Supervisory Board Report

AIXTRON can again look back on a very successful fiscal year. Order intake increased by 18% and Revenues by 8% compared to the previous year. This development is the result of a consistent implementation of the corporate strategy pursued by the Executive Board and supported by the Supervisory Board.

The addressed growth markets of compound semiconductors developed very positively and enabled AIXTRON to benefit from this development with its leading technologies. The new successfully launched AIX G10-SiC system platform has already generated very strong customer interest in its initial phase. AIXTRON also has its supply chain under control and the Company is making great progress in attracting new employees to strengthen the Company's structures for further growth. Through targeted investments in research and development, AIXTRON is laying the foundations for future success, both in the short and long term.

In addition to commercial success, the Company is also focusing on ESG (Environment, Social and Governance) aspects. Further progress was made in this area and the very good results in the EU taxonomy aligned key figures again impressively demonstrate the good and sustainable path AIXTRON is on.

Throughout the reporting year, the Supervisory Board performed the duties and responsibilities entrusted to it by law, the Articles of Association, and the Rules of Procedure without limitation. The training and continuing education measures of the Supervisory Board members are appropriately supported by the Company.

Cooperation between the Supervisory Board and the Executive Board
 

The Supervisory Board continuously monitored the Executive Board in its management of the Company and advised it on all matters of importance to the Company, so that the Supervisory Board was always able to verify the legality and regularity, expediency, and economic efficiency of the Company’s management.

The Supervisory Board was directly involved at an early stage in all decisions of fundamental importance to the Company. The Executive Board informed the Supervisory Board regularly, promptly, and comprehensively about the course of business, corporate planning, and the strategic development of the AIXTRON Group. In addition, the Supervisory Board regularly consulted with the Executive Board on the Company’s risk situation, risk management, and compliance. Particular attention was paid to the areas of information security and ESG, about which the Executive Board also provided the Supervisory Board with comprehensive information. Based on the Executive Board’s reports, business developments and other events of importance to the Company were discussed in detail. The Supervisory Board approved the respective resolution proposals of the Executive Board after thorough examination and consultation.

The Supervisory Board did not make use of the opportunity to review the Company's books and records (Section 111 (2) of the German Stock Corporation Act (AktG)).

Cooperation with the Executive Board was characterized in every aspect by responsible and targeted action. The Executive Board fully complied with its reporting obligations to the Supervisory Board, both verbally and in writing.

The Executive Board supports the members of the Supervisory Board to an appropriate extent in the training and continuing education measures they are generally responsible for. In addition, the Company provides the members with up-to-date, topic-specific information material in order to keep them informed about current market trends in the semiconductor industry and important capital market issues. In addition, AIXTRON supports participation in further training events relevant to Supervisory Board activities. New Supervisory Board members are introduced to all relevant topics and processes in an onboarding program, in particular with comprehensive background information on the technologies and markets in which AIXTRON operates (recommendation D.11 German Corporate Governance Code 2022).

As Chairman of the Supervisory Board, I was also in regular contact with the Executive Board even beyond the Supervisory Board meetings. In addition to the current business situation and important business transactions, we discussed especially matters of strategic positioning of the Company.

Supervisory Board Meetings 2022
 

In 2022, the Supervisory Board held five ordinary meetings on February 23, May 24 and 25, September 20, and December 12, and three extraordinary meetings on July 25, November 18, and December 11. Of these, three meetings were held by videoconference (May 25, July 25, November 18). All other meetings were held in person. All members of the Supervisory Board attended the meetings held in 2022.

Prior to the meetings, all Supervisory Board members received detailed quarterly reports on the Company's situation, as well as other information, such as internal control reports, meeting minutes, Company presentations, analyst reports, consensus estimates, press releases, and the AIXTRON financial reports or financial news. These are made available via an encrypted digital platform specially set up for the Supervisory Board. The Supervisory Board obtained a comprehensive picture of the business situation before and during the meetings based on current financial figures as well as updated forecast reports and development plans (orders, revenues, competition, market shares). Deviations in the course of business from the planned budgets were explained and justified in detail.

