Corporate Governance Statement pursuant to Section 289f HGB and Section 315d HGB

I. Relevant corporate governance practices

Corporate governance at SIMONA AG (hereinafter referred to as "SIMONA"), as an exchange-listed German stock corporation, is determined primarily by the requirements of the German Stock Corporation Act (Aktiengesetz – AktG) and the provisions within the German Corporate Governance Code (hereinafter referred to as "GCGC)" in its amended version. Beyond this, readers are kindly requested to refer to the organisational procedures and measures outlined in the combined management report of the SIMONA Group and SIMONA AG under the headings "Internal control system", "Risk management system", "Internal control system (ICS) relating to financial reporting – Report pursuant to Section 289(4) and Section 315(4) HGB" and "Quality". The Group management report can be accessed at www.simona.de under Company/Investor Relations/Financial Calendar & Reports/Financial Reports. Other elements of corporate governance include the system of management encompassing the Management Board and Supervisory Board, the appointment of shareholder and staff representatives to the Supervisory Board under the provisions of Sections 96(1) AktG and Section 4 of the One-Third Participation Act (Drittelbeteiligungsgesetz) concerning employee representation on the Supervisory Board as well as shareholders' rights of co-administration and supervision at the General Meeting of Shareholders. 

As a global plastics-processing company, SIMONA is acutely aware of the considerable responsibility it has towards the environment, its customers and business partners, its employees, its financing partners and investors, and the general public at all of its sites. In the context of these social responsibilities, it is also imperative that we abide by applicable laws at all times and wherever we operate, while also respecting fundamental ethical values and behaving in an exemplary manner. These responsibilities must be embraced by each and every one of us, be it our Management Board, our executives or our members of staff. Further information relating to compliance and the company's code of conduct can be found at www.simona.de under Company/Investor Relations/Corporate Governance/Compliance. The non-financial statement in accordance with Section 289b and Section 315b HGB, containing information on environment, energy, social, EU Taxonomy and employee-related matters as well as respect for human rights and anti-corruption and bribery matters has been included in the combined management report and can be accessed at www.simona.de under Company/Investor Relations/Financial Calendar & Reports/Financial Reports.

II. Description of the procedural methods adopted by the Management Board and Supervisory Board – Composition and duties of committees

The Management Board acts as the executive body of SIMONA; it is responsible for directing the company with the aim of achieving profitable growth for the purpose of safeguarding the company's future in the long term. The Supervisory Board is strictly separated from the executive body as regards the specific members appointed to the respective bodies. The Supervisory Board appoints, supervises and advises the Management Board. In the interests of the company, the Management Board and Supervisory Board work in cooperation with each other on a basis of trust and in a manner that is conducive to an exchange of information. 

 
Management Board

The Management Board develops the corporate strategy and ensures that this strategy is implemented accordingly. It is responsible for formulating company policy, planning investments, sales and human resources as well as managing the respective areas of business. Ordinary Management Board meetings are convened by the Chairman of the Management Board. SIMONA uses the Balanced Scorecard (BSC) as a strategic management and monitoring instrument. Within this context, the Management Board is responsible for the corporate goals, as well as being accountable for regularly reviewing the efficacy of the BSC process as part of an overall assessment of the management system and initiating adjustments to the BSC process and the corporate goals. The BSC cascades down to the company's other management levels and is applied worldwide.

In accordance with the company's Articles of Association, the Management Board consists of at least two members and has assigned individual fields of responsibility relating to specific areas of management.  

The age limit for members of the Management Board is their respective statutory retirement age.  

Supervisory Board

The Supervisory Board discharges its duties under legal regulations and the company's Articles of Association. It regularly advises the Management Board on issues relating to the governance of the company, in addition to assessing and monitoring its management activities. It reviews the company's risk management and compliance. The Supervisory Board convenes regularly as part of scheduled and, where necessary, extraordinary meetings; where required, it may also convene without the Management Board being present. In accordance with Section 96(1) of the German Stock Corporation Act (Aktiengesetz – AktG), Section 4 of the One-Third Participation Act (Drittelbeteiligungsgesetz) and Section 13 of the Articles of Association of SIMONA AG, the Supervisory Board of SIMONA AG is comprised of four members representing the shareholders and two members representing the staff of the company.

