Affimed
Annual Report 2020

Plain-text annual report

Affimed N.V. Amsterdam, The Netherlands Annual Report 2020 Affimed Annual Report 2020 Contents Report by Affimed’s Management Board Business and financial overview Risk Management Corporate Governance Report by Affimed’s Supervisory Board Consolidated Financial Statements Company Financial Statements Other information 1 14 20 40 47 82 95     Affimed Annual Report 2020 Forward-Looking Statements This Annual Report contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this Annual Report can be identified by the use of forward- looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,” “estimate” and “potential,” among others. Forward-looking statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section “Risk Management” in this Annual Report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.     Affimed Annual Report 2020 1 Report by Affimed’s Management Board Overview We are a clinical-stage immuno-oncology company focused on discovering and developing highly targeted cancer immunotherapies. Our product candidates represent an innovative approach to cancer treatment that seeks to harness the body's own immune defenses to fight tumor cells. The most potent cells of the human defense arsenal are types of white blood cells called innate immune cells (Natural Killer cells, or NK cells, and macrophages) and T cells. Leveraging our fit-for-purpose ROCK® platform, we develop proprietary, next-generation bispecific antibodies, so-called innate cell engagers, which are designed to direct innate immune cells and establish a bridge to cancer cells. Our innate cell engagers have the ability to bring innate immune cells into the proximity of tumor cells and trigger an activation cascade that leads to the destruction of cancer cells. Due to their novel tetravalent architecture with four binding domains, our innate cell engagers bind to their targets with high affinity. Different dosing schemes are being explored to allow for improved exposure in heavily pretreated patient populations. Based on their mechanism of action as well as the preclinical and clinical data we have generated to date, we believe that our product candidates as monotherapy and / or in combination, may ultimately improve response rates, clinical outcomes and survival in cancer patients, and could eventually become a cornerstone of modern targeted oncology care. Building on our leadership in the innate cell engager space, we are also developing novel antibody formats with the potential to tailor innate cell-engaging therapy to different indications and settings. Affimed was founded in 2000 based on technology developed by the group led by Professor Melvyn Little at Deutsches Krebsforschungszentrum (DKFZ), the German Cancer Research Center, in Heidelberg, Germany. Focusing our efforts on antibodies that specifically bind to innate cells through CD16A, a key activating receptor, we have built a clinical and preclinical pipeline of innate cell-engaging bispecific antibodies designed to activate both innate and adaptive immunity. Compared to a variety of T cell-engaging technologies, our innate cell engagers appear to have a better safety profile and have the potential to achieve more potent and deeper immune responses potentially through enhancing crosstalk of innate to adaptive immunity. The safety profiles of our molecules make them suitable for development as combination therapies (e.g. with checkpoint inhibitors, or CPIs, adoptive NK cells or cytokines). We are focusing our research and development efforts on three programs, for which we retain full global commercial rights, AFM13, AFM24 and AFM28. Because our tetravalent bispecific antibodies can be engineered to bind to different antigens that are known to be present on various cancer cells, our product candidates could be developed for the treatment of different cancer indications. We intend to clinically develop our product candidates to treat high medical need indications, including as a salvage therapy for patients who have relapsed after treatment with standard therapies, or patients who are refractory to these therapies, meaning they do not respond to treatment with standard therapies, whom we collectively refer to as relapsed/refractory patients. These patients have limited life expectancy and few therapeutic options. We believe this strategy will allow for a faster path to approval and will likely require smaller clinical studies compared to indications with more therapeutic options and larger patient populations. We believe such specialized market segments in oncology can be effectively targeted with a small and dedicated marketing and sales team. We currently intend to establish a commercial sales force in the United States and/or Europe to commercialize our product candidates when and if they are approved. We also see an opportunity in the clinical development of our innate cell engagers in combination with other agents that harness the immune system to fight cancer cells, such as CPIs, adoptive NK cell transfer and cytokines. Such combinations of cancer immunotherapies may ultimately prove beneficial or larger patient populations in earlier stages of diseases, beyond the relapsed/refractory disease setting. Our main offices and laboratories are located at the Technology Park adjacent to the German Cancer Research Center (DKFZ) in Heidelberg, where we employ 112 people, approximately 66% of whom Affimed Annual Report 2020 2 have an advanced academic degree. Including AbCheck (see description below) and Affimed Inc. personnel, our total headcount is 163 (153 full time equivalents) as of mid of April 2021. We are led by experienced executives with a track record of successful product development, approvals and launches, specifically in the area of biologics and biopharmaceuticals. Our supervisory board is made up of highly experienced experts from the pharmaceutical and biotech industries, including individuals with a background and expertise in hematological malignancies. Business Overview Our Strategy Our goal is to develop new treatment options for patients in need by activating innate immunity (e.g. NK cells and macrophages), the body's first line of defense, to fight cancer. We are developing single and combination therapies to treat a variety of cancers. Our novel proprietary antibody platform, ROCK®, delivers several unique types of next-generation tetravalent antibody formats, including bispecific and trispecific innate cell engagers. Based on the distinctive properties and mechanism of action of these products, which have demonstrated preclinical and / or clinical activity, we believe that our product candidates, alone or in combination, could eventually become a key element of improving clinical outcomes in cancer patients. Key elements of our strategy to achieve this goal are to: • Rapidly advance the development of our clinical stage product candidates using a three-pronged development approach, including development (i) as monotherapy, (ii) in combination with adoptive NK cells, and (iii) in combinations with immunotherapies such as checkpoint inhibitors; • Establish R&D and commercialization capabilities in Europe and in the United States; • Use our technology platforms and intellectual property portfolio to continue to build our cancer immunotherapy pipeline; • Maximize the value of our collaboration arrangements with LLS, The MD Anderson Cancer Center, Genentech and Roivant, and establish new collaborations; • Intensify our collaboration with academia; and • Utilize AbCheck to generate and optimize antibodies. Our Strengths We believe we are a leader in developing cancer immunotherapies due to several factors: • Our lead product candidate, AFM13, is a first-in-class innate cell engager for hematologic cancer indications; • Our development candidate, AFM24, is a first-in-class innate cell engager for solid tumor indications; • Our modular and versatile ROCK® platform, which we believe will enable future product candidates and collaborations with pharmaceutical companies; • We retain global commercial rights for AFM13, AFM24 and AFM28; • Our experienced management team has a strong track record in the development and commercialization of new medicines; and • We have a strong technology base and solid patent portfolio in the field of targeted immuno- oncology. Affimed Annual Report 2020 3 Our Research and Development Pipeline We are developing a pipeline of innate cell engagers for the treatment of cancer as shown below*: *As of mid of April 2021 Our most advanced candidate, AFM13, is a first-in-class innate cell engager designed for the treatment of certain CD30-positive (CD30+) malignancies, including T cell lymphomas. AFM13 selectively binds to CD30, a clinically validated target, and CD16A, an integral membrane glycoprotein receptor expressed on the surface of NK cells and macrophages, triggering a signal cascade that leads to the destruction of CD30- positive tumor cells. In contrast to conventional full-length antibodies, AFM13 does not bind to CD16B, which prevents binding to other cell types, e.g., neutrophils, and binds with equal affinity to CD16A polymorphisms at position 158. Furthermore, AFM13 binds CD16A with an approximately 1000-fold higher affinity than monoclonal antibodies thereby significantly increasing potency and efficacy as preclinically demonstrated. AFM13 is currently being investigated as monotherapy in a phase 2 registration-directed study in patients with relapsed/refractory peripheral T-cell lymphoma (PTCL), and in combination with adoptive NK cells in a Phase 1 clinical study in collaboration with the MD Anderson Cancer Center. Our second candidate, AFM24, is a tetravalent, bispecific epidermal growth factor receptor (EGFR)- and CD16A-binding innate cell engager. AFM24 is designed to address limitations, such as toxicities or treatment resistance, associated with current therapeutic anti-EGFR monoclonal antibodies, while also offering the potential for better efficacy and safety by using activation of innate immunity to target EGFR-expressing solid tumors rather than inhibition of EGFR-mediated signal transduction. AFM24 is currently being investigated as monotherapy in a first-in-human phase 1/2a study, and we intend to commence two clinical studies investigating AFM24 in combination with adoptive NK cells and a PD- L1 inhibitor, respectively, in the second half of 2021. Our third wholly-owned ICE® molecule, AFM28, was selected from our ROCK® platform for an undisclosed target. The selection of AFM28 followed our evaluation of oncology indications with a high level of innate immune cell activity, and where there was past clinical experience with therapeutic antibodies and antibody drug conjugates. We advanced AFM28 into preclinical studies in 2020 and expect to submit an IND application in the first half of 2022. In August 2018, we entered into a research collaboration and license agreement with Genentech, a member of the Roche Group, for the development and commercialization of certain product Affimed Annual Report 2020 4 candidates that contain novel NK cell engager-based immunotherapeutics to treat multiple cancers. The agreement included a license to AFM26, a tetravalent, bispecific B cell maturation antigen (BCMA)- and CD16A-binding innate cell engager from our fit-for-purpose ROCK® platform, for the treatment of multiple myeloma. AFM26 is now known as RO7297089. RO7297089 employs a unique mechanism of action through high affinity engagement of NK cells and has demonstrated in vitro efficacy against cells with very low levels of BCMA expression. NK cell binding of RO7297089 is largely unaffected by IgG competition. During 2020, Genetech initiated a phase I study for RO7297089. AFM32 is another ICE® candidate in preclinical development against an undisclosed target. In November 2020, we announced a License and Strategic Collaboration with Roivant Sciences Ltd. ("Roivant"), pursuant to which we granted Roivant a license to develop and commercialize AFM32 and options to license additional novel ICE® molecules against other targets. We believe that our collaborations help to validate and more rapidly advance our discovery efforts, technology platforms and product candidates, and will enable us to leverage our platforms through additional high-value partnerships. As part of our business development strategy, we aim to enter into additional research collaborations in order to derive further value from our platform and more fully realize its potential. Business impact of COVID-19 In response to the recent COVID-19 pandemic, we have implemented mitigation procedures to ensure the safety of trial participants and healthcare professionals and that drug supply and other trial-related materials are ready and available for patients enrolled in our clinical trials. We are closely monitoring and adhering to relevant federal and local guidelines on COVID-19 to ensure the safety and health of our global workforce and help limit the spread of COVID-19, while maintaining business continuity. We mandated a work-from-home policy for all employees not involved in preclinical research, and adjusted operations for laboratory personnel at our headquarters in Heidelberg, Germany. In addition, we eliminated nonessential travel to minimize exposure to COVID-19. We will continue to work closely with clinical sites as well as respective competent authorities to ensure the safety of trial participants and healthcare professionals, as well as the appropriate use of healthcare resources during the COVID-19 pandemic, while preserving the conduct and data integrity of our clinical studies. At this time, our contract manufacturers are operating without interruption, and there is sufficient material for the AFM13 phase 2 registration-directed study in PTCL, the investigator sponsored trial of cord blood-derived allogeneic natural killer (NK) cells in combination with AFM13, and the ongoing AFM24 phase 1/2a monotherapy clinical study. Our assessment of the potential impact of the COVID- 19 pandemic on patient enrollment and site activation in our clinical studies is ongoing and we will update trial timelines once we have more visibility on the length and extent of the COVID-19 pandemic. Operating results To date, we have financed our operations primarily through our public offerings of our common shares, private placements of equity securities, the incurrence of loans including convertible loans and through government grants and payments for collaborative research and development services. Through December 31, 2020, we have raised an aggregate of €332.5 million through the issuance of equity and incurrence of loans. To date, we have not generated any revenues from product sales or royalties. Based on our current plans, we do not expect to generate product or royalty revenues unless and until we or any collaboration partner obtain marketing approval for, and commercialize, any of our product candidates. We have generated losses since we began our drug development operations in 2000. For the year ended December 31, 2020, we incurred a net loss of €41.4 million. As of December 31, 2020, we had an accumulated deficit of €275.9 million. Affimed Annual Report 2020 5 We expect to continue incurring losses as we continue our preclinical and clinical development programs, apply for marketing approval for our product candidates and, subject to obtaining regulatory approval for our product candidates, build a marketing and sales team to commercialize our product candidates. Our profitability is dependent upon the successful development, approval, and commercialization of our product candidates and achieving a level of revenues adequate to support our cost structure. We may never achieve profitability, and unless and until we do, we will continue to need to raise additional cash. We intend to fund future operations through additional equity and debt financings, and we may seek additional capital through arrangements with strategic partners or from other sources. Collaboration Agreements We have entered into strategic collaborations for some of our therapeutic programs. As part of our business development strategy, we aim to increase the number of our research collaborations in order to derive further value from our platforms and more fully exploit their potential. Key terms of our current material collaborations are summarized below. Roivant On November 9, 2020, we announced that we entered into a license and strategic collaboration agreement with a subsidiary of Roivant Sciences Ltd. ("Roivant") to develop and commercialize novel ICE® molecules, including AFM32, in oncology. Under the terms of the agreement, we received $60 million in upfront consideration, comprised of $40 million in cash and pre-paid R&D funding, and $20 million of newly issued shares in Roivant Sciences Ltd. We are eligible to receive up to an additional $2 billion in milestones over time upon achievement of specified development, regulatory and commercial milestones, as well as tiered royalties on net sales. We recognized revenues of €1.4 million in 2020. Genentech On August 24, 2018 we entered into a research collaboration and license agreement with Genentech, a member of the Roche Group, for the development and commercialization of certain product candidates that contain novel NK cell engager-based immunotherapeutics to treat multiple cancers. Under the terms of the agreement, in the fourth quarter of 2018 we received $96 million in initial upfront payments and other funding and additional payments in 2019 for development milestones and a final target nomination. We recognized revenues of €26.2 million in 2020. Financial Operations Overview Revenue To date, our revenues have consisted principally of collaboration and service revenue. Collaboration revenue. Collaboration revenue of €19.7 million for the year ended December 31, 2019 was from the Genentech collaboration. Collaboration revenue for year ended December 31, 2020 amounted to €27.8 million, with €26.2 million from the Genentech collaboration and €1.4 million from the Roivant collaboration. Service revenue. Service revenue is primarily revenue from service contracts entered into by AbCheck, our wholly owned, independently operated antibody screening platform. We recognized €1.7 million and €0.6 million of service revenue in 2019 and 2020, respectively. Service revenue of AbCheck is derived from third party contracts as well as from the utilization of the entity by Affimed. The increase or decrease of the use of AbCheck's service capabilities by Affimed has an impact on AbCheck's ability to generate third party revenues. Affimed Annual Report 2020 6 In the future, the timing of our revenue may vary significantly from the receipt of the related cash flows, as the revenue from some upfront or initiation payments is deferred and recognized as revenue over the estimated service period, while other revenue is earned when received, such as milestone payments or service fees. Our revenue has varied substantially, especially due to the impact of collaboration revenue received from Genentech. The amount of future revenue is dependent on the services performed and milestones reached for our existing collaborations and on our ability to conclude new collaboration arrangements and the terms we are able to negotiate with our partners. Other Income Other income for years 2019 and 2020 primarily relates to foreign exchange gains and income from government grants for research and development projects of €348,000 in 2020 and €19,000 in 2019. Research and Development Expenses Research and development expenses consist principally of:        salaries for research and development staff and related expenses, including benefits; costs for production of preclinical compounds and drug substances by contract manufacturers; fees and other costs paid to contract research organizations in connection with additional preclinical testing and the performance of clinical trials; costs of related facilities, materials and equipment; costs associated with obtaining and maintaining patents and other intellectual property; amortization and depreciation of tangible and intangible fixed assets used to develop our product candidates; and expenses for share-based payments. Based on our current budget we expect that our total research and development expenses in 2021 will increase as compared to 2020. Our research and development expenses primarily relate to the following key programs:  AFM13. The following is a summary of completed and ongoing research and development activities for AFM13:   In November 2019, we initiated a registration directed phase 2 study of AFM13 as monotherapy in relapsed or refractory patients suffering from peripheral T cell lymphoma (PTCL). In March 2021, we announced positive results from an interim futility analysis for the study, and accordingly the study will continue to enroll patients until we reach approximately 100 - 110 response evaluable patients. In September 2020, a phase 1 clinical study was initiated in collaboration with the University of Texas MD Anderson Cancer Center (MDACC), in which MDACC is investigating the combination of AFM13 with allogeneic NK cells. MDACC is administering a stable complex of AFM13 pre-complexed with cord blood-derived allogeneic NK cells in different doses (numbers of pre-complexed NK cells) into patients with relapsed/refractory CD30-positive lymphoid malignancies. Affimed Annual Report 2020 7    In 2017, an investigator-sponsored Phase 1b/2a study was initiated by Columbia University to investigate AFM13 as monotherapy in patients with relapsed or refractory CD30-positive lymphoma with cutaneous manifestation, and the study is now complete. In 2016, we initiated a phase 1b study investigating the combination of AFM13 with Merck's anti-PD1 antibody Keytruda® (pembrolizumab) in patients with relapsed/refractory HL and the study is now complete.. In 2015, an investigator-initiated monotherapeutic phase 2a clinical trial of AFM13 in relapsed/refractory Hodgkin Lymphoma was initiated and the study is now complete.  We anticipate that our research and development expenses in 2021 for AFM13 will increase compared to those for 2020 due to the initiation of new clinical studies, pre-clinical studies with collaboration partners and the scale-up of the production of AFM13 for commercial purposes. • AFM11. The phase 1 clinical trials of AFM11 were placed on clinical hold and recruitment stopped in October 2018. In May 2019, we received notification from the FDA that additional data would be needed to determine whether the AFM11 clinical hold may be lifted. In line with the strategic focus on our innate immunity portfolio, we have made the decision to terminate the phase 1 clinical program of AFM11. This decision took into consideration the competitive landscape of B-cell directed therapies currently in development and associated resources needed for further development of AFM11. We subsequently informed the FDA of our intention to terminate the clinical program. • AFM24. AFM24, a tetravalent, bispecific epidermal growth factor receptor, and CD16A-binding innate cell engager, is in currently enrolling a phase 1/2a clinical trial in patients with advanced cancers known to express EGFR. During 2021, we expect to initiate clinical trials evaluating the combination of AFM24 with adoptive NK cell transfer and anti-PD-L1 therapies, subject to receipt of FDA clearance. We anticipate that our research and development expenses in 2021 for AFM24 will increase compared to those for 2020 due to the initiation of new clinical trials. • Other projects and infrastructure costs. Our other research and development expenses relate to our Genentech, Roivant and Artiva collaborations, and early-stage development/discovery activities, including those for AFM28. We have allocated a material amount of our resources to such discovery activities. The expenses mainly consist of salaries, manufacturing costs for pre- clinical study material and pre-clinical studies. In addition, we incur a significant amount of costs associated with our research and development that are non-project specific, including intellectual property-related expenses, depreciation expenses and facility costs. Because these are less dependent on individual ongoing programs, they are not allocated to specific projects. We assume that other projects and infrastructure costs will increase in 2021 due to increased early-stage development/discovery activities. Since January 1, 2012, we have cumulatively spent €235.2 million on research and development. In the years ended December 31, 2018, 2019 and 2020, we spent €35.1 million, €43.8 million and €50.0 million, respectively, on research and development; €8.7 million, €19.5 million and €19.1 million thereof on AFM13; €5.8 million, €2.4 million and -€0.8 million thereof on AFM11 and €5.8 million, €4.3 million and €8.7 million thereof on AFM24. Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including due to timing of initiation of clinical trials and enrollment of patients in clinical trials. Research and development expenses are expected to increase as we advance and broaden the clinical development of AFM13, AFM24 and certain of our other product candidates and further advance the research and development of our preclinical product candidates. The successful development of our product candidates is highly uncertain. At this time we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including the uncertainty of: Affimed Annual Report 2020 8 • • • • • • the scope, rate of progress, results and cost of our clinical trials, nonclinical testing, and other related activities; the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may develop; the number and characteristics of product candidates that we pursue; the cost, timing, and outcomes of regulatory approvals; the cost and timing of establishing sales, marketing, and distribution capabilities; and the terms and timing of any collaborative, licensing, and other arrangements that we may establish, including any milestone and royalty payments thereunder. A change in the outcome of any of these variables with respect to the development of AFM13, AFM24 or any other product candidate that we may develop could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA or other regulatory authority were to require us to conduct preclinical and clinical studies beyond those which we currently anticipate will be required for the completion of clinical development, if we experience significant delays in enrollment in any clinical trials or if we encounter difficulties in manufacturing our clinical supplies, we could be required to expend significant additional financial resources and time on the completion of the clinical development. General and Administrative Expenses Our general and administrative expenses consist principally of: • salaries for employees other than research and development staff, including benefits; • business development expenses, including travel expenses; • professional fees for auditors and other consulting expenses not related to research and development activities; • professional fees for lawyers not related to the protection and maintenance of our intellectual property; • cost of facilities, communication and office expenses; • IT expenses; • amortization and depreciation of tangible and intangible fixed assets not related to research and development activities; and • expenses for share-based payments. We expect that our general and administrative expenses in 2021 will be higher compared to the expenses in 2020 and will further increase in the future as our business expands. These increases will likely include costs of additional personnel, additional legal fees, accounting and audit fees, managing directors' and supervisory directors' liability insurance premiums and costs related to investor relations. In addition, we may grant share-based compensation awards to key management personnel and other employees. Affimed Annual Report 2020 9 Results of Operations The numbers below have been derived from our audited consolidated financial statements for the years ended December 31, 2019 and 2020. The discussion below should be read along with these financial statements, and it is qualified in its entirety by reference to them. Comparison of the years ended December 31, 2019 and 2020 Year ended December 31, 2019 2020 (in € thousand) Total Revenue: Other income/(expenses)—net Research and development expenses General and administrative expenses Operating income/(loss) Finance income/(costs)—net Income/(Loss) before tax Income taxes Income/(loss) for the period Total comprehensive income/(loss) Earnings/(loss) per common share in € per share 21,391 290 28,360 626 (43,791) (49,989) (10,266) (13,715) (32,376) (34,718) (6,647) (32,361) (41,365) (1) (32,365) (41,366) (32,997) (41,608) (0.50) (0.50) (4) 15 Revenue Revenue increased from € 21.4 million for the year ended December 31, 2019 to €28.4 million for the year ended December 31, 2020. Revenue for the year ended December 31, 2020 largely consisted of revenue from the Genentech collaboration. The increase in revenue in 2020 as compared to 2019 was primarily driven by an increase in revenues from our Genentech collaboration and revenues recognized from our collaboration with Roivant, which was signed in November 2020. Research and development expenses R&D Expenses by Project Project AFM13 AFM11 AFM24 Other projects and infrastructure costs Share-based payment expense Total Year ended December 31, 2019 2020 Change % (in € thousand) 19,471 2,418 4,327 16,671 904 43,791 19,089 (777) 8,660 21,493 1,524 49,989 (2)% — 100% 29% 69% 14% Research and development expenses increased 14% from €43.8 million in the year ended December 31, 2019 to €50.0 million in the year ended December 31, 2020, due to higher expenses for AFM24 and for other projects and infrastructure. The variances in project related expenses between the year ended December 31, 2019 and the corresponding period in 2020 are mainly due to the following projects: • AFM13. In the year ended December 31, 2020, we incurred lower expenses (2%) than in the year ended December 31, 2019 primarily due to lower expenses for manufacturing activities for clinical trial material. • AFM11. In the year ended December 31, 2020, no significant costs were incurred, however, we did recognize refunds from service providers following the termination of clinical trials, as well as Affimed Annual Report 2020 10 from the reversal of provisions for possible termination costs which were initially recognized in 2019. The majority of the expenses in the year ended December 31, 2019 related to costs for the termination of the phase 1 dose-finding study in NHL and the phase 1 dose-finding study in ALL. • AFM24. In the year ended December 31, 2020, we incurred significantly higher expenses (100%) which related to the initiation of the phase 1/2a clinical trial and manufacturing activities for the clinical trial material. Expenses in the year ended December 31, 2019 primarily related to the preparation of the phase 1/2a clinical trial and manufacturing activities for the clinical trial material. • Other projects and infrastructure costs. In the year ended December 31, 2020, expenses increased (29%) compared to the year ended December 31, 2019, primarily due to higher expenses incurred in relation to our discovery/early stage development activities and infrastructure costs. General and administrative expenses General and administrative expenses increased 33.6% from €10.3 million in the year ended December 31, 2019 to €13.7 million in the year ended December 31, 2020. In 2020, general and administrative expenses were largely comprised of personnel expenses of €6.3 million (2019: €5.4 million) which increased predominately due to higher headcount and legal, consulting and audit costs of €5.6 million (2019: €3.1 million). Legal, consulting and audit costs increased compared to 2019 primarily due to an increase in fees paid to outside legal firms for matters related to existing and new license agreements, including the termination of our license agreement with Xoma and our agreement with Roivant, and an increase in legal fees related to SEC reporting matters. Finance income / (costs)-net We recognized finance net costs for the year ended December 31, 2020 of €6.6 million compared to €15,000 income for the year ended December 31, 2019. The year ended December 31, 2020 was primarily affected by foreign exchange losses of €6.7 million primarily related to assets denominated in U.S. dollars as a result of the weakening of the U.S. dollar compared to the Euro during 2020. The year ended December 31, 2019 was primarily affected by interest income of €0.6 million and interest expenses of €0.5 million. Income tax expense During the year ended December 31, 2020, we recorded income tax expense of €1,000 compared to €4,000 for the year ended December 31, 2019 due to changes in deferred taxes. Liquidity and Capital Resources Since our inception, we have not generated any revenue from product sales and we have incurred significant operating losses. For the years ended December 31, 2019 and 2020 we incurred net losses of €32.4 million and €41.4 million, respectively. We have funded our operations to date with the proceeds principally from the sales of of our common shares and payments from collaboration partners. Our cash and cash equivalents as of December 31, 2020 consist primarily of deposits in current, savings and deposit accounts with original maturities of three months or less. We expect to continue this investment philosophy, though we may in the future decide to invest our available liquidity in other financial instruments. Based on our current operating and budget assumptions, we believe that our existing liquidity will enable us to fund our operating expenses and capital expenditure requirements at least into the second half of 2023. As part of our