Report of the Supervisory Board
In the fiscal year 2007 the Supervisory Board addressed the economic situation and the strategic development of the Corporation in detail in five meetings (one of these being in the form of a telephone conference). Two resolutions (the commissioning of Ernst & Young AG Wirtschaftsprüfungsgesellschaft, Steuerberatungsgesellschaft, Essen with the auditing of the annual financial statements of the Corporation and the consolidated annual financial statements for the fiscal year 2006 and the approval of the acquisition of all company shares in Multigestión S.A.) were adopted by written circular, having already been the subject of consultations in previous meetings. In the fiscal year 2007 the Supervisory Board also discussed individual questions regarding the annual financial statements and other issues significant for the economic situation of the Corporation in separate meetings with the annual auditors of the Corporation and other consultants without the presence of the Executive Board. In the fiscal year 2007 the Supervisory Board held a detailed discussion with the annual auditor on March 12, 2007 in preparation for the balance sheet meeting of the Supervisory Board.
Collaboration between the Supervisory Board and the Executive Board
The Executive Board informed the Supervisory Board in its meetings regularly and comprehensively about the situation of the Corporation, above all about the development of the business and the financial situation, the personnel situation and the investment plans and fundamental issues of corporate policy and strategy. It informed the Supervisory Board in due time before its meetings with written reports about the most important key financial data and submitted issues requiring approval to it in due time for the adoption of resolutions. These were approved by the Supervisory Board following examination of the comprehensive documents, questions addressed to the Executive Board and intensive discussions with the members of the Executive Board. The Supervisory Board was also informed comprehensively about special business transactions between meetings and was in urgent cases requested to adopt written resolutions. The chairman of the Executive Board also informed the chairman of the Supervisory Board about all important developments and imminent decisions on a regular basis in individual discussions.
Numerous individual issues were addressed and discussed with the Executive Board. In the course of the year issues focused on during consultations included the business development of the divisions Credit, Collection, Software and Systems, and the acquisition of all business shares in ID Innovative Datenverarbeitung GmbH (now: GENEVA-ID GmbH) and Multigestión S.A. in Spain. A particular focus of consultations was a possible IPO of the Corporation or alternatively a sale of the Corporation within the scope of a so-called trade sale procedure. In the second half of the year these considerations were eclipsed by the credit market crisis and the accompanying worsening of the stock market environment. The Supervisory Board discussed the impact of the credit crisis on a possible IPO and the refinancing of the Corporation in detail with the Executive Board and ensured that it was reported to on an ongoing basis with respect to the situation of the Corporation.
Issues discussed in the Supervisory Board meeting in 2007
In the Supervisory Board meeting in February 2007 the Executive Board reported – as in the other Supervisory Board meetings during the year – about the current situation of the Corporation and the corporate group. In addition to the situation of the individual business divisions it also explained the planned acquisition of Multigestión S.A., which took place in the further course of the year. Increased pressure on margins in the Leasing sector and possible reactions to this were also discussed. The Supervisory Board also approvingly acknowledged the planning for the fiscal year 2007 and addressed the issue of a possible IPO or trade sale of the Corporation or its shares. The Supervisory Board also approved the assignment of responsibility for the area Accounting and Tax to Dr. Ergenzinger and the resulting change to the Executive Board role sort. In its first meeting of 2007 the Supervisory Board also approved the acquisition of all business shares in INKASSO BECKER WUPPERTAL DIETER BECKER GmbH & Co. KG and the acquisition of all business shares in ID Innovative Datenverarbeitung GmbH. The Supervisory Board also finally carried out its regular examination of the efficiency of its own work.
In view of the imminent reappointment of the Executive Board members Dr. Jänsch and Dr. Haverkamp the Supervisory Board also discussed in detail during this meeting without the presence of the Executive Board the remuneration structure of the Executive Board on the basis of various preliminary considerations which had been drawn up together with an external specialist.
In the Supervisory Board meeting in April 2007 the Supervisory Board first of all approved the reappointment of the Executive Board members specified above until April 30, 2012 and the conclusion of new executive employment agreements with these. At the same time it also approved an appropriate amendment of the executive employment agreements of Dr. Ergenzinger and Mr. Baltes to ensure a standardized remuneration structure in the Executive Board. In light of the already mentioned considerations with respect to an IPO or a trade sale, following detailed discussion and after obtaining external advice, incentivization agreements, which expired, however, at the end of 2007, were in view of an IPO or trade sale entered into with all members of the Executive Board.
