REPORT OF THE SUPERVISORY BOARD

In 2007, the Supervisory Board performed the duties assigned to it by law and by the Company’s Articles of Association, regularly advising and monitoring the Management Board. It was closely involved in all decisions that were of major importance to the Group.

COOPERATION BETWEEN THE MANAGEMENT BOARD AND SUPERVISORY BOARD

Carrying out its monitoring and advisory activities, the Supervisory Board was kept regularly informed by the Management Board – in a timely manner and comprehensively, both in writing and orally – about the overall business development, the economic and financial position, and the profitability of the Company and the Group, the corporate strategy and planning, the risk situation and compliance, and important business events. In all, the Supervisory Board convened seven times in 2007. The Supervisory Board of Fresenius AG held meetings in March and May. The constitutive meeting of the Supervisory Board of Fresenius SE also took place in May. A telephone conference was held in June. An extraordinary meeting of the Fresenius SE Supervisory Board took place in September. Two regular Supervisory Board meetings were then held in October and December 2007. Before each of the Supervisory Board’s four regular meetings, detailed Management Board reports and comprehensive approval documents concerning the agenda were distributed to its members. At each of its regular meetings the Supervisory Board used the Management Board’s reports as the basis for its extensive discussions about business development and important corporate decisions. All matters requiring Supervisory Board approval were submitted with sufficient time for proper scrutiny. After reviewing the relevant documents, and after detailed consultation with the Management Board, the Supervisory Board was able to give its approval regarding all matters submitted to it. The Supervisory Board was also informed about any important business events occurring between meetings and, in urgent cases, was requested to pass resolutions by written proceedings. In addition, the chairman of the Management Board informed in individual meetings the chairman of the Supervisory Board regularly about the latest business developments and forthcoming decisions. Every member of the Supervisory Board attended more than half of the Board meetings in 2007.

MAIN FOCUS OF THE SUPERVISORY BOARD’S ACTIVITIES

The Supervisory Board’s monitoring and advisory activities were mainly focused on overall business operations as well as on business segment investments and acquisitions, and any related financing.

The Supervisory Board also closely pursued the conversion of Fresenius AG into a European Company (SE), which was listed in the Commercial Register on July 13, 2007, after the successful completion of the employee involvement procedure. The Supervisory Board was kept fully informed by the Management Board about the negotiations relating to this procedure.

The Supervisory Board also thoroughly reviewed and discussed all other significant business activities with the Management Board. It approved the budget for 2008 and the Group’s medium- term planning, following a detailed review and discussions with the Management Board. At its regular meetings and those of the Audit Committee, the Supervisory Board also kept itself informed about the Group’s risk situation and risk management activities as well as compliance.

CORPORATE GOVERNANCE

The further development of the corporate governance at Fresenius was reviewed by the Supervisory Board. On December 6, 2007, the Management Board and the Supervisory Board jointly issued a Declaration of Conformity in accordance with the German Corporate Governance Code in its version as of June 14, 2007.

For further information on corporate governance at Fresenius, please see the Corporate Governance Report issued jointly by the Management and Supervisory Boards.

In the course of the conversion of Fresenius AG into a European Company (SE) the newly constituted Supervisory Board of Fresenius SE adopted new rules of procedure at its extraordinary meeting in September. These new rules of procedure take account of the changed legal framework applying to Fresenius SE.

The Supervisory Board also issued new rules of procedure for the Management Board of Fresenius SE. In addition to the necessary adjustments associated with the change of legal form to a SE, these rules of procedure also take account of the changes in the business distribution plan resulting from the reorganization of the Group’s hospital operations. The former business segment Fresenius ProServe has been replaced by two new business segments, Fresenius Helios and Fresenius Vamed which previously formed Fresenius ProServe.

WORK OF THE COMMITTEES

The Personnel Committee, which is responsible, among other things, for concluding, amending, and terminating employment contracts with the members of the Management Board, held three meetings and one conference call.

The Audit Committee held four meetings. The main focus of its activities was on the preliminary audit of the financial statements and the consolidated financial statements for 2006 and discussions with the auditors about their report and the terms of reference of the audit.

The Audit Committee also reviewed the 2007 quarterly reports and the risk management system.

After their own meetings, the committee chairmen reported regularly to the following Supervisory Board meeting on the work of their committees.

The Nomination Committee convened a number of times and deliberated on the Supervisory Board’s proposals to the Annual General Meeting regarding the nomination of the Supervisory Board.

The Mediation Committee has ceased to exist since the German Co-determination Act (MitbestG), which provided for this committee, no longer applies to Fresenius SE.

Information on the present composition of the committees can be found in the Supervisory Board.

PERSONNEL – NOMINATION OF THE MANAGEMENT AND SUPERVISIORY BOARDS

The mandates of the members of the Supervisory Board ended with Fresenius AG’s conversion to a SE. We thank the members who left the Supervisory Board for their dedication to Fresenius.

