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Expert Corporate Governance Service (ECGS)
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K+S - AGM 15 May 2019

General: Supervisory Board member Jella Benner-Heinacher is Deputy Chief Managing Director (part-time) of DSW, the local partner of ECGS. This report has been prepared using standard ECGS guidelines.

K+S is an international resources company that has been mining and processing mineral raw materials for more than 125 years. The Company provides mineral products for the areas of agriculture, industry, consumers and communities. K+S operates production sites in Europe, North America and South America as well as a global distribution network.

As of 31 December 2018, DWS Investment GmbH held 5.69% and Dimensional Holdings Inc. held 3.01% of the Company's shares.In financial year 2018, Group revenues increased by 11.4% to EUR 4.0bn, EBIT decreased by 16.1% to EUR 227.2m, EBITDA increased by 5.1% to EUR 606.3m and net income attributable to the shareholders of K+S AG decreased by 77.2% to EUR 42.1m.

Item 2: Management and Supervisory Board are proposing a dividend of EUR 0.25 per share which corresponds to a payout ratio of 113.64% per share. The dividend is not covered by earnings and is also not covered by free cash flow for a fourth consecutive year. ECGS believes that dividends should be covered by consolidated earnings and/or free cash flow and supported by a strong balance sheet in terms of solvency and leverage. We consider a dividend payment inappropriate at this time and therefore recommend to oppose the dividend proposal.

Item 4: We raise our concerns over the insufficent attendances of five Supervisory Board members in financial year 2018 without an adequate justification for their absence. As the discharge of Supervisory Board members is proposed in a bundled resolution we recommend to oppose the discharge of the Supervisory Board as a whole.

Item 5: Deloitte, Hanover, is proposed as auditor for the current financial year. We have no concerns over the ratio of non-audit/audit fees. However, we note that Deloitte has audited the Company since the financial year 1972 which significantly exceeds our maximum acceptable term of office. We therefore recommend opposing the re-election of Deloitte as auditor.

Underlying
K+S AG

K+S is engaged in the chemical sector. Co. has three business segments. The Potash and Magnesium Products segment combines the production and marketing of potash fertilizers and fertilizer specialities as well as potash and magnesium compounds for technical, industrial and pharmaceutical applications. The Salt segment encompasses the production and marketing of food grade salt, industrial salt and salt for chemical use, de-icing salt and sodium chloride brine. The Complementary Activities segment bundles together recycling activities and waste disposal or reutilisation in potash and rock salt mines as well as catsan® granulation.

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