Corporate Governance Report

Declaration on corporate governance and the Corporate Governance Report of TTL Beteiligungs- und Grundbesitz-AG (TTL AG)

 

The Board of Directors shall, at the same time for the Supervisory Board, prepare a report on the company’s corporate governance pursuant to Point 3.10 of the German Corporate Governance Codex and shall simultaneously report on corporate governance pursuant to Sections 289f and 315d HGB [German Commercial Code].

The declaration on corporate governance for the company and the Group is a component of the Management Report or Consolidated Management Report.

Corporate governance means managing and controlling companies in a conscientious manner, geared towards long-term added value. The Board of Directors and Supervisory Board also address compliance with the recommendations of the German Corporate Governance Codex in the 2017 financial year. Consultation led to the adoption of a Declaration of Compliance on 1 December 2017, updated on an annual basis and permanently made publicly accessible on the company's website.

Declaration of Compliance pursuant to Section 161 AktG [German Stock Corporation Act]

Pursuant to Section 161 AktG, TTL AG’s Board of Directors and Supervisory Board declare:
TTL AG has complied with the recommendations published in the official section of the German Federal Gazette of the “Government Committee on the German Corporate Governance Codex” in its version of 5 May 2015 and from its application of 7 February 2017 onwards since the submission of its most recent Declaration of Compliance with the following exceptions and shall comply with it with the following exceptions:

Point 3.4.

The Supervisory Board should determine the information and reporting obligations of the Board of Directors in greater detail.

The Board of Directors reports to the Supervisory Board according to legal regulations, in particular pursuant to Section 90 of the German Stock Corporation Act (Aktiengesetz). The Supervisory Board believes that the statutory regulations on disclosure and reporting obligations already ensure the adequate provision of information.

Point 3.8.

An excess that complies with statutory regulations should be agreed for the Board of Directors in D&O insurance for the Supervisory Board.

The company had and has taken out D&O insurance for the members of the Supervisory Board which does not provide for any excess for Supervisory Board members. We believe that the motivation and responsibility with which members of the Supervisory Board undertake their duties would not be improved as a result of an excess in the D&O insurance.

Point 4.1.3.

Employees should be granted the opportunity, in a suitable manner which protects them, to provide information on legal violations in the company.

Compliance with the recommendation is not reported by an employee due to current staff numbers.

Point 4.2.1.

The Board of Directors should consist of several people and have one Chairman or speaker.

TTL AG's Articles of Association provide for the Board of Directors consisting of at least one person. The number of members of the Board of Directors is determined by the Supervisory Board. In accordance with the Articles of Association the Board of Directors consisted of a sole director until 30 September 2017. Since 1 October 2017, the Board of Directors has consisted of two members and a Chairman has been appointed.

Rules of procedure should govern the work of the Board of Directors, in particular the responsibilities of individual Board Members, the matters reserved for the overall board and the necessary majority with regard to resolutions of the Board of Directors.

To date, the Supervisory Board has not issued any rules of procedures for the Board of Directors as there was a sole director until 30 September 2017. In future, the recommendation should be followed.

Point 4.2.3.

The monetary parts of remuneration should include fixed and variable components.

Due to the previous structure of TTL AG, variable remuneration was agreed for the sole director. Previously, this payment for the sole director was waived. Since 1 October 2017, a second Board Member has been appointed, with whom fixed and variable remuneration components were agreed according to the recommendation.

Both positive and negative developments should be taken into consideration when designing the variable parts of remuneration.

Performance-related payments (emoluments) and options to “virtual” shares were promised to a member of the Board of Directors as variable remuneration. Pursuant to Point 4.2.3(2)(4) of the Codex, variable parts of remuneration should consider positive and negative developments within the agreed measurement period as payments may transpire to be accordingly higher or lower, or fully fail to materialise. When exercising the options, the Board Member shall receive share-price-dependent payments that are based solely on the stock-market price of the company's share within a reference period. In deviation from Point 4.2.3(2)(7) of the Codex, options to virtual shares therefore do not relate to “demanding, relevant comparison parameters” pursuant to the Codex. We do not believe that an increase in motivation and feeling of responsibility can be achieved through additional comparison parameters. 

