortion of competition and competitive disadvantages.

The risks from the lifting of import duties on biodiesel from Argentina and Indonesia are described in the section "Legal rules and regulations/regulatory risks".

Should the level of imports of foreign biofuels increase, domestic production would be dampened further. There is currently a balance of supply and demand in the German market.

In addition, for the German market there is a high level of motivation for fraudulent claims when determining GHG savings made by biofuels, with an associated risk to sales in Germany. This motivation will be increased further with the increase of the GHG quota to 7 percent in 2022.

In the USA and Canada, should there be no annual amendment to the volume obligations (RVO) the resulting oversupply would have a negative effect on biodiesel sale volumes and a general effect on the margins of biofuels used as a substitute for diesel.

Sales risks associated with the Biofuel Sustainability Regulation and the Federal Emissions Protection Act

Since January 1, 2011 biofuels can only count towards the biofuels quota if they have been produced according to the provisions of the Biofuel Sustainability Regulation and are made available to the general market.

VERBIO matches raw material and sales quantities on an ongoing basis and maintains control over the balance of volumes at all times as part of regular contract controlling procedures. In addition, this is examined by the certification authority in annual audits performed under the Biofuel Sustainability Regulation.

Since 2015, the Federal Emissions Protection Act (Bundes-Immissionsschutzgesetz – BIm-SchG) has no longer required the blending of defined quantities of biofuels, but instead requires the reduction of greenhouse gas emissions by 3.5 percent, rising to 4.0 percent from 2017 and 6.0 percent from 2020, through the use of biofuels or other greenhouse gas reduction measures (de-carbonising quota).

The legislators have recently issued several new regulations covering the biofuels market that are intended to adjust the reductions of fossil fuel greenhouse gas emissions to meet the current European Directives. The 37th Regulation on the Implementation of the Federal Emissions Protection Act (Verordnung zur Durchführung des Bundes-Immissionsschutzgesetzes – BImSchV) issued on May 15, 2017, the 38th BImSchV issued on December 8, 2017, and the Upstream Emission Reductions Regulation (Upstream-Emissionsminderungs-Verordnung – UERV) issued on January 22, 2018 all result in significant changes. All of these regulations, which implement credits for electricity powered mobility and co-processing of biogene oils in oil refineries (37th BImSchV), further amendments for crediting biofuels and natural gas (38th BImSchV) as well as credits for upstream emission reductions (UERV) from 2020, the initial mandatory year, are determinants of the sales-side risk. As a result, the risk that the oil industry will also be able to partially achieve its greenhouse gas reduction obligations by other methods, which may result in a reduction in demand for conventional biofuels, has increased significantly.

Procurement

Risks of raw material purchasing

The results of VERBIO are extremely dependent on the availability and prices of the raw materials used. For biodiesel this is predominantly vegetable oil; for bioethanol it is grain.

Generally, the raw materials needed for production purposes are purchased on an ongoing basis as and when sales contracts are entered into. This reduces the risk of price changes and the associated volume for which hedging is required.

Procuring raw materials on short-term contracts carries the risk of being exposed to potential physical supply limitations.

Current market developments are monitored closely. Noticeable market developments are immediately communicated and risk limitation measures are taken.

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Environment

Risks due to contaminated sites and other building, land and environmental risks

VERBIO is exposed to the risk that the land and buildings it owns could be contaminated with pollution, soil contamination or other harmful substances. Currently there are no decontamination or monitoring obligations.

Tax and commercial law

Risks of non-compliance with ongoing tax obligations

VERBIO is particularly exposed to the risks that ongoing tax obligations are not completely fulfilled or are not fulfilled in compliance with the law, particularly with respect to energy taxes, sales taxes and income taxes, due to the multiple layers and complexity of the tax regulations. Additional risks arise in this connection on transactions with foreign companies and our own operations abroad.

VERBIO counters this risk through appropriate internal tax compliance measures, and by taking external advice in particularly complex situations and in the case of special issues abroad.

Risks from tax audits

VERBIO is exposed to the risk that retroactive taxes become payable if additional taxes are determined to be payable during tax audits. Currently, beyond the amounts already recognised as liabilities or provisions in the consolidated financial statements, there are no known issues that could result in significant demands for retrospective tax payments.

