Corporate Governance

The SINGULUS TECHNOLOGIES AG highly values proper and responsible corporate governance within the context of the guidelines of the corporate governance.

For the Executive and Supervisory Boards this means leadership and management of the company aligned for the long-term success. Corporate governance aims to safeguard a targeted and efficient cooperation between Executive Board and Supervisory Board, the respect for the interests of our shareholders and employees, the suitable handling of risks and transparency as well as a responsibility for all corporate decisions. The Executive and Supervisory Boards regard corporate governance as a process integrated into the company’s development, which is constantly progressed.

There is a close connection with regards to content between the Corporate Governance Report pursuant to Art. 3.10 of the German Corporate Governance Code in its currently amended version as of February 7, 2017 (the Code) and the Declaration of Corporate Governance pursuant to Art. 289f of the German Commercial Code (HGB). For this reason, the Executive and the Supervisory Board of the SINGULUS TECHNOLOGIES AG together make the declaration in this connection.

CORPORATE GOVERNANCE DECLARATION PURSUANT ART. 289F HGB

The Corporate Governance Declaration pursuant to Art. 289f HGB includes the declaration of conformity pursuant to Art. 161 of the Germany Stock Corporation Act (AktG) (see 1.), relevant information about the corporate governance practices exceeding legal requirements (see 2.), a description of the composition and work processes of Executive and Supervisory Board (see 3.), the declaration pursuant to Art. 76 Para 4 and Art. 111 Para. 5 AktG and the information, whether determined targets were achieved or not as well as the respective reasons (see 4.) and a description of the diversity concept followed with respect to the composition of the representing boards and the Supervisory Board as well as the goals of the diversity concept, the manner of its implementation and the results achieved during the course of the year (see 5.).

The corporate governance declaration pursuant to Art. 289f HGB is part of the status report. Pursuant to Art. 317 Para. 2 Sent. 6 HBG the audit of the information according to Art. 289f HGB is limited to the disclosure of information.

2. Relevant information with regard to corporate governance

Management structure

The SINGULUS TECHNOLOGIES AG as a German corporation is subject to German Corporate Law and is thus comprised of a two-tiered management and monitoring structure consisting of Executive Board and Supervisory Board. The Executive Board manages the company and is responsible for the company's strategy, accounting, finances and development. It is advised and monitored by the Supervisory Board.

On the basis of the reports by the Executive Board the Supervisory Board discusses the business trends and planning, the corporate strategy and its implementation. Significant decisions by the Executive Board such as major acquisitions and financing measures are subject to the Supervisory Board’s approval according to the bylaws for the Executive Board. It issues the audit mandate for the auditor elected at the Annual General Meeting and is informed about the audit. After its own review the Supervisory Board adopts the annual reports and the consolidated financial statements.

Against the background of the Directive 2014/56/EC with regards of the amendment of the “Auditor Directive” (Directive 2006/43/EC) as well as the Regulation (EC) No. 537/2014 with regards to the specific requirements to the statutory audit of public-interest entities, the Supervisory Board has resolved a respective amendment of the bylaws for the Supervisory and Executive Boards as of January 1, 2017. The legal changes include (i) the prior approval by the Supervisory Board of non-auditing services, which are
to be provided by the auditor, (ii) the requirements with regards to the qualification of members of the Supervisory Board and (iii) the selection process of auditors to be appointed in the future. On January 26, 2017 the Supervisory Board resolved guidelines, according to which certain kinds of non-auditing services in general are approved and the Board resolved the set-up of a clearing position monitoring the adherence to the guidelines. In addition, the appointment of an auditor for non-auditing services, which are not generally approved by the guidelines in advance, is subject to the approval by the Supervisory Board.

The Executive Board currently consists of two members, the Supervisory Board of three members. The SINGULUS TECHNOLOGIES AG is not subject to the Co-Determination Act. Due to the company’s size and to ensure efficient work, both boards currently only meet the legally required minimum in terms of members.

Compliance Management

For the Executive Board and the Supervisory Board of the SINGULUS TECHNOLOGIES AG, the adherence to extensive compliance is an essential prerequisite for a sustainable economic success.

