Cooperation between Management Board and Supervisory Board

Achieving sustained increases in company value is the common goal of the collaboration between the Management Board and the Supervisory Board. The two Boards meet at regular intervals to discuss the strategic direction of the company as jointly coordinated by the Management Board and the Supervisory Board. The Management Board also provides the Supervisory Board with regular information on all issues relating to planning, business trends, risk, risk management and compliance. In its reporting the Management Board discusses and gives reasons for any discrepancies between the actual course of business and the company’s plans and targets. The Supervisory Board has drawn up Rules of Procedure setting out the details of the Management Board’s disclosure and reporting duties. These Management Board Rules of Procedure also stipulate that the Supervisory Board has the right of veto with respect to decisions or measures which could materially affect the company’s assets, financial situation or earnings position, and also concerning transactions of major importance.

Francotyp-Postalia Holding AG has taken out D&O insurance with no excess for members of both the Management Board and the Supervisory Board. During the first half of the year Francotyp-Postalia Holding AG was run by a three-man Management Board, from which one Board member was appointed Chairman. After the departure of two Board members in June 2009, the company was temporarily run by just one Board member. On 16 February 2009 the appointment of the Chairman and Management Board member was countermanded with immediate effect by resolution of the Supervisory Board. With effect of 1 December 2008 and immediate effect as of 23 Frebruary 2009 a new Management Board member was appointed so that the Management Board continued to exist with two member. A speaker of the Management Board has not been appointed.

The overall remuneration package for Management Board members comprises the monetary remuneration portion, pension commitments and other commitments, in particular for the event of the termination of employment, as well as ancillary payments of any kind and payments from third parties which have been granted during the financial year or pledged for Management Board activities. In compliance with the recommendations of the Corporate Governance Code the monetary remuneration portion is composed of both fixed and variable elements

To date the company has not put in place any variable remuneration components designed to act as long-term incentives and entailing an element of risk, such as share options or comparable arrangements. However, the Management Board and Supervisory Board are in ongoing discussions over the possibility of introducing share options or comparable arrangements. The principle talking points in this respect are the design and definition of performance targets and comparative parameters as well as the capping of benefits in the event of unforeseen circumstances.

In accordance with the Articles of Association, the Supervisory Board of Francotyp-Postalia Holding AG comprises three members elected by the Annual General Meeting. All three members have the knowledge and experience necessary to perform their mandate. As recommended in the Corporate Governance Code the Supervisory Board has drawn up its own Rules of Procedure.

Due to the corporate size of the company and the fact that the Articles of Association prescribe that the Supervisory Board must have three members and no more, as a rule no other committees are formed. For this reason the Supervisory Board as a whole decides on and monitors issues relating to the Management Board remuneration system, including the principal elements of contracts, without first submitting the matter to a committee. Likewise, the Supervisory Board as a whole assumes the duties of an Audit Committee, with the Supervisory Board Chairman acting as Chairman of said committee.

As stipulated in the Articles of Association of Francotyp-Postalia Holding AG, the Chairman and Deputy Chairman of the Supervisory Board are elected from amidst its members. Accordingly the company is unable to apply the recommendation of subsection 5.4.3 of the Corporate Governance Code concerning the disclosure to shareholders of candidate nominations for election as Supervisory Board Chairman.

By resolution of the Annual General Meeting, the remuneration of Supervisory Board members is laid down in the Articles of Association. Supervisory Board remuneration takes into account the responsibilities and duties of Supervisory Board members, as well as the chairmanship and deputy chairmanship thereof and also membership of any Supervisory Board committees. There are no provisions for performance-related remuneration.

Due to the hitherto brief history of the Supervisory Board of Francotyp-Postalia Holding AG, no efficiency audit has yet been conducted. However, such an audit is scheduled for 2009.