Remuneration Report

The remuneration report summarizes the principles used to determine remuneration for the Board of Management of Dyckerhoff AG. It details the structure and level of the income paid to the Board of Management. In addition, the report describes the principles and the level of the remuneration of the Supervisory Board. Information regarding shares held by the members of the Board of Management and the Supervisory Board can be found here.

Remuneration policies

Remuneration for members of the Board of Management is set with reference to their duties and individual performances, to the economic environment and future outlook for the Company, to the level and structure of remuneration for members of the Board of Management of comparable companies, as well as to normal remuneration practices within the Company. The total remuneration of the Board of Management consists of fixed and variable components, pension covenants, and additional benefits. The Supervisory Board is responsible for setting the remuneration – after appropriate preparations by the Executive Committee of the Supervisory Board. The remuneration of the Board of Management is reviewed on a regular basis, generally every two years. The last review was made by the Supervisory Board on December 10, 2010. As part of this review, the legal changes resulting from the Act on the Appropriateness of Management Board Remuneration (VorstAG) were considered for the Management Board members, Dr. Stefan Fink and Dr. Stefan John, whose appointments were renewed by the Supervisory Board. From the fiscal year 2011, the variable element of remuneration is composed of a component related to the earnings development over several years, and long-term sustainability objectives. The component related to earnings is calculated on the basis of the average EBIT over several fiscal years; it is subject to a hurdle rate for earnings, and only comes into force once it has been exceeded. A maximum amount has also been determined, which cannot be exceeded. The long-term sustainability objectives consist of key figures for controlling the cement business. The level of resulting variable remuneration is also subject to an upper limit, and distributed after three years.

Composition and amount of remuneration of the Board of Management in fiscal year 2010

In fiscal year 2010, the remuneration paid to Wolfgang Bauer, Dr. Stefan Fink, and Dr. Stefan John comprised fixed and variable components; Michele Buzzi has not been paid any variable remuneration since fiscal year 2006. The fixed remuneration is paid in twelve equal monthly amounts. It also includes additional benefits, such as the provision of a company car, for private as well as for business use, included at the value of the taxable benefits in kind. In principle, all members of the Board of Management are equally entitled to these benefits in kind; the level varies depending on their individual personal situations. Members of the Board of Management are liable for taxes on these benefits in kind. Contributions to pension schemes (for Wolfgang Bauer, Dr. Stefan Fink, and Dr. Stefan John) and optional accident insurance are also included.

The level of variable remuneration is closely linked to the economic performance of the Group and the achievement of goals set. It is calculated on the basis of earnings before interest and tax (EBIT); the reference value is taken from the fiscal year 2007. Variable remuneration is subject to a hurdle rate of EUR 300 thousand for Wolfgang Bauer, EUR 125 thousand for Dr. Stefan Fink, and EUR 105 thousand for Dr. Stefan John. There are no stock option plans or similar value-oriented incentive programs.

Remuneration for individual members of the Board of Management for the fiscal year 2010 is shown in the table below. For comparison we also show the previous year’s figures.

Wolfgang Bauer, Dr. Stefan Fink, and Dr. Stefan John have received a contractually defined benefit pension covenant, which entitles them to receive a pension upon retirement. They become entitled to a pension when their employment terminates as of, or after, the time they reach the age of 65. If, prior to reaching the age of 65, they become permanently disabled or their employment contract is terminated or not extended by Dyckerhoff AG, they are entitled to a pension from the following month. The pension covenants for members of the Board of Management are subject to the same legal provisions as those for Dyckerhoff AG employees, with the exception that the right to benefits vests immediately and is irrevocable, unless the retirement was caused by an intended action of the member.

The pension is calculated comprising a base amount corresponding to the most recent fixed salary and minimum variable remuneration, and an individually calculated percentage increment for each full year of service on the Board of Management. The pension is capped to 50 % of the base amount. As of the balance sheet date for 2010, the percentages of the most recently drawn salary and the minimum variable remuneration to which the Board members were entitled as pensions were: Wolfgang Bauer 30.30 % (2009: 28.77 %), Dr. Stefan Fink 26.04 % (2009: 24.20 %), and Dr. Stefan John 18.50 % (2009: 16.75 %).

Once the entitlement to a pension has commenced, the pension is adjusted regularly. The adjustment is in line with general developments in remuneration in the sector. Following the death of the pension beneficiary, the surviving dependents receive a proportionately tiered widow's or orphan's pension.

The total amount allocated to the pension provision for service and interest costs for the members of the Board of Management was EUR 599 thousand (2009: EUR 547 thousand). Of the total, EUR 374 thousand (2009: EUR 341 thousand) was attributable to Chairman Wolfgang Bauer, EUR 130 thousand (2009: EUR 120 thousand) to Dr. Stefan Fink, and EUR 95 thousand (2009: EUR 86 thousand) to Dr. Stefan John. The present value of the pension obligation amounts to EUR 4,841 thousand; thereof, EUR 2,722 thousand is attributable to Wolfgang Bauer, EUR 1,438 thousand to Dr. Stefan Fink, and EUR 681 thousand to Dr. Stefan John.

The settlement entitlement of the Chairman of the Dyckerhoff AG Board of Management, in the event of early contract termination, is limited to compensation equal to the total remuneration still outstanding up to the normal end of the contract. His current appointment ends on February 29, 2012. Accordingly, the compensation is restricted to the maximum amount, which applies to the residual term of the contract. The individual members of the Board of Management have not been granted any entitlement to a settlement in connection with a change in control. However, the Chairman of the Board of Management of Dyckerhoff AG is entitled to terminate his contract if the major shareholder, Buzzi Unicem S.p.A., introduces measures, which no longer permit the independent management of the Company by the Board of Management, and he is not granted an appropriate position on comparable terms.

The Chairman of the Supervisory Board will again report on the basic principles of the remuneration system used for the Board of Management at the next Annual General Meeting.

Members of the Board of Management do not receive any loans from the Company.

Remuneration paid to former Board of Management members and their beneficiaries in 2010 totaled EUR 2,465 thousand (2009: EUR 2,465 thousand). There are provisions of EUR 27,414 thousand to cover pension commitments for this group of individuals (2009: EUR 27,183 thousand) according to IFRS.

Supervisory Board remuneration

Following a resolution passed at the Annual General Meeting on May 12, 2004, the Supervisory Board now receives only fixed remuneration. The remuneration for the Supervisory Board is stipulated in article 17 of Dyckerhoff AG's Articles of Association. Accordingly, each member of the Supervisory Board receives fixed remuneration of EUR 40 thousand; the Chairman of the Supervisory Board is paid three times this amount, and the vice chairmen are each paid twice this sum. Total remuneration paid to the Supervisory Board in 2010 was unchanged, at EUR 560 thousand. This amount includes remuneration for the work of the Supervisory Board committees, which totaled EUR 40 thousand in 2010, also unchanged compared to the previous year.