In addition to the recommendations of the Code, which the SINGULUS TECHNOLOGIES AG to a large extent follows, the Ethics Code of the SINGULUS TECHNOLOGIES Group is another relevant, company-wide applied corporate governance principle. The Ethics Code was adopted by the Executive and Supervisory Boards in spring 2014 and since then has been implemented group-wide in several steps. In regular intervals, the contents were disseminated to various groups of employees partly in the course of electronic training programs. The relations within the company, but also with external business partners, shareholders and the public are subject of the Ethics Code. It includes binding internal rules, which are subject to high ethical and legal standards. In this context the Ethics Code focuses on integrity in the conduct with business partners, employees, shareholders and the public.

The goal of the Ethics Code is to inform the employees of the SINGULUS TECHNOLOGIES Group about the key compliance issues (competition regulations, corruption, handling of conflicts of interest, money laundering, embargo and trade restriction rules, data security, media and public affairs, workplace safety). This Ethics Code is supported by action guidelines to the Ethics Code, which amongst others includes rules regarding the granting and acceptance of gifts, and action guidelines for whistle-blower, which governs specifics with regards to reporting of misdemeanor and illegal, immoral or inappropriate activities within the SINGULUS TECHNOLOGIES Group. In case of actual or presumed compliance breaches, employees can contact their superiors, the compliance manager or the ombudsman of SINGULUS TECHNOLOGIES and, if preferred, can also do this anonymously. The compliance management system of the company is part of the risk management system. In this connection, quarterly reports are presented to the Chief Financial Officer and annually to the Supervisory Board. In addition, in case of extraordinary events immediate reports are submitted to the Chief Financial Officer. In the second half the business year 2017, the members of the Executive and Supervisory Boards participated in training for the topic of market abuse regulation (MAR) in the areas of insider trading, ad-hoc publications and directors’ dealings.

3. Composition and work processes of Executive and Supervisory Boards

Close cooperation of Executive and Supervisory Boards

Executive and Supervisory Boards work closely together for the benefit of the company. The Executive Board reports regularly, timely and in detail to the Supervisory Board about the relevant issues of corporate planning, the strategic development, the course of business activities and the overall situation of the Group. This holds particularly in light of the economically challenging business situation, which the SINGULUS TECHNOLOGIES Group was subject to in the past five years and which has just been left behind. The major order for production machines for CIGS solar cells in China in 2016 will mainly only be finally accepted at the beginning of the business year 2018. Although the machines for the new factory already contribute to sales and earnings of the SINGULUS TECHNOLOGIES Group pursuant to the International Financial Reporting Standards (IFRS), the SINGULUS TECHNOLOGIES AG has to draw up its financial accounts pursuant to HGB principles. According to HGB accounting, the major order can only make positive contributions to the company's results after the final acceptance. This diverging treatment pursuant to HGB results in commercial-law losses at the individual financial accounts level of the company and due to the loss of more than half of the nominal capital pursuant to HGB led to an Extraordinary General Meeting pursuant to Art. 92 Para. 1 AktG, which was conducted on November 29, 2017. In the course of a capital increase, the nominal capital of the company was increased in December of the business year. In particular against this background, the cooperation between Executive and Supervisory Board was very close.

The basis of the information and monitoring activities of the Supervisory Board is the detailed monthly reporting. Additional, written and oral reports of the Executive Board, by other employees, the auditors as well as by external consultants supplement the reporting. Furthermore, the Chairman of the Supervisory Board regularly discusses the situation and the future development of the company during individual talks with the Executive Board and subsequently informs the other members of the Supervisory Board about these discussions. The reports are reviewed and discussed within the Supervisory Board and also jointly with the Executive Board. According to the bylaws of the Executive Board, significant business decisions are subject to the approval by the Supervisory Board. Overall, there were ten Supervisory Board meetings in the business year 2017, of which five were meetings in present.

Members and work of the Executive Board

The Executive Board of the SINGULUS TECHNOLOGIES AG is currently comprised of two members. It is the management body of the company. In managing the company, the Executive Board is solely obligated to the interests of the company and follows the goal of a sustainable increase in the enterprise value as well as the interests of the shareholders and of the employees.

The current members of the Executive Board are Dr.-Ing. Stefan Rinck and Mr. Markus Ehret. Since April 1, 2010 Dr.-Ing. Stefan Rinck is the Chief Executive Officer, Mr. Markus Ehret is a member of the Executive Board of the SINGULUS TECHNOLOGIES AG since April 19, 2010. The employment contract with Dr.-Ing. Stefan Rinck expired on August 31, 2017 and was already extended in January 2017 for an additional period of five years. On January 26, 2017, the Supervisory Board resolved the appointment of Dr.-Ing. Stefan Rinck as member of the Executive Board for additional five years and appointed him as Chief Executive Officer once again. The employment contract with Mr. Markus Ehret expires on December 31, 2019.

