Matth. Hohner AG

Group Management Report for Fiscal Year 2010/2011
• 4 Financial Position
The interaction of cash inflows and cash outflows from operating activities, investing activities and financing
activities led to a cash affecting increase in cash and cash equivalents by EUR 1.5 million which led to an
accordant increase in liquid funds from EUR 9.4 million to EUR 10.9 million in the reporting year .
The cash flow from operating activities decreased by EUR 2.9 million to EUR 3.3 million in the reporting year.
As the net income increases by TEUR 642 the reduction can mainly be attributed to a decline in the change
of other assets in comparison to the prior year (TEUR 3,720). The negative cash flow from financing activities
notably results from the repayment of finance loans to shareholders in the amount of EUR 1.0 million. These
repayments served the purpose of reducing the future interest burden of the Group in order to strengthen its
profitability and to increase the financial scope in the difficult economic environment.
Taking into account expected results in future years and the options available for refinancing, the company’s
future funding, including any other financial commitments, can be considered as secure.
• 5 Research and Development
In the area of harmonicas, a diatonic Richter harmonica could be designed thanks to a newly developed
conical cover for which the company has been granted a patent. Its reeds do not touch the covers any
more despite the extremely low pitch, which was a problem so far for low keys. The instrument’s name is
Thunderbird, and meanwhile it is used on stage by many amateur musicians and famous artists.
In the area of accordions, a new instrument was developed for the beginner markets in France and China.
The Fun Nova II 80 light is an extremely light and compact instrument with high esthetic requirements and is
hence in line with the trend towards younger music segments in these important accordion countries.
In the area of melodicas, the Student Line was supplemented by an instrument with 26 keys, the Student 26.
This instrument particularly considers the special ergonomic requirements of children and therefore is suitable
for school teaching. This instrument is especially popular with accordion teachers since the keyboard layout
corresponds exactly to that of the Bravo Accordions.
The guitar range was further strategically developed in the acoustic area and higher positioned. By
investments in own designs the successful Essential Line was supplemented by the product line Essential
Roots. These are typical blues, folk, singer/songwriter guitars where HOHNER has a large know-how and a
high customer acceptance as brand.
Due to innovative new developments and continuous improvements, the SONOR brand stands out from the
international competitors and is established as a market leader for innovative and quality products. At the
moment, 7 patents and two petty patents on different markets are registered, thus, unique selling points
could be established. The internal R&D department, in close cooperation with the product management,
permanently searches for trend-setting technical solutions in order to secure the advantage in competition.
In the reporting year, focus was on the conception of the new and expanded product rang in the area of
favorable beginner and medium-class drums. Furthermore, Signature Snare Drums were developed in the
area of drums. In the other product areas (Orff, Percussion, Concert and Marching) the instruments have been
expanded to a small extend in line with the market.
Compared to previous year, the R&D expenses decreased by 7 % to TEUR 975.
• 6 Significant Events after the Balance Sheet Date
After the balance sheet date, there were no significant events of particular significance subject to a reporting
requirement.
• 7 Remuneration Report according to § 315 Section 2 No. 4 German Commercial Code
Each Management Board member is employed as managing director of one of the group subsidiaries and
he receives his full remuneration only from this subsidiary. This remuneration received does not contain any
separate remuneration for the function as Management Board member. The remuneration consists of a fixed
part, which is paid monthly, and a performance bonus, which depends on the fulfillment of performance
criteria and is paid after year end closing.
The current structure of the remuneration system for the Management Board is periodically checked and, if
necessary, adjusted by the responsible Supervisory Board committee. The variable remuneration for members
of the Management Board also includes components with long-term incentives in accordance with the
German Corporate Governance Codex. A retroactive change of the performance criteria is not excluded. In
the reporting year the remuneration paid to the Management Board amounted to a total of TEUR 401 after
TEUR 447 in the prior year. Thereof, TEUR 284 account for fixed payments, whereas TEUR 118 account for
variable parts of total remuneration. The total remuneration paid to former members of the Management
Board and their surviving dependants amounted like in the prior year to TEUR 120. Pension provisions for
former members of the Management Board amounted to TEUR 1,186 after TEUR 1,035 in the prior year.
According to the resolutions of the shareholders’ meeting, each member of the Supervisory Board receives an
annual lump sum remuneration.
Group ManaGeMent report Group ManaGeMent report
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