KHD Humboldt Wedag International : KHDAG_Compensation _Report_2023

Content

1. COMPENSATION OF THE MEMBERS OF THE MANAGEMENT BOARD OF KHD

2. COMPENSATION OF THE MEMBERS OF THE SUPERVISORY BOARD OF KHD

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COMPENSATION REPORT OF KHD HUMBOLDT WEDAG INTERNATIONAL AG FOR THE 2023 FINANCIAL YEAR

This compensation report of KHD Humboldt Wedag International AG ("KHD AG") describes the compensation granted and owed individually to current and former members of the Management Board and Supervisory Board in the 2023 financial year. In this context, the report explains in detail and on an individualized basis the structure and amount of the individual components of Management Board and Supervisory Board compensation.

The compensation report was prepared jointly by the Management Board and the Supervisory Board and complies with the requirements of Section 162 of the German Stock Corporation Act ("AktG"). For KHD AG, a transparent and comprehensible presentation of Management Board and Supervisory Board compensation is an element of good corporate governance. This compensation report will be submitted for approval to the Annual General Meeting on May 24, 2024.

Cologne, March , 2024

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Approval of the compensation report for the previous financial year 2021

The compensation report for the 2022 financial year prepared by the Management Board and Supervisory Board of KHD AG in accordance with the requirements of Section 162 AktG was approved by the Annual General Meeting on May 12, 2023 in accordance with Section 120a (4) AktG with a result of 99.92%.

The compensation report for the financial year 2022, including the independent auditor's report on the audit pursuant to Section162 (3) AktG, was made publicly available on the Company's website at www.khd.com/ir/news-reports/#compensation-reports.

Composition of the Management Board and the Supervisory Board

In the 2023 financial year, the Management Board of KHD AG was composed of the following members:

• Mr. Jianlong Shen - Chief Executive Officer (CEO)
• Mr. Jürgen Luckas - Chief Financial Officer (CFO)
• Mr. Dr. Matthias Jochem - Chief Operating Officer (COO)
• Mr. Matthias Mersmann - Chief Technology Officer (CTO)
• Mr. Tao Xing - Executive Vice President (until November 30, 2023)

In the 2023 financial year, the Supervisory Board of KHD AG consisted of the following four members:

• Mr. Jiayan Gong - Chairman
• Mr. Gerhard Beinhauer - Vice Chairman
• Mr. Xiaodong Wu
• Mr. Jingnan Yang

1. COMPENSATION OF THE MEMBERS OF THE MANAGEMENT BOARD OF KHD HUMBOLDT WEDAG INTERNATIONAL AG

a) Compensation System for the Management Board

The compensation of the Management Board members of KHD AG for the 2023 financial year described below is based on the compensation system in place since January 1, 2021. It complies with the requirements of Section 87a AktG introduced by the ARUG II and largely complies with the recommendations of the German Corporate Governance Code as amended on April 28, 2022 (hereinafter "GCGC"). The compensation system was presented to the Annual General Meeting on May 20, 2021 for the first-time adoption in accordance with Section 120a AktG; it was approved by a majority of 99.64%. A full description of the Management Board compensation system is publicly available as part of the invitation to the Annual General Meeting held in the 2021 financial year at www.khd.com/ir/annual-general-meeting/#2021.

The compensation system was applied in the 2023 financial year to all active Management Board members who have a Management Service Agreement. In accordance with Section 120a (1) Sentence 1 AktG, the Annual General Meeting has to resolve on the approval of each significant change to the compensation system, but at least every four years. The compensation system will therefore have to be approved again at the latest at the Annual General Meeting in 2025.

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The Management Board member Dr. Matthias Jochem does not have a Management Service Agreement and does not receive Management Board compensation. In the 2019 financial year, KHD entered into a consulting agreement (last amended on September 22, 2023) with 4-stream consulting GmbH, Roetgen, a company that is considered a related party with regard to Dr. Jochem. In accordance with this contractual agreement, KHD AG recognizes the remuneration for the consulting services rendered as other operating expenses.

