Deutsche Euroshop Investor Relations

Supervisory Board (Financial Year 2016)

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 2016 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 management activities 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. In addition to a three-member Supervisory Board Executive Committee (which also functions as a nomination committee), an Audit Committee and a Capital Market Committee were established (each also consisting of three members).


Mr Strecker, Ms Dohm and Mr Armbrust are members of the Supervisory Board Executive Committee.  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 Armbrust and Mr Strecker. It is responsible for issues relating to financial reporting, auditing and the preparation of the annual and consolidated financial statements. In addition, this committee supervises the audit as well as the effectiveness of internal control and risk management systems. 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.

 

Mr Armbrust, Dr Kreke and Mr Strecker are members of the Capital Market Committee. During the past year, it was chaired by Mr Armbrust. The position of Deputy Chairman was held by Mr Strecker. 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 2016, page R24

 

 

Report by the Supervisory Board

During financial year 2016, 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.

 

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 busness.

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. 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 and refinancing options. We received regular reports detailing the turnover trends and payment patterns of our tenants and banks’ lending policies. The Executive Board and Supervisory board also held regular discussions on the how the company was valued by the stock markets and its participants and made peer group comparisons.

 

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. Some meetings were held without the board present.

 

Meetings

Four scheduled Supervisory Board meetings took place during financial year 2016. In instances in which members of the Supervisory Board did not attend individual meetings, they had excused themselves in good and provided good reason. The meeting on 23 September 2016 was not attended by Ms Better, Dr Kreke and Dr Otto. The meeting on 29 November 2016 was not attended by Ms Dohm.

 

At the first scheduled meeting, on 26 April 2016, 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 at the Annual General Meeting held on 15 June 2016. In addition, the Executive Board presented the financial, accounting and tax aspects of the 2015 annual financial statements. The auditor also provided an explanation of the results of the audit of the 2015 annual financial statements. In the subsequent discussion of the 2015 annual financial statements, we attached great important to the explanations of the Executive Board and those of the auditor on the real estate appraisals, which were performed for the first time by Jones Lang LaSalle. The Executive Board additionally presented and subsequently discussed the long-term plan for the company, which ended with the determination of a dividend strategy for the years up to 2018. In this meeting, we also held discussions with the Executive Board about the consolidation activities being undertaken at listed real estate companies. Lastly, we informed the Executive Board about the current acquisition opportunities and negotiations, particularly about the negotiations to acquire a 50% stake in the Saarpark-Center Neunkirchen.

 

In the meeting held on 15 June 2016, we approved the renewal of the €150 million acquisition credit line negotiated by the Executive Board. The Executive Board provided an update on the status of the negotiations for the acquisition of a 50% stake in the Saarpark-Center Neunkirchen, on the basis of which we granted the Executive Board with a negotiating mandate. We also granted the Executive Board a negotiating mandate for another investment opportunity – the Olympia shopping centre in Brünn, Czech Republic. Mr Armbrust, Mr Otto and Mr Striebich did not participate in the passing of this resolution in order to avoid a potential conflict of interests. In addition, we gave the Executive Board a report on the ongoing refinancing for the shopping centres in Hamburg-Harburg, Klagenfurt, Danzig and Pécs. The Chairman of the Audit Committee gave us a report on the current situation regarding the selection procedure for the annual financial statements 2017.

 

In the third meeting on 23 September 2016, the Executive Board informed us about the level of progress made on the planned expansion of the Galeria Baltycka, as well as the about the status of the negotiations relating to the Olympia shopping centre in Brünn. During this meeting, we unanimously approved the Executive Board's proposal to acquire a 50% stake in the Saarpark-Center in Neunkirchen. Furthermore, we carried out an in-depth examination of the company strategy, with particular regard to the current developments on the investment, rental and retail markets as well as on the capital markets. The Chairman of the Audit Committee reported on the progress that had been made on the selection procedure for the annual financial statements 2017.

 

In the final meeting on 29 November 2016, we once again carried out an in-depth examination of the latest findings from the acquisitions audit as well as the status of the negotiations vis-a-vis the acquisition of the Olympia shopping centre and unanimously granted the Executive Board a mandate to conclude the deal. Mr Armbrust, Mr Otto and Mr Striebich once again abstained from this vote for the reasons already mentioned. We also gave the Executive Board our unanimous approval for the intended raising of a €130 million loan for the long-term external financing of the investment in the Saarpark-Center Neunkirchen as well as for the Herold-Center in Norderstedt, which was acquired in 2012. 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. In this meeting, we also provided an explanation of the process carried out by the Chairman of the Audit Committee for selecting the auditor for 2017. In the end, the Audit Committee proposed to the Supervisory Board two auditors on the basis of an in-depth assessment and a table of rankings. After partners from the two proposed auditors had delivered presentations in the meeting and a frank discussion was held in which all arguments were weighed up, we followed the proposal put forward by the Audit Committee and intend to once again recommend that shareholders vote for BDO AG Wirtschaftsprüfungsgesellschaft to be named as the auditor for 2017 in the Annual General Meeting to be held in June 2017. The Executive Board ended the meeting by reporting on the implementation status vis-a-vis the Compliance organisation within the company owing to new legal regulations.

 

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 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 15 April 2016 for a regular meeting. Furthermore, the Audit Committee met for a meeting on 28 November 2016 to discuss the auditor selection process for 2017.

 

The Audit Committee also discussed the quarterly financial reports with the Executive Board in conference calls on 10 May, 11 August and 11 November 2016. In the conference call held on 11 November 2016, the Audit Committee provided information about the current situation vis-a-vis the auditor selection process for 2017. In addition, the Audit Committee held a conference call with the Executive Board on 7 June 2016 to provide advice on issues relating to the balance sheet.

 

In a conference call held on 11 August 2016, the Executive Committee provided information and advice to the Executive Board on the current progress of the ongoing acquisition negotiations. There was no meeting of the Capital Market Committee in 2016.

 

 Corporate Governance

In November 2016, 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 Supervisory Board and the Executive Board declared in writing at the beginning of 2017 that no conflicts of interest had arisen during the financial year 2016.

 

Financial statements of Deutsche EuroShop AG and the Group for the period ending 31 December 2016

At the Audit Committee meeting on 12 April 2017 and the Supervisory Board meeting on 26 April 2017, 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 2016, as well as the management report and group management report for financial year 2016.

 

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 15 June 2016 – 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 12 April 2017 and the Supervisory Board meeting on 26 April 2017 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 €1.40 per share.

The Company’s success in financial year 2016 was the result of its sustainable, long-term 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 2017

Reiner Strecker, Chairman


Source: Annual Report 2015, page E10-E12


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