GRENKELEASING AG Group Financial Report 2012

Transcription

1 GRENKELEASING AG Group Financial Report 2012

2 GRENKE Consolidated Group Key Figures GRENKE Group Jan. 1, 2012 to Dec. 31, 2012 Change (%) Jan. 1, 2011 to Dec. 31, 2011 Unit New business GRENKE Group including franchise partners, factoring, and business start-up financing 1,027, ,020 EURk of which Germany 352, ,695 EURk of which international* 598, ,292 EURk of which franchise international* 76, ,033 EURk Leasing segment 898, ,133 EURk of which Germany 265, ,090 EURk of which international* 598, ,292 EURk of which franchise international* 34, ,751 EURk Factoring 122, ,381 EURk of which Germany 81, ,099 EURk of which franchise international (CH) 41, ,282 EURk Contribution margin 2 on new business GRENKE Group including franchise partners and factoring 159, ,748 EURk of which Germany 37, ,109 EURk of which international* 112, ,324 EURk of which franchise international* 9, ,315 EURk Leasing business 156, ,023 EURk of which Germany 35, ,877 EURk of which international* 112, ,324 EURk of which franchise international* 8, ,822 EURk Further information Leasing segment Number of new contracts 107, ,176 units Share of IT products in lease portfolio percent Share of corporate customers in lease portfolio percent Mean acquisition value EURk Mean term of contract months Volume of leased assets 2, ,209 EURm Number of current contracts 324, ,051 units GRENKE BANK Deposits 217, ,127 EURk Business start-up financing volume 6, ,506 EURk *In the third quarter of 2012, we have acquired our franchise partners in Spain (Madrid/Málaga), Romania, and Portugal. Their new business volume is no longer included in the franchise partner s volume. The figures were adjusted for the full year. GRENKE Group = GRENKE Consolidated Group including franchise partners GRENKE Consolidated Group = GRENKELEASING AG and all consolidated subsidiaries and special-purpose entities according to IFRS

3 GRENKE Consolidated Group Key Figures GRENKE Consolidated Group Jan. 1, 2012 to Dec. 31, 2012 Change (%) Jan. 1, 2011 to Dec. 31, 2011 Unit Key figures income statement Net interest income 111, ,691 EURk Settlement of claims and risk provision 43, ,415 EURk Profit from insurance business 30, ,703 EURk Profit from new business 35, ,021 EURk Profit from disposals (income exceeding the calculated residual value) 3, ,653 EURk Other operating income 3, ,755 EURk Costs of new contracts 24, ,660 EURk Costs of current contracts 7, ,646 EURk Project costs and basic distribution costs 23, ,812 EURk Management costs 18, ,069 EURk Other costs 7, ,498 EURk Operating result 59, ,723 EURk Other interest income (expense) EURk Income / expenses from fair value measurement EURk EBT (earnings before taxes) 59, ,432 EURk Net profit 42, ,251 EURk Earnings per share (according to IFRS) EUR Further information Dividend EUR Embedded value, leasing contract portfolio (incl. equity before taxes) EURm Embedded value, leasing contract portfolio (incl. equity after taxes) EURm Cost / income ratio percent Return on equity (ROE) after taxes percent Average number of employees employees Staff costs 42, ,695 EURk of which total remuneration 35, ,545 EURk of which fixed remuneration 26, ,515 EURk of which variable remuneration 8, ,030 EURk GRENKE Group = GRENKE Consolidated Group including franchise partners GRENKE Consolidated Group = GRENKELEASING AG and all consolidated subsidiaries and special-purpose entities according to IFRS

4 New business in 2012 exceeds EUR 1 billion. Growth in new markets outside of Europe. Expansion of product range.

5 GRENKE Consolidated Group 1 Content Letter to Shareholders from the Board of Directors 2 The Board of Directors of GRENKELEASING AG 4 Report of the Supervisory Board 5 The Supervisory Board of GRENKELEASING AG 10 Corporate Governance Report; Remuneration Report (Part of the Management Report) 11 Our Shares and Investor Relations 18 Combined Management Report of GRENKELEASING AG and GRENKE Consolidated Group 22 Company Profile 22 Economic Conditions and Sector Trends 27 Key Events in the Fiscal Year 28 Report on the Results of Operations 29 Report on the Financial Position and Net Assets 33 Overall Statement on the Financial Situation of the GRENKE Consolidated Group 35 Research and Development 35 Non-Financial Performance Indicators 35 Employees 38 Matters Concerning the Board of Directors 39 Remuneration Report 39 Share Trading and Shares Held by the Governing Bodies 39 Dependence Report 40 Explanatory Report on the Disclosures Pursuant to Section 289 (4) and Section 315 (4) HGB 40 Corporate Governance Statement Pursuant to Section 289a HGB 42 Events Subsequent to the End of the Fiscal Year 42 Report on Forecasts and Outlook (Including Report on Opportunities and Risks) 42 Management Report of GRENKELEASING AG (Condensed Version in Accordance with HGB) 57 Consolidated Financial Statements for Fiscal Year Consolidated Income Statement 64 Consolidated Statement of Comprehensive Income 65 Consolidated Statement of Financial Position 66 Consolidated Statement of Cash Flows 68 Consolidated Statement of Changes in Equity 70 Notes to the Consolidated Financial Statements for Fiscal Year Audit Opinion 147 Declaration in Accordance with Section 297 (2) Sentence 4 and Section 315 (1) Sentence 6 HGB 148 Calendar of Events and Contact Information 149

