CORPORATE MANAGEMENT AND CONTROL

Indicator-based strategic group management. Our vision “BUILD A SOLARWORLD” Vision provides the framework for our strategy and activities. Strategy and action Corporate objectives are determined annually by the Management Board. More detailed strategic discussions as a supplement to Management Board meetings over the course of the year take place in the “Strategy Council”, a group that consists of Management Board members and Managing Directors of the holding company and the subsidiaries. The “Strategy Council” meets every six months. It discusses the results that have been achieved and advises the Management Board on determining additional short- and medium-term objectives and programs. Based on defined divisional targets, implementation takes place in the business units. In the course of the year rolling adjustments will be made to the plan by the “Strategy Council.”

The internal control system (ICS) at SolarWorld includes various control mechanisms: On the one hand, these are organizational security measures supported by the management systems mentioned in the following. On the other hand, they also include department-related controls as a supplement to the groupwide control exercised by Group Controlling and verification by the Internal Audit staff department.

Group Controlling aggregates the indicators and steers risk management on the basis of the strategic indicators and financial background conditions. A continuous target/actual comparison and monthly reporting to the Management Board – inter alia the primary group control variables, revenue and EBIT, Selected indicators including a rolling forecast – serve in continuous monitoring. The trade indicators (revenue and shipments) are additionally reported to the Management Board at weekly intervals. These control variables reflect the price development while EBIT portray the development of profitability. With the objective of long-term EBIT stabilization, the focus in the period under review was on consistently pursuing initiatives to cut costs throughout the entire process chain and on making investments in increasing production capacities as well as on profitable growth in foreign markets. Our investments in building up the brand and its value proposition, secured by the product and service quality promise, formed the basis for fairly stable pricing in the market and for the revenue volume achieved.

The operational units of the SolarWorld Group formed for control purposes correspond to the segments created for reporting purposes, i.e. “Production Germany”, ”Production U.S.”, “Trade” and “Other”.  Segmental structure and value chain stages While shipments, revenue, average sales prices, the total contribution margin and the product mix are the major indicators in the “Trade” segment, the production output and step costs constitute the most important control variable in the “Production” segments. Non-financial indicators such as productivity figures, customer satisfaction, gaining and retaining employees as well as resource consumption supplement the financial control indicators. The financial and non-financial control indicators of the various management instruments are pooled by way of the SolarWorld Scorecard.  Group control and sustainability management To this end the individual data acquisition systems were placed step by step on the same groupwide basis in 2010.  Target achievement 2009 and 2010 and targets for 2011+ With regard to a detailed description of the SolarWorld Scorecard, we refer to the additional content concerning the Annual Group Report 2010. Further information on the annual group report

The framework for the company’s sustainable group management and group control is determined by the SolarWorld values as well as by its guidelines. Sustainability The groupwide Code of Conduct provides concrete recommendations for action. The code was approved by the works council in 2010 and was subsequently signed by the Supervisory Board and the Management Board.

Operational metrics act as leading indicators. Leading indicators enable conclusions to be drawn concerning the achievement of high-level targets. In the segments “Production Germany” and “Production U.S.”, for example, we use the average production output (MW/day) and the reject rate as leading indicators for productivity. In the “Trade” segment, we work with metrics relating to product quality (e.g. Error Potential and Influence Analysis) to obtain an early assessment of our competitiveness.

To assess customer satisfaction and forecast market trends, we rely on explicit comments and information from our customers, and on the atmosphere during customer contacts. We also perform subject-specific interviews (e.g. on product innovations) among our specialist partners. For further information about our leading indicators, we refer to the additional content concerning the Annual Group Report 2010. Further information on the annual group report

Interlinking management tools for sustainable development. SolarWorld employs a whole range of management tools. Further information on the annual group report Our Total Productive Management (TPM)/Six Sigma again contributed significantly to cost reductions with a single digit million amount in the year 2010. The German Center of Excellence for TPM (CETPM) awarded us for our performance in this field in 2010, SolarWorld wafer production at the Freiberg site was the first company in the photovoltaic industry worldwide to receive the CETPM Award in bronze for the operating improvements achieved. More than 50 teams from different production areas and service departments worked together on practical implementation of the TPM process. Not only manufacturing costs could be reduced and plant availability increased, it was also possible to cut waste disposal costs.

We use our Customer Relationship Management (CRM) to control the objective of customer satisfaction. Thus, in the year 2010, in view of the changing market conditions (better terms for solar power self-consumption and in-roof systems), we developed the product innovations, SunPac (battery system to increase the share of solar power self-consumption), and Sundeck® (in-roof solution where modules are installed at the same level as the roof tiles), that will be available as of the first quarter of 2011. Via year-end customer surveys and the many talks we have held with our specialist partners (by way of our field force and feedback at our training sessions), we obtained comprehensive information on our systems and frame technology and designed the new Sunfix Plus® frame, which is easier to install and offers greater variety. At the request of customers, we also established WholesaleNet: This includes an online shop for brochures, data sheets, and marketing support for our wholesalers. In addition, wholesalers can review their orders, check the order status and export their data.

Quality Management (QM) at SolarWorld achieved certification of the Hillsboro production site in 2010 pursuant to quality standard ISO 9001. Environmental Management (EM) also has some corresponding successes to its name. Thus, certification pursuant to environmental standard ISO 14001 was achieved in the United States. This means that SolarWorld has now been certified groupwide pursuant to these two ISO standards. Health and Safety Management, Risk Management and Internal Audit are also further management instruments. Opportunity and risk management system Further information on the annual group report

Group Control and Sustainability Management

Sustainable Corporate Management The chief groupwide control indicators used by Controlling form the basis of management. In the segments, control is also exerted by way of strategic management tools. Some of these tools are primarily employed in certain segments, such as TPM in production, for example. Others such as QM are used on a groupwide basis. Over and above this, the financial and the non-financial indicators – i.e. the control variables and the divisional targets that are largely derived from the other management instruments – are consolidated via the SolarWorld Scorecard. Consequently, sustainability management assumes a cross-sectional function between Controlling and the departments.

For further information on our management approach regarding economic, environmental and social aspects go to Management approach (EC, EN, LA, HR, SO, PR) as well as to our economic, environmental and social performance indicators or to GRI-Index.