1 THE VILLEROY & BOCH GROUP // THE GROUP AT A GLANCE C2 THE GROUP AT A GLANCE Revenue in Euro million Revenue Germany in Euro million Revenue Abroad in Euro million EBITDA (before special expenditures/proceeds) in Euro million EBITDA in Euro million EBIT (before special expenditures/proceeds) in Euro million EBIT in Euro million EBT (before special expenditures/proceeds) in Euro million EBT in Euro million Group results in Euro million NOPAT in Euro million Net operating assets (12 month average) in Euro million Balance sheet total in Euro million Cash flow from operating activities in Euro million Cash flow from operating activities (2010: before EU) in Euro million Capital Expenditure in Euro million Depreciation and amortisation in Euro million Impairment losses (incl. reversals) in Euro million Employees (annual average) Number 7,946 8,558 8,729 9,440 10,193 Return on Net operating assets in percent Net operating margin (before special expenditures/proceeds) in percent Return on equity (ROE) (before special expenditures/proceeds) in percent Cash flow sales profitability (2010: before EU) in percent Equity ratio (incl. minority interests) in percent Earnings per ordinary share in Euro Earnings per preference share in Euro Dividend per ordinary share in Euro Dividend per preference share in Euro DIVISIONS Bathroom and Wellness Sales in Euro million EBIT in Euro million EBIT (before special expenditures) in Euro million Net operating assets (12 month average) in Euro million Return on Net operating assets in percent ANNUAL REPORT 2012 Tableware Sales in Euro million EBIT in Euro million EBIT (before special expenditures) in Euro million Net operating assets (12 month average) in Euro million Return on Net operating assets in percent
2 VILLEROY&BOCH WORLDWIDE PRODUCTION Europe Gustavsberg, Sweden Hódmezövásárhely, Hungary Lugoj, Rumania Merzig, Germany Mettlach, Germany Mondsee, Austria Roden, The Netherlands Roeselare, Belgium Valence d Agen, France Vargarda, Sweden Torgau, Germany Treuchtlingen, Germany America Lerma, Mexico Ramos, Mexico Asia/Pazific Saraburi, Thailand Countries in which Villeroy&Boch products are distributed THE GROUP AT A GLANCE // VILLEROY & BOCH WORLDWIDE Ç
3 THE VILLEROY & BOCH GROUP // MANAGEMENT BOARD 1 Dear shareholders, It is my great pleasure to report on our performance in 2012 today. First of all, the good news: in another year dominated by the European sovereign debt crisis and its negative impacts on demand from private households and companies, we improved our operating result by 11 % with stable revenue. At the end of the fiscal year, revenue stood at Euro 744 million. At first glance, this equates to growth of just 0.1 %. However, taking into account the impact of a major project with a chain of convenience stores in the Tableware Division in 2011 (Euro 15 million) and the decreases in revenue following our targeted withdrawal from unprofitable project business in Mexico (Euro 5 million), we increased our revenue on an adjusted basis by Euro 21 million (3 %). One key factor here was a strong final quarter in which our revenue rose by more than Euro 8 million year-on-year. The operating result (EBIT) rose sharply by Euro 3 million year-on-year to Euro 31 million. On the earnings side, we benefited from the rigorous continuation of cost management as well as productivity improvements, optimisation of the product and country mix of the goods sold, and downstream effects from the master plan we adopted in Taken together, these resulted in an improved gross margin. A detailed look at our performance on the individual markets shows a very mixed picture, especially in Europe. Revenue decreases in the mid-single-digit percentage range on average were posted in the crisis-hit EU states of Greece, Spain, Portugal, Italy and Ireland. Business performance was even weaker in the Netherlands, where the Bathroom and Wellness Division saw its revenue plummet by 17 % in a