Deutsche Euroshop Investor Relations

Supervisory Board (Financial Year 2015)

In line with German company law, Deutsche EuroShop has a dual management and control structure comprising two executive bodies, the Executive Board and the Supervisory Board.

 

The Supervisory Board as of 31 December 2015 consisted of nine members and was composed of the following people:

Supervisory Board and committees established by it

The Supervisory Board supervises and advises the Executive Board in its managementactivities in accordance with the provisions of German company law and its rules of procedure. It appoints members of the Executive Board, and significant business transacted by the Executive Board is subject to its approval. The Supervisory Board is composed of nine

members, who are elected by the Annual General Meeting.The Supervisory Board has established the notification and reporting duties to be met by the Executive Board. Alongside a SupervisoryBoard Executive Committee (whichfunctions also as a nomination committee) reduced from four to three members on 18 June 2015, an Audit Committee and a Capital Market Committee were established (each also consisting of three members).

 

Mr Strecker, Ms Dohm and Mr Armbrust were members of the Supervisory Board Executive Committee throughout the year. Mr Zaß stepped down from the Committee after the Annual General Meeting. The Executive Committee is chaired by the Chairman of the Supervisory Board. The Committee discusses urgent business matters and passes relevant resolutions. Moreover, it is responsible for human resources issues concerning the Executive Board and for reviewing the Company’s corporate governance principles. The Executive Committee of the Supervisory Board also fulfils the role of a nomination committee.

 

The Audit Committee consists of Ms Dohm as Financial Expert and Chairwoman as well as Mr Zaß (until 18 June 2015) Mr Armbrust, and Mr Strecker (since 18 June 2015). It is responsible for issues relating to financial reporting, auditing and the preparation of the annual and consolidated financial statements. Former members of the Company’s Executive Board and the Chairman of the Supervisory Board generally do not chair the Audit Committee, to avoid conflicts of interest.


The Capital Market Committee consisted of Mr Zaß (until 18 June 2015), Mr Armbrust, Mr Strecker and Dr Kreke (since 18 June 2015). During the past year, it was chaired by Mr Zaß (until 18 June 2015) and Mr Armbrust (since 18 June 2015). The position of Deputy Chairman was held by Mr Armbrust (until 18 June 2015) and Mr Strecker (since 18 June 2015). The Supervisory Board’s powers relating to the utilisation of approved capital and conditional capital were transferred to the Committee for decision-making and processing.

 

Supervisory Board Remuneration

In FY 2015 the remuneration of the members of the Supervisory Board amounted to €312 thousand, and is broken down as follows:

 

 

 

No advances or loans were granted to the members of the Supervisory Board.
Source: Annual Report 2015, page 135

 

 

Report by the Supervisory Board

During financial year 2015, the Supervisory Board performed the duties incumbent on it according to the law and the Articles of Association and closely oversaw the performance of Deutsche EuroShop AG. The strategic orientation of the Company was coordinated with the Supervisory Board, and the status of the strategy implementation was discussed at regular intervals. The Supervisory Board monitored and advised the Executive Board on its management of the business, and the Executive Board informed us regularly, promptly and in detail of business developments.
 
Mr Manfred Zaß, who had served on the Board for some 13 years, ended
both his membership and chairmanship of the Supervisory Board of our company at the Annual General Meeting on 18 June 2015. Mr Zaß had closely overseen and supported
the development of Deutsche EuroShop AG. The Supervisory Board thanked Mr Zaß for his many years of commitment, evidenced by his extended period as Chairman of the Board, and wished him all the best for the future.
 