When concluding agreements for the Board of Directors, it should be ensured that payments to one member of the Board of Directors do not exceed the value of two years of remuneration upon the premature ending of Board activity, including ancillary services, (cap on severance payment) and that remuneration is only awarded for the remainder of the employment agreement.

The company has not and will not agree any cap on severance payments when concluding agreements for the Board of Directors. Such remuneration contradicts the essential understanding of the Board of Directors Agreement that was regularly concluded for the period of the appointment and cannot be ordinarily terminated. Furthermore, the company cannot unilaterally enforce a limitation on severance payments if the Board activity, as is frequently the case in practice, is ended by mutual agreement. In the event of a premature termination of a Board Member Agreement, we will endeavour to bear the fundamental idea of the recommendation in mind. 

The Chairman of the Supervisory Board should inform the Shareholders’ Meeting of the basic principles of the remuneration system and its amendment.

Based on the previous situation with a sole director, the remuneration of the Board of Directors could be found in the Annual Account and giving additional information to the Shareholders’ Meeting was superfluous. With the appointment of a further Board Member, the company shall in future follow the recommendation.

Point 5.1.2.

The Supervisory Board should also consider diversity when composing the Board of Directors.

The Supervisory Board decides on the composition of the Board of Directors primarily according to expertise and competence. Further qualities such as gender or national or religious affiliation were and are of secondary importance for decision-making.

Point 5.3.1.

The Supervisory Board should form specially qualified committees depending on the specific circumstances of the company and the number of members.

The Supervisory Board consists of only three members. As a committee of a minimum of two members needs to exist, the formation of committees would not lead to more efficient activity of the Supervisory Board.

Point 5.3.2.

The Supervisory Board should set up an Audit Committee which in particular deals with monitoring invoicing, the invoicing process, the efficacy of the internal control system, risk management and the internal auditing system, the audit and compliance.

The Supervisory Board consists of only three members. As a committee of a minimum of two members needs to exist, the formation of an Auditing Committee would not lead to more efficient activity of the Supervisory Board.

Point 5.3.3.

The Supervisory Board should form a Nominations Committee which is exclusively occupied by shareholder representatives and provides the Supervisory Board with suitable candidates for suggestions to the Shareholders’ Meeting to elect members of the Supervisory Board.

As the Supervisory Board, consisting of three members, only includes shareholder representatives and the previous practice of preparing election suggestions in the full supervisory board has proven to be efficient, the Supervisory Board does not see the need to form a Nominations Committee.

Point 5.4.1.

The Supervisory Board should name specific objectives for its composition and develop a skills profile for the full board. For its composition, within the context of the company-specific situation, it should appropriately consider the company's international activity, potential conflicts of interest, the number of independent members of the Supervisory Board, an age limit for Supervisory Board members to be established, a control limit to be established for the term of belonging to the Supervisory Board and diversity.

With the exception of an age limit for members of the Supervisory Board and in deviation from Point 5.4.1(2) of the Codex, the Supervisory Board did not name any specific objectives for its composition and has not developed any skills profile for the full board and will not name such objectives or develop any formal skills profile. However, the Supervisory Board believes that it currently has an appropriate number of independent members, in its opinion. The Codex does not however conclusively govern the term of independence of Supervisory Board Members, but negatively defines it through examples of rules, in which cases there is no longer any independence “in particular”. Furthermore, the Supervisory Board shall no longer be independent if significant, and not only temporary, conflicts of interest may rise without it depending on whether conflicts of interest actually arise or not. As a result, the question arises for the Supervisory Board as to when independence pursuant to Point 5.4.2 of the Codex can be assumed in individual cases appears to be subject to too much legal uncertainty than the determination of a specific number shows. With regard to the control limit for the term of belonging to the Supervisory Board, the Supervisory Board believes that it is more beneficial for the company’s interests to be able to also rely in individual cases on the many years of experience of individual members in the Supervisory Board and to weigh up continuity and replacement in individual cases. Potential conflicts of interest and competence requirements are also considered without formal specifications by the Supervisory Board. For these reasons, the Supervisory Board has waived formal specifications. Due to no relevant objectives and a skills profile for the full board, and in deviation from Point 5.4.1(4) of the Codex in this respect there is no consideration for the election suggestions of the Supervisory Board in the Shareholders’ Meeting nor any publication on the status of implementation, including the number of independent members and their names.

