Supervisory Board Report

The Supervisory Board fully satisfied its responsibilities and duties as stipulated by law, in the Articles of Association and by-laws in fiscal year 2015.

We continuously monitored the Executive Board's management activities and advised it on all matters important to the company so that we were assured at all times that the Company was managed in a legal, orderly, proper and cost-effective manner.

During the reporting year, the Supervisory Board did not make use of the option to inspect the books and documentation of the Company (Section 111 (2) German Stock Corporation Act (AktG)). This was not necessary due to the regular, intensive and satisfactory reporting by the Executive Board, the audit by and discussions with the Auditor (German Public Auditors) and the supplementary monitoring measures described.

Composition of the Supervisory Board and Executive Board

The Executive Board fully satisfied its verbal and written reporting duty to the Supervisory Board. It involved us and our specialist committees in all material business transactions and highly significant decisions for the Company.

At the meetings (both in plenary sessions as well as in the committees) with the Executive Board, we had in-depth discussions about the information presented to us. Cooperation with the Executive Board was characterized in all respects by responsible and targeted activities.

Outside of the meetings we regularly consulted within the Supervisory Board, and the Executive Board informed us of important events in the AIXTRON Group in a timely manner.

Between meetings I met regularly – also in my role as a member of the  Capital Market Committee – with the Chief Executive Officer, Martin Goetzeler. In addition to talking about the current business situation, we also talked about issues related to strategic alignment, the risk situation, risk management and compliance. Between meetings, the Chairman of the Audit Committee, Prof. Dr. Blättchen, and the Chairman of the Technology Committee, Prof. Dr. Denk, maintained active dialogue with the respective responsible Executive Board members.

All Supervisory Board members also received detailed quarterly reports on the status of the Company as well as other information such as internal control reports, meeting minutes, company presentations, research analyst reports, consensus reports, press releases and AIXTRON's financial reports.

As in every year, we also consulted with the Executive Board on the risk situation, risk management and compliance in the Company and carefully checked the corresponding developments and measures.

The Executive Board presented all transactions subject to approval to the Supervisory Board in a timely manner. After thorough consultation and review we gave our consent where appropriate.

Focus of plenary sessions

During 2015, the Supervisory Board held four ordinary Supervisory Board meetings on February 23, May 19, September 16 and December 2. All six Supervisory Board members were present at the first three meetings, while only Dr. Komischke was absent with valid excuse at the fourth meeting on December 2, 2015.

In the four ordinary meetings, we regularly discussed in detail the development of the business of the AIXTRON Group, particularly in light of the continuing market weakness and the price/competition pressure. During these meetings we were able to form a sufficient picture of the current business situation using the current financial figures and the updated forecast reports and development plans (orders, revenues, competition, market shares). Deviations from the budget plan during the course of business were explained in detail and justified.

In the ordinary Supervisory Board meetings in February, May, September and December 2015, we were informed of the progress of various projects, relevant product developments, new technologies (examples: OLED, power electronics), key customer orders (example: San'an, a major contract from China), relevant projects, key developments in the regions (example: integration of Plasma Si) as well as internal reorganization processes (examples: sub-division into three technology groups, further layoffs, new career and remuneration structures).

A particular focus in all four meetings was the longer than expected qualification processes for the AIX R6 MOCVD system and the associated modification costs and cost inefficiencies as well as the impact on other customers. The risks associated with the major contract awarded for this system were also discussed in detail. After the customer informed the Executive Board on December 9, 2015 that the customer specifications had not been met, an ad-hoc announcement was published without undue delay.

In view of various cost-cutting programs that have already been implemented, our discussions and evaluations in the 2015 fiscal year once again concentrated on the market environment and the market opportunities for the various AIXTRON technology groups. In this context, we also explored possible M&A opportunities, particularly with a view to targeted improvement of market access.

In addition, the following topics were addressed in the individual meetings:

Supervisory Board meetings in 2015

The meeting on February 23, 2015 concentrated on the Annual and Consolidated Financial Statements for the 2014 fiscal year and the respective discussions and resolutions on the agenda. We reported on this information in detail in our report for the 2014 fiscal year. We also discussed in detail the existing horizontal and vertical comparison of Board remuneration and came to the conclusion that remuneration, both horizontally and vertically, is appropriate. In addition, we looked at the agenda of the 2015 Annual General Meeting and the resolutions it proposed. In view of the significant increase in takeover activities on the capital market, we discussed the relevance and potential alternatives in the event of a takeover bid.

At the meeting on May 19, 2015 we discussed, in addition to the recurring issues mentioned above, the possibilities for dissolving the Genus Trust which expired in March 2015. It was formed as part of the takeover of Genus, Inc. to secure claims arising from the stock option plans which were part of the acquisition. We asked the Executive Board to assess a transfer of the assets to Germany. We also talked about various ways to use or convert the property on Kaiserstrasse at the headquarters in Herzogenrath.