The Supervisory Board has issued rules of procedure relating to its work, which have been published on www.simona.de within the Investor Relations section.  

From its members, the Supervisory Board has established an Audit Committee as well as a Personnel and Nomination Committee. The committees regularly provide the Supervisory Board with extensive information relating to their activities. The Audit Committee is responsible primarily for issues relating to the supervision of the accounting process, the efficacy of the internal control system, the internal risk management system and the internal auditing system, year-end auditing, with a particular focus on the independence of the auditor, the quality of the audit, the additional services provided by the independent auditor, the issuing of the audit mandate to the auditor, the determination of auditing focal points and arrangements relating to fees as well as compliance. The Personnel and Nomination Committee deals in particular with issues relating to compensation, i.e. remuneration, as well as the conclusion, amendment, extension and termination of the employment contracts of the members of the Management Board in the context of the compensation system determined in each case by the plenary session of the Supervisory Board and the compensation determined for the specific Management Board member in question. In addition, its task is to nominate suitable candidates to the Supervisory Board for its proposals to the Annual General Meeting for the election of Supervisory Board members. 

The committees and their members:

Audit Committee  

• Dr. sc. techn. Roland Reber, Chairman 

• Dr. Klaus F. Erkes 

• Roland Frobel 

Personnel and Nomination Committee 

• Dr. Klaus F. Erkes, Chairman 

• Roland Frobel 

• Dr. sc. techn. Roland Reber 

Profile of skills and expertise

The Supervisory Board has defined the following profile of skills and expertise for members of the Supervisory Board. It outlines key requirements with regard to professional expertise, skills and experience as well as in respect of personal credentials and integrity:

The Supervisory Board is committed to ensuring that its members are individuals of integrity who embrace the principles of the social market economy and possess expertise and extensive experience in managing and/or advising commercial enterprises or entities closely affiliated with the business sector. Among the preferred credentials are experience and specialist knowledge relating to the company's principal fields of activity. The Supervisory Board shall include, at the very least, one member with expertise in the field of accounting and one member with expertise in the field of auditing; it shall also include at least one member whose professional track record suitably reflects the international nature of the company. The Supervisory Board shall also include at least one member with expertise regarding sustainability issues (ESG – Environmental, Social, Governance). Additionally, the aim is to ensure that at least half of the shareholder representatives on the Supervisory Board are independent. Potential candidates should not hold advisory or governance roles at significant competitors, customers or suppliers. The age limit agreed at the time of elections to the Supervisory Board shall also be taken into consideration when selecting candidates. 

Qualification matrix for the Supervisory Board: 

The Supervisory Board has set the statutory retirement age (currently 67 years) as the upper age limit at the time of first election to the Supervisory Board. Members of the Supervisory Board are not put forward as candidates for re-election if they reach the age of 75 during their term of office.  

The current members of the Supervisory Board fully meet the profile of skills and expertise. This applies both to the requirements in respect of personal credentials and to the experience gained in various organisations. Financial expertise and many years of activity in an international environment are represented several times.

We consider all shareholder representatives (Dr. Klaus F. Erkes, Roland Frobel, Dr. Roland Reber and Martin Bücher) to be independent within the meaning of the GCGC as amended on 27 June 2022.  

Roland Frobel has been a member of the Supervisory Board since 1997. Under the previous version of the GCGC, Mr. Frobel is considered an independent member of the Supervisory Board. In accordance with the recommendation C 7 of the GCGC, it must be taken into account when assessing the independence of the members of the Supervisory Board that Mr. Frobel has been a member of the Supervisory Board for more than 12 years. The Supervisory Board is confident that Mr. Frobel will continue to perform his duties as before and will continue to contribute his financial expertise to the discussions. In this context, the length of service on the Supervisory Board appears to be of secondary importance. Therefore, in the opinion of the shareholder representatives, he is still considered to be independent.  

