Joint report by the Board of Management and the Supervisory Board of Biotest AG pursuant to Section 3.10 of the German Corporate Governance Code

Corporate Governance principles

The corporate management and control of Biotest AG are geared towards the company’s long-term success. The Board of Management and the Supervisory Board work closely together and base their actions on internationally accepted standards of good corporate governance.

Corporate management and control thereof meet the valid legal guidelines and the requirements (“should” provisions) of the German Corporate Governance Code (the “Code”), unless the statement of compliance expressly indicates exception. Amended and supplemented on several occasions in recent years, the list of recommendations and suggestions of the Code represents a high standard in our view, including at international level.

Explanations to the new version of the Code

With effect from 6 June 2008, the German Corporate Governance Code has been subject to moderate development. In addition to further clarification of Section 4.2.2, which relates to the treatment of remuneration of the Board of Management by the Supervisory Board, three previous suggestions (“may” and “can” provisions) in Section 4.2.3 have been converted into recommendations (“should” provisions). The provisions relate to payments to members of the Board of Management in the event of premature termination of Board of Management duties.

Accordingly, when Board of Management contracts are drawn up, it should be ensured that, in the event of premature termination of Board of Management duties for no major reason, payments do not exceed the value of two years’ remuneration (settlement cap) and at the same time, do not provide remuneration in excess of the residual contractual term. The Code also recommends that the corresponding payment commitment in the event of a change in control amounts to a maximum of 150% of the settlement cap.

The recommendation under Section 7.1.2 is also new and states that the Supervisory Board or its Audit Committee should discuss interim financial reports with the Board of Management prior to publication.

Implementation of the recommendations and suggestions of the Code at Biotest

The Supervisory Board and Board of Management have comprehensively addressed the recommendations and suggestions in the version of the Code dated 6 June 2008. The Boards agree that Biotest should implement the “should” (recommendations) and “can” provisions (suggestions) with one exception in each case:

We will not implement the recommendation in Section 5.3.3 regarding the establishment of a Nomination Committee within the Supervisory Board. Since the Supervisory Board of Biotest AG comprises only four shareholder representatives, we do not deem it necessary to set up a separate committee from this small group of people. Moreover, we believe that improved transparency of the selection procedure, which is the aim of the recommendation, can be achieved from within the full Supervisory Board.

For reasons of the associated cost, Biotest will dispense with the recommendation made in Section 2.3.4 to transmit the Annual Shareholders’ Meeting via the Internet.

The suggestions regarding settlement regulations for members of the Board of Management, which were introduced with the amendment of the Code in June 2007 and converted into recommendations with the amendment of the Code in June 2008, have not applied to date. Biotest has not concluded any new Board of Management contracts in the relevant period.

The statement of compliance which was approved at the balance sheet meeting of the Supervisory Board on 5 March 2009 is available on the company’s website www.biotest.de

Also available on the site are the previous declarations of compliance, the Corporate Governance report, the remuneration report and the company’s Articles of Association.

Corporate Governance in financial year 2008

The Annual Shareholders’ Meeting of Biotest AG took place in Frankfurt/Main on 27 May 2008. 84.02% of the ordinary share capital was represented. The proposals made by the Board of Management were approved with a significant majority in each case. These included authorisation for the Board of Management to buy and sell treasury stock. This authorises the Board of Management to buy ordinary bearer shares and/or preference bearer shares. At no time may the shares acquired, combined with other treasury stock of the company or shares that are attributable to the company in accordance with Sections 71a ff. of the German Stock Corporation Act (AktG), exceed 10% of the share capital existing at the time of the Annual Shareholders’ Meeting, amounting to €30,025,152.00. The authorisation is valid until 26 November 2009.

The authorisation to buy treasury stock issued by resolution of the Annual Shareholders’ Meeting on 3 May 2007 was revoked.

Change in the composition of the Supervisory Board

At the end of the Annual Shareholders’ Meeting for 2008, Dr. Jochen Hückmann resigned from his office. Dr. Hückmann was a member of the Supervisory Board for more than ten years and elected by the capital side.

With effect from 22 September 2008, the Supervisory Board appointed Professor Dr. Marbod Muff, resident in Ingelheim/Rhine, to the Supervisory Board as a new member. He will also assume the duties of Dr. Hückmann as Chairman of the Audit Committee. Until 31 December 2008, Professor Muff was a member of the management of Boehringer Ingelheim GmbH with responsibility for Finance and Human Resources.

