Report by the Supervisory Board on the 2015 Fiscal Year
in the fiscal year 2015, international demand for solar power products increased although strong competition continued to define market environment. For the first time in its history, SolarWorld achieved groupwide shipments of more than one gigawatt – an increase of 33 percent compared to 2014. Earnings before interest and taxes (EBIT) improved significantly compared to the previous year, even though a deficit of € 4 million remained. In the fourth quarter of 2015, a positive EBIT was achieved for the first time again – an important milestone on the path to a sustainable return to profitability.
The group was able to further strengthen its position as a quality provider. While production capacities were extended and new staff recruited, numerous measures were simultaneously implemented to reduce costs and increase efficiency. And with success: In 2015 SolarWorld was the world’s largest manufacturer of PERC high-efficiency solar cells and was able to set not just one, but two new efficiency records in this technology. The company also introduced a series of new products, such as the 300-watt solar module and bifacial modules, thereby underlining its claim to provide customers with leading solar power solutions.
The Supervisory Board would like to thank the SolarWorld staff and management for their extraordinary effort and loyalty to the company.
Supervisory Activities of the Supervisory Board
The Supervisory Board once again accompanied the Management Board in an advisory capacity during the past fiscal year and supervised its activities on the basis of written and verbal management reports and Supervisory Board meetings. In addition, the chairman of the Supervisory Board also maintained regular contact with the Management Board outside Supervisory Board meetings. The Management Board informed the Supervisory Board regularly and without delay on all issues relevant to the company’s planning, including the financial, investment and HR planning; course of business; ongoing revenue, earnings and liquidity development; economic situation of the company and group, including risk situation and risk management; compliance within the group; strategic realignment of the group within the framework of the restructuring process developed and implemented by the Management Board; as well as important decisions and transactions relating to the company and group. Reporting was as and when appropriate, i.e. when specifically requested by the Supervisory Board, as well as regularly according to the rules of procedure issued by the Supervisory Board for the Management Board. The Supervisory Board also consulted external advisors where necessary. As required by law, as well as by the Articles of Association and the rules of procedure for the Management Board, the Supervisory Board was involved in all decisions of fundamental importance to the company. This applies in particular for transactions requiring approval.
Composition of the Supervisory Board
Since the Annual General Meeting (AGM) on May 30, 2014, the Supervisory Board has included six shareholder representatives: Mr. Heiner Eichermüller (Deputy Chairman of the Supervisory Board), Dr. Khalid Klefeekh Al Hajri, Mr. Faisal M. Al Suwaidi, Dr. Andreas Pleßke, Mr. Jürgen Wild and Dr. Georg Gansen.
As of the AGM of June 2, 2015, and on completion of a status procedure pursuant to Section 97 German Stock Corporation Act (AktG), the provisions of the German Co-determination Act apply owing to the circumstance that SolarWorld AG now normally has more than 2,000 but less than 10,000 attributable employees. Since then, the SolarWorld AG Supervisory Board comprises six shareholder representatives elected by the AGM plus six employee representatives.
The AGM of June 2, 2015, re-elected as shareholder representatives the previous members of the Supervisory Board named above. Their term of office ends with the conclusion of the AGM that will decide on the approval of the actions of the members of the Supervisory Board for the 2019 fiscal year. Mr. Peter Finger, Mr. Joachim Götz, Ms. Anke Martin-Heede, Dr. Ute Mareck, Mr. Wolfgang Lemb and Mr. Gerald Voigt were elected to represent the employees and appointed to the Supervisory Board by court order the same day as a simultaneous ballot was no longer possible due to legal deadlines. Mr. Wolfgang Lemb, Mr. Gerald Voigt, Dr. Ute Mareck, Mr. Olaf Zirr, Mr. Albrecht Handke and Mr. Alexander Richter were elected employee representatives to the Supervisory Board in a ballot that ended on October 5, 2015, when the results of the elections of September 29 and 30, 2015, were officially announced by the central election committee. The previous members appointed by court order, Mr. Peter Finger, Mr. Joachim Götz and Ms. Anke Martin-Heede, therefore ceased to be members of the Supervisory Board. At the constitutive meeting of the equal-representation, co-determined Supervisory Board, Dr. Georg Gansen was confirmed as Chairman of the Supervisory Board, and Mr. Gerald Voigt was elected its Deputy Chairman.
