Kendrion N : Remuneration Policy Executive Board

KENDRION N.V.

REMUNERATION POLICY

EXECUTIVE BOARD

ADOPTED AGM JUNE 2020

EXECUTIVE BOARD REMUNERATION POLICY

General

The remuneration policy for the members of the Executive Board of Kendrion N.V. ("Kendrion") has been developed by the Supervisory Board. The current remuneration policy for the members of the Executive Board was adopted by the general meeting of shareholders (the "General Meeting") in April 2018. In order to align the remuneration policy to the Dutch Act implementing the EU Shareholders' Rights Directive that became effective as at 1 December 2019, a new remuneration policy was submitted and presented for adoption at the General Meeting in June 2020. The remuneration policy that was submitted to the General Meeting in June 2020 did not comprise a value change to the remuneration packages of members of the Executive Board.

The Executive Board remuneration policy is comprehensively evaluated at least once every four years by the Supervisory Board. The HR Committee will continue to keep the Supervisory Board informed of relevant market and legislative developments in order to support the periodic evaluation of the remuneration policy and related decision-making.

Objectives

The remuneration policy serves to recruit and retain diverse, qualified and experienced executives in order to deliver Kendrion's long-term value creation strategy. In addition, the remuneration policy aims to further enhance the link between pay and performance and align the interests of the members of the Executive Board with the shareholders' interests - and other stakeholders' interests - and focus on the sustainable delivery of high performance over the long-term by stimulating share ownership whilst adhering to the applicable standards of good corporate governance.

Taking account of Kendrion's size (in terms of revenues, average market capitalisation, total assets and number of FTE), its industrial market position, geographical scope and labour market competition, the companies included in the AScX Index on Euronext Amsterdam are defined as reference group. Financial services, real estate and movies and entertainment companies are excluded from the reference group. Within the defined reference group, Kendrion is positioned around the median in terms of the average of the abovementioned parameters revenues, average market capitalisation, total assets and number of FTE. The remuneration structure and level for the Executive Board is set at the median level relative to the reference group.

The remuneration policy does not contain variable incentives that may be detrimental to the responsibilities of the Executive Board in defining and achieving Kendrion's long-term value creation strategy.

Temporary deviations remuneration policy

In exceptional circumstances, the Supervisory Board can decide to temporarily deviate from the remuneration policy for members of the Executive Board. Exceptional circumstances means circumstances in which a deviation is considered necessary to serve the long-term interests and sustainability of Kendrion or to otherwise ensure its viability.

Depending on the exceptional circumstances, the Supervisory Board can resolve to deviate from any or all of the four remuneration components included in the remuneration policy for members of the Executive Board.

When considering a temporary deviation from the remuneration policy, the Supervisory Board shall take into account Kendrion's long-term value creation strategy, ongoing business and operational requirements as well as the financial situation of Kendrion. In addition, the deviation considered should be assessed in light of the principles of reasonableness and fairness.

Upon having resolved a temporary deviation from the remuneration policy, the Supervisory Board will (i) cancel and withdraw all temporary deviations from the remuneration policy prior to the first annual General Meeting following the effective date of the deviation; or (ii) propose the necessary amendments to the remuneration policy for adoption during the first annual General Meeting following the effective date of the deviation.

Deviations from the remuneration policy will be reported in Kendrion's remuneration report.

Remuneration components

The remuneration policy for the members of the Executive Board consists of four components: a fixed base salary, a short-term variable remuneration, a long-term variable remuneration and other benefits such as a pension scheme and a car allowance or lease budget.

The sum of the fixed base salary, the short-term variable remuneration and the long-term variable remuneration for members of the Executive Board are considered appropriate in relation to: (i) the identity, the purpose and values of Kendrion, (ii) the pay-ratios within Kendrion, (iii) the international context in which Kendrion operates and (iv) views of relevant stakeholder groups.

The variable remuneration components are subject to a maximum value determined in advance in accordance with the remuneration policy.

The Supervisory Board will carry out scenario analyses to assess that the pay-out level of variable remuneration components appropriately reflect performance.

Fixed base salary

Members of the Executive Board receive a fixed base salary, the amount of which is set at the median level relative to the abovementioned reference group1. The fixed base salary levels can be adjusted to be decided upon by the Supervisory Board, based on general market movement and inflation figures.

In addition to the above, any increase of the annual fixed base salary up to the median level relative to the abovementioned reference group, can be decided upon by the Supervisory Board and will not be regarded as an amendment to the remuneration policy.