The term of office of all Supervisory Board members runs until the end of the Annual Shareholders’ Meeting, which grants formal approval of the Supervisory Board’s actions for financial year 2011.

Professor Muff is currently court-appointed. During the Annual Shareholders’ Meeting of 7 May 2009, a vote will therefore be taken on whether to terminate Professor Muff’s term of office with effect from the end of the Annual Shareholders’ Meeting. This would result in the release of the Supervisory Board in financial year 2011, which would ensure that the terms of office of the shareholder representatives on the Supervisory Board are synchronised.

The Board of Management has lodged an appeal against the decision of the Frankfurt/ Main Higher Regional Court of 12 February 2008, whose ruling upheld the complaint against the resolution of the 2006 Annual Shareholders’ Meeting to amend the Articles of Association of Biotest AG. The Federal High Court of Justice in Germany will make a decision on the matter in the last instance. The date for the hearing has yet to be set.

The contested resolution regards the right granted to the Chairman of the Annual Shareholders’ Meeting to restrict the right of shareholders to speak and raise questions at the Annual Shareholders’ Meeting. With the amendment, Biotest AG implemented the provisions of the Act on Corporate Integrity and the Modernisation of the Right to Appeal (UMAG). For further information on this matter, please refer to the Corporate Governance report in the 2007 Annual Report.

Directors’ Dealings

The following purchases and sales subject to notification by members of the executive bodies and other senior management members at the Biotest Group took place in financial year 2008:

Name	Function	ISIN	Share class	Purchase/sale	Trade Date	No. of shares	Price €	Value €
Dr. Michael Ramroth	Executive Body	522721/DE000522723	Biotest preference share	Purchase	19 Dec 2008	500	42.28	21,140.00

Remuneration of the Board of Management and the Supervisory Board

Joint report by the Board of Management and the Supervisory Board of Biotest AG as part of the Corporate Governance report

Remuneration of the Board of Management

The Supervisory Board specifies the remuneration for members of the Board of Management. This is composed of a fixed remuneration, a bonus and a component entailing a long-term incentive effect and risk elements. Added to this are benefits in kind. From the point of view of the Supervisory Board, all remuneration components are appropriate, individually and as a whole.

Pursuant to Section 4.2.3 of the Code, the remuneration of the Board of Management including the non-monetary components is presented in detail below.

Fixed remuneration

The non-performance related fixed remuneration of members of the Board of Management is composed of their fixed salary and fringe benefits. The amount is based on Biotest’s financial situation and future prospects and on remuneration in the competitive environment.

The annual fixed salary is specified for the entire term of the respective contract of employment and paid in 13 monthly instalments. In the past financial year, the fixed salary of Professor Schulz amounted to €300 thousand, while that of Dr. Ramroth amounted to €260 thousand.

Members of the Board of Management received fringe benefits above and beyond their fixed salary.

Insurance policies

Both members of the Board of Management are insured professionally and privately as part of Biotest AG’s collective accident policy. Members of the Board of Management receive an allowance for social insurance and also for direct insurance. In 2008, the value of these benefits amounted to €27 thousand for Professor Schulz and €24 thousand for Dr. Ramroth.

The members of the Board of Management of Biotest AG are covered by the Groupwide D&O insurance with excess, which Biotest has concluded for its entire senior management.

Further benefits in kind

Both members of the Board of Management are provided with a top-of-the-range company car free of charge, which may also be used privately. The value of the benefits in kind in 2008 amounted to €8 thousand for Professor Schulz and €8 thousand for Dr. Ramroth.

The Board of Management of Biotest AG is also included in Biotest AG’s occupational pension scheme. The members receive an individual commitment as part of Biotest AG’s pension scheme, for which provisions are created. The amount of the provisions for this type of pension scheme is contingent on the number of years worked, the eligible salary and the benefits scale applicable below and above the social contribution assessment limit.

No loans or advances were granted to members of the Board of Management in financial year 2008.

Bonuses

The performance-related component of the remuneration (bonuses) is based on the achievement of corporate and personal targets. The operating profit (EBIT) and return on capital employed (RoCE) are weighted at 30% each and the achievement of individual targets established in the previous financial year at 40%. A separate bonus for the achievement of targets of particular significance can also be determined by the Presiding Committee of the Supervisory Board.