home-grown property crisis, which slowed down the entire construction sector. Encouragingly, there were signs of growth in the other regions of Europe: we posted our strongest increases in Russia (+22 %), the UK (+ 11 %), Norway (+9 %), Austria (+8 %) and Germany (+4 % on an adjusted basis). Outside Europe, business development was very positive in the USA (+8 %) and Asia, particularly revenue growth in Thailand (+25 %) and Japan (+14 %). Our target for the years ahead, dear shareholders, is clearly formulated: further profitable growth. The following activities and strategies are geared towards target attainment: On the American markets, we repositioned ourselves with the Bathroom and Wellness Division in Following the sale of our Mexican sanitary ware plant in Saltillo, we are focusing on the manufacture of high-quality products for North, Central and South America with our two remaining plants in Ramos and Lerma. We see considerable revenue and
4 2 THE VILLEROY & BOCH GROUP // MANAGEMENT BOARD earnings potential in the USA through the strategic sales partnership with the US organisation of TOTO, the world's biggest sanitary ware group, launched in April. Specifically, we expect synergies in terms of distribution, logistics and service. For instance, on the North American market, our bathroom products will be sold exclusively through the sales and distribution channels of TOTO USA in future. This gives us access to a wide customer base and more than 2,500 showrooms. On the dynamic markets of Russia and Asia in particular, our intention is to grow quickly and consistently. Since July 2012, our Bathroom and Wellness Division has therefore been active in Russia as a general importer with its own company and a logistics platform. With this local organisation, we are now able to expand beyond the major cities of Moscow and St Petersburg. We also took a key decision regarding Asia in 2012: here, we intend to establish a decentralised, autonomous organisation aimed at responding to local needs quickly and flexibly and controlling both divisions. The main targets for the years ahead are extensive expansion of distribution and enhancement of brand awareness. For example, our presence in China currently consists of 67 bathroom displays and 34 tableware sales areas at the point of sale. There is also growth potential on the Indian market, where we will be stepping up our presence from 2013 onwards. In the medium term, we aim to expand our revenue in the Asia/Pacific region to well over Euro 100 million, thus increasing its share of consolidated revenue from 7 to 15 %. To meet the expected surge in demand, we increased the capacity of our sanitary ware plant in Saraburi, Thailand by more than 20 % in 2012, as well as turning the location into a competence centre. Despite all the growth opportunities in the new markets, the home market of Europe remains the backbone of Villeroy&Boch. Ultimately, this is where we earn the money that enables investments in other regions. To grow in Europe as well, we are continuing to enhance our product range in a targeted manner, creating products and strengthening the premium character of our brand. For example, in 2012, we converted our shops in Düsseldorf and Brussels to premium stores and issued a special edition for the royal wedding in Luxemburg in October with the initials of the couple, Guillaume and Stéphanie. In addition, the Tableware Division launched Mariefleur, a new country collection that instantly became the best new range of the last ten years. In the Bathroom and Wellness division, O.novo, launched in 2011, went on to become the best-selling new product range, while our bathroom furniture business again grew by approx. 10 %. The year was rounded off with prestigious orders in the project business, for instance supplying the Turkish presidential palace in Ankara with tableware products and the European Central Bank in Frankfurt with high-quality sanitary ware.