contractual obligations, we are also bound by certain operating lease obligations. Operating lease obligations consist of payments pursuant to non-cancellable operating lease agreements relating to our lease of office and laboratory space. Approximately 60% of the space in Germany is under a revolving 24-month lease period, with a 12-month termination period. The lease could expire in 2023 if notice to terminate is provided by either party by February 2022. No such notice has been received to date. Approximately 30% of this facility was under a fixed term lease period until February 2021 and prolongations are currently in preparation. The remaining 10% is under a fixed term Affimed Annual Report 2020 11 lease period until March 2025. We also lease office and laboratory space in the Czech Republic that is contracted until December 2025 with a period of notice of three months. During 2020, we entered into two 'at-the-market' share sale agreements which resulted in the sale of in total approximately 20.4 million common shares primarily to new investors. In May 2020, we implemented a $50 million at-the-market (ATM) program that resulted in the sale of 12.5 million common shares and generated net proceeds of €34.5 million in the aggregate. In November 2020, we entered into a new $75 million ATM program, and as of December 31, 2020 an additional 7.9 million common shares had been sold under the new ATM program, generating net proceeds of €34.5 million. Cash Flows Comparison of the years ended December 31, 2019 and 2020 The table below summarizes our consolidated statement of cash flows for the years ended December 31, 2019 and 2020: Net cash from/(used) in operating activities Net cash from/(used) for investing activities Net cash generated from financing activities Net changes to cash and cash equivalents Cash and cash equivalents at the beginning of the year Exchange-rate related changes of cash and cash equivalents Cash and cash equivalents at the end of the year Year ended December 31, 2019 (in € thousand) 2020 (29,056) 4,340 26,038 1,322 94,829 (917) 95,234 (19,400) 8,006 69,252 57,858 95,234 (6,238) 146,854 Net cash used in operating activities amounted to €29.1 million for the year ended December 31, 2019 whereas net cash used in operating activities amounted to €19.4 million in the year ended December 31, 2020. The amount in 2020 includes an initial upfront payment and committed funding of €33.3 million (USD 40 million) from the Roivant collaboration. We generated cash from investing activities of €4.3 million in the year ended December 31, 2019, compared to €8.0 million in the year ended December 31, 2020. The investing activities primarily relate to investments in and proceeds from the sale or maturity of financial assets. Net cash generated from financing activities in the year ended December 31, 2020 amounted to €69.3 million (2019: €26.0 million) and relate primarily to the net proceeds received from the at-the-market sale of common shares amounting to €69.0 million. Cash and Funding Sources Our cash and cash equivalents as of December 31, 2020 were €146.9 million. Funding sources generally comprise proceeds from the issuance of equity instruments, loans, payments from collaboration agreements and government grants. On November 30, 2016, our subsidiary Affimed GmbH entered into a loan agreement with Silicon Valley Bank, a California corporation ("SVB"), as lender, which we fully guarantee. The loan agreement provides us with a senior secured term loan facility (the "SVB Credit Facility") for originally up to €10.0 million, which agreement was amended in May 2017 to provide that such amount would be available in three tranches. On December 8, 2016, we drew down the initial tranche of €5.0 million, and on May 31, 2017 we drew down the second tranche of € 2.5 million; the availability of the third tranche expired in September 2017 with such amount remaining undrawn. In connection with such drawdowns, we issued SVB warrants to purchase 219,692 of our common shares, at a weighted-average exercise price of $2.07 per common share. The SVB Credit Facility matured in November 2020. Affimed Annual Report 2020 12 On January 25, 2017, we sold 10,000,000 of our common shares at a price of $1.80 per share in an underwritten public offering and received $16.6 million in net proceeds, after deducting underwriting discounts and commissions and other offering expenses. The underwriters partially executed an option to purchase additional shares and on February 9, 2017 we sold an additional 646,762 shares at a price of $1.80 per share and received $1.1 million, after deducting underwriting discounts and commissions and other offering expenses. On February 15, 2018, we sold an additional 13,225,000 of our common shares at a price of $2.00 per share in an underwritten public offering and received $24.5 million in net proceeds, after deducting underwriting discounts and commissions and other offering expenses. On November 13, 2019, we sold an additional 13,800,000 of our common shares at a price of $2.50 per share in an underwritten public offering and received $32.0 million in net proceeds, after deducting underwriting discounts and commissions and other offering expenses. In May 2020, we implemented a $50 million at-the-market (ATM) program providing for the sale of shares over time, which resulted in the sale of in total 12.5 million common shares and generated net proceeds of €34.5 million in the aggregate. In November 2020, we entered into a new ATM program for an amount not to exceed $75 million, and as of December 31, 2020 a further 7.9 million common shares were sold, generating net proceeds of €34.5 million in the aggregate. On January 8, 2021, we entered into a new loan agreement with SVB. The loan agreement provides us with a senior secured term loan facility (the "2021 SVB Credit Facility") for up to €25.0 million, of which €10.0 million was available at closing and drawn in February 2021, and €15.0 million of which is available in two additional tranches of €7.5 million each, subject to the satisfaction of certain milestones and conditions. The interest rate on amounts borrowed under the 2021 SVB Credit Facility is calculated as the sum of (i) the European Central Bank Base Rate plus (ii) an applicable margin of 5.5%, with European Central Bank Base Rate deemed to equal zero percent if the European Central Bank Base Rate is less than zero percent. The 2021 SVB Credit Facility matures in November 2025 with an interest-only period through December 1, 2022, or June 1, 2023 if we draw on all tranches of the loan, with amortized payments of principal and interest thereafter in equal monthly installments. Borrowings under the 2021 SVB Credit Facility are secured by a pledge of 100% of our shares in Affimed GmbH, all intercompany accounts receivables owed by our subsidiaries to us and a security assignment of essentially all our bank accounts, inventory, trade receivables and payment claims as specified in the loan agreement governing the facility. On January 15, 2021, we closed the sale of 16,666,667 of our common shares at a price of $6.00 per share in an underwritten public offering. Concurrent with closing, underwriters exercised an option to purchase additional shares and we sold an additional 2,500,000 shares at a price of $6.00 per share. We received approximately $108 million in net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses. Funding Requirements We expect that we will require additional funding to complete the development of our product candidates and to continue to advance the development of our other product candidates. In addition, we expect that we will require additional capital to commercialize our product candidates, including AFM13, AFM24 and AFM28. If we receive regulatory approval for AFM13, AFM24, AFM28 or other earlier programs, and if we choose not to grant any licenses to partners, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We also continue to incur substantial costs associated with operating as a public company. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long- term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. Affimed Annual Report 2020 13 Based on our current operating and budget assumptions, we believe that our existing liquidity, will enable us to fund our operating expenses and capital expenditure requirements at least into the second half of 2023. We have based this estimate on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including but not limited to: • • • • • • the scope, rate of progress, results and cost of our clinical trials, nonclinical testing, and other related activities; the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates and any products that we may develop; the number and characteristics of product candidates that we pursue; the cost, timing, and outcomes of regulatory approvals; the cost and timing of establishing sales, marketing, and distribution capabilities; and the terms and timing of any collaboration, licensing, and other arrangements that we have or may establish, including any required milestone and royalty payments thereunder. To address our financing needs, we may raise additional capital through the sale of equity or convertible debt securities. In such an event, the ownership interest of our shareholders will be diluted, and the terms of any such securities may include liquidation or other preferences that adversely affect the rights of holders of our common shares. For more information as to the risks associated with our future funding needs, see “Risk Management.” JOBS Act Exemptions As September 17, 2019 represented the fifth anniversary of the date of the first sale of our common shares pursuant to an effective registration statement under the Securities Act, we no longer qualify as an "emerging growth company" as defined in the JOBS Act, commencing December 31, 2019. As a result, our independent registered public accounting firm is required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management's assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation. Affimed Annual Report 2020 14 Risk Management Our business is exposed to specific industry risks, as well as general business risks. Our financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common shares could decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors. Listed below are the risks perceived by management to be the most significant. The risks faced by Affimed during 2020 are not limited to this list; a more comprehensive set of risks are described in Affimed’s form 20-F which was filed with the Securities Exchange Commission on April 15, 2021, and a copy of which is available from Affimed’s website www.affimed.com. Strategic and Operational Risks Any failure or delay in commencing or completing clinical trials for our products could severely harm our business. To obtain the requisite regulatory approvals to market and sell any of our products, we must demonstrate through extensive pre-clinical tests and clinical trials that the products are safe and effective in humans. Pre-clinical tests and clinical trials are expensive, can take many years and have an uncertain outcome. A failure of one or more of our pre-clinical programs on clinical trials could occur at any stage of testing. Positive or timely results from pre-clinical tests and early clinical trials do not ensure positive or timely results in later stage clinical trials or product approval by the European Medicines Agency, or EMA, the U.S. Food and Drug Administration, or FDA or any other regulatory authority. Products that show positive preclinical or early clinical results often fail in later stage clinical trials. Any delay in commencing or completing clinical trials for our product candidates would delay commercialization of our products and severely harm our business and financial condition. It is also possible that none of our product candidates will complete clinical trials in any of the markets in which we intend to sell those product candidates. Accordingly, we would not receive the regulatory approvals needed to market our product candidates. The regulatory approval process is costly and lengthy and we may not be able to successfully obtain all required regulatory approvals. The pre-clinical development, clinical trials, manufacturing, marketing and labeling of pharmaceuticals and medical devices are all subject to extensive regulation by governmental authorities and agencies in the European Union (“EU”), the US and other jurisdictions. We must obtain regulatory approval for products before marketing or selling any of them. The approval process is typically lengthy and expensive, and approval is never certain. Additional clinical trials may be required if clinical trial results are negative or inconclusive, which will require us to incur additional costs and significant delays. Our products will remain subject to ongoing regulatory review even if they receive marketing approval. If we fail to comply with continuing regulations, we could lose these approvals and the sale of our products could be suspended. Even if we receive regulatory approval to market a particular product, the approval could be conditional on us conducting additional costly post-approval studies or could limit the indicated uses included in the labeling of our products. Moreover, the product may later cause adverse effects that limit or prevent its widespread use, force us to withdraw it from the market or impede or delay our ability to obtain regulatory approvals in additional countries. In addition, the manufacturer of our Affimed Annual Report 2020 15 products, and their facilities, will continue to be subject to regulatory review and periodic inspections to ensure adherence to applicable regulations. After receiving marketing approval, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and the product will remain subject to extensive regulatory requirements. Our products may not gain market acceptance. Sales of medical products depend on physicians’ willingness to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe and effective from a therapeutic and cost perspective relative to competing treatments. We cannot predict whether physicians will make this determination in respect of our products. Even if our products achieve market acceptance, the market may prove not to be large enough to allow us to generate significant revenues. Our ability to generate revenue from any products that we may develop will depend on reimbursement and pricing policies and regulations. Our ability to commercialize our products may depend, in part, on the extent to which reimbursement for our products will be available from government and health administration authorities, private health insurers, managed care programs and other third-party payers. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. In many countries, healthcare and pharmaceutical products are subject to a regime of reimbursement by government health authorities, private health insurers or other organizations. There is increasing pressure from these organizations to limit healthcare costs by restricting the availability and level of reimbursement. Risks related to COVID-19 The recent outbreak of COVID-19 has evolved from a regional epidemic to a global pandemic, impacting almost every corner of the globe. The continued spread of COVID-19 is adversely impacting clinical and preclinical trials globally and in different therapeutic areas. As a result, our clinical trials or preclinical studies, including our ability to recruit and retain patients, principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may be significantly impacted. In response to the COVID-19 pandemic, we are implementing mitigation procedures designed to enable us to address the various issues that may arise from the COVID-19 pandemic, although there can be no assurance that these procedures will be successful or that we can avoid a material and adverse disruption to our business. As the pandemic continues, we may experience the prioritization of hospital resources toward the outbreak and further restrictions on travel. Furthermore, some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. For example, although we are continuing to enroll patients in our phase 2 study of AFM13 as monotherapy in relapsed or refractory patients suffering from peripheral T cell lymphoma, we have paused enrolment in an exploratory cohort intended to investigate the initial efficacy of AFM13 as monotherapy in patients suffering from transformed mycosis fungoides (T-MF) given the challenges presented by the ongoing pandemic. COVID-19 may also negatively affect the operations of third-party contract research organizations that we rely upon to carry out our clinical trials or the operations of our third-party manufacturers, each of which could result in delays or disruptions in the supply of our product candidates. The negative impact COVID-19 has had and may continue to have on patient enrollment and treatment, and the timing and execution of our clinical trials could cause costly delays to our clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to advance towards Affimed Annual Report 2020 16 commercialization, increase operating expenses and have a material adverse effect on our business and financial results. In addition, COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus. Public health officials have recommended and mandated precautions to mitigate the spread of COVID-19, including prohibitions on congregating, traveling across borders, shelter-in-place orders and other similar measures. We have taken precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring some or all of our employees to work remotely, suspending all non- essential travel and discouraging employee attendance at industry events and in-person work-related meetings. Such measures could negatively affect our business. For instance, temporarily requiring employees to work remotely may disrupt our operations or create unforeseen issues related to the use of technology designed to allow for remote communication and collaboration. The COVID-19 pandemic has also caused volatility in the global financial markets and has threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all. The full extent to which the COVID-19 pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time. As such, we cannot presently predict the scope and severity of any potential business shutdowns or disruptions, the impacts on our business, financing or clinical trial activities or on the healthcare system and the global economy as a whole. Risks Related to our Financial Position and need for Additional Capital We have incurred significant losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We have no products approved for commercial sale, and to date we have not generated any revenue or profit from product sales. No assurance can be given that we will achieve profitability in the future. Furthermore, if our products fail in clinical trials or do not gain regulatory approval, or if our products do not achieve market acceptance, we may never achieve profitability. We expect to need additional funding in the future, which may not be available to us on acceptable terms, or at all, which could force us to delay or impair our ability to develop or commercialize our products. Our current available cash and cash equivalents may not be sufficient to finance our long term research, development and commercialization programs. Therefore, additional funds will be required. There can be no assurance that additional funds will be available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be sufficient to enable us to continue to implement our long term business strategy. If we are unable to raise such additional funds through collaboration arrangements or equity or debt financing, we may need to delay, scale back or cease expenditures for some of our longer term research, development and commercialization programs, or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves, thereby reducing their ultimate value to us. Our inability to obtain additional funds necessary to operate the business could materially and adversely affect the market price of our shares and all or part of an investment in our shares could be lost. In addition, to the extent we raise capital by issuing additional shares, shareholders’ equity interests would be diluted. Risks Related to Legal Compliance Matters Our operations, including our research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions. The third parties with whom we contract to manufacture our product candidates are also subject to these and other environmental, health and safety laws and regulations. Liabilities they incur pursuant to these laws and regulations could result in significant costs or in certain circumstances, an Affimed Annual Report 2020 17 interruption in operations, any of which could adversely impact our business and financial condition if we are unable to find an alternate supplier in a timely manner. Risks Related to Information Technology Systems or Infrastructure In the ordinary course of business, we and our business partners store sensitive data, including intellectual property and proprietary information related to our business and our business partners, on our information technology systems. Despite the implementation of security measures, these systems are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, terrorism, war and telecommunication, electrical and other system failures due to employee error, malfeasance or other disruptions. We could experience a business interruption, intentional theft of confidential information or reputational damage, including damage to key customer and partner relationships, from system failures, espionage attacks, malware, ransomware or other cyber-attacks. Such cyber-security breaches may compromise our system infrastructure or lead to data leakage, either internally or at our contractors or consultants. In particular, system failures or cyber-security breaches could result in the loss of nonclinical or clinical trial data from completed, ongoing or planned trials, which could cause delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. The risk of a security breach or disruption, particularly through cyber- attacks, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, we could be subject to legal claims or proceedings, liability under laws and regulations governing the protection of health and other personally identifiable information and related regulatory penalties. In any such event, our business, results of operations, financial position and cash flows could be materially adversely affected. Risk Management regarding Financial Instruments Qualitative Disclosure about Market Risk As a result of our operating and financing activities, we are exposed to market risks that may affect our financial position and results of operations. Market risk is the potential to incur economic losses on risk sensitive instruments arising from adverse changes in factors such as foreign exchange rate fluctuations. Our senior management is responsible for implementing and evaluating policies which govern our funding, investments and any use of derivative financial instruments. Management monitors risk exposure on an ongoing basis. Credit risk The Group's financial assets comprise to a large extent cash and cash equivalents. In addition, financial assets include shares, certificates of deposit, trade and other receivables. The total carrying amount of shares (€20.0 million, 2019: €3.2 million) cash and cash equivalents (€146.9 million, 2019: €95.2 million), trade and other receivables (€2.4 million, 2019: €1.5 million), and certificates of deposit (€0.0 million, 2019: €8.9 million), represents the maximum credit exposure of €169.3 million (2019: €108.8 million). The cash and cash equivalents and certificates of deposit are held with banks, which are rated BBB+ to AA– based on Standard & Poor's and Moody's. Affimed Annual Report 2020 18 Interest rate risks The Group's interest rate risk arises from cash accounts. Market interest rates on cash and cash equivalents as well as on term deposits were low, and in some cases negative, resulting in interest income of €186,000 in 2020. A shift in interest rates (increase or decrease) could potentially have a material impact on the loss of the Group. Other price risks The fair value of the shares in Amphivena and Roivant depends on the estimated share price. The total exposure of the Group amounts to €20.0 million. Foreign currency risk Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency. We use the euro as our functional and reporting currency. The Group’s entities are exposed to Czech Koruna (CZK) and US Dollars (USD). As a result, we are exposed to foreign currency exchange movements. Our material budgeted future expenses are in euros and US dollar. We have converted into euros only the portion of the IPO proceeds, the proceeds from our follow-on offerings and the private placement and cash received from the Genenetech and Roivant Life Sciences Limited collaboration that will be spent in euros according to our budget. The company does not apply additional hedging methods. Assets and liabilities and income and expenses of Group companies, other than the euro, are translated to euro at foreign exchange rates prevailing at the balance sheet date and the dates of the transactions respectively. Cash surpluses, held in a currency other than the functional currency, are not used for speculative purposes. We do not enter into contracts that reflect the changes in the value of foreign currency exchange rates to preserve the value of assets, commitments and anticipated transactions. Therefore, fluctuations in exchange rates may distort year-to-year comparisons of financial performance. In 2020, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables held constant, the loss would have been €11.2 million (2019: €5.7 million) higher/lower, mainly as a result of foreign exchange gains/losses on remeasurement of US dollar-denominated financial assets. The Group considers a shift in the exchange rates of 10% as a realistic scenario. Loss is more sensitive to movement in exchange rates shifts in 2020 than in 2019 because of the increased volume of US dollar- denominated transactions. Net investments in subsidiaries in foreign countries are long-term investments. Their book value changes through movements of foreign currency exchange rates. We do not hedge the net investments in foreign subsidiaries. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities which are normally settled by delivering cash. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. In 2018, the Group issued 13,225,000 common shares in a public offering at a price of $2.00 per common share for net proceeds of approximately €19.7 million and 2,373,716 common shares in connection with its at-the-market sales agreement for net proceeds of €3.8 million. Affimed Annual Report 2020 19 In 2019, the Group issued 13,800,000 common shares in a public offering at a price of $2.50 per common share resulting in aggregate net proceeds of €29.5 million. In May 2020, the Company implemented an at-the-market ("ATM") program providing for the sales over time of up to $50,000,000 of its common shares. The Company issued approximately 12.5 million common shares under this ATM program, generating net proceeds of approximately €34.5 million. In November 2020, the Company implemented a new ATM program providing for additional sales over time of up to $75,000,000 of common shares. As of December 31, 2020 the Company had issued a further approximately 7.9 million shares, generating further approximate €34.5 million in net proceeds. In December 2020, Affimed filed a "shelf registration statement" with the SEC in order to offer and sell securities to the public in multiple, future offerings for up to $225,000,000. On January 15, 2021 the Group issued 19,166,667 common shares at a price of $6.00 per share in a public offering resulting in gross proceeds before deducting underwriting discounts and commissions and estimated expenses of the offering of $115 million. In January 2021, the Group entered into a loan agreement with Sillicon Valley Bank for up to €25 million, of which the Group was drawn €10 million in February 2021. The Group expects that further funding will be required to complete the development of the existing product candidates. Further, funding will also be required to commercialize the products if regulatory approval is received. Affimed Annual Report 2020 Corporate Governance Report I. GENERAL 20 Affimed N.V. is a public limited liability company (the "Company," "Affimed," or "we") with corporate seat in Amsterdam, the Netherlands, governed by Dutch law, and with registered office in Heidelberg, Germany. Affimed started as a private company with limited liability and was converted to a Dutch public limited liability company in connection with a corporate reorganization that occurred prior to the consummation of the initial public offering of common shares of Affimed, which began trading on the Nasdaq Global Market on September 12, 2014 under the symbol "AFMD." The Dutch Corporate Governance Code We are subject to various corporate governance requirements and best practices codes, the most relevant being those in the Netherlands and the United States. As a Dutch company, the Company is subject to the Dutch Corporate Governance Code ("DCGC" or the "Code") and is required to disclose in its statutory annual report filed in the Netherlands (“Annual Report”), whether it complies with the provisions of the DCGC. The DCGC contains principles and best practice provisions for managing boards, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. If the Company does not comply with the provisions of the DCGC (for example, because of a conflicting Nasdaq requirement or otherwise), the Company must list the reasons for any deviation from the DCGC in its Annual Report. In the present Annual Report, we address our overall corporate governance structure and state to what extent we apply the provisions of the DCGC. The Company's deviation from certain practices of the DCGC is due to the Company being listed in the United States with most of Affimed's investors being outside of the Netherlands, as well as due to the international business focus of the Company. As a company listed on Nasdaq, the Company also complies with Nasdaq's corporate governance listing standards (except for instances where we follow our Dutch home country corporate governance practices, including the Code, in lieu of certain Nasdaq corporate governance requirements as explained below) and the rules and regulations promulgated by the SEC. Nasdaq investors are often more familiar with Nasdaq's rules than with the DCGC. The full text of the DCGC can be found at the website of the Monitoring Commission Corporate Governance Code (www.commissiecorporategovernance.nl). Further information about the Company’s corporate governance practices is available at our website (www.affimed.com/corporate-governance). The Monitoring Committee Corporate Governance has published an amended version of the Code on 8 December 2016, which applies to the Company for the financial year starting on 1 January 2017. II. MANAGING DIRECTORS AND SUPERVISORY DIRECTORS The following table lists the current members of our management board: Name Adi Hoess Wolfgang Fischer Andreas Harstrick Arndt Schottelius Angus Smith Age Position 59 57 59 54 38 Chief Executive Officer Chief Operating Officer Chief Medical Officer Chief Scientific Officer Chief Financial Officer Affimed Annual Report 2020 21 At the 2020 general meeting of the Company held on 4 August 2020, Adi Hoess and Wolfgang Fischer were reappointed as managing directors with the titles of Chief Executive Officer and Chief Operating Officer, respectively. At the same general meeting, Andreas Harstrick, Arndt Schottelius and Angus Smith were appointed as managing directors, with the titles of Chief Medical Officer, Chief Scientific Officer and Chief Financial Officer, respectively. The term of (re)appointment of all five managing directors will end on the date of the annual general meeting of the Company to be held in 2023. The following is a brief summary of the business experience of the members of our management board. Adi Hoess, Chief Executive Officer. Dr. Hoess joined us in October 2010 as Chief Commercial Officer and since September 2011 has served as our Chief Executive Officer. He has more than 20 years of professional experience with an extensive background in general management, business development, product commercialization, fund raising and M&A. Prior to joining us, Dr. Hoess was Chief Commercial Officer at Jerini AG and Chief Executive Officer of Jenowis AG. At Jerini AG he was responsible for business development, marketing and sales and the market introduction of Firazyr. He also played a major role in the sale of Jerini to Shire plc. Dr. Hoess began his professional career in 1993 at MorphoSys. Dr. Hoess received his Ph.D. in chemistry and biochemistry from the University of Munich in 1991 and an M.D. from the Technical University of Munich in 1997. Wolfgang Fischer, Chief Operating Officer. Dr. Fischer joined us in 2017 from Sandoz Biopharmaceuticals (Novartis Group). He has 20 years of experience in research and drug development with a focus on oncology, immunology and pharmacology. At Sandoz he managed the development and registration of Sandoz' biosimilar pipeline assets since 2012 and served as Global Head of Program and Project Management since 2014. Prior to joining Sandoz, he held various positions of increasing responsibility within the Novartis Group since 2003, including Medical Director Oncology for Novartis Pharma Switzerland AG as well as Regional Medical Director Hematology (Emerging Growth Markets), where he was responsible