As Chief Executive Officer Dr.-Ing. Stefan Rinck is responsible for the departments Production, Marketing & Sales, Technology, Research & Development as well as Strategy and International Operations. Mr. Markus Ehret is responsible for the areas Finance, Controlling, Investor Relations, Human Resources, Procurement and IT.

Members and work of the Supervisory Board

The Supervisory Board of the SINGULUS TECHNOLOGIES AG is comprised of three members. No employee representative is a member of the Supervisory Board. The cooperation of the Supervisory Board was characterized by efficiency, professional competence and trust.

The Supervisory Board is currently comprised of Dr.-Ing. Wolfhard Leichnitz, Ms. Christine Kreidl WP/StB and Dr. rer. nat. Rolf Blessing. There were no elections to the Supervisory Board scheduled for the business year 2017. The Supervisory Board continued to refrain from forming an audit committee or other committees in the fiscal year 2017, because according to its assessment there is neither an increase in efficiency to be expected nor an improved handling of complex issues nor a more efficient or improved execution of tasks of the Supervisory Board in connection with issues about accounting principles, risk management or the audit. In addition, corporate law provides that decision-making Supervisory Board committees have to have at least three Supervisory Board members. For this reason, a delegation of tasks is not reasonable, either.

It is still possible to appoint a member of the Supervisory Board for a shorter tenure than after the completion of the ordinary Annual General Meeting, which resolves the discharge for the fourth business year after the commencement of the tenure and is still part of the articles of association of the company. The Supervisory Board met in ten meetings in the business year 2017. The Supervisory Board regularly reviews the efficiency of its work. On September 28, 2017, the Supervisory Board resolved to review in October 2018, whether the improvement proposals to enhance the efficiency of the Supervisory Board presented on September 28, 2017 will have been implemented. In particular, this concerns proposals with respect to the flow of information between Executive and Supervisory Board, the execution of the monitoring tasks as well as the preparation and organization of the meetings. For detailed information about the work of the Supervisory Board in the business year 2017 please refer to the Report of the Supervisory Board on pages 10 to 19 of the Annual Report.

There were no advisory or other services and work contracts in place between the members of the Supervisory Board and the company in the past business year.

All three members of the Supervisory Board are independent in the meaning of the Code. No conflicts of interests of members of the Supervisory Board arose during the period under review.

4. Reporting pursuant to Art. 289f Para. 2 No. 4 HGB

As an exchange-listed and non-codetermination stock corporation, the SINGULUS TECHNOLOGIES AG is obligated to resolve specific targets for the company with regards to the so-called women’s quota and publish these targets as part of the status report for the business year. The target for the Supervisory Board and the Executive Board has to be determined by the Supervisory Board pursuant to Art. 111 Para. 5 AktG and the targets for the management levels below these boards by the Executive Board pursuant to Art. 76 Para. 4 AktG. For the achievement of the targets the Supervisory and Executive Boards have set deadlines, which shall not be longer than five years. The targets had to be achieved by June 30, 2017 for the first time.

The Executive and Supervisory Boards have extensively deliberated the targets. At the time of the determination and also currently the Executive Board of the SINGULUS TECHNOLOGIES AG is comprised of two members with no female members. Against the background that the Supervisory Board did not intend any personnel changes in the composition of the Executive Board or an increase in the number of members of the Executive Board, the target for the women’s quota for the Executive Board was set to 0 percent until June 30, 2017. There are no changes with respect to this assessment and the target in the past business year and also for the future business years. Accordingly, the Supervisory Board of the SINGULUS TECHNOLOGIES AG has once again determined a target for the women’s quota of the Executive Board to 0 percent for the subsequent period until December 31, 2019. At the time of the determination of the target and also currently the Supervisory Board of the SINGULUS TECHNOLOGIES AG is comprised of three members with one female member. There were no changes in the women’s quota of 33 % in the Supervisory Board in the past business year and the new target for the women’s quota in the Supervisory Board was once again set at 33 % for the subsequent period until December 31, 2019.