In addition, the Supervisory Board focused intensively on the development progress of new equipment generations and their customer acceptance. These are key to the Company's ecologically and economically sustainable growth, resulting from the expected growth in AIXTRON’s target markets. The Supervisory Board also received detailed reports on the supply chain situation and the status of outstanding export licenses.

The meeting on February 23, 2022, focused on the annual and consolidated financial statements and the combined management report for fiscal year 2021 and the corresponding discussions and resolutions. In addition, the Supervisory Board discussed and approved the draft agenda presented and the form of conduction of the Annual General Meeting 2022. Furthermore, the Supervisory Board discussed and approved the proposed Declaration of Corporate Governance. The non-financial report of AIXTRON SE and the Group (Sustainability Report) for fiscal year 2021 prepared by AIXTRON was extensively discussed, reviewed and approved. The non-financial consolidated report of AIXTRON SE was undertaken an independent limited assurance review by the auditor. In addition to the status on strategic projects, the Executive Board presented an internal efficiency program as well as measures to strengthen the organization in terms of structure and personnel. The winding up of the OLED subsidiary APEVA was also discussed, and the establishment of a service organization in Malaysia was explained.

At the meeting on May 24, 2022, the Executive Board explained the year-to-date business performance and the planned course of the 2022 Annual General Meeting, which was to be held virtually in accordance with the pandemic regulation once again for the protection of all participants. The Executive Board gave a detailed overview of the strategy and development in the Power Electronics technology segment based on the material systems gallium nitride (GaN) and silicon carbide (SiC), as well as on the progress of various strategy projects.

At the constituent meeting of the Supervisory Board, which was expanded by one person to now six members, on May 25, 2022, both the incumbent members of the Supervisory Board and the newly elected member of the Supervisory Board, Dr. Stefan Traeger, participated via video conference. At this meeting, Dr. Traeger was congratulated on his election and both the Chairman and his Deputy were confirmed as well as new appointments were made to the Supervisory Board committees.

During the meeting on July 25, 2022, the Executive Board reported on the business development in the 1st half of the year and provided an outlook for the second half of fiscal year 2022.

At the ordinary meeting on September 20, 2022, the Executive Board reported on the business development in the first half of the year as well as the development in the area of ESG and provided an outlook for the second half of the fiscal year 2022. The Supervisory Board received a comprehensive update on the strategy and development in the optoelectronics technology area. The strategy in general, and of the Micro LED technology area in particular, were discussed in detail. The Executive Board also presented the technology roadmap derived from its strategy. Following a presentation by the Executive Board on the current status of diversity within the Company, discussions were held on ways to further promote diversity at AIXTRON.

In the meetings on November 18 and December 11, the Supervisory Board dealt with succession planning for the Supervisory Board.

On December 12, 2022, the Supervisory Board of AIXTRON SE held its last ordinary meeting of the year. The budget for 2023 presented by the Executive Board was discussed in detail and was approved by the Supervisory Board. The 2023 budget includes, among other things, the detailed revenue, earnings, financial and investment planning as well as the planned personnel development of the AIXTRON Group. Furthermore, the Supervisory Board discussed the agenda for the next Annual General Meeting on May 17, 2023 which is to be held in presence again for the first time since 2019. As part of the annual efficiency review, the Supervisory Board's activities were assessed and deemed effective using a comprehensively revised questionnaire. The appropriateness of the Executive Board's remuneration was discussed and determined. In addition, the Executive Board's targets for subsequent years were set as part of the remuneration system. The rules of procedure for the Executive Board, the Supervisory Board and the Audit Committee were revised and adopted.

Committees
 

The Supervisory Board has formed four committees: an Audit Committee, a Capital Markets Committee, a Nomination Committee, and a Remuneration Committee. The committees prepare resolutions and issues to be dealt with in the plenary sessions of the Supervisory Board.

