Deutsche Euroshop Investor Relations

Supervisory Board (Financial Year 2017)

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 2017 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 were 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.

 

Quota of women

The Supervisory Board and the Executive Board took into consideration the Act on the Equal Participation of Women and Men in Executive Positions in the Private and Public Sector that entered into force in 2015, and defined corresponding quotas. A quota of women of at least 30% was set for the Supervisory Board and the Executive Board, which was to be achieved by 30 June 2017. The Executive Board also set the same target for the same time period for the management levels below the Executive Board. Given that there are five employees in total, there is only one management level.

 

Since the quota was established in 2015, the target for the nine-member Supervisory Board has been met with three female members.

 

The quota of women on the two-member Executive Board as of 30 June 2017 was 0%. In November 2017, Mr Wellner’s term in office on the Executive Board, which ends on 30 June 2018, was extended until 31 December 2021 in view of his performance. Moreover, continuity and experience gained with the business model are important to the company's success. Mr Borkers’ membership on the Executive Board ends on 30 September 2019. The expansion of the Executive Board to three members is neither appropriate nor reasonable due to the low number of employees and to the specifics of a holding company.

 

The quota of women in the first management level below the Executive Board was also at 0% on 31 December 2017. The first management level also consists of two people. The quota of women specified in 2015 at 50% was met until the leading female member left the Company at her own request on 31 March 2016. Her responsibilities were taken over by a new male employee whose professional training and experience made him the best choice.

 

Supervisory Board Remuneration

In FY 2017 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 2017, page 172

 

Report by the Supervisory Board

During financial year 2017, 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 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 our 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. At meetings held over the course of the year, in-depth discussions took place regularly regarding the Company’s strategy as well as the question of how the Company should operate in an environment of continuing low interest rates, high demand for retail property and growing online retailing. We explored at length an extensive investment programme for the years 2018 to 2022 to enhance the competitiveness of our shopping centres. 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 how the Company was valued by the stock market 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 or a committee were discussed and decided on at the scheduled meetings. Where required, circular resolutions were passed in writing by the Supervisory Board and the responsible committee for transactions of the Executive Board requiring approval. All resolutions in the reporting period were passed unanimously. To avoid conflicts of interest, any parties affected abstained from voting. Some meetings were held without the Executive Board present.


Meetings

Four scheduled Supervisory Board meetings took place during financial year 2017. In instances in which members of the Supervisory Board did not attend individual meetings, they had excused themselves in good time and provided good reason. The meeting on 28 September 2017 was not attended by Ms Better.

 

At the first scheduled meeting, on 26 April 2017, the Supervisory Board’s annual review of efficiency was completed and the agenda for the Annual General Meeting was approved. The main focus of the meeting was the Executive Board’s presentation of the financial, accounting and tax aspects of the 2016 annual financial statements. The auditor also provided an explanation of the results of the audit of the 2016 annual financial statements. During the subsequent discussion of the 2016 annual financial statements, we once again this year attached great importance to the explanations of the Executive Board and those of the auditor concerning the real estate appraisals. We unanimously adopted a diversity concept for the Supervisory Board and Executive Board, and the Executive Board finally informed us about the completed acquisition of the Olympia Centre in Brno in the Czech Republic and gave us the details of the capital increase carried out to finance the investment. In addition, the Executive Board presented current acquisition opportunities to us, as well as restructuring and modernisation concepts for individual centres.

 

At the meeting on 28 June 2017, the Supervisory Board was reorganised following the re-election of Ms Dohm, Mr Striebich and myself at the preceding Annual General Meeting. The distribution of responsibilities remained unchanged after the corresponding elections. The Executive Board explained the current status of the project to extend the Galeria Baltycka in Gdansk as well as the status of the financing negotiations for the existing property and the planned extension. The Executive Board also reported to us on current refinancing measures for the shopping centres in Wuppertal and Viernheim. We also discussed expectations regarding the final maturity of the convertible bond in November 2017.

 

At the third meeting on 28 September 2017, we carried out an in-depth examination of the Company’s strategy and the measures to be derived from it in view of the increasing competition for bricks-and-mortar retailing from online retailing. The Executive Board presented us with an extensive investment programme for the years 2018 to 2022 to further increase the appeal of our shopping center portfolio. This was discussed at length, partly in conjunction with the acquisition opportunities which the Executive Board also presented to us.

 

At the last meeting on 29 November 2017, the Executive Board reported to us on the planned implementation of the investment measures, especially the “At Your Service” and “Beautification” programmes in various centres. The Executive Board presented us with acquisition opportunities on the market and also reported on the outcome of the conversion of the convertible bond upon maturity. The Executive Committee informed us that the extension of the employment contract with Mr Wellner, as assigned by the Supervisory Board, from July 2018 to December 2021 had been agreed.


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 12 April 2017 for a regular meeting. The Executive Committee also met on 29 November 2017 for a meeting in connection with the extension of the contract with Mr Wellner.

The Audit Committee also discussed the quarterly financial reports with the Executive Board in conference calls on 10 May, 9 August and 13 November 2017. The Executive Committee held a telephone conversation with the Executive Board on 6 March 2017 to discuss investment approval and the planned finance for the Olympia Centre in Brno in accordance with the stipulations of the Supervisory Board.

 

The Capital Market Committee held telephone conversations on 7 and 8 March 2017 to discuss and decide on the implementation of the capital increase.

 

Corporate governance

In November 2017, 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 2018 that no conflicts of interest had arisen during financial year 2017.

 

Financial statements of Deutsche EuroShop AG and the Group for the period ending 31 December 2017

At the Audit Committee meeting on 11 April 2018 and the Supervisory Board meeting on 25 April 2018, 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 2017, as well as the management report and group management report for financial year 2017.

 

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 28 June 2017 – 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 11 April 2018 and the Supervisory Board meeting on 25 April 2018 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 €1.45 per share.

 

The Supervisory Board would like to thank the Executive Board and the Company’s employees for their dedication. Alongside the Company’s sustainable, long-term strategy, this is one of the main reasons for the Company’s success in financial year 2017.

Hamburg, 25 April 2018

 

Reiner Strecker, Chairman


Source: Annual Report 2017, page 16-18


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