for the Hematology Medical Affairs program and supported the launch of several products in various countries. Dr. Fischer holds a Ph.D. in Cancer Research from the Swiss Federal Institute of Technology (ETH), Zurich, Switzerland. Thereafter, he completed postdoctoral fellowships at the Swiss Institute of Experimental Cancer Research, Lausanne, Switzerland and at the Scripps Research Institute, Department of Immunology, La Jolla, CA, USA, followed by a state doctorate (Habilitation) in Pharmacology and Toxicology at the Medical School of the University of Würzburg in Germany in 2003. Andreas Harstrick, M.D., Chief Medical Officer. Dr. Harstrick agreed to serve as our Chief Medical Officer, starting in March 2020. He brings 30 years of extensive experience in cancer drug development, including the successful designing of clinical trials leading to approval of antibody drugs (Erbitux®; Cyramza®) and in-depth experience in setting-up and managing clinical oncology teams. Dr. Harstrick was Chief Medical Officer at Molecular Partners AG from 2015 to 2019, where he oversaw clinical activities, including expansion of the clinical team, and was a member of the Management Board. Between 2012 and 2014, Dr. Harstrick was Senior Vice President Medical Sciences at ImClone Systems, a wholly-owned subsidiary of Eli Lilly and Company, where he was also a member of the Lilly Oncology Program Review Board and the Lilly Oncology Business Unit Development Committee. Prior to joining ImClone in 2008, Dr. Harstrick was Senior Vice President Global Clinical Development Unit Oncology at Merck Serono until 2008. Dr. Harstrick is an oncologist by training. He spent his medical career at the University Hospital and Cancer Center Hannover, Germany; the Roswell Park Cancer Institute, Buffalo NY; as well as the West German Cancer Center, Essen, Germany. He earned his MD at Medical School Hannover, Germany, and in 1999 he became Associate Professor for Internal Medicine, University of Essen, Germany. Arndt Schottelius, M.D. Ph.D., Chief Scientific Officer. Dr. Schottelius joined Affimed as Chief Scientific Officer in April 2020. He brings over 20 years of deep drug discovery and development experience in cancer and immunology with a strong track record in building therapeutic antibody pipelines and advancing drugs through development. Most recently, Dr. Schottelius was Executive Vice President and Head of Research & Development at Kymab Group Limited, where he was responsible for expanding the therapeutic antibody portfolio. Dr. Schottelius previously served as Chief Development Officer at MorphoSys AG, developing the portfolio of proprietary therapeutic Affimed Annual Report 2020 22 antibody programs in cancer and immunology. He was instrumental in in-licensing tafasitamab (MOR208) and drove strategic direction and development of the MOR208 program into multiple phase 2 trials, which were the basis for a fast-to-market registration path. Prior to his role at MorphoSys, Dr. Schottelius was a Director and Medical Director, Immunology Development at Genentech Inc., where he directed early and late-stage development programs of therapeutic antibodies. Before joining Genentech, Dr. Schottelius held science and management positions in immunology research at Schering AG and Berlex Biosciences. Dr. Schottelius holds a PhD and MD degree from the Albert Ludwigs University of Freiburg and is a lecturer at Ludwig Maximilian University of Munich with a habilitation in Experimental Internal Medicine. He practiced medicine as a resident physician in gastroenterology at the Charité-Universitätsmedizin in Berlin, Germany, and completed a postdoctoral fellowship at the Lineberger Cancer Center, University of North Carolina at Chapel Hill. Angus Smith, Chief Financial Officer and Co-President Affimed Inc. Mr. Smith joined Affimed in July 2020 as Chief Financial Officer. Previously, he was Chief Financial Officer at Rockwell Medical, Inc., a biopharmaceutical company developing and commercializing anemia therapies. He has broad biopharmaceutical industry experience including financial strategy, capital markets, business development and operations. Prior to Rockwell, Mr. Smith served as Senior Vice President, Chief Business Officer and Principal Financial Officer at Pernix Therapeutics, a specialty pharmaceutical company focused on the acquisition, development and commercialization of prescription drugs. Mr. Smith began his career in healthcare investment banking, having most recently served as Director in the Healthcare Investment Banking Group at Cantor Fitzgerald in New York, NY. During his nearly decade-long investment banking tenure, he focused on strategic and financial advice for life science and healthcare companies. He has worked on a substantial number of transactions across the healthcare sector with an aggregate transaction value of more than $15 billion. Mr. Smith holds a Bachelor of Arts in Mathematical Economics from Colgate University in Hamilton, NY. The following table lists the supervisory directors currently in office. Thomas Hecht is the chairman of our supervisory board. The term of each of our supervisory directors will end on the date of the annual general meeting of shareholders in the year indicated below. Name Gender Nationality Age Initial/reappointment Term Thomas Hecht Bernhard Ehmer Ulrich Grau Annalisa Jenkins M M M F Mathieu Simon M Ferdinand Verdonck M M Harry Welten German German German/US British French/US Belgian Swiss 70 66 72 55 64 78 55 August 4, 2020 June 25, 2019 June 19, 2018 August 4, 2020 June 19, 2018 August 4, 2020 August 4, 2020 2023 2022 2021 2023 2021 2023 2023 The following is a brief summary of the business experience of the Company's supervisory directors. Thomas Hecht, Chairman. Dr. Hecht has been the chairman of our supervisory board since 2014, and previously had been the chairman of the supervisory board of our German operating subsidiary since 2007. He is head of Hecht Healthcare Consulting in Küssnacht, Switzerland, a biopharmaceutical consulting company founded in 2002. Dr. Hecht also serves as Chairman of Aelix Therapeutics and of the Board of Orion Biotechnology. As from 3 July 2020, Dr. Hecht became a member of the board of directors of BioInvent, Sweden. Previously, Dr. Hecht served as a director of Humabs BioMed AG until August 2017 and he served as chairman of the board of directors of Cell Medica Ltd. Until the beginning of June 2020, he served as chairman of the board of directors of Vaximm AG, until March 2015, he served as chairman of the supervisory council of SuppreMol GmbH and until June 2016, of Delenex AG. Dr. Hecht was previously Vice President Marketing at Amgen Europe. A seasoned manager and industry professional, he held various positions of increasing responsibility in clinical development, medical affairs and marketing at Amgen between 1989 and 2002. Prior to joining the Affimed Annual Report 2020 23 biopharmaceutical industry, he was certified in internal medicine and served as Co-Head of the Program for Bone Marrow Transplantation at the University of Freiburg, Germany. Bernhard R.M. Ehmer, Director. Dr. Ehmer has been a member of our supervisory board since 2016. He also served as chairman of the board of directors at Symphogen A/S, Denmark until June 2020 and as chairman of the board of management of Biotest AG until April 2019. Prior to this, he worked for the Imclone Group, a wholly owned subsidiary of Eli Lilly, as president of Imclone Systems Corporation in the United States and as managing director in Germany. In 2007/2008 he was CEO of Fresenius Biotech, Germany and before this, Dr. Ehmer headed the Business Area Oncology of Merck KGaA, Darmstadt and served as head of Global Clinical Operations at Merck. Between 1986 and 1998 he held various functions at Boehringer Mannheim in Germany, Italy and Singapore. Dr. Ehmer holds a degree in medicine and worked in the Department of Internal Medicine at the Academic Teaching Hospital of the University of Heidelberg. Ulrich M. Grau, Director. Dr. Grau has been a member of our supervisory board since July 2015. Prior to that, he served as an advisor to the management board of our German operating subsidiary beginning in May 2013. He has over 30 years of experience in the biotechnology and pharmaceutical industries including in general management, business development, corporate strategy and the development of new products and technologies. Dr. Grau was Chief Operating Officer at Micromet from 2011 to 2012. Between 2006 and 2010, Dr. Grau was a founder, President and CEO of Lux Biosciences, Inc., a clinical stage ophthalmic company. Previously, Dr. Grau served as President of Research and Development at BASF Pharma/ Knoll where he directed a global R&D organization with a development pipeline which included Humira. The majority of his career was at Aventis Pharma (now Sanofi), where he last held the position of Senior Vice President of global late stage development. Sanofi's product Lantus for the treatment of type 2 and type 1 diabetes is based on his inventions made during his early years as a scientist with Hoechst AG. Dr. Grau received his Ph.D. in chemistry and biochemistry from the University of Stuttgart and spent three years as a post-doctoral fellow at Purdue University in the field of protein crystallography. Annalisa M. Jenkins, Director. Dr. Jenkins has been a member of Affimed's supervisory board since August 2020. Dr. Jenkins serves on the Board of Directors of AgeX Therapeutics, Inc. (NYSE American: AGE), Avrobio, Inc. (Nasdaq: AVRO), Oncimmune Holdings plc (LSE: ONC) and a number of privately held biotechnology and life science companies and is a committee member of the science board to the FDA, which advises FDA leadership on complex scientific and technical issues. Earlier, Dr. Jenkins served as the Chief Executive Officer of PlaqueTec Ltd. and Dimension Therapeutics. Previously, Dr. Jenkins held various senior management level positions at Merck Serono Pharmaceuticals, including Executive Vice President, head of global research and development. Prior to that, Dr. Jenkins pursued a 15-year career at Bristol- Myers Squibb with increasing responsibilities. Dr. Jenkins graduated with a degree in medicine from St. Bartholomew's Hospital in the University of London and subsequently trained in cardiovascular medicine in the UK National Health Service. Mathieu Simon, Director. Dr. Simon has been a member of our supervisory board since 2018. He also serves as Senior Strategic Advisor at Messier Maris, an M&A advisory firm in the healthcare sector, located in New York, London and Paris. He is an independent director on the Board of Vaximm, headquartered in Basel, Switzerland as well as an independent director at Idorsia Pharmaceuticals (Switzerland), Lysogene (France) and Asarina (Sweden). Dr. Simon has served as Cellectis' Executive Vice-President since 2012 and as Chief Operating Officer since 2013. Dr. Simon also served as Chief Executive Officer of a former subsidiary of Cellectis. He has been instrumental to the development of Cellectis and its CAR Allogenic T-Cell platform. He also served as Chief Executive Officer of Ectycell in 2012. He served as Chairman of the Board of Celleartis AB until 2014 before its acquisition by Takara Bio. Prior to joining Cellectis, Dr. Simon was Managing Director, Head of Global Pharma at Pierre Fabre SA, the third largest French Pharma Company. Beginning in 1994, he served at Wyeth Pharmaceuticals in both general management roles (President Managing Director of Wyeth SMA) and senior corporate role in Philadelphia, United States (SVP / Head of International Marketing and Medical Affairs). Harry Welten, Director. Mr. Welten has been a member of our supervisory Board since August 2020. He serves as chairman and member of the board of directors of several biotechnology companies in Switzerland, Germany and the USA. Over the last 20 years, Mr. Welten served as Chief Financial Officer of both public as well as venture capital financed biotech companies. Mr. Welten has served in senior roles at UBS in Switzerland and New York for the first 15 years of his career. Mr. Welten has degrees in Banking, Finance and Economics as well as an MBA (honours) from Columbia University, NY, USA. Affimed Annual Report 2020 24 Ferdinand Verdonck, Director. Mr. Verdonck has been a member of our supervisory board since July 2014. He is a director of Laco Information Services. In recent years he was director of Groupe SNEF, director and member of the audit committee of J.P. Morgan European Investment Trust and director and chairman of the audit committee of biotechnology companies: uniQure N.V. in the Netherlands and Movetis and Galapagos in Belgium. He has previously served as chairman of Banco Urquijo and of Nasdaq Europe and as a director of Dictaphone Corporation. From 1992 to 2003, he was the managing director of Almanij NV, a financial services company which has since merged with KBC, and his responsibilities included company strategy, financial control, supervision of executive management and corporate governance, including board participation in publicly-traded and privately-held companies in many countries. Mr. Verdonck holds a law degree from KU Leuven and degrees in economics from KU Leuven and the University of Chicago. Mr. Verdonck, whose term of appointment would expire at the end of the annual general meeting of the Company to be held in 2023, has indicated that he will step down as a supervisory director on June 14, 2021. III. BOARD PRACTICES Governance structure Affimed N.V. is a public limited liability company under Dutch law with a two-tier board structure. Our management board (raad van bestuur) has ultimate responsibility for the overall management of Affimed. The management board is supervised and advised by a supervisory board (raad van commissarissen). The management board and the supervisory board are accountable to Affimed’s shareholders. Management board The management board manages our general affairs and ensures that we can effectively implement our strategy and achieve our objectives. At least once per year the management board informs the supervisory board in writing of the main lines of the Company's strategic policy, the general and financial risks and the management and control system. The management board provides the supervisory board with any other information as the supervisory board requires in performing its duties. We have a strong centralized management board led by Adi Hoess, our Chief Executive Officer, who has a strong track record in the development and commercialization of new medicines. Our management team has extensive experience in the biopharmaceutical industry, and key members of our team have played an important role in the development and commercialization of approved drugs. For a more detailed description of the responsibilities of the management board, please refer to the corporate governance section of our website at www.affimed.com. Composition of the management board The number of managing directors is determined by the supervisory board. Currently the management board consists of five directors. The size and composition of our management board and the combined experience and expertise of its members should reflect the best fit for Affimed’s profile and strategy. This aim for the best fit, in combination with the availability of qualifying candidates, has resulted in Affimed having a management board in which all five members are male. In order to increase gender diversity of the management board we pay close attention to gender diversity in the process of recruiting and appointing new management board candidates, as is demonstrated by the nomination by the supervisory board of Ms. Denise Mueller as new member to the management board (Chief Business Officer) at the upcoming annual general meeting of shareholders. Affimed Annual Report 2020 Appointment, suspension and dismissal 25 Managing directors are appointed by the general meeting of shareholders upon a binding nomination of the supervisory board. The general meeting of shareholders can suspend or dismiss a management board member by an absolute majority of votes cast, upon a proposal made by the supervisory board. If another party makes the proposal, a two-thirds majority of the votes cast, representing more than half of the issued share capital, is required. If this qualified majority is not achieved, a second general meeting as referred to in article 2:120 section 3 of the Dutch Civil Code may not be convened. Supervisory board Our supervisory board supervises the policies of the management board including the strategy and long term value-creation for the company and the general course of affairs of the Company's business. The supervisory board gives advice to the management board and is guided by the Company's interests and its business when performing its duties. The management board provides such information to the supervisory board as is required to perform its duties. Currently, the supervisory board consists of seven supervisory directors. The composition of the supervisory board has changed in 2020. The number of members of the supervisory board was increased from five to seven members following the appointment of Mr. Harry Welten and Ms. Annalisa Jenkins as supervisory board members at the annual general meeting of shareholders in 2020. At that same general meeting, Dr. Thomas Hecht and Mr. Ferdinand Verdonck were reappointed as supervisory board members. Mr. Verdonck will step down as supervisory board member of the Company on June 14, 2021. The Company's articles of association provide for a term of appointment of supervisory directors of up to four years. Furthermore, the Company's articles of association state that a supervisory director may be reappointed, but that any supervisory director may be a supervisory director for no longer than twelve years. Under the DCGC a supervisory director may be appointed for a term of four years and may then be reappointed for another four-year period. The supervisory director may then subsequently be reappointed for a period of two years, which may be extended by at most two years. The Company's supervisory directors are appointed for overlapping terms. The supervisory board meets as often as any supervisory director deems necessary. In a meeting of the supervisory board, each supervisory director has a right to cast one vote. All resolutions by the supervisory board are adopted by an absolute majority of the votes cast. In the event the votes are equally divided, the chairman has the decisive vote. A supervisory director may grant another supervisory director a written proxy to represent him or her at the meeting. The Company's supervisory board can pass resolutions outside of meetings, provided that the resolution is adopted in writing and all supervisory directors have consented to adopting the resolution outside of a meeting. The Company's supervisory directors do not have a retirement age requirement under the Company's articles of association. Composition of the supervisory board The composition of the supervisory board, including its members’ combined experience and expertise, independence, and diversity of age and gender, should reflect the best fit for Affimed’s profile and strategy. This aim for the best fit, in combination with the availability of qualified candidates, has resulted in Affimed currently having a supervisory board in which six members are male and one member is female. In order to increase gender diversity of the supervisory board we pay close attention to gender diversity in the process of recruiting and appointing new supervisory board candidates, as is demonstrated by the appointment of Dr. Annalisa Jenkins as supervisory board member at the annual general meeting of shareholders in 2020 and by the nomination by the supervisory board of Mrs. Uta Kemmerich-Keil as supervisory board member at the upcoming annual general meeting of shareholders. Affimed Annual Report 2020 Appointment, suspension and dismissal 26 Supervisory directors are appointed by the general meeting of shareholders upon a binding nomination of the supervisory board for a term of up to four years. The general meeting of shareholders can suspend or dismiss a supervisory board member by an absolute majority of votes cast, upon a proposal made by the supervisory board. If another party makes the proposal, a two- thirds majority of the votes cast, representing more than half of the issued share capital, is required. If this qualified majority is not achieved, a second general meeting as referred to in article 2:120 section 3 of the Dutch Civil Code may not be convened. Diversity policy In line with best practice provision 2.1.5 of the Code, the supervisory board has adopted a diversity policy for the composition of the supervisory board, the management board and key leadership positions (the "Diversity Policy"). The Diversity Policy contains specific diversity objectives to improve the diversity within the supervisory board and the management board: - Using best efforts to increase the gender diversity within the supervisory board whenever one of the supervisory board members will be replaced or the supervisory board will be extended; - Using best efforts to increase the gender diversity within the management board whenever one of the management board members will be replaced or the management board will be extended. In order to increase gender diversity, we pay close attention to gender diversity in the process of recruiting and appointing new supervisory board or management board candidates. This is demonstrated by the appointment of Dr. Annalisa Jenkins as a supervisory director at the annual general meeting 2020, and by the nomination by the supervisory board of Ms. Denise Mueller for appointment as managing director and Mrs. Uta Kemmerich-Keil for appointment as supervisory director at the upcoming annual general meeting of shareholders. Conflicts of interest Each member of the management board is required to immediately report any potential conflict of interest to the chairman of the supervisory board and to the other members of the management board and provide them with all relevant information. Each member of the supervisory board is required to immediately report any potential conflict of interest to the chairman of the supervisory board and provide him or her with all relevant information. The chairman determines whether there is a conflict of interest. If a member of the supervisory board or a member of the management board has a conflict of interest with the Company, the member may not participate in the discussions and/or decision-making process on subjects or transactions relating to the conflict of interest. The chairman of the supervisory board will arrange for such transactions to be disclosed in the Annual Report. In accordance with best practice provision 2.7.5 of the DCGC, Affimed reports that no transactions between the Company and legal or natural persons who hold at least 10% of the shares in the Company occurred in 2020. Supervisory Board Committees Although the supervisory board retains ultimate responsibility, the supervisory board has delegated certain of its tasks to its committees. Audit committee The audit committee, which consists of Ferdinand Verdonck (Chairman), Harry Welten and Bernhard Ehmer, assists the board in overseeing our accounting and financial reporting processes and the audits of our financial statements. Our supervisory board has determined that all members of the audit committee satisfy the “independence” requirements set forth in Rule 10A-3 under the Affimed Annual Report 2020 27 Exchange Act. The supervisory board has determined that Ferdinand Verdonck and Harry Welten qualify as “audit committee financial experts,” as such term is defined in the rules of the SEC. The audit committee is responsible for the selection of the registered public accounting firm that should serve as our independent auditor, and our supervisory board is responsible for recommending the appointment of the independent auditor to the general meeting of shareholders. In addition, the audit committee is responsible for the compensation, retention and oversight of the independent auditor appointed by the general meeting of shareholders; pre-approving the audit services and non-audit services to be provided by our independent auditor before the auditor is engaged to render such services; evaluating the independent auditor's qualifications, performance and independence, and presenting its conclusions to the full supervisory board on at least an annual basis and reviewing and discussing with the management board and the independent auditor our annual audited financial statements and quarterly financial statements prior to the filing of the respective annual and quarterly reports, among other things. The audit committee is also responsible for the oversight of our information security management system, including the audit results of the information security certification and material information breaches and cybersecurity attacks. The audit committee meets as often as one or more members of the audit committee deem necessary, but in any event at least four times per year. The audit committee meets at least once per year with our independent auditor, without our management board being present. The audit committee reviews information security matters no less than once per year. The audit committee held ten meetings by conference call in 2020 and no in-person meetings. Compensation committee The compensation committee, which consists of Bernard Ehmer (Chairman), Thomas Hecht and Harry Welten, assists the supervisory board inter alia in determining management board compensation. The committee recommends to the supervisory board for determination of the compensation of each of our managing directors. Under SEC and Nasdaq rules, there are heightened independence standards for members of the compensation committee, including a prohibition against the receipt of any compensation from the Company other than standard supervisory director fees. As permitted by the listing requirements of Nasdaq, we have opted out of Nasdaq Listing Rule 5605(d) which requires that a compensation committee consist entirely of independent directors. The compensation committee is responsible for identifying, reviewing and approving corporate goals and objectives relevant to management board compensation; analysing the possible outcomes of the variable remuneration components and how they may affect the remuneration of the managing directors; evaluating each managing director’s performance in light of such goals and objectives and making recommendations to the supervisory board for each managing director’s compensation based on such evaluation and for any long-term incentive component of each managing director’s compensation in line with the remuneration policy adopted by the general meeting of shareholders. In addition, the compensation committee is responsible for reviewing our management board compensation and benefits policies generally, among other things. The compensation committee held one meeting in person and seven meetings by conference call in 2020. Nomination and corporate governance committee The nomination and corporate governance committee, which consists of Ulrich Grau (Chairman), Thomas Hecht and Mathieu Simon, assists our supervisory board in identifying individuals qualified to become members of our supervisory board and management board consistent with criteria established by our supervisory board and in developing our corporate governance principles. As permitted by the listing requirements of Nasdaq, we have opted out of Nasdaq Listing Rule 5605(e) which requires independent director oversight of director nominations. The nomination and corporate governance committee held four meetings by conference call in 2020 and no in-person meetings. Affimed Annual Report 2020 Research and Development Committee 28 The research and development committee, which consists of Annalisa Jenkins (Chairwoman), Ulrich Grau and Mathieu Simon, assists our supervisory board in aligning the R&D strategy of the Company with the overall Company strategy, to evaluate critical junctures of research and development activities and assess the competitive landscape and the impact on the Company's strategy and business. The research and development committee held two meetings by conference call in 2020 and no in- person meetings. IV. COMPENSATION OF MEMBERS OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD Affimed's remuneration policy aims to attract, motivate and retain the best-qualified workforce. The objectives and structure of the remuneration policy for the management board is regularly reviewed and/or evaluated by the supervisory board. The current remuneration policy for the management board and supervisory board was adopted and approved by the general meeting of shareholders on 17 September 2014, prior to the consummation of our initial public offering (the ''IPO''). The remuneration policies were last amended by the general meeting of shareholders on 4 August 2020. The description of the compensation of managing directors and supervisory directors in the following sections is based on the management and supervisory board remuneration policies which are currently in effect. Compensation of managing directors and supervisory directors Dutch law provides that we must establish a policy in respect of the remuneration of our managing directors and supervisory directors. With respect to remuneration in the form of plans for shares or rights to shares (such as the Equity Incentive Plan 2014 mentioned below) the policy for managing directors must set out the maximum number of shares or rights to shares to be granted as well as the criteria for grants and for amending existing grants. The remuneration policy for the managing directors provides the supervisory board with a framework within which the supervisory board determines the remuneration of the managing directors. Our remuneration policy for our managing directors provides the supervisory board with the authority to enter into management services agreements with managing directors that provide for compensation consisting of base compensation, performance-related variable compensation, long- term equity incentive compensation (as detailed in the terms of the Equity Incentive Plan 2014 described below), pension and other benefits and severance pay and benefits. The remuneration policy for the managing directors provides that the annual cash bonus payable to managing directors may not exceed 100% of the annual base gross salary and will be based upon the achievement of set financial and operating goals for the period. The bonus payments may be increased in any given year by the supervisory board upon a proposal of the compensation committee based on any exceptional achievements of that managing director. In addition, the remuneration policy for managing directors allows for termination payments, which shall be in line with relevant market practices, and shall not exceed 100% of the managing director’s annual base salary, increased with the average variable compensation (the "STI Variable Compensation") over the last full three years, or if the term of office of the managing director is shorter than three years, the average received STI Variable Compensation over the shorter period. For a dismissal within six months after a change of control over the Company, the severance compensation shall not exceed 200% of the managing director’s annual base salary, increased with the STI Variable Compensation over the last full three years, or if the term of office of the managing director is shorter than three years, the average received STI Variable Compensation over the shorter period. The remuneration policy for the supervisory board established the compensation for our supervisory directors. This policy provides for payments and initial and annual equity awards. This is permissible under Dutch law, but constitutes a deviation from best practice provisions 3.3.2 of the DCGC. Affimed Annual Report 2020 29 The remuneration policy for our supervisory directors provides that each supervisory director is entitled to an annual retainer of €20,000, provided that the chair of the supervisory board is entitled to an annual retainer of €75,000. In addition, the chair of the audit committee is entitled to an additional annual retainer of €15,000 and the chairs of other committees established by the supervisory board are each entitled to annual retainers of €7,500. Supervisory directors will also be paid €3,000 for each supervisory board meeting attended in person and €1,500 for each virtual/telephonic supervisory board meeting, provided the virtual/telephonic meeting exceeds 30 minutes. The members of each committee will be paid €1,500 for each committee meeting attended in person and €750 for each virtual/telephonic committee meeting, provided the virtual/telephonic meeting exceeds 30 minutes. The Company is granting each newly elected member of the supervisory board an initial award of stock options to purchase 60,000 ordinary shares of the Company (the “Initial Board Member Award”). The Initial Board Member Award will be made on the date of the general meeting of the Company in which the member was initially elected to the supervisory board If such dates falls within a so-called 'closed period' according to Affimed's Insider Trading Policy, the granting date shall be amended for such occasion to be the 15th day after the closed period has ended. Initial awards vest over a period of three years, with 1/3 of the stock options vesting on the first anniversary of the grant date, and the remainder vesting in equal instalments at the end of each three-month period following the first anniversary of the date of grant. In addition, the remuneration policy, provides that the Company will annually grant the supervisory board