The Audit Committee deals with the monitoring of accounting, the accounting process, corporate governance & compliance, the effectiveness of the internal control system, the risk management system, the internal audit system, the audit of the financial statements as well as assessing the quality of the audit. The Chairwoman of the Audit Committee, Prof. Dr. Anna Weber, has expertise in the areas of accounting and auditing (Section 107 (4), Section 100 (5) of the German Stock Corporation Act (AktG)) as well as special knowledge and experience in the application of internal control and risk management systems. Accounting and auditing also include the non-financial (sustainability) reporting and its audit. Mr. Kim Schindelhauer, as a further member of the Audit Committee, also has expertise in the field of accounting.

In the year under review, the Supervisory Board commissioned KPMG AG Wirtschaftsprüfungsgesellschaft for the first time to audit the separate and consolidated financial statements and the combined management report of AIXTRON SE as of December 31, 2022. Based on an invitation to tender for the audit, the Audit Committee recommended to the Supervisory Board to propose to the general shareholders meeting to elect KPMG AG Wirtschaftsprüfungsgesellschaft as auditor for fiscal year 2022. The Annual General Meeting on May 25, 2022 followed this proposal with a large majority. KPMG was also appointed to review the content of the separate non-financial Group report to be prepared for fiscal 2022. In addition, the key audit matters to be mentioned in the auditor's report on the AIXTRON annual and consolidated financial statements 2022 were discussed with the auditor.

The Audit Committee consists of three members and met a total of six times in 2022 (February 23, May 24, September 20, October 24 and 26, December 12), of which two meetings were held virtually (October 24 and 26). All meetings were attended by Prof. Dr. Weber and all acting members of the Audit Committee. All resolutions were passed unanimously. For the quarterly financial statements as of March 31, 2021, June 30, 2021, and September 30, 2021, the Audit Committee held discussions with the auditors and accounting representatives in each case and discussed the publication of the quarterly figures in detail with the Executive Board.

In addition to the above-mentioned tasks and the quarterly accounting issues, the Audit Committee dealt with the following special topics, among others:

• Declaration of independence and ongoing monitoring of the auditor's independence
• Non-financial Group report (Sustainability Report), in particular implementation of the requirements of the EU Taxonomy Directive
• Risk management, in particular implementation of the requirements from the new version of the auditing standard IDW PS 340 n.F.
• Implementation of the requirements under the Financial Market Integrity Strengthening Act (Finanzmarktintegritätsstärkungsgesetz – FISG)
• Implementation of the amendments from the German Corporate Governance Code (GCGC 2022)
• Adequacy and effectiveness of the internal control system (ICS) and the risk management system (RMS)
• Internal audits 2022 and audit planning for the following year
• Compliance, esp. compliance training plan for 2022
• Information security, esp. cyber security risks
• Tax audits, esp. at AIXTRON SE
• Assessment of the quality of the audit of the financial statements

The Capital Market Committee is concerned with the evaluation of activities with potential capital market relevance. It consists of three members with Mr. Kim Schindelhauer as Chairman. No meetings were held in 2022.

In fiscal year 2022, the Nomination Committee consisted of four members with Mr. Frits van Hout as Chairman. The committee makes appropriate proposals to the full Supervisory Board in the event of new appointments to the corporate bodies. In doing so, it also considers the targets for the composition of the corporate bodies. During 2022, a total of three meetings was held (May 23, July 23, September 14) to search for suitable candidates for election to the AIXTRON Supervisory Board. All meetings were attended by all members in office. Two of these meetings were held virtually (July 23, September 14). As of January 1, 2023, Mr. Schindelhauer took over the role of Chairman from Mr. van Hout. Since then, the committee has consisted of three members.

The Compensation Committee mainly deals with issues relating to the remuneration of the Executive Board members, in particular its variable short-term and long-term remuneration components. No separate meetings were held in 2022.

