Corporate governance principles

Biotie Therapies Corp. (hereafter, the “Company or Biotie”) is a public Finnish limited liability company which complies with the Finnish Companies Act, Securities Market Act, Accounting Act, the rules of NASDAQ OMX Helsinki Ltd as well as the Company’s Articles of Association. In addition, Biotie complies with the Finnish Corporate Governance Code

The Company departs from the recommendations of the Code as follows:
- in deviation from recommendation 43 of the Code, member of the Board of Directors Guido Magni holds options entitling to shares in the Company. The options relate to Synosia Therapeutics Holding AG’s (currently Biotie Therapies Holding AG) option program and were granted prior to the acquisition of Synosia Therapeutics Holding AG by Biotie.

Group structure

The parent company of the group is Biotie Therapies Corp. The domicile of the Company is Turku, Finland. The company has an operative subsidiary Biotie Therapies Inc, located in San Francisco, United States of America and a holding subsidiary, Biotie Therapies Holding AG, located in Basel, Switzerland, which has an operative subsidiary, Biotie Therapies AG, located in Basel, Switzerland.

The Group also has two non-operational subsidiaries named Biotie Therapies GmbH, located in Radebeul, Germany and Biotie Therapies International Ltd in Finland.

General Meeting

The highest decision-making power in Biotie is exercised by the Company’s shareholders at General Meetings, in which the shareholders may exercise their right to speak, ask questions and vote.

The Annual General Meeting is held by the end of June each year and it handles the matters that fall under its authority according to the Articles of Association as well as any matters proposed to a General Meeting. Biotie’s Annual General Meeting has usually been held in March or April. Extraordinary General Meetings are convened if needed to handle specific matters proposed to a General Meeting.

Usually General Meetings handle the matters placed on its agenda by the Board of Directors. According to the Finnish Companies Act, shareholders also may request to the company’s Board of Directors to place a matter on the agenda of the next General Meeting. The Company states well in advance on its website the date by which a shareholder must declare his or her demands for matters to be dealt with at the Annual General Meeting. The demand is always deemed to have arrived in sufficient time, if the Board has been notified of the demand four weeks before the delivery of the notice of the General Meeting at the latest.

Shareholders holding a minimum of 10% of all shares and the company’s auditor, may request the handling of a specified matter at a General Meeting, which the Board of Directors shall then convene.

Major matters subject to the decision-making power of a General Meeting include:

- amendments to the Articles of Association

- increases or decreases in share capital

- decisions on the number, election and remuneration of Directors

- adoption of the financial statements

- distribution of profits / allocation of losses.

Summons to the General Meeting

The shareholders of the Company are summoned to the General Meeting by publishing the summons on the company's website. The summons shall be published not earlier than two (2) months before the last registration date mentioned in the summons and not later than three (3) weeks prior to the date of the meeting. In addition, the Board of Directors shall publish a summary notice of the General Meeting in one or more national daily newspapers, or by sending the notice of the General meeting as a registered letter or other verifiable way to the shareholders' address, which is registered in the share register. The summons shall state the matters to be handled at the General Meeting and other information required in Finnish Companies Act and Corporate Governance Code.

The summons and the proposals of the Board of Directors to the General Meeting are also published by means of a stock exchange release.

The summons to the General Meeting and the following information shall be made available on the Company´s website at least 21 days before the General Meeting:

-Total number of shares and voting rights according to classes of shares at the date of the notice is disclosed in the summons.

- Documents to be submitted to the General Meeting

- Resolution proposals to the General Meeting

- An introduction of possible candidates for election to the Board of Directors

- The proposal for the election of the external auditor is disclosed in the summons.

Attendance

The Board of Directors may decide that the shareholders may participate in the General Meeting by post or telecommunications or by other technical means.

Shareholders who have registered eight (8) working days before the General Meeting in the Company’s shareholders register kept by Euroclear Finland Ltd have the right to attend the General Meeting and exercise their voting (and other shareholder´s) rights. Shareholders may exercise their rights at the General Meeting either in person or through an authorized proxy representative. A shareholder may have several proxy representatives, who represent the shareholder with shares on different book-entry accounts. When registering for the General Meeting, the shares on the basis of which each proxy representative represents the shareholder must be declared.

