Remuneration

• The Board of Management’s APP now considers two instead of three measurable targets: a financial target constituting 80% of the individual APP and a non-financial target constituting 20% of the individual APP. In the case of 100% target attainment, the individual APP for ordinary Board of Management members is 100% and for the Chairman of the Board of Management 125% of the annual base salary. The financial target is currently the LANXESS Group’s key controlling indicator, EBITDA pre exceptionals. The non-financial target is the lost time injury frequency rate (LTIFR: accidents per million hours worked) for accidents with days lost. This reflects the high importance of employee and site safety for LANXESS. The targets for the Board of Management’s APP are defined annually by the Supervisory Board before the start of the fiscal year. The Supervisory Board resolved upon the following payment curves for fiscal year 2021, which also apply to the level below the Board of Management.

• 100% target attainment is achieved in the event of a certain EBITDA pre exceptionals defined by the Supervisory Board before the start of the fiscal year. The payment curve plots a straight line between this target and the upper or lower limit. Achievement of the financial target set by the Supervisory Board corresponds to a payout percentage of 100% for the financial target. If the LANXESS Group’s EBITDA pre exceptionals is at least 12.5% higher than the financial target, the payout percentage equals the upper limit of 200% of the APP of the Board of Management for the financial target. If EBITDA pre exceptionals is more than 15% lower than the financial target, the payout percentage falls from 50% to 0%. This also applies to the variable short-term compensation of non-managerial and managerial staff. The steeper gradient of the payment curve if the 100% target is exceeded provides a special financial incentive to exceed the target, which is difficult to achieve as it is. The Board of Management’s financial target is published after the end of the fiscal year.

• The payment curve for the LTIFR, which is reported to one decimal place, takes a tiered approach in order to maintain the existing positive incident reporting culture. An LTIFR of between 1.3 and 1.7 equates to 100% target attainment and results in a payout percentage of 100% for the non-financial target. If the LTIFR is 1.0 or lower, this equates to a payout percentage of 200% of the Board of Management’s APP for the non-financial target. If the LTIFR is higher than 2.0, the payout percentage falls to 0%. The long-term goal is to avoid any accidents. Compared with other companies in the chemical industry and the past trend at LANXESS, the target set for 2021 is an ambitious one.

• In the future, the existing ad hoc discretionary bonus to recognize special achievements or to create an additional incentive can be granted only as part the Board of Management’s APP and is capped at 20% of the annual base salary. This requires a transparent justification from the Supervisory Board. The maximum payout percentage for the Board of Management’s APP (including discretionary bonus) is 200%.

• The Supervisory Board still reserves the right to reduce the APP in the event of serious occupational safety and/or environmental problems.

• In the future, the long-term variable compensation (Long-Term Incentive - LTI) will likewise comprise two measurable targets: a component based on share price performance in the form of the LTSP, which is unchanged and measures price performance relative to a reference index, and a sustainability component in the form of the Sustainability Performance Plan (SPP). The SPP considers the long-term development of sustainability targets. On the basis of LANXESS’s published interim goal for 2025, the Supervisory Board adopted a CO2e target for 2024, which is included in the SPP. In subsequent years, a different target criterion can be selected to reflect the company’s current focus. In the long-term, the share price component will constitute 60% and the sustainability component 40% of the LTI. The assessment period is four years for each of the two components. The reference value for the LTI programs is the annual base salary.

The assessment periods for the LTI are as follows:

• The LTSP payment curve is unchanged compared with previous years. The Supervisory Board resolved upon the payment curve for the SPP. The two payment curves are as follows:
  Both payment curves plot a straight line between the target value and the upper or lower limit. Like in the APP, the steeper gradient of the payment curve if the 100% target is exceeded provides an additional financial incentive to exceed the target. On achievement of the minimum value, the payout percentage amounts to 50%. The maximum payout percentage is 200% for each target.

• Target values and payment curves for the short- and long-term variable compensation components are defined by the Supervisory Board before the start of the fiscal year. Subsequent adjustments are permitted only in the case of the CO2 targets to take M&A transactions into account. The long-term variable compensation component LTPB is expiring and will end on December 31, 2023. It will be paid for the last time in fiscal year 2024.

• Payments in the event of a change of control are capped at two annual base salaries plus the Board of Management’s APP and the LTPB/SPP at 100% target attainment, accounting pro rata for the remaining term at the date of contract termination.

• The compensation system still provides for a cap on the compensation of Board of Management members. This maximum compensation for fiscal year 2021, including compensation in kind and company pension plans, amounts to €21,087 thousand for the full Board of Management.

• For the reporting year, the target values and degree of target attainment for the indicators relevant to the bonus will subsequently be published in the compensation report.

The compensation of the Supervisory Board is set out in § 12 of the Company's Articles of Association. Under the provisions of the German Stock Corporation Act, a resolution on the compensation of Supervisory Board members must be adopted by the Annual Stockholders' Meeting at least every four years in the case of listed companies. Pursuant to Section 113 Paragraph 3 of the German Stock Corporation Act, the Annual Stockholders' Meeting of LANXESS AG therefore adopted a resolution on the compensation of Supervisory Board members on May 19, 2021. The system of compensation for Supervisory Board members presented to the Annual Stockholders' Meeting was approved by a majority of 99.91% of the votes cast.

The members of the Supervisory Board of LANXESS AG receive annual fixed compensation of €80 thousand. The Chairman of the Supervisory Board receives three times the fixed compensation, and his deputy one and a half times. Chairmanship and membership of Supervisory Board committees are compensated separately in accordance with the GCGC. Supervisory Board members who belong to a committee other than the Nomination Committee additionally receive half the fixed compensation. Supervisory Board members who belong to the Nomination Committee additionally receive one-eighth of the fixed compensation. The Chairman of the Audit Committee receives an additional half of the fixed compensation. Supervisory Board members who chair a committee other than the Audit Committee additionally receive one quarter of the fixed compensation. No additional compensation is paid for membership of the committee to be formed pursuant to § 27 (3) of the Codetermination Act (MitbestG) or for chairing the Nomination Committee. In total, however, a member of the Supervisory Board receives a maximum of three times the fixed compensation.

In addition, Supervisory Board members are reimbursed for their expenses. In addition, Supervisory Board members receive an attendance fee of €1.5 thousand for each Supervisory