6 2 GRENKE Consolidated Group Letter to Shareholders from the Board of Directors Dear Shareholders, Dear Ladies and Gentlemen, In fiscal year 2012, the GRENKE Group achieved more than one billion euros in new business for the first time. With an increase of around 20 percent to EUR 1,027.6 million we have not only exceeded our forecast of around 15 percent but we have also realised almost double our mid-term growth target of at least ten percent growth per year. The contribution margin 2 in the Leasing segment increased to 17.4 percent after 16.0 percent in the previous year. With increasing income, a relatively unchanged loss rate, and moderate growth in expenses, the net profit of the GRENKE Consolidated Group reached EUR 42.5 million and thus occurred within the forecasted range of between EUR 41 and 44 million. After we were able to achieve a leap in net profit of 41 percent in fiscal year 2011, we were able to accomplish a further rise of eight percent in the year under review. This underlines once again our understanding of ourselves as a growth company and not only with respect to new business, but also of course in terms of our profit. In the past ten years, we have built an extensive European market position and are now reaping the fruits of these efforts. This lays the foundation for future growth through gains in market share. In the meantime however, we have also begun a new chapter and have defined new themes for the growth phase ahead. Expansion beyond Europe is on the GRENKE Group s agenda. Since the beginning of 2012, we have been active with our classic small-ticket IT leasing in Brazil the most populated country in South America and the sixth largest economy in the world. The first year has been very promising. In the fiscal year 2013 which has just begun, we will expand into Dubai and Canada. This not only means an expansion into new countries, but also the challenge of forging into a new culture with different societal, economic, and legal systems. Moreover, we have greatly expanded our current finance solution offers. Since 2010, we have been offering business start-up financing via GRENKE BANK AG and have had the opportunity to cooperate with development banks. In fiscal year 2012, we quadrupled the volume of business start-up financing to EUR 6.1 million. The collaboration with the development banks of the German states is being met with great interest so that the number of partner banks with whom we cooperate in this area has successively increased. In 2013, we will again expand our circle of partners.

7 GRENKE Consolidated Group 3 In addition, we are further expanding our factoring business. With an increase in new business of 41 percent to EUR million in fiscal year 2012, we have nearly tripled the annual amount of newly purchased volume versus Since the fourth quarter of 2012, we have been also providing this offer in Hungary and the preparations have already been completed for an upcoming entry into the United Kingdom and Austrian markets in GRENKE BANK AG is also growing strongly in the area of investment products. Here, beyond our commercial customers with whom we concentrate on financing, we also address private customers with interesting investment opportunities. This represents an important element in the diversification of our refinancing sources. As a result, we can use both institutional as well as private funds for our various refinancing instruments. In fiscal year 2012, we have expanded the volume of bank deposits by 40 percent to EUR million. This was equivalent to 20 percent of our refinancing requirements. We want to increase the share to around one third with great caution and on a sustainable basis. During the coming expansion phase we will abide by the proven cornerstones of our business model: Standardisation, comprehensive IT-supported automation, quickness, as well as the efficient measuring of risk and risk diversification. We do not favour avoidance of risk but rather the accurate assessment of risks and guided along with an attractive risk-opportunity profile. This is how we are able to continue to thrive and enter new markets successfully, even in overall difficult economic periods. In 2013, we are expecting GRENKE Group s new business to grow between 13 and 16 percent while maintaining profitability and riskadequate CM2 margins. GRENKE Consolidated Group s net profit should reach a range of EUR 44 to 48 million. Based on the favourable developments of the reporting year and the continued positive outlook for the future, the Supervisory Board and the Board of Directors are proposing an increase in the dividend distribution for the third consecutive time to the Annual General Meeting of GRENKELEASING AG. The dividend should increase to EUR 0.80 per share following EUR 0.75 per share in the previous year. We would like to thank our employees for their commitment and flexibility and their enthusiasm in always pursing new paths with us. We would like to invite our shareholders to join us again in the next period of growth for the GRENKE Group and to participate in the upcoming increase in value. Wolfgang Grenke Chairman of the Board of Directors