A curriculum vitae should be attached to the candidate suggestion and the Supervisory Board should disclose the personal and commercial relationships of each candidate to the company, the company's bodies and any shareholder who is significantly invested in the company when providing the Shareholders’ Meeting with suggestions for election to the Supervisory Board.

The company does not believe that the recommendation of the German Corporate Governance Codex governs, with sufficient specificity, which candidate relationships need to be disclosed and the extent to which they need to be disclosed when providing suggestions for election to the Shareholders’ Meeting in order to satisfy the recommendation. In the interest of the legal certainty of future elections to the Supervisory Board, the Board of Directors and Supervisory Board have decided to declare a deviation from this recommendation. We believe that the statutory disclosure requirements in Section 124(3)(4) and Section 125(1)(5) of the German Stock Corporation Act (Aktiengesetz) consider the information requirement of shareholders and shall in due course examine and decide whether, when suggestions for election are given to the Shareholders’ Meeting, additional information regarding the candidates should be made accessible on a voluntary basis where the recommendation of the Codex is not binding. To date, the company has not published the curricula vitae of members of the Supervisory Board and candidates for election but is planning to do so in future on its website.

Point 5.4.6.

The deputy chair on the Supervisory Board, the chair and members on committees should be considered in the remuneration of the Supervisory Board.

The company does not believe separate remuneration for the deputy chairs of the Supervisory Board to be necessary as the number of occasions where a deputy chair replaced the Chairman was and is low. There are no committees.

Remuneration of Supervisory Board members should be specified in the Appendix or Management Report, displayed according to their components. Moreover, remuneration paid by the company to the members of the Supervisory Board of the benefits granted for services rendered in person, in particular consultation and brokerage services, must be indicated individually.

The paid remuneration of the Supervisory Board is shown as a total pursuant to IAS 24 in the consolidated notes. Additional consultation fees that go beyond remuneration according to the Articles of Association, if they become due, are not shown as they do not provide any additional information of capital market relevance.

Point 7.1.2.

The consolidated financial statements should be publicly accessible within 90 days of the end of the financial year and the half-yearly financial report should be made publicly accessible within 45 days of the end of the reporting period.

The 2016 consolidated financial statements were made accessible in the first four months of the following year and the 2017 half-yearly financial report was made accessible within three months of the end of the reporting period on the company's website. In future, we will strive to follow the recommendation.

 

Munich, 1 December 2017

 

 

Corporate Governance Practices

The Board of Directors and Supervisory Board undertake to ensure the existence of the company and long-term added value through conscientious and long-term oriented corporate governance. Managing risks in a responsible manner is part of good corporate governance for TTL AG and its Group companies. The Board of Directors shall therefore ensure appropriate risk management and control in the company (see also the information in the risk and opportunity report) and shall ensure legal compliance in the company and Group and compliance with the recommendations of the German Corporate Governance Codex according to the annual Declaration of Compliance. The Board of Directors shall regularly inform the Supervisory Board of the existing risks and their development. Control, reporting and compliance structures within the company are regularly examined, further developed and adjusted to amended framework conditions.

Working Method of the Board of Directors and Supervisory Board

In accordance with German stock corporation law, TTL AG has a dual management system consisting of a Board of Directors and Supervisory Board. This means a clear separation between management and supervisory bodies. The company’s management body is the Board of Directors which is supervised and advised by the Supervisory Board with regard to corporate governance. Good corporate governance requires trustworthy and efficient cooperation between the Board of Directors and Supervisory Board. Open communication and close cooperation is of particular importance. The Board of Directors shall regularly inform the Supervisory Board of all relevant matters in good time and in detail.

