2021 Remuneration Report

This Remuneration Report describes the basic principles of the remuneration system for the members of the Management Board and the Supervisory Board of NORMA Group SE and provides information on the remuneration granted and owed in fiscal year 2021.

Remuneration of the Management Board

In accordance with the recommendation of the German Corporate Governance Code (GCGC) as amended on December 16, 2019, the Supervisory Board shall agree on a clear and comprehensible system for the remuneration of the members of the Management Board and determine the exact remuneration of the individual members of the Management Board on the basis of this. Accordingly, the Annual General Meeting must resolve – basically in an advisory capacity – on the approval of the remuneration system presented by the Supervisory Board.

Remuneration system for Management Board members

The Supervisory Board fundamentally revised and redefined the system for the remuneration of Management Board members with effect from January 1, 2020. The new remuneration system, which complies with the requirements of the Act on the Transposition of the Second Shareholder Rights Directive (ARUG II) and takes the recommendations of the amendment to the German Corporate Governance Code (GCGC) into account, was explained to and approved by the 2020 Annual General Meeting.

The following key points of the new remuneration system are particularly worth noting:

The bonus components are based on actually achieved, transparently comprehensible and audited results.

The Short-Term Incentive (STI) depends on the absolute performance factor adjusted, i.e. EBIT (earnings before interest and taxes) of NORMA Group adjusted for acquisitions, on the one hand. On the other hand, the STI now depends on a relative performance factor (relative total shareholder return (TSR)). NORMA Group SE’s TSR is compared with the TSR of a predefined peer group of 15 listed companies. Depending on NORMA Group SE’s ranking within the peer group, the payout amount from the STI either increases or decreases by up to 20%.

Within the Long-Term Incentive (LTI), an amount of up to 20% of the fixed annual salary now depends on the fulfillment of sustainability targets, e.g. the reduction of CO

₂

emissions (Environment, Social

and Governance LTI, or ESG LTI for short

).

With the introduction of a comprehensive share acquisition and shareholding obligation, NORMA Group SE is implementing a recommendation of the German Corporate Governance Code. The members of the Management Board must invest 75% of the amount paid out from the NOVA

LTI

and 100% of the amount paid out from the ESG

LTI

in shares of NORMA Group SE. The company may also pay out this amount in full or in part in shares of NORMA Group SE. As a result, more than 50% of the payout target amount of the variable remuneration will either be invested in shares of NORMA Group SE by the members of the Management Board or granted by NORMA Group SE on a share-based basis. The NOVA LTI includes a four-year shareholding obligation. The ESG LTI is four years into the future and provides for a one-year retention obligation.

The Supervisory Board sets binding performance criteria for the STI and the LTI. The Supervisory Board sets the targets for ESG

LTI

before the start of the fiscal year. The respective amounts to be paid out are calculated after the end of the fiscal year on the basis of achievement of the targets. The Supervisory Board has the option to adjust the terms of the STI and the LTI at its reasonable discretion only in the event of exceptional events. Otherwise, the Supervisory Board has no discretion in determining the STI and LTI payout amounts.

The change-of-control clause, according to which Management Board members may leave the company with severance pay of three years’ remuneration in the event of a change of control, has been abolished for new members of the Management Board.

The variable remuneration components are subject to a clawback if the audited Consolidated Financial Statements and/or the basis for determining other targets on which the calculation of the variable remuneration is based are subsequently found to be objectively incorrect and therefore need to be corrected and the error has led to an incorrect calculation of the variable remuneration.

Basic principles of the remuneration system

The system for the remuneration of the members of the Management Board is designed to be clear and comprehensible. The goal of NORMA Group’s remuneration system is to remunerate the members of the Management Board in accordance with their tasks and performance and in an appropriate relationship to the company’s situation. In line with NORMA Group’s strategy, the remuneration of the members of the Management Board promotes the business strategy as well as the long-term interests of NORMA Group and thus contributes to the sustainable and long-term development of the company. The strengthening of profitable growth of NORMA Group’s divisions – also by making certain acquisitions – as well as the consideration of the sustainability strategy are the focus and basis for the design of the remuneration system for the members of the Management Board.

In this context, the remuneration system takes into account various targets aligned to profitability (through EBIT), return on investment (through NOVA), development of the company’s value (through its share price and relative share return) and sustainability. The metrics used have different but always multi-year terms to support the strategic success of the company on a sustainable basis. The remuneration of the Management Board members is designed to create an appropriate incentive system for the implementation of the company strategy and sustainable value creation and enhancement. Particular attention is paid to achieving the greatest possible congruence between the interests and expectations of shareholders and Management Board remuneration.

In line with the role and performance, individual target achievement is taken into account by distinguishing between the fixed remuneration of the Management Board members on an individual basis. Due to the limited number of Management Board members, their performance is regarded as a joint effort and responsibility as a body, and no further individual targets have been included in the remuneration system. In accordance with the recommendations of the German Corporate Governance Code, remuneration is composed of a fixed component (fixed remuneration) as well as short-term variable and long-term variable components.