8 4 GRENKE Consolidated Group The Board of Directors of GRENKELEASING AG

9 GRENKE Consolidated Group 5 Report of the Supervisory Board In fiscal year 2012, the Supervisory Board of GRENKELEASING AG performed the activities required of it by law and under the Articles of Association. It collaborated with the Board of Directors on an on-going basis, advised it regularly and monitored its business management. The Board of Directors and the Supervisory Board closely coordinated with one another on the strategic orientation of the GRENKE Consolidated Group. The Supervisory Board was involved by the Board of Directors in all decisions of fundamental significance to the Company. The Supervisory Board also received information on all key issues regularly, comprehensively, and in a timely manner, both orally and in writing, including on the basis of submissions by the Board of Directors and minutes of the meetings. In particular, the Board of Directors provided the Supervisory Board with detailed information on all relevant issues and topics relating to the strategic development of the GRENKE Consolidated Group, its economic situation, the current course of business including the business of GRENKE BANK AG and the management of the sales organisation, as well as keeping it up to date with current events, the status of corporate planning, and the personnel situation. The reports from the Board of Directors were critically reviewed by the Supervisory Board with regard to their plausibility. The subject and scope of reporting by the Board of Directors met the requirements of the Supervisory Board in full. As far as required by law and the Articles of Association, the Supervisory Board closely examined, discussed, and then voted on the reports and resolution proposals of the Board of Directors. The Board of Directors submitted matters requiring approval in a timely manner. In the year under review, the Supervisory Board monitored the Consolidated Group-wide risk management system, the internal control systems in the areas of internal audit, accounting, and compliance including compliance with the German Banking Act (KWG) and the operating risk control system. To this end, it received reports from the Board of Directors on the risk management system of the GRENKE Consolidated Group, its on-going development, and on the current risk situation. The GRENKE Consolidated Group s liquidity and refinancing situation was a regular issue at the meetings of the Supervisory Board. As a result of its diversified sources of refinancing and targeted liquidity management, the GRENKE Consolidated Group s refinancing was again ensured at all times in fiscal year The key issues at the meetings of the Supervisory Board also included regular discussion on the current business performance, risk strategy and its implementation, the monitoring of the international entities particularly with regard to risks in connection with possible

10 6 GRENKE Consolidated Group consequences of the European sovereign debt crisis as well as evaluating the efficiency of the Supervisory Board's work. Additional issues included the adoption of the annual financial statements of GRENKELEASING AG, and approval of the consolidated financial statements as per December 31, The Supervisory Board also discussed issues relating to the Rules of Procedure of the Supervisory Board and of the Board of Directors and the schedule of responsibilities for the Board of Directors when there were impending changes in the Board of Directors. In the reporting year, the Supervisory Board again dealt in depth with the German Corporate Governance Code. In this context, it assessed and determined that the requirements were fulfilled for Supervisory Board members of companies that are subject to the KWG. On April 21, 2012, together with the Board of Directors, the Supervisory Board issued the GRENKELEASING AG Declaration of Conformity in accordance with Section 161 of the German Stock Corporation Act on the recommendation of the Government Commission on the German Corporate Governance Code in the version dated May 26, In this financial report for fiscal year 2012, the Board of Directors report on corporate governance at GRENKELEASING AG is also on behalf of the Supervisory Board. All members of the Supervisory Board have personally pledged to comply with the principles of corporate governance that are applicable in the reporting year. The Supervisory Board met five times in fiscal year 2012: February 3, April 21, May 9, July 22, and November 12. At its meeting on February 3, 2012, the Supervisory Board reviewed in detail, discussed, and adopted or approved the annual financial statements of GRENKELEASING AG as per December 31, 2011, the management report for fiscal year 2011, the consolidated financial statements as per December 31, 2011, and the Group management report for fiscal year It also reviewed the dependence report and adopted the resolution on the proposal for the appropriation of the 2011 unappropriated surplus. The auditor responsible, Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, Eschborn/Frankfurt am Main, took part in the discussions and reported on the key results of its prior audit. Other topics of this meeting included discussion and approval of the report of the Supervisory Board in the 2011 annual financial report, the budget planning for fiscal year 2012, and the resolution on broadcasting the Board of Directors speech and the general debate at the 2012 Annual General Meeting on the internet in accordance with Section 13 of the Company's Articles of Association. On April 21, 2012, the Supervisory Board dealt in depth with the acquisition of the franchise companies in Portugal, Spain, and Romania and approved these acquisitions. It also adopted the resolution on the Declaration of Conformity by the Board of Directors and Supervisory Board with the German Corporate Governance Code. The audit assignment was issued by the Supervisory Board on March 13, The Board of Directors also informed the Chairman of the Supervisory Board of transactions of particular significance between the meetings of the Supervisory Board. As the Chairman of the Supervisory Board, I kept myself informed of the current business development including the banking business and key transactions at all times. Further issues discussed in personal talks with the Board of Directors included the preparation of refinancing decisions, compliance issues, internal controlling, risk management and its on-going development, and personnel issues. In accordance with the Articles of Association, the Supervisory Board of GRENKELEASING AG is comprised of six members. There were no changes in the composition of the Supervisory Board in the reporting year. The members of the Supervisory Board in fiscal year 2012 were:

11 GRENKE Consolidated Group 7 Prof. Dr. Ernst-Moritz Lipp, Chairman Mr. Gerhard E. Witt, Deputy Chairman Mr. Dieter Münch Mr. Florian Schulte Mr. Erwin Staudt Prof. Dr. Thilo Wörn In accordance with its Rules of Procedure, the Supervisory Board formed two committees to allow it to perform its duties efficiently: the Audit Committee and the Personnel Committee (Executive Committee). The chairmen of the committees reported in detail on their committees' work to the Supervisory Board as a whole at its meetings. The Audit Committee consists of the following three members: Mr. Gerhard E. Witt, Chairman Prof. Dr. Ernst-Moritz Lipp Mr. Dieter Münch The Audit Committee primarily deals with the issues of internal and external accounting, the corporate planning policies, corporate risk management, and compliance. Its members have specialised knowledge in these areas. The Audit Committee commissioned the auditor, determined the audit focus, and concluded the fee agreement with the auditor. In the reporting year, the Audit Committee did not learn of any circumstances which would call the independence of the auditor into question. The Audit Committee prepared the Supervisory Board meeting for the adoption of the annual financial statements and the approval of the consolidated financial statements. In the presence of the auditor, it dealt with the 2011 annual financial statements and discussed these in depth. The Audit Committee also discussed the quarterly financial statements to be published in depth with the Board of Directors. The Personnel Committee (Executive Committee) consists of the following three members: Prof. Dr. Ernst-Moritz Lipp, Chairman Mr. Erwin Staudt Mr. Gerhard E. Witt The Personnel Committee primarily deals with personnel decisions by the Supervisory Board. It is also responsible for proposals regarding the conclusion, amendment, and termination of employment agreements with the members of the Board of Directors. In fiscal year 2012, the Personnel Committee and subsequently the Supervisory Board in its entirety also dealt in depth with the selection and appointment of the new Representative of the Board of GRENKELEASING AG, Ms. Antje Leminsky, and the new member of the Board of Directors, Mr. Jörg Eicker. Ms. Antje Leminsky joined the Company on August 1, 2012, strengthening its expertise in the area of IT which is of particular importance to the GRENKE Consolidated Group. She will join the Board of Directors as per August 1, 2013 and take over responsibility for IT from Mr. Wolfgang Grenke. Mr. Jörg Eicker joined the Company's Board of Directors on September 1, 2012 and assumed responsibility for Treasury, Refinancing, Risk Management, Reporting, Investor Relations, and GRENKE BANK AG from Dr. Uwe Hack as per October 1, 2012.

12 8 GRENKE Consolidated Group Dr. Hack left the Company by mutual agreement on September 30, 2012 to take up a professorship at a university. The Supervisory Board and the Board of Directors have thanked Dr. Hack for his major contribution to GRENKELEASING AG's positive development in recent years, particularly his role in successfully securing the Company against the financial crisis and in the purchase and realignment of GRENKE Bank. They wish him all the best for his future. The annual financial statements of GRENKELEASING AG and the consolidated financial statements prepared by the Board of Directors as per December 31, 2012, the first-time combined presentation of the management reports of GRENKELEASING AG and of the GRENKE Consolidated Group for fiscal year 2012 in accordance with Section 315 (3) and Section 298 (3) HGB, and the Board of Directors proposal on the appropriation of GRENKELEASING AG s unappropriated surplus were all submitted to the Supervisory Board in a timely manner. The annual financial statements were audited by Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, Stuttgart. The accounting of the separate financial statements of GRENKELEASING AG was prepared in accordance with the provisions of the German Commercial Code (HGB), taking the regulations for bank accounting into consideration. The HGB annual financial statements as per December 31, 2012 were audited in accordance with the rules and regulations of Section 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). The consolidated financial statements and the Group management report for the fiscal year from January 1 to December 31, 2012 were prepared in accordance with Section 315a (1) HGB on the basis of the International Financial Reporting Standards as adopted in the EU. The consolidated financial statements were audited in accordance with the rules and regulations of Section 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the IDW (IDW PS 200). Unqualified audit opinions were issued for both the annual financial statements of GRENKELEASING AG and the consolidated financial statements of the GRENKE Consolidated Group. The Supervisory Board carried out a detailed review of the annual financial statements submitted to it by the Board of Directors and the auditor and discussed the result at its meeting on January 31, The auditor responsible took part and reported on the key findings of the audit. After completing its own review, the Supervisory Board did not raise any objections to the result of the audit of the annual financial statements by the auditor and therefore adopted the annual financial statements of GRENKELEASING AG and approved the consolidated financial statements of GRENKELEASING AG. The Supervisory Board endorsed the Board of Directors proposal on the appropriation of GRENKELEASING AG s unappropriated surplus. It also discussed and approved this report of the Supervisory Board for the 2012 annual financial report at this meeting. On January 30, 2013, the auditor Ernst & Young GmbH issued the following opinion on the dependence report: "On the basis of our audit performed in accordance with professional care and our assessment, we confirm that 1. the factual information contained in the report is correct, 2. the consideration given by the Company for the legal transactions referred to in the report was not unreasonably high or had compensated for any disadvantages, 3. and that for the measures mentioned in the report there are no circumstances supporting a judgement materially different from that reached by the Board of Directors. At its meeting on January 31, 2013, the Audit Committee dealt at length with the dependence report and accepted the auditor's report. Based on its own careful examination, the Audit Committee had no objections to the dependence report. At the Supervisory Board