Focus of advisory activities
We conducted detailed examinations of the Company’s net assets, financial position, results of operations, and risk management at our regular meetings. In this context, we also checked that the formal conditions for implementing an efficient system of monitoring our Company were met and that the means of supervision at our disposal were effective. We were informed on an ongoing basis of all significant factors affecting the business. We considered the development of the portfolio properties, specifically their sales and frequency trends, the accounts receivable and occupancy rates, and the Company’s liquidity position. We discussed our succession ideas with respect to the expiration of Mr Zaß’s mandate in 2015 and successfully transitioned the chairmanship of the Supervisory Board to the new generation with the shareholders’ election of Mr Roland Werner as a new member of the Supervisory Board at the 2015 Annual General Meeting. At meetings held over the course of the year, in-depth discussions took place repeatedly regarding both the Company’s strategy as well as the question of how the Company should operate in an environment of continuing low interest rates and ongoing, extremely high demand for retail property. Regular discussions
were conducted with the Executive Board regarding trends on the capital, credit, real estate and retail markets and the effects of these on the Company’s strategy. The Executive Board and Supervisory Board examined various investment options. We received regular reports detailing the turnover trends and payment patterns of our tenants and banks’ lending policies. The Chairman of the Supervisory Board and the Executive Committee of the Supervisory Board also discussed other topical issues with the Executive Board as required. Transactions requiring the approval of the Supervisory Board were discussed and resolved upon at the scheduled meetings. Where required, circular resolutions were passed in writing by the Supervisory Board for transactions of the Executive Board requiring approval. All resolutions in the reporting period were passed unanimously.
 
Mr Wilhelm Wellner has been serving as an appointed member of the Executive Board since 1 February 2015 and, as planned, succeeded Mr Böge as CEO on 1 July 2015. Mr Böge’s tenure of around 14 years ended on 30 June 2015. Upon his departure, the Supervisory Board thanked Mr Böge for his many successful years of service which contributed toward the Company’s positive development. Meetings Four scheduled Supervisory Board meetings took place during financial year 2015. Where members of the Supervisory Board were unable to attend individual meetings, they provided apologies and good reasons why they could not make it in advance. Dr. Kreke was unable to attend the meeting held on 24 April 2015. Ms Better and Mr Werner were unable to attend the meeting held on 18 June 2015. Ms Bell was unable to attend the meeting held on 24 September 2015. Ms Better, Ms Dohm and Dr Kreke were unable to attend the meeting held on 27 November 2015. At the first scheduled meeting, on 24 April 2015, the Supervisory Board’s annual review of efficiency was completed and the agenda for the Annual General Meeting was approved. We selected the auditor, who was proposed to the shareholders for election. In relation to the audit of the annual financial statements, we once again attached great importance to the explanations of the Executive Board and those of the auditor on the real estate appraisals. In addition, the Executive Board
presented the financial, accounting and tax aspects of the 2014 annual financial statements. The Executive Board also reported on its plan to commission another appraiser with the necessary annual valuation of the property portfolio. Finally, the Executive Board notified us of current acquisition opportunities and negotiations. At the constituent meeting on 18 June 2015, we elected members by open ballot to various functions on the Supervisory Board and its committees. The following were elected and / or returned to office:
 
 

The Executive Board then reported on the status of expansion / renovation measures at the Phoenix-Center Harburg and City-Point Kassel. Additionally, the Executive Board requested our approval to commission Jones Lang LaSalle with the valuation of the property portfolio. We approved the commissioning. In our new composition, we also continued to discuss the Company’s strategy in terms of the competitive environment and the capital markets. In this context, the Executive Board presented us with its ideas for reviewing the strategy. The third meeting was held on 24 September 2015 at the Phoenix- Center Harburg. We gained a firsthand impression of the ongoing expansion activities at the shopping center on a tour of the construction site. During the meeting, the Executive Board presented the planned
acquisition of the Karstadt property in Dessau and requested our approval. We approved the Executive Board’s proposal. It also reported about ongoing negotiations to refinance
the three foreign properties. We approved the Executive Board’s planned €96 million refinancing arrangement for the City-Arkaden in Klagenfurt.