Production and technology

Production and technology risks

The continued success of the VERBIO Group is driven by the Group's highly competitive technologies. The VERBIO Group is well positioned, making use of technology standards already achieved for large-scale production of biofuels (biodiesel, bioethanol and biomethane), and also has the process know-how to implement further ongoing and coherent programmes for the development and optimisation of the current production processes. The production of biofuels is exposed to the risk that entirely different and more efficient production and process technologies could arise suddenly, and that the operation of existing plants could, as a result, no longer be possible in such a way that their operating costs may be covered. The continual expansion and optimisation of co-production manufacturing is one of the significant drivers of VERBIO's competitiveness, but at the current time it cannot be guaranteed that we will be able to operate our plants profitably should there no longer be sales channels for biofuels.

The production plants are technically state of the art and are subject to constant maintenance. Accordingly, from the viewpoint of the Company's management, environmental risks are minimised to the greatest extent possible. Nevertheless, potential environmental damage is insured through environmental liability insurance. All plants are insured against natural disasters by property and business interruption insurance.

Finance

Financial and liquidity risks

In order to ensure that the Group's ability to meet its payment obligations and its financial flexibility are maintained at all times, VERBIO holds a liquidity reserve in the form of cash and available credit lines of EUR 45 million.

There are currently no identifiable financing risks. Where there are covenants attached to loan agreements, these are monitored on an ongoing basis.

Interest and exchange rate risks

VERBIO is exposed to risks associated with a possible change in interest rates and exchange rates and their effect on the Group's assets, receivables and payables. General interest and currency risks are managed with the help of a systematic risk management system and hedged through the use of derivatives and non-derivative financial instruments. Only limited use of hedges is made for currency risks arising on shareholder loans made to foreign subsidiaries in the Group. The liquidity risks of a revaluation of the shareholder loans in foreign currencies are regarded as low; however, their effects on the statement of profit or loss are considered to be medium to high.

Risks from derivatives

The risks from derivatives depend on the risk structure of the individual derivatives. The derivatives used by the VERBIO Group belong to different risk groups and are used to hedge both raw material purchases and sales contracts, as well as to hedge interest rate and currency risks. For this purpose, hedging transactions are concluded and assigned to individual underlying transac-

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tions. There is exposure to the risk of inadequate hedging effectiveness with respect to the underlying transaction, and, in connection with certain price developments, the risk that resulting payment obligations cannot be fulfilled in spite of available cash reserves and trading facilities.

The price change risks on the procurement and sales side in the Biodiesel and Bioethanol segments are hedged based on market estimates made by the Management Board, and within ranges defined by the Management Board by the use of effective and ineffective derivatives on the relevant exchanges, such as, for example, NYMEX, ICE, CBOT and EURONEXT, as well as through OTC transactions. Through the use of derivative contracts, a production margin in the respective segment is fixed to the extent possible on a forward basis. Nevertheless, it cannot be excluded that in spite of the use of hedging instruments, undesirable market developments may lead to negative effects on results. The timing and chronological order in which the underlying transactions and the hedging transactions are entered into may also lead to deviations.

However, the Group-wide risk management procedures ensure that these risks are limited to acceptable amounts. For further details we refer to note 9 "Disclosures on financial instruments" in the notes to the consolidated financial statements.

Credit and default risks

Credit and default risks are primarily associated with a deterioration in the economic situation of suppliers, customers or other contracting parties of the Company. As a result, there is a risk of partial or complete loss of contractually agreed payments or services, and additionally of impairment losses due to a deterioration of creditworthiness. In order to minimise the risk of default the payment behaviour of debtors is monitored on a continuous basis, and additionally customer-specific credit insurance is obtained and internal creditworthiness assessments are carried out. The risk management system ensures that these risks are kept to a minimum.

Risks from impairment of assets

The carrying amounts of individual non-current assets are subject to changes in market and business conditions and thereby also to changes in their values in use. Individual impairment tests are performed in accordance with IAS 36 if there are indications of an impairment of property, plant and equipment.

In particular, when the assumptions underlying the planning prove to be inappropriate, it cannot be ruled out that future additional write-downs with profit or loss effect may be made against the carrying value of non-current assets up to their entire carrying amount, with an effect on VERBIO's net assets, financial position and results of operations. However, the additional financial effects of such a write-down are assessed to be minor.

Legal rules and regulations

Regulatory risks

VERBIO is subject to multiple political and regulatory framework conditions at the national, European and international levels, changes in which can have direct effects on VERBIO's results of operations.