The Board of Directors shall assume management as a collegial body. It determines corporate objectives, the strategic orientation, the company policy and Group organisation, coordinates this with the Supervisory Board and ensures they are implemented. In doing so, it is tied to the Group-wide company interests and is obliged to ensure the sustainable increase of the company's value in addition to the concerns of shareholders, clients, employees and other Groups associated with the company. The members of the Board of Directors jointly bear responsibility for the entire management of the company. Regardless of the full responsibility, individual members of the Board of Directors are responsible for managing the departments assigned to them by means of decisions of the Board of Directors. The distribution of business between members of the Board of Directors can be found in the distribution-of-business plan. The Board of Directors shall constitute a quorum when all members participate in the passing of a resolution and unanimously pass its resolutions. The Supervisory Board appoints and dismisses members of the Board of Directors and is jointly responsible for long-term succession planning together with the Board of Directors.

The Supervisory Board shall be included by the Board of Directors in strategy, planning and all matters of fundamental importance for the company. The Chairman of the Supervisory Board coordinates the work on the Supervisory Board, conducts its meetings and externally presents the concerns of the Committee. The Board of Directors shall inform the Supervisory Board in good time, in detail, in writing and per telephone in addition to in the meetings of the Supervisory Board of the development of the company and the Group’s situation. If necessary, an extraordinary meeting of the Supervisory Board shall be convened in the case of significant events. The Supervisory Board has set out rules of procedure for its work. The Supervisory Board generally passes its resolutions in meetings. On the order of the Chairman of the Supervisory Board, they may also be passed in telephone conferences or outside a meeting by telephone voting or the written submission of a vote if no member objects. Resolutions can also be made through a combination of voting submissions in meetings and other forms of voting submission. The Supervisory Board shall constitute a quorum if all members participate in the voting. Resolutions of the Supervisory Committee are generally passed with a simple majority of the submitted votes if the law does not provide for another majority. Minutes are kept of Supervisory Board meetings and the minutes are signed by the Chairman of the Supervisory Board. Resolutions passed outside meetings are also recorded in writing. A copy of the minutes or decision made outside the meeting shall be sent to all members of the Supervisory Board without delay.

No committees have been formed.

Composition of the boards

When appointing the members of the Board of Directors and Supervisory Board, priority is given to the knowledge, skills and professional experience required to fulfil the tasks.

TTL AG’s Board of Directors consisted of one member, Dr Wolfgang Gillmaier, until 30 September 2017. With effect from 1 October 2017, Mr Theo Reichert was appointed as a further member of the Board of Directors by the Supervisory Board and named as Chairman. As at 31 December 2017, Dr Gillmaier stepped down from his seat on the Board. With effect from 18 January 2018, Mr Thomas Grimm was appointed as a further Board member. At the time that this report was prepared, TTL’s Board of Directors consisted of two members.

The Supervisory Board consists of three members who are all elected by the Shareholders’ Meeting. The Supervisory Board has elected one Chairman and one Deputy Chairman. Members of the Supervisory Board are elected for a term of office by the end of the Shareholders’ Meeting which decided on their discharge for the fourth financial year after the start of the term of office. The financial year in which the term of office begins is not counted.

During the 2017 financial year and currently, the Supervisory Board consisted and consists of the following persons:

• Mr Klaus Kirchberger (Chairman)
• Dr Daniel Schütze (Deputy Chairman)
• Mr Klaus W. Schäfer, until 23 January 2018
• Prof. Gerhard Schmidt, since 23 January 2018

The terms of office of Supervisory Board members shall run until the end of the Shareholders’ Meeting that decides on their discharge for the 2018 financial year.

Objectives of the Supervisory Board with regard to its composition

The Supervisory Board named an age limit for Supervisory Board members in the rules of procedure for the Supervisory Board. According to these rules, only persons who have not yet reached 71 may be recommended for election to the Supervisory Board.