Dr. Roland Reber holds the position of Managing Director at Ensinger GmbH, Nufringen. SIMONA and Ensinger GmbH maintain business relations with each other on arm’s length terms. Dr. Roland Reber has been a member of the Supervisory Board since 2006. The shareholder representatives regard Dr. Roland Reber as independent for two reasons. First, the business relationship with Ensinger is not a significant one that could call independence into question. Secondly, it has been determined that in the event of a material conflict of interest in specific areas as a result of the mandate held by Dr. Reber the latter will inform the Supervisory Board about such a conflict of interest and will not take part in discussions or, if applicable, voting on any such points on the agenda. To date, no conflicts of interest have arisen during Dr. Reber's membership of the Supervisory Board of SIMONA AG. In accordance with the recommendation C 7 of the GCGC, it must be taken into account when assessing the independence of the members of the Supervisory Board that Dr. Reber has been a member of the Supervisory Board for more than 12 years. The Supervisory Board is confident that Dr. Reber will continue to perform his duties as before and will continue to contribute his business expertise and international knowledge of the plastics industry to the discussions. In this context, the length of service on the Supervisory Board appears to be of secondary importance. Therefore, in the opinion of the shareholder representatives, he continues to be considered independent in this respect as well. 

The Supervisory Board regularly uses a self-evaluation questionnaire to assess how effectively it as a whole and its committees perform their duties (efficiency review). The results are discussed on an anonymous basis at a meeting, including any potential for improvement. The last self-evaluation took place in 2022 and resulted in grades ranging from good to excellent in the individual categories that were subject to review.  

Cooperation between Management Board and Supervisory Board

The Management Board and Supervisory Board consult with each other concerning the strategic direction of the company and regularly discuss the status of strategy implementation. The Supervisory Board is directly involved in all decision-making processes of fundamental importance to the company. The Management Board informs 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 intended business policy and other fundamental issues of corporate planning/planning, the profitability of the company, the strategy, 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.

The Chairman of the Supervisory Board regularly maintains contact with the Management Board, also in between meetings of the Supervisory Board and its committees, for the purpose of discussing issues relating to strategy, current business development and performance as well as risk management, in addition to consulting with the Management Board on specific issues and decisions considered to be of significance. The Supervisory Board also deliberates on the implementation of the provisions and recommendations of the German Corporate Governance Code within the company and, where applicable, initiates measures aimed at fulfilling the new requirements, working in close cooperation with the Management Board.

The Management Board and the Supervisory Board have drawn up rules of procedure for the purpose of specifying the responsibilities of the Management Board and collaboration with the Supervisory Board. Among other aspects, the rules of procedure govern the individual duties and areas of competence, as well as determining transactions that are subject to prior approval. 

III. Declaration of Conformity

Pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz – AktG), the supervisory board and management board of exchange-listed stock corporations are obliged to issue at least once per year a declaration stating that the recommendations of the German Corporate Governance Code have been and will continue to be complied with or, if applicable, specifying which recommendations have not been or will not be applied, as well as outlining the reason for non-compliance. The Management Board and the Supervisory Board most recently issued the following Declaration of Conformity on 5 April 2024:

Since issuing its last Declaration of Conformity on 6 April 2023, SIMONA AG (hereinafter referred to as "SIMONA") has complied with the recommendations of the Government Commission on the German Corporate Governance Code as amended on 16 December 2019 and – since its publication in the Federal Gazette – as amended on 28 April 2022, with the following exceptions, and complies with the recommendations of the Government Commission on the German Corporate Governance Code as amended on 28 April 2022, with the following exceptions: 

Transparency and external reporting – Recommendation F.2 

Explanation: SIMONA publishes its consolidated financial statements in compliance with statutory schedules of disclosure. Owing to the procedures defined for the preparation of financial statements, the aim being to deliver the greatest possible transparency and accuracy, earlier publication would not be feasible. 