The minutes of the General Meeting including the voting results and any appendices that are part of a decision made by the General Meeting shall be posted on the Company website within two weeks after the General Meeting. The decisions of the General Meeting are  are also published by means of a stock exchange release immediately after the General Meeting. The documents related to the General Meeting shall be available on the Company´s website at least for three months after the general meeting.

Attendance of the members of the Board and the Managing Director

The Managing Director, the chairman of the Board and a sufficient number of the members of the Board and its committees shall attend the General Meeting. In addition, the auditor shall be present at the Annual General Meeting. A candidate proposed for the first time to be elected to the Board shall participate in the General Meeting that decides on his or her election unless there are well-founded reasons for the absence.

Decision-making

Biotie has only one series of shares, which entitle its holders to one vote per share owned at the General Meeting. The shareholder may vote with different shares in a different manner, unless the Articles of Association stipulate otherwise. A shareholder may also vote with only part of his or her shares. Most resolutions by the General Meeting require a simple majority of the votes cast at the meeting. In an election, the person receiving the highest number of votes shall be deemed elected. The General Meeting may, however, prior to an election, decide that to be elected, a person shall receive more than half of the votes cast. However, there are several matters, which according to the Finnish Companies Act require a 2/3 majority of the votes cast and of the shares represented at the meeting.

The Articles of Association of Biotie include no redemption clauses or voting limitations.

For more information on shareholders´ meetings

ADMINISTRATION:

Board of Directors

Composition and term

Under the Articles of Association, the Board of Directors consists of at least three (3) and at most ten (10) members. The members of the Board are elected by the Annual General Meeting of the shareholders and the term of office of the Board members expires at the end of the Annual General Meeting following their election.

The Articles of Association set no limitations regarding the number of terms that Directors may serve, nor do they restrict in any other way the decision-making power of the General Meeting in electing Board members. However, the General Meeting shall take into account all recommendations stipulated by the Corporate Governance Code regarding the composition of the Board of Directors, especially with regards to meeting the independence and other requirements applicable to publicly listed companies in Finland. The Board of Directors elects one of its members as the Chairman of the Board and a possible deputy. The Managing Director of the company cannot be elected as the Chairman of the Board of Directors.

Current composition of the Board of Directors (Annual General Meeting 29 March 2012)

The number of the members of the Board of Directors was resolved to be seven. The following current members of the Board of Directors Peter Fellner, William M. Burns, Merja Karhapää, Bernd Kastler, Ismail Kola, Guido Magni and James S. Shannon were elected as the members of the Board of Directors for a new term.

The duties of the Company's Board of Directors are set forth in the Companies Act and other applicable legislation. The Board of Directors is responsible for the management of the company. Its responsibilities include, inter alia, to:

- decide on the strategy

- confirm the business plan and budget

- deliberate on and approve interim reports, the annual accounts and the Board’s reports as well as the corporate governance statement

- decide on investments (as far as not approved as part of the budget), mergers and acquisitions as well as divestments (as far as not falling into the responsibility of the shareholder) and on all creations of actual or potential liabilities (as far as not approved as part of the budget)

- confirm internal control and risk management systems and reporting procedures

- decide on bonus and incentive schemes for the management (as far as not falling into the responsibility of the shareholders)

- decide on the structure of the Group and the organisation of the Company

and

- appoint the Managing Director and the other senior members of the executive management as well as to decide on their perquisites.

The Board of Directors held 15 meetings during 2011. The average ratio of attendance at the meetings was 84.4 percent.

Biotie does not have a supervisory board.

Decision-making

Meetings of the Board of Directors are convened by its chairman. The Board of Directors constitutes a quorum when more than half of the members are present. The Board of Directors is always obliged to act in the Company’s interests and in such a way that its acts or measures are not likely to produce unjustified benefit to any shareholder or other third party at the cost of the Company or another shareholder. A Board member is disqualified from participating in the handling of a matter pertaining to a contract or other transaction between the Board member and the Company or of such matter where the member is to derive an essential benefit and that benefit may be contrary to the interests of the Company. When votes are cast, the majority opinion will be the Board’s decision and, in the case of a tie, the Chairman will have the casting vote.