Supervisory Board Meetings
In fulfilling its obligations, the Supervisory Board held a total of 10 meetings during the reporting period 2015 – on January 12, January 17, January 20, January 24, February 18, February 26, March 18, May 12, August 12 and November 11. Meetings were generally held as physical meetings. Exceptions were the Supervisory Board meetings on January 17, January 20, January 24, February 18 and March 18, all of which were telephone conferences. In addition, the Management Board regularly informed the Supervisory Board by telephone of any current affairs. They also phoned ad hoc in preparation for or to follow up Supervisory Board meetings. All members of the Supervisory Board participated in all the respective board meetings, with the exception of Dr. Al Hajri on January 17, January 20 and January 24; Mr. Al Suwaidi on January 17, January 20, January 24, February 18 and August 12; and Dr. Mareck on August 12.
Advisory and Auditing Priorities
The ongoing revenue, earnings and liquidity development, as well as short- and medium-term liquidity forecasts for the company were explained to the Supervisory Board at all meetings and then discussed with the Management Board. These topics were dealt with in particular depth during monthly financial reporting teleconferences with the Chief Financial Officer. The focus of the advisory and supervisory activities during fiscal year 2015 was on the critical support of the optimization of production processes and on the coordination of production and sales efforts, as well as other corporate planning processes. Priority was given to individual topics such as the development of the respective national sales markets, the integration of production facilities acquired from Bosch in Arnstadt, the legal dispute with Hemlock (a silicon supplier), the sale of the Auermühle property interest, the company’s capital resources and the future remuneration of Management Board members, in particular with regard to variable remuneration.
On February 26, 2015, and in the presence of the auditors, the Supervisory Board discussed the 2014 annual financial statements and the consolidated financial statements, the auditors’ report and the auditors’ mandate for the 2015 fiscal year.
Main topics in the individual Supervisory Board meetings
Topics prioritized in individual Supervisory Board meetings were:
On January 12, discussion of the budget for the 2015 fiscal year. The Supervisory Board also approved the foundation of two new entities in Italy and the UK. Compliance was a further focus of this Supervisory Board meeting.
The telephone conferences on January 17, 20 and 24 served the further analysis of the budget for the 2015 fiscal year in due consideration of extended sensitivity analyses and prospects for the 2016/2017 fiscal years. The budget for the 2015 fiscal year was approved at the last telephone conference on January 24.
The telephone conference on February 18 served the preparation of the discussion on the annual financial statements and consolidated financial statements with the auditor, which was scheduled for the following meeting.
At the meeting on February 26, the auditor BDO AG Wirtschaftsprüfungsgesellschaft Bonn presented the preliminary results of the audit of the annual financial statements and the consolidated financial statements for the 2014 fiscal year, which were subsequently discussed by the Supervisory Board. The Supervisory Board also reviewed the group’s U.S. strategy. A further discussion dealt with the fact that, owing to an increase in the number of employees, SolarWorld AG has become subject to the German Co-determination Act and the future Supervisory Board should comprise twelve members, half of which ought to be employee representatives.
The meeting on March 18 adopted the annual financial statements and the consolidated financial statements. It was also agreed to recommend that the AGM should mandate BDO AG Wirtschaftsprüfungsgesellschaft AG with the audit for the 2015 fiscal year.
The meeting on May 12 was designated for a discussion on the results of the first quarter of 2015. The group’s sales strategy was also examined in detail. The members of the Supervisory Board were given the opportunity to observe production at SolarWorld Industries Thüringen for themselves. The Supervisory Board also dealt with the introduction of co-determination into the Supervisory Board.
The meeting on August 12 discussed the group’s interim report for the first half of 2015. This meeting also focused on production and future site planning. The Supervisory Board also dealt with the legal dispute with the silicon supplier Hemlock. Moreover, the meeting installed committees, which are described in detail below. In addition, draft rules of procedure for the Management and Supervisory Boards were discussed. In accordance with the legal requirements, a target of 20 percent by June 2017 was set for the proportion of female members of the Management Board.
The November 11 meeting in Arnstadt discussed the interim report for the third quarter. The legal dispute with Hemlock was also a matter of further discussion. The meeting approved the extension of the employment contract with Chief Sales Officer Frank Henn to the end of January 2019, as well as rules of procedure for the Management and Supervisory Boards.
