Preamble

SURTECO SE aims to continuously strengthen the trust placed in the company by national and international investors, business partners and employees, and the public in the stewardship and monitoring of the company. The company is dedicated to compliance with the recommendations of the German Corporate Governance Code, the key statutory regulations on the management and monitoring of the company and recognized standards of good and responsible corporate management.

When the company was converted to a European Company (SE), the dualistic management system, comprising Supervisory Board and Board of Management was retained. The structure of co-determination within the company between the company management and the employees was defined in the course of the conversion also taking the employees in the other EU states into account.

This report explains the implementation of corporate governance in SURTECO SE. It concludes with the statement of compliance made jointly by the Board of Management and the Supervisory Board for 2007.

Shareholders and Annual General Meeting

The shareholders of SURTECO SE exercise their rights at the Annual General Meeting and are entitled to cast their votes at the meeting. Each of the no-par-value bearer shares is entitled to one vote.

The Board of Management submits the annual financial statements and the consolidated financial statements to the Annual General Meeting. The Annual General Meeting decides on the appropriation of profit and the discharge of the Board of Management and the Supervisory Board. The Annual General Meeting also elects the representatives of the shareholders on the Supervisory Board and appoints the auditor, agrees any changes to the Articles of Association and – if required by law – votes on any significant corporate measures.

Each shareholder is authorized to participate in the Annual General Meeting, to speak on the items listed in the agenda, and to ask relevant questions and put forward appropriate motions. The Chairman of the Supervisory Board is responsible for chairing the Annual General Meeting. He is responsible for ensuring the smooth-running of the Annual General Meeting.

The Annual General Meeting of Shareholders is convened by the Board of Management at least once every year and an agenda is provided for the meeting. The ordinary Annual General Meeting will in future be held during the first six months of a business year, as defined in the statutory regulations for European companies. Minority shareholders are entitled to convene an Annual General Meeting and to request an extension to the agenda. The Board of Management will draw up the documents required under statutory regulations, including the Annual Report, and shall provide such documents to the shareholders on request. These reports and documents are also published on the Internet site of the company (www.surteco.com), together with the agenda for the meeting.

In order to make it easier for shareholders to exercise their rights, the Board of Management appoints a representative so that shareholders can exercise their right to cast votes by issuing instructions for proxy voting, and this representative can also be reached during the Annual General Meeting.

Interaction of Board of Management and Supervisory Board

The Board of Management and the Supervisory Board of SURTECO SE work closely together to promote the well-being of the company. The Board of Management agrees the strategic direction with the Supervisory Board and discusses the status of strategy implementation with the Supervisory Board at regular intervals.

Ensuring that the Supervisory Board is provided with adequate information is a joint function of the Board of Management and the Supervisory Board. The Board of Management provides the Supervisory Board with regular, timely and comprehensive reports on all the issues of planning, business development, the risk position, risk management and compliance relevant to the company. The Board of Management addresses all deviations in the current business situation from the plans and goals that have been prepared and provides reasons for such deviations.

The Board of Management and the Supervisory Board observe the rules of proper corporate management. If they culpably breach the duty of care incumbent on a prudent and conscientious Board of Management or Supervisory Board, they shall be liable in respect of the company for compensation for damages. When entrepreneurial decisions are made, there shall be no breach of the duty of care if the Member of the Board of Management or Supervisory Board was entitled to reasonably assume on the basis of reasonable information that he or she was acting in the interests of the company (business judgement rule).

The Annual Report by the Board of Management and the Supervisory Board on corporate governance also provides details of deviations from the recommendations of the code. Declarations of Compliance on the code that are no longer current are kept accessible on the Internet site of SURTECO SE for five years.

Board of Management

The Board of Management of SURTECO SE is responsible for managing the company. It has a duty to act in the interests of the company and to bring about a sustainable increase in the corporate value. 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. It makes provision for appropriate risk management and risk controlling in the company.

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

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

Supervisory Board

The Supervisory Board regularly advises the Board of Management on the management of the company. It is involved in decisions of fundamental importance for the company and appoints and dismisses the Members of the Board of Management. The Supervisory Board is governed by rules of procedure.