1. Principles of the Compensation System

The compensation system for members of the Management Board of KHD AG makes an important contribution to promoting the business strategy. By the structure of the compensation system, the members of the Management Board are motivated to achieve key strategic Group objectives, in particular increasing the value of the Group and improving the market position in the areas of customer orientation, technology leadership, and value creation. In determining Management Board compensation, the Supervisory Board is guided by the following principles:

• Promotion of the Group strategy

The compensation system as a whole makes a significant contribution to promoting and implementing the business strategy by defining sustainable performance criteria based on the long-term success of the Group.

• Appropriateness of compensation

The compensation of the members of the Management Board is commensurate with their duties and performance. It takes into account the complexity and the economic situation of the Group. Compared with similar companies, the compensation is in line with the market and at the same time competitive.

• Linking performance and compensation

The compensation of Management Board members is linked to their performance by making the variable compensation components dependent on the achievement of certain targets. This ensures that special performance is rewarded appropriately, while failure to meet the specified targets leads to a significant reduction in compensation.

• Focus on sustainable and long-term corporate development

The compensation of Management Board members is geared to the long-term and sustainable development of the Group. The variable compensation therefore mainly has a multi-year assessment basis.

• Harmonization with shareholder and stakeholder interests

The compensation system makes a key contribution to linking the interests of the Management Board with those of shareholders and other stakeholders. The majority of the variable compensation is linked to the economic success of the KHD Group.

• Consistency of the compensation system

The compensation system for the members of the Management Board is in line with the compensation for other leaders / managers in the Group, sets comparable incentives, and specifies comparable targets.

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1. Components of the Compensation System

In the financial year 2023, the compensation of the members of the Management Board who have a Management Service Agreement consisted of fixed non-performance-related compensation components

1. fixed compensation and (2) fringe benefits, and variable performance-related compensation components

1. bonus for individual targets (short-term) and (4) bonus for financial targets (long-term). In addition, the Supervisory Board may grant a (5) discretionary bonus.

1. Fixed compensation Design
2. • The fixed annual salary is a fixed payment based on a full year, paid out in twelve equal monthly installments.

Reference to strategy

1. • Forms the basis for attracting and retaining the highly qualified members of the Management Board, who are required for the development and implementation of the corporate strategy.
   • Reflects the role, experience and area of responsibility of the in dividual Management Board member.
2. Fringe benefits

Design

• Provision of a company car, which may also be used privately, relocation costs and expenses for a double household for operational reasons, costs of a health check, accident insurance, as well as contributions to a private pension plan and health and long-term care insurance contributions in accordance with § 257 SGB V and § 61 SGB XI.

Reference to strategy

1. • The fringe benefits should be customary / competitive on the market for highly qualified members of the Management Board.
2. Bonus for individual targets (short-term performance bonus) / one-year variable compensation Design
3. • In the respective Management Service Agreement, the Supervisory Board has defined a target amount for the bonus for individual targets for each Management Board member, which is granted if the targets are achieved by 100%.
   • The target achievement corridor is between 0% and 100%, i.e. the maximum amount of the short- term incentive bonus is limited to 100% of the target amount.
   • Determination of target achievement is done by the Supervisory Board after the end of each individual financial year.

Reference to strategy

• The performance criteria are intended to motivate the Management Board members to create value and to achieve or outperform the short-term economic targets as well as operational excellence.
• The short-term performance bonus additionally gives the Supervisory Board the opportunity to consider individual or collective performance of the Management Board based on non-financial performance criteria and targets that are relevant for the operational implementation of the corporate strategy.
• The short-term performance bonus is intended on the one hand to reflect the overall responsibility of the Management Board members for the Group and to promote cooperation among the business areas, and on the other hand to reflect the independent management of the respective area of

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responsibility. Therefore, when setting the targets and calculating the short-term performance bonus for each Management Board member, the respective business responsibility is taken into account.

1. Bonus for financial targets (long-term performance bonus) / multi-year variable compensation Design
2. • In the respective Management Service Agreement, the Supervisory Board has agreed a target amount for the bonus for financial targets for each Management Board member, which is granted if the targets are achieved by 100%.
   • The long-term performance bonus is determined on the basis of four fixed levels (0% / 25% / 50%/ 100%), i.e. the maximum amount of the long-term performance bonus is limited to 100% of the target amount.
   • Determination of target achievement is done by the Supervisory Board at the end of the two-year assessment period.