In addition, changes in political or economic environments, in particular in larger EU countries and in countries such as the USA, Canada, China, India, Brazil, Malaysia or Indonesia, could have a direct impact on VERBIO's activities.

Regulatory risks are countered by VERBIO through memberships in various industry associations that represent the interests of the biofuel industry at the national and also at the European level. In addition, the regular, intensive and direct dialogue with political decision-making bodies and decision makers represents the core element of the political activities of VERBIO.

The second Renewable Energy Directive (RED II) published in December 2018 provides for a limit of 7 percent for the use of cultivated biomass from 2021. Within this limit, in each member state the maximum use of cultivated biomass for conventional first generation biofuels is limited to the 2020 level, plus an additional 1 percent allowance for flexibility purposes. For VERBIO, as a leading technology company, this result should provide further market opportunities, also beyond 2020. With RED II there will be an obligatory minimum quota for advanced second generation biofuels for the first time, which will present additional market opportunities for VERBIO as a leading manufacturer of biomethane based on straw and distillation waste.

There are uncertainties concerning the implementation of RED II in the respective countries, including in Germany. The RED II implementation process in Germany has started, and it was originally planned that it would be completed by June 2021. The Act was approved by the German Parliament on May 21, 2021, but it has not yet been approved by the Federal Assembly, the second house. The Federal Assembly is expected to approve the implementation on September 17, 2021. A rejection by the Federal Assembly would mean that a new German Parliament, which may

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have a different majority composition, would have to reconsider the implementation of RED II.

The EU Commission, in its "Fit for 55" package, has already set out draft proposals for amendments to RED II that provide for more ambitious greenhouse gas savings targets than were foreseen by RED II. These changes will presumably lead to further amendments to resolutions needed to implement RED II in Germany. However, we do not expect these amendments until 2023 or 2024.

We will accompany this process in a constructive manner as a Company, and in our role as a member of the associations we are part of.

In the USA the current legal framework to promote renewable energies in the transport sector runs out at the end of 2022. However, the Renewable Fuel Standard (RFS2) includes clauses to regulate how to continue in the absence of new legislation. The new US government has not given the impression that there will be a new RFS3 in the foreseeable future, but has indicated that regulations based on RFS2 will apply after 2022. First proposals are scheduled for the end of 2021. Currently we assume that the present level of volume obligations will not be cut, and that in connection with RFS2 regulations will provide for further increases in the obligations, in particular for cellulose-based biofuels.

In Canada there are no changes to the status quo planned until the introduction of the Clean Fuel Standard that is planned for 2023. As a result, the USA will continue to be the primary market for biodiesel manufactured in Canada.

Risks from legal disputes

Currently there are no significant risks arising from legal disputes. VERBIO attempts to minimise these risks through the appropriate management of legal proceedings and adequate drafting of contracts in advance.

Other risks

Risks arising from the worldwide spread of the coronavirus

The worldwide spread of COVID-19 was declared a worldwide health emergency by the World Health Organization (WHO) in January 2020, with a substantial effect on the world population and economy.

VERBIO took immediate and comprehensive measures to counter these risks as far as it is possible to do so, in order to protect employees and business partners on the one hand, and at the same time to ensure that business operations could continue.

In addition to the general risks associated with the spread of COVID-19 there is a risk that the Group's planned financial objectives may not be met – if, for example, infections are identified within the Company, or if there is a requirement to close a location or suspend a part of the Group's business activities.

IT-Risks

IT risks with an effect on business results can materialise when information is not available or is incorrect. The consequences of a failure of the IT applications used for the Company's operational and strategic management and its effect on the net assets, financial position and results of operations is assessed as high, despite the relevant migration measures and an effective continuity plan, as cyber-criminal activities are becoming ever more effective and, in particular, more professional in their approach, which means that the probability of occurrence needs to be assessed as medium. Specifically, in response to this, VERBIO is taking further measures in order to protect against these increased risks.

Opportunities

Opportunities from raw material purchasing

VERBIO follows a "multi-feedstock strategy", which means that it is possible to produce biodiesel and bioethanol using various different raw materials, dependent on what is being offered at the most advantageous purchasing conditions on the agricultural markets. This can result in price advantages and therefore competitive advantages. VERBIO is in a position to convert plant and equipment to use different raw materials at short notice.