Overview of the remuneration components and their respective relative share of remuneration

The remuneration of the members of the Management Board includes fixed and variable components. The fixed components of the remuneration of the Management Board members are the fixed annual salary, fringe benefits and the company pension plan. The variable components are the short-term variable remuneration STI and the long-term variable remuneration. The long-term variable remuneration in turn comprises the multi-year LTI and the ESG LTI, a multi-year variable component based on sustainability targets. The share of long-term variable remuneration in total remuneration exceeds the share of short-term variable remuneration. The relative shares of the fixed and variable remuneration components are shown below in relation to the maximum remuneration. The maximum payout amounts that are limited relative to the fixed annual salary for the STI (180% of the fixed annual salary), the LTI (200% of the fixed annual salary), the ESG LTI (20% of the fixed annual salary), the pension expense for the company pension plan (service costs), and fringe benefits are set in relation to the maximum remuneration.

Excluding the company pension plan and fringe benefits, the share of fixed remuneration is 20% and the share of variable remuneration is 80% of the sum of the fixed annual salary and the maximum payout amounts from the STI, LTI and ESG LTI (“adjusted maximum total remuneration”). The STI (maximum payout amount of 180% of the fixed annual salary) accounts for 36%, the LTI (maximum payout amount of 200% of the fixed annual salary) for 40%, and the ESG LTI (maximum payout amount of 20% of the fixed annual salary) for 4% of the adjusted maximum total remuneration.

Taking the company pension plan and fringe benefits into account, for the Chairman of the Management Board, the share of fixed remuneration (fixed annual salary, pension expense (service costs) and fringe benefits) is approximately 38% of the maximum remuneration, and the share of variable remuneration is approximately 62% of the maximum remuneration. The STI (maximum payout of 180% of the fixed annual salary) accounts for approximately 28% of the maximum remuneration, the LTI (maximum payout of 200% of the fixed annual salary) for approximately 31% of the maximum remuneration, and the ESG LTI (maximum payout of 20% of the fixed annual salary) for approximately 3% of the maximum remuneration. For ordinary Management Board members, taking the company pension plan and fringe benefits into account, the share of the fixed remuneration (fixed annual salary, pension expense (service costs) and fringe benefits) is approximately 36% of the maximum remuneration and the share of variable remuneration is approximately 64% of the maximum remuneration. The STI (maximum payout of 180% of the fixed annual salary) accounts for approximately 29% of the maximum remuneration, the LTI (maximum payout of 200% of the fixed annual salary) for approximately 32% of the maximum remuneration and the ESG LTI (maximum payout of 20% of the fixed annual salary) for approximately 3% of the maximum remuneration.

The percentages cited may differ slightly due to the different actuarial calculation of service costs for each fiscal year and each member of the Management Board as well as the development of the cost of contractually agreed-upon fringe benefits.

Determination of the target total remuneration

The Supervisory Board determines a target total remuneration for the individual members of the Management Board. The target total remuneration is the sum of all remuneration components that are relevant for the total remuneration. For the STI, LTI and ESG LTI, the target amounts are based on 100% target achievement (“target amounts of variable remuneration components”) of the budget values. The Supervisory Board determines the target amounts of the variable remuneration components for each fiscal year. In doing so, the Supervisory Board decides which targets the company should achieve on the basis of the results of the previous fiscal years as part of the budget planning for the current fiscal year.

Maximum remuneration

The total remuneration to be granted for a fiscal year (total of all remuneration amounts expended for the fiscal year in question, including the fixed annual salary, variable remuneration components, pension expenses (service costs) and fringe benefits) of the members of the Management Board – irrespective of whether it is paid out in this fiscal year or at a later date – is capped in absolute terms (“maximum remuneration”). The maximum remuneration is EUR 3,900,000 for the Chairman of the Management Board and EUR 2,500,000 for each of the other members of the Management Board. If the total remuneration calculated for a fiscal year exceeds the maximum remuneration, the amount paid out under the LTI is reduced to such an extent that the maximum remuneration is complied with. If necessary, the Supervisory Board may at its discretion reduce other remuneration components or demand reimbursement of remuneration already granted. Irrespective of the maximum remuneration set, the payout amounts of the individual variable remuneration components are also limited in each case relative to the fixed annual salary.

Severance payments

In the event of premature termination of the service contract without good cause, any possible severance payment is limited to the value of a maximum of two years’ remuneration in line with the recommendations of the GCGC and, if the service contract has a remaining term of less than two years, may not exceed the contractual remuneration for the remaining term (severance payment cap). The severance payment cap is always calculated on the basis of the total remuneration for the past fiscal year and, if applicable, also the expected total remuneration for the current fiscal year. If a special termination right is exercised in the event of a change of control or due to reorganization – only applicable if the member of the Management Board commences service before 2020 – he or she will receive a severance payment equal to three years’ remuneration, but not more than the value of the remuneration for the remaining term of the service contract. In line with the GCGC, the service contracts of Mrs. Stieve and future members of the Management Board no longer include a change of control clause. The annual remuneration is the current fixed annual salary at the time of termination plus the variable remuneration components granted for the past fiscal year.