At the meeting on September 16, 2015 we discussed with the Executive Board, among other things, the definition of the relevant management levels in relation to the law on the equal participation of men and women in executive management positions in force since May 2015 and passed or confirmed the target quotas to be set by the Supervisory Board (Executive Board: 0%; Supervisory Board: approx. 20%). Due to the upcoming elections for a new Supervisory Board during the 2016 Annual General Meeting, we decided that the Nomination Committee should take up its work again.

The Supervisory Board of AIXTRON SE convened for its last ordinary meeting of the year on December 2, 2015. We discussed in detail the 2016 budget adjusted to the current business forecast which was presented by the Executive Board. This budget was approved after the meeting by circular resolution and is once again subject to the condition that the planned expenditures are reviewed on a regular basis and adjusted to the development of the business. The 2016 budget includes detailed sales revenues, income, financial and investment plans, as well as the planned personnel development at AIXTRON. We discussed new laws, guidelines and specifications and revised the by-laws for the Supervisory Board. The Executive Board reported on the definition of target quotas for the percentage of women at the two management levels below the Executive Board which the Executive Board defined as follows with the resolution on September 29, 2015: first management level: 0% (current: 0%); second management level: 8.3% (current: 8.3%). The deadline for achieving these targets is June 30, 2017.

Finally, in the last meeting of the year, we conducted a self-evaluation of our activities using an extensive questionnaire distributed to the members of the Supervisory Board in advance of the meeting which found that the Supervisory Board and its committees are working efficiently.

Committees

The Supervisory Board currently has four committees: an Audit Committee, a Technology Committee, a Nomination Committee and a Capital Market Committee.

The Audit Committee addresses, in particular, monitoring of the accounting process, compliance, the effectiveness of the internal control system, the risk management system, the internal audit system and the implementation of the rules in accordance with Section 404 Sarbanes-Oxley Act (SOA 404). The Chairman of the Audit Committee, Prof. Dr. Blättchen, is an independent Supervisory Board member whose area of expertise is reporting and audits (as required by law: Section 107 (4); Section 100 (5) AktG and who has particular knowledge and experience in the application of internal control processes. In the reporting year as well, the Audit Committee was responsible for auditing the financial statements and monitored in particular the required independence of the auditor and any additional services performed by the auditor. Finally, it issued the mandate to the auditor, identified the focal points of the audit and handled the fee arrangements. The Committee Chair reported regularly on the work of the Audit Committee to the Supervisory Board.

The Audit Committee convened four times in 2015; each meeting was attended by all three Committee members. In addition to accounting issues related to the financial and earnings situation, the Audit Committee looked at the following issues, among others:

  • The engagement of the auditing firm Deloitte & Touche GmbH to audit the Individual Financial Statements of AIXTRON SE and the Consolidated Financial Statements of the AIXTRON Group as of December 31, 2015, the US Annual Report in the 20-F form, the risk screening system in the meaning of Section 91 (2) AktG and the internal controls for the financial reporting in the meaning of SOA 404 and the preparation of a Management Letter and findings in accordance with Section 7.2.3 DCGK (German Code of Corporate Governance) at AIXTRON SE
  • Review of the Statement of Independence and the "Management Letter" written by the Auditor (main conclusions from 2014 audits of the Individual Financial Statements and the Consolidated Financial Statements of the AIXTRON Group and of the internal control system)
  • Regular discussion of the quarterly reports and the semi-annual report in telephone conferences
  • Audit focal points for Deloitte & Touche GmbH for the audit of the 2015 AIXTRON Individual Financial Statements and Consolidated Financial Statements
  • 2016 audit focal points of the German Financial Reporting Enforcement Panel (DPR)
  • Integration of the accounting system of Plasma Si following its acquisition and discussions on how to handle accounting for the major contract awarded by San'an
  • Dissolution of the Genus Trust
  • Update of the Compliance Manual and transfer to an e-learning system
  • Quarterly risk management report (ordinary risk management of the Executive Board pursuant to Section 91 (2) AktG)
  • Improved performance of the risk management system as well as its direct incorporation into the internal forecast and business planning
  • Reduction of the SOX inspections
  • Adoption of an anti-corruption guideline
  • Internal R&D audit in a separate teleconference
  • Information security as well as the implementation of software to improve the information security
  • Update of the report on the use of "conflict minerals"
  • New relevant guidelines, laws and regulations

The Technology Committee focuses in particular on issues related to the technology market positioning of AIXTRON, patents, product planning (product roadmaps) and technology developments, possible technology acquisitions and other issues related to diversification. The current level of technical development of the MOCVD system technology AIX R6 was additionally discussed. The Committee also heard reports about the core processes in the area of development. The focus of the Technology Committee's work, in addition to the status reports from the individual technology areas, was on further developments of products and their critical assessment.

The Committee Chair, Prof. Dr. Denk, regularly reported to the Supervisory Board on the activities of the Technology Committee in the plenary meetings. In fiscal year 2015, the Technology Committee convened in four meetings which were all attended by all three committee members.