Agricultural raw materials are traded internationally and are generally available in sufficient quantities at all times.

Sales-side opportunities

An increased demand for biofuels is expected not only in Germany but also in particular in the Netherlands, France and Great Britain.

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It can be observed that ever more countries are introducing E10 as a standard fuel for use in petrol-based engines as part of the process of implementing RED II, and they are replacing or complementing the energetic-based biofuels quotas with greenhouse gas quotas. This increases the demand for ethanol and for lower emission fuels.

With the implementation of RED II separate quotas for advanced biofuels will be introduced in all member states which will lead to a boost in demand for this new biofuels category.

Supply and demand on international crude oil markets are increasingly returning to an equilibrium, the prices for fossil fuels are rising, and with them the competitiveness of biofuels.

Production and technology opportunities

VERBIO's production facilities in Germany are state of the art, and in most cases they have been conceived and built mainly using the Company's own processing know-how. Therefore, it is possible to optimise the production facilities or adjust them for different raw materials using the Company's own resources.

The production facilities are positioned well with respect to their energy balance. All plants and production processes are optimised further on an ongoing basis, which leads on the one hand to a significant reduction in energy usage, and on the other hand to higher or optimised yields.

The same objectives apply to the straw biomethane plants currently under construction – which are close to being commissioned – and the biodiesel plant acquired in Canada. It is planned to achieve technical levels in Canada that are equivalent to those in the German plants.

Financial opportunities

VERBIO's stock exchange listing gives the Company access to the capital market, enabling it to generate financial resources to reduce indebtedness or to finance growth.

Overall assessment of the risks and opportunities by the Company's management

VERBIO consolidates and aggregates all risks reported by the Group's various divisions and functions in accordance with its risk management guidelines.

The results of the overall assessment of all of the risks described give no indication that current risks, considering the likelihood of their occurrence and their effects, could, either individually or in the aggregate, endanger the Company's ability to continue as a going concern. The cash reserves currently available are also a source of risk minimisation, as potential damage can be dealt with more easily despite the challenging market environment and the uncertainties resulting from the COVID-19 pandemic. The increased diversification towards other markets away from the dominating fuel customers, which has been initiated with the acquisition of XiMo, also contributes to the reduction of risks in the future.

The Company's management is convinced that VERBIO's earnings power forms a solid basis for its future business development, in particular with its entry into new markets by means of the expansion strategy already implemented, and that it provides the necessary resources needed in the 2020/2021 financial year and thereafter to pursue the opportunities offered to the Group and successfully confront the challenges from the risks described.

Other reporting obligations

Internal control systems of the Company related to financial reporting

The objective of the financial reporting processes is to identify risks that could hinder the preparation of the annual financial statements, the consolidated financial statements and the (Group) management report in a manner that is compliant with the relevant rules. By establishing appropriate controls, the internal control system is designed to ensure that, despite the identified risks, the annual and consolidated financial statements comply with the relevant requirements. The organisation of this system ensures that all subsidiaries are included in this process.

The Management Board has overall responsibility for the scope and design of the internal control and risk management system, including the financial reporting system.

The central organisation, the uniformity of the IT programmes used, in particular the planning and consolidation tools and the BI (business intelligence) interface – which is improved on an ongoing basis – as well as the clear assignment of responsibilities within accounting, controlling and Group financing, and the use of appropriate controls, should ensure and facilitate appropriate risk management and control, and ensure the compliance of the financial reporting. Also, all tasks associated with the consolidated financial statements, such as consolidation measures, reconciliation of intercompany balances, reporting requirements etc., are clearly assigned, and the processes are defined in the internal control and risk management system.

The extent and effectiveness of the internal control and early warning system for risks with respect to financial reporting are evaluated in

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connection with the annual process of preparing the annual financial statements. The internal monitoring is carried out by the Group controlling department that reports directly to the Management Board.

Statement on corporate governance

The Corporate Governance Statement of VERBIO, in accordance with § 315 d HGB in connection with § 289 f HGB, is published in the investor relations section of the VERBIO Vereinigte BioEnergie AG website verbio.de.

In addition to providing a description of the Management and Supervisory Boards' working methods, the statement includes the corporate governance report, the declaration of conformity in accordance with § 161 AktG, and relevant disclosures regarding significant corporate governance practices.

