SIMONA returned to a path of growth in 2010. Following the dramatic slump in sales in 2009 and a restrained start to the year, the SIMONA Group saw a significant increase in revenue from March onward. Within this context, the measures immediately drawn up in 2009 and subsequently implemented with the necessary conviction proved particularly effective. Based on a close dialogue between the Management Board and the Supervisory Board, SIMONA reined back costs wherever possible, but without jeopardising its growth targets. The company retained its core workforce, without having to make re- dundancies for operational reasons. In doing so, SIMONA was able to respond quickly and flexibly to the sudden surge in demand from March 2010 onward, generating revenue growth that was well into double figures.

Earnings matched the company’s forecast, but nevertheless remained below expectations given the level of revenue growth. This was attributable primarily to the significant hike in procurement costs for raw materials used by SIMONA. The Supervisory Board monitored this situation closely over the course of the year and worked in collaboration with the Management Board to draw up measures to be implemented rapidly for the purpose of safeguarding operating profit. The Supervisory Board believes that prospects for the current financial year are favourable. Committed to cultivating international growth markets and focusing on applications in areas that are particularly promising for the future, SIMONA is well positioned in this respect. Within this context, profitable growth is the prime objective for the current financial year.

This report outlines the Supervisory Board’s interaction with the Management Board as well as the key topics discussed at meetings convened by the Supervisory Board and its committees.

Cooperation with the Management Board
Over the course of the 2010 financial year, the Supervisory Board discharged its duties under statutory provisions and the company’s articles of association, advised the Management Board and senior staff on a regular basis and evaluated and monitored management’s activities. It also conducted an assessment of the company’s risk management and compliance procedures and came to the conclusion that the system implemented meets the requirements to the fullest extent. The Management Board and Supervisory Board engaged in dialogue concerning the strategic direction of the company and regularly discussed the status of strategy implementation. The Supervisory Board was directly involved in all decision-making processes of fundamental importance to the company. The Management Board informed the Supervisory Board as part of regular written and verbal reports, furnished in a timely and comprehensive manner. The reports focus in particular on issues relating to corporate planning, the course of business and the position of SIMONA AG and its subsidiaries, including the risk situation, risk management, compliance and transactions of significant importance to the company.

At the same time, the Management Board outlined any deviations between specified targets and the actual course of business, elucidated them in full and explained any countermeasures taken to rectify the situation. The content and scope of reports furnished by the Management Board met the requirements set out by the Supervisory Board. In addition to the above-mentioned reports, the Supervisory Board asked the Management Board to provide supplementary information relating to certain issues. In particular, the Management Board was available at Supervisory Board meetings for the purpose of discussing specific points and answering any questions put to it by the Supervisory Board. Transactions requiring the Supervisory Board’s consent were discussed and examined thoroughly in cooperation with the Management Board, focusing particularly on the benefits and effects of these transactions.

The Chairman of the Supervisory Board was also kept fully informed in between meetings convened by the Supervisory Board and its committees. For example, the CEO and the Chairman of the Supervisory Board met regularly to discuss SIMONA’s strategy, current progress in business and risk management, as well as other key topics and decisions that arose. Additionally, the Chairman of the Supervisory Board conducted one-to-one meetings with the other members of the Management Board for the purpose of discussing specific issues relating to their departments. The CEO informed the Chairman of the Supervisory Board without delay of all important events that were significant in the assessment of SIMONA’s state of affairs and progress or for the management of the company. The Supervisory Board also deliberated on the implementation of the German Corporate Governance Code within the company and, where applicable, initiated measures aimed at fulfilling the new requirements, working in close cooperation with the Management Board. The Supervisory Board does not concur with all aspects of the Corporate Governance Code. A summary of departures from the Code was made available to shareholders via the company’s website as part of the updated Declaration of Conformity, dated 10 March 2011 and issued pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz – AktG). Furthermore, the relevant points were explained as part of the Corporate Governance Report.

Supervisory Board meetings
The Supervisory Board convened four scheduled meetings over the course of 2010. At the meeting held on 25 February 2010, the Supervisory Board discussed the concluding report prepared by the Management Board in respect of the financial year 2009 as well as the economic situation at the beginning of the financial year 2010. Within this context, the focus was on measures aimed at stabilising earnings as well as on the investments to be made over the course of the financial year. Other topics included business performance within the international markets and at the production sites in the United States, China and the Czech Republic, as well as the principal action plans to be formulated on the basis of this information. Additionally, the Supervisory Board informed itself about the status of integration of the company’s pressed sheets and fittings business, which was formerly located in Kirchhundem-Würdinghausen, within its operations in Kirn and Ringsheim. The Supervisory Board also discussed contractual issues relating to one of the company’s key accounts in Asia.