5 THE VILLEROY & BOCH GROUP // MANAGEMENT BOARD 3 We also made another step forwards in terms of our processes in Our compliance management system was examined and successfully certified by external auditors in line with the principles of Audit Standard 980 promulgated by the Institut der Wirtschaftsprüfer e.v. (Institute of Public Auditors in Germany). In addition, in the Finance department, we changed our accounting process last year so that we are able to close the financial year 2012 nearly eight weeks earlier than in the previous year, thus enabling us to focus more quickly on further developments in the new financial year. Dear shareholders: Villeroy&Boch generated a sound operating result in 2012, particularly in view of the challenging market environment. As we want you to participate in our strong business development, the Management Board and the Supervisory Board will propose to the General Meeting of Shareholders on 22 March 2013 the payment of a dividend of Euro 0.35 per ordinary share and Euro 0.40 per preference share; as in the previous year. I hope this overview will give you an impression of our work in the past financial year and show you how we are positioning Villeroy&Boch for a promising future. And I can assure you that I, my Management Board colleagues Jörg Wahlers, Andreas Pfeiffer, Nicolas Luc Villeroy and our entire workforce are totally committed to continuing to generate reliable returns for you in future. I would be delighted if you continued to accompany your company s development and, on behalf of the Management Board of Villeroy&Boch AG, I would like to thank the people who do the company proud and make it even better day by day: our 7,840 employees. Yours, Frank Göring Chairman of the Management Board Mettlach, February 2013
7 THE VILLEROY & BOCH GROUP // TABLE OF CONTENTS 5 TO OUR SHAREHOLDERS 01 Letter to Shareholders 01 Members of the Management Board 14 Members of the Supervisory Board 15 Report of the Supervisory Board 16 Corporate Governance Report 20 Villeroy & Boch's Shares 28 CONSOLIDATED FINANCIAL STATEMENTS 67 Income Statement 69 Balance Sheet 70 Statement of Equity 72 Statement of Comprehensive Income 73 Cash Flow Statement 74 OUR COMPANY 30 Our employees 30 Bathroom and Wellness Division 40 Tableware Division 44 GROUP MANAGEMENT REPORT 51 General Conditions 52 Revenue and Earnings 53 Investments 56 Financing 56 Balance Sheet Structure 57 Employees 58 Procurement 58 Research and Development 58 Opportunities 59 Risks 60 Events of Particular Importance 65 Remuneration System 65 Group Outlook 66 Dividend Proposal 66 NOTES 75 General Information 75 Notes to the Balance Sheet 81 Notes to the Income Statement 100 Notes to the Cash Flow Statement 104 Group Segment Reporting 104 Other Notes 107 Combined Responsibility Statement 119 Audit Report 120 ADDITIONAL INFORMATION The Group at a Glance C2 Table of Pictures 48 Glossary 121 Disclaimer 122 Company Calendar C5 Contact and Imprint C5
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16 14 THE VILLEROY & BOCH GROUP // MANAGEMENT BOARD MEMBERS OF THE MANAGEMENT BOARD Members of the Management Board (left to right): Nicolas Luc Villeroy, Jörg Wahlers, Frank Göring and Andreas Pfeiffer Frank Göring Chairman of the Management Board (CEO) b ) within the Group: Villeroy & Boch Magyarország Kft., Hódmezövásárhely/Hungary (until 26 June 2012) Jörg Wahlers Finance and Human Resources (CFO) b ) Linnenbecker GmbH & Co. KG, Erkrath within the Group: Delfi Asset S.A., Luxembourg Andreas Pfeiffer (since 01 May 2012) Management Board member responsible for Bathroom and Wellness Division b ) within the Group: Villeroy & Boch Magyarország Kft., Hódmezövásárhely/Hungary (since 27 June 2012) Villeroy & Boch Trading Shanghai Co., Ltd Nicolas Luc Villeroy (since 01 May 2012) Management Board member responsible for Tableware Division
17 THE VILLEROY & BOCH GROUP // SUPERVISORY BOARD 15 MEMBERS OF THE SUPERVISORY BOARD Luitwin Gisbert von Boch-Galhau Honorary member of the Supervisory Board b) Banque CIC Est S.A., Strasbourg/France (Member of the Administrative Board) within the Group: Villeroy & Boch Magyarország Kft., Hódmezövásárhely/Hungary (Chairman of the Supervisory Board) Wendelin von Boch-Galhau Chairman of the Supervisory Board Managing Director of country life von Boch-Galhau Verwaltungs-Gesellschaft mbh Managing Director of Solarpark Linslerhof GmbH b) V&B Fliesen GmbH, Merzig Ralf Runge* First Vice Chairman of the Supervisory Board Chairman of the Faiencerie Works Council Chairman of the Villeroy & Boch Euro Works Council Peter Prinz Wittgenstein Second Vice Chairman of the Supervisory Board Management Consultant Jürgen Beining* Head of Sales Central Europe, Bathroom and Wellness Division Dr. Alexander von Boch-Galhau Management Consultant b) Union Stiftung, Saarbrücken Dietmar Geuskens* District Manager of IG Bergbau, Chemie, Energie, Saarbrücken a) RAG Deutsche Steinkohle AG, Herne Steag Power Saar GmbH, Saarbrücken Dr. Jürgen Friedrich Kammer Former Chairman of the Management Board and Supervisory Board of Industrie-Chemie AG Munich b) Wittelsbacher Ausgleichsfonds, Munich (Vice Chairman) Charles Krombach Former Managing Director of Landewyck Group S.