13 GRENKE Consolidated Group 9 meeting on January 31, 2013, the Chairman of the Audit Committee reported on the audit of the dependence report by the Audit Committee. The Supervisory Board accepted the audit result of the auditor and came to the conclusion that there were no objections raised to the Board of Directors explanation at the end of the report regarding relationships to affiliated companies. At the same meeting, the Supervisory Board dealt with the mandatory disclosures in accordance with Section 289 (4) and Section 315 (4) HGB and the related report. Please refer to the corresponding explanations in the combined management report of GRENKELEASING AG and the GRENKE Consolidated Group. The Supervisory Board has reviewed these disclosures and explanations, which it believes to be complete, and has adopted them. Also at this meeting, the Supervisory Board resolved, in accordance with the Articles of Association, to broadcast the Board of Directors speech and the general debate at the 2013 Annual General Meeting on the internet. The Supervisory Board also discussed this report in detail and approved it at this meeting. Capital market participants once again placed their trust in GRENKE shares in fiscal year 2012 and acknowledged the GRENKE Consolidated Group's successful international growth strategy. The share price saw an impressive increase of 30 percent on balance. Thus, the GRENKE shares clearly stood out from the DAX and SDAX, whose price indices rose by 24 percent and 15 percent respectively. The sector index for German financial service providers, to which the GRENKE shares belong, also did not perform as well and achieved a 26 percent increase. All employees of the GRENKE Group contributed to the Company's success and thus also to the positive performance of the GRENKE shares in fiscal year The Supervisory Board would like to thank all of the employees of the GRENKE Consolidated Group and its franchise companies in the 25 countries in Europe and overseas where GRENKE now operates, as well as the members of the Board of Directors for their work in fiscal year It is due to their personal commitment that the GRENKE Consolidated Group can record another successful year and look to the future with confidence. Baden-Baden, January 31, 2013 For the Supervisory Board Prof. Dr. Ernst-Moritz Lipp Chairman

14 10 GRENKE Consolidated Group The Supervisory Board of GRENKELEASING AG

15 GRENKE Consolidated Group 11 Corporate Governance Report All activity in the GRENKE Consolidated Group is governed by a sense of responsibility. Therefore, effective corporate governance that complies with the relevant laws and the requirements of the German Corporate Governance Code is an integral part of how we do business. The Board of Directors, Supervisory Board, and senior executives identify with the principles of good corporate governance and compliance with the ethical and legal rules of conduct and standards. They are committed to managing and monitoring the GRENKE Consolidated Group in a value-oriented and transparent manner. They are also aware of the special significance these principles hold with shareholders and debt capital providers on the capital market when making an assessment of the Company. They know that good corporate governance represents an important basis for maintaining and increasing confidence among present and future customers, employees, and business partners. Transparent accounting and early reporting are essential to GRENKE for dealing with the public in a way that creates confidence. GRENKELEASING AG complies with the recommendations of the German Corporate Governance Code in the version dated May 26, 2010 with only a few exceptions. The Board of Directors and the Supervisory Board have discussed their compliance with the Code in depth and have adopted the Declaration of Conformity of the Code which has been duplicated at the end of this corporate governance report. The declaration can also be found on the website of GRENKELEASING AG. Consolidated Group Management and Monitoring The Board of Directors of GRENKELEASING AG is currently comprised of four members. The Supervisory Board is comprised of six members. Supervisory Board During the 2012 fiscal year, the Board of Directors provided the Supervisory Board with regular, detailed, and extensive information on the Company s economic situation, the status of corporate planning, and current events. In this context, the presentation of the refinancing and liquidity status was a regular and key focus of the reports. The Supervisory Board coordinated strategic developments with the Board of Directors and discussed issues related to risk management, risk provisions, the internal control system, and the internal audit system. Further Supervisory Board responsibilities include appointing and monitoring the members of the Board of Directors, reviewing and adopting the annual financial statements of GRENKELEASING AG, and reviewing and approving the consolidated financial statements, while taking into consideration the auditors reports and the findings of the reviews by the Audit Committee (see Report of the Supervisory Board ). Another key activity is examining and approving the acquisition of companies. The Supervisory Board of GRENKELEASING AG has formed two committees in order to allow it to perform its duties efficiently. These committees have been given certain authorisations which are in line with the Supervisory Boards Rules of Procedure. The committees prepare the issues and resolutions which are relevant to them and which are then discussed by the Supervisory Board as a whole. At the meetings of the Supervisory Board, the chairmen of the committees report on the work of their committees. Audit Committee The Audit Committee is comprised of three members who have expertise in the areas of accounting, corporate planning, risk management, and compliance. The committee primarily deals with external and internal accounting issues, corporate planning systems, and the Consolidated Group s risk management. It reviews and monitors the independence of the auditor in accordance with