In its meeting of 20 April 2010, the Supervisory Board dealt with the consolidated financial statements, the annual financial statements of the parent as well as the Group management report and the management report of SIMONA AG for the financial year 2009, the proposal by the Management Board for the appropriation of distributable profit generated in the financial year 2009 and the result of the year-end audit conducted by Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft. The meeting was attended by the auditor, who reported in detail on the results of the audit. The Supervisory Board was thus able to satisfy itself that the audit had been conducted in a proper manner. At the same meeting, the Supervisory Board approved the results of the audit. Having concluded its examination in full, the Supervisory Board raised no objections to the annual financial statements of the parent and consolidated financial statements or the management report and Group management report for the 2009 financial year; the accounts were thus approved by the Supervisory Board. It assessed and endorsed the Management Board’s proposal for the appropriation of profits. At this meeting the Supervisory Board also informed itself about the course of business during the first quarter of 2010, as well as deliberating on Group and liquidity forecasting. The latest situation at the company’s sites in the United States, China and the Czech Republic was also on the agenda. Furthermore, the Supervisory Board informed itself of the situation with regard to the planned closure of the Kirchhundem-Würdinghausen site. Among the other items on the agenda at this meeting were the preparations to be made for the Annual General Meeting 2011 as well as Management Board remuneration.

At the Supervisory Board meeting of 12 August 2010 the Management Board reported on the course of business during the financial year to date and provided an outlook for the period up to the year-end. At this meeting the Supervisory Board also discussed, and subsequently approved, the medium- and long-term corporate strategy with the Management Board. In addition, the Supervisory Board asked to be briefed on the situation at the Kirchhundem- Würdinghausen site. The agenda also included business performance at the production sites in the United States, the Czech Republic and China.

At the Supervisory Board meeting of 9 December 2010 the focus was on the report issued by the Management Board for the financial year in question. Furthermore, the Supervisory Board discussed and approved the budget for the 2011 financial year, including investment plans. It also informed itself about various issues of prime importance, such as operations in the United States, Jiangmen and Litvinov. Additionally, the Supervisory Board agreed on the dates of its meetings in 2011.

Committee work
The Supervisory Board is assisted by the Audit Committee and Personnel Committee. Both committees regularly provide the Supervisory Board with extensive information relating to their activities. The Audit Committee is responsible mainly for addressing issues relating to accounting and year-end auditing, risk management and acquisitions. The principal duties of the Personnel Committee are centred around compensation as well as the conclusion, amendment and termination of Management Board members’ employment contracts. The Audit Committee convened on four occasions during 2010. In particular, it dealt with the issue of R&D projects. Furthermore, the Audit Committee discussed the product strategy relating to finished parts, as well as deliberating on an internal project aimed at optimising the supply chain. Against the background of high commodity prices, the Audit Committee also focused on the company’s earnings performance. Internal auditing formed an essential part of its work. The Audit Committee reviewed the half-yearly and quarterly results and prepared the proposal by the Supervisory Board for the appointment of the independent auditor for the 2010 financial year, to be put forward to the Annual General Meeting of Shareholders, as well as determining the focal points of the audit.

In 2010, the Personnel Committee primarily discussed the company’s organisational structure and the responsibilities of the Management Board, as well as reviewing the fixed-level compensation and bonuses payable to the members of the Management Board. Additionally, it focused on efforts to restructure the company’s retirement benefits system.

In February 2010, the Personnel Committee resolved not to extend the contract of Management Board member Jochen Feldmann. Annual fi nancial and consolidated fi nancial state ments The accounts of SIMONA AG for the 2010 financial year were audited by Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, Frankfurt, appointed as auditor by the General Meeting of Shareholders on 25 June 2010. Before proposing Ernst & Young GmbH as auditor to the General Meeting of Shareholders, the Chairman of the Supervisory Board had obtained confirmation from Ernst & Young GmbH that there were no circumstances which might prejudice its independence as an auditor. Ernst & Young GmbH audited the financial statements and the consolidated financial statements for the year as well as the management report and the Group management report in conjunction with the accounting records and issued an unqualified audit opinion. The financial statements mentioned above, the audit reports prepared by Ernst & Young GmbH and the Management Board’s proposal for the appropriation of net retained earnings were sent to all Audit Committee and Supervisory Board members in good time.


The Supervisory Board would like to thank the Management Board and all members of staff. The significant  increase in revenue achieved in 2010 is a tribute to their  exceptional commitment over the course of the year. The Supervisory Board would also like to express its gratitude to the Group's customers and business partners.


SIMONA AG
Kirn, 28 April 2011
The Supervisory Board