Fixed remuneration components

Fixed annual salary

The Management Board members receive a fixed annual salary in twelve monthly installments that are paid out at the end of each month. The amount of the fixed annual salary is based on the tasks and the strategic and operational responsibility of the individual Management Board member.

Company pension scheme

The Management Board members Dr. Schneider and Dr. Klein are covered by a company defined benefit plan. The entitlement to a pension arises when the service contract ends and the Management Board member has reached age 65 or is permanently incapacitated for work. The pension level (retirement pension) of the pension agreements is 4% of the fixed annual salary for each completed year of service from being appointed a Management Board member up to a maximum of 55% of the last fixed annual salary. A surviving dependents’ pension is also provided for. After retirement, adjustments are agreed in accordance with Section 16 (1) BetrAVG.

The Management Board member Mrs. Stieve and future members of the Management Board are granted a defined contribution plan on a reinsurance basis. Under the defined contribution plan, the company is required to make payments to an external provider each year. The amount of the payments is in line with standard market practice.

Fringe benefits

The company provides each member of the Management Board with a company car for private use. In addition, Management Board members are included in the company’s D&O insurance, and the company reimburses 50% of the expenses for health and long-term care insurance up to a maximum of the expenses the company would have to pay if an employment relationship under social security law existed. The company also takes out accident insurance (private and occupational accident) for the members of the Management Board at its own expense.

Variable remuneration components

The performance indicators used to measure the short-term and long-term variable remuneration components are derived from NORMA Group’s company strategy and are based on a three- or four-year observation period. The variable remuneration of the Management Board consists of the following components:

Short-Term Incentive, STI

The STI is a performance-based bonus that takes the absolute performance indicator adjusted EBIT (earnings before interest and taxes, adjusted for acquisitions) of NORMA Group, on the one hand, and, on the other hand, the relative total shareholder return (TSR) of NORMA Group SE in relation to a peer group into account. The payout amount of STI is calculated from a starting value and an adjustment to the target achievement of the TSR in the grant year. The calculation is shown in the following formula:

Payout amount = Initial value (= average adjusted EBIT x individual STI percentage) x TSR adjustment factor

The initial value results from multiplying the average EBIT, adjusted for acquisitions, in the fiscal year for which the STI is granted and the two fiscal years preceding the grant year (arithmetic mean) by the individual STI percentage specified in the service contract. The individual STI percentage is 0.33% for the Chairman and 0.22% for the other members of the Management Board. In a second step, this initial value is then multiplied by the TSR adjustment factor, and the result represents the payout amount. The TSR is defined as the percentage change in the stock market price during the grant year, including notionally reinvested dividends and all capital measures. In other words, the TSR is a measure of how the value of a share investment has developed over a period of time and takes into account both dividends accrued during the period and any share price increases that may have occurred. In the current remuneration system, the share yield is taken into account as a relative performance factor. The TSR adjustment factor is determined by measuring the TSR development (share price and dividend development) of NORMA Group SE in relation to the TSR development of the companies in the peer group during the grant fiscal year. Depending on the results of the comparison, the starting value of the STI is adjusted upwards by 20% if a position in the peer group is reached above the 75th percentile and downwards by 20% if a position in the peer group is reached below the 25th percentile; the TSR adjustment factor is thus limited to the range of 0.8 to 1.2. The peer group currently consists of the following 15 listed companies with a size, structure and industrial sector comparable to NORMA Group: Bertrandt AG, Deutz AG, DMG Mori AG, ElringKlinger AG, Gerresheimer AG, Jungheinrich AG, König & Bauer AG, Leoni AG, SAF-Holland S.A., Schaeffler AG, SGL Carbon SE, Stabilus S.A., Vossloh AG, Wacker Neuson SE and Washtec AG. The Supervisory Board is entitled to adjust the peer group for future assessment periods before the beginning of the respective assessment period.

The payment amount (= base value x TSR adjustment factor) is limited to a maximum of 180% of the basic annual salary; the initial value (= average adjusted EBIT x individual STI percentage rate) is limited to a maximum of 150% of the fixed annual salary. The short-term variable remuneration for the past fiscal year is to be paid out the following year after approval of the Consolidated Financial Statements by the Supervisory Board. If the Management Board member did not work for the company for a full twelve months in a fiscal year, the annual bonus will be reduced accordingly.

All claims to the STI from a current fiscal year lapse without replacement or remuneration if the Management Board member’s service contract ends as a result of extraordinary termination by the company for good cause attributable to the Management Board member in accordance with Section 626 of the German Civil Code (BGB), the appointment of the Management Board member is revoked due to gross breach of duty and/or the appointment of the Management Board member ends as a result of resignation from office without the resignation being caused by a breach of duty by the company or health impairments of the Management Board member or of a close family member (“bad leaver cases”). In the event of extraordinary events or developments, e.g. the acquisition or sale of part of the company, the Supervisory Board is entitled to adjust the plan conditions of the STI temporarily and appropriately at its reasonable discretion. The same applies if changes in the accounting standards applicable to the company have a material impact on the parameters used to calculate the STI and in the event that a fiscal year comprises less than twelve months (short fiscal year).

The following table provides an overview of the short-term variable remuneration in 2021:

The TSR factor is 0.80 as the 9th percentile was reached in 2021.