16 12 GRENKE Consolidated Group Article of the German Corporate Governance Code. It determines the audit s focus and is responsible for and agrees on the fee with the auditor. The Audit Committee also prepares the decision of the Supervisory Board on the adoption of the annual financial statements and the approval of the consolidated financial statements. As part of the Supervisory Board s activities under the German Corporate Governance Code, the Audit Committee also deals with compliance issues. The Board of Directors regularly reports to the Audit Committee on the Company s compliance situation, including compliance with the KWG. Personnel Committee (Executive Committee) The Personnel Committee is comprised of three members. In particular, this committee prepares the Supervisory Board decisions on personnel and submits proposals for concluding, amending, and terminating employment agreements with members of the Board of Directors. Board of Directors The Board of Directors autonomously manages the GRENKE Consolidated Group and is responsible for the Company's operational and strategic orientation and compliance with the principles of corporate policy. In addition, it prepares the quarterly financial statements, the annual financial statements of GRENKELEASING AG, and the consolidated financial statements. The Board of Directors reports to the Supervisory Board regularly and comprehensively by way of reports and proposals on issues such as strategy and its implementation, planning, business performance, the financial and earnings situation, the strategic and operational business risks, their respective management, and activities involving the Company in its entirety. The Rules of Procedure of the Board of Directors contain a list of transactions requiring approval. Key decisions by the Board of Directors such as acquisitions and financial measures require the approval of the Supervisory Board. The Board of Directors and the Supervisory Board are liable to pay damages to the Company in the event of culpable neglect. Remuneration Report (Part of the Combined Management Report) Remuneration of the Board of Directors Long-term Fixed remuneration components Variable remuneration components remuneration components Total Total Performance Share-based EUR Annual salary Other claims bonus Bonus compensation Christ 185, , , , , , Eicker 102, , , , Grenke 332, , , , , Dr. Hack 200, , , , , , , Kindermann 149, , , , , Total 970, , , , , ,125, ,776,118.69

17 GRENKE Consolidated Group 13 The principles of the remuneration system for the Board of Directors provide for a fixed, performance-unrelated basic annual salary and a variable performance-related component. In addition, agreements on granting phantom stocks were/are in place for Mr. Christ and for Dr. Hack, who left the Board of Directors in fiscal year The structure of the remuneration system is aimed at promoting the Consolidated Group s long-term success and creating incentives to enter into only those risks that are easily controllable by employing statistical tools and an appropriate return for the respective risk. No incentive is provided for entering into inappropriate risks. Furthermore, the regulatory capital of GRENKELEASING AG is neither jeopardised by its remuneration practice, nor does this restrict the long-term retention of its equity. In the year under review, the remuneration paid to the members of the Board of Directors totalled EUR 2,126k (previous year: EUR 1,776k), of which EUR 970k (previous year: EUR 931k) was attributable to gross salaries and EUR 427k (previous year: EUR 488k) to performance bonuses. An annual pension premium of EUR 21k (previous year: EUR 21k) was also paid to an external provident fund for Dr. Hack. Due to Dr. Hack s departure from the Board of Directors as per September 30, 2012 and Mr. Eicker s entry into the Board as per September 1, 2012, the remuneration for both Messieurs is presented on a pro rata basis according to their membership in the Board. Following his departure, Dr. Hack receives a monthly compensation in the amount of EUR 15k for a period of one year as a result of an agreed non-competitive clause. The criteria for the variable remuneration components are defined in advance each year. They are based on the increase in the GRENKE Consolidated Group's operating result ( EBIT Earnings before Interest and Taxes) and the development of the key performance indicators forming part of the GRENKE balanced scorecard (BSC). The attainment of the EBIT growth target is measured retrospectively each year. Failure to achieve the targets means that no variable remuneration is paid at all. The relevant BSC criteria correspond to the key performance indicators for the Consolidated Group s long-term success, and hence the long-term increase in the shareholder value. Among other things, this includes the development in the number of lease contracts and the volume of new business. The attainment of the BSC criteria is measured retrospectively each quarter. By way of signature dated June 29, 2010 and July 13, 2010, the Supervisory Board of GRENKELEASING AG concluded phantom stock agreements with Board of Directors members Dr. Hack and Mr. Christ. Under these agreements, Dr. Hack and Mr. Christ received entitlements to payment equal to the increase in value of 30,000 and 15,000 shares in GRENKELEASING AG, respectively, in relation to a defined basic share price for fiscal years 2010, 2011, and The basic share price is the arithmetic mean of the XETRA closing prices on all trading days from December 1 to December 23 of the respective prior year. The basic share price for 2010, 2011, and 2012 was EUR 28.68, EUR 37.72, and EUR 35.81, respectively. The maximum payment arising from this agreement is limited to EUR 600,000 or EUR 300,000 for the period of three years. Due to Dr. Hack s departure from the Board of Directors as per September 30, 2012, his possible entitlement for 2012 was halved. Under the programme, Mr. Christ is required to invest the respective net amount paid plus a personal contribution of 25 percent of that amount in GRENKELEASING AG shares. For 2010, a total of EUR 374k was paid out on the basis of the phantom stock agreements to Dr. Hack and Mr. Christ. No payment was made for 2011 on the basis of the phantom stock agreements. As per December 31, 2012, the value of the phantom stocks agreement granted totalled EUR 371k. GRENKELEASING AG has also taken out a directors and officers liability insurance policy for members of the Board of Directors. This prescribes a fixed deductible of 10 percent per claim for each member of the Board of Directors; however, this is limited to a maximum of one and a half times the annual fixed remuneration for all claims per year. In case of a termination of their appointment, the employ-