Separate non-financial statement

The non-financial statement issued in accordance with the implementation of the German CSR Directive Implementation Act in accordance with § 289 c and § 315 c HGB, which does not form part of this Group management report, will be published on the investor relations section of the VERBIO Vereinigte BioEnergie AG website.

In the report, selected non-financial information is presented based on international sustainability standards issued by the Global Reporting Initiative (GRI).

Report on relationships with affiliated companies

The Management Board of VERBIO AG is required to prepare a report on its relationships with affiliated companies in accordance with § 312 AktG. VERBIO has prepared this dependency report. Under the circumstances known to the Management Board at the time of undertaking the transactions, VERBIO and its subsidiaries received appropriate consideration for every transaction listed in the dependency report on its relationships with affiliated companies. No measures were undertaken or omitted in the interests of, or at the instigation of, the controlling company or one of its affiliated companies.

Statutory takeover disclosures in accordance with § 315 a HGB

The following information relates to the corporate legal structure and other legal relationships. It should allow a better overview of the Company and any obstacles to a takeover.

Following a capital increase registered at the commercial register on June 1, 2021 the subscribed capital (share capital) of VERBIO AG consists of 63,183,632 no-par bearer shares. Each share grants the holder the same rights and grants one vote in the general shareholders' meeting. All shares entitle the holder to dividend payments in full; dividend payments are made in euros.

Restrictions on voting rights of shares could result from regulations of the German Stock Companies Act. Thus, under certain circumstances shareholders are subject to a voting prohibition (§ 136 AktG). Furthermore, the Company has no voting rights on its treasury shares (§ 71b AktG). By entering into a pooling contract, the old/ founder shareholders have entered into a voting trust agreement requiring the voting rights to be pooled. There are no further restrictions of voting rights or share transfer restrictions. Special rights or control authority are not connected to the pooling relationship. A new pooling contract was agreed in the financial year 2018/2019. The shareholders Albertina and Alois Sauter, who have joined as new members of the voting rights pool, are also subject to pooled voting rights under the voting trust agreement. The pooling contract could not be cancelled earlier than April 5, 2021 and since then it is extended automatically every six months unless it is terminated with a threemonth notice period before the conclusion of its term. There has been no termination of the contract.

Claus Sauter and Bernd Sauter, both members of the Management Board, as well Dr.-Ing. Georg Pollert, a former member of the Supervisory Board, have direct holdings in VERBIO in excess of 10 percent. They hold directly, or indirectly via holding companies, a total of 49.14 percent of the outstanding shares. In total, the old shareholders of VERBIO hold an interest in the share capital of 61.77 percent; shares held under the voting trust agreement represent 68.77 percent.

The provisions regarding the appointment and withdrawal of members of the Management Board, as well as the change to the articles of association, are in accordance with the statutory requirements (§ 84, § 95, § 179 AktG) in conjunction with § 6, § 13 and § 18 of the articles of association.

Under a shareholders' resolution approved at the annual general meeting of shareholders held on January 31, 2020 the Management Board is authorised, subject to the approval of the Supervisory Board, to increase the share capital by a total of up to EUR 31,316,368.00, by means of issuing additional no-par bearer shares in exchange for cash or non-cash contributions on one or more occasions until January 30, 2025 (authorised capital).

The Management Board is empowered, subject to the approval of the Supervisory Board, to

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exclude existing shareholders' subscription rights for shares issued in exchange for contributions in kind of up to an amount of EUR 9,450,000.00, which represents 15 percent of the share capital at the date of the resolution. This also includes the use of the authorised capital to fulfil purchase obligations or purchase rights for the Company's shares based on agreements made or to be made with members of the Company's Management Board under Management Board remuneration agreements. This type of share issue is dependent on a prior election being made by the Supervisory Board to exercise its option under the current remuneration rules that the sharebased remuneration shall not be settled in cash but shall be fulfilled by the issue of shares or by a new form of share-based remuneration.

The powers of the Management Board to issue or repurchase shares are comprehensively described and governed in the respective authorisations resolved by the general shareholders' meeting.

In the event of an early termination of Management Board activity resulting from a change in control, members of the Management Board have a one-off special right of termination, and on exercising this right, a claim for a termination payment that is calculated by capitalisation of the expected total remuneration for the remaining contract term. This amount may not, however, exceed the amount of three years' remuneration consisting of the fixed and variable contractual components. The Company does not have any compensation agreements with employees.