chair options to purchase 45,000 ordinary shares of the Company, and each other supervisory director stock options to purchase 30,000 ordinary shares of the Company (each such award referred to as an “Annual Award”). The grant date for the Annual Awards shall be determined by the Supervisory Board and must (i) be in the first quarter of the financial year and (ii) compliant with the Company´s Insider Trading Policy. Annual Awards will be made to supervisory board members under the condition that they will remain in office after the annual general meeting of that year. If, in any given year, a Supervisory Board member will no longer be in office after the annual general meeting, he or she will not receive an Annual Award for that year. These Annual Awards will vest in four quarterly instalments and will be fully vested on the first anniversary of the grant date. Initial awards and annual awards will be granted automatically on the respective dates and as determined by the supervisory board of the company in accordance with the policy, based on the approval by the shareholders of this remuneration policy and without any further decisions or approvals by the supervisory board of the company. Supervisory directors are also entitled to be reimbursed for their reasonable expenses incurred in attending meetings of the supervisory board and its committees. The aggregate cash compensation including benefits in kind, accrued or paid to our managing directors and supervisory directors with respect to the year ended December 31, 2020, for services in all capacities was approximately €2.9 million. As of December 31, 2020, we have no amounts set aside or accrued to provide pension, retirement or similar benefits to our managing directors and supervisory directors. In 2020, awards for approximately 1.6 million stock options were granted to management and members of the supervisory board. Further details on the managing directors and supervisory directors individual remuneration are outlined in Note 41 to the Company only financial statements and Note 28 to the consolidated financial statements. In accordance with Dutch law, we are not required to disclose information regarding third party compensation of our directors or director nominees. As a result, our practice varies from the third- party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3). Long-term incentive plans Equity Incentive Plan 2014 In conjunction with the closing of our IPO, we established the Affimed N.V. Equity Incentive Plan 2014 (the “2014 Plan”) with the purpose of advancing the interests of our shareholders by enhancing our ability to attract, retain and motivate individuals who are expected to make important contributions to us. The maximum number of shares available for issuance under the 2014 Plan equals 7% of the total outstanding common shares on September 17, 2014, or approximately 1.7 Affimed Annual Report 2020 30 million common shares. On January 1 of any calendar year thereafter (including January 1, 2021), an additional 5% of the total outstanding common shares on that date becomes available for issuance under the 2014 Plan. As of January 1, 2021, we had approximately 14.4 million common shares available for issuance, and approximately 8.0 million common shares subject to issuance under outstanding awards. The absolute number of shares available for issuance under the 2014 Plan will increase automatically upon the issuance of additional shares by the Company. The option exercise price for options under the 2014 Plan is the fair market value of a share as defined in the 2014 Plan on the relevant grant date. We are following home country rules relating to the re- pricing of stock options. Under applicable Dutch law, re-pricing is permissible, provided this falls within the framework set by the remuneration policy for the management board and the 2014 Plan. Plan administration. The 2014 Plan is administered by our compensation committee. Approval of the compensation committee is required for all grants of awards under the 2014 Plan. The compensation committee may delegate to the managing directors the authority to grant equity awards under the 2014 Plan to our employees. Eligibility. Managing directors, supervisory directors and other employees and consultants of the Company are eligible for awards under the 2014 Plan. Awards. Awards include options and restricted stock units. Vesting period. Subject to any additional vesting conditions that may be specified in an individual grant agreement, and the accelerated vesting conditions below, the plan provides for three year vesting of stock options. One-third of the stock options granted to participants in connection with the start of their employment vest on the first anniversary of the grant date, with the remainder vesting in equal tranches at the end of each 3-month period thereafter. Stock options granted to other participants vest in equal tranches at the end of each 3-month period after the grant date over the course of the vesting period. The compensation committee will establish a vesting schedule for awards granted to supervisory directors as well as for any awards in the form of restricted stock units. Accelerated vesting. Unless otherwise specified in an individual grant agreement, the 2014 Plan provides that upon a change of control of the Company (as defined in the 2014 Plan) all then outstanding equity awards will vest and become immediately exercisable. It also provides that upon a participant’s termination of service due to (i) retirement (or after reaching the statutory retirement age), (ii) permanent disability rendering the relevant participant incapable of continuing employment or (iii) death, all outstanding equity awards that would have vested during a 12 month period following such termination of service will vest and become immediately exercisable. Otherwise at termination all unvested awards will be forfeited. If a participant experiences a termination of service without “cause” or for “good reason” (in each case, as defined in the 2014 Plan) within six months prior to a change of control, the Company will make a cash payment equivalent to the economic value that the participant would have realized in connection with the change of control upon the exercise and sale of the equity awards that such participant forfeited upon his or her termination of service. In connection with a change of control and subject to the approval of the supervisory board, the management board may amend the exercise provisions of the 2014 Plan. Carve Out Agreements Our pre-IPO shareholders have entered into agreements with certain managing directors and certain of our supervisory directors and consultants that grant the beneficiaries the right to receive common shares of the company. In 2019, these agreements were transferred from the pre-IPO shareholders to an independent trust company (the “Trust GmbH”). The agreements were satisfied or will be satisfied in the future through a transfer to the beneficiaries of in the aggregate 7.78% of the common shares now owned by the Trust GmbH, or the respective market value thereof in cash to the beneficiaries. Affimed Annual Report 2020 31 Managing director and supervisory director services agreements Our managing directors have entered into management services agreements with us or our subsidiary, Affimed Inc. New management services agreements of Adi Hoess and Wolfgang Fischer became effective upon their reappointment as managing directors by the general meeting of shareholders on 4 August 2020. The management services agreements of Arndt Schottelius and Andreas Harstrick became effective upon their appointment as managing directors by the general meeting of shareholders on 4 August 2020. The management services agreement of Angus Smith became effective on 13 July 2020. The management services agreements of Adi Hoess, Wolfgang Fischer, Arndt Schottelius and Andreas Harstrick are for a definite period of time, which period equals the term of office of the managing director. In addition, the management services agreements of Adi Hoess, Wolfgang Fischer, Arndt Schottelius and Andreas Harstrick provide for a termination notice period of not less than six months, both for us and for the managing director. The management services agreement of Angus Smith is for an indefinite period of time and provides for a termination notice period of 45 days, both for us and for Angus Smith. In the event of an urgent cause, the management services agreements may be terminated with immediate effect. Each management services agreement provides for payment of severance upon pre-defined circumstances such as a termination by us without urgent cause or the existence of certain events posing the managing director to terminate the management services agreement for urgent cause (including, but not limited to, a reduction of the managing director's salary) for which the severance is 100% (Adi Hoess) and 50% (Wolfgang Fischer, Arndt Schottelius and Andreas Harstrick) of the managing director's gross annual salary increased with the average STI Variable Compensation over the last full three years, or if the term of office of the managing director is shorter than three years, the average received STI Variable Compensation over the shorter period. The severance for Angus Smith is 75% of the managing director's gross annual salary and variable compensation. The management services agreements provide for a lump-sum payment following a change of control, subject to certain conditions. In the event of termination of the management services agreements following a change of control, the aforementioned severance is increased to 185% (Adi Hoess) and to 150% (Wolfgang Fischer, Arndt Schottelius and Andreas Harstrick) of the managing director's gross annual salary increased with the average STI Variable Compensation over the last full three years, or if the term of office of the managing director is shorter than three years, the average received STI Variable Compensation over the shorter period. The severance for Angus Smith is increased to 125% of the managing director's gross annual salary and variable compensation. The management services agreements contain post-termination restrictive covenants, including a post-termination non-competition covenant, which lasts until six months after the management services agreement has ended, and a non-solicitation covenant, which lasts until two years after the management services agreement has ended. Insurance and Indemnification Our managing directors and supervisory directors have the benefit of indemnification provisions in our articles of association. These provisions give managing directors and supervisory directors the right, to the fullest extent permitted by law, to recover from us amounts, including but not limited to litigation expenses, and any damages they are ordered to pay, in relation to acts or omissions in the performance of their duties. However, there is generally no entitlement to indemnification for acts or omissions that amount to willful (opzettelijk), intentionally reckless (bewust roekeloos) or seriously culpable (ernstig verwijtbaar) conduct. In addition, upon consummation of our IPO, we entered into agreements with our managing directors and supervisory directors to indemnify them against expenses and liabilities to the fullest extent permitted by law. These agreements also provide, subject to certain exceptions, for indemnification for related expenses including, among others, attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by any of Affimed Annual Report 2020 32 these individuals in any action or proceeding. In addition to such indemnification, we provide our managing directors and supervisory directors with directors’ and officers’ liability insurance. Insofar as indemnification of liabilities arising under the U.S. Securities Act of 1933 (the “Securities Act”) may be permitted to supervisory directors, managing directors or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. V. Related party transactions The following is a description of related party transactions occurred in 2019 and 2020 with any of our members of our supervisory board or management board and the holders of more than 5% of our common shares. Agreement with supervisory director Prior to his appointment as supervisory director of the Company, Harry Welten has provided consultancy services to us and received related payments of €172,000 in 2020. Agreement with former managing director In 2017, we entered into a consulting agreement with our former managing director Jörg Windisch consisting of high level consultancy and strategic guidance in the field of clinical manufacturing. In 2019, Dr. Windisch provided no services and received no payments. The consulting agreement with Dr. Windisch was terminated in July 2019. Indemnification Agreements We have entered into indemnification agreements with our managing directors and supervisory directors. The indemnification agreements and our articles of association require us to indemnify our managing directors and supervisory directors to the fullest extent permitted by law. VI. RISK MANAGEMENT AND CONTROL SYSTEMS Risk Management: general methods Affimed’s management board has implemented an Enterprise Risk Management System (ERM), which is designed with the objective to:  increase Shareholder Value through well informed and thoughtful weighing of risks against opportunities,  guide the employees in accurate management of risks, while realizing and fully exploiting the opportunities,  address the applicable regulatory requirements,  ensure alignment across the entire Affimed organization on risk attitude, risk appetite and risk materiality. The ERM Policy covers:  Identification, assessment and treatment of risks by the Risk Owners, according to the evaluation criteria and treatment strategies as defined by this Policy,  Risk consolidation and aggregation across the Affimed organization,  Continuous monitoring of identified risks and their defined treatments by the Risk Owners, Reporting of risks, including ad-hoc risk reporting, to the Risk Committee, the management board and supervisory board. Affimed Annual Report 2020 Implementation effectiveness 33 The effectiveness of risk management is implemented by the three-lines-of-defence model: 1st line: Business – management board owns, implements and operates business controls to ensure compliance with laws, regulations and policies (including supervisory controls). 2nd line: Compliance, Risk Management and Internal Control System functions, which identify exposed areas and manage mitigation activities; perform monitoring to gain assurance that compliance controls operate effectively; and report upon such activities as well as significant findings to the management board and to the supervisory board, which present the 3rd defence lines together with external auditors as additional control functions. A description of the key risk factors and the risk management approach, as well as the sensitivity of the Company's results to external factors and variables are described in more detail in "Risk Management." Information security risks We are establishing a comprehensive Information Security Management System (ISMS) in accordance with the VdS 10000 guideline. The key objective of our ISMS is to ensure:  Availability of data,  Confidentiality of data,  Integrity of data. In March 2021, the Company’s ISMS was audited and re-certified in accordance with the VdS 10000 guideline without any identified deviations or findings. The sector-neutral VdS guidelines 10000 are a catalogue of measures for a management system that is specially tailored to small and medium companies. VdS 10000 is based on good practice from BSI Grundschutz and ISO/IEC 27001. Our ISMS consists of multiple elements ensuring security from a variety of perspectives and regulations. We are planning further improvements to our ISMS by establishing additional elements such as performance monitoring, supplier relationships and continual improvement processes. The Company is implementing a plan to reach this status utilizing both internal and external expertise, and implementation of the plan began in early 2020. The Company has entered into an information security risk insurance policy, though to date the Company has not experienced any security breaches. Internal Control System: general methods Affimed’s management board is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. The main elements of our internal control and risk management system in relation to the financial reporting process comprise the following: - Framework for Internal Control System: Integrated Framework (2013) by the COSO - Scoping of key business processes according to SOX Sec. 404a and continuing monitoring status of SOX Sec. 302 process due to the listing of Affimed’s shares on NASDAQ - Clear assignment of responsibilities - Segregation of duties and four eyes principle - Appropriate financial accounting system including authorisation concepts - Use of checklists when preparing quarterly and annual financial statements - Use of guidelines and work procedures Affimed Annual Report 2020 34 ITGC considerations - - Risk and control assessment (testing of control design and effectiveness) - Evaluation of testing results, remediation action - Continuing monitoring status of SOX Sec. 302 process - Reporting the conclusions about the adequacy and effectiveness of internal controls incl. any significant deficiency or material weakness over financial reporting to the audit committee on a regular basis Further, a Disclosure Committee is in place, which advises the various officers and departments involved, including the CEO and the CFO, on the timely review, publication and filing of periodic and current (financial) reports. In addition to the certification by the CEO and the CFO under U.S. law, each individual member of the supervisory board and management board must under Dutch law, sign the consolidated and the company-only financial statements being disclosed and submitted to the general meeting of shareholders for adoption. Monitoring of effectiveness Our management board, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2020, have concluded that based on the evaluation of these controls and procedures required by Rule 13a- 15(b) of the Exchange Act, our disclosure controls and procedures were effective and the risk management and control systems worked properly in 2020. We conclude that these systems provide a reasonable assurance that the financial report does not contain any errors of material importance. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020. Since 2019, our independent registered public accounting firm is required to attest the effectiveness of our internal controls over financial reporting pursuant to Section 404. In the opinion of our independent registered public accounting firm, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. VII. STATEMENT BY THE MANAGEMENT BOARD The management board states in accordance with best practice provision 1.4.3 of the DCGC that the management report provides sufficient insights into any failings in the effectiveness of the internal risk management and control systems. The implemented systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies. Based on the current state of affairs, it is justified that the financial reporting is prepared on a going concern basis; material risks and uncertainties that are relevant to the expectation of the company’s continuity for the period of twelve months after the preparation of the report are disclosed. It should be noted that these systems cannot provide absolute assurance that internal risk management and control systems can prevent or detect all inaccuracies or errors. VIII. CODE OF CONDUCT The management board has implemented a Code of Conduct to ensure that we conduct our business activities in accordance with the highest ethical, legal and professional standards. Our Code of Conduct covers a broad range of matters including the handling of conflicts of interest, compliance issues and other corporate policies such as insider trading and equal opportunity and non-discrimination standards. Our Code of Conduct applies to all of our supervisory directors, managing directors and employees of the Company and its subsidiaries. Affimed Annual Report 2020 35 Affimed has also established suitable processes and devoted sufficient personnel resources for the enforcement of this Code, subject to the supervision of the CEO and the nomination & corporate governance committee of the supervisory board, and the Company supports its supervisory directors, managing directors and employees to maintain a culture of accountability and to facilitate compliance with this Code. These processes also include a regular external “Compliance Health Check” to make sure the Compliance Management System is working effectively and efficiently. We have published our Code of Conduct on our website: https://www.affimed.com/investors/corporate-governance/ IX. SHARES AND SHAREHOLDERS’ RIGHTS General meeting of shareholders Affimed shareholders exercise their rights through annual and extraordinary general meetings of shareholders. We are required to convene an annual general meeting of shareholders in the Netherlands each year, no later than six months after the end of the Company’s financial year. Additional extraordinary general meetings of shareholders may be convened at any time by the supervisory board and the management board. Pursuant to Dutch law, one or more shareholders, who jointly represent at least 10% of the issued capital may, on their application, be authorized by a Dutch district court to convene a general meeting of shareholders. The agenda for the annual general meeting of shareholders must contain certain matters as specified in our articles of association and under Dutch law, including the adoption of our annual financial statements. Shareholders are entitled to propose items for the agenda of the general meeting of shareholders provided that they hold at least 3% of the issued share capital. Proposals for agenda items for the general meeting of shareholders must be submitted at least 60 days prior to the date of the meeting. The general meeting of shareholders is also entitled to vote on important decisions regarding Affimed’s identity or character, including major acquisitions and divestments. In accordance with our articles of association, for each general meeting of shareholders, the management board may determine that a record date will be applied in order to establish which shareholders are entitled to attend and vote at the general meeting of shareholders. Such record date shall be the 28th day prior to the day of the general meeting. The record date and the manner in which shareholders can register and exercise their rights will be set out in the notice of the meeting. We encourage participation in Affimed’s general meetings of shareholders. All shareholders and others entitled to attend general meetings of shareholders are authorized to attend the general meeting of shareholders, to address the meeting and, in so far as they have such right, to vote. In view of the current status of the COVID-19 pandemic, Affimed has decided that the 2021 annual general meeting of shareholders will be held entirely virtual, as permitted under the Dutch emergency bill ''Temporary Measures in the Field of the Ministry of Justice and Security in connection with the Outbreak of COVID 19''. Voting rights In accordance with Dutch law and our articles of association, each issued common share confers the right to cast one vote at the general meeting of shareholders. Each holder of shares may cast as many votes as it holds shares. Shareholders may vote by proxy. No votes may be cast at a general meeting of shareholders on shares held by us or our subsidiaries or on shares for which we or our subsidiaries hold depositary receipts. Affimed Annual Report 2020 36 Nonetheless, the holders of a right of use and enjoyment (vruchtgebruik) and the holders of a right of pledge in respect of shares held by us or our subsidiaries in our share capital are not excluded from the right to vote on such shares, if the right of use and enjoyment (vruchtgebruik) or the right of pledge was granted prior to the time such shares were acquired by us or any of our subsidiaries. Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such subsidiary holds a right of use and enjoyment (vruchtgebruik) or a right of pledge. Shares which are not entitled to voting rights pursuant to the preceding sentences will not be taken into account for the purpose of determining the number of shareholders that vote and that are present or represented, or the amount of the share capital that is provided or that is represented at a general meeting of shareholders. Decisions of the general meeting of shareholders are taken by an absolute majority of votes cast, except where Dutch law or the articles of association provide for a qualified majority or unanimity. In accordance with Dutch law and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings of shareholders. To this extent, our practice varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. Under our articles of association, our managing directors and supervisory directors are appointed by the general meeting of shareholders upon a binding nomination by our supervisory board. The general meeting of shareholders may overrule the binding nomination by a resolution adopted with a two-thirds majority of the votes cast representing at least half of the issued share capital. If the general meeting of shareholders overrules the binding nomination, the supervisory board shall make a new binding nomination. Issue of additional shares and pre-emptive rights Shares may be issued following a resolution by the general meeting of shareholders on a proposal of the management board made with the approval of the supervisory board. The general meeting of shareholders may resolve to delegate this authority to the management board for a period of time not exceeding five years. At the general meeting of shareholders held at June 25, 2019, our management board was granted the authority, with effect from that date, for a period of five years (i.e., until June 25, 2024) and subject to the approval of the supervisory board, to resolve to issue common shares (either in the form of stock dividends or otherwise) and/or grant rights to subscribe common shares in the share capital of the Company, for a maximum of common shares that can be issued under the size of the authorised share capital of the Company as per the date of adoption of such resolution. Upon the issuance of new common shares, holders of Affimed’s common shares have a pre- emptive right to subscribe to common shares in proportion to the total amount of their existing holdings of Affimed’s common shares. According to the Company’s articles of association, this pre- emptive right does not apply to any issuance of shares to Affimed employees. The general meeting of shareholders may decide to restrict or exclude pre-emptive rights. The general meeting of shareholders may also resolve to designate the management board as the corporate body authorized to restrict or exclude pre-emptive rights for a period not exceeding five years. At the general meeting of shareholders held at June 25, 2019, with effect from that date, our management board was granted the authority, for a period of five years (i.e., until June 25, 2024) and subject to the approval of the supervisory board, to restrict or exclude the pre-emptive rights of holders of common shares upon the issuance of common shares and/or upon the granting of rights to subscribe for common shares. Affimed Annual Report 2020 Repurchase by Affimed of its own shares 37 Affimed may only acquire fully paid shares of any class in its capital for a consideration following authorization by the general meeting of shareholders and subject to certain provisions of Dutch law and the Company’s articles of association, if: (i) the Company’s shareholders’ equity less the payment required to make the acquisition does not fall below the sum of paid-up and called-up capital and any reserves required by Dutch law or its articles of association and (ii) the Company and its subsidiaries would not thereafter hold shares or hold a pledge over shares with an aggregate par value exceeding 50% of its then current issued share capital. At the general meeting of shareholders held at 4 August 2020, our management board was granted the authority, for a period of 18 months, with effect from the same date (i.e., until 4 February 2022) and subject to the approval of the supervisory board, to cause the repurchase of common shares by us of up to 10% of our issued share capital, for a price per share not exceeding 110% of the most recent closing price of a common share on any stock exchange where the common shares are listed. No authorization of the general meeting of shareholders is required if common shares are acquired by us with the intention of transferring such common shares to our employees under an applicable employee stock purchase plan. Articles of Association Our articles of association outline certain of the Company’s basic principles relating to corporate governance and organization. The current text of the articles of association is available at the Trade Register of the Dutch Chamber of Commerce and on our public website at www.affimed.com. A resolution to amend the articles of association may only be adopted by the general meeting at the proposal of the management board with the prior approval of the supervisory board. A proposal to amend the articles of association whereby any change would be made in the rights which vest in the holders of shares of a specific class in their capacity as such, shall require the prior approval of the meeting of holders of the shares of that specific class. Independent Auditor The general meeting of shareholders appoints the independent auditor. The audit committee was closely involved in the evaluation of Affimed's independent auditor and has recommended to the supervisory board the independent auditor to be proposed for (re)appointment by the general meeting of shareholders. In addition, the audit committee evaluates and, where appropriate, recommends the replacement of the independent auditors. On 4 August 2020, the general meeting of shareholders appointed KPMG Accountants N.V. as independent auditor for the Company for the financial year 2020. Anti-Takeover Provisions Dutch law permits us to adopt protective measures against takeovers and we have adopted several provisions that may have the effect of making a takeover of Affimed more difficult or less attractive, including:  the staggered four-year terms of our supervisory directors, as a result of which only approximately one-fourth of our supervisory directors will be subject to election in any one year;  a provision that our managing directors and supervisory directors may only be removed by the general meeting of shareholders by a two-thirds majority of votes cast representing at least 50% of our outstanding share capital if such removal is not proposed by our supervisory board; Affimed Annual Report 2020 38  requirements that certain matters, including an amendment of our articles of association, may only be brought to our shareholders for a vote upon a proposal by our management board that has been approved by our supervisory board; and  a statutory response period. Under Dutch law, the management board can invoke a response period by which a shareholder is prevented from convening a general meeting putting new items on the agenda. As per May 1, 2021, a bill took effect extending the statutory response period from 180 to 250 days. X. COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE As a Dutch company, the Company is subject to the DCGC and is required to disclose in this Annual Report, filed in the Netherlands, whether the Company complies with the provisions of the DCGC. If the Company does not comply with the provisions of the DCGC (for example, because of a conflicting Nasdaq requirement or otherwise), the Company must list the reasons for any deviation from the DCGC in this Annual Report. The Company's deviations from the DCGC are summarized below. Remuneration  The Company has granted and intends to grant options and restricted stock units in the future to members of its management board. These options provide for vesting conditions which allow exercise of one third of the options after the first anniversary of the grant date, which qualifies as a deviation from best practice provision 3.1.2 of the DCGC. Such vesting conditions are market practice among companies listed at Nasdaq. The Company is in competition with other companies in this field and intends to maintain an attractive compensation package for its current and any future management board members.  The Company has granted and intends to grant options and restricted stock units in the future to members of its supervisory board, which qualifies as a deviation from best practice provision 3.3.2 of the DCGC. Such remuneration is in accordance with the Nasdaq corporate governance requirements and market practice among companies listed at Nasdaq. The Company is in competition with other companies in this field and intends to maintain an attractive compensation package for its current and any future supervisory board members. The number of option rights granted to each supervisory board member is determined by the general meeting of shareholders.  The compensation committee of the Supervisory Board has not prepared a remuneration report, which qualifies as a deviation from best practice provision 3.4.1 of the DCGC. Instead an overview of the implementation and planning of the remuneration of managing and supervisory directors is described in more detail in the annual report (20-F) filed with the Securities and Exchange Commission on April 15, 2021 (available on our website: http://www.affimed.com/sec).  