Report of the Supervisory Board

Introduction
The Roto Smeets Group Supervisory Board looks back at 2010 as a turbulent year, characterised by the completed reorganisation, the market's failure to recover, the changed makeup of the major shareholders, the Riva Investments B.V. bid, and Mr. J.P. Caris's departure as Chairman of the Management Board.

In its preparations for the Annual Shareholders' Meeting on 11 May 2011, the Supervisory Board herewith present to the shareholders the annual accounts prepared by the Management Board for the accounting year 2010. The accounts have been audited and approved by Ernst & Young Accountants LLP. The auditor's report can be found on page 108.

The Supervisory Board has approved this report and the 2010 accounts and proposes that the General Shareholders' Meeting should adopt the counts as presented.

In keeping with the group's dividend policy and in view of the 2010 results, no proposal will be made to pay a dividend.

Bid process
On 7 April 2010 Riva Investments B.V. announced in a unilateral press release that it was preparing a bid for all shares in Roto Smeets Group N.V., stating also that the planned bid price was € 12.50. Roto Smeets Group replied on the same day. The Supervisory Board set up a committee consisting of Messrs. Huyzer and Groenen to remain closely involved with the negotiations on behalf of the Supervisory Board. The committee reported back at appropriate times to the full Supervisory Board.

After 7 April the committee held regular talks, with varying degrees of intensity, with the bidding party and their advisors (Loyens & Loeff and ABN AMRO) until 7 September. It was not clear until September whether agreement could be reached on the plan announced by Riva Investments in April 2010. The most important obstacles were the bid price, corporate governance and the protection of minority shareholders in light of the bid price, which Roto Smeets Group regarded as too low for adequate corporate governance.

Finally, on 8 September this led to the joint announcement that Riva Investments proposed to make a public bid of € 14.00 per share for all ordinary shares in the Roto Smeets Group, in respect of which Roto Smeets Group adopted a neutral position, while remaining prepared to facilitate the bid.
This press release can be found on the corporate website
(www.rotosmeetsgroup.com).

In the joint press release issued by Riva Investments and Roto Smeets Group on 5 October 2010 on progress in preparations for the bid, it was stated that the bidder expected to submit an application to the Financial Markets Authority [stichting Autoriteit Financiële Markten, AFM] for approval of the bid prospectus before the end of October. The bid prospectus was submitted on 18 October 2010, but the AFM's supplementary queries meant it was not possible to make the prospectus generally available before the end of October.

Since the bid prospectus would not be published within four months after the end of the first half-year, the company had an interim quarterly report prepared by September 30, 2010. The results were published on February 18, 2011.

On 3 March 2011 Riva Investments stated that, despite their confidence in the Roto Smeets Group they have nevertheless had to decide not to pursue the process of bidding for the shares of Roto Smeets Group NV. This decision has been taken in light of the disappointing quarterly figures, which represented a material departure from Riva Investments' expectations at the time the merger protocol was entered into. Negotiations with Roto Smeets Group on changing of the price and conditions under which the bid was made have failed to reach agreement.

Supervisory Board membership
At the end of 2009 the Supervisory Board was at its full strength of five members. Mr. R.A.J. Huyzer was appointed its Chairman as of 1 January 2010. Mr. A.P. Lugt indicated to the Shareholders' Meeting on 28 April his wish to retire as from 23 July 2010. The shareholders proposed Mr. J. Rijper of Riva Investments as successor to Mr. Lugt. This proposal was not put into effect during the course of the bid. His appointment will be on the agenda of the next General Shareholders' Meeting.

On 1 December Mr. J.P. Caris, Chair of the Management Board, announced he was to take early retirement as of 1 January 2011. Partly in view of the continuing bid process at that time, Mr. R.A.J. Huyzer was appointed CEO pro tempore, to take on the functions of the Management Board together with Mr. Ir B.J.W. van der Heijden. During this period Mr. Huyzer will not sit on the Supervisory Board. Mr. Huyzer will resume his position for the remainder of his original term after the temporary arrangement stops.