à r.l., Luxembourg, and Heintz van Landewyck S.à r.l., Luxembourg b) Advisory Board of Landewyck Group S.à r.l., Luxembourg Dietmar Langenfeld* Industrial Foreman for Logistics Chairman of the Villeroy & Boch AG Central Works Council Chairman of the Sanitärfabrik Works Council Ralf Sikorski* Trade Union Secretary District Manager of IG Bergbau, Chemie, Energie for Rhineland-Palatinate and Saarland, Mainz a) BASF SE, Ludwigshafen Steag Power Saar GmbH, Saarbrücken (Vice Chairman) KSBG GmbH, Essen (Vice Chairman) b) V&B Fliesen GmbH, Merzig Steag New Energies GmbH, Saarbrücken (Vice Chairman) Francois Villeroy de Galhau Member of the Executive Committee (Directeur général délégué) of BNP Paribas S.A., Paris/France b) BGL BNP PARIBAS, Luxembourg BNP Paribas Fortis S.A., Brussels/Belgium BNP Paribas Leasing Solutions, Puteaux/France Banca Nazionale del Lavoro S.p.A., Rome/Italy Cortal Consors S.A., Paris/France Arval, Rueil-Malmaison/France Bayard Presse S.A., Montrouge/France Werner Jäger* IT Administrator Chairman of the Head Office Works Council *Employee representative a) Memberships of other statutory supervisory boards within the meaning of section 125 of the German Stock Corporation Act (AktG) b) Memberships of comparable domestic and foreign controlling bodies of commercial enterprises within the meaning of section 125 of the German Stock Corporation Act (AktG)
18 16 THE VILLEROY & BOCH GROUP // SUPERVISORY BOARD REPORT OF THE SUPERVISORY BOARD In the year under review, the Supervisory Board performed the duties prescribed to it by law and the Articles of Association in full. It monitored the course of business and advised the Management Board in managing the Company. The Management Board kept the Supervisory Board informed about the current development of the earnings situation of the Company and the individual divisions, including the risk situation and risk management, comprehensively, continuously and in a timely manner in both written and oral reports. The Supervisory Board was also directly involved in all decisions of material importance to the Company, allowing it to intensively discuss and advise on the relevant matters at its meetings. Following its own detailed examination and discussion, the Supervisory Board approved the proposed resolutions by the Management Board. KEY TOPICS DISCUSSED BY THE SUPERVISORY BOARD In the 2012 financial year, the Supervisory Board held four ordinary meetings and one extraordinary meeting and adopted one resolution by written circulation procedure. No member of the Supervisory Board attended fewer than half of these meetings. The detailed reports by the Management Board on the position and business development of thevilleroy&boch Group formed the basis for discussions at all times. KEY TOPICS ADDRESSED IN THE PAST FINANCIAL YEAR At an extraordinary meeting of the Supervisory Board in February, the Supervisory Board discussed its further actions with regard to the EU antitrust proceedings on bathroom fittings and resolved, among other things, to observe the continued proceedings with the assistance of a wellknown legal firm in order to allow it to respond quickly to new developments as necessary. The Chairman of the Supervisory Board did not attend the meeting in order to exclude the possibility of a conflict of interests. As a precaution, Mr. Wendelin von Boch-Galhau will continue to refrain from participating in any necessary votes by the Supervisory Board on such matters in future; in this context, the Supervisory Board examined whether measures in accordance with section sentence 2 of the German Corporate Governance Code were necessary and came to the conclusion that this was not the case. Furthermore, the Management Board informed the Supervisory Board of the status of the compliance organisation and the nomination of the Chief Compliance Officer at this meeting. The balance sheet meeting in March 2012 focused on discussing the single-entity and consolidated financial statements for 2011 and their approval and adoption by the Supervisory Board. The agenda for the General Meeting of Shareholders was also adopted. With regard to Management Board remuneration, the Supervisory Board examined target fulfilment for 2011 and defined the new targets for The results of the efficiency review of the Supervisory Board were also presented and discussed. Furthermore, the Management Board informed the Supervisory Board of the Group s current position.