Meeting practice

The Board of Directors shall convene as frequently as necessary to discharge its responsibilities. The Managing Director ensures that the Board is provided with sufficient information to assess the operations and financial situation of the group. The secretary of the Board of Directors is Mr. Mikko Heinonen from Hannes Snellman Attorneys Ltd.

The Board of Directors conducts annual performance self-evaluations.

Audit Committee

The Audit Committee has been established by the Board to ensure the overseeing of the accounting, auditing and financial reporting processes. The Audit Committee consists of the committee’s Chairperson and at least two (2) additional members, who are all annually appointed after the Annual General Meeting by the Board among its members. The committee members shall be independent of the Company and at least one member shall be independent of significant shareholders.

The Audit Committee shall:

- monitor the reporting process of financial statements

- supervise the financial reporting process

- monitor the efficiency of the company’s internal control and risk management systems

- initiate and oversee internal financial audits

- review the description of the main features of the internal control and risk management systems pertaining to the financial reporting process, which is included in the company’s corporate governance statement

- monitor the disclosure controls and procedures

- evaluate and monitor arrangements for the employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters (“whistle blowing”) and respond to any requests by employees and third parties in relation  to the Company’s disclosure policy

- monitor the statutory audit of the financial statements and audit of consolidated financial statements

- evaluate the independence of the statutory auditor or audit firm, particularly the provision of related services to the Company to be audited

and

- prepare the proposal for resolution on the election of the auditor.

In 2011, The Audit Committee held five meetings. The average ratio of attendance at the meetings was 85 percent.

The Audit Committee members in 2011 were Bernd Kastler (Chairman), Merja Karhapää, Riku Rautsola (until 6 February 2011), Andrew J. Schwab (from 7 February 2011)  and Piet Serrure.
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Annual General Meeting (March 29, 2012)

Bernd Kastler was elected as the Chairman and Merja Karhapää and James S. Shannon as the members of the Board's Audit Committee.

Biotie announced on 2 May 2012 that Dr. James S. Shannon has notified the company that he will resign from the Board of Directors of Biotie, effective immediately.

As a consequence, the Board of Directors in its meeting of 3 May 2012 appointed Guido Magni as a member of the Audit Committee. The composition of the committee after the nomination is Bernd Kastler as Chairman and Merja Karhapää and Guido Magni as members.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee has been established to ensure the efficient preparation of nomination and remuneration matters.

The committee consists of the committee’s Chairperson and at least two (2) additional members who all are annually appointed after the Annual General Meeting by the Board among its members. The majority of the members of the committee shall be independent of the company. The managing director or other executives of the company may not be appointed to the Committee.

When carrying out its duties, the Nomination and Remuneration Committee shall act independently. If the committee uses an external advisor, the committee must see to it that the advisor does not advise the human resources department or the operative management at the same time.

The Nomination and Remuneration Committee shall

-prepare and present a recommendation to the Board for the proposal to the Annual General Meeting concerning the composition and compensation of the Board.

- prepare for the Board the appointment of any executive directors or other senior members of the executive management. When considering the appointment of the other members of the executive management, the managing director of the Company shall participate to the handling of such matters.

- prepare the framework for remuneration of the Company’s managing director, the executive directors and such other members of the executive management as it is designated to consider. No Board member, director or manager shall be involved in any decisions as to their own remuneration.

- assess the need for bonus or other incentive programs as well as review design of the group’s compensations schemes and determine targets for any performance related compensation schemes.

- prepare the policy for authorising claims for expenses from the managing director and Chairperson of the Board.

- prepare the annual self-evaluation, including its nature and manner, to be conducted in accordance with the rules and procedure of the Board of Directors.

In 2011, the Nomination and Remuneration Committee held four meeting. The average ratio of attendance at the meetings was 86.7 percent.