The composition of the Supervisory Board is based on Clause § 95 sentence 2 of the Stock Corporation Act (AktG) in conjunction with Clause § 8 Section 1 of the Articles of Association and the provisions of the agreement pursuant to Clauses §§ 13 Section 1 sentence 1, 21 SEBG between the special negotiating committees and the management of SURTECO AKTIENGESELLSCHAFT relating to the participation of the employees of SURTECO SE dated 13 February 2007. This states that the Supervisory Board of the Company shall be composed of nine members. Six members are elected by the Annual General Meeting. Three members are nominated to the Supervisory Board as employee representatives in accordance with the provisions of the agreement referred to above by the Works Councils of the three German companies of SURTECO SE with the most employees.

The Chairman of the Supervisory Board coordinates the work of the Supervisory Board, chairs its meetings and represents the requirements of the Supervisory Board in the public domain. He is also chairman of the committees.

Members of the Supervisory Board should not exercise a total of more than five memberships of Supervisory Boards for companies outside the Group listed on the stock exchange. The Supervisory Board should not have more than two former members of the Board of Management. Members of the Supervisory Board should not be older than 63 years of age when they take up their office.

Each Member of the Supervisory Board has a duty to act in the interests of the company. The Supervisory Board makes all resolutions by a simple majority vote. If there is parity of voting, the Chairman of the Supervisory Board holds the casting vote.

The Supervisory Board is in regular contact with the Board of Management and discusses the strategy, business performance and risk management of the company. The Supervisory Board must also agree the annual financial plan and approve the annual financial statements of SURTECO SE and the Group.

The Supervisory Board of SURTECO SE has a Presiding Board and two committees made up of appropriately qualified members. The Personnel Committee deals with the level of compensation paid to Members of the Board of Management and the other conditions of the contracts between the company and the Board of Management. The Audit Committee addresses issues relating to accounting and risk management, the mandatory independence of the auditor, the appointment of the auditor to carry out the audit, the determination of the focuses of the audit and the agreement of the fee.

The remuneration of the Members of the Supervisory Board comprises fixed and performance-oriented components.

Each Member of the Supervisory Board will disclose to the Supervisory Board any conflicts of interest, in particular such conflicts which may arise as a result of consultancy or exercise of official duties with customers, suppliers, lenders or other business partners. The Supervisory Board will provide information on any conflicts of interest that have occurred in its report to the Annual General Meeting and on how these conflicts have been dealt with. Any substantial conflicts of interest to which a Member of the Supervisory Board is subject and which are not temporary should lead to termination of membership of the Supervisory Board.

The Supervisory Board of SURTECO SE will review the efficiency of its activities on a regular basis.

Transparency

SURTECO SE immediately publishes insider information that relates directly to the company, insofar as it is not exempt from publication in individual cases.

As soon as the company receives notification or finds out in some other way that an individual has reached, exceeds or falls below a shareholding of 3, 5, 10, 15, 20, 25, 30, 50 or 75 percent of the voting rights in the company by means of purchase or disposal or in some other manner, the Board of Management is under an obligation to disclose such information immediately. Notification is also necessary for any transactions in shares initiated by persons with management functions and by legal or natural persons who are closely related to such executive officers (spouses, registered partners, dependent children and other relatives, who at the point in time when the transaction is concluded have lived in the household for at least one year) and notified to the company pursuant to Clause 15a of the Securities Trading Act (WpHG).

Punctual and consistent information is provided by means of ad hoc communications and press releases so that any new facts are immediately available to the shareholders, financial analysts, and comparable persons. SURTECO SE publishes quarterly and annual reports in German and English within the scope of regular reporting.

All shareholders and other interested parties are able to request the publications of SURTECO SE or have themselves entered on the postal and electronic circulation list. In addition, all publications and press releases are made available on the Homepage of the company. All important dates for publications and events are also published here (financial calendar). The Internet site has a user-friendly structure. All information is also published in German and English.

Accounting and auditing

The annual financial statements are the main source of information for shareholders and third parties. During a business year, they are kept up to date through regular interim reports. The accounts are drawn up at the SURTECO Group pursuant to the accounting regulations of the International Financial Reporting Standards (IFRS). The annual financial statements of SURTECO SE are prepared in accordance with the German Commercial Code (HGB).

The Annual Financial Statements are drawn up by the Board of Management and audited by the auditor and by the Supervisory Board. The Supervisory Board appoints the auditor and makes the financial arrangements with the auditor for remuneration. The auditor participates in the deliberations of the Supervisory Board relating to the annual financial statements and consolidated financial statements and reports on the main results of the audit. The Supervisory Board audits and approves the annual financial statements and the consolidated financial statements.