In its meeting in April the Supervisory Board then addressed the annual financial statements of GFKL Financial Services AG for the year 2006, the consolidated financial statements for the year 2006, the 2006 management report of GFKL Financial Services AG and the 2006 consolidated management report certified by the annual auditor. In order to facilitate a focused discussion of the audit results together with the Executive Board during the meeting the audit results had been discussed by the Supervisory Board in advance with the auditors before the balance sheet meeting. Following detailed examination, the Supervisory Board approved the annual financial statements of the Corporation and the consolidated financial statements. The discussion also focused on the Supervisory Board’s approval of the planned conclusion of a Control and Profit and Loss Transfer Agreement with Zyklop Inkasso Deutschland GmbH and Amendment Agreements to the Control and Profit and Loss Transfer Agreements with Proceed Portfolio Services GmbH, Proceed Securitization Services GmbH and Sirius Inkasso GmbH. Following intensive discussion and examination, the Supervisory Board granted its approval in all cases and approved – where necessary – the agenda for the Annual Shareholders’ Meeting; it in particular proposed to the Shareholders’ Meeting that Ernst & Young Wirtschaftsprüfungsgesellschaft be again selected as annual auditor of the GFKL Group and the Corporation.
The subject of the Supervisory Board meeting held by telephone in August 2007 was again the considerations accompanying the year 2007 with respect to an IPO or trade sale. In light of the increasingly emerging crisis on the credit market, its impact on the refinancing of the Corporation and the additional costs incurred by the Corporation as a result were also discussed and subsequently closely followed and monitored together with the Executive Board.
In September 2007 the discussion again focused predominantly on the development on the credit market and its impact on the refinancing of the area Credit. The Supervisory Board had the current refinancing situation of the Corporation reported to it in detail. Within the scope of its status report the Executive Board also reported on the intermediate results of the tax audit. The issue IPO or trade sale was discussed in light of the worsening situation on the stock market.
The meeting in December 2007 again focused on the development in the area Credit and the situation on the credit market. The Supervisory Board also approved the commissioning of the annual auditor Ernst & Young with the annual audit work for the year 2007 on the basis of the audit offer which had in the meantime been submitted and authorized the acquisition of a receivable portfolio from a well known German mail order company. The Supervisory Board finally discussed in detail the preliminary planning for the fiscal year 2008 submitted by the Executive Board and addressed the equity situation of the Corporation and a capital increase which was possibly to be intended. Following a detailed discussion the Supervisory Board requested the Executive Board to examine further whether and subject to which conditions a capital increase should be considered to improve the equity situation.
Formation of Supervisory Board committees
In view of the current shareholder structure of the Corporation the Supervisory Board came to the conclusion that the formation of committees is not currently necessary and agreed to review this issue again in the event of an IPO of the Corporation. The Supervisory Board will, however, continue to form working groups as needed in order to prepare Supervisory Board decisions. In this context the Supervisory Board will maintain its normal practice of discussing individual questions with respect to the annual financial statements and regarding other issues of significance for the economic situation of the Corporation in separate meetings in advance with the annual auditors of the Corporation without the presence of the Executive Board. As mentioned above, the Supervisory Board held a preparatory meeting with the annual auditors in the fiscal year 2007 on March 12, 2007.
Supervisory Board members
There were no changes in the composition of the Supervisory Board in the reporting period. Due to personal reasons Dr. von Borries resigned from his office effective January 31, 2008 in December 2007. Dr. Eckehard Schulz was appointed in his place by the court on March 13, 2008.
Executive Board members
In the course of the year the Supervisory Board – as explained above – adopted resolutions with respect to various matters concerning the Executive Board, including the reappointment of the Executive Board members Dr. Jänsch and Dr. Haverkamp and the conclusion of new executive employment agreements with the members of the Executive Board. There were no personnel changes in the Executive Board during the reporting period.
Audit of the 2007 annual financial statements
The 2007 annual financial statements of GFKL Financial Services AG and the management report including the accounting have been audited by Ernst & Young AG Wirtschaftsprüfungsgesellschaft, Steuerberatungsgesellschaft, Essen, and received unqualified audit certification. This also applies for the consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS), which were supplemented by a consolidated management report. The submitted IFRS consolidated financial statements exempt from the obligation in accordance with Section 292 German Commercial Code [HGB] to prepare consolidated financial statements in accordance with German law.
The documentation with respect to the annual financial statements and the audit reports of the annual auditors were available to the Supervisory Board. They were reviewed in detail by the Supervisory Board and discussed in the presence of the annual auditor, which reported on the results of its audit. The Supervisory Board agreed with the results of the audit by the annual auditor and established within the scope of its own review that no objections were to be raised. The Supervisory Board approves the financial statements prepared by the Executive Board. The annual financial statements are therefore adopted.
The Supervisory Board thanks the management of the Corporation and all employees of the GFKL Group for their high level of personal commitment and their performance in the fiscal year 2007.
Essen, April 2008
The Supervisory Board
Dr. Georg F. Thoma
(Chairman)