The individual targets are agreed annually between members of the Board of Management and the Presiding Committee of the Supervisory Board. The latter determines the level of the performance-related component after the end of the financial year.

For 2008, a provision of €150 thousand was created for the performance-related remuneration of Professor Schulz and a provision of €130 thousand for Dr. Ramroth.

Each member of the Board of Management received a bonus of €100 thousand (gross) for the successful establishment and integration of Biotest Pharmaceuticals Corp. in the Biotest Group, which was paid in instalments of €50 thousand in January and July 2008. Provisions for these amounts were included in the 2007 annual financial statements.

Remuneration in 2008 comprising the components fixed salary, bonuses and benefits in kind totalled €485 thousand for Professor Schulz and €422 thousand for Dr. Ramroth.

Remuneration components with a long-term incentive effect and risk elements

The remuneration component with a long-term incentive effect and risk elements is based on Biotest’s Long Term Incentive Programme (LTIP). In addition to the members of the Board of Management, this also includes selected senior managers, who have a profound influence on the company’s success through their position within the Group, their decisions, their management and their actions.

The programme’s structure is geared to the established criteria which the capital market sets for systems of this kind, and complies with the requirements of the Code. The first tranche of the programme was launched on 1 October 2006 and ended on 31 December 2008, with a second tranche beginning on 20 June 2007 and ending on 31 December 2009 and a third tranche starting on 1 May 2008, which will run until 31 December 2010.

The precondition for participation is the participant’s own investment through the purchase of preference shares in Biotest AG. The maximum number of preference shares that members of the Board of Management can purchase is 1,000. The shares must be held in a securities account at least until the incentive total is disbursed.

The level of the incentive payment is calculated from the performance of Biotest preference shares compared to the SDAX selection index and from the average EBIT margin achieved during the term of the relevant tranche (2006 to 2008, 2007 to 2009 and 2008 to 2010). Section F1 of the notes to the consolidated financial statements provides a detailed explanation of the procedure used to calculate the incentive payment.

It is anticipated that participants will be paid the incentive component in May of the year, following expiry of the tranche.

The total value of the LTIP over the entire period amounted to €494 thousand for Professor Schulz and €442 thousand for Dr. Ramroth as of the valuation date of 31 December 2008.

In financial year 2008, Biotest transferred a total of €194 thousand to pension reserves for the Board of Management. Of this figure, €152 thousand was attributable to Professor Schulz and €42 thousand to Dr. Ramroth.

Remuneration system for former members of the Board of Management and their surviving dependants

The pensions agreed in their service contracts are paid to former Board of Management members and their surviving dependants. A total of €3,782 thousand is provided for this purpose. The value of pension commitments is calculated pursuant toIAS 26.

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board is regulated in the Articles of Association. Members receive an annual fixed remuneration of €15 thousand each. The Chairman of the Supervisory Board shall receive twice this amount and his Deputy one and a half times. For work in a Supervisory Board committee, a member will receive a further €3 thousand, while the Chairman of the committee will receive a further €5 thousand. Biotest AG reimburses the VAT payable on the Supervisory Board remuneration.

Furthermore, the members of the Supervisory Board receive a variable remuneration of €500 for every €1million by which the operating profit (EBIT) exceeds a minimum amount of currently €17.3 million, however, no more than a total of €5 thousand.

Like the members of the Board of Management, the members of the Supervisory Board of Biotest AG are included in the Group-wide D&O insurance with excess. Biotest paid the relevant premiums for all Supervisory Board members. No further benefits in kind were granted.

€ thousand	Fixed remuneration	Variable remuneration	Total remuneration
Dr. Thorlef Spickschen (Chairman)	43	5	48
Dr. Cathrin Schleussner (Deputy Chairwoman)	29	5	34
Prof. Dr. Marbod Muff 2)	6	2	8
Dr. Jochen Hückmann1)	9	2	11
Thomas Jakob	18	5	23
Barbara Arnold-Schlosser	18	5	23
Astrid Paluch	15	5	20
Total	138	29	167

1) as of 27 May 2008
2) as of 22 September 2008

The remuneration of the Supervisory Board was adjusted in line with the provisions of the Code by resolution of the 2008 Annual Shareholders’ Meeting becoming effective from 1 January 2009.