Short-term variable remuneration

The short-term variable remuneration is payable in cash, the amount of which is based on the achievement of predetermined, specific and measurable financial and non-financial driven performance criteria.

1 On 8 April 2019, the General Meeting reappointed J.A.J. van Beurden as CEO and member of the Executive Board for a four-year period commencing on 1 December 2019 and ending on 1 December 2023. The fixed annual gross base salary that becomes effective as of 1 December 2019 amounts to EUR 550,000, which amount is not subject to indexation during the second four-year term. The reappointment resolution does not also encompass a change to the Executive Board remuneration policy as adopted by the General Meeting.

CEO

The short-term variable remuneration ranges from 0% to 60% of the annual fixed gross base salary of the CEO, with 40% being the target amount2

CFO

The short-term variable remuneration ranges from 0% to 52.5% of the annual fixed gross base salary of the CFO, with 35% being the target amount

Performance criteria

The performance criteria for the short-term variable remuneration are based on Kendrion's strategic intent to continuously grow revenue and profitability in a sustainable way, with a lean and focused organisation, and to provide a top quality work environment to its employees. In order to support Kendrion's strategic intent, the performance criteria for the short-term variable remuneration include financial and non-financial criteria.

The financially driven performance criteria determine 60% of the short-term variable remuneration and reflect the financial priorities of Kendrion. The remaining 40% of the short-term variable remuneration is determined by non-financially driven performance criteria and reflect sustainability ambitions and other priorities directly linked to Kendrion's strategic intent.

Financial performance criteria

Each year the Supervisory Board selects at least three financial driven performance criteria from the list below with a view to incentivise delivery of financial priorities that support Kendrion's strategic and operational spearheads.

The Supervisory Board may allocate different weight percentages to the different financial performance criteria it selects for a particular year, provided a minimum weight of 10% shall apply to a financial performance criterion.

Financial performance criteria3

Net profit

Return on sales (ROS)

Average return on capital employed (ROIC)

Organic growth

Free cash flow

Revenue

EBITA

EBITDA

The performance incentive zone (threshold, target and maximum) for each financial performance criterion will be determined in advance by the Supervisory Board by reference to the strategic and operational spearheads for the respective performance year. No pay-out will be made for below threshold performance.

2 See also footnote 1. The short-term variable remuneration that becomes effective as of 1 December 2019 ranges from 0% to 90% of the annual fixed gross base salary of J.A.J. van Beurden, with 60% being the target amount.

3 In each case excluding exceptional or one-off cost and revenue items and the amortization of intangibles arising on acquisitions or similar corporate events.

Non-financial performance criteria

Each year the Supervisory Board selects a certain number of non-financial performance criteria derived from the strategic and operational spearheads for the respective performance year, which will in any event include performance criteria in the area of sustainability (i.e. environmental, social and/or governance criteria).

Achievement of each individual non-financial performance criterion will be measured by applying a binary scoring model. The amount of the pay-out for the achievement of non-financial performance criteria depends on the number of non-performance criteria achieved. A predefined step curve will be applied to calculate the pay-out between the achievement of the minimum threshold number of selected non-financial performance criteria and achievement of all selected non-financial performance criteria. No pay-out will be made for below threshold performance.

Investment of part of the short-term remuneration earned

Members of the Executive Board have to invest at least 20% of the net amount of the pay-out of the short-term remuneration earned until the required ownership level has been reached as prescribed under the 'Share ownership guideline' (as described below).

Long-term variable remuneration

The long-term variable remuneration component incentivises members of the Executive Board to focus on long-term sustainable value for shareholders and other stakeholders and to align the interests of the members of the Executive Board with the long-term interests of shareholders and other stakeholder groups.

The members of the Executive Board annually receive conditional performance shares. The conditional performance shares will vest upon achievement of performance measured over a period of three years following the grant date, and are restricted by a holding period for another two years after vesting.

Size of the award

The size of the award is defined as a percentage of the annual fixed gross base salary of the relevant Executive Board member as per the grant date, where the actual grant is determined by this percentage and the average share price of the last quarter of the year immediately preceding the year of the grant date.

The target value at grant date is as follows:

CEO

55% of the annual fixed gross base salary of the CEO as per the grant date4

CFO

50% of the annual fixed gross base salary of the CFO as per the grant date

The maximum opportunity for the long-term variable remuneration shall not exceed 150% of the target value.

4 See also footnote 1. The long-term variable remuneration that becomes effective as of 1 December 2019 ranges from 0% to 90% of the annual fixed gross base salary of J.A.J. van Beurden, with 60% being the target amount.