 

At the last meeting on 27 November 2015, the Executive Board reported on the completed acquisition of the Karstadt property in Dessau and ongoing preparatory work for the expansion of the Galeria Baltycka in GdaÅ„sk as well as the property’s overall financing.
We approved the Executive Board’s refinancing and expansion financing arrangements in the amount of €138 million. The Executive Board also reported on the current status of the €30 million refinancing arrangement for Árkád Pécs in Hungary. Following a circular resolution initiated due to the urgency of the matter, the Supervisory Board had previously
granted its approval to the Executive Board’s refinancing proposal. The Executive Board also presented the acquisition activities being undertaken at the German listed real estate companies. We also held extensive discussions on the projections for the past financial year and the Company’s medium- term performance planning as presented by the Executive Board. At the end of the meeting, the Supervisory Board decided to extend Mr Borkers’ membership on the Executive Board until 30 September 2019.

 

Committees
The Supervisory Board has established three committees: the Executive Committee, the Audit Committee and the Capital Market Committee. Each of the committees is made up of three members. The Supervisory Board comprised four members on a transitional basis up until 18 June 2015 and the election of the new Chairman. The Executive Committee of the Supervisory Board functions simultaneously as a nomination committee. Given the size of the Company and the number of Supervisory Board members, we consider the number of committees and committee members to be appropriate. During the reporting period, the Executive Committee and the Audit Committee met on 16 April 2015. The Audit Committee discussed the quarterly  with the Executive Board in conference calls on 11 May, 12 August and 11 November 2015. During a conference call on 8 October 2015, the consequences for the Company of the European Union’s reform of statutory auditing were discussed. In its capacity as a nomination committee, the Executive Committee came to several agreements regarding personnel matters related to the Supervisory and Executive Boards. There was no meeting of the Capital Market Committee in 2015.

 

Corporate governance
In November 2015, together with the Executive Board, we issued an updated declaration of conformity in relation to the recommendations of the Government Commission pursuant to section 161 of the Aktiengesetz (German Public Companies Act – AktG) and made this permanently available on the Deutsche EuroShop AG website. A separate report on the implementation of the German Corporate Governance Code is included in this Annual Report. The members of the Super- visory Board and the Executive Board declared in writing at the beginning of 2015 that no conflicts of interest had arisen. Financial statements of Deutsche EuroShop AG and the Group for the period ending 31 December 2015 At the Audit Committee meeting on 15 April 2016 and the Supervisory Board meeting on 26 April 2016, the Audit Committee and the Supervisory Board respectively examined in detail the annual financial statements of Deutsche EuroShop AG in accordance with German commercial law, and the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), each as at 31 December 2015, as well as the management report and group management report for financial year 2015. The documents relating to the financial statements, the auditor’s reports and the Executive Board’s proposal for the utilisation of the unappropriated surplus were presented to us in good time. The auditor appointed by the Annual General Meeting on 18 June 2015 – BDO AG Wirtschaftsprüfungsgesellschaft, Hamburg – had already audited the financial statements and issued an unqualified audit opinion in each case. The auditor also confirmed that the accounting policies, measurement methods and methods of consolidation in the consolidated financial statements complied with the relevant accounting provisions. In addition, the auditor determined in the course of its assessment of the risk management system that the Executive Board had undertaken all required measures pursuant to section 91 (2) AktG to promptly identify risks that could jeopardise the continued existence of the Company.

 

The auditor’s representatives took part in the discussion of the annual financial statements and the consolidated financial statements on the occasions of the Audit Committee meeting on 15 April 2016 and the Supervisory Board meeting on 26 April 2016 and explained the main findings. Following its own examination of the annual financial statements of Deutsche EuroShop AG, the consolidated financial statements and the corresponding management reports, the Supervisory Board did not raise any objections. It agreed with the findings of the auditor’s examination and approved the annual financial statements of Deutsche EuroShop AG and the consolidated financial statements. The annual financial statements have thus been adopted. The Supervisory Board endorses the Executive Board’s proposal for the utilisation of the unappropriated surplus and distribution of a dividend of €1.35 per share. The Company’s success in financial year 2015 was the result of its sustainable, longterm strategy and the dedication shown by the Executive Board and our employees, for which the Supervisory Board would like to express its particular gratitude.

 

Hamburg, 26 April 2016

Reiner Strecker, Chairman


Source: Annual Report 2015, page 12-14


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