The Executive Board has already employed women in management positions for years, if they have the professional and personal qualifications. The Executive Board had set targets for the share of women at the first management level below the Executive Board to 33 % and to the second management level below the Executive Board to 20 % by June 30, 2017. The target with respect to the women’s quota at the first management level below the Executive Board was achieved with two females of in total six executives up to this date. The target of 20 % with respect to the women’s quota at the second management level was not achieved with approximately 17 %. This development was due to the economic situation of the company in the years 2015 and 2016, which prompted two female managers to leave the company. So far, both positions have not been filled again yet. For an additional to be filled position in the second management level during the implementation period, there were only male applicants and no females. The Executive Board continues to maintain former targets for the share of women at the first management level below the Executive Board to 33 % and to the second management level below the Executive Board to 20 % for the subsequent period until June 30, 2022 and has resolved a respective goal.

5. Competence profile and diversity concept

The Supervisory Board has fixed the competence profile and diversity concept of its composition with respect to aspects such as age, gender, educational and occupational background in its bylaws. Accordingly, the Supervisory Board should not recommend anyone for appointment to the Supervisory Board for a tenure exceeding the person’s age of 70. Candidates recommended to the Annual General Meeting for appointment to the Supervisory Board should have the following expertise and experience (while not all criteria have to be met): (i) knowledge of the core business areas, in particular the competitive situation and the customers’ requirements, (ii) professional expertise with respect to the technologic challenges tied to the development of new machines, (iii) experience with complex development project, (iv) international business experience, also outside of Europe, (v) experience with national and international sales and marketing organizations, (vi) expertise in the areas capital markets and investor relations and (vii) expertise in the area mergers & acquisitions. At least one member of the Supervisory has to have expertise in the areas of accounting or auditing. In its entirety the members have to be knowledgeable in the sector the company is operating in. Members should display personality, integrity, professionalism, willingness to perform and independence. Nationality should not play a role in the selection of a candidate. In addition, the Supervisory Board should have at least two independent members. The Supervisory Board still has a target for the women’s quota of the Supervisory Board (cf. page 33).

The Supervisory Board is convinced that the described competence profile and diversity concept are already achieved with the appointment of one female and two male members and due to their age, educational and professional backgrounds. Furthermore, there were no appointments to the Supervisory Board scheduled for the business year 2017. Insofar, no additional measures were taken during the course of the business year.

Targets for the diversity concept with respect to the composition of the Executive Board are also fixed in the bylaws of the Supervisory Board. Accordingly, the Chairman of the Supervisory Board coordinates the long-term succession planning for the Executive Board, while an age limit of 65 years should be applied to the members of the Executive Board. In terms of the appointments to the Executive Board, the Supervisory Board should also consider diversity aspects. This is done on a case-by-case basis. The appointment of Dr.-Ing. Stefan Rinck, who has been a member of the Executive Board of the company since 2009, was extended by five years ahead of schedule during the business year 2017. With respect to expertise, industry know-how and long-time experience in the company, the Supervisory Board deems Dr.-Ing. Stefan Rinck as the optimum appointment as member and Chief Executive Office of the Executive Board. Since these criteria have the highest priority for the appointment to Executive Board, there were no alternative under diversity aspects.

6. Additional corporate governance information

Transparency and communications

The Executive Board publishes potentially share price-relevant information concerning the SINGULUS TECHNOLOGIES AG immediately unless the company is being exempt in individual cases. All of the announcements pursuant to Art. 17 Market Abuse Regulation (EU) 596/2014 (“MAR”) published in 2017 are available on the company’s website. In addition, the company keeps an insider register pursuant to Art. 18 MAR, which includes all people with access to insider information. These persons are regularly informed in detail about the resulting legal obligations.

The SINGULUS TECHNOLOGIES AG makes sure that the shareholders of the company are able to gain timely and extensive access about the situation of the company through the information provided on its internet website. The SINGULUS TECHNOLOGIES AG reports about its business trends and the financial and earnings situation to its shareholders four times during the business year. All of the financial reports, current company presentations, the corporate calendar as well as the announcements pursuant to Art. 17 MAR, the securities’ transactions pursuant to Art. 19 MAR (Director’s Dealings) and the voting rights announcements pursuant to Art. 21f. Wertpapierhandelsgesetz (WpHG) (and respectively after becoming effective the Second Act Amending Financial Market Regulations (2. FiMaNoG) on January 3, 2018 Art 33f. WpHG) are published under www.singulus.de in the Investor Relations section. To improve transparency and to support the stock price the SINGULUS TECHNOLOGIES AG held several analyst conferences and numerous one-on-one discussions with investors.