TTL AG, as a listed and non-co-determined company, is legally obliged to set target numbers for the proportion of women in the Supervisory Board and Board of Directors. As there is no management tier below the Board of Directors, the Board of Directors did not bear any related obligation for setting target numbers for management tiers.

The Supervisory Board decided on a target number of 0% for the Supervisory Board and likewise 0% for the Board of Directors. The target numbers should each be achieved by 30 November 2020.

Furthermore, in deviation from Point 5.4.1(2) of the German Corporate Governance Codex, the Supervisory Board has not named any other specific objectives and has not developed any formal skills profile for the full board. Reference is made to the aforementioned Declaration of Compliance for the reasons for this.

In its current composition, the Supervisory Board complies with the aforementioned objectives.

Disclosure of conflicts of interest

Each member of the Board of Directors and Supervisory Board shall disclose conflicts of interest that may arise in consideration of the German Corporate Governance Codex. No conflicts of interest arose in the 2017 financial year.

D&O insurance

There is Directors and Officers insurance (D&O insurance) for the members of the Board of Directors and Supervisory Board. Claims for compensation of the company, shareholders or third parties are insured in this insurance that may be asserted due to the bodies violating due diligence. The company shall bear the cost for insurance. Members of the Board of Directors are covered in the event of a claim with an excess.

Transparency – Communication with the capital market and accounting principles

All relevant company information, Annual Reports and any Interim Reports are published on our website, www.ttl-ag.de, where they are made permanently accessible. TTL AG also publishes the current Declaration of Compliance and an archive of previous Declarations of Compliance in the Investor Relations area.

Regular reporting and ad-hoc publicity

Relevant reports are published twice per year when preparing the Annual and Half-Yearly Reports. Ad-hoc reports are distributed across Europe and made immediately accessible online.

Financial calendar

The company's most important dates are published in a financial calendar.

Accounting principles

TTL AG’s consolidated financial statements are prepared according to IFRS (International Financial Reporting Standards). TTL AG's annual accounts as the Group parent company are prepared according to the accounting regulations of the German Commercial Code (HGB). Both sets of statements are audited and certified by an independent auditing firm.

Remuneration structures of the Board of Directors

In addition to its Board function, the Board of Directors also has a contractual relationship with the company. The Supervisory Board is responsible for concluding service agreements with the Board of Directors. The rights and obligations of the members of the Board of Directors are established in the agreement, including remuneration.

Remuneration system for the Board of Directors:
The Supervisory Board establishes the total remuneration for individual members of the Board of Directors, decides on the remuneration system for the Board of Directors and regularly reviews it.

Total remuneration is appropriately proportionate to the task of each member of the Board of Directors, his personal performance, economic situation, success and future prospects of TTL AG and are also appropriate in consideration of the comparative environment and remuneration structure that otherwise applies in the company. The remuneration structure in particular sets long-term conduct incentives with share-based remuneration and is overall geared towards sustainable company development. At the same time, remuneration is designed to be competitive.

Remuneration for the Board of Directors is composed of three components. It comprises (i) fixed remuneration and additional benefits, (ii) variable remuneration depending on the achievement of certain objectives (long-term performance-related component) and (iii) share-based remuneration (components with a long-term incentive effect).

Fixed remuneration and additional payments:
Fixed remuneration is paid in equal monthly instalments. Additional benefits consist of the provision of a company car, mobile phone and, based on appropriate amounts, limited subsidies for insurance, in particular accident, health and pension insurance or another private pension fund.

Variable, performance-related remuneration:
The variable, performance-related remuneration of the Board of Directors (emoluments) is based on TTL AG’s operating result and therefore considers both positive and negative developments. A requirement for granting the emoluments for all members of the Board of Directors is a positive operating result for TTL AG Group. The amount of emoluments is based on the extent to which corporate and personal objectives were achieved. Corporate and personal objectives are weighted with 50% each by the Supervisory Board when determining the emoluments. The amount of emoluments was contractually limited to EUR 30,000 for the member of the Board of Directors in office until 31 December 2017. Variable remuneration (emoluments) for the second member of the Board of Directors is limited to 50% of his total remuneration (total fixed remuneration and variable remuneration). The Supervisory Board shall make an annual decision regarding emoluments by 31 May of the following year. Emoluments are paid on the last bank business day of the month in which the Supervisory Board decides on the emoluments.

