Remuneration Report

This report provides a description of the remuneration policies of the Board of Management and the Supervisory Board of Draka Holding N.V., as applied in 2007, as well as the remuneration policies planned for 2008.

Prior to the General Meeting of 11 May 2007, the Supervisory Board proposed several changes to the remuneration policy for the members of the Board of Management. The adjusted remuneration policy was adopted by the General Meeting of 11 May 2007 and included the following changes:

• the labour market peer group was amended;


• the short term and long term incentive plans were disentangled (in line with market practice):


• short term incentives are fully paid out in cash;


• long term incentives consist of an annual conditional grant of performance shares for which the vesting, after three years, might vary between 0 % and 200 %;
• the peer group for Draka’s long term incentive plan which is based on TSR (Total Shareholder Return) performance, was amended.

This remuneration report consists of three parts. The first section is a description of the remuneration policy of the Board of Management applicable in 2007 and includes the remuneration structure of the Board of Management. The second section describes the remuneration of the Board of Management in 2007 and briefly discusses the remuneration policy for the Board of Management to be followed in 2008. The third section describes the remuneration policy applicable to and the remuneration received by the Supervisory Board in 2007.

Remuneration policy Board of Management 2007

The remuneration policy of the Board of Management is designed to ensure that the Company is able to attract, motivate and retain qualified and expert members of the Board, as required in order to achieve Draka’s strategic objectives.
The underlying principles of the remuneration policy for 2007 and subsequent years can be described as follows:

• the total level of remuneration of the Board of Management will be in line with a labour market peer group consisting of European companies with comparable activities and / or similar in terms of size and / or complexity;


• the labour market peer group has been amended during 2007 due to changes in the activities and organisational structures within some of the labour market peers.

Independent remuneration advisors, who use statistical models in order to gear the remuneration details of the companies to Draka’s size, can be consulted by the Company’s Remuneration & Nomination Committee.


The remuneration levels of the members of the Board of Management
were aligned with this European labour market peer group.

Remuneration structure 2007

The total remuneration package of the members of the Board of Management consists of:

• Base salary;


• Short term incentive;


• Long term incentive;


• Pension arrangement.

Base salary
In 2007, we have reconsidered the base salaries and aligned them to the median market levels of the European labour market peer group.

Short term incentive
In line with market practice, the short term and long term incentive plans were disentangled from 2007 onwards. The short term incentive is now paid out annually fully in cash.

The annual pay out, in terms of the short term incentive, is based on the following performance criteria:

• 1/3rd based on the Company’s Earnings before Interest & Tax (‘EBIT’);


• 1/3rd based on the Company’s average Net working capital as percentage of the yearly revenue;


• 1/3rd based on the discretionary judgment and proposals by the Remuneration & Nomination Committee to the Supervisory Board, related to so-called ‘milestones’ and applying a ‘test of reasonableness’.

If the pre-set targets for 2007 are met, a target bonus of 60% of the base salary can be achieved by the members of the Board of Management. In the event of outstanding performance, a maximum bonus of 90% of the base salary may be achieved by the members of the Board of Management. If performance is below a certain threshold, no bonus will be paid.

Draka regards this combination of performance measures as a proper reflection of the short-term operational performance of the Company. The specific details of the targets are not publicly disclosed since these qualify as competition-sensitive and hence commercially confidential information. On the advice of its Remuneration & Nomination Committee, the Supervisory Board reviews the short term incentive objectives each year in order to guarantee that they are challenging, realistic and in accordance with Draka’s strategy.

Long term incentive plan
Following the disentanglement of the previously applicable short term and long term incentive plans, the long term incentive now consists of an annual conditional grant of performance shares. After a three year period, these performance shares might vest (i.e. become unconditional) based on Draka’s TSR performance. Draka’s TSR performance will be measured against the following companies:


The table below reflects the number of shares (as a percentage of the initially granted number of shares) each member of the Board of Management will receive in relation to the relative TSR position Draka will have achieved three years after the initial share grant.