Also, all reports and documents concerning corporate governance including the declaration of conformity to the German Corporate Governance Code, an internet link to the full text of the code itself and the articles of the SINGULUS TECHNOLOGIES AG as well as the invitations to the Annual General Meetings and resolution results can be accessed through SINGULUS TECHNOLOGIES' website under “Investor Relations”. The Annual General Meeting of the SINGULUS TECHNOLOGIES AG is usually held during the first half of the year. The ordinary Annual General Meeting of the SINGULUS TECHNOLOGIES AG in the business year 2017 took place on June 20, 2017. The deadline of eight months after the conclusion of the fiscal year for holding an annual general meeting pursuant to Art. 175 Para. 1 Sent. 2 AktG was thus complied with. Due to the loss of more than half of the nominal capital, pursuant to Art. 92 Para. 1 AktG an extraordinary shareholders’ meeting was convened, which took place on November 29, 2017.

With the use of electronic forms of communication, in particular the internet and email, the Executive Board facilitates the shareholders’ participation in the Annual General Meeting and enables them to exercise their voting rights by representatives. In addition, the Executive Board may allow the shareholders to exercise the voting rights in written form and through electronic media without having to participate in the Annual General Meeting in person. All reports, annual financial reports and other documents, which have to be provided to the Annual General Meeting, as well as the agenda of the Annual General Meeting and counter-motions, if applicable, can be downloaded via the internet.

Accounting principles and audit of financial accounts

The consolidated financial accounts and the interim reports of the SINGULUS TECHNOLOGIES Group are drawn up in accordance with IFRS as well as the applicable commercial-law regulations pursuant to Art. 315e Para. 1 HGB. The individual financial statements of the SINGULUS TECHNOLOGIES AG are drawn up according to HGB and AktG principles as well as supplementary requirements according to the bylaws. The annual financial statements and consolidated statements for the business year 2017 drawn up by the Executive Board were audited by the auditor KPMG AG, Frankfurt am Main. The Supervisory Board reviewed the statements and the audit and adopted them. Important aspects were discussed with the Supervisory Board and the reports were approved by the board before publication.

Interim reports are published within 45 days after the respective end of the quarter. The consolidated financial statements and the annual financial statements are made publicly accessible within 90 days after the end of the respective business year. Half-year and quarterly financial reports are not subject to an audit.

The Annual Report for the business year 2017 and the interim reports are published on SINGULUS TECHNOLOGIES AG's website.

Compensation of Executive and Supervisory Board members

Similar to the past years, SINGULUS TECHNOLOGIES individually reports the fixed and variable components of the compensation as well as the stock-based compensation components with long-term incentives for the members of the Executive Board. In addition, also the contributions to pensions, which are based on a defined contribution scheme, are disclosed individually. The details are set forth in the Compensation Report, which is part of the Status Report and supplements this Corporate Governance Report. The Compensation Report lays out the compensation and the compensation scheme for the Executive Board in detail and also explains the design of the compensation components with long-term incentives. In addition, the remuneration of the members of the Supervisory Board is stated individually. The Compensation Report can be found on pages 98 to 109 of this Annual Report.

SHAREHOLDINGS AS WELL AS REPORTABLE SECURITIES' DEALINGS OF EXECUTIVE AND SUPERVISORY BOARD MEMBERS

1. Shareholdings of Executive and Supervisory Board members

No member of the Executive or Supervisory Board holds directly or indirectly a share of the nominal capital of the company exceeding 1 %.

The following members of the Executive and Supervisory Board held directly or indirectly shares in the SINGULUS TECHNOLOGIES AG as of December 31, 2017:

December 31, 2017 December 31, 2016
Supervisory Board
Dr.-Ing. Wolfhard Leichnitz 245 245
Executive Board
Dr.-Ing. Stefan Rinck, CEO 122 122
Dipl.-Oec. Markus Ehret, CFO 43 43

The sitting members of the Executive and Supervisory Boards did not hold subscription rights through stock options or convertible bonds as of December 31, 2017.

2. Directors‘ Dealings

Pursuant to Art. 19 MAR, the members of the Executive and Supervisory Boards or closely-related persons were obligated in the business 2017 to disclose transactions with shares or bonds of the company or related derivatives or other related financial instruments, if the total volume of the transactions made within a calendar year exceeds a total of € 5.000. The company was not notified of any relevant transactions for the business year 2017.

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