The severance payments for our managing directors as described above, may exceed 100% of their annual fixed salary. This is a deviation from best practice provision 3.2.3 of the DCGC. Board nominations and shareholder voting  Pursuant to our articles of association, the supervisory board will nominate one or more candidates for each vacant seat on the management board or the supervisory board. A resolution of the Company's general meeting of shareholders to appoint a member of the management board or the supervisory board other than pursuant to a nomination by the Company's supervisory board requires at least two-thirds of the votes cast representing more than half of the Company's issued share capital, which qualifies as a deviation from best practice provision 4.3.3 of the DCGC. Although a deviation from the provision 4.3.3 of the DCGC, the supervisory board and the management board hold the view that these provisions will enhance the continuity of Affimed’s management and policies. Affimed Annual Report 2020 Chairman of the compensation committee 39  Until June 2020, Thomas Hecht, chairman of our supervisory board, chaired the compensation committee, which qualified as a deviation from best practice provision 2.3.4 of the DCGC. We have opted out of the director independence requirements under applicable Nasdaq rules. May 20, 2021 On behalf of the Management Board, Dr. Adi Hoess, CEO, Dr. Wolfgang Fischer, COO Dr. Arndt Schottelius, CSO Dr. Andreas Harstrick, CMO Angus Smith, CFO Affimed Annual Report 2020 40 Supervisory Board report The Supervisory Board is an independent corporate body responsible for supervising and advising the Management Board and overseeing the general course of affairs and the establishment and monitoring of the strategy of the Company. The Supervisory Board is guided by the interests of the Company and will also take into consideration the relevant interests of all the Company's stakeholders. We report on the activities of the Supervisory Board in 2020. The Company had a number of corporate updates in 2020 and early 2021. Following the passing away of our Chief Financial Officer ("CFO"), Dr. Florian Fischer early 2020, the Company announced the appointment of Angus Smith as Affimed’s new CFO, completing Affimed’s leadership team in June 2020. Mr. Smith started his role as CFO on July 13, 2020 and has been appointed as a member of the Management Board at the annual general meeting of shareholders of the Company on August 4, 2020 ("2020 AGM"). In May 2020, the Company implemented a $50 million at-the-market ("ATM") program providing for the sale of shares over time, which resulted in the sale of in total 12.5 million common shares and generated net proceeds of €34.5 million in the aggregate. In November 2020, the Company entered into a new ATM program for an amount not to exceed $75 million, and as of December 31, 2020 a further 7.9 million common shares were sold, generating net proceeds of €34.5 million in the aggregate. In addition to Mr. Smith, at the 2020 AGM, Dr. Andreas Harstrick and Dr. Arndt Schottelius were appointed as members of the Management Board, Dr. Andreas Harstrick with the title of Chief Medical Officer and Dr. Arndt Schottelius with the title of Chief Scientific Officer. Dr. Andreas Harstrick started his employment in March 2020 and Dr. Arndt Schottelius started his employment in April 2020. In addition, at the 2020 AGM, Dr. Adi Hoess and Dr. Wolfgang Fischer were reappointed as members of the Management Board with the titles of Chief Executive Officer and Chief Operating Officer, respectively. On November 9, 2020, the Company announced that Affimed entered into a license and strategic collaboration agreement with a subsidiary of Roivant Sciences Ltd. ("Roivant") to develop and commercialize novel ICE® molecules, including AFM32, in oncology. Under the terms of the agreement, the Company received $60 million in upfront consideration, comprised of $40 million in cash and pre-paid R&D funding, and $20 million of newly issued shares in Roivant. The Company is eligible to receive up to an additional $2 billion in milestones over time upon achievement of specified development, regulatory and commercial milestones, as well as tiered royalties on net sales. On January 8, 2021, the Company entered into a new loan agreement with SVB. The loan agreement provides the Company with a senior secured term loan facility for up to €25.0 million, of which €10.0 million was available at closing and drawn in February 2021, and €15.0 million of which is available in two additional tranches of €7.5 million each, subject to the satisfaction of certain milestones and conditions. On January 15, 2021, the Company closed the sale of 16,666,667 of our common shares at a price of $6.00 per share in an underwritten public offering. Concurrent with closing, underwriters exercised an option to purchase additional shares and we sold an additional 2,500,000 shares at a price of $6.00 per share. The Company received approximately $108 million in net proceeds from the offering, after         Affimed Annual Report 2020 41 deducting underwriting discounts and commissions and other offering expenses. In response to the recent COVID-19 pandemic, we have implemented mitigation procedures to ensure the safety of trial participants and healthcare professionals and that drug supply and other trial-related materials are ready and available for patients enrolled in our clinical trials. We are closely monitoring and adhering to relevant federal and local guidelines on COVID-19 to ensure the safety and health of our global workforce and help limit the spread of COVID-19, while maintaining business continuity. We mandated a work-from-home policy for all employees not involved in preclinical research, and adjusted operations for laboratory personnel at our headquarters in Heidelberg, Germany. In addition, we eliminated nonessential travel to minimize exposure to COVID-19. We will continue to work closely with clinical sites as well as respective competent authorities to ensure the safety of trial participants and healthcare professionals, as well as the appropriate use of healthcare resources during the COVID-19 pandemic, while preserving the conduct and data integrity of our clinical studies. Composition The Supervisory Board determines the number of its members, provided that pursuant to our articles of association, the Supervisory Board shall always consist of at least three members. The composition of the Supervisory Board has changed in 2020. Thomas Hecht and Ferdinand Verdonck were re-appointed and Harry Welten and Annalisa Jenkins were newly appointed at the 2020 AGM. Berndt Modig left the Supervisory Board effective as of the date of the 2020 AGM. The Supervisory Board profile was amended in 2018 and the Supervisory Board is of the opinion that its composition is currently in accordance with such profile and the Supervisory Board has sufficient experience and expertise in various fields to fulfil its statutory obligations as Supervisory Board members of the Company. In relation to Ferdinand Verdonck stepping down as member of the Supervisory Board prior to the 2021 annual general meeting of shareholders, the Supervisory Board deems it advisable to fill the resulting vacancy. Therefore, the Supervisory Board has nominated for appointment at the 2021 annual general meeting of shareholders Mrs. Uta Kemmerich-Keil as member of the Supervisory Board. The following table lists the members of the Supervisory Board. See chapter II. “Managing Directors and Supervisory Directors” of the Corporate Governance Report of the Management Board for detailed biographies including details on their profession, principal positions and other positions. Thomas Hecht is the chairman of the Supervisory Board. The term of each member will terminate on the date of the annual general meeting of shareholders in the year indicated below. Initial/re-appointment Term Name August 4, 2020 Thomas Hecht 2023 June 25, 2019 Bernhard Ehmer 2022 June 19, 2018 Ulrich Grau 2021 August 4, 2020 Annalisa Jenkins 2023 Mathieu Simon June 19, 2018 2021 2023 Ferdinand Verdonck August 4, 2020 2023 August 4, 2020 Harry Welten Age Gender 70 66 72 55 65 78 55 M M M F M M M Nationality German German German/US British French/US Belgian Swiss         Affimed Annual Report 2020 42 Meeting and activities The Supervisory Board held four meetings by conference call in 2020 and no in-person meetings. The Management Board attended these meetings. During these meetings, key areas of discussion were the progress of the various projects, the main risks of the business, the financial situation, business development activities and the implementation and monitoring of the business strategy. In addition, the Supervisory Board discussed the Company’s internal control system with the audit committee and the external independent auditor. The Supervisory Board, on the advice of the audit committee, also discussed the result of the assessment of the structure and operation of the internal risk management and control systems as well as significant changes thereto including the need for an internal audit function. Based on the results of the review of the audit committee the Supervisory Board currently does not see a need for an internal audit function. The Supervisory Board reviewed the Company's annual financial statements, including non-financial information. The report of the external auditor to the annual financial statements is included in the annual accounts. The Supervisory Board agrees to the contents of the annual accounts and will recommend the adoption thereof by the annual general meeting of shareholders. All Supervisory Board members made adequate time available to give sufficient attention to matters concerning Affimed. Each of the members was able to frequently attend Supervisory Board meetings. Attendance at the Supervisory Board meetings during 2020 was as follows: Thomas Hecht 4/4 Meeting Supervisory Board Audit Committee Compensation committee Nomination and corporate governance committee Research and development committee 8/8 4/4 Bernhard Ehmer Ulrich Grau 4/4 Annalisa Jenkins 2/2 Mathieu Simon 4/4 Ferdinand Verdonck 4/4 Harry Welten 2/2 Berndt Modig 2/2 4/4 10/10 3/3 3/3 7/7 4/4 10/10 4/4 1/1 5/6 4/5 4/4 2/2 2/2 2/2 The Supervisory Board also held several non-formal Supervisory Board meetings which are attended by the Management Board. In addition, the members of the Supervisory Board have regular contact with the members of the Management Board outside of the scheduled meetings of the Supervisory Board. These informal consultations ensure that the Supervisory Board remains well-informed about the Company’s operations.         Affimed Annual Report 2020 43 The Supervisory Board is responsible for the quality of its own performance and it discusses, once a year on its own, without the members of the Management Board both its own performance and that of the individual members. As in the previous year, in 2020 the Supervisory Board conducted an evaluation through a self-assessment and was positive about the performance of its committees and the collaboration with the Management Board. Further, the Supervisory Board was satisfied with the performance of the Supervisory Board and determined that it works well together, with all members fully contributing to discussions. The Supervisory Board has also reviewed the performance of the Management Board as a whole and each Management Board member for the year 2020. The conclusions from this review have been discussed with the Management Board as well as the individual Management Board members. During the financial year 2020 no conflict of interest of a Supervisory Board member was reported. We refer to the chapter Conflict of Interest in the corporate governance report of the annual report for further information. Committees of the Supervisory Board The Supervisory Board currently has four permanent committees to which certain tasks are assigned. The committees report back on their activities to the Supervisory Board on a regular basis. The composition of each committee is detailed in the following table (as of December 31, 2020). Name audit committee compensation committee nomination and corporate governance committee research and development committee member chairperson member chairperson member member chairperson member member member member chairperson Bernhard Ehmer Ulrich Grau Thomas Hecht Harry Welten Mathieu Simon Ferdinand Verdonck Annalisa Jenkins Audit committee The audit committee assists the Supervisory Board in overseeing Affimed’s accounting and financial reporting processes, the audits of the financial statements and information security. The audit committee meets at least four times per year and during the regular meetings at least once a year with our external independent auditor, without the Management Board being present. In 2020, the audit committee’s main areas of focus were review of quarterly financial statements, the Company’s system of internal controls over financial reporting and the compliance with the relevant rules and regulations (SOX), risk management, auditing approach and auditing timelines of quarterly and annual financial statements,         Affimed Annual Report 2020 44 discussion of the financing situation and the tax policy. In 2020 the audit committee started to oversee the Company´s information security system. At least once a year the committee is informed about risks for the Company and mitigating and preventive measures. The financial statements of the Company for 2020 as presented by the Management Board have been audited by KPMG as independent external auditors. KPMG attended the audit committee meeting in which the annual accounts and the auditor’s report were discussed. The Management Board and the audit committee report to the Supervisory Board annually on their dealings with the external auditor, including the auditor’s independence. The Supervisory Board takes these reports into account when deciding on the nomination for the appointment of an external auditor that is submitted to the general meeting of shareholders. The audit committee held ten meetings by conference call in 2020 and no in-person meetings. Nomination and corporate governance committee The nomination and corporate governance committee assists the Supervisory Board in identifying individuals qualified to become members of the Supervisory Board and Management Board consistent with criteria established by the Supervisory Board and in developing our corporate governance principles. In 2020, the nomination and corporate governance committee's main areas of focus were reviewing the profile of the Supervisory Board, preparing the self-assessments of the Supervisory Board and its committees, composition and succession planning of the Supervisory Board and Management Board, discussing contract extensions and new contracts of the Management Board and analysing corporate governance topics. The nomination and corporate governance committee held four meetings by conference call in 2020 and no in-person meetings. Compensation committee The compensation committee assists the Supervisory Board in determining Management and Supervisory Board compensation. The main responsibilities of the compensation committee are preparing proposals for the Supervisory Board on the remuneration policy for the Management Board, to be adopted by the general meeting of shareholders, and preparing proposals on the remuneration of individual members of the Management Board. In its meetings in 2020, the compensation committee mainly discussed the remuneration of the individual members of the Management Board, pre-determined and pre-approved the corporate goals and objectives and reviewed their progress regularly and reviewed the Supervisory Board remuneration policy. For more information on the remuneration policy, and the work by the compensation committee, see Compensation of Managing Directors and Supervisory Directors in the Corporate Governance section in the management report. The compensation committee held one meeting in person and seven meetings by conference call in 2020. Research and Development Committee The research and development committee assists the Supervisory Board in aligning the R&D strategy of the Company with the overall Company strategy, to evaluate critical junctures of research and         Affimed Annual Report 2020 45 development activities and assess the competitive landscape and the impact on the Company's strategy and business. The research and development committee held two meetings by conference call in 2020 and no in-person meetings. Remuneration of the Supervisory Board The compensation of Supervisory Board members consists of a fixed annual fee in cash and an additional meeting fee for any Supervisory Board meeting or committee meeting. Members of the Supervisory Board are entitled to annual grants under our share-based compensation plans. Remuneration is subject to an annual review by the Supervisory Board. The remuneration of members of the Supervisory Board complies with almost all aspects of the provision of the Dutch Corporate Governance Code. The exceptions are where it conforms more closely to customary practice in the biotechnology industry worldwide, in particular in the United States. These exceptions and further details on the remuneration of the Supervisory Board are disclosed in the Corporate Governance section in the management report. An overview of the implementation and planning of the remuneration of supervisory and managing directors and in addition the remuneration policy is given in more detail in section “Item 6. Directors, Senior Management and Employees – Compensation” in the annual report (20-F) filed with the Securities and Exchange Commission on April 15, 2021 (available on our website http://www.affimed.com.sec). Independence of the Supervisory Board The Supervisory Board is a separate corporate body that is independent of the Management Board of the Company. Members of the Supervisory Board can neither be a member of the Management Board nor an employee of Affimed. During the financial year 2020, all but one of our members of the Supervisory Board were independent in accordance with the Dutch Corporate Governance Code. Pursuant to the Dutch Corporate Governance Code, Harry Welten is considered non-independent due to his former relationship with Affimed as consultant prior to his appointment as member of the Supervisory Board in 2020. All members of the Supervisory Board are considered independent pursuant to the Nasdaq listing rules. Appreciation The Supervisory Board is of the opinion that during the year 2020, its composition, mix and depth of available expertise, working processes, level and frequency of engagement in all critical Company activities, and access to all necessary and relevant information and the Company’s management and staff were satisfactory and enabled it to carry out its duties towards all the Company’s stakeholders.         Affimed Annual Report 2020 46 The members of the Supervisory Board would like to express their gratitude and appreciation to the Management Board and employees of Affimed for their efforts and performance in 2020. In particular, the Supervisory Board would very much like to thank our shareholders for their continued support. May 20, 2021 On behalf of the Supervisory Board, Dr. Thomas Hecht, Chairman of the Supervisory Board         Affimed Annual Report 2020 47 Consolidated Financial Statements Consolidated statements of comprehensive loss Consolidated statements of financial position Consolidated statements of cash flows Consolidated statements of changes in equity Notes to the consolidated financial statements       Affimed Annual Report 2020 48 Affimed N.V. Consolidated statements of comprehensive loss (in € thousand) Revenue Other income—net Research and development expenses General and administrative expenses Operating loss Finance income / (costs)—net Loss before tax Income taxes Loss for the period Other comprehensive income / (loss) Items that will not be reclassified to profit or loss Equity investments at fair value OCI—net change in fair value Other comprehensive income / (loss) Total comprehensive loss Loss per share in € per share (undiluted = diluted) Weighted number of common shares outstanding Note 9 10 11 12 14 15 17 2020 2019 2018 28,360 626 (49,989) (13,715) (34,718) (6,647) (41,365) (1) (41,366) 21,391 290 (43,791) (10,266) (32,376) 15 (32,361) (4) (32,365) 23,735 1,515 (35,148) (9,638) (19,536) 60 (19,476) (1) (19,477) (242) (242) (41,608) (0.50) (632) (632) (32,997) (0.50) (4,731) (4,731) (24,208) (0.32) 83,471,559 64,242,396 60,514,407 The Notes are an integral part of these consolidated financial statements. Affimed Annual Report 2020 49 Affimed N.V. Consolidated statements of financial position (in € thousand) ASSETS Non-current assets Intangible assets Leasehold improvements and equipment Long term financial assets Right-of-use assets Current assets Cash and cash equivalents Financial assets Trade and other receivables Inventories Other assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Issued capital Capital reserves Fair value reserves Accumulated deficit Total equity Non-current liabilities Borrowings Contract liabilities Lease liabilities Total non-current liabilities Current liabilities Trade and other payables Provisions Borrowings Lease liabilities Contract liabilities Total current liabilities Note December 31, 2020 December 31, 2019 16 17 18 20 19 21 24 9 26 25 23 24 26 9 1,718 2,226 20,042 940 24,926 146,854 0 2,439 246 1,260 150,799 137 2,291 3,193 824 6,445 95,234 8,902 1,482 296 0 105,914 175,725 112,359 983 345,164 1,720 (275,874) 71,993 762 270,451 1,962 (234,508) 38,667 231 35,992 482 36,705 11,394 0 92 492 55,049 67,027 278 37,961 272 38,511 10,674 517 2,105 532 21,353 35,181 TOTAL EQUITY AND LIABILITIES 175,725 112,359 The Notes are an integral part of these consolidated financial statements. Affimed Annual Report 2020 50 Affimed N.V. Consolidated statements of cash flows (in € thousand) Cash flow from operating activities Loss for the period Adjustments for the period: —Income taxes —Depreciation and amortization —Net gain/(losses) from disposal of leasehold improvements and equipment —Share based payments —Finance income / costs—net Change in trade and other receivables Change in inventories Change in other assets Change in trade, other payables, provisions and contract liabilities Cash used in operating activities Interest received Paid interest Paid income tax Net cash flow from operating activities Cash flow from investing activities Purchase of intangible assets Purchase of leasehold improvements and equipment Cash received from the sale of leasehold improvements and equipment Cash paid for investments in current financial assets Cash received from maturity of financial assets Cash paid for investments in long term financial assets Net cash used for investing activities Cash flow from financing activities Proceeds from issue of common shares Transaction costs related to issue of common shares Proceeds from borrowings Repayment of lease liabilities Repayment of borrowings Cash flow from financing activities Exchange-rate related changes of cash and cash equivalents Net changes to cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The Notes are an integral part of these consolidated financial statements. Note 2020 2019 2018 (41,366) (32,365) (19,477) 1 1,115 34 4 906 (5) 1 403 25 22 14 18 18 21 21 24 26 24 2,469 3,381 6,647 2,035 (60) (30,188) (29,006) (17,073) (15) (1,065) 50 (1,260) 12,848 (322) 33 (19) (36) 340 121 (791) 66,856 49,563 218 (342) (1) 49,438 0 (19,615) (29,460) 628 (224) 294 (78) (1) (19,400) (29,056) (9) (431) (150) (1,324) (30) (691) 0 0 1 (8,101) (45,131) (14,029) 0 50,945 16,547 (861) (15,610) 8,006 4,340 0 0 74,195 (2,294) 0 (521) 31,373 (2,215) 562 (405) (2,128) (3,277) (2,917) 69,252 26,038 20,495 25,113 (1,701) 0 00 (917) 1,322 (6,238) 57,858 669 54,323 95,234 94,829 39,837 146,854 95,234 94,829 Affimed Annual Report 2020 51 Affimed N.V. Consolidated statements of changes in equity (in € thousand) Note Balance as of January 1, 2018 Issue of common shares Exercise of share based payment awards Equity-settled share based payment awards Loss for the period Other comprehensive income Balance as of December 31, 2018 Balance as of January 1, 2019 Issue of common shares Exercise of share based payment awards Equity-settled share based payment awards Loss for the period Other comprehensive income Balance as of December 31, 2019 Balance as of January 1, 2020 Issue of common shares Exercise of share based payment awards Equity-settled share based payment awards Loss for the period Other comprehensive income Balance as of December 31, 2020 Issued capital 468 156 Capital reserves 213,778 Fair value reserves 7,325 23,171 71 2,035 Accumulated deficit Total equity (182,667) 38,904 23,327 71 2,035 624 624 138 239,055 239,055 28,901 26 2,469 762 762 205 16 270,451 270,451 68,341 2,991 3,381 (4,731) 2,594 2,594 (632) 1,962 1,962 (19,477) (19,477) (4,731) (202,144) 40,129 (202,144) 40,129 29,039 26 2,469 (32,365) (32,365) (632) (234,508) 38,667 38,667 (234,508) 68,546 3,007 3,381 983 345,164 (242) 1,720 (41,366) (41,366) (242) (275,874) 71,993 21 22 22 17 The Notes are an integral part of these consolidated financial statements. Affimed Annual Report 2020 52 1. Reporting entity Affimed N.V. is a Dutch company with limited liability (naamloze vennootschap) and has its corporate seat in Amsterdam, the Netherlands. Affimed N.V. is registered in the Trade Register of the Chamber of Commerce under the number 60673389. The consolidated financial statements are comprised of Affimed N.V., and its controlled (and wholly owned) subsidiaries Affimed GmbH, Heidelberg, Germany, AbCheck s.r.o., Plzen, Czech Republic, Affimed Inc., Delaware, USA and AbCheck Inc., Delaware, USA (together “Affimed” or the “Group”). Affimed is a clinical-stage biopharmaceutical company focused on discovering and developing highly targeted cancer immunotherapies. The Group’s product candidates are developed in the field of immuno-oncology, which represents an innovative approach to cancer treatment that seeks to harness the body’s own immune defenses to fight tumor cells. Affimed has its own research and development programs, strategic collaborations and service contracts, where the Group is performing research services for third parties. 2. Local exemption rules applied by subsidiaries of the Group Affimed GmbH, Heidelberg, Germany, makes use of the exemption clause, available under § 264 (3) HGB in 2020. The consolidated financial statements of Affimed N.V. as of and for the year ended 31 December 2020 will be filed in Germany as a supplement to the financial statements of Affimed GmbH, in order to meet the requirements of the exemption clause available under § 264 (3) HGB in 2020. 3. Financial reporting period These financial statements cover the year 2020, which ended at the balance sheet date of 31 December 2020. 4. Going concern The financial statements of the Company have been prepared on the basis of the going concern assumption. 5. Application of Section 402, Book 2 of the Dutch Civil Code The financial information of the Company is included in the consolidated financial statements. For this reason, in accordance with Section 402, Book 2 of the Dutch Civil Code, the separate statement of profit and loss of the Company exclusively states the share of the result of participating interests after tax and the other income and expenses after tax. For an appropriate interpretation of these statutory financial statements, the consolidated financial statements of the Company should be read in conjunction with the Company financial statements, as included under pages 82 to 94. Affimed Annual Report 2020 53 6. Basis of preparation – consolidated financial statements Statement of compliance The consolidated financial statements of the Company are part of the statutory financial statements of the Company. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board as adopted in the European Union (EU IFRSs) and with Section 2:362(9) of the Netherlands Civil Code. The consolidated financial statements were authorized for issuance by the management board and supervisory board on May 20, 2021. Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for financial instruments measured at fair value (see note 14) and monetary assets and liabilities denominated in foreign currencies which are remeasured at period-end exchange rates. The Group did not opt for a valuation of liabilities at fair value through profit or loss. Consolidation The Group controls an entity when it has power over the investee, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A subsidiary is consolidated from the date on which control is obtained by the Group. It is de-consolidated from the date control ceases. Intercompany transactions, balances and unrealized gains/losses on transactions between group companies are eliminated. Functional and presentation currency The consolidated financial statements are presented in euro. The functional currency of the Company and its’ subsidiaries is the euro. All financial information presented in euro unless otherwise noted has been rounded to the nearest thousand (abbreviated €) or million (abbreviated € million). Presentation of consolidated statements of comprehensive loss As a clinical-stage biopharmaceutical company with a primary focus on research and development activities, cost of sales and gross profit are not considered meaningful measures for Affimed and therefore are not presented. See note 4 for the Group’s accounting policies related to revenue recognition and research and development expenses. These consolidated financial statements cover the year 2020, which ended at December 31, 2020. Affimed Annual Report 2020 54 Foreign currency transactions Transactions denominated in currencies other than the euro are translated at exchange rates at the date of the transaction. Monetary assets and liabilities denominated in currencies other than the euro are translated at the exchange rate at the date of the consolidated statement of financial position. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency gains or losses that relate to borrowings, cash and cash equivalents and financial assets, except for financial instruments at fair value through other comprehensive income are presented in the statement of comprehensive loss within ‘Finance income / (costs) - net’. All other foreign exchange gains and losses are presented in the statement of comprehensive loss within ‘Other income – net’. 7. Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. Revenue recognition The Group generates revenues from the provision of research and development services to third parties based on both Group and third party owned intellectual property. Such services are performed on a “best efforts” basis without a guarantee of technological or commercial success. For some research programs, Affimed entered into collaborations with other companies that provide the Group with funding or other resources such as access to technologies. From time to time, the Group also licenses its intellectual property to third parties who use it to develop product candidates. Collaboration and license agreements are evaluated to determine whether they involve multiple promises that represent separate performance obligations. Such agreements may comprise more than one research program, platform licenses or intellectual property licenses originally generated by the Group. Usually each of those promises is considered to meet the definition of a separate performance obligation. The total consideration is generally allocated to separate performance obligations based on relative stand-alone selling prices. Usually sales prices for research and development activities and licenses are not directly observable or highly variable across customers. Therefore, we use estimation techniques to determine stand-alone selling prices for such services and licenses. The stand-alone selling prices for research activities are determined based on an Affimed Annual Report 2020 55 expected cost plus a margin approach. For licenses of intangible assets where little or no incremental costs are incurred in providing such licenses, a residual approach is used. Performance obligations from research programs are satisfied over time because the work performed by the Group either enhances a license that the customer already controls or because the work does not result in an asset with an alternative use for the Group due to contractual restrictions. Therefore, revenue for such performance obligations is recognized according to the stage of completion measured by reference to costs incurred in relation to anticipated total costs of the research program. Platform licenses or intellectual property licenses originally generated by the Group are recognized at a point in time if their nature is a right to use the intellectual property as it exists at the point in time at which the license is granted. This is usually the case when there is no significant continuing involvement by the Group. In these cases, revenue is recognized when control of the license is transferred. Control is considered to be transferred when the customer received all necessary documents and information to begin to use and benefit from the license. Platform licenses or intellectual property licenses originally generated by the Group are recognized over time if their nature is to access the intellectual property as it exists throughout the license period. This might be the case when there is significant continuing involvement by the Group. In these cases, revenue is recognized on a straight-line basis until the use of the license by the customer ends. Payments received from customers commonly include non-refundable upfront payments that are initially recognized as a contract liability, and subsequently recognized as revenue as the related performance obligation is fulfilled. The Group concluded that non-refundable upfront payments do not include financing components because the advance payments arise for reasons other than the provision of financing. In addition, payment terms may also include payments to be received from customers at a later point in time upon the achievement of certain milestones. Milestone payments are contingent upon the achievement of contractually stipulated targets. The achievement of these targets or milestones depends largely on meeting specific requirements laid out in the respective agreement. Milestone payments are included in the transaction price when it is highly probable that a significant reversal of revenue recognized will not occur when the uncertainty associated with the milestone is subsequently resolved. In the Group’s view, uncertainty is sufficiently resolved only when the milestone is reached. Reaching a milestone will result in a cumulative catch up of revenue for the performance to date. The Group distinguishes development and registration milestones and sales-based milestones. Whereas development and registration milestone payments are generally recognized on reaching the defined milestones, revenues for sales-based milestones are recognized on achievement of contractually stipulated underlying revenues. Affimed Annual Report 2020 56 Research and development Costs incurred related to research activities are expensed in the period when they are incurred. Costs incurred on development projects are recognized as intangible assets beginning on the date it can be established that it is probable that future economic benefits attributable to the asset will flow to the Group considering its technological and commercial feasibility. Given the current stage of the development of the Group’s candidates and technologies, no development expenditures have been capitalized in any of the periods presented in these consolidated financial statements. Intellectual property-related costs for patents are part of the expenditure for the research and development projects. Therefore, registration costs for patents are recognized as expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization. Employee benefits (i) Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under a short-term cash bonus, if (a) the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and (b) the obligation can be estimated reliably. (ii) Share-based payment transactions The Group’s share-based payment awards outstanding as of December 31, 2019 and 2020, are classified as equity-settled share-based plans. The fair value of share-based equity-settled awards granted to employees is measured at grant date and compensation cost is recognized over the vesting period with a corresponding increase in equity. Share-based payment awards with non-employees are measured and recognized when services are received. Fair value is estimated using the Black-Scholes-Merton formula. The formula determines the value of an option based on input parameters like the value of the underlying instrument, the exercise price, the expected volatility of share price returns, dividends, the risk-free interest rate, the expected forfeiture rate and the time to maturity of the option. The number of stock options expected to vest is estimated at each measurement date. (iii) Termination benefits Termination benefits are expensed when the Group can no longer withdraw the offer of those benefits. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted. Government grants Affimed Annual Report 2020 57 The Group receives certain government grants that support its research effort in specific projects. These grants are generally provided in the form of reimbursement of approved costs incurred as defined in the respective grants. Income in respect of grants also includes contributions towards the costs of research and development. Income is recognized when costs under each grant are incurred in accordance with the terms and conditions of the grant and the collectability of the receivable is reasonably assured. Government grants relating to costs are deferred and recognized in the income statement over the period necessary to match them with the costs they are intended to compensate. When the cash in relation to recognized government grants is not yet received the amount is included as a receivable on the statement of financial position. The Group recognizes income from government grants under ‘Other income - net’ in the consolidated statement of comprehensive loss. Leases Policy applicable from 1 January 2019 Affimed recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred. Subsequently, the right-of-use asset is depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.  The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Affimed’s incremental borrowing rate. Generally, Affimed uses its incremental borrowing rate as the discount rate. The Group determines the incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and the type of the asset leased. The lease liability is subsequently measured at amortized cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. Affimed has elected not to recognize right-of-use assets and lease liabilities for some short- term leases (leases with less than 12 months of lease term) and right-of-use assets and Affimed Annual Report 2020 58 liabilities for leases of low value assets. Lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term. Policy applicable before 1 January 2019 Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Finance income and finance costs Finance income comprises interest income from interest bearing bank deposits. Interest income is recognized as it accrues using the effective interest method. Finance costs comprise primarily interest expense on borrowings and losses from foreign exchange differences. Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. (i) Non-derivative financial assets The Group’s non-derivative financial assets include shares, trade and other receivables, other assets and cash and cash equivalents and certificates of deposit at banks with original maturities of more than three months. Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Those debt instruments are held to collect solely payments of principal and interest. They are included in current assets and are subsequently carried at amortized cost. Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. The Group holds preferred shares in Amphivena Therapeutics Inc., USA, and common shares in Roivant Ltd, USA, designated at fair value through other comprehensive income (see note 14). (ii) Non-derivative financial liabilities The Group’s classes of financial liabilities are borrowings and trade and other payables. The Group initially recognizes non-derivative financial liabilities on the date that they are originated and measures them at amortized cost using the effective interest rate method. The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. (iii) Compound financial instruments Affimed Annual Report 2020 59 The Group entered into a loan agreement pursuant to which it issued warrants to purchase common shares of the Group at the option of the respective holders (for warrants issued to SVB see note 21). The number of shares to be issued does not vary with changes in their fair value. The liability component of the loan was recognized initially at the fair value of a similar liability without a warrant. The equity component was recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Subsequent to initial recognition, the liability component is measured at amortized cost using the effective interest method. The equity component is not re-measured subsequent to initial recognition. As of December 31, 2020 the loan was fully repaid. Impairment (i) Trade and other receivables Trade and other receivables at amortized cost are subject to the expected credit loss model according to IFRS 9. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate. Affimed determines the counterparties’ lifetime expected credit losses that result from all possible default events over the expected life of a financial instrument based on an estimated rating and corresponding probability of default rates according to the Bloomberg database. In addition, trade and other receivables are assessed at each reporting date to determine whether there is objective evidence that they are impaired. Trade or other receivables are impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the receivable, and such loss event had a negative effect on the estimated future cash flows of that receivable that can be estimated reliably. Loss events include indications that a debtor is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization. All receivables are assessed for specific impairment. Losses are recognized in profit or loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. No impairments or reversals of impairments were recognized in 2018, 2019 or 2020. (ii) Intangible assets and leasehold improvements and equipment Affimed Annual Report 2020 60 Intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses. Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses. Amortization and depreciation is calculated using the straight-line method over the estimated useful lives, and is recognized in profit or loss. Depreciation and amortization methods and useful lives are reviewed at each reporting date and adjusted if appropriate. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss is recognized as the amount by which an asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. Non- financial assets that were previously impaired are reviewed for possible reversal of the impairment at each reporting date. Income taxes Income taxes comprise current and deferred tax. Current and deferred taxes are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive loss. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and adjustments to taxes payable in respect of previous years. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences associated with assets and liabilities if the transaction which led to their initial recognition is a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are presented net if there is a legally enforceable right to offset. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Subsequent events Affimed Annual Report 2020 61 Events that provide further information on the actual situation at the balance sheet date and that appear before the financial statements are being prepared, are recognised in the financial statements. Events that provide no information on the actual situation at the balance sheet date are not recognised in the financial statements. When those events are relevant for the economic decisions of users of the financial statements, the nature and the estimated financial effects of the events are disclosed in the financial statements. Fair Value Measurement All assets and liabilities for which fair value is recognized in the consolidated financial statements are classified in accordance with the following fair value hierarchy, based on the lowest level input parameter that is significant on the whole for fair value measurement:  Level 1 – Prices for identical assets or liabilities quoted in active markets (non-adjusted)  Level 2 – Measurement procedures, in which the lowest level input parameter significant on the whole for fair value measurement is directly or indirectly observable for on the market  Level 3 – Measurement procedures, in which the lowest level input parameter significant on the whole for fair value measurement is not directly or indirectly observable for on the market The carrying amount of all trade and other receivables, other assets, certificates of deposit, cash and cash equivalents and trade and other payables is a reasonable approximation of the fair value and therefore information about the fair values of those financial instruments has not been disclosed. The measurement of the fair value of the shares held by the group and note disclosure for the fair value of a loan (financial liability) is based on level 3 measurement procedures (see note 14 and 21). Loss per share Loss per common share is calculated by dividing the loss of the period by the weighted average number of common shares outstanding during the period. The Group has granted warrants under certain loan agreements (see note 21) and options under share-based payment programs (see note 19) which potentially have a dilutive effect; no instruments actually had a dilutive effect. Critical judgments and accounting estimates The preparation of the consolidated financial statements in conformity with EU-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Affimed Annual Report 2020 62 Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In preparing these financial statements, the critical judgments made by management in applying the Group’s accounting policies resulted in the following accounting estimates: (i) Share-based payments The fair value of stock options issued by Affimed N.V. is estimated using the Black-Scholes- Merton formula. The formula determines the value of an option based on input parameters like the value of the underlying instrument, the exercise price, the expected volatility of share price returns, dividends, the risk-free interest rate and the time to maturity of the option. The fair value of share-based equity-settled compensation plans is measured at grant date and compensation cost is recognized over the vesting period with a corresponding increase in equity. The number of stock options expected to vest is estimated at each measurement date. On April 20, 2018, Affimed N.V. issued 240,000 options under its share-based-payment program, the vesting of which deviates from the standard 3 year vesting scheme and depends upon a market parameter, which is the average price of Affimed N.V. shares during a certain period of time as described in note 19. Incorporating the market condition in the fair value estimate requires the use of a simulation technique (Monte Carlo simulation), which implies a higher uncertainty with regard to the estimated fair value. The Group determined the fair value of the awards at grant date to be €133. (ii) Revenue recognition The Group’s contracts with customers contain multiple performance obligations. Judgment is required in determining whether a good or service is considered a separate performance obligation. If standalone selling prices are not directly observable, the Group allocates the transaction price to the performance obligations by reference to the expected cost plus a margin. In doing so, observable input data such as internal project plans and margins are used. Elements of consideration in collaboration and license agreements are non-refundable up-front research funding payments, technology access fees and milestone payments. Generally, the Group has continuing performance obligations and therefore up-front payments are initially recognized as a contract liability, and the related revenues are subsequently recognized as the related performance obligation is fulfilled. Technology access fees are generally initially recognized as a contract liability and subsequently recognized over the expected term of the research service agreement on a straight-line basis. The Group estimates that the achievement of a milestone reflects a stage of completion under the terms of the agreements and recognizes revenue when a milestone is achieved as then the uncertainty is resolved. If the research service is cancelled due to technical failure, the remaining contract liability from non-refundable upfront payments, if any, is recognized as revenue. Affimed Annual Report 2020 63 The determination of whether a performance obligation is satisfied at a point in time versus over time might also require judgment. (iii) Accrued expenses The Group obtains services from third parties who do not always invoice their (partial) performance as per the balance sheet date. If the Group is not invoiced or otherwise notified of the actual accrued cost for the services as of the reporting date, the amount of the services performed as of the balance sheet date has to be estimated. For this purpose, the Group periodically confirms the accuracy of its estimates with the service providers. (iv) Financial instruments The Group owns preferred shares in Amphivena Therapeutics Inc. (“Amphivena”) and common shares in Roivant Sciences Ltd. (“Roivant”) classified as long-term financial assets and classifies them as equity instruments at fair value through other comprehensive income. As neither Amphivena nor Roivant are public companies, substantial judgment was required in estimating the fair values as at December 31, 2020 (see note 17). For the valuation of the shares of Amphivena, the Group based its estimate primarily on observable financing round valuations and considered certain other publicly available information as well as relevant qualitative information provided by Amphivena as of the respective valuation dates (level 3). The fair value of the shares in Roivant was based on an observable financing round valuation, which was adjusted as of the respective valuation dates considering certain assumptions such as the development of quoted market prices of peer companies and other publicly available information as well as quantitative and qualitative information provided by Roivant (level 3). (v) Contractual liabilities The Group is a clinical-stage biopharmaceutical group of companies and has not yet established a sales, marketing or product distribution infrastructure because the lead product candidate is still at an early stage in clinical development. Given this early development stage of the Group, management has concluded that the Group's normal operating cycle is not clearly identifiable. Conclusively, it is assumed to be twelve months. A liability is classified as current if it meets any of the following conditions:     it is expected to be settled in the entity's normal operating cycle; it is held primarily for trading purposes; it is due to be settled within 12 months of the reporting date; or it is not subject to an unconditional right of the entity at the reporting date to defer settlement of the liability for at least 12 months after the reporting date. Affimed Annual Report 2020 64 Consequently, the Group determined the amounts of contract liabilities that are expected to be settled within 12 months of the reporting date vs. after 12 months from the reporting date, respectively. The amounts that are expected to be settled within 12 months are classified as current liabilities, whereas the amounts that are expected to be settled after 12 months from the reporting date are classified as non-current. (vi) Lease payments Affimed has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether Affimed is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized. As at December 31, 2020, no renewal options were incorporated into the determining the lease term. (vii) Provisions In the second quarter of 2019, Affimed decided to terminate the Phase 1 clinical program of AFM11, a CD19/CD3-targeting bispecific T cell engager as a part of its strategic plans (see note 23). (viii) Intangible assets In December 2020 the group has recognized a license with acquisition cost of €1,649. The useful life was estimated at 19 years being the current expected period in which the licence will be used, i.e. until the expiration of the patents covered by the license. New standards and interpretations applied for the first time The following amendments to standards and new or amended interpretations are effective for annual periods beginning on or before January 1, 2020, and have been applied in preparing these financial statements: Standard/interpretation Effective Date 1 Amendments to References to the Conceptional Framework Amendments to IAS 1 and IAS 8: Definition of Material Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform Amendments to IFRS 3 Business Combination Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions January 1, 2020 January 1, 2020 January 1, 2020 January 1, 2020 June 1, 2020 None of the amendments to standards and new or amended interpretations had a material effect on the consolidated financial statements. 1 Shall apply for periods beginning on or after the date shown in the effective date column.     Affimed Annual Report 2020 65 New standards and interpretations not yet adopted The following new standards and amendments to standards are effective for annual periods beginning after December 31, 2020 and have not been applied in preparing these consolidated financial statements. Standard/interpretation Effective Date 1 Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current Amendments to IFRS 3 Business Combinations Amendments to IAS 16 Property, Plant and Equipment Amendments to AS 37 Provisions, Contingent Liabilities and Contingent Assets Annual Improvements 2018-2020 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and I FRS 16 Interest Rate Benchmark Reform – Phase 2 January 1, 2023 January 1, 2022 January 1, 2022 January 1, 2022 January 1, 2022 January 1, 2021 1 Shall apply for periods beginning on or after the date shown in the effective date column. The amended standards are not expected to have a significant effect on the consolidated financial statements of the Group. 8. Segment reporting (i) Information about reportable segment The Group is active in the discovery, pre-clinical and clinical development of antibodies based on its core technology. The activities are either conducted as own project development or for third party companies. Management of resources and reporting to the chief operating decision maker is based on the Group as a whole. (ii) Geographic information The geographic information below analyses the Group’s revenue and non-current assets by country. In presenting the following information, segment revenue has been based on the Affimed Annual Report 2020 66 geographic location of the customers and segment assets were based on the geographic location of the assets. Discovery activities and research services are conducted in both the Heidelberg and Plzen premises. Pre-clinical and clinical activities are conducted and coordinated from Heidelberg. Revenue for the year ended December 31: 2020 2019 2018 Germany Europe USA Consolidated revenue 194 2 28,164 28,360 0 1,646 19,745 21,391 31 1,175 22,529 23,735 Non-current assets as of December 31: 2020 2019 2018 Germany Czech Republic USA Total non-current assets (iii) Major Customers 3,796 914 20,216 24,926 2,017 870 3,558 6,445 1,224 246 3,825 5,295 In 2018, 2019 and 2020, the Group’s revenue with Genentech Inc. exceeded 10% of total revenues. 9. Revenue Collaboration agreement The Leukemia & Lymphoma Society (LLS) Affimed is party to a collaboration with LLS to fund the development of specific product candidates (immune cell engagers). Under the terms of the agreement, LLS has agreed to contribute up to $4.4 million contingent upon the achievement of certain milestones. In the event that the research and development is successful, Affimed must proceed with commercialization of the licensed product. If Affimed decides for business reasons not to continue the commercialization, Affimed must at its option either repay the amount funded or grant a license to LLS to enable LLS to continue with the development program. In addition, LLS is entitled to receive royalties from Affimed based on the Group’s future revenue from any licensed product, with the amount of royalties not to exceed three times the amount funded. Affimed Annual Report 2020 67 In June 2016, the research funding agreement with LLS was amended to reflect a shift to the development of combination therapeutic approaches so that the milestones now relate primarily to the development of a combination therapy. During the year ended December 31, 2019, the Group recognized revenue totaling €0.2 million. In 2020 the Group achieved the final milestones and recognized €0.1 million as revenue. Collaboration with Genentech Inc. In August 2018, Affimed entered into a strategic collaboration agreement with Genentech Inc., headquartered in South San Francisco, USA. Under the terms of the agreement Affimed is providing services the development of novel NK cell engager-based immunotherapeutics to treat multiple cancers. The Genentech agreement became effective at the beginning of October 2018. Under the terms of the agreement, Affimed received $96.0 million (€83.2 million) in an initial upfront payment and committed funding on October 31, 2018. related to The Group recognized €26.2 million as revenue in 2020 (2019: €19.7 million, 2018: €21.8 million) and €41.9 million (December 31, 2019: €59.3 million, December 31, 2018: €61.4 million) under contract liabilities, which is recognized as revenue in subsequent periods as services are provided. Under the terms of the agreement, Affimed is eligible to receive up to an additional $5.0 billion over time, including payments upon achievement of specified development, regulatory and commercial milestones. Affimed is also eligible to receive royalties on any potential sales. Collaboration with Roivant Sciences Ltd. On November 9, 2020 Affimed and Pharmavant 6 GmbH, a subsidiary of Roivant Sciences Ltd. (Roivant), announced a strategic collaboration agreement which grants Roivant a license to the preclinical molecule AFM32. Under the terms of the agreement, Affimed received €50.4 million ($60 million) in upfront consideration, comprised of €33.3 million ($40 million) in cash and pre-funded research and development funding, and €17.1 million ($20 million) of common shares in Roivant. Affimed is eligible to receive additional proceeds in the form of option fees contingent on the commencement of additional programs contemplated under the agreement. The Group is eligible to receive up to an additional $2 billion in milestones over time upon achievement of specified development, regulatory and commercial milestones, as well as tiered royalties on net sales. At December 31, 2020 the Group has recognized €1.4 million as revenue and €49.0 million under contract liabilities, which is recognized as revenue in subsequent periods as services are provided. Research service agreements The Group, through its subsidiary AbCheck has entered into certain research service agreements. These research service agreements provide for non-refundable upfront Affimed Annual Report 2020 68 technology access research funding or capacity reservation fees and milestone payments. The Group recognized revenue of €0.6 million, €1.7 million and €1.7 million during the years ended December 31, 2020, 2019 and 2018 respectively. Contract balances The following table provides information about receivables and contract liabilities from contracts with customers. Receivables  Contract liabilities December 31, 2020 December 31, 2019 204 59,314 0 91,041  An amount of €17.5 million that was recognized in contract liabilities at the beginning of the period was recognized as revenue during the period ended December 31, 2020 (2019: €14.8 million; 2018: €0.2 million). The remaining performance obligations at December 31, 2020 are approximately €91.0 million and are expected to be recognized as revenue to a large extent over the next two years. Disaggregation of revenue For the year ended December 31: Major service lines: Collaboration revenue Service revenue Revenue: Point in time Over time 2020 2019 2018 27,755 605 28,360 9,180 19,180 28,360 19,685 1,706 21,391 5,783 15,608 21,391 22,018 1,717 23,735 21,863 1,872 23,735 10. Other income and expenses - net Other income and expenses, net primarily comprises foreign exchange gains of €129 in 2020 (2019: €251, 2018: €1,523) and income from government grants for research and development projects of €348 in 2020, €19 in 2019, and €10 in 2018. 11. Research and development expenses The following table shows the different types of expenses allocated to research and development costs for the years ended December 31: Third-party services  2020 2019 2018 29,324 27,338 22,126 Affimed Annual Report 2020 69 Personnel expenses  Legal, consulting and patent expenses  Cost of materials  Amortisation and depreciation  Other expenses  13,638 2,380 1,730 834 2,083 49,989  10,154 1,983 1,547 725 2,044 43,791 8,055 1,672 1,140 351 1,804 35,148 12. General and administrative expenses The following table shows the different types of expenses allocated to general and administrative costs for the years ended December 31: Personnel expenses  Legal, consulting and audit expenses  Other expenses  13. Employee benefits 2020 2019 2018 6,319 5,601 1,795 13,715  5,358 3,055 1,853 10,266 4,929 2,881 1,828 9,638 The following table shows the items of employee benefits for the years ended December 31: Wages and salaries Social security costs 2020 2019 2018 15,081 1,847 16,928 11,587 1,620 13,207 10,027 1,092 11,119 The employer’s contributions to pension insurance plans of €795 (2019: €696, 2018: €502) are classified as payments under a defined contribution plan, and are recognized as an expense. 14. Finance income and finance costs The following table shows the items of finance income and costs for the years ended December 31: Interest SVB Loan Agreement (see note 21)  Foreign exchange differences (95) (6,693) (483) (175) (847) 651 2020 2019 2018                 Affimed Annual Report 2020 70 Interest on certificates of deposit with maturities of more than three months Other finance income/finance costs – net 15. Income taxes 186 (45) (6,647) 602 71 15 5 251 60 The Group did not incur any material income tax in the periods presented. As of December 31, 2020, deferred tax assets from differences resulting from intangible assets (€303; 2019: €283 trade and other receivables (€463; 2019: €243), borrowings (€61; 2019: €70), lease liabilities (€194; 2019: €121), trade and other payables (€7; 2019: €23) and contract liabilities (€556; 2019: €0). have not been recognized as deferred tax assets as no sufficient future taxable profits or offsetting deferred tax liabilities are available. As of December 31, 2020 deferred tax liabilities from temporary differences result mainly leasehold improvements and equipment and right-of-use assets (€280; 2019: €226), long term financial assets (€1,146; 2019: €1,218), other assets (€316; 2019: €0), trade and other payables (€60; 2019: €0) and contract liabilities (€0; 2019: €308). Deferred tax liabilities are not recognized as there is an excess of deferred tax assets over deferred tax liabilities. A reconciliation between actual income taxes and the expected tax benefit from the loss before tax multiplied by the Group's applicable tax rate is presented below for the years ended December 31: 2020 2019 2018 Loss before tax Income tax benefit at tax rate of 29.825 % Adjustments of deferred tax assets Adjustments for local tax rates Non-deductible expenses Other Income taxes  (41,365) 12,337 (11,196) (41) (803) (298) (1) (32,361) 9,652 (9,822) 5 (72) 233 (4) (19,476) 5,809 (5,318) (34) (515) 57 (1) In Germany, Affimed N.V. and GmbH has tax losses carried forward of €233.7 million (2019: €199.2 million) for corporate income tax purposes and of €234.6 million (2019: €198.4 million) for trade tax purposes that are available indefinitely for offsetting against future taxable profits of that entity. Restrictions on the utilization of tax losses in case of a change of control of ownership in Affimed N.V. and GmbH were mitigated by the enactment of the Economic Growth Acceleration Act (Wachstumsbeschleunigungsgesetz 2009). According to the provisions of this act unused tax losses of a corporation as at the date of a qualified change in ownership are preserved to the extent they are compensated by an excess of the fair value of equity for tax purposes above its carrying amount. The maximum amount of tax losses at risk of being lost due to ownership changes is approximately €59 million. Deferred tax assets have not been recognized in respect of any losses carried forward as no sufficient taxable profits of Affimed are expected.   Affimed Annual Report 2020 71 16. Intangible assets In December 2020, Affimed entered into a Patent and Technology license agreement providing the Group with an exclusive development and commercialization license. The Group recognized the non-refundable license fee of $2 million (€1.6 million) as an intangible asset and amortizes the acquisition cost over an estimated useful life of 19 years. 17. Long term financial assets The Company holds preferred shares in Amphivena recognized at their fair value of €2.9 million (2019: €3.2 million) and common shares in Roivant Sciences Ltd (acquired in 2020) at their fair value of €17.1 million. The Company recognized losses from the change in fair values of €0.2 million in other comprehensive income in 2020 (2019: €0.6 million). 18. Financial assets The financial assets consist of U.S. Dollar denominated certificates of deposit with original maturities of more than three months. As of December 31, 2020, no term deposits were held; for 2019, the fair value (level 1) of the financial assets did not differ significantly from their carrying amount. 19. Other assets The other assets as of December 31, 2020 of €1.3 million (2019: €0 million) are short-term in nature, do not bear interest and are not impaired. These assets mainly comprise a deferred prepayment of €1 million in respect of a research project where certain milestone payments are due. 20. Trade and other receivables The trade receivables as of December 31, 2020 and 2019, of €0 and €204, respectively, are all due in the short-term, do not bear interest and are not impaired. Other receivables are all due within the short-term and mainly comprise value-added tax receivables of €1.321 (2019: €453). 