Share-based remuneration with long-term incentive effect:
In addition, the members of the Board of Directors have options to “virtual” shares in TTL AG which consider both positive and negative developments. The number of options granted is individually contractually governed and capped. Options are hypothetically designed and only grant the right to payment in cash. Exercising options is associated with the fulfilment of a certain number of years of service (vesting period). The duration of the vesting period is individually contractually governed (see the table “Virtual share options” in Appendix 1). When exercising the options, special remuneration is determined as the positive difference between the average closing rate within a reference period of ten trading days before exercising the options and the contractually governed exercise price in the amount of EUR 1.50 per virtual share. Members of the Board of Directors may therefore benefit from the price increase potential of the shares in the reference period. With regard to participation in the price increase potential at the time of exercising the options, no limit for the amount has been set. The fair value of the options as at 31 December 2017 was EUR 4,950.00.

Activities that the members of the Board of Directors exercise in executive management and/or supervisory functions in TTL AG subsidiaries or investment companies are compensated for with the remuneration of the Board of Directors at TTL AG.

Regulations should Board of Directors activity end:
Board agreements for members of the Board of Directors in office shall not receive any express promise of a severance payment. In deviation from the recommendation in Point 4.2.3 of the German Corporate Governance Codex, it has not been agreed that payments to one member of the Board of Directors will exceed the value of two years of remuneration upon the premature ending of Board activity, including ancillary services, (cap on severance payment) or that remuneration is only awarded for the remainder of the employment agreement.

Should a member of the Board of Directors pass away during the term of his Board agreement, the fixed annual salary and variable remuneration must be paid to surviving relatives for six months after the end of the month in which the member of the Board of Directors passed away on a pro rata temporis basis. If a member of the Board of Directors is unable to work on a long-term basis during the term of the agreement, the Board agreement shall end three or, in one case, six months after the end of the half-year in which the long-term work incapacity was determined. In the event of illness, salary payments shall continue for six months, however at the latest until the end of the Board agreement.

There are no commitments for occupational pensions for members of the Board of Directors.

Remuneration structure of the Supervisory Board

According to TTL AG’s Articles of Association, the members of the Supervisory Board shall receive fixed remuneration. Variable remuneration is not guaranteed. The Chairman of the Supervisory Board shall receive double the fixed basic remuneration. Members of the Supervisory Board who were not in office for the entire financial year shall receive remuneration on a pro rata temporis basis. In 2017, payments to Supervisory Board members amounted to EUR 0.00. As in the previous year, the Supervisory Board members waived remuneration for the 2017 financial year.

Appendix 1:

Amount of the allowances given to members of the Board of Directors for the year under review

	Theo Reichert				Dr. Wolfgang Gillmaier
	Chairman of the Board of Directors				Board of Directors
	since 01/10/2017				01/01/2005 / 31/12/2017
Benefits granted	2016	2017 exp.	2107 (min)	2017 (max)	2016	2017 exp.	2107 (min)	2017 (max)
Fixed remuneration	0	62,500	62,500	62,500	0	0	0	0
Additional benefits	0	645	645	645	0	0	0	0
Total	0	63,145	63,145	63,145	0	0	0	0
One-year variable remuneration*	0	50,000	0	62,500	0	0	0	30,000
Multi-year variable remuneration (2017-2020 Long-Term Incentive Plan)	0	4,950	0	4,950	0	0	0	0
Total	0	54,950	0	67,450	0	0	0	30,000
Pension expenses	0	0	0	0	0	0	0	0
Total remuneration	0	118,095	63,145	130,595	0	0	0	30,000

* 2017 exp. = Provision amount

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TTL Beteiligungs- und Grundbesitz-AG
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80539 Munich
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Phone: +49 89 381611-0
Fax: +49 89 391592
Email: presse@ttl-ag.de