BOARD OF MANAGEMENT

Tasks and Responsibilities

The Board of Management of SURTECO SE manages the company with the objective of generating long-term organic Economic Value Added. It performs its duty independently and in the interests of the company, and takes into account the requirements of its shareholders, its employees and the Groups affiliated with the company (stakeholders) with the objective of generating long-term Economic Value Added. The Board of Management develops the strategic direction of the company, agrees it with the Supervisory Board and implements the strategy. It ensures compliance with the statutory regulations and internal company guidelines and ensures that they are observed by the Group companies. In addition, it establishes an appropriate system of risk management and risk controlling in the company. The Board of Management has also implemented a Code of Conduct for the SURTECO Group beyond the statutory requirements. The code contains additional regulations governing cooperation within the company and with respect to business partners and third parties. The Board of Management takes account of diversity when making appointments to management positions within the company and in particular seeks to achieve reasonable representation of women.

Composition

The Board of Management comprises two members. Rules of procedure govern the allocation of business and cooperation in the Board of Management.

Compensation report of the Board of Management

This report describes the compensation system for the Board of Management and explaining the structure and the Ievel of compensation for individual Members of the Board of Management. lt takes into account the recommendations of the German Corporate Governance Code and observes the requirements of the German Commercial Code (HGB), the legislation about the disclosure of executive compensation (Act on the Disclosure of Management Board Compensation, VorstOG) that came into force on 11 August 2005, and the legislation on the reasonableness of executive pay (Act on the Appropriateness of Executive Compensation Act, VorstAG) that came into force on 5 August 2009.

Definition and review of the compensation structure
The compensation structure and the Ievel of compensation of the Members of the Board of Management are defined on the basis of the proposal of the Supervisory Board 's Personnel Committee and are regularly reviewed. The existing compensation system establishes a Ievel of remuneration appropriate to the activity and responsibility of the Members of the Board of Management. Alongside the functions of the individual Members of the Board of Management and their personal performance, further factors taken into account include the economic situation, the success and future prospects of the company, and the commensurability of the compensation in view of the comparative environment and the compensation structure otherwise applicable within the SURTECO Group. The Supervisory Board reviewed the compensation system against the background of the Act on the Appropriateness of Management Board Compensation (VorstAG) that came into force on 5 August 2009 with the assistance of external expert advisers and came to the conclusion the system is compliant with the applicable statutory regulations and the recommendations of the German Corporate Governance Code. The compensation system is described below for the reporting year.

Compensation elements
The total cash compensation is comprised of a fixed compensation (basic salary) that is independent of any performance element and a performance-based variable component (bonus). The compensation for Members of the Board of Management also includes non-cash benefits and other payments.

Basic salary
The relevant basic salary of the Members of the Board of Management is paid in equal monthly instalments.
The salary for the Chairman of the Board of Management, Mr. Friedhelm Päfgen, and for Board Member Dr.-lng. Herbert Müller in each case amounted to € 252,000.00 p.a. during the reporting period. Neither of the Members of the Board of Management had undertaken separately remunerated functions as executive officers at the consolidated subsidiary companies.

Bonuses
The remuneration system applicable for the reporting period on the basis of current contracts of service defines a variable bonus which the Supervisory Board defines using equitable discretion and on the basis of the consolidated earnings before taxes (EBT)- adjusted by any additions/curtailments- in accordance with IFRS, taking account of the return on sales. The variable bonus is directed towards the long term and sustainability. This is achieved by deducting any lass from ordinary activities incurred in any one business year from the applicable basis of assessment for the variable bonus in the subsequent business years until the shortfall has been settled. The bonus assessment is therefore based on a reference period of several years. ln each case, the bonus for the business year under review falls due at the end of the subsequent ordinary Annual General Meeting of SURTECO SE.

Non-cash benefits and other payments
The Members of the Board of Management receive fringe benefits in the form of non-cash benefits that fundamentally entail values to be recognized from the tax guidelines for use of a company car and various insurance premiums, as well as payments for provision of surviving dependents. The Board Member Dr.-lng . Herbert Müller receives an allowance amounting to € 50,000 (since 1 September 2011 € 100,000 p.a.) for private retirement provision. To the extent that the company does not have to pay employer contributions for the members of the Board of Management, each Member of the Board of Management receives an additional remuneration amounting to the relevant employer contributions that have been saved.

D&O insurance
A Directors' and Officers Liability lnsurance ("D&O") is provided for the Members of the Board of Management. Pursuant to the requirements of § 93 Section 2 Sentence 3 of the Stock Corporation Act (AktG), the excess (deductible) amounts to 10 % of the loss or damage up to an amount of one and a ha lf times the fixed annual compensation of the Board Member.

Provision for surviving dependents
The contract of service for the Chairman of the Board of Management Mr. Päfgen includes a provision for surviving dependents for the widow in the form of a widow's pension currently amounting to € 68,400 p.a. for life from the seventh month after the month of decease to be paid in equal monthly amounts.

Payments by third parties
During the business year under review, no Member of the Board of Management received payments or equivalent plan benefits from third parties (including companies with which the SURTECO Group maintains business relations) in relation to their activity as a Member of the Board of Management.

Loans to Members of the Board of Management
During the period under review, no advances or loans were granted to Members of the Board of Management of SURTECO SE.

Benefits for preliminary termination of employment
The contracts of service currently valid for the Members of the Board of Management automatically come to an end when the period of appointment for the relevant Member of the Board of Management is concluded. lf the appointment of a Member of the Board of Management is revoked during the term of their contract of service, the Board Member affected can be placed on administrative leave for the remaining term of the contract and the compensation will continue to be paid. ln each case, notice of termination can be served on the contracts of service by both sides for good cause. lf a Member of the Board of Management is temporarily incapacitated and unable to work, the basic salary will be paid for a period of up to 12 months. lf death occurs during the period of the employment relationship, the heirs of the relevant Board Member have the right to continued payment of the basic salary for the month in which death occurred and ongoing for a period up to an additional six months.
lf there is a "change of control ", the Members of the Board of Management have the right within the space of 12 months to serve notice on their contract of service to the end of the month specified following the month of their submitting the notice of termination. They are entitled to payment of the outstanding fixed annual remuneration for the remaining term of the contract as a lump sum and an amount in the sum of € 500,000 for each year of the contract term commenced for which a bonus has not yet been paid. ln accordance with subsection 4.2.3 of the German Corporate Governance Code, the obligation to make payments arising from the premature termination of the position as Member of the Board of Management shall not exceed 150 % of the cap for severance pay.

The compensation elements for the Board of Management were as follows for the business year 2011:

Conflicts of interest

The members of the Board of Management are subject to a comprehensive prohibition on competition during the course of their activity for SURTECO SE.
Important transactions require the consent of the Supervisory Board.