The Nomination and Remuneration Committee members in 2011 were Peter Fellner (Chairman,), Bradley J. Bolzon (from 7  February 2011), William M. Burns (from 7 February 2011), Pauli Marttila (until 6 February 2011) and, James S. Shannon.
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Annual General Meeting (March 29, 2012)

Peter Fellner was elected as the Chairman and William M. Burns and James S. Shannon as the members of the Nomination and Remuneration Committee

Biotie announced on 2 May 2012 that Dr. James S. Shannon has notified the company that he will resign from the Board of Directors of Biotie, effective immediately.

Managing Director

The Managing Director is responsible for the day-to-day management of the Group in accordance with the instructions and guidance given by the Board of Directors and ensuring that the accounting practices of the Group comply with the law and that the financial management of the group has been arranged in a reliable manner.

The Managing Director primarily presents the matters handled in Board meetings and is responsible for preparing draft resolutions. The Board of Directors elects the Managing Director and decides on the remuneration of the Managing Director and on other terms of the Managing Director contract on the basis of the recommendations by the Nomination and Remuneration Committee of the Board. The terms of duty of the Managing Director have been agreed on in writing. The Managing Director is elected for an indefinite term until further notice.

Management team

Biotie group has a management team consisting of Timo Veromaa (President and CEO), Ian Massey (Chief Operating Officer and President of US operations), Chris Piggott (Chief Business Officer), Stephen Bandak (Chief Medical Officer), and Panu Miettinen (Chief Financial Officer from 15 March 2011).

More information

The management team members handle the issues that concern managing of the group in their respective areas and on the basis of the guidance provided by the Board of Directors.

The management team assists the Managing Director in running the Company. The management team members prepare matters that are to be put before the Board of Directors for decision-making, e.g. the Company's strategies, budgets and policies as well as significant acquisitions and divestments. In addition, the management team handles matters pertaining to reporting, internal and external communication, personnel development, hiring of employees and their terms of employment as well as investor relations. The management team has no formal status under company law.

Remuneration

Remuneration schemes are drawn up in such a manner that their goal is to promote competitiveness and long-term financial success of the Company and to contribute to the favorable development of shareholder value. Remuneration schemes are based on predetermined and measurable performance and result criteria.

The General Meeting decides on the remuneration payable for Board and committee work as well as the basis for its determination. The Board of Directors decides on the basis of the recommendation by the Nomination and Remuneration Committee on the remuneration of the Managing Director as well as other compensation payable to him or her.

Annual General Meeting (March 29, 2012)

The General Meeting resolved that the remuneration payable to the Chairman of the Board of Directors shall be EUR 4,000 per month and to other Board members EUR 3,000 per month. In addition, reasonable travelling expenses for the meetings shall be compensated.

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Internal control and risk management in Biotie

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Disclosure Policy

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Insider Administration

Biotie’s insider rules fully observe the insider guidelines issued by NASDAQ OMX Helsinki Ltd. Biotie’s insider rules are regularly updated and compliance therewith monitored on an ongoing basis. Biotie has appointed Timo Veromaa, President and CEO as insider officer.

Information on shareholding data of public insiders is accessible via Euroclear Finland Ltd and available on Biotie’s website (www. biotie.com) more information. Biotie’s insider rules stipulate that all members of the Board of Directors, the Managing Director and the Group auditors are considered to be public insiders. All other members of the management team, the secretary to the Board of Directors and certain key employees of the Company are registered as permanent company-specific insiders within the Company.

Trading in any kind of securities or derivatives related to the Company is limited for all permanent insiders of Biotie. Three principal rules govern trading by the permanent insiders: (i) trading is generally permitted only during the four-week period starting drom the date  following the date of publication of the annual results or of an interim report (the ”Open Window”); (ii) trading may exceptionally be permitted outside of the Open Window upon prior approval Biotie’s insider officer; (iii) trading is always prohibited during the two week period preceding the release of the annual results and interim reports, and on the date of publication itself (the ”Closed Window”). In addition, specific trading restrictions apply to project specific insiders.

The Company´s insider administration is included in the Sire-system of Euroclear Finland Ltd. Visiting address of the public insiders register is Euroclear Finland Ltd, Urho Kekkosen katu 5 C, 00100 Helsinki.

Audit

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Shareholders’ Agreements

Biotie is not aware of any shareholders’ agreements regarding the Company.

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Updated May 8, 2012