The conversion of Fresenius AG to a SE has not altered the size of the Supervisory Board. It continues to have twelve members, with six shareholder representatives and six employee representatives.

The six shareholder representatives on the first Supervisory Board of Fresenius SE were appointed according to the Fresenius SE statutes. These formed an integral part of the conversion plan agreed by the General Meeting on December 4, 2006. The shareholder representatives on the first Supervisory Board of Fresenius SE are Dr. Gabriele Kröner, Dr. Gerd Krick, Dr. Gerhard Rupprecht, Dr. Dieter Schenk, Dr. Karl Schneider and Dr. Bernhard Wunderlin; there have been no changes with respect to the composition of the former Supervisory Board of Fresenius AG.

The employee representatives on the first Supervisory Board of Fresenius SE were named in the Agreement for Employee Involvement in Fresenius SE of July 13, 2007, and were officially appointed by the Municipal Court of Bad Homburg v.d.H. on July 16, 2007. The employee representatives on the first Supervisory Board of Fresenius SE are Mr. Dario Ilossi, Mr. Konrad Kölbl, Mr. Wilhelm Sachs, Mr. Stefan Schubert, Mr. Rainer Stein and Mr. Niko Stumpfögger. For the first time, employee representatives in EU member states outside Germany have become members of the Supervisory Board of Fresenius SE, namely Mr. Ilossi from Italy and Mr. Kölbl from Austria.

At its constitutive meeting in May 2007 the Supervisory Board elected Dr. Gerd Krick as its chairman. Dr. Dieter Schenk, who was nominated by the shareholder representatives, was elected as deputy chairman. The employee representatives did not attend the constitutive meeting in May 2007, as they were only appointed in July 2007. Mr. Niko Stumpfögger, nominated by the employee representatives, was then elected as a further deputy chairman in the extraordinary meeting in September.

The Supervisory Board of Fresenius AG appointed Dr. Jürgen Götz as a member of the Management Board as from July 1, 2007 with the responsibility for legal, compliance and personnel affairs. He took over the responsibility for personnel affairs from Mr. Stephan Sturm, who continues to serve as Chief Financial Officer of Fresenius SE.

The mandates of the members of the Management Board of Fresenius AG also ended with the change of legal form to a SE. All the members of the Management Board of Fresenius AG in office at the time the conversion took effect on July 13, 2007, were reappointed by the newly constituted Supervisory Board of Fresenius SE.

Further, with the reorganization of the Group’s hospital operations, the Supervisory Board of Fresenius SE appointed Dr. Francesco De Meo, responsible for the business segment Fresenius Helios, and Dr. Ernst Wastler, responsible for the business segment Fresenius Vamed, as members of the Management Board of Fresenius SE as from January 1, 2008. As a result of the reorganization, Mr. Andreas Gaddum, the member of the Management Board responsible for the former business segment Fresenius ProServe, resigned from the Company as of December 31, 2007.

FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS

The accounting records, the financial statements prepared according to the German Commercial Code (HGB) and the Management Report of Fresenius SE (formerly Fresenius AG) for 2007 were audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main. They were elected as auditors at Fresenius AG’s Annual General Meeting on May 16, 2007 and were subsequently commissioned by the Supervisory Board. The auditors issued their unqualified audit opinion for these statements. The same applies to the consolidated financial statements of Fresenius SE (formerly Fresenius AG), which were prepared according to IFRS accounting principles, and the US GAAP statements, which were prepared voluntarily.

Management Reports were added to the consolidated financial statements. The financial statements, the consolidated financial statements, the Management Reports and the auditors’ reports were submitted to each member of the Supervisory Board of Fresenius SE within the required time. The Supervisory Board noted and approved the auditors’ findings. The Supervisory Board’s own review found no objections to the financial statements of Fresenius SE (formerly Fresenius AG) or the consolidated financial statements. The Supervisory Board agrees with the Management Reports and the statements contained therein with respect to future development.

At its meeting on March 10, 2008, the Supervisory Board approved the financial statements of Fresenius SE (formerly Fresenius AG) for the fiscal year 2007 as presented by the Management Board, thereby adopting them as official. The Supervisory Board also approved the consolidated financial statements of Fresenius SE (formerly Fresenius AG) prepared according to IFRS standards and the consolidated financial statements prepared voluntarily according to US GAAP for 2007.

The auditors delivered a detailed report on the results of the audit during this meeting. The auditors attended all four regular meetings of the Supervisory Board and all meetings of the Audit Committee.

The Supervisory Board concurs with the proposal by the Management Board on the appropriation of the 2007 retained earnings.

The Supervisory Board would like to thank the Management Board and all employees for their achievements and commitment during the fiscal year 2007.

 

Bad Homburg v.d.H., March 10, 2008

The Supervisory Board

 

Dr. Gerd Krick

Chairman