Zörbig, September 21, 2021

Claus Sauter Chairman of the Management Board

Prof. Dr. Oliver Lüdtke Vice-Chairman of the Management Board

Bernd Sauter Member of the Management Board

Stefan Schreiber Member of the Management Board

Theodor Niesmann Member of the Management Board

Consolidated Financial Statements (IFRS)

Consolidated statement of comprehensive income	57
Consolidated balance sheet	58
Consolidated cash flow statement	60
Consolidated statement of changes in equity	62
Notes to the consolidated financial statements	63

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Consolidated statement of comprehensive income

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Consolidated statement of comprehensive income

for the period July 1, 2020 to June 30, 2021

	EUR (thousands)	01.07.2020– 30.06.2021	01.07.2019– 30.06.2020	Notes
1	Sales revenue (including energy taxes collected)	1,027,363	873,572
	less: energy taxes	–1,328	–1,174
	Revenue	1,026,035	872,398	3.15/5.1
2.	Change in unfinished and finished goods	22,508	17,696
3.	Own work capitalised	2,579	1,475	5.2
4.	Other operating income	12,696	16,076	5.3
5.	Cost of materials	–779,482	–692,630	5.4
6.	Personnel expenses	–54,450	–44,896	5.5
7.	Depreciation and amortisation	–29,696	–30,220	3.2/3.3/5.6/6.1
8.	Other operating expenses	–46,377	–45,613	5.7
9.	Impairment loss on financial assets	91	351	5.8/9.4.3
10.	Result from commodity forward contracts	–17,276	–2,712	5.9
11.	Operating result	136,628	91,925
12.	Interest income	157	678	3.17/5.10/9.4
13.	Interest expense	–1,435	–1,625	3.17/5.10/9.4
14.	Financial result	–1,278	–947	3.17/5.10/9.4
15.	Share of profit (loss) of companies accounted for using the equity method	0	0
16.	Result before tax	135,350	90,978
17.	Income tax expense	–41,802	–27,184	2.3/3.6/5.11
18.	Net result for the period	93,548	63,794
	Result attributable to shareholders of the parent company	93,203	63,381
	Result attributable to non-controlling interests	345	413	6.3.7
	Income and expenses recognised directly in equity: Items that may be reclassified subsequently to profit or loss::
	Translation of foreign operations	–2,905	90
	Fair value remeasurement on cash flow hedges	38,825	868	6.3.3/9.3
	Deferred taxes recognised in equity	–6,537	–246
19.	Income and expenses recognised directly in equity	29,383	712
20.	Comprehensive result	122,931	64,506
	Comprehensive result attributable to shareholders of the parent	122,586	64,093
	Comprehensive result attributable to non-controlling interests	345	413	6.3.7
	Result per share (basic)	1.48	1.01	3.18/6.3.6
	Result per share (diluted)	1.47	1.01	3.18/6.3.6

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Consolidated balance sheet

at June 30, 2021

	EUR (thousands)	30.06.2021	30.06.2020	Notes
	Assets
A.	Non-current assets
I.	Intangible assets	602	673	3.2/3.5/6.1.1
II.	Property, plant and equipment	290,554	249,756	3.3/3.5/6.1.2
III.	Right-of-use assets under leasing arrangements	16,228	17,829	3.4/6.1.3
IV.	Financial assets	2,816	2,806	3.8/9.2
V.	Deferred tax assets	2,077	2,688	3.6/5.11
	Total non-current assets	312,277	273,752
B.	Current assets
I.	Inventories	101,463	78,810	3.7/6.2.1
II.	Trade receivables	69,565	64,688	3.8/6.2.2/9.2
III.	Derivatives	44,172	4,073	3.9/6.2.3/9.3
IV.	Other short-term financial assets	28,506	14,655	3.8/6.2.4/9.2
V.	Tax refunds	73	1,348	3.6/6.2.5
VI.	Other asset	17,540	17,989	3.8/6.2.6
VII.	Term deposits	0	20,000	3.10/6.2.7
VIII.	Cash and cash equivalents	105,025	53,885	3.11/6.2.8/9.2
	Total current assets	366,344	255,448
	Total assets	678,621	529,200