Remuneration of the Management Board – Recommendation G.10 

Explanation: Variable compensation granted to the members of the Management Board is not share-based. SIMONA AG holds no treasury shares that could be made available for the purpose of granting such share-based compensation. Furthermore, due to the small free float and the associated low trading volume, the members of the Management Board would not be able to invest any variable compensation granted predominantly in shares of the company. 

Remuneration of the Management Board – Recommendation G.11 

Explanation: The employment contracts of the Management Board members do not currently provide for the possibility of withholding or reclaiming any variable compensation. The Supervisory Board is of the opinion that the method of linking variable compensation to the company's EBIT performance takes sufficient account of the effects of extraordinary events. 

Remuneration of the Supervisory Board – Recommendation G.17 

Explanation: The Articles of Association of SIMONA include provisions outlining special compensation in respect of the role of chairperson and deputy chairperson of the Supervisory Board. Additionally, membership of Supervisory Board committees is subject to special compensation. By contrast, no separate compensation is payable in respect of the chairmanship of a committee, and such a policy is not deemed necessary at present.

Kirn, 5 April 2024
SIMONA AG
Supervisory Board and Management Board 

IV. Notes to specifications made pursuant to Section 76(4) and Section 111(5) AktG

At its meeting on 9 June 2022, the Supervisory Board set new targets for the proportion of women on the Management Board and the Supervisory Board, which are to be achieved by 9 June 2027.

A target of zero was set for the Management Board. 

Explanation: 

The Management Board and the Supervisory Board have already dealt with this issue on numerous occasions. The Supervisory Board expressly supports diversity within the management and supervisory bodies of SIMONA AG. When selecting and appointing members of the Management Board, the Supervisory Board focuses on the individual professional and personal skills and expertise of potential candidates, paying particular attention to the company-specific situation; gender is one of several relevant factors in this context. At present, there are no women on the Management Board of SIMONA AG (actual quota 0 per cent). The term of the contracts of two members of the Management Board ends in August 2027, which is subsequent to the legally permissible deadline for achieving the target to be set in June 2022. The term of the contract of one member of the Management Board ends in December 2026, six months prior to the legally permissible deadline. In the interest of continuity in the management of the company and in acknowledgement of the confidence placed in the incumbent members of the Management Board, as well as taking into account the various factors regarding qualifications, as outlined earlier, the Supervisory Board is adamant not to commit itself in advance when it comes to personnel-related decisions in the coming five years by determining a gender quota. In addition, as a manufacturer of semi-finished plastics and piping systems, SIMONA AG operates in a sector in which the overall proportion of women is still very low. Therefore, in the Supervisory Board's experience, it is particularly difficult, in comparative terms, to recruit suitable female candidates for management positions within this industry. This applies in particular to the Management Board. With this in mind, as part of its resolution passed in June 2022, the Supervisory Board did not set a target deviating from the status quo in respect of the proportion of women on the Management Board, which it aims to achieve by 9 June 2027, and thus set a target of zero. 

A target of zero was set for the Supervisory Board. 

Explanation: 

When appointing members to the Supervisory Board, the focus is also on the individual professional and personal skills and expertise of potential candidates, taking into account the company-specific situation. Thus, as regards appointments to the Supervisory Board, gender is also one of several decision-making factors in this context. At present, no women are represented on the Supervisory Board of SIMONA AG, whose shareholder representatives were not appointed until 2021 for the period up to the end of the Annual General Meeting in 2026 and whose employee representatives were not elected until 2022 for the period up to the end of the Annual General Meeting in 2027 (actual quota 0 per cent). As the Supervisory Board generally does not wish to commit itself in advance by defining a gender quota for its composition, given the aforementioned factors relating to qualifications and the company-specific situation, it did not set a target deviating from the status quo in respect of the proportion of women on the Supervisory Board, which it intends to achieve by 9 June 2027, when it passed the corresponding resolution in June 2022, and thus set a target of zero.