In line with the principles of the Dutch Corporate Governance Code, vested shares must be held an additional two years from the moment of vesting.


The annual conditional grant of performance shares equals 55% of the base salary. In extraordinary circumstances, the Supervisory Board has the authority to grant additional (performance) shares.

Pension arrangements
In principle, the pension arrangements are in line with the median level of the country of origin of each member of the Board of Management.

Loans
The Company does not grant loans, guarantees or the like to members of the Board of Management of Draka.

Remuneration Board of Management 2007

As per 30 September 2007, Ingolf Schulz stepped down as Chief Executive Officer of Draka Holding N.V. and, subsequently, stepped back from the Board of Management on 31 December 2007. He was succeeded, on 1 October 2007, by Sandy Lyons as Chief Executive Officer of Draka Holding N.V. Sandy Lyons had already been appointed as member of Draka’s Board of Management on 1 September 2007 and had been CEO of Draka Comteq since 1 December 2004. Christian Raskin stepped down from the Board of Management on 31 August 2007.

The remuneration of Draka’s Board of Management substantially changed in 2007, as a result of an in-depth review.

Base salary
As a result of this review, the base salaries of the Board of Management were brought in line with the labour market peer group resulting in increases for Ingolf Schulz of 8%, Frank Dorjee of 4% and Christian Raskin of 3%. Sandy Lyons new (CEO) base salary was determined in line with the approved remuneration policy.

Short term incentive
With regard to the 2007 short term incentive, financial targets are achieved on a level, which results in a 60% pay-out for the annual bonus. With regard to the discretionary part, the Supervisory Board decided to pay out 20% of the base salary. Therefore, the Supervisory Board decided to pay out 80% (of the maximum 90%) of the base salary to the members of the Board of Management over 2007.

The bonus pay-outs over the financial year 2007 are presented in the remuneration table below.

Long term incentive
In 2007, the Supervisory Board used its authority to grant Ingolf Schulz 15,603 conditional performance shares and Frank Dorjee 12,394 conditional performance shares. In addition, as extra appreciation for their contributions during the last three years, Ingolf Schulz and Frank Dorjee were awarded a so called ‘one off grant’ of one year conditional performance shares, of 15,603 and 12,394 each. The General Meeting approved this grant on 11 May 2007.

Pensions
Ingolf Schulz has a defined benefit scheme based on an annual accrual of 2.5% per annum.

Sandy Lyons has a deferred compensation arrangement under Section 401K of the United States Internal Revenue Service Code. Under this arrangement Sandy Lyons is allowed to defer a limited part of his compensation for retirement purposes under the same conditions as all participants in this plan. In addition, Sandy Lyons is entitled to receive annually a deferred payment of no more than 85% of his base salary. This deferred payment can be allocated to a private retirement plan.

Frank Dorjee has a defined contribution pension scheme, which is structured as follows as from 1 January 2006:

• January 1, 2006 until reaching the age of 54 23.0%


• Age 55 – 59 28.6%


• As from age 60 36.1%

The contribution under the pension scheme of Frank Dorjee is based on the base salary minus a social security offset (in 2007: € 11,872). In 2007 Frank Dorjee has received a one-off € 140,000 extra contribution to his pension plan as compensation for earlier commitments.

The defined contribution scheme of Christian Raskin is based on a flat rate contribution of his annual base salary, or € 57,750.
The corresponding Dutch fiscal costs are € 90,284. So the total costs in relation to Christian Raskin amount to € 148,034.

Overview
The table below shows the direct remuneration of the Board of Management for 2007. As a result of him stepping down from the Board of Management on 30 August 2007, the table reflects the remuneration of 8 months for Christian Raskin. Please note that Sandy Lyons was employed by Draka for the whole year 2007 but that the table only reflects the remuneration for Sandy Lyons over the period 1 September 2007 until 31 December 2007 (reflecting his 2007 tenure as member of the Board of Management of the Company).

