Dr. Dr. h.c. Jörn Kreke
Chairman of the Supervisory Board
Report of the Supervisory Board
During the past fiscal year, the Supervisory Board of DOUGLAS HOLDING AG dealt comprehensively with the business and strategic development of our Group. In the 2010/11 fiscal year, the Supervisory Board fulfilled its duties in accordance with statutory requirements, the company’s statutes and rules of procedure, and the DOUGLAS Group’s principles of corporate governance.
Collaboration between the Executive Board and the Supervisory Board
The Supervisory Board advised the Executive Board regarding its management of the company and provided oversight. The Executive Board reported to the Supervisory Board regularly, comprehensively, and in a timely manner both orally and in written form concerning business performance, the economic and financial situation, as well as the company‘s strategy and planning. The Chairmen of the Supervisory and Executive Boards also maintained close contact outside of scheduled meetings in order to review strategic options and current policy issues.
Key topics of discussion
The Supervisory and Executive Boards held four regularly scheduled meetings to discuss business trends in the European retail sector and the economic situation of the DOUGLAS Group’s individual corporate divisions. The Executive Board submitted detailed reports to the Supervisory Board members prior to each Supervisory Board meeting. Numerous issues were discussed and resolved. They included:
a) operational planning for the 2011/12 fiscal year
b) business transactions requiring approval, such as the sale of the Russian perfumery business and the acquisition of additional shares of buch.de internetstores AG by Thalia
c) changes in the bookselling business resulting from digitalization
d) strategic considerations and measures relative to the Douglas perfumeries in certain countries
e) medium-term financing strategies
f) various measures to protect earnings in a challenging economic environment
Against the backdrop of the marked effects of digitalization throughout the entire book sector, it was a priority—especially at Thalia—to analyze the effects on the bookselling business and to enact measures to ensure the profitability in this sector to the greatest extent possible. This included investing in a new enterprise planning system and reinforcing the Internet-based e-book segment by acquiring textunes GmbH. The Supervisory Board addressed the topics of corporate values and management principles and was briefed about the status of the company’s compliance activities.
The declaration of compliance with the Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Act [AktG] was updated and can be viewed on the Internet, together with the DOUGLAS HOLDING AG Principles of Corporate Governance, at www.douglas-holding.com.
The next regular efficiency audit of the Supervisory Board’s work will be performed during the 2011/12 fiscal year.
In addition to holding numerous teleconferences and individual discussions, the Executive Committee convened for one meeting during the period under review. Among other topics, it discussed the further strategic development of the DOUGLAS Group in Germany and abroad, important leases, a range of acquisition and divestment projects as well as Executive Board remuneration and issues relating to human resources. Additionally, the form and content of the Supervisory Board’s activities were discussed and reviewed. Both were found to be appropriate and effective by the Executive Committee and the plenary Supervisory Board.
The Audit Committee met three times during the 2010/11 fiscal year. The main focal points of its deliberations were the DOUGLAS HOLDING AG’s annual financial statements and consolidated annual financial statements, the current financial structure, the hedging of interest and foreign currency risks, and the operational planning for the Group. Moreover, the Executive Board and Audit Committee held three in-depth teleconferences concerning the quarterly financial statements for the past fiscal year. The plenary Supervisory Board was kept fully informed of the outcome of all the discussions held at the committee meetings. There was no need to convene the Arbitration Committee (pursuant to Section 27 (3) of the German Codetermination Act [Mitbestimmungsgesetz]).
Human resources announcements
1. During the 2010/11 fiscal year, Dr. Henning Kreke’s contract as President and CEO of the Executive Board was renewed for five years. The contracts with Michael Busch, Director of the Books Division, and Manfred Kroneder, Director of the Jewelry, Fashion, and Confectionery Divisions, were both extended for three years.
2. Bernd Michael was unable to attend the meetings of the Supervisory Board and he resigned due to illness effective as of the end of the Annual Shareholders’ Meeting on March 23, 2011.
3. As of the end of the Annual Shareholders’ Meeting on March 23, 2011, the tenure of the following shareholder representatives ended: Detlef Bierbaum, Henning Kreke (Schwaig), Dr. h.c. August Oetker, and Dr. Ernst F. Schröder.
4. Karen Heumann, Claus-Matthias Böge, and Dr. Michael Hinderer were elected during the ordinary Annual Shareholders’ Meeting on March 23, 2011, as the new shareholder representatives on the Supervisory Board. Dr. h.c. August Oetker and Dr. Ernst F. Schröder were reelected.
In accordance with the vote of the Annual Shareholders’ Meeting, the Supervisory Board appointed Susat & Partner oHG Wirtschaftsprüfungsgesellschaft (now RBS RoeverBroennerSusat GmbH & Co. KG), Hamburg, in August 2011 to audit the annual financial statements and the consolidated annual financial statements for the 2010/11 fiscal year. Prior thereto, the extent and focus of the audit had been defined by the Audit Committee.
The accounting and annual financial statements of DOUGLAS HOLDING AG, the consolidated financial statements for the 2010/11 fiscal year, as well as the consolidated management report covering both the Group and DOUGLAS HOLDING AG were audited and found to be in compliance with the law and the company’s Articles of Incorporation; an unqualified audit report was issued.
On December 6, 2011, the Audit Committee and the Executive Board held in-depth discussions with the auditors regarding the audit findings, the risk management system, and organizational matters relative to the Group’s subsidiaries. At the Supervisory Board’s financial statements meeting on December 7, 2011, the auditors were party to the discussions on the agenda items relating to their work; they reported on the principal findings of the audit and answered questions. Prior to the meeting, the auditor’s reports were made available to the Supervisory Board. The Supervisory Board approved the findings of the audit; no objections were raised.
Annual financial statements of DOUGLAS HOLDING AG and the Group
In accordance with statutory provisions, the Supervisory Board conducted a review of the company’s annual financial statements and the consolidated annual financial statements, the consolidated management report of the Group and DOUGLAS HOLDING AG, as well as the proposed appropriation of earnings and, subsequently, gave its approval in writing. The annual financial statements are therefore deemed approved pursuant to Section 172 of the German Stock Corporation Act [AktG]. The release of the consolidated financial statements was approved on January 9, 2012. The Supervisory Board endorsed the Executive Board’s proposal for the appropriation of profits that stipulates a dividend of EUR 1.10 per dividend-bearing share for the 2010/11 fiscal year.
The Supervisory Board would like to thank the Executive Board, the management, and all the employees of the DOUGLAS Group in Germany and abroad for their impressive commitment and the success they achieved under the difficult economic conditions that prevailed during the 2010/11 fiscal year. They faced challenges in problematic markets in Southern Europe and the far-reaching changes in the German book market with great perseverance and dedication and impressive commitment.
Hagen, January 2012
On behalf of the Supervisory Board
Dr. Jörn Kreke