At its meeting on 20 June 2022, the Management Board set a target of three women for the first managerial level below the Management Board. This target is to be achieved by 20 June 2027. The notional headcount at this managerial level at the end of the determination period is 15.

At its meeting on 20 June 2022, the Management Board set a target of two women for the second managerial level below the Management Board. This target is to be achieved by 20 June 2027. The notional headcount at this managerial level at the end of the determination period is 18. 

V. Diversity concept and long-term succession planning

The Supervisory Board and Management Board support the fundamental idea of diversity as regards their composition and the importance of this concept to the company. The Supervisory Board has defined a profile of skills and expertise for members of the Supervisory Board. It outlines key requirements with regard to professional expertise, skills and experience as well as in respect of personal credentials and integrity. In addition, targets were set for the number of women on the Supervisory Board and Management Board as well as the two management levels below the Management Board and an age limit was adopted for members of the Supervisory Board and Management Board. 

Beyond this, no formal diversity concept has been adopted to date, as the Supervisory Board primarily takes into consideration the individual abilities, knowledge and professional experience of male and female candidates in respect of its nominations submitted to the General Meeting. With this in mind, no regular limit with regard to length of membership for members of the Supervisory Board has been defined. The Supervisory Board is of the opinion that, in particular, the expertise of experienced Supervisory Board members with a proven track record spanning many years and a demonstrable understanding of the industry and enterprise should be made available to the company. 

Long-term succession planning for the Management Board 

The Supervisory Board, together with the Management Board and with the support of the Personnel and Nomination Committee, ensures long-term succession planning for the Management Board. Long-term succession planning takes into account the requirements of the German Stock Corporation Act, the German Corporate Governance Code and the rules of procedure as well as the target set by the Supervisory Board for the proportion of women on the Management Board. If necessary, the experience and qualifications of the candidates are compared with the specific requirements of the respective area of Management Board responsibility. The Supervisory Board regularly monitors company employees who display a high degree of potential. If there is a need for development or qualification of specific candidates, concrete development measures are agreed with these candidates to enable them to take over a board position. If necessary, the Supervisory Board or the Personnel and Nomination Committee are supported by external advisors. 

VI. Other information on corporate governance

Corporate governance encompasses the entire system of management and supervision within a company. In particular, this includes organisation, internal and external systems of control and monitoring as well as guidelines relating to business policy. Good corporate governance promotes trust among investors, customers and employees as well as the general public, which is a key factor in the long-term success of a company.

Shareholdings of the Management Board and the Supervisory Board 

The ownership interests held by members of the Supervisory Board and Management Board are disclosed in the consolidated financial statements insofar as they have been registered for the annual general meeting. For further information, please refer to the mandatory publications available on the Internet at www.simona.de/en/company/investor-relations/corporate-governance/corporate-governance-statement-including-corporate-governance-report/. Furthermore, the ownership interests are presented online insofar as the company was notified of any movements above or below the thresholds necessitating disclosure. 

Share option plans 

SIMONA has no share option plans or similar securities-based incentive systems in place.

Avoidance of conflicts of interest 

Dr. Roland Reber was re-appointed to the Supervisory Board of SIMONA AG on 2 June 2021. 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 points on the agenda. No conflicts of interest occurred in 2023. 

Disclosure of other information on corporate governance 

As regards details of corporate governance at SIMONA, please also refer to the report issued by the Supervisory Board. This information is also published on the internet at www.simona.de within the Company/Investor Relations/Corporate Governance section. 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. 

Kirn, April 2024
SIMONA AG
Management Board and Supervisory Board

This document is published in German and as an English translation. Only the German original shall be deemed authoritative.