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Annual Report 2016

Members of the Board of Directors, Feintool International Holding AG

As at December 31, 2016

ALEXANDER VON WITZLEBEN (1963, GERMAN NATIONAL)

Position:

Member of the Board of Directors (not executive)

Committees:

Member of the Compensation and Nomination Committee and the Audit Committee

Qualifications:

Studied economics at the University of Passau

Professional background:

  • 1990–1993 KPMG Deutsche Treuhand Gesellschaft, Munich (GER): Lead Auditor

  • 1993–2007 Jenoptik AG, Jena (GER): firstly as Chief Financial Officer, then Chief Executive Officer from 2004

  • 2007–2008 Franz Haniel & Cie. GmbH, Duisburg (GER): Member of the Management Board

  • Since 20 January 2009 Feintool International Holding AG, Lyss: Chairman of the Board of Directors

Other activities and commitments:

  • Chairman of the Board of Directors and interim CEO of AFG Arbonia-Forster-Holding AG, Arbon

  • Chairman of the Supervisory Board of PVA TePla AG, Wettenberg (GER)

  • Chairman of the Supervisory Board of VERBIO Vereinigte BioEnergie AG, Leipzig (GER)

  • Member of the Board of Directors of Artemis Holding AG, Aarburg

  • Member of the Supervisory Board of Siegwerk Druckfarben AG & Co. KGaA, Siegburg (GER)

  • Member of the Advisory Board of KAEFER Isoliertechnik GmbH & Co. KG, Bremen (GER)

DR. MICHAEL SOORMANN (1958, GERMAN NATIONAL)

Position:

Vice-Chairman of the Board of Directors (non-executive)

Committees:

Chairman of the Compensation and Nomination Committee and member of the Audit Committee

Qualifications:

Degree in commerce from the University of Erlangen-Nürnberg (Nuremberg), 1984, doctorate in political science (Dr. sc. pol.) from the University of Kiel, 1988

Professional background:

  • 1988–1992 Business Consultant, Treuarbeit GmbH/Coopers & Lybrand, Hamburg/Berlin (GER)

  • 1992–1994 Internal Auditing, Sandoz AG, Nuremberg (GER)

  • 1994–2004 CFO, CEO of MBT Deutschland/Degussa Construction Chemicals Schweiz AG, Zurich

  • 2004–2007 Administrative General Manager, Degussa Construction Chemicals Europe, Zurich

  • 2007–2009 Director, Franke Artemis Group, Hergiswil

  • Since 2010: Member of the Group Management of Franke Artemis Holding AG resp. Artemis Holding AG, Aarburg

Other activities and commitments:

Chairman of the Board of Directors of Reppisch Werke AG, Dietikon

THOMAS A. ERB (1945, SWISS NATIONAL)

Position:

Member of the Board of Directors (non-executive)

Qualifications:

Studied law at the University of Zurich 1965–1966
Studied business administration and management in Basel (Sandoz Management Programme) and in the UK

Professional background:

  • 1970–1977 Various positions at Sandoz AG, Basel, including marketing management for country organizations within the Chemicals division

  • 1977–1986 Positions as Head of Division and CEO in Scandinavia and the UK for Sandoz Chemicals Ltd.

  • 1987–1995 CEO for MBT Asia/Pacific (headquartered in Japan), a region of MBT Construction Chemicals Ltd. (division of Sandoz AG)

  • 1995–2001 COO and CEO of MBT (and SKW-MBT) Construction Chemicals Ltd. (division of Sandoz AG; from 1996 a division of SKW Trostberg, Germany)

  • Since 2001 positions as consultant and director

Other activities and commitments:

  • Chairman of the Board of Directors of Artemis Holding AG and of Franke Holding AG

WOLFGANG FEIL (1944, GERMAN NATIONAL)

Position:

Member of the Board of Directors (non-executive)

Committees:

Member of the Compensation and Nomination Committee and the Audit Committee

Qualifications:

Training in the foreign trade and transport sector and in business management Stuttgart 1974

Professional background:

  • 1980–2002 Managing Director of Schuler SMG GmbH, Waghäusel (GER)

  • 1989–1999 Managing Director of Schuler GmbH, Göppingen (GER)

  • 1999–2002 Member of the Board of Directors and Management Board of Schuler AG (responsible for strategic business areas of Hydraulic Forming Systems and Hydroforming)

  • 2002–2009 COO of the Hofkammer des Hauses Württemberg, Friedrichshafen (GER)

Other activities and commitments:

  • Member of the Advisory Board of Paul Hartmann AG, Heidenheim (GER)

  • Chairman of the Advisory Board of Hubert Schlieckmann GmbH, Marienfeld (GER)

  • Member of the Advisory Board of Hirschvogel Holding GmbH, Denklingen (GER)

  • Member of the Advisory Board of GBZ Holding GmbH, Mittelbiberach (GER)

DR. Thomas Muhr (1963, GERMAN NATIONAL)

Position:

Member of the Board of Directors (non-executive)

Qualifications:

Studied business administration and metallurgy at RWTH University Aachen (GER)
Doctorate at RWTH Aachen (GER) 1992

Professional background:

  • 1989–1991 Assistant the company management, Muhr und Bender KG, Attendorn (GER)

  • 1992–1993 Assistant to the management of the engines and purchasing division, BMW AG, Munich (GER)

  • 1994–1997 Technical manager responsible for production and production development, Muhr und Bender KG, Attendorn (GER)

  • Since 1998 Managing associate, Muhr und Bender KG, Attendorn (GER)

Other activities and commitments:

  • Member of the advisory board of the Parts and Accessories Producer Group, German Association of the Automotive Industry, Berlin (GER)

  • Member of the senate of acatech, German academy of technical science, Munich (GER)

  • Member of the board of directors of proRWTH, friends and sponsors of RWTH University Aachen e.V., Aachen (GER)

  • Honorary doctorate of RWTH University Aachen, Aachen (GER)

Business relationships

Several subsidiaries of Muhr und Bender KG, Attendorn, are in business relationships with Feintool. All transactions are conducted at arm's length.

DR. KURT E. STIRNEMANN (1943, SWISS NATIONAL)

Position:

Member of the Board of Directors (non-executive)

Committees:

Chairman of the Audit Committee

Qualifications:

Graduated as a mechanical engineer (Dipl.-Ing.) from ETH Zurich; subsequently obtained a doctorate (Dr. sc. techn.).

Professional background:

  • 1977–1990 Various senior positions in Production as well as in Research & Development at Rieter AG, Winterthur; from 1988: Chief Executive Officer

  • 1990–1996 CEO of AGIE AG, Losone & Agie Group

  • 1996–1998 Member of Group Management of Georg Fischer AG, Schaffhausen, Chairman of the Board of Directors of Agie Charmilles Holding AG, Zug

  • 1998–2003 Head of the Georg Fischer Manufacturing Technology Corporate Group (Agie Charmilles); Member of the Executive Committee

  • 2003–2008 CEO and Delegate to the Board of Directors of Georg Fischer AG, Schaffhausen.

  • 2003–2014 Member of the Board of Directors of Georg Fischer AG, Schaffhausen

Other activities and commitments:

None

DR. Rolf-Dieter Kempis (1953, GERMAN NATIONAL)

Position:

Member of the Board of Directors (non-executive)

Qualifications:

  • 1976 Degree in mechanical engineering (Dipl.-Ing. Maschinenbau, RWTH Aachen)

  • 1978 Degree in industrial engineering (Dipl.-Wirtsch.-Ing., RWTH Aachen)

  • 1981 Doctorate in engineering (Dr. Ing., RWTH Aachen)

  • Thesis: FEM calculations in the reactor industry

Professional background:

  • 1976–1981 Assistant at the Institute for Machine Elements (RWTH Aachen)

  • 1981–82 Production planning assistant (Thyssen Stahl AG)

  • 1983–2005 McKinsey & Company (Consultant, Principal, Director)

  • 2005–07 Supervisory Board, Grammer AG

  • 2007–10 Chairman of the Board, Grammer AG

  • 2011–14 Supervisory Board, SMT-Scharf AG

  • 2011–13 Chairman of the Advisory Board, Novem Beteiligungs GmbH

  • Since 2010 Freelance consultant

  • Since 2014 Partner, Theron Advisory Group

  • Since 2015 Managing Director of Theron Waldenburg GmbH

  • Since 2015 Advisory board Muhr und Bender KG

Other activities and skills:

  • Author/co-author of several management text books: "Einfach überlegen" [Just think] (1993), "Qualität gewinnt" [Quality wins] (1995), "Do IT smart" (1998), "Innovation in der Stahlindustrie" [Innovation in the steel industry] (2001)

  • Functional subject areas covered by consulting activities: Operations, strategy, M&A

  • Industrial competencies covered by consulting activities: Automotive manufacturing/supply industry, metallurgy (steel, aluminum, copper), mechanical engineering

3 BOARD OF DIRECTORS

3.1 Members of the Board of Directors

As of December 31, 2016, the Board of Directors comprised seven members. None of the non-executive members of the Board of Directors was a member of Group Management at Feintool or any of its subsidiaries either in the year under review or during the three previous financial years. With the exception of the business relations conducted by a few members of the Board, no business relations took place with Feintool or its subsidiaries, either in the year under review or during any of the three previous financial years.

3.2 Other activities and commitments

Other activities and commitments are also listed above in section 3.1.

3.3 Number of mandates permitted

According to Article 18b of the Articles of Association, members of the Board of Directors, Group Management and, where applicable, the Advisory Board may not hold or exercise more than (i) 8 additional, paid mandates, of which no more than 4 at companies whose equity securities are listed on a stock exchange, and (ii) 8 unpaid mandates, expense allowances not being deemed to constitute compensation.

"Mandate" denotes activity on the most senior management or administrative organs of other legal entities that are required to be registered in the commercial register or a comparable register abroad and that are not controlled by the company or do not control the company. Mandates at various companies belonging to the same corporate group shall count as one mandate. Mandates fulfilled by a member of the Board of Directors or Group Management on the instructions of a Group company shall not fall under the restriction on additional mandates.

3.4 Election and terms of office

3.4.1 Principles of the election procedure and restrictions on terms of office for members of the Board of Directors

The General Meeting elects members of the Board of Directors by voting for them individually, and also elects the Chairman from amongst the Board members. The term of office of the members and the Chairman of the Board of Directors ends at the latest at the conclusion of the ordinary General Meeting following that at which they were elected, subject to any prior resignation or dismissal. Members of the Board of Directors are indefinitely eligible for reappointment. No age limits apply for members of the Board of Directors.

In accordance with Art. 3.1 of the Organizational Regulations, the Board of Directors should comprise individuals with business experience and an entrepreneurial mindset. At least one member should have specific experience in the automotive supply industry or production operations, or financial expertise. The criteria for new elections to the Board of Directors are determined by the Compensation and Nomination Committee. It prepares a selection of candidates in accordance with the list of criteria that has been drawn up.

3.4.2 Principles of the election procedure and restrictions on term of office for members of the Compensation and Nomination Committee

The General Meeting elects a Compensation and Nomination Committee consisting of one or more members. The members of the Compensation and Nomination Committee are elected individually. Only members of the Board of Directors may be elected. The term of office for the members of the Compensation and Nomination Committee ends at the latest at the conclusion of the ordinary General Meeting following that at which they were elected. Members may be re-elected.