21. Equity As of December 31, 2020, the share capital of €983 (2019: €762) is composed of 98,287,333 (2019: 76,249,901) common shares with a par value of €0.01. Affimed Annual Report 2020 72 In May 2020, the Company implemented an at-the-market (“ATM”) program providing for the sales over time of up to $50,000,000 of its common shares. The Company issued approximately 12.5 million common shares under this ATM program, generating net proceeds of approximately €34.5 million. In November 2020, the Company implemented a new ATM program providing for additional sales over time of up to $75,000,000 of its common shares. As of December 31, 2020, the Company had issued a further approximately 7.9 million shares, generating further approximate €34.5 million in net proceeds. In connection with common share issuances in 2020 an amount of €2.4 million (2019: €2.3 million) of direct and incremental transaction cost was deducted from equity. In the Annual General Meeting of Affimed N.V. held on August 4, 2020 the structure of the authorized share capital was changed as cumulative preference shares were abolished. As of December 31, 2020, authorized share capital of the Affimed N.V. amounts to €3,120 and is divided into 311,950,000 shares, each with a nominal value of €0.01 per share. As at December 31, 2019, the authorized share capital consisted of 155,975,000 common shares and 155,975,000 cumulative preference shares, each with a par value of €0.01 per share. 22. Share based payments In 2014, an equity-settled share-based payment program was established by Affimed N.V. (ESOP 2014). Under this program, the Group granted awards to certain members of the Management Board, the Supervisory Board, non-employee consultants and employees. Share based payments with service condition The majority of the awards vest in installments over three years and can be exercised up to 10 years after the grant date. In 2020 and 2019, the Group granted 2,607,809 and 1,736,803 awards, respectively, to employees, the Management Board and Supervisory Board. In 2020, 247,684 ESOP 2014 awards were cancelled or forfeited due to termination of employment or termination of consulting agreements with non-employees (2019: 357,879), and 1,624,351 options were exercised at an average exercise price of $2.19 (2019: 19,795 ESOP 2014 awards at an average exercise price of $1.54). As of December 31, 2020, 8,043,341 ESOP 2014 awards were outstanding (December 31, 2019: 7,307,567), 4,712,122 awards (December 31, 2019: 4,773,840) were vested. The options outstanding at December 31, 2020 had an exercise price in the range of $1.30 to $13.47 (2019: $1.30 to $13.47) and weighted average remaining contractual life of 7.4 years (2019: 8.9 years). In 2020 and 2019, the Group estimated an annual forfeiture rate of 4.0% for unvested options. Share based payments with market condition Affimed Annual Report 2020 73 On April 20, 2018, Affimed N.V. issued 240,000 options, of which each grant consists of three tranches that vest when the volume-weighted average share price (measured based on Affimed N.V. closing share prices over the preceding fifteen trading days) reaches a certain hurdle ($6.15, $8.20 and $10.25). Fair value of the awards at grant date amounts to €133 ($164 thousand) and the contractual lifetime of the options is two years. As at December 31, 2020 no options were exercisable and the term of the options has expired. Fair value was determined using the Monte Carlo Simulation. Share based payment expense In 2020, an expense of €3,381 was recognized affecting research and development expenses (€1,524) and general and administrative expenses (€1,857). In 2019, an expense of €2,469 was recognized affecting research and development expenses (€904) and general and administrative expenses (€1,565). In 2018, an expense of €2,035 was recognized affecting research and development expenses (€852) and general and administrative expenses (€1,183). Fair value measurement The fair value of options was determined using the Black-Scholes valuation model. The significant inputs into the valuation model of share based payment grants with service conditions are as follows (weighted average): Fair value at grant date   Share price at grant date  Exercise price   Expected volatility  Expected life  Expected dividends  Risk-free interest rate 2020 2019 $2.38 $3.18 $3.18 93% 5.9 0.00 0.89%  $2.10 $1.44 $1.44 82% 5.9 0.00 2.09% Expected volatility is estimated based on the observed daily share price returns of a peer group measured over a historic period equal to the expected life of the awards. 23. Provisions In 2019, the Group decided to terminate the AFM 11 program and recognized related costs totalling to €1.4 million, whereof €0.9 million were incurred in 2019 and €0.5 million were expected in 2020. As of December 31, 2020, since previously anticipated services did not transpire and no further costs are expected, the balance of the provision of €478 was released within the research and development expenses. 24. Borrowings Silicon Valley Bank Affimed Annual Report 2020 74 On November 30, 2016, Affimed entered into a loan agreement with Silicon Valley Bank (the “SVB loan”) which provides the Group with a senior secured term loan facility originally for up to €10.0 million, which agreement was amended in May 2017 to provide that such amount would be available in three tranches. In December 2016, the Group drew an initial tranche of €5.0 million and in May 2017, a second tranche of €2.5 million; the availability of a third tranche of €2.5 million expired in September 2017 with such amount remaining undrawn. Finance costs comprised the interest rate of one-month EURIBOR plus an applicable margin of 5.5%, with a floor of 5.5%, related one-time legal and arrangement fees of €236 and a final payment fee equal to 10% of the total principal amount to be paid with the last instalment. Pursuant to the loan agreement, the Group also granted the lender 166,297 and 53,395 warrants with an exercise price of $2.00 and $2.30 per share, respectively. Each warrant can be used to purchase common shares of Affimed N.V. at the respective exercise price for a period of ten years from the grant date. The fair value of the warrants of €192 less deferred taxes and transaction costs of €81 and €8, respectively, was recorded as an addition to capital reserves in equity. The fair value of the warrants was determined using the Black-Scholes- Merton valuation model, with an expected volatility of 75-80% and an expected exercise period of five years to exercise of the warrant. The contractual maturity of the warrants is ten years. The loan was secured by a pledge of 100% of the Group’s ownership interest in Affimed GmbH, all intercompany claims owed to Affimed N.V. by its subsidiaries, and collateral agreements for all bank accounts, inventory, trade receivables and other receivables of Affimed N.V. and Affimed GmbH. As of December 31, 2020, the loan was fully repaid. UniCredit Leasing CZ  In April 2019, the Group entered into a loan agreement with UniCredit Leasing CZ for €562. After an initial instalment of €127 in the second quarter of 2019, repayment is effected in monthly instalments of €8 until November 2023. As at December 31, 2020, an amount of €323 (December 31, 2019: €368) was outstanding, of which €92 (December 31, 2019: €91) was classified as current liabilities. As of December 31, 2020 and December 31, 2019, the fair value of the liability did not differ significantly from its carrying amount. Reconciliation to cash flows from financing  Movements of liabilities reconcile to cash flows arising from financing activities as follows:  Balance as of January 1 Changes from financing cash flows Proceeds from borrowings Repayment of borrowings Other Changes Changes in capitalized borrowing costs, net 2020 2019 2,383 4,773 0 (2,128) (2,128) 562 (3,277) (2,715) 68 325 Affimed Annual Report 2020 75 Balance as of December 31 323 2,383 25. Trade and other payables Trade and other payables comprise trade payables of €7,986 (2019: €10,249). Other payables mainly comprise payroll and employee related liabilities for withholding taxes and social security contributions of €2,144 (2019: €801) and payables due to employees for unused holidays and other accruals. Other payables are normally settled within 30 days. 26. Leases Affimed presents right-of-use assets for offices, laboratories and vehicles leased in a separate line item from the line item “Leasehold improvements and equipment” that presents other assets of the same nature that Affimed owns. The agreements have an average non- cancellable term of between one and four years with renewal options included in some contracts. For equipment leased with contract terms that are short term and/or leases of low- value items the Group has elected not to recognize right-of-use assets and lease liabilities for these leases. The carrying amounts of right-of-use assets reconcile as follows: Balance as of January 1, 2020 Depreciation charge for the year Additions to right-of-use assets Balance as of December 31, 2020 Buildings Cars Carrying amount Office equipment 815 (568) 676 923 9 (7) 0 2 0 (2) 17 15 Balance as of January 1, 2019 Depreciation charge for the year Additions to right-of-use assets Balance as of December 31, 2019 Cash outflow related to leases are as follows: Carrying amount Cars Buildings 694 (371) 492 815 22 (13) 0 9 Total 824 (577) 693 940 Total 716 (384) 492 824 Repayment of lease liabilities 2020 2019 521 405 Affimed Annual Report 2020 76 Interest on lease liabilities Short-term lease payments Cash outflow from leasing 34 70 625 24 66 495 In 2018, lease expenses of €562 had been recognized in the consolidated statement of comprehensive income. Future contractually agreed undiscounted lease payments are as follows: Payments within one year Payments between one and five years 2020 2019 519 515 1,034 553 276 829 Movements of lease liabilities reconcile to cash flows arising from financing activities as follows: Balance as of January 1 Changes from financing cash flows Repayment of lease liabilities Other Changes New lease contracts Balance as of December 31 27. Other commitments and contingencies Commitments 2020 2019 804 (521) (521) 691 691 974 717 (405) (405) 492 492 804 The Group has entered into agreements for the use of licenses. The fees recognized in the consolidated statement of comprehensive income for 2020, 2019 and 2018, as well as future related payment obligations under any non-cancellable fees are not considered material. Contingencies Affimed has entered into various license agreements that contingently trigger payments upon achievement of certain milestones and royalty payments upon commercialization of a product in the future. 28. Related parties (i) Shareholders As of December 31, 2020 and 2019, no shareholder holds more than 20% of the voting rights.     Affimed Annual Report 2020 77 (ii) Transactions with key management personnel The compensation of managing directors and other key management personnel comprised of the following: Short-term employee benefits Termination benefits Share-based payments 2020 2019 2018 2,936 0 1,848 4,784 2,598 264 1,738 4,600 2,683 0 1,229 3,912 Remuneration of Affimed’s managing directors comprises fixed and variable components and share-based payment awards. In addition, the managing directors receive supplementary benefits such as fringe benefits and allowances. In the case of an early termination, the managing directors receive a severance. Compensation for other key management personnel comprises fixed and variable components and share-based payment awards. The supervisory directors of Affimed N.V. received a cash compensation for their services on the supervisory board of €364 (2019: €382; 2018: €382). In 2020, the Group recognized expenses for share-based payments for supervisory board members of €293 (2019: €243, 2018: €117). The following table provides the total amounts of outstanding balances for supervisory board compensation and expense reimbursement related to key management personnel: Outstanding balances December 31, 2020 2 0 16 7 0 10 14 15 8 8 December 31, 2019 5 1 26 9 9 11 21 20 0 0 Adi Hoess Wolfgang Fischer Thomas Hecht Mathieu Simon Berndt Modig Ferdinand Verdonck Ulrich Grau Bernhard Ehmer Harry Welten Annalisa Jenkins 29. Financial risk management   Affimed Annual Report 2020 78 (i) Financial risk management objectives and policies The Group’s principal financial instruments comprise cash and cash equivalents, certificates of deposit at commercial banks, warrants and investor loans presented in borrowings. The main purpose of these financial instruments is to raise funds for the Group's operations. The Group has various other financial assets and liabilities such as trade and other receivables and trade and other payables, which arise directly from its operations. The main risks arising from the Group's financial instruments are credit risk, interest rate risk, liquidity risk and foreign currency risk. The measures taken by management to manage each of these risks are summarized below. (ii) Credit risk The Group’s financial assets comprise to a large extent cash and cash equivalents. In addition, financial assets include shares, certificates of deposit, trade and other receivables. The total carrying amount of shares (€20.0 million, 2019: €3.2 million) cash and cash equivalents (€146.9 million, 2019: € 95.2 million), trade and other receivables (€2.4 million, 2019: €1.5 million), and certificates of deposit (€0.0 million, 2019: €8.9 million), represents the maximum credit exposure of €169.3 million (2019: €108.8 million). The cash and cash equivalents and certificates of deposit are held with banks, which are rated BBB+ to AA- based on Standard & Poor’s and Moody’s. (iii) Interest rate risk The Group’s interest rate risk arises from cash accounts and long-term borrowings at variable rates. Market interest rates on cash and cash equivalents as well as on term deposits were low, and in some cases negative, resulting in interest income of €186 in 2020. A shift in interest rates (increase or decrease) could potentially have a material impact on the loss of the Group. (iv) Other price risks The fair value of the shares in Amphivena and Roivant depends on the estimated share price. The total exposure of the Group amounts to €20.0 million. (v) Foreign currency risk Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency. Affimed Annual Report 2020 79 The Group’s entities are exposed to Czech Koruna (CZK) and US Dollars (USD) and British Pound (GBP). The net exposure as of December 31, 2020 was €122,322 (2019: €56,531) and mainly relates to US Dollars. In 2020, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables held constant, the loss would have been €11,155 (2019: €5,677) higher/lower, mainly as a result of foreign exchange gains/losses on remeasurement of US dollar-denominated financial assets. The Group considers a shift in the exchange rates of 10% as a realistic scenario. Loss is more sensitive to movement in exchange rates shifts in 2020 than in 2019 because of the increased volume of US dollar-denominated transactions. The following significant exchange rates have been applied during the year: 2020 CZK or USD or GBP/EUR 0.03780 0.03811 CZK - Average Rate CZK - Spot rate 0.03896 0.03936 2019 CZK or USD or GBP/EUR 2018 CZK or USD or GBP/EUR USD - Average Rate USD - Spot rate 0.87550 0.81493 0.89326 0.89015 GBP - Average Rate  GBP - Spot rate 1.12397 1.11231 1.1393 1.1754 (vi) Liquidity risk 0.03899 0.03887 0.84674 0.87336 1.13031 1.11791 Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities which are normally settled by delivering cash. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The Group continually monitors its risk of a shortage of funds using short and mid-term liquidity planning. This takes account of the expected cash flows from all activities. The supervisory board undertakes regular reviews of the budget. In 2018 and 2019 and 2020, Affimed raised significant funding that it estimates will enable the Group to fund operating expenses and capital expenditure requirements at least into the second half of 2023.       Affimed Annual Report 2020 80 In 2018, the Group issued 13,225,000 common shares in a public offering at a price of $2.00 per common share for net proceeds of approximately €19.7 million and 2,373,716 common shares in connection with its at-the-market sales agreement for net proceeds of €3.8 million. In 2019, the Group issued 13,800,000 common shares in a public offering at a price of $2.50 per common share resulting in aggregate net proceeds of €29.5 million. In May 2020, the Company implemented an at-the-market (“ATM”) program providing for the sales over time of up to $50,000,000 of its common shares. The Company issued approximately 12.5 million common shares under this ATM program, generating net proceeds of approximately €34.5 million. In November 2020, the Company implemented a new ATM program providing for additional sales over time of up to $75,000,000 of common shares. As of December 31, 2020 the Company had issued a further approximately 7.9 million shares, generating further approximate €34.5 million in net proceeds. In December 2020, Affimed N.V. filed a “shelf registration statement” with the SEC in order to offer and sell securities to the public in multiple, future offerings for up to $225,000,000. On January 15, 2021 the Group issued 19,166,667 common shares at a price of $6.00 per share in a public offering resulting in gross proceeds before deducting underwriting discounts and commissions and estimated expenses of the offering of $115 million. In January 2021, the Group entered into a loan agreement with Sillicon Valley Bank for up to €25 million, of which the Group was drawn €10 million in February 2021. The Group expects to require additional funding to complete the development of the existing product candidates. In addition, the Group expects to require additional capital to commercialize the products if regulatory approval is received. (vii) Capital management The primary objective of the Group’s capital management is to ensure that it maintains its liquidity in order to finance its operating activities and meet its liabilities when due. The Group manages its capital structure primarily through equity. 30. Subsequent events In January 2021, the Group entered into a loan agreement with Silicon Valley Bank German Branch (SVB) which provides Affimed with up to €25 million in term loans in three tranches: €10 million available at closing, an additional €7.5 million upon the achievement of certain conditions, including milestones related to Affimed’s pipeline and market capitalization, and a third tranche of €7.5 million upon the achievement of certain additional conditions related to Affimed’s pipeline and liquidity. The first tranche of €10 million was drawn in February 2021. Pursuant to the terms of the agreement, the loans will bear interest at the greater of the European Central Bank Base Rate and 0%, plus 5.5%, and Affimed is entitled to make interest Affimed Annual Report 2020 81 only payments through December 1, 2022, or June 1, 2023 if Affimed draws on the third tranche of the loans. The loans will mature at the end of November 2025. On January 15, 2021 the Group issued 19,166,667 common shares at a price of $6.00 per share in a public offering and achieved gross proceeds before deducting underwriting discounts and commissions and estimated expenses of the offering of $115 million. In the first quarter of 2021, based upon information available as of the date of this filing, including information regarding the share prices of publicly listed companies, we expect, on a preliminary basis, that the value of our investment in Roivant will decline by between $2.5 million and $3.5 million, before the impact of foreign exchange fluctuations. This estimate is subject to change based upon the completion of our procedures related to valuation of the investment. On May 3, 2021, Roivant announced a merger with Montes Archimedes Acquisition Corp. with a fully committed, concurrent $200 million PIPE financing transaction. Both transactions are expected to close in the third quarter of 2021. Based on the terms of the transactions, we expect to further reduce the value of the investment in Roivant. Affimed Annual Report 2020 82 Company Financial Statements Balance sheet of Affimed N.V. Profit and loss account of Affimed N.V. Notes to the financial statements of Affimed N.V. Affimed Annual Report 2020 83 Company balance sheet as at December 31, 2020 (before appropriation of result of the year) In € thousand Note 2020 2019 December 31, December 31, Assets Non current assets Financial fixed assets Total non current assets Current assets Receivables from subsidiaries Other receivables Other assets Cash and cash equivalents Total current assets Total assets Equity and liabilities Shareholders’ equity Issued capital Share premium Other reserves Revaluation reserve Unappropriated result Total equity Current liabilities Payables to subsidiaries Other current payables Total current liabilities Total liabilities Total equity and liabilities 33 34 35 36 37 34 38 16,735 16,735 1,240 1,312 201 57,604 60,357 77,092 983 235,625 (114,046) 1,720 (52,289) 71,993 1,611 3,488 5,099 5,099 77,092 0 0 643 475 0 50,566 51,684 51,684 762 164,293 (95,985) 1,962 (21,442) 49,590 941 1,153 2,094 2,094 51,684 Affimed Annual Report 2020 84 Company profit and loss account (before appropriation of result of the year) In € thousand For the year ended December 31, 2020 For the year ended December 31, 2019 Note Share in results from participating interests after taxation Other result after taxation 39 (39,904) (12,385) (14,321) (7,121) Net result (52,289) (21,442) Affimed Annual Report 2020 85 Notes to the Company financial statements for the year ended 31 December 2020 31. General information Affimed N.V. (in the following ‘Affimed N.V.’ or the ‘Company’) has its corporate seat in Amsterdam. The Company was founded as Affimed Therapeutics B.V. in 2014. Affimed N.V. is a clinical-stage biopharmaceutical company focused on discovering and developing highly targeted cancer immunotherapies. The Company’s product candidates are developed in the field of immuno-oncology, which represents an innovative approach to cancer treatment that seeks to harness the body’s own immune defenses to fight tumor cells. Affimed N.V. has its own research and development programs, strategic collaborations and service contracts, where the Company is performing research services for third parties. These Company financial statements and the consolidated financial statements together constitute the statutory financial statements of Affimed N.V.. The financial information of the Company is included in the Company’s consolidated financial statements, as presented on pages 48 to 81. 32. Basis of preparation The Company financial statements of Affimed N.V. have been prepared on the basis that the Company will be able to continue as a going concern. Affimed believes that the existing cash and cash equivalents and financial assets will enable the Company to fund its operating expenses and capital expenditure requirements well into the second half of 2023. These Company financial statements have been prepared in accordance with Title 9, Book 2 of the Netherlands Civil Code. For setting the principles for the recognition and measurement of assets and liabilities and determination of results for its Company financial statements, the Company makes use of the option provided in section 2:362(8) of the Netherlands Civil Code. This means that the principles for the recognition and measurement of assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of the Company financial statements are the same as those applied for the consolidated EU-IFRS financial statements. These principles also include the classification and presentation of financial instruments, being equity instruments or financial liabilities. In case no other principles are mentioned, refer to the accounting principles as described in the consolidated financial statements. For an appropriate interpretation of these statutory financial statements, the Company financial statements should be read in conjunction with the consolidated financial statements. Information on the use of financial instruments and on related risks for the Group is provided in the notes to the consolidated financial statements of the Group. All amounts in the company financial statements are presented in EUR thousand, unless stated otherwise. Participating interests in Group companies Group companies are all entities in which the Company has directly or indirectly control. The Company controls an entity when it is exposed, or has rights, to variable returns from its involvement with the Group company and has the ability to affect those returns through its power over the Group company. Group companies are recognised from the date on which control is obtained by the Company and derecognised from the date that control by the Company over the Group company ceases. Participating interests in Group companies are Affimed Annual Report 2020 86 accounted for in the Company financial statements according to the equity method, with the principles for the recognition and measurement of assets and liabilities and determination of results as set out in the notes to the consolidated financial statements. Participating interests with a negative net asset value are valued at nil. This measurement also covers any receivables provided to the participating interests that are, in substance, an extension of the net investment. In particular, this relates to loans for which settlement is neither planned nor likely to occur in the foreseeable future. A share in the profits of the participating interest in subsequent years will only be recognised if and to the extent that the cumulative unrecognised share of loss has been absorbed. If the Company fully or partially guarantees the debts of the relevant participating interest, or if has the constructive obligation to enable the participating interest to pay its debts (for its share therein), then a provision is recognised accordingly to the amount of the estimated payments by the Company on behalf of the participating interest. Result of participating interests The share in the result of participating interests consists of the share of the Company in the result of these participating interests. Results on transactions involving the transfer of assets and liabilities between the Company and its participating interests and mutually between participating interests themselves, are eliminated to the extent that they can be considered as not realised. The Company makes use of the option to eliminate intragroup expected credit losses against the book value of loans and receivables from the Company to participating interests, instead of elimination against the equity value of the participating interests. The financial information of the Company is included in the consolidated financial statements. For this reason, in accordance with Section 402, Book 2 Netherlands Civil Code, the profit and loss account of the Company exclusively states the share in the result of participating interests after taxation and the other result after taxation. 33. Financial fixed assets Financial fixed assets solely relate to the investment of the Company in its fully owned subsidiary Affimed GmbH, with statutory seat in Heidelberg, Germany. Movements in the net asset value of Affimed GmbH during the year were as follows: In € thousand Affimed GmbH Net asset value as at January 1, 2020 Capital contribution Effect of change in fair value of Amphivena and Roivant shares held by Affimed GmbH Unrecognised loss from prior year Share in result of Affimed GmbH, net of tax Net asset value as at December 31, 2020 - 56,880 (242) (10,924) (28,979) 16,735 Affimed Annual Report 2020 87 Affimed GmbH holds preferred shares in Amphivena and common shares in Roivant Ltd which are both recognized at fair value through other comprehensive income (see note 33). The subsidiary Affimed GmbH had a negative net asset value of €10,924 thousand for the year ended 31 December 2019 and was valued at nil because the Company did not fully or partially guarantee the debts of this participating interest, and had no constructive obligation to support Affimed GmbH to pay its debt. The Company’s share in the negative equity value of Affimed GmbH also represented the accumulated losses of this participating interest on the reporting date. Following the capital contribution of €56,880 thousand which was financed by proceeds from the equity issuance (see note 37) the unrecognised loss from 2019 is recognised in 2020. 34. Receivables from/payables to subsidiaries These receivables and payables relate to Affimed GmbH and do not bear interest. 35. Other receivables These receivables relate primarily to VAT refunding. 36. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. 37. Equity As of December 31, 2020 the number of issued common shares is 98,287,333 with a par value of €0.01 per share. All issued shares are fully paid. Besides the minimum amount of share capital to be held under Dutch law, there are no distribution restrictions applicable to the equity of the Company. As the structure of the equity components for the Company financial statements is largely based on legal aspects, the presentation of the movement in shareholder’s equity is different from the presentation in the consolidated financial statements. The movement in shareholder’s equity is as follows: In € thousand Issued capital Share premium Other reserves Revalu- ation reserve Unappro -priated result Total equity January 1, 2019 624 135,365 (78,977) 2,594 (19,477) 40,129 Issue of common shares 138 31,208 Share issuance costs Exercise of share-based payments awards Allocation of accumulated losses - - - (2,306) 26 - - - - - - - - - 31,346 (2,306) 26 - - (19,477) - 19,477 Affimed Annual Report 2020 88 Net result Other comprehensive income Share-based payments - - - - - - - - 2,469 - (21,442) (21,442) (632) - - (632) - 2,469 December 31, 2019 762 164,293 (95,985) 1,962 (21,442) 49,590 January 1, 2020 762 164,293 (95,985) 1,962 (21,442) 49,590 Issue of common shares Share issuance costs Exercise of share-based payments awards Allocation of accumulated losses Net result Other comprehensive income Share-based payments 205 70,782 - 16 (2,441) 2,991 - - - (21,442) - - - - - - - 70,987 (2,441) 3,007 21,442 - - - - - - - - - - - 3,381 - (52,289) (52,289) (242) - - - (242) 3,381 December 31, 2020 983 235,625 (114,046) 1,720 (52,289) 71,993 Issued capital and share premium In May 2020, the Company implemented an at-the-market (“ATM”) program providing for the sales over time of up to $50,000,000 of its common shares. The Company issued approximately 12,5 million common shares under this ATM program, generating net proceeds of approximately €34,5 million. In November 2020, the Company implemented a new ATM program providing for additional sales over time of up to $75,000,000 of common shares. As of December 31, 2020 the Company had issued a further approximately 7.9 million shares, generating further approximate €34.5 million in net proceeds. In December 2020, Affimed filed a “shelf registration statement” with the SEC in order to offer and sell securities to the public in multiple, future offerings for up to $225,000,000. Other reserves The Company has adopted a share-based compensation plan (ESOP 2014), pursuant to which the Company’s directors, selected employees and consultants are granted the right to acquire common shares of the Company (note 19 of the consolidated financial statements). The share- based payment expenses are recorded in the profit and loss account. The ESOP 2014 plan is equity-settled. In case of an equity-settled plan, there is no obligation to transfer economic benefits, therefore the credit entry should be recognized as an increase in equity. The Company uses “Other reserves” as the equity classification. Affimed Annual Report 2020 89 Revaluation reserves Affimed GmbH holds preferred shares in Amphivena and common shares in Roivant Ltd, both these investments are recognized at their fair value through other comprehensive income. The initial recognition as of January 1, 2018 amounted to €7,325 thousand for Amphivena. The initial recognition as of November 3, 2020 amounted to € 17.1 million for Roivant Ltd. As of December 31, 2020, the accumulated changes in fair value amounted to a decrease of €5,633 thousand and an increase of €28 thousand, respectively. The Company uses “Revaluation reserves” as the equity classification (see also note 33). Unappropriated result The result after tax for 2020 is included in the unappropriated result. The company can only make payments to the shareholders and other parties entitled to the distributable profit in so far as the shareholders’ equity exceeds the paid-up and called-up part of the capital plus the legal reserves and statutory reserves under the articles of association to be maintained. Reconciliation of shareholder’s equity and net result per the consolidated financial statements with shareholder’s equity and net result per the Company financial statements As a result of the recording of the unrecognized prior year losses of Affimed GmbH (see note 33) there is a difference between the net result per the consolidated financial statements with the net result per the Company financial statements in 2020. These can be explained as follows: In € thousand Net result according to the consolidated profit and loss account Unrecognized share of the losses Affimed GmbH Total result according to the Affimed N.V. financial statements In € thousand Shareholders’ equity of Affimed N.V. according to the consolidated statement of financial position Differences Shareholders’ equity of Affimed N.V. according to the company-only statement of financial position December 31, 2020 (41,366) (10 923) (52,289) December 31, 2020 71.993 - 71,993 Affimed Annual Report 2020 90 38. Other current payables In € thousand Trade payables Social security and wage tax Payables due from the sale of carve out shares Other liabilities Total All current payables are short-term. December 31, 2020 December 31, 2019 1,133 1,122 1,147 86 3,488 909 201 - 43 1,153 The amount due from the sale of carve out shares relate to common shares transferred to certain beneficiaries in connection with a carve-out plan of Affimed N.V. outstanding immediately prior to the initial public offering. 