18 14 GRENKE Consolidated Group ment agreements of the members of the Board of Directors include a provision of a possible non-competitive clause. This clause provides for the payment of compensation for a period of two years (cap). The amount is limited to 50 percent of the most recent annual remuneration (cap). The fixed remuneration and the actually paid variable remuneration in the fiscal prior to the termination of the appointment are the basis for calculating the payment of compensation. No settlement agreements are in place. Moreover, none of the members of the Board of Directors received benefits or corresponding commitments from third parties relating to their position as a member of the Board of Directors in the past fiscal year. Remuneration of the Supervisory Board Basic remuneration 2012 Audit Committee Personnel Variable Committee remuneration Travel expenses Total 2012* Total 2011* Name EUR Function Prof. Dr. Lipp Chairman 11, , , , Witt Deputy Chairman 7, , , , Münch Member 7, , , , Schulte Member 7, , , , Staudt Member 7, , , , Prof. Dr. Wörn Member 7, , , , , Total 48, , , , , , , * Fixed remuneration (basic remuneration, Audit and Personnel Committee), variable remuneration and travel expenses In fiscal year 2012, the members of the Supervisory Board received a total of EUR 109k (previous year: EUR 108k) including travel expenses in remuneration for their work. The remuneration for each individual member can be seen in the table above. The remuneration of the members of the Supervisory Board is regulated in the Articles of Association of GRENKELEASING AG and determined by the Annual General Meeting. In accordance with the Articles of Association, the members of the Supervisory Board receive a fixed remuneration of EUR 7,500 for each full year on the Board, except for the Chairman who receives EUR 11,250, plus EUR 600 for each committee membership and EUR 900 for each committee chaired. If members are on the Supervisory Board for only part of a fiscal year, the basic remuneration and the remuneration for committee memberships and chairmanships are calculated on a pro rata basis. The members of the Supervisory Board also receive a variable component if a dividend in excess of EUR 0.20 per share is paid to shareholders. In this case, the remuneration is increased by one half of the percentage by which the dividend per share exceeds the amount of EUR However, the variable component may not exceed 100 percent of the fixed remuneration. GRENKELEASING AG has also taken out a directors and officers liability insurance policy for members of the Supervisory Board. This prescribes a fixed deductible of 10 percent per claim for each member of the Supervisory Board; however, this is limited to a maximum of one and a half times the annual fixed remuneration for all claims per year. The Company also reimburses the members of the Supervisory Board for their cash expenses and VAT insofar as they are entitled to invoice the tax separately and actually do so.

19 GRENKE Consolidated Group 15 Accounting, Audits of Financial Statements, and Financial Reporting Beginning with the fiscal year 2012 report, the management report for the GRENKE Consolidated Group and the management report for the separate financial statements of GRENKELEASING AG in accordance with Section 315 (3) and Section 298 (3) HGB are presented as a combined section. If substantial differences arise between the corporate entities, these are discussed in a separate section. The financial statements of GRENKELEASING AG and the financial statements of the GRENKE Consolidated Group for fiscal year 2012 are published jointly in the Federal Gazette (Bundesanzeiger). The accounting policies applied to the consolidated financial statements for the January 1 to December 31, 2012 fiscal year were conducted in accordance with the rules and regulations of International Financial Reporting Standards as adopted in the European Union. In preparing the consolidated financial statements and the Group management report, the Company was also subject to and applied the provisions of German commercial law under Section 315a (1) HGB. The consolidated financial statements were audited in accordance with the rules and regulations of Section 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the IDW (IDW PS 200). The Audit Committee ensures the independence of the auditor and recommends an auditor for election to the Annual General Meeting. The auditor is elected at the Annual General Meeting in accordance with statutory provisions. Transparency and Reporting to Shareholders GRENKE uses the internet in order to promptly, equitably, and thoroughly report to shareholders, capital market participants, and the public. All ad hoc publications and press releases, annual and quarterly reports and notifications in accordance with Section 15 of the German Securities Trading Act are published in German and English. The Declaration of Conformity with the German Corporate Governance Code is available on GRENKE s website ( Shareholders can use the internet to find information on the GRENKE Consolidated Group, the management, and the organisational structure. Notifications by the Company are published in the Federal Gazette (Bundesanzeiger). Shareholders can also watch the report by the Board of Directors and the general debate during the Annual General Meeting on the internet. Proxies appointed by the Company can be entrusted to exercise voting rights, even in absentia. The dates of regular financial reporting are shown in the financial calendar and on GRENKE s website. The GRENKE shares are reported on in detail in the Investor Relations section. Compliance The purpose of our new compliance department is to ensure compliance with legal provisions, company-internal regulations, as well as with the ethical standards we are committed to. At GRENKE, compliance spans over all operational activities and business processes and embraces all governing bodies, senior management, and employees. The core task of our compliance officer includes the compilation of relevant provisions, the collaboration with the respective departments of the Company, and the training of senior management and employees. In addition, the compliance officer supports the Executive Board preventing breaches of the law, corruption, and fraudulent acts and their clarification. In fiscal year 2012, the compliance officer was invited to a meeting of the Supervisory Board to report his findings.