3.4.3 Principles of the election procedure and restrictions on the term of office for the independent proxy

The General Meeting elects an independent proxy. Natural persons, legal persons or partnerships may be elected. Their independence may not be compromised, either in fact or appearance, and is based on Article 728 paras. 2-6 of the Swiss Code of Obligations.

The term of office of the independent proxy ends at the conclusion of the ordinary General Meeting following that at which they were elected. Members may be re-elected.

3.4.4 Initial election and remaining term of office of each member of the Board of Directors

Name Member since Term of office until AGM on
Alexander von Witzleben 1998 April 25, 2017
Dr. Michael Soormann 2010 April 25, 2017
Thomas A. Erb 2012 April 25, 2017
Wolfgang Feil 2003 April 25, 2017
Dr. Rolf-Dieter Kempis 2016 April 25, 2017
Dr. Thomas Muhr 2014 April 25, 2017
Dr. Kurt E. Stirnemann 2008 April 25, 2017

3.5 Internal organizational structure

The Chairman of the Board of Directors is elected by the General Meeting. In accordance with Article 13 of the Articles of Association, the Chairman of the Board of Directors leads the General Meeting and heads the Board of Directors, which makes decisions as a collective body.

In accordance with Article 14 of the Articles of Association, the Board of Directors will constitute itself, taking account of the General Meeting's election of the Chairman of the Board of Directors and the members of the Compensation and Nomi-nation Committee.

At its first meeting after the ordinary General Meeting, the Board of Directors elects a Deputy Chairman; it also appoints a Secretary, who is not required to be a member of the Board of Directors. The Board of Directors also elects the members of the Audit Committee.

3.5.1 Distribution of responsibilities on the Board of Directors

In the financial year, Alexander von Witzleben held the office of Chairman. Dr. Michael Soormann served as Deputy Chairman. No Secretary to the Board of Directors is currently appointed. These tasks are being undertaken by the members of the Board of Directors.

3.5.2. Composition of all Board committees and their duties and authority

Audit Committee

The current members of the Audit Committee are Dr. Kurt E. Stirnemann (Chairman), Alexander von Witzleben, Dr. Michael Soormann and Wolfgang Feil.

The Audit Committee submits draft proposals to the Board of Directors on the following issues:

  • Coordinating the external audit, particularly defining the scope of the audit; instructing internal audit, particularly determining the focal points
  • Monitoring financial reporting and overseeing auditors (quarterly discussion of financial reporting with the CEO and CFO; monthly discussions between the Chairman of the Audit Committee and the CFO; discussion of interim results with the CEO and CFO; discussion of annual financial statements with CEO, CFO and auditors)
  • Analyzing and assessing possible weak points in the financial reporting results and the internal control system (ICS)
  • Assessing the functionality of the internal control system
  • Proposing the commissioning of special audits to the Board of Directors
  • Monitoring the company's credit and cash flow situation and business relationships with banks
  • Monitoring and coordinating all mergers and acquisitions (M&A) activity
  • Selecting and proposing external advisors.

Compensation and Nomination Committee

The current members of the Compensation and Nomination Committee are Dr. Michael Soormann (Chairman), Alexander von Witzleben and Wolfgang Feil.

The Compensation and Nomination Committee submits draft proposals to the Board of Directors on the following issues:

  • The composition (fixed, variable, proportion of shares, etc.) and amount of the compensation of members of the Board of Directors, Group Management and, if applicable, the Advisory Board
  • Ensuring the termination provisions contained in the employment contracts of members of Group Management and other senior executives are commensurate with market conditions and provide protection for the company
  • Verifying that compensation paid is in line with market rates and performance standards
  • Verifying and authorizing any internal business between senior executives or persons closely associated with them and companies in the Feintool Group.

In the 2016 financial year, the Compensation and Nomination Committee and the Audit Committee assumed their responsibilities in accordance with the respective regulations.