Long-term variable remuneration, LTI

The long-term variable remuneration consists of two components, the NORMA Value Added LTI (NOVA LTI) and the Environmental, Social and Governance LTI (ESG LTI).

NOVA

LTI

The NOVA LTI is granted in the form of a backward-looking performance cash plan in annual tranches, supplemented by a share purchase and share retention obligation. The Management Board members are granted a tranche from the Performance Cash Plan on January 1 of each grant fiscal year. Each tranche of the Performance Cash Plan has a term of three years and covers the grant fiscal year and the two fiscal years preceding the grant fiscal year (“performance period”). The relevant performance criterion for the LTI is the average adjusted NORMA Value Added (“NOVA”) during the three-year performance period. The amount to be paid out under the LTI is calculated by multiplying the individual LTI percentage defined in the service contract by the average adjusted NOVA during the performance period. The individual LTI percentage is 1.5% for the Chairman and 1.0% for ordinary Management Board members.

The annual increase in value is calculated according to the following formula:

NORMA Value Added = (adjusted EBIT x (1 – t)) – (WACC x capital employed)

The calculation of the first component is based on the adjusted Group earnings before interest and taxes (adjusted NORMA Group EBIT) of the fiscal year and the average corporate tax rate. The second component is calculated from NORMA Group’s weighted average cost of capital (WACC) multiplied by the capital employed. The weighted average cost of capital (WACC) is derived from the following assumptions:

The base interest rate is derived from the interest rate structure data of the Deutsche Bundesbank (three-month average: October 1 to December 31, 2021). The market risk premium represents the difference between the expected return of a risky market portfolio and the risk-free interest rate. NORMA Group relies on the recommendation of the Institute of Public Auditors in Germany (IDW) to determine this. The beta factor represents the individual risk of a share compared to a market index. It is initially determined as the average value of the non-leveraged beta factors of the comparable companies (peer group) and subsequently adjusted to the individual capital structure of NORMA Group. The cost of equity is the sum of the following three components: the risk-free interest rate, the weighted country risk of NORMA Group, the product of the market risk premium and the leveraged beta factor of the peer group. The credit spread used for the calculation of the cost of debt capital was determined on the basis of conditions of NORMA Group’s current external financing. Invested capital is calculated from Group equity plus net financial liabilities as of January 1 of the fiscal year.

The NOVA LTI is limited to a maximum of 200% of the fixed annual salary for all Management Board members. The company can pay out the amount in cash or in company shares. If it is paid in cash, the Management Board members are obliged to purchase shares in the company for an amount equivalent to 75% of the net amount paid out and to hold these shares for a period of four years (share purchase and shareholding obligation). The Supervisory Board of the company may decide at its reasonable discretion to issue shares in the company in whole or in part in lieu of a cash payment. If the company issues shares in the company rather than a cash payment, the members of the Management Board are likewise obliged to hold 75% of the issued shares in their ownership for four years. Regardless of whether the company makes the payout in cash or shares, 75% of the net payout under the NOVA LTI must be invested in company shares and held in ownership for a period of four years. The NOVA LTI is paid out in the following year after approval of the Consolidated Financial Statements by the Supervisory Board, irrespective of the type of payment (cash or in shares of the company). After termination of the service agreement, the retention obligation generally continues until twelve months after the legal end of the service agreement unless the four-year retention period has expired beforehand.

The cases described with regard to the STI for a departure during a current performance period apply accordingly. In the event of extraordinary events or developments, e.g. in the event of an acquisition or the sale of part of the company, the Supervisory Board is entitled to temporarily adjust the plan conditions of the LTI as appropriate in its reasonable discretion. The same applies if changes in the accounting standards applicable to the company have a significant impact on the parameters used to calculate the LTI and in the event that a fiscal year comprises less than twelve months (short fiscal year).

The following table provides an overview of the NOVA LTI in fiscal year 2021 (no bonus is granted due to a negative NOVA value):

The calculation of the NOVA value is explained in the following table:

ESG

LTI

In addition to the NOVA LTI, the ESG LTI is the second component of long-term variable remuneration. The ESG LTI is a variable remuneration element in the form of a forward-looking performance cash plan in annual tranches, supplemented by a share purchase and shareholding obligation for members of the Management Board. Each tranche of the ESG LTI has a term of four years. A tranche begins on January 1 of the grant fiscal year and ends at the end of December 31 of the third year following the grant fiscal year (“ESG performance period”). The amount paid out under the ESG LTI depends on the achievement of environmental, social and governance targets (“ESG targets”). ESG targets may include reducing greenhouse gas emissions, increasing employee satisfaction, increasing customer satisfaction, reducing workplace accidents, and increasing sustainability, for example.

The target amount of the ESG LTI is 20% of the fixed annual salary. The payout amount is capped at 100% of the target amount. The payout amount under the ESG LTI is due for payment at the end of the month following the month in which the Supervisory Board has approved the company’s Consolidated Financial Statements for the grant year. The company may pay the amount payable under the ESG LTI in cash or in company shares. In the case of cash payment, the Management Board members are obliged to purchase shares in the company for the entire net amount paid out and to hold these shares for a period of one year (“share purchase and shareholding obligation”). The company’s Supervisory Board may decide at its reasonable discretion to issue shares in the company in whole or in part in lieu of a cash payment. In this case, too, the Management Board members are obliged to hold 100% of the shares issued for one year. As a result, 100% of the net payout amount from the ESG bonus must be invested in the company’s shares and be held in ownership for a period of one year.