20 16 GRENKE Consolidated Group Controlling and Risk Management The purpose of GRENKE Consolidated Group s risk management system is the systematic identification, assessment, documentation, and disclosure of risks posed to the parent company and its subsidiaries. It is designed to enable employees and management to address risks responsibly and make the most of the opportunities that present themselves. The GRENKELEASING AG risk management system is being continually expanded and is operated using a risk management tool on the intranet of the GRENKE Consolidated Group. Leasing companies must also comply with the Minimum Requirements for Risk Management [Mindestanforderungen an das Risikomanagement (MaRisk)] published by the Deutsche Bundesbank and the German Federal Office for Supervision of Financial Services. The appropriate risk management and controlling processes demanded by MaRisk for the key types of risks counterparty, market price, liquidity, and operational risks have been implemented accordingly in the GRENKE Consolidated Group. The functionality of the risk management system and the results of its measures are reviewed by the internal audit department which reports directly to the Board of Directors. The details of the risk management system are presented in the management report. Declaration of Conformity of the Board of Directors and Supervisory Board on the German Corporate Governance Code (DCGK) in accordance with Section 161 AktG On April 21, 2012, the Board of Directors and Supervisory Board of GRENKELEASING AG issued the following Declaration of Conformity: The Board of Directors and Supervisory Board of GRENKELEASING AG hereby declare, in accordance with Section 161 AktG, that since the issue of the last Declaration of Conformity on May 3, 2011, the recommendations of the Government Commission on the German Corporate Governance Code in the version dated May 26, 2010 have been complied and will be complied in the future with the following exceptions: In their current valid version, the Company s Articles of Association do not provide for the possibility of absentee voting for shareholders or a corresponding authorisation of the Board of Directors. The Company does not currently intend to provide for absentee voting prior to or at the Annual General Meeting in addition to the proxy holders who are bound by instructions. The introduction of the possibility of absentee voting involves legal risks as well as additional administrative expenses and does not offer significant value to the Company s practice of using proxy holders who are bound by instructions. Accordingly, the recommendations set out in Item and of the DCGK relating to the conduction of absentee voting have not been complied with. By derogation from Item of the DCGK, GRENKELEASING AG does not transmit the convening of the Annual General Meeting together with the convention documents to shareholders, shareholders associations, and domestic and foreign financial service providers by electronic means. Automatic electronic transmission in accordance with Item of the DCGK cannot take place as GRENKELEASING AG has issued ordinary bearer shares and it does not know the identities and addresses of its shareholders. Collecting and updating all relevant addresses would therefore represent a disproportionately large bureaucratic burden. Furthermore, transmission by electronic means is permitted only with the corresponding approval of the Annual General Meeting. No such approval resolution has been adopted. In accordance with Section 30b (3) No. 1 Letter d WpHG, electronic transmission would also have to be explicitly consented to, or at least not objected to, by the shareholders.

21 GRENKE Consolidated Group 17 The contracts of the current members of the Board of Directors do not provide for a severance pay cap, which differs from the recommendation set out in Item of the DCGK. This is because some of the contracts of members of the Board of Directors were concluded before the recommendation in question was included in the DCGK, and hence are protected accordingly. However, a severance pay cap has also not been agreed for newly concluded contracts with members of the Board of Directors as these contracts are often concluded only for the respective term of office and cannot be terminated by giving regular notice. Accordingly, the early termination of the contracts of members of the Board of Directors without good cause is possible only by mutual consent, not unilaterally. The contracts of Board of Director members do not include any severance pay provisions relating to events at the Company and, in particular, a change of control. The recommendations of Item and of the DCGK require that the composition of the Board of Directors and proposals for the election of Supervisory Board members take account of diversity and a specified age limit among others. Instead, the Company believes that, with regard to the composition of the Board of Directors and proposals for the election of Supervisory Board members, the knowledge, skills, and experience required in the respective area of business or responsibility should be key when selecting suitable candidates. The above recommendations of the DCGK are taken into consideration with regard to the composition of the Board of Directors and proposals for the election of Supervisory Board members. In accordance with Item of the DCGK, the Supervisory Board should form a nomination committee composed exclusively of shareholder representatives to suggest suitable candidates to the Supervisory Board for recommendation to the Annual General Meeting. The Supervisory Board of GRENKELEASING AG currently consists of a total of six members, who are to be elected by the shareholders only. The Board of Directors and Supervisory Board do not consider it necessary to form an additional committee. The Company believes that the transparency of the selection procedure intended by the Commission with Item of the DCGK is already guaranteed without such a committee. It therefore does not comply with the recommendation in Item Baden-Baden, April 21, 2012 GRENKELEASING AG The Supervisory Board The Board of Directors