148 Corporate Governance Report Compensation Report (Part of the Combined Group Management Report) This compensation report describes the compensation plan and the individual compensation for E.ON AG's Supervisory Board and Board of Management. It applies the regulations of the German Commercial Code amended to reflect the Management Board Compensation Disclosure Law, the regu- lations of the German Stock Corporation Act including the Act on the Appropriateness of Management Board Compen- sation, and the principles of the German Corporate Governance Code ("the Code"). Compensation Plan for Members of the Supervisory Board The compensation of Supervisory Board members is deter- mined by the Annual Shareholders Meeting and governed by E.ON AG's Articles of Association. In accordance with German law and the Code's recommendations, the compensation plan takes into consideration Supervisory Board members' responsibilities and scope of duties as well as the Company's financial situation and business performance. In accordance with the Code, Supervisory Board members receive fixed annual compensation as well as two variable, performance- based compensation components. The short-term component is linked to dividends. The long-term component is linked to the three-year average of the E.ON Group's consolidated net income. The three-for-one stock split that took place in 2008 did not affect the Supervisory Board's compensation plan. The word- ing of the Articles of Association was amended to neutralize the effects of the stock split. Fixed compensation: in addition to being reimbursed for their expenses including the value-added tax due on their com- pensation, Supervisory Board members receive fixed compen- sation of 55,000.00 for each financial year. Short-term variable compensation: in addition, Supervisory Board members receive variable compensation of 345.00 for each 1 euro cent of per-share dividend paid out to share- holders in excess of 3 euro cents per no-par-value share for the relevant financial year. Long-term variable compensation: furthermore, Supervisory Board members receive variable compensation of 210.00 for each 1 euro cent of the three-year average of the E.ON Group's consolidated net income per share (attributable to share- holders of E.ON) in excess of 76 euro cents. To adjust for the stock split, net income per share for 2007 will be divided by three before being factored into the three-year average. Individuals who were members of the Supervisory Board or any of its committees for less than an entire financial year receive pro-rata compensation for each full or partial month of membership. Fixed compensation is payable after the end of the financial year. Variable compensation components are payable after the Annual Shareholders Meeting, which votes to formally approve the acts of the members of the Super- visory Board in the previous financial year. The Chairman of the Supervisory Board receives a total of three times the above-mentioned compensation; the Deputy Chairman and every chairman of a Supervisory Board com- mittee receive a total of twice the above-mentioned amount; and each committee member receives a total of one-and-a- half times the above-mentioned compensation. Supervisory Board members are paid an attendance fee of 1,000.00 per day for meetings of the Supervisory Board or its committees. Finally, the Company has taken out D&O insur- ance for the benefit of Supervisory Board members to cover the statutory liability related to their Supervisory Board duties. If an insurance claim is granted, this insurance includes a deductible equal to 50 percent of a Supervisory Board member's annual fixed compensation. In accordance with the Code's recommendations, effective June 16, 2010, the deduct- ible will be increased to 10 percent of a damage claim but with a maximum cumulative annual cap of 150 percent of a mem- ber's annual fixed compensation. Fixed annual compensation of 55,000.00 is intended to reflect the independence necessary for the Supervisory Board to fulfill its supervisory function. In addition, there are a number of duties that Supervisory Board members must per- form irrespective of the Company's financial performance. For this reason, there should be minimum guaranteed com- pensation even when the Company faces difficult times,