The cases described with regard to the STI for a departure during a current performance period apply accordingly. In the event of extraordinary events or developments, e.g. the acquisition or sale of part of a company, the Supervisory Board is entitled to temporarily adjust the plan conditions of the ESG LTI as appropriate in its reasonable discretion. The same applies if changes in the accounting standards applicable to the company have a material impact on the parameters used to calculate the ESG LTI or if a fiscal year comprises fewer than twelve months (short fiscal year).

Disclosure of shares and stock options granted or promised within the meaning of Sec. 162 (1) no. 3 German Stock Corporation Act (AktG) under Long-Term Incentives (LTI)

The following table provides an overview of the shares granted:

The acquisition of shares from the ESG LTI will only take place in the future; therefore, these shares will only be shown in the future.

Matching Stock Program MSP (applicable solely to former members of the Management Board)

For members of the Management Board who were appointed to the Management Board before 2015 - these members of the Management Board left the Board of Management in fiscal year 2019 at the latest - tranches of share-based compensation (allocation in 2015, 2016 and 2017) were granted. The compensation is composed according to the following parameters:

The Matching Stock Program (MSP) provided a share price-based long-term incentive to commit to the success of the company. The MSP was a share-based option right. For this purpose, the Supervisory Board specified a number of stock options to be allotted each fiscal year with the reservation that the Management Board member makes a corresponding personal investment in the company. The MSP was split into different tranches. The first tranche was allotted on the day of the initial public offering of NORMA Group (April 8, 2011). The other tranches were allotted on March 31 each following year, whereby the last allotment took place on March 31, 2017 (no allotment in fiscal years 2018, 2019 and 2020). The stock options related to those shares allotted or acquired and qualified in accordance with the MSP stipulated in the Management Board contract. The number of stock options is calculated by multiplying the number of qualified shares held on the grant date (for the years 2015 to 2017, 85,952 shares per year) by the option factor determined by the Supervisory Board. The option factor was or is recalculated for each tranche and amounts or amounted to 1.5 for each of the tranches in 2015, 2016 and 2017. 128,928 shares are or were to be taken into account in fiscal years 2015, 2016 and 2017. Each tranche was or will be recalculated taking into account changes in the influencing factors and was settled pro rata temporis over the retention period. The retention period was and continues to be four years and ended or will end on March 31, 2019, 2020 and 2021 for the 2015, 2016 and 2017 tranches. Exercise of the options of a tranche can take place only within an exercise period of two years after the end of the retention period. As a prerequisite for exercise, the share price at the time of exercise (basis: weighted average of the last ten stock exchange trading days before exercise) must be above the relevant exercise hurdle. The exercise hurdle is determined by the Supervisory Board when the respective tranche is allocated and amounts to at least 120% of the exercise price. The exercise hurdle was set at 120% of the exercise price for the 2015, 2016 and 2017 tranches. The exercise price of the tranches is determined on the basis of the weighted average of the closing prices of the company’s shares on the last 60 trading days immediately preceding the allocation of the respective tranche. Dividend payments by the Company during the holding period are deducted from the exercise price of the respective tranche. The value of the stock option is calculated on the basis of valuation models recognized by business management. The company is free to decide at the time of exercise whether the option will be settled in shares or in cash. However, based on the history, it is still assumed that compensation will be paid in cash.

The option for the 2015 tranche was not exercised and therefore expired on March 31, 2021. The option for the 2017 tranche was exercised in 2021 (Werner Deggim on May 27, 2021 and Bernd Kleinhens on June 8, 2021) and the following amounts were paid out: Werner Deggim EUR 133 thousand and Bernd Kleinhens EUR 232 thousand. Lastly, the 2016 tranche remains, which can be exercised up until March 31, 2022, and otherwise expires.

Remuneration of the Management Board in fiscal year 2021

The remuneration of the Management Board for fiscal year 2021 is disclosed for the first time in accordance with Section 162 of the German Stock Corporation Act (AktG) and, for reasons of continuity, in accordance with the recommendations of the German Corporate Governance Code (GCGC).

Remuneration of the Management Board in fiscal year 2021 in accordance with Section 162 of the German Stock Corporation Act (AktG)

The remuneration granted and owed to the members of the Management Board breaks down as follows:

The variable remuneration (STI, NOVA LTI and ESG LTI) is presented as granted and owed in the fiscal year in which the activity on which the remuneration is based was performed in full in accordance with Section 162 (1) sentence 2 no. 1 German Stock Corporation Act (AktG). For example, the NOVA LTI for the 2019-2021 performance period is presented as granted and owed in fiscal year 2021 (but no bonus is granted in fiscal year 2021 due to a negative NOVA value).