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EUR (thousands)	30.06.2021	30.06.2020	Notes
Equity and liabilities
A. Equity
I. Share capital	63,184	63,000	6.3.1
II. Additional paid-in capital	495,692	487,681	6.3.2
III. Other reserves	33,680	1,392	6.3.3
IV. Retained earnings	–81,727	–162,855	6.3.5
V. Reserve for translation adjustments	–2,980	–75	6.3.4
Total equity attributable to owners of the parent	507,849	389,143
VI. Non-controlling interests	2,023	1,680	6.3.7
Total equity	509,872	390,823
B. Non-current liabilities
I. Bank loans and other loans	30,000	30,136	3.14/6.4.1/9.2
II. Lease liabilities	11,125	12,665	3.4/6.4.2
III. Provisions	131	131	3.13/6.4.3
IV. Deferred investment grants and subsidies	2,172	3,012	3.12/6.4.4
V. Other non-current financial liabilities	222	3,316	3.14/6.4.5/9.2
VI. Deferred taxes	1,806	59	3.6/5.11
Total non-current liabilities	45,456	49,319
C. Current liabilities
I. Bank loans and other loans	0	100	3.14/6.5.1/9.2
II. Lease liabilities	5,356	5,344	3.4/6.5.2
III. Trade payables	45,382	41,130	3.14/.6.5.3/9.2
IV. DerivatIives	22,508	3,140	3.9/6.5.4/9.3
V. Other current financial liabilities	11,235	11,963	3.14/6.5.5/9.2
VI. Tax liabilities	18,993	18,096	3.6/6.5.6
VII. Provisions	9,656	2,973	3.13/6.5.7
VIII. Deferred investment grants and subsidies	859	998	3.12/6.4.4
IX. Other current liabilities	9,304	5,314	3.14/6.5.8
Total current liabilities	123,293	89,058
Total equity and liabilities	678,621	529,200

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Consolidated cash flow statement

for the period July 1, 2020 to June 30, 2021

EUR (thousands)	01.07.2020– 30.06.2021	01.07.2019– 30.06.2020	Notes
Net result for the period	93,548	63,794
Income taxes expense	41,802	27,184	5.11
Interest result	1,278	947	5.10/9.4
Depreciation and amortisation	29,696	30,220	5.6/6.1.1/6.1.2/6.1.3
Non-cash income expenses	1,113	1,005	6.1
Non-cash expenses from share-based remuneration	3,607	0
Gain on disposal of property, plant and equipment and derecognition of investment grants	–158	–431
Release of deferred investment grants and subsidies	–979	–1,021	6.4.4
Non-cash changes in derivative financial instruments	13,029	–429	9.3
Increase in inventories	–22,654	–15,733	3.7/6.2.1
Increase in trade receivables	–4,877	–16,148	3.8/6.2.2
Increase in other assets and other current financial assets	–8,004	–7,516	6.2.4/6.2.5/6.2.6
Increase (previous year: decrease) in provisions	6,602	–3,762	6.4.3/6.5.7
Increase in trade payables	3,354	1,785	6.5.3
Increase in other current financial and non-financial liabilities	5,265	5,935	6.4.5/6.5.5/6.5.6/ 6.5.8
Interest paid	–1,129	–1,297	6.4.4/6.5.4/ 6.5.5/6.5.7
Interest received	157	677
Income taxes paid	–44,467	–13,532
Cash flows from operating activities	117,183	71,678

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EUR (thousands)	01.07.2020– 30.06.2021	01.07.2019– 30.06.2020
Cash inflows for term deposits	20,000	0
Cash outflows for term deposits	0	–20,000
Acquisition of intangible assets	–214	–130
Cash outflows for acquisition of property, plant and equipment	–67,065	–67,971
Proceeds from disposal of property, plant and equipment	342	709
Cash outflow for loan to associate	0	–1,051
Proceeds from repayment of loan by associate	380	760
Cash flows from investing activities	–46,557	–87,683
Payments of dividends	–12,600	–12,600
Cash outflows for the repayment of financial liabilities	–234	–11,804
Proceeds from new financial liabilites	0	31,983
Payment of lease liabilities	–5,926	–5,344
Cash flows from financing activities	–18,760	2,235
Change in cash funds resulting from business transactions	51,866	–13,770
Change in cash funds due to effects of exchange rates	–726	–370
Cash funds at beginning of year	53,885	68,025
Cash funds at end of year	105,025	53,885

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Consolidated statement of comprehensive income