39. Other result after taxation In € thousand Other income (service fee) General and administrative expenses Other gains/(losses) – net Net operating result Financial income Financial expense Net financial result Result before taxation Taxation Result after taxation 2020 2019 1,304 (9,935) 10 (8,621) - (3,764) (3,764) (12,385) - (12,385) 1,086 (7,676) 23 (6,567) 400 (954) (554) (7,121) - (7,121) The Company has entered into a service agreement with Affimed GmbH. The service fee includes the reimbursement of the net service expenses and a mark-up rate (at arms-length) on these net service expenses. 40. Employee benefits and number of employees The average number of employees during 2020 was approximately four employees and consisted of managing directors only. One managing director (Florian Fischer) passed away on February 1, 2020. The managing director’s compensation is shown in note 41. Affimed Annual Report 2020 91 41. Related-party transactions Director’s remuneration 2020 Managing directors (in € thousand) Adi Hoess Wolfgang Fischer Florian Fischer Andreas Harstrick Arndt Schottelius Angus Smith Total Periodically paid compensation Bonuses Total cash compensation 2014 Plan share-based payment expense1 Total share-based payment expense 493 237 730 625 625 419 155 574 324 324 90 60 150 76 76 256 101 357 159 159 306 116 422 179 183 76 1,747 745 259 2,492 291 1,654 179 291 1,654 Thomas Hecht Bernhard Ehmer Ulrich Grau 103 103 69 69 50 50 39 39 52 52 39 39 Annalisa Jenkins 18 18 Berndt Modig 27 27 28 28 7 7 Mathieu Simon 39 39 43 43 Ferdinand Verdonck 57 57 Harry Welten 18 18 Total 364 364 39 39 28 292 28 292 Supervisory directors (in € thousand) Periodically paid compensation Total cash compensation 2014 Plan share-based payment expense1 Total share-based payment expense Director’s remuneration 2019 Managing directors (in € thousand) Periodically paid compensation Bonuses Total cash compensation 2014 Plan share-based payment expense1 Total share-based payment expense Supervisory directors Hoess F. Fischer W. Fischer 474 156 630 686 686 360 94 454 317 317 402 103 505 367 367 Total 1,236 353 1,589 1,370 1,370 (in € thousand) Hecht Ehmer Grau Modig Simon Verdonck Total Periodically paid compensation Total cash compensation 2014 Plan share-based payment expense1 Total share-based payment expense 116 116 61 61 56 56 35 35 58 58 35 35 46 46 35 35 48 48 42 42 58 58 35 35 382 382 243 243 1 Expense related to the issuance of options under the 2014 Plan. Details of options granted are summarized in the table below. For further details and other information with regard to related-party transactions as well as Management and Supervisory Director’s compensation reference is made to note 25 of the consolidated financial statements.               Affimed Annual Report 2020 92 Stock options granted under the Equity Incentive Plan 2014 Awards granted in 2020 Managing directors  Beneficiary Grant date Number of options Strike price USD Expiration date Adi Hoess Wolfgang Fischer Andreas Harstrick Arndt Schottelius Angus Smith Total Supervisory directors August 4, 2020 August 4, 2020 March 1, 2020 April 20, 2020 July 13, 2020 350,000 190,000 200,000 275,000 350,000 1,365,000 3.80 3.80 2.36 2.30 4.41 August 4, 2030 August 4, 2030 March 1, 2030 April 20, 2030 July 13, 2030 Beneficiary Grant date Number of options Strike price USD Expiration date August 4, 2020 August 4, 2020 August 4, 2020 August 31, 2020 August 4, 2020 August 4, 2020 August 31, 2020 35,000 20,000 20,000 60,000 20,000 20,000 60,000 235,000 3.80 3.80 3.80 3.45 3.80 3.80 3.45 August 4, 2030 August 4, 2030 August 4, 2030 August 31, 2030 August 4, 2030 August 4, 2030 August 31, 2030 Thomas Hecht Bernhard Ehmer Ulrich M. Grau Annalisa Jenkins Mathieu Simon Ferdinand Verdonck Harry Welten Total Awards granted in 2019 Managing directors Beneficiary Grant date Number of options Strike price USD Expiration date Adi Hoess Florian Fischer Wolfgang Fischer Total June 25, 2019 June 25, 2019 June 25, 2019 360,000 160,000 160,000 680,000 2.91 2.91 2.91 June 25, 2029 June 25, 2029 June 25, 2029 Supervisory directors Beneficiary Grant date Number of options Strike price USD Expiration date Thomas Hecht Bernhard Ehmer Ulrich Grau Berndt Modig Mathieu Simon Ferdinand Verdonck Total June 25, 2019 June 25, 2019 June 25, 2019 June 25, 2019 June 25, 2019 June 25, 2019 35,000 20,000 20,000 20,000 20,000 20,000 135,000 2.91 June 25, 2029 2.91 June 25, 2029 2.91 June 25, 2029 2.91 June 25, 2029 2.91 June 25, 2029 2.91 June 25, 2029 Affimed Annual Report 2020 93 For further disclosure related to the stock options we refer to note 19 of the consolidated financial statements. The Company aims to meet its obligations by virtue of the granted option rights by issuing new shares (no purchase of treasury shares). 42. Audit fees With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the financial year have been charged by KPMG Accountants N.V. to the Company, its subsidiaries and other consolidated entities. (in € thousand) Audit of the financial statements Other audit engagements Tax-related advisory services Other non-audit services (in € thousand) Audit of the financial statements Other audit engagements Tax-related advisory services Other non-audit services 43. Subsequent events KPMG Accountants N.V. Other KPMG network Total KPMG 2020 2020 2020 60 - - - 60 302 68 - 1 371 362 68 - 1 431 KPMG Accountants N.V. Other KPMG network Total KPMG 2019 2019 2019 62 - - - 62 293 75 - - 368 355 75 - - 430 On January 15, 2021 Affimed N.V. issued 19,166,667 common shares at a price of $6.00 per share in a public offering and achieved gross proceeds before deducting underwriting discounts and commissions and estimated expenses of the offering of $115 million. In the first quarter of 2021, based upon information available as of the date of this filing, including information regarding the share prices of publicly listed companies, we expect, on a preliminary basis, that the value of Affimed GmbH’s investment in Roivant will decline by between $2.5 million and $3.5 million, before the impact of foreign exchange fluctuations. This estimate is subject to change based upon the completion of our procedures related to valuation of the investment. On May 3, 2021, Roivant announced a merger with Montes Archimedes Acquisition Corp. with a fully committed, concurrent $200 million PIPE financing transaction. Both transactions are expected to close in the third quarter of 2021. Based on the terms of the transactions, Affimed GmbH expects to further reduce the value of its investment in Roivant. Affimed Annual Report 2020 94 Signing of the financial statements May 20, 2021 Originally signed by: Management Board: Dr. Adi Hoess, CEO Dr. Wolfgang Fischer, COO Andreas Harstrick, CMO Arndt Schottelius, CSO Angus Smith, CFO Supervisory Board: Dr. Thomas Hecht, Chairman Dr. Bernhard Ehmer Dr. Ulrich Grau Dr. Annalisa Jenkins Dr. Mathieu Simon Ferdinand Verdonck Harry Welten Affimed Annual Report 2020 95 Other information Provisions in the Articles of Association governing the appropriation of profit The company’s Articles of Association provide under chapter 10 provisions about the appropriation of profit, the full text is as follows: Chapter 10 Profit and loss. Distributions on shares. Article 10.1. 10.1.1. The management board will keep a share premium reserve and profit reserve to which the shareholders are entitled. 10.1.2. The company may make distributions on shares only to the extent that its shareholders' equity exceeds the sum of the paid-up and called-up part of the capital and the reserves which must be maintained by law. 10.1.3. Distributions of profit, meaning the net earnings after taxes shown by the adopted annual accounts, shall be made after the adoption of the annual accounts from which it appears that they are permitted, entirely without prejudice to any of the other provisions of the articles of association. 10.1.4. The management board may resolve, with the approval of the supervisory board, to reserve the profits or part of the profits. 10.1.5. The profit remaining after application of article 10.1.4 shall be at the disposal of the general meeting. The general meeting may resolve to carry it to the reserves or to distribute it among the shareholders. 10.1.6. On a proposal of the management board - which proposal must be approved by the supervisory board -, the general meeting may resolve to distribute to the shareholders a dividend in the form of shares in the capital of the company instead of a cash payment. 10.1.7. Subject to the other provisions of this article 10.1 the general meeting may, on a proposal made by the management board which proposal is approved by the supervisory board, resolve to make distributions to the shareholders to the debit of one or several reserves which the company is not prohibited from distributing by virtue of the law. 10.1.8. No dividends on shares shall be paid to the company on shares which the company itself holds in its own capital or the depositary receipts issued for which are held by the company, unless such shares are encumbered with a right of use and enjoyment or pledge. 10.1.9. The management board is authorised to determine how a deficit appearing from the annual accounts will be accounted for. Interim distributions. Article 10.2. 10.2.1. The management board may resolve with the approval of the supervisory board, to make interim distributions to the shareholders if an interim statement of assets and liabilities shows that the requirement of article 10.1.2 has been met. 10.2.2. The interim statement of assets and liabilities shall relate to the condition of the assets and liabilities on a date no earlier than the first day of the third month preceding the month in which the resolution to distribute is published. It shall be Affimed Annual Report 2020 96 prepared on the basis of generally acceptable valuation methods. The amounts to be reserved under the law and the articles of association shall be included in the statement of assets and liabilities. It shall be signed by the managing directors and supervisory directors. If one or more of their signatures are missing, this absence and the reason for this absence shall be stated. 10.2.3. Any proposal for distribution of a dividend on shares and any resolution to distribute an interim dividend on shares shall immediately be published by the management board in accordance with the applicable stock exchange regulations at the company's request. The notification shall specify the date when and the place where the dividend shall be payable or - in the case of a proposal for distribution of dividend - is expected to be made payable. 10.2.4. Dividends shall be payable no later than thirty (30) days after the date when they were declared, unless the body declaring the dividend determines a different date. 10.2.5. Dividends which have not been claimed upon the expiry of five (5) years and one (1) day after the date when they became payable shall be forfeited to the company and shall be carried to the reserves. 10.2.6. The management board may determine that distributions on shares shall be made payable either in euro or in another currency. Branch offices Affimed N.V. operates through the following branch offices (direct or indirect wholly owned subsidiaries): - Affimed GmbH, Germany - Affimed Inc., USA - AbCheck s.r.o., Czech Republic Other participation - Amphivena Therapeutics Inc., USA (participation of ca. 4%) Independent auditor’s report The independent auditor’s report is set forth on the following pages. Independent auditor's report To: the General Meeting of Shareholders and the Supervisory Board of Affimed N.V. Report on the audit of the financial statements 2020 included in the annual report Our opinion In our opinion: — the accompanying consolidated financial statements give a true and fair view of the financial position of Affimed N.V. as at 31 December 2020 and of its result and its cash flows for the year 2020, in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. — the accompanying company financial statements give a true and fair view of the financial position of Affimed N.V.as at 31 December 2020 and of its result for the year 2020 then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. What we have audited We have audited the financial statements 2020 of Affimed N.V. based in Amsterdam. The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise: 1 2 3 the consolidated statement of financial position as at 31 December 2020; the following consolidated statements for the year 2020: the statements of comprehensive loss, the statement of cash flows and the statement of changes in equity; and the notes comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise: 1 2 3 the company balance sheet as at 31 December 2020; the company profit and loss account for the year 2020; and the notes comprising a summary of the accounting policies and other explanatory information. Basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report. We are independent of Affimed N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics). We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Audit approach Summary Materiality — Materiality of EUR 648 thousand — 0,4% of total assets Group audit — 99% of total assets — 98% of revenue Key audit matters — Revenue recognition of the collaboration agreement with Genentech Inc. and Roivant Sciences Ltd. — Valuation of shares held in unlisted equity investments in Roivant Sciences Ltd. and Amphivena Therapeutics Inc. Opinion Unqualified Materiality Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 648 thousand (2019: EUR 460 thousand). The materiality is determined with reference to the total assets (0,4%). We consider total assets as the most appropriate benchmark because Affimed N.V. (hereafter: the Company) is currently in its research and development phase and thus is predominantly focussed on asset development/capital expenditure. Materiality increased compared to last year due to the increase of the total assets which relates to the additional funding’s received in current year. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons. We agreed with the Management Board and the Supervisory Board that misstatements in excess of EUR 32 thousand which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds. Scope of the group audit Affimed N.V. is at the head of a group of components. The financial information of this group is included in the financial statements of Affimed N.V. Our group audit mainly focused on significant components that are (i) of individual financial significance to the group, or (ii) that, due to their specific nature or circumstances, are likely to include significant risks of material misstatement of the financial statements. We have: — performed audit procedures at group level in respect of the company financial statements; — made use of the work of KPMG Germany for the audit of the components that are significant to the group. We have sent detailed instructions to KPMG Germany, covering significant areas including the relevant risks of material misstatement and set out the information required to be reported to the group audit team. In order to be sufficiently involved in the several component auditor’s phases, we had communication with KPMG Germany to our satisfaction through instructions, exchange of mails and virtual meetings (conference calls) and also performed a remote file review. By performing the procedures mentioned above at group components, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the financial statements. By performing the audit of the complete reporting package we covered 99% of total assets and 98% of revenue. Our focus on the risk of fraud and non-compliance with laws and regulations Our objectives The objectives of our audit with respect to fraud and non-compliance with laws and regulations are: With respect to fraud: — to identify and assess the risks of material misstatement of the financial statements due to fraud; — to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate audit responses; and — to respond appropriately to fraud or suspected fraud identified during the audit. With respect to non-compliance with laws and regulations: — to identify and assess the risk of material misstatement of the financial statements due to non-compliance with laws and regulations; and — to obtain a high (but not absolute) level of assurance that the financial statements, taken as a whole, are free from material misstatement, whether due to fraud or error when considering the applicable legal and regulatory framework. The primary responsibility for the prevention and detection of fraud and non-compliance with laws and regulations lies with the Management Board with oversight by the Supervisory Board. Our risk assessment As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption. We, together with our forensics specialists evaluated the fraud risk factors to consider whether those factors indicated a risk of material misstatement due to fraud. In addition, we performed procedures to obtain an understanding of the legal and regulatory frameworks that are applicable to the Company and we inquired the Management Board and the Supervisory Board as to whether the entity is in compliance with such laws and regulations and inspected correspondence, if any, with relevant licensing and regulatory authorities. The potential effect of the identified laws and regulations on the financial statements varies considerably. Firstly, the Company is subject to laws and regulations that directly affect the financial statements, including taxation and financial reporting. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items and therefore no additional audit response is necessary. Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have an indirect material effect on amounts recognized or disclosures provided in the financial statements, or both, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an indirect effect: — sector specific laws and regulations (reflecting the healthcare legislation including various drug approval processes); — employment legislation (reflecting the Company’s significant and geographically diverse work force); — health and safety regulation (reflecting the nature of the Company’s (R&D) operations); — environmental regulation (reflecting environmental impact restrictions, waste and contamination related to the Company’s (R&D) operations). In accordance with the auditing standards we evaluated the following fraud and non-compliance risks that are relevant to our audit, including the relevant presumed risks: — revenue recognition of collaboration agreement with Genentech Inc. and Roivant Sciences Ltd.; — valuation of shares held in unlisted equity investments in Roivant Sciences Ltd. and Amphivena Therapeutics Inc.; — management override of controls (a presumed risk). We communicated the identified risks of fraud and non-compliance with laws and regulations throughout our team and remained alert to any indications of fraud and/or non-compliance throughout the audit. This included communication from the group to component audit teams of relevant risks of fraud and/or non-compliance with laws and regulations identified at group level. In all of our audits, we addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by management that may represent a risk of material misstatement due to fraud. We refer to the key audit matters (revenue recognition and valuation of shares held in unlisted equity investments), that are examples of our approach related to areas of higher risk due to accounting estimates where management makes significant judgements. We communicated our risk assessment and audit response to the Board of Management and the Supervisory Board. Our audit procedures differ from a specific forensic fraud investigation, which investigation often has a more in-depth character. Our response We performed the following audit procedures (not limited) to respond to the assessed risks: — we evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness of internal controls that mitigate fraud risks; — we performed data analysis of high-risk journal entries and evaluated key estimates and judgements for bias by the Company, including retrospective reviews of prior year's estimates. Where we identified instances of unexpected journal entries or other risks through our data analytics, we performed additional audit procedures to address each identified risk. These procedures also included testing of transactions back to source information; — assessment of matters reported on the Company’s complaints procedures and results of management's investigation of such matters; — with respect to the risk of fraud in revenue recognition we refer to the first key audit matter; — with respect to the risk of bribery and corruption across various countries, we evaluated the Company's controls and procedures such as due diligence procedures on third parties. We considered the possibility of fraudulent or corrupt payments made through third parties including agents and conducted detailed testing on third-party vendors in high-risk jurisdictions; — we considered the outcome of our other audit procedures and evaluated whether any findings or misstatements were indicative of fraud or non-compliance. If so, we re-evaluated our assessment of relevant risks and its resulting impact on our audit procedures; — we obtained audit evidence regarding compliance with the provisions of those laws and regulations generally recognized to have a direct effect on the determination of material amounts and disclosures in the financial statements; — we assessed side functions of the Board of Directors with special attention to procedures, governance and payments done (also in view of possible conflicting interests). We do note that our audit is based on the procedures described in line with applicable auditing standards. In addition to the requirements of the auditing standards we have performed the following additional procedures: — investigation into publicly held information in relation to negative publicity. Our procedures to address identified risks of fraud and related to non-compliance with laws and regulations resulted in the two key audit matters reported in our auditor’s report. We do note that our audit is not primarily designed to detect fraud and non-compliance with laws and regulations and that management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to errors or fraud, including compliance with laws and regulations. The more distant non-compliance with indirect laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Board of Directors and the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Compared to last year the key audit matter with respect to completeness of accruals and related research and development expenses is not included considering the limited amount of suppliers involved and the application of detailed research plans. Furthermore, compared to last year the key audit matter with respect to the valuation of shares held in unlisted equity investments has been added related to the fact the Company obtained shares of Roivant Sciences Ltd. in 2020. Revenue recognition of collaboration agreement with Genentech Inc. and Roivant Sciences Ltd. Description There is a risk due to fraud and error that collaboration agreements with Genentech Inc. (hereafter: Genentech) and Roivant Sciences Ltd. (hereafter: Roivant), as disclosed in note 9 (Revenue), were not accounted for properly which could lead to inappropriate financial reporting. According to the existing collaboration agreement Affimed N.V. may be eligible to receive up to USD 5.0 billion in additional milestone payments over time, including payments upon achievement of specified development, regulatory and commercial milestones, and royalties on sales. Furthermore Affimed N.V. entered in 2020 into a new licensing and strategic collaboration with Roivant Sciences under which Affimed N.V. has received USD 60 million in upfront consideration, comprised of USD 40 million in cash and pre-paid R&D funding, and USD 20 million of newly issued shares in Roivant. Pursuant to the agreement, Affimed N.V. will be primarily responsible for driving the discovery and research phases of molecule development through filing of the IND. Accounting for both the Genentech as Roivant collaboration agreements involves amounts that are very material to the Company’s financial statements, and will require the appropriate technical expertise and the application of significant judgment and estimates by management. Furthermore, there is a general presumption in auditing standards that a material misstatement due to fraudulent financial reporting relating to revenue recognition may result from an overstatement of revenues through, for example, premature revenue recognition. The significant risk on fraud and error due to revenue recognition relating to the Genentech and Roivant collaboration agreement relates to the: — identification of the performance obligation – risk of error that performance obligation in a contract are not completely and accurately identified; — allocation of the transaction price to performance obligations – risk of error that the transaction price, including variable considerations and discounts, is not accurately allocated to each performance obligation; — furthermore, we identified a significant risk of fraud and error that revenues from Genentech and Roivant collaboration agreement may be overstated. The risk of fraud results from the pressure that management may have to achieve performance targets at the reporting period-end, due to manipulation of the timing of revenue recognition on the method and the measure of progress used to recognized revenue for each identified performance obligation. The risk of error relates to the significant estimate on measuring the progress of a performance obligation satisfied over time in which the risk arises that incurred costs that do not contribute to the progress in satisfying the performance obligations are improperly included in measuring the progress. The employee costs to complete the exclusive targets is a key estimation that give rise to a significant risk on inappropriate revenue recognition in order to overstate the percentage of completion calculation. Our response In order to address the identified risk of error and risk of fraud as described above, we obtained an understanding from the collaboration agreements of Roivant and Genentech and of the developments over the year of the agreement as well as the progress of the activities. Further, we obtained an understanding of the design of controls implemented and tested the effectiveness of certain controls to ensure proper accounting for the agreement in accordance with the applicable financial reporting framework. Our substantive audit procedures comprised, amongst others, of obtaining and evaluating the audit evidence of the Company’s: — identification of the parties respective performance obligations; — determination of the transaction price, including potential variable considerations and discount; — assumptions used to allocate the transaction price to separate performance obligations; — determination of when performance obligations have been satisfied and timing of revenue should be recognized, including the analysis of related journal entries; — assessment and evaluation of the accounting regarding the in 2020 settled Roivant agreement based on five-steps model of IFRS 15 prepared by Company’s specialist; — obtaining external confirmation from Genentech and Roivant regarding the budget and stage of progress of the targets in order to determine if the performance obligations is fully satisfied and that we can agree with the recognized revenue in the reporting period associated with this performance obligation; determination the accuracy of the remaining contractual liabilities; — assessing the disclosures in the consolidated financial statements in respect of the revenue recognition principles with reference to the requirements of the prevailing accounting standards. Our observation The results of our procedures were satisfactory. Valuation of shares held in unlisted equity investments in Roivant Sciences Ltd. and Amphivena Therapeutics Inc. Description As disclosed in note 7 the valuation of the unlisted shares of Roivant and Amphivena is based on external input parameters (level 3), including information obtained from Roivant/Amphivena and from publicly available sources. As a result we identified the following significant risk of error that: — an inaccurate amount is estimated and recorded for the fair value of financial assets at fair value through OCI at or subsequent to initial recognition; — subsequent changes to Roivant’s and/or Amphivena’s identifiable assets and liabilities are not appropriately identified; — an inappropriate amount is estimated for Affimed’s share in the net fair value of Roivant’s either Amphivena’s identifiable assets and liabilities. Specifically, the following elements included within the estimate give rise to a significant risk: — assumptions and parameters used in deriving the initial fair value; — data, assumptions and parameters used in rolling forward their fair value from the initial valuation to the balance sheet data (including changes in fair value of Roivant’s and/or Amphivena’s identifiable assets). Our response In order to address the identified risk, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s fair value valuation process on the shares held in Roivant and Amphivena. This included controls related to the: — significant observable model inputs and assumptions, including their development and application, and the monitoring of changes to the inputs and assumptions; and — the relevance and reliability of observables inputs available at the time. Furthermore, we tested management’s ability to produce a fair value estimate compliant with IFRS. This was accomplished by: — testing the Company’s process for developing the estimate, including inputs and assumptions; — testing the source and the reliability of evidence used in determining the Company’s assumptions, and — evaluating this assumptions in the light of historical and market information. Finally, we assess the disclosures in the consolidated financial statements in respect of the relevant estimate with reference to the requirements of the prevailing accounting standards. Our observation The results of our testing were satisfactory. Report on the other information included in the annual report In addition to the financial statements and our auditor’s report thereon, the annual report contains other information. Based on the following procedures performed, we conclude that the other information: — is consistent with the financial statements and does not contain material misstatements; and — contains the information as required by Part 9 of Book 2 of the Dutch Civil Code. We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less than the scope of those performed in our audit of the financial statements. Affimed N.V. is responsible for the preparation of the other information, including the information as required by Part 9 of Book 2 of the Dutch Civil Code. Engagement We were engaged by the general meeting of shareholders as auditor of Affimed N.V. on 4 August 2020, as of the audit for the year 2020 and have operated as statutory auditor ever since that financial year 2014. Description of responsibilities regarding the financial statements Responsibilities of the Board of Directors and the Supervisory Board for the financial statements The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Board of Directors is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Board of Directors should prepare the financial statements using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements. The Supervisory Board is responsible for overseeing Company’s financial reporting process. Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. A further description of our responsibilities for the audit of the financial statements is included in appendix of this auditor's report. This description forms part of our auditor’s report. Zwolle, 21 May 2021 KPMG Accountants N.V. J.J. van den Berg RA Appendix: Description of our responsibilities for the audit of the financial statements Appendix Description of our responsibilities for the audit of the financial statements We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others: — identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the risk resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; — obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control; — evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors; — concluding on the appropriateness of the Board of Director’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Board of Director’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern; — evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and — evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We are solely responsible for the opinion and therefore responsible to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the financial statements. In this respect we are also responsible for directing, supervising and performing the group audit. We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. 

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