19 THE VILLEROY & BOCH GROUP // SUPERVISORY BOARD 17 Wendelin von Boch-Galhau, Chairman of the Supervisory Board By circular resolution of the Supervisory Board in April 2012, the divisional heads Andreas Pfeiffer (Bathroom and Wellness) and Nicolas Luc Villeroy (Tableware) were appointed as members of the Management Board with effect from 1 May The meeting in May 2012, which was held following the General Meeting of Shareholders, discussed the proceedings and results of the General Meeting of Shareholders. An editorial amendment to the Articles of Association of Villeroy&Boch AG, a revision of the allocation of responsibilities and a revision of the Rules of Procedure of the Management Board were also resolved. At the meeting in September 2012, the Management Board reported to the Supervisory Board on the Group s position. A further core element of this meeting was the strategic development of the Group. The Management Board s strategic projects were presented to the Supervisory Board and discussed. This meeting also granted an authorization in principle for an investment requiring the consent of the Supervisory Board. The meeting in November 2012 focused on the continuation of the strategic topics discussed at the September meeting, as well as the presentation of the figures as of 31 October 2012 and the resulting orientation for the single-entity and consolidated financial statements for The meeting also adopted the annual planning for 2013, updated the Rules of Procedure of the Supervisory Board and the Declaration of Conformity in accordance with section 161 of the German Stock Corporation Act, and prepared the agenda for the General Meeting of Shareholders. Members of the Management Board also met with the Chairman of the Supervisory Board and the Chairman of the Audit Committee to discuss current issues. This served to ensure that the Supervisory Board was informed about the Company s current operational development, significant transactions, the risk situation and risk management, and the development of key financial indicators at all times.
20 18 THE VILLEROY & BOCH GROUP // SUPERVISORY BOARD REPORT ON THE COMMITTEES To ensure that the work of the Supervisory Board is performed efficiently, it is conducted to a large extent by the four committees it has formed: The Audit Committee held three meetings in the year under review. At its preparatory meeting in February 2012, the Audit Committee discussed the preliminary single-entity and consolidated financial statements. At the March meeting, Ernst&Young GmbH Wirtschaftsprüfungsgesellschaft reported on its audit of the annual financial statements for 2011 and it was agreed that it would be recommended to the Supervisory Board that Ernst&Young GmbH Wirtschaftsprüfungsgesellschaft be proposed to the General Meeting of Shareholders for re-election as the auditor of the single-entity and consolidated financial statements for the 2012 financial year. The meeting in November 2012 focused on the status of the preliminary audit of the single-entity and consolidated financial statements by the auditor, risk management, the status of the expansion of the Internal Control System (ICS) and the report by Internal Audit, and discussed the amendment to the Rules of Procedure of the Supervisory Board and the Declaration of Conformity. The Investment Committee met twice in the year under review. At its September meeting, the Committee prepared the decision on an investment requiring the approval of the Supervisory Board; this was approved by the Supervisory Board the next day. The meeting of the Investment Committee in November 2012 involved the preparation of corporate and investment planning for 2013 for resolution by the Supervisory Board. The members of the Human Resources Committee met in March and November 2012 to discuss the remuneration system for the Management Board, the objectives for the Management Board and the pension adjustments in the contracts of the Management Board members in preparation for the resolutions by the Supervisory Board. The Conciliation Committee formed in accordance with section 27 (3) of the German Codetermination Act did not meet in the year under review. The Supervisory Board was regularly informed about the work of the committees. PERSONNEL CHANGES With effect from 1 May 2012, the Supervisory Board resolved the extension of the Management Board to four members. The Supervisory Board appointed Nicolas Luc Villeroy, Head of the Tableware Division since 2005, as the Management Board member responsible for the Tableware Division. Mr. Villeroy previously performed several roles in the areas of tiles, sanitary ware and tableware, and has worked for the Group for 25 years. Andreas Pfeiffer, Head of the Bathroom and Wellness Division, was appointed as the Management Board member responsible for the Bathroom and Wellness Division. Mr. Pfeiffer joined the Group in 2008 as Head of the Bathroom and Wellness Division, having previously advised the Company on various strategic projects in 2006 and 2007.