Following expansion of the Supervisory Board from six to twelve members, a number of new committees were installed: business committee, human resources committee, mediation committee in accordance with Section 27(3) German Co-determination Act, audit committee, technology and development committee and nomination committee. The Supervisory Board had not previously installed committees due to its small number of members.
The business committee is responsible for preparing Supervisory Board meetings and taking decisions in urgent matters. The human resources committee deals with Management Board matters. The mediation committee fulfils tasks assigned on the basis of Section 27(3) Codetermination Act. The audit committee focuses on monitoring accounting, controlling, risk management and auditing. As stated in the declaration of compliance with the German Corporate Governance Code, no individual member of the Supervisory Board fulfils all the requirements of expert in the field of accounting and internal control processes. Where appropriate, the Supervisory Board and the audit committee draw on external experts to support their members in the execution of their duties. The technology and development committee deals with production technology, research and development and supply chain management. In the 2015 fiscal year it dealt with i. a. the technology plan, production plans, production-site alignment and logistics plans. From its inauguration in August to the end of the year, the committee also visited the three production sites in Freiberg, Arnstadt and Hillsboro. The nomination committee recommends, if and when required, candidates to the Supervisory Board at the AGM.
Advisory and Auditing Activities on the 2015 Annual and Consolidated Financial Statements
The AGM appointed BDO AG Wirtschaftsprüfungsgesellschaft to audit the annual financial statements and consolidated financial statements of SolarWorld AG for the 2015 fiscal year, as well as the management report for the fiscal year from January 1, to December 31, 2015. The Supervisory Board subsequently discussed and assigned the audit mandate.
The auditors reviewed the 2015 SolarWorld AG management report and the annual financial statements prepared according to the German Commercial Code (HGB) accounting rules and awarded the unqualified audit opinion. This status was also awarded to the consolidated financial statements and group management report prepared according to IFRS accounting rules. The auditors confirmed that the consolidated financial statements complied with the conditions required for exemption from preparing financial statements under German law. In addition, they also checked the early risk detection system at SolarWorld AG and determined that it fulfils the management responsibilities stipulated in the German Control and Transparency in Business Act (KonTraG).
The financial statements and auditor’s reports were presented to the Supervisory Board in good time. They were discussed in detail and checked in the presence of the auditor on February 25, 2016. The auditor reported on the audit procedure and the essential findings of the audit. The Supervisory Board recorded notes from the audit reports and discussed these with the Management Board.
On examination of the annual financial statements as at December 31, 2015, with the management report and the consolidated financial statements with the group management report, the Supervisory Board found no grounds for objection. The Supervisory Board accepted the auditors’ opinion and approved the respective documents on March 16, 2016. The annual financial statements of the SolarWorld AG are thereby adopted.
Declaration of Compliance and Corporate Governance
Corporate governance plays a major role for the Supervisory Board. It presents its report on the topic together with the Management Board in the Corporate Governance Report, which is part of the Group Management Report.
In November 2015, the Supervisory Board and Management Board issued the annual declaration of compliance with the German Corporate Governance Code and published it on the company’s website.
The remuneration of Supervisory Board members is published in the Remuneration Report, which is part of the Group Management Report.
The Supervisory Board identified no conflicts of interest among its members in the 2015 fiscal year.
An efficiency review of the Supervisory Board as recommended by the German Corporate Governance Code was last performed during the 2013 fiscal year. No further efficiency review has been conducted since then due to changes in the composition of the Supervisory Board in 2014 and 2015. An efficiency review is scheduled for 2016 after the Supervisory Board has worked together in its current size and composition for about one year.
Changes in the Management Board and the Supervisory Board
There were no personnel changes in the Management Board in 2015. Mr. Frank Henn was confirmed as member of the Management Board of SolarWorld AG for a further three years until January 31, 2019, with effect from November 22, 2015. The conditions of his employment are in line with the tasks at hand and the market, and are in a balanced relation to the employment conditions of the other Management Board members
Changes in the Supervisory Board are a necessary consequence of the first implementation of the German Co-determination Act. Details are given in the section “Composition of the Supervisory Board.
Bonn, March 16, 2016
The Supervisory Board
Dr. Georg Gansen