Report of the Supervisory Board

Guido A. Krass, Chairman of the Supervisory Board
about fiscal 2010



Dear Shareholders,

The Supervisory Board of CENTROTEC Sustainable AG performed the tasks resting upon it in accordance with the law, the articles of incorporation and the rules of internal procedure during the 2010 financial year, in regularly advising the Management Board on the running of the company and monitoring its activities.

2010 was another highly successful business year for CENTROTEC Sustainable AG. For yet another year, the companies of the CENTROTEC Group demonstrated their sales strength, customer centricity, innovativeness and the reliability of their products in a challenging market environment. The evidence comes in the shape of a further increase in market shares and the acquisition of new customers with abundant future potential.

Since the takeover of the Wolf Group in 2006, CENTROTEC has covered the entire product range of heating, climate control and ventilation technology as well as renewable energies in buildings. Over the past few years synergies between the various different expertise areas, technologies, products and organisations have been realised in a forward-looking but measured way. This approach is exemplified by the development of the integrated energy roof, but also by many other cross-company projects. In that connection we expect the next few years to feature further innovations and market successes based on combining the entrepreneurial leeway granted to the individual companies with the cross-company coordination of resources, along with a unique blend of skills in the areas of heating and climate control that is unique in the entire heating technology market.

As well as organic growth, CENTROTEC continues to pursue opportunities that present themselves for expanding, building on its technological expertise and cultivating new markets. The company sets the yardstick for technology, market position and profitability very high here. The Supervisory Board supports and advises the Management Board in connection with such moves and critically scrutinises any such plans, while demonstrating the necessary receptiveness to new developments. The company is particularly looking to tap opportunities for energy-efficient building technology in the in the future growth markets of the USA, Asia and Africa.

The Supervisory Board held a total of four meetings in the 2010 financial year. In regular reports on the business position, the Supervisory Board was informed in detail and in a timely manner by the Management Board of the current business progress of the company, including above all the development in its revenue, orders, financial performance and financial position, along with the company’s discernible opportunities and risks of future development. Annual, half-yearly and quarterly financial reports were discussed by the Supervisory Board with the Board of Management prior to their publication. Decisions of the Management Board requiring approval were examined and discussed at length by the Supervisory Board prior to their approval. Supervisory Board meetings during 2010 were held on March 18, May 20, September 20 and December 7. All Supervisory Board members attended all meetings in person.

The members of the Supervisory Board furthermore discussed forthcoming projects and matters of substantive importance with the Management Board and with other management employees of the company outside the context of their regular meetings, in face-to-face discussions and by means of telephone conferences. Written reports were furthermore submitted on specific projects and issues. The Management Board always satisfied the information and reporting requirements laid down by the Supervisory Board in every respect. As the Supervisory Board has only three members, no committees were formed. All matters were discussed by the full board.

In the past financial year there were again no conflicts of interest among Management Board and Supervisory Board members that are to be disclosed to the Supervisory Board without delay and of which the Shareholders’ Meeting is to be informed.

The topics discussed at the Supervisory Board meetings comprised fundamental and strategic matters concerning the holding company, segments and individual companies, but also individual matters of major importance and with far-reaching consequences from the viewpoint of the group. The individual matters discussed comprised:

• The strategic direction and business policy of the group, the segments and the group companies
• General business performance and financial reports to be published
• Acquisitions in progress and in preparation, as well as possible options for acquisitions
• Major or strategically significant investment decisions
• Various topics concerning the operating companies and the progress of important areas of business
• Strategic, operating and financial risks as well as risk management
• Matters of financing
• The corporate culture and social issues
• Response to changes to the Corporate Governance Code
• Changes to regulatory and negotiable instruments law
• Remuneration structures of the Management Board and management employees
• The efficiency of the Supervisory Board’s own activities
• Opportunities and risks, and risk management
• The selection and monitoring of the independent auditor

The Supervisory Board and Management Board again discussed corporate governance within the company at length during the year under review and jointly issued an updated Declaration of Compliance on the German Corporate Governance Code in accordance with Section 161 of German Stock Corporation Law, and made it permanently available to the shareholders on the company’s website. In connection with the amendments made to the Code in May 2010, the Supervisory Board identified specific targets in respect of its future composition and resolved to strive for diversity in the composition of the Management Board. The Supervisory Board considered the remuneration system for the Management Board in the latter’s absence. In the absence of the Management Board, on May 20, 2010 the Supervisory Board resolved the reappointment of Dr. Gert-Jan Huisman as Management Board Chairman from June 1, 2010 and on September 20, 2010 the appointment of Jacko van der Stege as member of the Management Board. Jacko van der Stege had already been responsible for the Gas Flue Systems segment as Managing Director for the previous two years.

The accounts, annual financial statements, management report, consolidated financial statements and group management report at December 31, 2010 have been examined by the auditors Pricewaterhouse Coopers AG Wirtschaftsprufungsgesellschaft, Essen, who have given their unqualified certification thereof. The above documents and the proposal by the Management Board on the appropriation of the accumulated profit were made available to each member of the Supervisory Board in a timely manner. These were discussed at length with the auditors at the Supervisory Board meeting on March 22, 2011, when the auditors reported on the principal findings of their audit. The auditors of the accounts furthermore established that the Management Board has set up a suitable information and monitoring system. The Supervisory Board has considered at length the disclosures made in the management report and group management report. Reference is therefore made to the corresponding comments in the management report and group management report, which the Supervisory Board has examined and supports. The Supervisory Board has examined the annual financial statements, management report and consolidated financial statements, including group management report, as prepared by the Management Board, together with the dependence report drawn up by the Management Board as a precautionary measure. The examination by the Supervisory Board has revealed no cause for objection. The annual financial statements of the group parent and the consolidated financial statements at December 31, 2010 were approved by the Supervisory Board. The annual financial statements of the group parent issued by the Management Board are hereby established. The proposal by the Management Board on the appropriation of the accumulated profit was approved by the Supervisory Board.

The Supervisory Board expects that CENTROTEC Sustainable AG will further consolidate and extend its position in the worldwide growth market for energy-saving building technology, and achieve a good return on investment in the interests of its shareholders.

Particular thanks are due to the employees of the CENTROTEC Group, who have made a major contribution to the success of the company through their considerable dedication, expertise and creativity.

Brilon, March 2011
The Supervisory Board

Guido A. Krass
[Supervisory Board Chairman]