21 THE VILLEROY & BOCH GROUP // SUPERVISORY BOARD 19 The General Meeting of Shareholders re-elected Mr. Wendelin von Boch-Galhau to the Supervisory Board as a shareholder representative; the subsequent meeting of the Supervisory Board then reelected him as Chairman of the Supervisory Board. AUDIT OF THE SINGLE-ENTITY AND CONSOLIDATED FINANCIAL STATEMENTS The single-entity financial statements, the IFRS consolidated financial statements and the combined Management Report of Villeroy&Boch AG for the 2012 financial year were audited by the auditor elected by the General Meeting of Shareholders, Ernst&Young GmbH Wirtschaftsprüfungsgesellschaft, and issued with an unqualified audit opinion. These documents and the reports by the auditor were made available to all members of the Audit Committee and the Supervisory Board in good time before the balance sheet meeting. The Audit Committee discussed the singleentity financial statements in January The single-entity financial statements were also intensively discussed at the balance sheet meeting of the Supervisory Board in February At both meetings, the auditor reported on the audit as a whole and the individual focal points and key findings of the audit and answered all of the Supervisory Board s questions in detail. In particular, the auditor expressed an opinion as to whether there were any material deficiencies in the internal control and risk management system with regard to the financial reporting process and did not express any objections in this respect. The auditor also stated that there were no circumstances that could give rise to grounds for concern as to its impartiality and provided the Supervisory Board with information on the services performed in addition to the audit of the annual financial statements. The Supervisory Board concurred with the audit report and the findings of the audit. The Supervisory Board examined the single-entity and consolidated financial statements and the combined Management Report for the 2012 financial year, taking into account the report by the auditor, and the proposal by the Management Board on the appropriation of retained earnings. Following its own examination, the Supervisory Board approved the single-entity financial statements prepared by the Management Board at its balance sheet meeting in February 2013 in accordance with the recommendation by the Audit Committee. The single-entity financial statements have therefore been adopted in accordance with section 172 of the German Stock Corporation Act. The Supervisory Board also approved the consolidated financial statements and the combined Management Report. The Supervisory Board concurred with the proposal by the Management Board on the appropriation of retained earnings. The Supervisory Board would like to express its gratitude to all of the Group s employees for their work in the past financial year. It would also like to thank the members of the Management Board. For the Supervisory Board Wendelin von Boch-Galhau, Chairman Mettlach, February 2013
22 20 THE VILLEROY & BOCH GROUP // CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT In accordance with section 3.10 of the German Corporate Governance Code, the Management Board also acting on behalf of the Supervisory Board reports on corporate governance at Villeroy&Boch in the following report. This report contains the declaration on corporate governance in accordance with section 289a (1) of the German Commercial Code (HGB) and the remuneration report pursuant to sections and of the German Corporate Governance Code on the remuneration paid to the Management Board and Supervisory Board. Good corporate governance aimed at creating sustainable value through responsible corporate management is of fundamental importance for Villeroy&Boch. It serves as the foundation for promoting the trust of investors, customers, employees and the public. Accordingly, the recommendations and suggestions of the Government Commission of the German Corporate Governance Code constitute the basis for the actions of the Management Board and Supervisory Board of Villeroy&Boch AG. DECLARATION ON CORPORATE GOVERNANCE Responsible management The Management Board of Villeroy&Boch AG is responsible for managing the Company as the governing body with the aim of creating short-term and long-term value. The workings of the Management Board are determined by corresponding Rules of Procedure. Resolutions are adopted at meetings of the Management Board, which take place at least twice a month. In filling management positions at the Company, the Management Board seeks to take regard of diversity and, in particular, to take appropriate account of women. The Supervisory Board appoints, advises and monitors the Management Board. Its workings are established in corresponding Rules of Procedure. Ordinary meetings of the Supervisory Board are held at least four times a year. The Supervisory Board is provided with continuous, timely information in the form of written and oral reports by the Management Board and is involved in all decisions of material importance to the Company. Composition of the Management Board The Management Board of Villeroy&Boch AG currently consists of four members. The members of the Management Board are appointed by the Supervisory Board in accordance with the provisions of the German Codetermination Act. In appointing members to the Management Board, the Supervisory Board pays attention to the professional suitability, experience and management quality of the candidates. With respect to the overall composition of the Management Board, it seeks to ensure diversity and to have appropriate participation by women. When examining potential candidates to fill vacant positions on the Management Board, highly qualified women are included in the selection process and are taken into account to an appropriate extent. The current composition of the Management Board is shown on page 14. Personnel changes in the year under review are presented in the Report of the Supervisory Board.
