The objective of the German Corporate Governance Code is to make existing national regulations governing corporate management and supervision more transparent for both domestic and international investors, thereby promoting trust in the governance of listed German stock corporations. This framework is based on the German Corporate Governance Code adopted by the Commission of the German Corporate Governance Code in the amended version of 26 May 2010.

SIMONA AG has met the majority of requirements specified within the Code. The Supervisory Board and the Management Board responded to the legal requirements of the Code by implementing appropriate measures within the company, insofar as these were necessary to supplement the corporate governance system already in place at SIMONA.

Departures from the German Corporate Governance Code
There are several company-specific characteristics which preclude SIMONA AG from adopting the Code in its entirety.

Invitation to General Meeting of Shareholders
“The company shall send notification of the convening of the General Meeting together with the convention documents to all domestic and foreign financial services providers, shareholders and shareholders’ associations by electronic means if the approval requirements are fulfilled.” (Section 2.3.2 of the Code)
Under Section 30 b (1) no. 1 of the Securities Trading Act (Wertpapierhandelsgesetz – WpHG), the convening of a General Meeting of Shareholders as well as the convention documents must be published in the electronic Federal Gazette. Disclosure in the electronic Federal Gazette cannot be substituted with publication in other media or transmission of the convention documents in a different format. An additional dispatch to all recipients by electronic means would not be feasible for SIMONA AG, even if the necessary approval requirements were to be met, as the names and e-mail addresses of shareholders are not known in all cases. Therefore, SIMONA AG is of the opinion that convening the General Meeting of Shareholders by electronic means, in addition to the method already implemented, is not practicable. In view of this, the company has decided not to implement procedures relating to the request for approval to electronic notifications.

Transparency of Management Board and Supervisory Board compensation
“In concluding Management Board contracts, care shall be taken to ensure that payments made to a Management Board member on premature termination of his contract without serious cause do not exceed the value of two years’ compensation (severance payment cap) and compensate no more than the remaining term of the contract. The severance payment cap shall be calculated on the basis of the total compensation for the past full financial year and if appropriate also the expected total compensation for the current financial year. Payments promised in the event of premature termination of a Management Board member’s contract due to a change of control shall not exceed 150% of the severance payment cap.” (Section 4.2.3, para. 4 of the Code)
At present, the Management Board contracts contain no possibilities of limitation (cap) in respect of extraordinary developments. In the company’s opinion, a change of ownership in particular is considered to constitute an extraordinary development. As regards such events, the current Management Board contracts contain no provisions under which board members would have a claim for additional payments. Therefore, from SIMONA’s perspective an agreement concerning caps is deemed unnecessary.

“The total compensation of each one of the members of the Management Board is to be disclosed by name, divided into fixed and variable compensation components. The same applies to promises of benefits that are granted to a Management Board member in case of premature or statutory termination of the function of a Management Board member or that have been changed during the financial year. Disclosure may be dispensed with if the General Meeting has passed a resolution to this effect by three-quarters majority.” (Section 4.2.4 of the Code)
On 23 June 2006, the General Meeting of Shareholders of SIMONA AG agreed – for the period up to and including the 2010 consolidated and separate financial statements – by a three-quarters majority to disclose Management Board compensation in an aggregated format, divided into fixed and performance-related components, rather than disclosing each amount by name.

“Disclosure shall be made in a compensation report which as part of the Corporate Governance Report describes the compensation system for Management Board members in a generally understandable way.” (Section 4.2.5 of the Code)
The compensation report is published as part of the management report.

"Members of the Supervisory Board shall receive fixed as well as performance-related compensation. Performancerelated compensation should also contain components based on the long-term performance of the enterprise. The compensation of the members of the Supervisory Board shall be reported individually in the Corporate Governance Report, subdivided according to components. Also payments made by the enterprise to the members of the Supervisory Board or advantages extended for services provided individually, in particular, advisory or agency services shall be listed separately on an individual basis in the Corporate Governance Report.” (Section 5.4.6 para. 2, 3 of the Code)
The members of the Supervisory Board receive remuneration that is commensurate with their duties and scope of responsibility. Beyond the fixed remuneration specified in the Articles of Association, this compensation does not contain any performance-related components. However, the General Meeting of Shareholders is authorised to introduce compensation for the Supervisory Board, with this form of remuneration being linked to the attainment of specific performance targets. In view of the overall compensation structure, SIMONA considers this approach to be the most suitable compensation model in respect of the Supervisory Board’s activities. No such variable compensation components were agreed by the General Meeting of Shareholders for the 2010 financial year. Disclosure of Supervisory Board compensation is made on an itemised basis, i. e. for each member, within the compensation report, which forms an integral part of the management report.

Structure of the Supervisory Board and its Committees
“The Supervisory Board shall form a nomination committee composed exclusively of shareholder representatives which proposes suitable candidates to the Supervisory Board for recommendation to the General Meeting.” (Section 5.3.3 of the Code)
The Supervisory Board has not formed a Nomination Committee. The shareholder representatives on the Supervisory Board already discuss nominations on a separate basis. Therefore, in SIMONA’s opinion the actual formation of a Nomination Committee is unnecessary.

Reporting
“The consolidated financial statements shall be publicly accessible within 90 days of the end of the financial year; interim reports shall be publicly accessible within 45 days of the end of the reporting period.” (Section 7.1.2 of the Code)
Consolidated financial statements and interim statements are made publicly accessible in accordance with the statutory time frames. Owing to the procedures defined for the preparation of annual financial statements, the aim being to deliver the greatest possible transparency and accuracy, SIMONA is of the opinion that earlier publication would not be feasible in terms of meeting requisite quality standards.

Shareholdings
Ownership interests held by members of the Management Board or the Supervisory Board are presented in the consolidated financial statements or in the compensation report, which is an integral part of the management report. Furthermore, the ownership interests are presented online insofar as the company was notified of any movements above or below the thresholds necessitating disclosure.

Conflicts of interest
Dr. Roland Reber was re-appointed to the Supervisory Board of SIMONA AG on 27 June 2008. Dr. Roland Reber also holds the position of Managing Director at Ensinger GmbH, Nufringen. The two entities maintain business relations with each other on arm’s length terms. Should a material conflict of interest arise in specific areas as a result of the mandate held by Dr. Roland Reber, the latter will inform the Supervisory Board about such conflict of interest and will not take part in discussions or, if applicable, voting on any such items on the agenda. No conflicts of interest occurred during the period under review.

Disclosure on the internet
SIMONA AG also publishes its corporate governance statement, declaration of conformity, compensation report and corporate governance report on the internet. In addition, all facts deemed to be of relevance are disclosed on the corporate website in order to reach a broad audience and establish a level playing field for shareholders, analysts and other stakeholders.