2007 Direct Remuneration Board of Management


* ‘Allowances’ primarily reflect the gross compensation for housing costs, education and daycare.

The long term incentive reflects the fair value of shares, (conditionally) granted to the members of the Board of Management. The actual grant of shares depends on the Company’s future performance in relation to the peer group.

The members of the Board of Management do not have options on ordinary Draka Holding N.V. shares.

Shareholdings by the members of Draka’s Board of Management (at 31 December 2007) are as follows:


Employment contracts 2006
The members of the Board of Management have been appointed for a definite period.

Sandy Lyons’ current employment was entered into on 1 September 2007 for a period of four years and will, therefore, end on 31 August 2011. The contract provides for a notice period of three months in case of termination by Sandy Lyons and of six months in case of termination by the Company. An exit arrangement has been agreed with Sandy Lyons of a full year’s base salary in case of termination of employment without cause before the end of his term.

Frank Dorjee’s current employment contract was entered into on 1 June 2007 for a period of four years and will, therefore, end on 31 May 2011. The employment contract provides for a notice period of three months in case of termination by Frank Dorjee and of six months in the case of termination by the Company. An exit arrangement has been agreed with Frank Dorjee under which a full year’s base salary plus the average bonus received over the previous three years would be paid if the employment contract were to be terminated before 31 May 2011 due to any other reason than cause.

As stated previously, Christian Raskin stepped down from the Board of Management as per 31 August 2007 and Ingolf Schulz as per 31 December 2007. Christian Raskin and Ingolf Schulz remain employed by Draka as advisers to the Board of Management.

Remuneration policy Board of Management 2008
The remuneration policy for the members of the Board of Management, as adopted by the General Meeting on 11 May 2007, will be continued in 2008. In line with this the base salaries of the Board of Management will increase with 3.25% to € 516,250 for Sandy Lyons and to € 438,813 for Frank Dorjee.
Because of the (intended) take-over of some of Draka’s peers, the composition of the peer groups needs to be amended in 2008.

Remuneration policy Supervisory Board 2007

The remuneration policy for the members of the Supervisory Board is based on the median level of Draka’s European labour market peer group, which is equal to the peer group for the Board of Management.

In accordance with good governance, the remuneration of the Supervisory Board is not dependent on the results of the Company. Consequently, neither stock options nor performance shares are granted to Supervisory Board members by way of remuneration. If any shareholdings in Draka are held by Supervisory Board members, they serve as a long-term investment in the Company. The Company does not provide any loans to its Supervisory Board members.

A set of regulations are in place containing rules governing ownership of and transactions in securities by Supervisory Board members other than securities issued by Draka.

Since 1 June 2006, the Supervisory Board has established three Supervisory Board subcommittees: the Audit & Governance Committee, the Remuneration & Nomination Committee and the Strategy Committee. The following fees for the members of the Supervisory Board and its specialized Committees are applicable:


In addition to the fixed fee, members of the Supervisory Board are entitled to an expense allowance of € 907.56 per year and are reimbursed for travel and accommodation expenses.

Remuneration Supervisory Board 2007

At the Annual General Meeting of Shareholders of 11 May 2007, the proposed remuneration for the separate Supervisory Board Committees was approved with retrospective effect as per 1 June 2006. As a result, the remuneration received by the members of the Supervisory Board in 2007 includes the remuneration for the separate Supervisory Board Committees of 2006.

The remuneration received by the Supervisory Board members in 2007 can be specified as follows:

* Frits Fentener van Vlissingen passed away on 25 March 2006.
** Appointed during the Annual General Meeting of Shareholders of 8 May 2006.
*** Wim Jacobs stepped down at the General Meeting of Shareholders of 8 May 2006.

Remuneration Supervisory Board 2008
For 2008, the remuneration for the Supervisory Board is proposed to remain unchanged, except for the remuneration of the Chairman which is proposed to increase by € 10,000 to € 70,000. This proposed change will be submitted for adoption at the Annual General Meeting of Shareholders in 2008.