During the business year ended, the Supervisory Board of DOUGLAS HOLDING AG held four regular meetings to discuss in depth the commercial and strategic development of our Group. During this period, it fulfilled its duties in accordance with the legal requirements and the company’s statutes, rules of order and DOUGLAS Principles of Corporate Governance, and further monitored and provided advice to the Executive Board. The Executive Board reported to the Supervisory Board regularly, comprehensively and in good time. Beyond the meetings, the Chairmen of the Supervisory and Executive Boards remained in close contact to regularly review strategy options and current policy issues.
Focuses of work
The Supervisory and Executive Boards communicated closely on the trends in the European retail sector and the financial performance of the DOUGLAS Group’s individual divisions. Discussions were held, and decisions made, on numerous issues, including:
a) the continued growth of the Douglas perfumeries in southern and eastern Europe and the prospects and risks of expansion in North America and the Far East;
b) the further expansion of the Thalia bookstores in the context of a changing German book market;
c) the strategic reorientation of René Kern within the Group’s Jewelry division;
d) the below-par performance posted by the Appelrath-Cüpper women’s fashion stores and the modernization of the Pohland menswear shops;
e) reducing risk levels during the disposal of cash both at home and abroad.
Against a background of slightly higher consumer spending in our domestic market, the preparations for the rise in sales tax in Germany were a major topic of deliberation. In order to cushion the anticipated effects, additional measures designed to optimize Group processes and improve services were agreed.
The declaration of compliance pursuant to Section 161 of the [German] Stock Corporation Law [“AktG”] was updated and published on the Internet at www.douglas-holding.com, together with the DOUGLAS HOLDING AG Principles of Corporate Governance. Additionally, the content, form and efficiency of the Supervisory Board’s activities were reviewed by means of anonymous questionnaires. Overall, the Supervisory Board’s work was viewed as efficient, pertinent and appropriate. Some minor changes were discussed and agreed at plenary sessions.
In addition to participating in several teleconferences, the Executive Committee convened for one meeting during the period under review. Among other topics, its discussions covered the strategic development of the DOUGLAS Group, significant leases, a range of acquisition projects and issues relating to human resources and the Executive Board. The Audit Committee met on three occasions during the 2005/06 financial year. The main focuses of its deliberations were the DOUGLAS HOLDING AG annual and consolidated financial statements for 2004/05, the application of the International Financial Reporting Standards (IFRS), measures to increase the company’s value on a sustained basis, operational plans for fiscal 2006/07, and basic aspects of the Group’s financing. The Supervisory Board as a whole was kept fully informed of the outcome of discussions held at all the Committee meetings. There was no need to convene the Arbitration Committee (pursuant to Section 27, Para. 3 of the [German] Co-Determination Act).
In accordance with the vote at the Shareholders’ Meeting, the Supervisory Board appointed Susat & Partner oHG Wirtschaftsprüfungsgesellschaft, Hamburg, in August 2006 to audit the annual and consolidated financial statements for the 2005/06 financial 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 statements for the financial year 2005/06, as well as the joint management report covering both the Group and DOUGLAS HOLDING AG, were examined by the auditors, found to comply with legal requirements and the company statutes, and hence awarded an unqualified auditors’ certificate.
On December 7, 2006, the Audit Committee joined the Executive Board to hold full discussions with the auditors on the audit results, risk management procedures and organizational matters at the Group’s subsidiaries. The auditors were party to the discussion on the agenda items relating to their work at the Supervisory Board’s balance sheet meeting on December 13, 2006, where they also reported on the principal results of the audit and answered questions. Copies of the auditors’ reports were provided for the Supervisory Board. The Supervisory Board approved the result of the audit; no objections were raised.
Annual Financial Statements for DOUGLAS HOLDING AG and the Group
In accordance with its legal obligations, the Supervisory Board conducted a review of the annual and consolidated financial statements, the joint management report on the Group and DOUGLAS HOLDING AG, as well as the proposed appropriation of profits – all of which had been submitted in good time – and gave its approval in writing. The annual financial statements are therefore deemed adopted pursuant to Section 172 of the [German] Stock Corporation Law. The release of the consolidated financial statement was approved on January 12, 2007. The Supervisory Board approved the proposal for the appropriation of profits as submitted by the Executive Board, including the payment of a dividend of 1.10 EUR per dividend-bearing share for the 2005/06 financial year.
Changes to the Executive Board
With effect at October 1, 2006, some of the responsibilities of the DOUGLAS HOLDING AG Executive Board were reallocated. Dr. Burkhard Bamberger was appointed to the Executive Board, where he took charge of the Finance, Accounting, Controlling and Taxes portfolios which had previously been the responsibility of Ms. Gabriele Traude-Stopka. At the same time, Ms. Traude- Stopka assumed responsibility for Real Estate, Organization and IT, in addition to her existing Human Resources, Legal Affairs and Services portfolios. Since January 1, 2007, Mr. Reiner Unkel has been the Director of the Perfumeries division. He will be progressively assuming the duties of Mr. Claus Mingers, who is retiring on September 30, 2007. We wish Ms. Traude-Stopka and Messrs. Bamberger and Unkel every success and the best of luck in taking up the challenges ahead in their respective areas.
The Supervisory Board would like to thank the Executive Board, the management and all the men and women employed within the DOUGLAS Group in Germany and abroad for their tremendous dedication and successful work in the financial year just ended.
Hagen, January 2007
On behalf of the Supervisory Board
Dr. Jörn Kreke