23 THE VILLEROY & BOCH GROUP // CORPORATE GOVERNANCE 21 Composition of the Supervisory Board The Supervisory Board of Villeroy&Boch AG is composed of twelve members, six of whom are elected by the General Meeting of Shareholders (shareholder representatives) and six of whom are elected by the Company s employees in accordance with the provisions of the German Codetermination Act (employee representatives). The term of office of members of the Supervisory Board is normally five years. The Supervisory Board takes its role of monitoring a globally operating company seriously. It is of the opinion that its composition is an important factor in successfully performing its diverse tasks to the optimal benefit of the Company. In accordance with the recommendation set out in section of the German Corporate Governance Code, it therefore defined the following targets for its composition at its meeting on 10 March 2011: The composition of the Supervisory Board of Villeroy&Boch AG should be such that the Management Board will be subject to informed monitoring by and receive expert advice from the Supervisory Board at all times. The candidates proposed for election to the Supervisory Board should be in a position, thanks to their knowledge, skills and professional experience, to perform the tasks of a Supervisory Board member in an internationally active company and to safeguard the reputation of the Villeroy&Boch Group with the public. In the process, attention should be paid to the personality, integrity, commitment, professionalism and independence of the persons proposed for election. The individual knowledge, skills and experience of the individual members of the Supervisory Board should complement each other in such a way that there is sufficient professional expertise available for the work of the Supervisory Board as such and for the business activities of each division at all times to guarantee that the Management Board is monitored professionally and efficiently and provided with advice on a continuous basis. In view of the Company s international focus, attention should be paid to the fact that, as has been the case to date, there is an adequate number of members with many years of international experience. In proposing members for election, the Supervisory Board shall also seek to ensure appropriate participation by women. Highly qualified women should be included in the selection process when examining potential candidates as new members or filling vacant positions on the Supervisory Board and should be taken into account to an appropriate extent in the members proposed for election. The Supervisory Board will strive to have at least one female member in future. The Supervisory Board should have a sufficient number of independent members. Significant conflicts of interest that are not merely temporary should be avoided. The Supervisory Board members should also have sufficient time to perform their functions such that they can do so with the requisite regularity and diligence. The regulation on the age limit laid down by the Supervisory Board in the Rules of Procedure will be taken into account. No more than two former members of the Management Board of Villeroy & Boch AG should sit on the Supervisory Board. The Supervisory Board is of the opinion that, on the whole, its current members have the necessary knowledge, professional experience and skills to perform their tasks properly. The Supervisory Board took these targets into account when advising on the proposals for election that were presented to the General Meeting of Shareholders in the year under review and that will be presented to the General Meeting of Shareholders in the coming financial year. The current composition of the Supervisory Board is shown in the list on page 15.
ANNUAL REPORT 2011 THE VILLEROY & BOCH GROUP // THE GROUP AT A GLANCE U2 THE GROUP AT A GLANCE 2011 2010 2009 2008 2007 Revenue in Euro million 743 714 715 841 849 Revenue Germany in Euro million 208 180
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