Reference to strategy

1. • With regard to the financial targets, key figures of the KHD Group based on a two-year assessment period are used.
   • The financial targets are closely linked to the continuous and sustainable development of the KHD Group.
   • There is congruence between shareholders' interests and expectations and Management Board compensation.
2. Discretionary bonus

Design

• Can be granted in case of special performance of a Management Board member and / or in case of corresponding special economic success of the KHD Group.
• Additional voluntary bonus (discretionary bonus) for each member of the Management Board of up to € 0.10 million per year.

Reference to strategy

• Consideration of the particular performance of the individual Management Board member, especially with regard to the long-term sustainable success of the Group, the interests of shareholders and employees, environmental and social responsibility, and the compliance culture.

In accordance with Section 87a (1) Sentence 2 No. 1 AktG, the Supervisory Board has set a maximum amount for the total of all compensation components including fringe benefits for each member of the Management Board (hereinafter "maximum compensation"). The maximum compensation is intended to avoid unreasonably high Management Board compensation. It amounts to € 0.55 million for the Chairman of the Management Board (CEO) and € 0.50 million for all other members of the Management Board. These maximum limits relate in each case to the total of all payments resulting from the compensation arrangements for a financial year.

In the event of premature termination of a Management Board member's service contract without good cause, any payments to the Management Board member to be agreed, including fringe benefits, must not exceed the value of two years' compensation (severance cap) or the value of the compensation for the remaining term of the contract. The severance payment cap is intended to prevent inappropriately high compensation in the event of premature termination of a Management Board member's service contract. The severance payment cap is calculated on the basis of the total compensation for the past financial year and, if applicable, also the expected total compensation for the current financial year. None of the

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Management Service Agreements of the current members of the Management Board, i.e. the Management Service Agreements of Messrs. Shen, Luckas and Mersmann, provide for benefits in the event of premature or regular termination of service.

If a member of the Management Board in his function as a member of the Management Board demonstrably and knowingly commits a gross violation of one of his duties of care within the meaning of Section 93 AktG, a material principle of the internal Code of Conduct and Code of Ethics issued by the Company, or one of his other duties under his service contract, the Supervisory Board may, at its due discretion, partially or fully reduce to zero the variable compensation that is to be granted for the financial year in which the gross violation occurred. If the variable compensation has already been paid out at the time of the reduction decision, the Management Board member must repay the excess payments received in accordance with the reduction decision ("clawback provision"). In this case the Company is also entitled to offset any other compensation claims by the Management Board member. Any claims for damages by the Company against the Management Board member, in particular under Section 93 (2) AktG, shall remain unaffected. In the financial year 2023, there was no reason to apply the clawback rule, i.e. no variable compensation components were reclaimed.

1. Determination of compensation for the 2023 financial year

1. Target Compensation

The total target compensation represents an appropriate level of compensation that takes effect if all predefined targets are achieved and is thus intended to provide incentives for strong corporate performance as well as collective and individual achievements. Due to the high proportion of variable compensation, failure to achieve the set targets leads to a significant reduction in total compensation. However, overachievement of targets does not lead to an increase in compensation. The share of long-term variable compensation exceeds that of short-term variable compensation. As a result, the compensation of the Management Board is geared towards the long-term, viable, and sustainable development of the KHD Group.

In the 2023 financial year, the total target compensation is composed as follows:

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The above table shows the contractually agreed target compensation and the compensation structure as a percentage of the total target compensation. The stated target values for variable compensation correspond to the values for the respective financial year, i.e. the financial year in which the corresponding bonus is to be earned. However, the Supervisory Board does not determine the one-year or multi-year variable compensation on the basis of actual target achievement until the next financial year or the year after. When disclosing the compensation granted and owed, the actual bonus for a given financial year is therefore not shown until the next financial year or the year after that. The compensation structure of the total target compensation for the financial year 2023 shown, corresponds to the compensation structure specified in the valid compensation system pursuant to Section 87a (1) No. 3 AktG.

1. Appropriateness of the Management Board Compensation

As described above, the Supervisory Board determines the amount of the target total compensation for each Management Board member for the upcoming financial year in accordance with the compensation system. The guiding principle for this is that the respective compensation is in an appropriate relationship to the tasks and performance of the Management Board member as well as to the situation of the Group, does not exceed the standard market compensation without special reasons, and is geared towards the long-term and sustainable development of the KHD Group. For this purpose, both external and internal comparisons are made by the Supervisory Board at regular intervals.