The benefits promised to the Management Board members in the event of regular termination of their service (cf. Art. 162 par. 2 no. 3 German Stock Corporation Act (AktG)) are divided among the individual members of the Management Board as shown in the following table.

The present value of all pension obligations to former members of the Management Board and their surviving dependents amounted to EUR 923 thousand as of December 31, 2021 (2020: EUR 817).

Compliance with the maximum remuneration

The total remuneration to be granted for a fiscal year (total of all remuneration amounts granted for the fiscal year in question, including the fixed annual salary, variable remuneration components, pension expenses (service costs) and fringe benefits) of the members of the Management Board – irrespective of whether it is paid out in this fiscal year or at a later date – is capped in absolute terms (“maximum remuneration”). The fixed maximum remuneration amounts to EUR 3,900,000 for the Chairman of the Management Board and EUR 2,500,000 for each of the other members of the Management Board. In accordance with Section 162 (1) sentence 2 no. 7 of the German Stock Corporation Act (AktG), an explanation must be provided of how the maximum remuneration of the members of the Management Board was complied with. The following table shows that the total remuneration granted and owed to the members of the Management Board is in each case below the maximum remuneration (positive sign in the “Difference” line):

Remuneration of the Management Board for fiscal year 2021 in accordance with the German Corporate Governance Code

For reasons of continuity, this Remuneration Report adheres to the presentation in accordance with the model tables of the German Corporate Governance Code as amended on February 7, 2017 (GCGC 2017 for short), even though this presentation is no longer mandatory. In deviation from Section 162 of the German Stock Corporation Act (AktG), the remuneration of the Management Board is broken down according to whether it was granted in the reporting year or received in or for the reporting year and is presented as follows:

The allocation table does not show the remuneration actually paid. It shows the target values of the respective remuneration components and their theoretically possible minimum and maximum values for 2021. The defined expected and target values provide the indication required by the GCGC of what would be paid out if the targets (EBIT, NOVA and ESG) were to be achieved as planned or typically expected. If the targets are not actually achieved, the payout is correspondingly lower. This is shown in the following table.

No remuneration has been paid to former members of the Management Board – with the exception of the above-mentioned MSP – since fiscal year 2020.

Remuneration of the Supervisory Board

Remuneration system for the members of the Supervisory Board

The remuneration system for the members of the Supervisory Board has been slightly modified compared to previous years and was approved by the Annual General Meeting on May 20, 2021. The remuneration system is intended to contribute to the promotion of the business strategy and the long-term development of NORMA Group. The Supervisory Board remuneration takes into account the requirements of the office of a Supervisory Board member of NORMA Group SE, in particular the associated time commitment and responsibility, both in terms of its structure and amount.

The remuneration is commensurate with the tasks of the Supervisory Board members and the situation of NORMA Group and its amount is comparable to the remuneration of the Supervisory Board members of comparable listed companies. The remuneration makes it possible to recruit appropriate and qualified candidates for the office as a member of the Supervisory Board. In this way, the Supervisory Board remuneration contributes to the Supervisory Board as a whole being able to perform its duties of monitoring and advising the Management Board properly and competently. The limitation on fixed remuneration also takes these duties of the Supervisory Board into account. The limitation provides an incentive for the members of the Supervisory Board to appropriately scrutinize the management of the company by the Management Board in the performance of their supervisory and advisory duties without being primarily oriented towards the development of key operating figures. Together with the Management Board, the Supervisory Board thus promotes the business strategy and the long-term development of NORMA Group. The limitation to fixed remuneration also complies with suggestion G.18 sentence 1 of the German Corporate Governance Code as amended on December 16, 2019.

Remuneration components

The remuneration of the members of the Supervisory Board consists of fixed remuneration; this amounts to EUR 100,000 per fiscal year for the Chairperson of the Supervisory Board, EUR 75,000 for the Deputy Chairperson of the Supervisory Board, and EUR 50,000 for each other member of the Supervisory Board. In addition, the Chairpersons of the Audit Committee and the General and Nomination Committee each receive remuneration of EUR 25,000 per fiscal year, and the Chairpersons of other committees receive remuneration of EUR 15,000. Members of a Supervisory Board committee receive additional annual remuneration of EUR 10,000 per committee, up to a maximum of EUR 20,000 per fiscal year for committee membership (“maximum amount”). This maximum amount does not take into account additional remuneration for chairing committees. Remuneration for committee membership is granted in addition to any remuneration for chairing committees. Against this backdrop, the remuneration of Supervisory Board members also complies with Recommendation G.17 of the German Corporate Governance Code as amended on December 16, 2019, according to which the higher time commitment of the Chairperson and Vice Chairperson of the Supervisory Board as well as the Chairperson and members of committees should be appropriately taken into account. The fixed annual remuneration is reduced pro rata temporis if a member does not belong to the Supervisory Board or a committee for the full fiscal year or does not hold a chair or deputy chair position for the full fiscal year.

In addition, the members of the Supervisory Board receive an attendance fee of EUR 1,000 for each attendance at a meeting of the Supervisory Board. Committee members also receive an attendance fee of EUR 1,000 for each attendance of a meeting of the respective committee. For several meetings of the same body (the full Supervisory Board or the respective committee of the Supervisory Board) held on the same day, the attendance fee is paid only once.