Corporate Governance and Declaration of Conformity
 

The Supervisory Board continuously monitors the development of corporate governance standards and prepares a joint corporate governance report together with the Executive Board. The Supervisory Board will continue to support the Executive Board in its efforts to fully comply with the recommendations of the German Corporate Governance Code (“GCGC”).

In the current Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act (AktG) dated February 2023, full compliance with the recommendations of the German Corporate Governance Code is declared, except for the deviation explained.

No conflicts of interest involving members of the Supervisory Board or Executive Board were reported in the fiscal year.

Audit, Annual Financial Statements and Non-Financial Report
 

In accordance with the resolution of the general shareholders meeting on May 25, 2022, the Supervisory Board commissioned KPMG AG Wirtschaftsprüfungsgesellschaft, Essen, Germany with the audit of the annual financial statements and the consolidated financial statements as well as the combined management report of AIXTRON SE for fiscal year 2022. The audit was performed by the audit team of the lead auditor Dr. Kathryn Ackermann.

The audits also covered the measures taken by the Executive Board to identify risks at an early stage that could jeopardize the success and continued existence of the Company. It was also agreed that the auditor must inform the Supervisory Board or make a note in the audit report if, during the performance of the audit, it ascertains facts that show a misstatement in the Declaration of Conformity issued by the Executive Board and Supervisory Board in accordance with Section 161 of the AktG. As in previous years, such a determination was not necessary for the 2022 fiscal year.

The annual financial statements and the combined management report of AIXTRON SE and the AIXTRON Group as of December 31, 2022, were prepared in accordance with the rules of the German Commercial Code (HGB), the consolidated financial statements and the group management report as of December 31, 2022, were prepared in accordance with Section 315e HGB on the basis of the International Financial Reporting Standards IFRS. The independent auditing Company KPMG AG audited the annual financial statements and the consolidated financial statements and combined management report prepared by AIXTRON SE for fiscal year 2022 and has reviewed the separate non-financial report of the group. The financial statements including the combined management report were issued with an unqualified audit opinion. The non-financial consolidated report received the note on an audit to obtain limited assurance. The auditors found that the combined management report of the Company and the Group accurately presents the current business and future development of the Company and the Group.

The financial statement documents (annual financial statements of AIXTRON SE and consolidated financial statements as of December 31, 2022, as well as the combined management report of AIXTRON SE and the Group), the proposal for the appropriation of profits, the separate Group non-financial report as well as the auditor's reports were submitted to the Audit Committee and the Supervisory Board in a timely manner. These documents were reviewed in detail by the Supervisory Board. In the meeting of the Audit Committee and the full Supervisory Board on February 27, 2023, both the annual financial statements of AIXTRON SE and the consolidated financial statements as well as the combined management report and the Group non-financial report were discussed and debated in detail, considering the audit reports of the auditor. The auditor, who attended both the Audit Committee meeting and the Supervisory Board meeting, reported on the main results of its audit, which also included the internal control and risk management system regarding the accounting process, and was available to the Audit Committee and the Supervisory Board, respectively, for any additional questions and information.

The results of our own review did not give rise to any objections either to the Group non- financial report or to the annual financial statements, the consolidated financial statements and the combined management report. The combined management report is consistent with our own assessment of the situation and business development of the Company and the Group. We concurred with the auditor's findings, with which we fully agreed in terms of content and approved the annual financial statements and the consolidated financial statements as well as the combined management report prepared by the Executive Board, as well as the Group non-financial (sustainability) report of the Company for fiscal year 2022, by resolution dated February 27, 2023. The annual financial statements of AIXTRON SE were thus formally adopted.

Note of thanks from the Supervisory Board

On behalf of the Supervisory Board, I would like to thank the members of the Executive Board and all employees of the AIXTRON Group for their extraordinary commitment in fiscal year 2022, which was characterized by many in particular external challenges. The entire Supervisory Board would also like to thank the employee representatives for their constructive cooperation with the Company's executive bodies in this successful and challenging year.

Herzogenrath, February 2023

Kim Schindelhauer
Chairman of the Supervisory Board