BERU AG : L'entreprise

Declaration of compliance by the Executive Board and the Supervisory Board

of BERU Aktiengesellschaft, Ludwigsburg, with the German Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Law issued on December 31, 2003

“In December 2003, the Executive Board and the Supervisory Board of BERU AG issued their second declaration of compliance pursuant to Section 161 of the German Stock Corporation Law, in which they declare to what extent the recommendations contained in the Corporate Governance Code of the German Government Commission have been complied with and will be complied with in the future, and which recommendations have not been followed and/or will not be followed in the future.

I. BERU AG complies with all of the recommendations contained in the Corporate Governance Code of the German Government Commission in the version of May 21, 2003, with the exception of the following clauses:

Clause 4.2.4

According to Clause 4.2.4 of the version of the German Corporate Governance Code of May 21, 2003, the compensation of the members of the Executive Board shall be reported in the notes to the consolidated financial statements subdivided according to fixed, performance-related and long-term incentive components; the figures shall be individualized.

BERU AG will not comply with this recommendation. The compensation model for the members of the Executive Board of BERU AG is divided into fixed and variable performance-related components. The variable components are linked to the development of the share price, net income and the level of the dividend distribution. These details and the reporting of the total compensation of the Executive Board in the notes to the consolidated financial statements provide a basis for an assessment of whether the division of compensation into fixed and variable components is appropriate. These details also serve to asses whether the compensation structure provides the desired sustained incentive effect for the purpose of achieving a long-term increase in shareholder value at BERU AG. The crucial point for the shareholders is their view of the entire Executive Board, which acts as a collegial body. In the view of the Executive Board and the Supervisory Board, individualized details of the compensation of the members of the Executive Board would not result in additional knowledge of their personal performances, particularly as the Executive Board consists of just three members.

Clause 5.3.2

According to Clause 5.3.2, the Supervisory Board shall set up an audit committee which, in particular, handles issues of accounting, risk management and the independent auditors.

This recommendation is not complied with. With this decision, BERU AG is in accordance with the recommendation of the German Corporate Governance Code contained in Clause 5.3.1, which makes the formation of committees by the Supervisory Board dependent on a company’s specific circumstances and the number of members of its Supervisory Board. As a medium-sized company, BERU AG reflects these specific circumstances by refraining from forming an audit committee. Practice has shown that in the meetings of the entire Supervisory Board and particularly in the meeting in which the financial statements are dealt with, a qualified and productive exchange of opinions takes place, and the formation of an audit committee by a supervisory board consisting of only six members would not result in any more efficiency. The Supervisory Board will review this decision at regular intervals, or whenever a change in circumstances necessitates a review.

Clause 5.4.5

According to Clause 5.4.5, the compensation of the members of the Supervisory Board shall be reported in the notes to the consolidated financial statements individually, subdivided according to components.

On September 16, 2003, the annual shareholders’ meeting approved a new version of Article 10 of the Articles of Incorporation of BERU AG concerning the compensation of the members of the Supervisory Board. This matter is thus regulated in a comprehensible way. The compensation of the members of the Supervisory Board consists of a fixed component and a variable component which depends on the level of the dividend distribution. The Chairman of the Supervisory Board receives triple the amount received by an ordinary member, the Deputy Chairman of the Supervisory Board receives double this amount. Furthermore, for the membership of committees and for the chairmanship of these committees, bonuses of 25% and 50% respectively are paid in addition to the fixed components. These items are not listed individually, neither is the compensation listed individually in the notes to the consolidated financial statements. Details beyond what is specified in the Articles of Incorporation would not result in any additional valuable information.

Clause 7.1.1

Shareholders and third parties shall be informed during the financial year by means of interim reports. The consolidated financial statements and the interim reports shall be prepared under observance of internationally recognized accounting principles.

BERU AG regularly prepares quarterly and half-year reports and publishes them in good time. The Group is currently changing over its reporting of annual financial statements and interim reports from national accounting principles (HGB=German Commercial Code) to international accounting principles (IFRS, formerly IAS). For the 2003/04 financial year (April 1, 2003 until March 31, 2004), the annual financial statements have already been prepared according to IFRS (IAS), the interim reports will be prepared according to IFRS (IAS) as of the 2004/05 financial year.

II. Since it last issued a declaration of compliance, BERU AG has complied with the recommendations of the German Government Commission’s Corporate Governance Code in the version of November 7, 2002 in all points with the exception of the aforementioned Clauses 4.2.4, 5.3.2 and 7.1.1. The introduction of a performance-related component of compensation for the Supervisory Board (Clause 5.4.5) took place as a result of the resolution by the annual shareholders’ meeting held on September 16, 2003.”

Ludwigsburg, December 31, 2003

The Executive Board          The Supervisory Board

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