Furthermore, the members of the Supervisory Board are included in a pecuniary loss liability insurance for members of the corporate bodies and certain executives (“D&O insurance”) maintained by NORMA Group SE. NORMA Group SE reimburses any value-added tax payable on the remuneration and expenses of the members of the Supervisory Board.

Procedures for establishing, implementing and reviewing the remuneration system

The Annual General Meeting sets the remuneration of the Supervisory Board at the proposal of the Management Board and Supervisory Board in the Articles of Association or by resolution. The Supervisory Board remuneration was determined by resolution of the Annual General Meeting on May 20, 2021.

Pursuant to Section 113 (3) of the German Stock Corporation Act (AktG) as amended by the ARUG II, the Annual General Meeting must resolve on the remuneration system for the members of the Supervisory Board at least every four years. In preparation for the resolution of the Annual General Meeting, the Management Board and the Supervisory Board each review whether the Supervisory Board remuneration, in particular with regard to its amount and structure, continues to be in the interest of NORMA Group SE and is appropriate. For this purpose, the Supervisory Board may also conduct a horizontal market comparison. If necessary, the Management Board and the Supervisory Board shall propose an appropriate adjustment of the remuneration to the Annual General Meeting. The General and Nomination Committee can prepare the deliberations and resolutions of the Supervisory Board on Supervisory Board remuneration.

Remuneration of the Supervisory Board for fiscal year 2021

The remuneration for Supervisory Board activities for fiscal year 2021 is payable on the day after the Annual General Meeting in 2022 as follows:

The values in the “2020” columns relate analogously to the remuneration for fiscal year 2020, which was paid in fiscal year 2021.

No remuneration was paid to members of the Supervisory Board in fiscal year 2021 for services provided personally (in particular consulting and mediation services). In addition, the Supervisory Board is reimbursed for reasonable expenses and travel costs incurred in connection with the performance of its official duties for the company within the framework of the guidelines applicable at the company in each case. For the D&O insurance taken out for the Management Board and the Supervisory Board of NORMA Group SE, the statutory deductible of 10% of the damage amount, up to a limit of 1.5 annual salaries, is borne privately by the members of the Supervisory Board or insured privately.

Comparative presentation of the annual change within the meaning of Sec. 162 (1) sentence 2 no. 2 German Stock Corporation Act (so-called vertical comparison)

The provision of Art. 162 par. 1 sentence 2 no. 2 German Stock Corporation Act (AktG) requires a comparative presentation of the annual change in the remuneration of the Management Board and the Supervisory Board, the earnings performance of the company and the average remuneration of employees on a full-time equivalent basis. The annual change was determined as follows:

The company’s earnings development was based on the annual result according to the income statement. As NORMA Group SE is the parent company of the Group and the variable remuneration of the Management Board is based, among other parameters, on Group earnings (e.g. adjusted Group EBIT)

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his parameter was also included in the comparative presentation.

In order to determine the change in the average remuneration of employees on a full-time equivalent basis, reference was made on the one hand to the total workforce in Germany (excluding the Management Board) and on the other hand to employees covered by collective bargaining agreements in Germany, as this data is comparable with the other remuneration due to the legal and social security framework conditions.

For the sake of completeness, it should be mentioned that the remuneration data for 2020 was impacted by both short-time working and salary sacrifices by executives.

The following annual changes result for the years 2019 to 2021:

Other Legally Required Disclosures

An overview of the information required under section 315a paragraph 1 and Section §289a paragraph 1 of the German Commercial Code (Handelsgesetzbuch, HGB) is presented below:

NORMA Group SE’s share capital totaled EUR 31,862,400.00 on December 31, 2021. This is divided into 31,862,400 registered shares with no par value. Each share entitles the bearer to one vote. There are no other classes of shares. NORMA Group SE holds no treasury shares.

The Management Board of NORMA Group SE is not aware of any restrictions affecting voting rights or the transfer of shares or any agreements between shareholders which could result in such restrictions.

There are no direct or indirect capital holdings exceeding one tenth of the voting rights other than those voting rights listed in the Notes to the Consolidated Financial Statements.

There are no shares in NORMA Group SE that confer special control rights to the holder.

There are no employee share plans through which employees can acquire shares of NORMA Group SE. Employees with shareholdings in NORMA Group SE exercise control rights in the same way as other shareholders in accordance with applicable legislation and the Articles of Association.

Management Board members are appointed and dismissed in accordance with Section 84 et seq. of the German Stock Corporation Act (Aktiengesetz, AktG). The Articles of Association of NORMA Group SE do not contain any provisions related to this issue that contradict the applicable legislation. The Supervisory Board is responsible for determining the concrete number of members on the Management Board. It can nominate a Chairman and Vice Chairman of the Management Board or a Management Board spokesperson and a deputy spokesperson.