Committees
After the Supervisory Board's expansion from four to five members in 2009 its core tasks were divided between two committees, viz., the audit and risk management committee, on which the Supervisory Board was represented by Messrs. H.C.A. Groenen (chairman) and A.P. Lugt (until 23 July 2010); and the appointment and remuneration committee, composed of R. Blom (chairman), H.C.P. Noten and R.A.J. Huyzer. The committees met once in 2010.

The audit and risk management committee discussed the 2009 audit statement with the accountant, current matters in 2010 and the results of the risk analysis, the findings of the administrative organization and internal control, which did not reveal any urgent matters. There was an indication that procedures should be formalised and kept up to date. It appears that risk awareness has increased across the board.

In its meeting the appointment and remuneration committee discussed the organisation's Management Development policy and the assessment system. The remuneration of the Supervisory Board members was also discussed but, in view of the group's current situation, it was decided not to make any changes. A proposal was drafted for the General Shareholders' Meeting for the temporary remuneration of the interim CEO, Mr. R.A.J. Huyzer.

The temporary shrinkage of the Supervisory Board means that, until further notice, the three members of Board will all sit on both committees.

On behalf of the Supervisory Board, Mr. Groenen, with Mr. Huyzer now representing the Management Board, formed the temporary committee that monitored the bid process.

Meetings in 2010
Seven regular meetings of the Supervisory Board were held in 2010, with all members present. Two extra meetings were held in connection with the planned bid by Riva Investments B.V. The Supervisory Board also met in the absence of the Management Board.

The members of the Supervisory Board took turns, one at a time, to attend the eight meetings between management and the Central Works Council.

Topics discussed in the meetings in 2010 included strategy, the 2010 budget plans, and the main risks to which the Group is vulnerable. There was also a discussion with management about how the internal risk management and control system should be judged and how it could be developed further. These topics were also discussed with the external accountant, both in the presence and absence of management.

Regular consultations were held with management on the periodic and quarterly reports and with the financial director on the financial situation, completion of the reorganisation and the financing agreements. In regard to the organisation's strategy, there were long discussions about market developments and their effect on the organisation. In the same context, a critical look was also taken at investment and reorganisation proposals.

The Corporate Social Responsibility Report gave rise to talks about developments in such areas as safety, health and working conditions, and the environment, and the contribution the Group makes to society in terms of its core business.

Other topics dealt with in the meetings included an assessment of the Supervisory Board Members' own work, that of the Management Board, the composition of management, the work of the external accountant, corporate governance and the work of the Supervisory Board's subcommittees.

Membership of the Management Board
In consultation with the Supervisory Board, Mr. J.P. Caris resolved to take early retirement as of 1 January 2011. The Supervisory Board expresses its appreciation to John for the way he has worked for the Group during his period as CEO.

As a result of the reduced size of the Group after its restructuring, the Supervisory Board has resolved to simplify the corporate management model. The new situation is to be based on a management team of operating company and staff directors, reporting directly to the CEO. This will embed authority and responsibilities deeper within the organisation and allow a vigorous response to the changed market conditions. For this reason the post of COO has been declared superfluous. In this situation it is assumed that Mr. van der Heijden will continue his career outside the Group. In connection with producing the annual report for 2010 the Supervisory Board already regarded the new direction of the group as effected.

Remuneration
The remuneration policy fixed by the General Shareholders' Meeting remained unchanged in 2010 (see page 16 for current policy).

Details of remuneration in 2010 can be found on page 96 of the present report.

The salaries of top management remained frozen in 2010. It was further resolved that the incentive bonus that forms part of the employment package would not be paid out for 2010. Finally, it was resolved that all agreed and/or established bonuses for all other employees would not be paid out for 2010.
In connection with Mr. Caris taking early retirement as of
1 January 2011, "phantom shares" were issued to Mr. Caris in December 2010.

Conclusion
The Supervisory Board thanks management and the workforce for their hard work and loyalty during the past year.

Supervisory Board
28 March 2011