3.5.3 Working methods of the Board of Directors

and its committees

In accordance with Art. 3.5 of the Organizational Regulations, the Board of Directors meets at least four times a year, for one day on each occasion. In the reporting period, the Board of Directors held six detailed meetings. The CEO and CFO attended all the meetings. Additional members of operational management also attended if the topic was relevant to them.

The Audit Committee met three times and the Compensation and Nomination Committee three times in the period under review. These meetings usually last half a day and are in preparation for the next meeting of the Board of Directors. The Audit Committee and the Compensation and Nomination Committee meet as required, but at least two detailed meetings must take place for each committee each year. All proposals arising from both committees were discussed at the regular meetings of the Board of Directors.

3.6 Division of responsibilities between the Board of Directors and Group Management

In accordance with Art. 15 of the Articles of Association, the Board of Directors is the supreme body of the company with responsibility for supervising Group Management. It represents the company externally and deals with all matters not assigned to any other corporate body by law, the Articles of Association or the Organizational Regulations. In accordance with Art. 6.5a. of the Organizational Regulations, the Board of Directors delegates overall management to the CEO, where permitted under the law and provided such responsibilities are not expressly assigned to the Board of Directors. The Board of Directors' responsibilities include decisions statutorily assigned to it regarding financial and information policies as well as decisions relating to investments, cooperation agreements, contracts, real estate and shareholdings, provided such decisions are of special significance to the company and they exceed a specified scale, together with resolutions concerning internal and external auditing.

The CEO's responsibilities include management of the company's operations, as well as drawing up requisite remits, directives and guidelines within the framework of the organizational structure approved by the Board of Directors. The CEO is responsible for managing and organizing Group Management and also represents the company in dealings with the Board of Directors, the general public and the authorities.

In accordance with the resolution by the Board of Directors on April 14, 2014, the CEO and CFO constitute Group Management as defined by the Ordinance against Excessive Remuneration in Listed Companies Limited by Shares ("ERCO").

Group Management determines binding, Group-wide management instruments (planning, accounting, management information systems and controlling) and is responsible for developing the corporate culture. It is also responsible for developing and periodically reviewing the corporate strategy and for its implementation. Group Management prepares information on all matters that fall under the responsibility of the Board of Directors and is also responsible for ensuring that the Board's resolutions are implemented.

3.7 Information and control instruments of Group Management

At its meetings, all members of the Board of Directors and members of Group Management have an obligation to provide the required information. If necessary, other senior executives may also be involved. At such meetings, the Chairman informs the other members of the Board of Directors about their activities since the last Board meeting; the CEO reports on current business developments and the CFO comments on financial reporting.

As part of the Feintool Group's Management Information System (MIS), members of the Board of Directors receive a monthly report from Group Management informing them about the financial and business situation of the company and relevant company segments. This report contains information on market and sector developments and risks, the income statement, key figures (sales, EBIT, orders received and order backlog, among others) and detailed quarterly, interim and annual financial statements, which are then commented on by the CEO and the CFO at meetings held specifically for this purpose. This includes a data comparison with the prior years and with the budgeted figures. Between meetings, the CEO also informs the members of the Board of Directors about extraordinary events, either in writing or by telephone.

Between meetings of the Board of Directors, each member may ask the CEO to provide information at any time regarding the performance of the business and, with the approval of the Chairman, regarding individual transactions; members may also request the inspection of business documents. Such requests should be forwarded to the Chairman in writing.

Internal Audit

Internal Audit concentrates on areas of operational and strategic risk management in addition to the internal control system. It conducts group-wide audits, analyses and interviews. The annual audit schedule is approved by the Audit Committee in cooperation with the external auditors. Internal Audit reports regularly to the Audit Committee on a project-related basis, either in writing or verbally. Internal audit activities are carried out by PriceWaterhouseCoopers AG, Zurich. Its activities are coordinated on an ongoing basis by the Chairman of the Board of Directors and the CFO.

The Board of Directors has decided to continue to award internal audit tasks to an external auditor.