(1) Horizontal (external) comparison

In order to assess the appropriateness and customary nature of the specific total compensation of Management Board members in comparison to other companies, the Supervisory Board uses a suitable peer group (horizontal comparison). For this comparison, various compensation data from listed stock corporations below the SDAX are currently used.

(2) Vertical (internal) comparison

The vertical comparison relates to the relationship between the Management Board compensation and the compensation of the workforce of the operating subsidiary Humboldt Wedag GmbH in Germany. Specifically, the workforce comprises the subsidiary's General Managers as well as the group of non-pay- scale employees and the group of pay-scale employees.

(3) Differentiation according to the respective requirement profile

The compensation system allows the Supervisory Board to take into account the function and area of responsibility of the individual Management Board member when determining the amount of the total target compensation. At the due discretion of the Supervisory Board, function-specific differentiations are therefore possible, taking into account criteria such as the experience of the respective Management Board member and the Management Board area for which he is responsible.

(4) Conclusion

The Supervisory Board carried out a review of Management Board compensation prior to the introduction of the compensation system. For the members of the Management Board in office, Management Board compensation in recent years has been at the lower end of the peer group. However, it should be noted that due to the loss situation of the KHD Group up to and including the 2020 financial year, the long-term variable compensation (bonus for financial targets) up to and including the 2021 financial year was zero. The Supervisory Board therefore came to the conclusion that the amount of Management Board compensation is appropriate from a legal perspective within the meaning of Section 87 (1) AktG.

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c) Variable Compensation for the 2023 Financial Year

The two variable performance-based compensation components (1) bonus for individual targets (short-term performance bonus) and (2) bonus for financial targets (long-term performance bonus) represent a significant part of the total target compensation. .

(1) Short-term performance bonus

In the respective Management Service Agreement, the Supervisory Board has defined a target amount for the bonus for individual targets (hereinafter "short-term performance bonus") for each Management Board member, which is granted if the targets are achieved by 100%. The maximum amount of the short-term performance bonus is limited to 100% of the target amount.

The amount of the short-term performance bonus to be paid depends on the extent to which a Management Board member achieves the individual targets. At the beginning of a financial year the Supervisory Board determines the targets for the respective Management Board member from the list of the following financial and non-financial performance criteria within the meaning of Section 87a (1) sentence 2 no. 4 AktG:

• Achievement of key financial indicators (order intake, revenue, earnings before taxes) at subsidiaries within the direct area of responsibility of the respective Management Board member;
• Development and implementation of costs optimization measures;
• Development and implementation of measures to increase efficiency;
• Development and implementation of measures to improve operational excellence (incl. reorganization and improvement of work processes);
• Cash flow optimization;
• Specific operational and/or strategic goals that are highly relevant for the long-term and sustainable development of the company (such as goals for digitalization, investment strategy and R&D strategy);
• Market development and customer orientation (such as new markets, new product or customer segments);
• Social/employee (such as measures to increase employer attractiveness and employee satisfaction, succession planning, measures for leadership development, diversity and equal opportunities);
• Governance/Compliance (such as measures to ensure and maintain a compliance management system).

Within the scope of its dutiful discretion, the Supervisory Board may extend or adjust the list of individual targets for each financial year. Each of the selected individual targets is weighted with a fixed percentage in relation to the maximum amount of the short-term incentive bonus. In principle, the assessment of the individual performance of a Management Board member is only meaningful if non-financial, qualitative performance criteria are included.

The performance criteria are intended to motivate the Management Board members to create value and to achieve or outperform short-term economic goals as well as operational excellence. The short-term performance bonus also gives the Supervisory Board the opportunity to consider individual or collective performance of the Management Board on the basis of non-financial performance criteria and targets that are relevant for the operational implementation of the corporate strategy. The short-term performance bonus is intended on the one hand to reflect the overall responsibility of the Management Board members for the Group and to promote cooperation between the business areas, and on the other hand to reflect the independent management of the respective area of responsibility. Therefore, when setting the targets and calculating the short-term performance bonus for each Management Board member, the respective business responsibility is taken into account.

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