The Nomination Committee, consisting of three members, makes nomination proposals to the Supervisory Board if Supervisory Board positions need to be replaced; in doing so, it also takes into account its own targets defined in 2010 for its future composition as well as the requirements of the German Corporate Governance Code (DCGK) for appropriate diversity and an appropriate number of independent Supervisory Board members. Due to the upcoming election for the entire Supervisory Board in 2016, the Nomination Committee convened once in the 2015 fiscal year on December 1, 2015.

To evaluate M&A opportunities and strategy options with possible capital market relevance, the Capital Market Committee with its two members held a total of six conference calls in 2015 (on June 2, 5 and 19, on September 8 as well as on October 1 and 29).

Corporate Governance and Declaration of Conformity

The Supervisory Board regularly follows the development of the Corporate Governance Standards and, together with the Executive Board, issues a joint Corporate Governance report. We will continue to support the Executive Board in its efforts to remain in full compliance with the German Corporate Governance Code recommendations.

In the latest Declaration of Conformity in accordance with Section 161 AktG dated February 2016, with the exception of the deviations stated, the Executive and Supervisory Boards certified full compliance with the recommendations of the German Corporate Governance Code.

No conflicts of interest were reported by the members of the Supervisory or Executive Board.

Composition of the Executive and Supervisory Board

There were no changes in the composition of the Executive and Supervisory Boards in fiscal year 2015.

Audit and Annual Financial Statements

Following the resolution passed at the Company's Annual General Meeting on May 20, 2015, the Supervisory Board awarded the mandate to audit the Financial Statements of AIXTRON SE and the Consolidated Financial Statements of the AIXTRON Group for fiscal year 2015 to Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Düsseldorf.

The auditors also reviewed the Company's Annual Report in Form 20-F and the internal control system in accordance with the Sarbanes-Oxley Act, as well as measures implemented by the Executive Board to detect, at an early stage, business risks that could potentially jeopardize the performance and existence of the Company. It was also agreed that the auditors would, if necessary, inform the Supervisory Board or make a note in the audit report of any facts found during their examination which conflict with the Declaration of Conformity under Section 161 AktG issued by the Executive Board and the Supervisory Board. As in previous years, the auditors did not make note of any such findings for fiscal year 2015.

The Financial Statements of AIXTRON SE as of December 31, 2015 and the Management Report were prepared in accordance with the requirements of the German Commercial Code (HGB), while the Consolidated Financial Statements as at December 31, 2015 and the Group Management Report were prepared in accordance with Section 315a HGB on the basis of the International Financial Reporting Standards (IFRS). Deloitte & Touche GmbH, an independent registered public accounting firm, has audited the 2015 Financial Statements of AIXTRON SE and the Consolidated Financial Statements of the AIXTRON Group, both of which were given an unqualified audit opinion. The auditors found that the Management Reports of both AIXTRON SE and the AIXTRON Group present a true and fair view of the current position and prospects of AIXTRON SE and the AIXTRON Group. The audit team with auditor in charge Dr. Holger Reichmann has audited the Financial Statements of the Company since 2012.

The Annual Financial Statement documents (Annual Financial Statements of AIXTRON SE and the Consolidated Financial Statements of the AIXTRON Group as of December 31, 2015, including the Management Report of the Company and the Group) and the audit reports by the auditors were submitted to the Audit Committee and the Supervisory Board for examination in a timely manner. We examined these documents in detail. The Annual Financial Statements of AIXTRON SE and the Consolidated Financial Statements of the AIXTRON Group, as well as the respective Management Reports, were discussed in detail with the Company's auditors at the meeting of the Audit Committee and entire Supervisory Board on February 22, 2016, with due consideration given to the auditor's reports. The auditor, who participated in both the meeting of the Audit Committee as well as the subsequent Supervisory Board meeting, reported on the key audit results, which also covered the internal control and risk management system as they relate to the accounting process. The auditor was available to answer any additional questions raised by the Audit Committee or Supervisory Board. The Supervisory Board also discussed the 2015 Annual Report "Form 20-F" as required by the U.S. Securities and Exchange Commission (SEC).

Following our own examination, we had no objections to the single-entity or consolidated financial statements submitted. The respective Management Reports matched our own assessment of the Company and the Group's situation. We fully concurred with the auditor's results and opinion and consequently, in a resolution passed on February 22, 2016, we approved both the Annual Financial Statements of AIXTRON SE and the Consolidated Financial Statements of the AIXTRON Group prepared by the Executive Board for fiscal year 2015. The Annual Financial Statements of AIXTRON SE are therefore formally adopted. Form 20-F for fiscal year 2015 was approved for filing with the SEC.

Note of thanks from the Supervisory Board

We would like to thank the Executive Board and all employees around the world. We would also like to thank the employee representatives for their constructive work with various boards and councils within the Company. Also, we would like to express our appreciation to the shareholders for their support and their ongoing confidence in AIXTRON SE.

Herzogenrath, February 2016

AIXTRON SE

Kim Schindelhauer
Chairman of the Supervisory Board