Changes to the Articles of Association are to be decided on by the Annual General Meeting in accordance with Section 179 (1) AktG. In accordance with Section 179 (1) sentence 2 AktG, the Annual General Meeting can authorize the Supervisory Board to make changes which affect only the wording of the Articles of Association. The Annual General Meeting of NORMA Group SE has chosen to do so: According to Article 14 (2) of the Articles of Association, the Supervisory Board is authorized to make changes to the Articles of Association which only affect their wording. In accordance with Article 20 sentence 3 of the Articles of Association, a simple majority of votes submitted is sufficient for a resolution on changing the Articles of Association if at least half of the share capital is represented when the resolution is adopted and a different majority is not required under the law.

The Supervisory Board is authorized to amend the wording of sections 4 and 5 of the Articles of Association in line with the issue of new shares from Authorized Capital 2020 and, if Authorized Capital 2020 has not been used or not used in full by June 29, 2025, after expiry of the authorization.

The Supervisory Board is authorized to amend the wording of Articles 4 and 6 of the Articles of Association to reflect the issue of new shares from the Authorized Capital 2020. The same shall apply insofar as the authorization to issue convertible bonds, bonds with warrants and/or profit participation rights with or without conversion or option rights or conversion or option obligations in accordance with the resolution of the Annual General Meeting of June 30, 2020 is not exercised during the term of the authorization or the corresponding option or conversion rights or option or conversion obligations lapse due to the expiry of exercise periods or in any other way.

Shares may be redeemed without the redemption or its implementation requiring a further resolution by the Annual General Meeting. The retirement of shares generally leads to a reduction in capital. However, the Executive Board may, in derogation of this, determine that the capital stock shall remain unchanged upon redemption and that instead the redemption shall increase the proportion of the capital stock represented by the remaining shares in accordance with Art. 8 par. 3 AktG. In this case, the Executive Board and Supervisory Board are authorized to adjust the number of shares stated in the Articles of Association.

Authorized capital

In accordance with the resolution passed at the Annual General Meeting on June 30, 2020, the Management Board is authorized, with the Supervisory Board’s consent, to increase the company’s share capital once or repeatedly by up to a total of EUR 3,186,240 on or before June 29, 2025 (including that day) by issuing up to 3,186,240 new registered shares against cash and/or non-cash contributions (Authorized Capital 2020). The Management Board is authorized, with the Supervisory Board’s consent, to exclude shareholders’ subscription rights wholly or in part, once or repeatedly, in certain cases for capital increases under the Authorized Capital.

Conditional capital

In accordance with the resolution passed by the Annual General Meeting on June 30, 2020, the Management Board is authorized, with the Supervisory Board’s consent, to issue once or repeatedly on or before June 29, 2025 (including that day) bearer or registered convertible bonds and/or bonds with warrants and/or participation rights carrying a conversion or option right and/or conversion or option obligation (or a combination of these instruments) in a total nominal amount of up to EUR 200,000,000 with or without a limited maturity term (hereinafter collectively referred to as “bonds” and to grant the creditors of bonds conversion/option rights and / or conversion/option obligations to subscribe to a total of up to 3,186,240 new registered shares of NORMA Group SE with a pro rata amount of the share capital of a total of up to EUR 3,186,240 in accordance with the terms and conditions of the bonds.

The share capital of the company is conditionally increased by up to EUR 3,186,240 through the issuance of up to 3,186,240 new registered shares (Conditional Capital 2020). The purpose of the Conditional Capital 2020 is to issue shares to the creditors of convertible bonds and/or bonds with warrants and/or participation rights carrying a conversion/option right and/or a conversion/option obligation, which will be issued based on the authorizations granted by the Annual General Meeting of the company on June 30, 2020, by NORMA Group SE or companies in which NORMA Group SE directly or indirectly holds a majority of the votes and the capital.

Authorization to acquire treasury shares

Pursuant to the resolution of the Annual General Meeting on June 30, 2020, NORMA Group SE is authorized to acquire up to a total of 10% of the share capital of NORMA Group SE at the time at which the resolution is adopted or – in the event that this value is lower – at the time that the authorization is exercised, for any permissible purpose by June 29, 2025 (including that day). The Management Board is authorized to use shares of the company for any legal purpose. The shareholders’ acquisition right to these treasury shares is thereby excluded in certain cases.

NORMA Group SE is authorized to acquire its own shares also by using derivatives such as put options, call options, forward purchases or a combination of these instruments and to conduct corresponding derivative transactions. The acquisition of shares using derivatives is limited to a number of shares that does not exceed a proportionate amount of 5% of the share capital existing at the time of the resolution.

NORMA Group’s financing agreements, including the contracts for the promissory notes, include the typical Change of Control Clause. In the event of a takeover by a third party, the possibility that NORMA Group would not be able to finance itself at similarly favorable terms and conditions cannot be ruled out. The service agreements of Dr. Schneider and Dr. Klein also contain a Change of Control clause. In this respect reference is made to the REMUNERATION REPORT.

Dr. Schneider’s and Dr. Klein’s Management Board service contracts include a special termination right in the event of a change of control. If their service contracts end due to this special termination right, the company will pay severance compensation when the termination takes effect in the amount of one and a half times the severance cap, but not more than the value of the remuneration for the remaining terms of the service contracts.

Report on Transactions with Related Parties

In fiscal year 2021, there were no reportable related party transactions.