ANNUAL REPORT 2007 GRENKELEASING

Transcription

1 ANNUAL REPORT 2007 GRENKELEASING

2 KEY FIGURES OF GRENKELEASING AG GROUP AND GRENKE GROUP 2007 Change 2006 Unit Key figures of GRENKE Group including franchise partners New business of GRENKE Group 509,171 11% 459,996 EURk - of which: Germany 301,786 2% 296,855 EURk - of which: International 207,385 27% 163,141 EURk New business of franchise partners 96,306 75% 55,002 EURk - of which: Factoring business (Germany) 48, % 22,500 EURk Key figures of GRENKE Group leasing business excluding factoring New business GRENKE Group leasing business 460,372 5% 437,459 EURk Contribution margin 2 of new business 65,120 7% 60,730 EURk Number of new contracts 60,000 5% 56,955 Units Share of IT products in the lease portfolio % Share of corporate customers in the lease portfolio 100 1% 99 % Mean acquisition value 7.7-5% 8.1 EURk Mean term of contract 45-2% 46 Months Volume of leased assets 1,512 11% 1,365 EURm Number of current contracts 201,854 9% 185,413 Units GRENKELEASING AG Group, consolidated figures Net interest income from leasing business 62,389 1% 61,696 EURk Expenses from settlement of claims -17,139 13% -15,148 EURk Profit from insurance business 16,733 10% 15,228 EURk Profit from new business 20,418 8% 18,875 EURk Profit from disposals (income exceeding the calculated residual value) 1,892-41% 3,185 EURk Result from currency translation difference EURk Other operating income 1,170 33% 879 EURk Costs of new contracts 12,834 2% 12,564 EURk Costs of current contracts 4,781 13% 4,236 EURk Project costs and basic distribution costs 10,723 25% 8,559 EURk Management costs 10,089 3% 9,837 EURk Other costs 1,736 20% 1,448 EURk EBIT (Earnings before interest and taxes) 45,224-6% 48,066 EURk Other interest result % -293 EURk Income/Expenses from market valuation of financial instruments % 44 EURk EBT (Earnings before taxes) 44,815-6% 47,817 EURk Net profit (consolidated net profit pursuant to IFRS) 32,125 5% 30,510 EURk IFRS earnings per share % 2.23 EUR Dividend % 0.55 EUR Embedded value of the lease portfolio (incl. Equity before taxes) % 291 EURm Embedded value of the lease portfolio (incl. Equity after taxes) % 257 EURm Cost/income ratio % 43.4 % Return on equity (ROE) after taxes % Average number of employees 411 8% 384 Persons

3 GRENKELEASING AG GROUP ANNUAL REPORT 2007

4 01 LETTER TO SHAREHOLDERS 02 SUPERVISORY BOARD REPORT 03 CORPORATE GOVERNANCE 04 CORPORATE SOCIAL RESPONSIBILITY 05 STOCK AND INVESTOR RELATIONS 06 GROWTH STRATEGY 07 BUSINESS MODEL AND HISTORY OF GRENKELEASING 08 FINANCIAL REPORT

5 CONTENTS 01.0 Letter to the Shareholders from the Board of Directors Supervisory Board Report Corporate Governance Corporate Social Responsibility The GRENKELEASING Stock in Investor Relations The Stock at a Glance Growth Strategy Development of the Industry and the Competitive Environment Development of the Domestic Market and the Major Foreign Markets of GRENKELEASING History of the Group s development Highlights GRENKELEASING Locations in Europe Overview of the Group The Board of Directors of GRENKELEASING AG Business Model The GRENKELEASING Franchise System Optimal Financing Strategies Transparency in Financial Reporting Positioning on the Refinancing Market 54 Glossary Group Management Report for Fiscal Year Consolidated Financial Statements for Fiscal Year Notes to the Financial Statements for Fiscal Year Auditors Report 146

6 04 LETTER TO SHAREHOLDERS 01.0 SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY

7 05 LETTER TO SHAREHOLDERS 01.0 SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY LETTER TO THE SHAREHOLDERS FROM THE BOARD OF DIRECTORS Dear Shareholders, Ladies and Gentlemen, We are pleased to report on another successful year for the GRENKE Group in this Annual Report. On our way to becoming the European leader in small-ticket IT leasing, we have made great progress and have been able to highlight the success of our strategy once again. Europe was the focus of our developments for 2007 and at the beginning of With the formation of four new franchise companies, our geographic expansion has been more rapid than ever in the history of our company. We also took over franchise partners in the UK and in Poland, thus completing a full development cycle in our franchise system for the first time from the formation of a company through a partner, to its development by the partner, to our takeover of the company. This document highlights the success of this system when it comes to tap quickly into new markets for GRENKELEASING. In both countries, the annual volume of new business under the GRENKELEASING brand has already exceeded EUR 10m. We have also reached the cell division stage in Italy, founded an additional location, and added another sales location in France, our most important foreign market, where we now have eight offices across the country. We are present in 19 European countries. Additional areas for expansion in the EU include Finland, the Baltics, and selected countries in southeastern Europe. In the next few years, we want to use the momentum that the GRENKELEASING brand has gained in Europe primarily to solidify our presence here. The high growth rates send a clear message: We have completed the start-up phase related to market entry in an increasing number of countries and are now beginning to profit from our growing recognition. This is how we have been able to increase new foreign business in fiscal year 2007 for the GRENKE Group, including franchises, by 27.1 percent to EUR 207.4m and experience significant growth in both our new markets as well as our well-established foreign markets, such as France.

8 06 LETTER TO SHAREHOLDERS 01.0 SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY We have also been successful in our domestic market in Germany: We launched new products at the right time to supplement our traditional leasing business. Thus, our factoring portfolio grew considerably while lease financing was burdened in the first half of 2007 by uncertainties regarding the German corporate tax reform, and then only saw subdued development in volume in the second half of the year. As the uncontested market leader in small-ticket IT leasing, we are developing with the market a larger market share would only be possible at the expense of profitability, which is not our strategy. Overall, however, we were able to increase new business in Germany for the GRENKE Group, including franchise partners, by 1.7 percent to EUR 301.8m in the fiscal year. Our clear focus on earnings is obvious in the above-average increase of the contribution margin 2 (DB2) which is the key performance indicator for our business: With an increase in new business for the GRENKE Group s leasing division, including franchise partners, of 5.2 percent to EUR 460.4m, we further expanded the contribution margin 2 of the leasing business by 7.2 percent to EUR 65.1m. The earnings power of the GRENKE Group also increased. Accordingly, the embedded value of our contract portfolio on a pre-tax basis increased considerably by 10 percent to EUR 320m and, including the positive effects resulting from the corporate tax reform in Germany, by 14 percent to EUR 293m. The foreign expansion of the GRENKE Group required investments in personnel and office space. Furthermore, the new countries must be integrated into our central IT infrastructure. This will temporarily burden our earnings before taxes, which amounted to EUR 44.8m for the Group in the fiscal year after totaling EUR 47.8m in the prior year. The result therefore stayed within our budgets and, accordingly, we reached our original goal of net income of EUR 30.5m before one-off tax effects. If the tax effects are included, net income increases to EUR 32.1m. Thus, we also had a very high return on equity after tax of 14.2 percent in fiscal year 2007, based on an equity ratio of 17.9 percent, which exceeded our target equity ratio of 16.0 percent.

9 07 LETTER TO SHAREHOLDERS 01.0 SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY GRENKELEASING therefore developed positively while remaining stable and solid. We are pleased that this performance is reflected in our confirmed BBB+ rating from Standard & Poor s. Of course we are not satisfied with the stock price, which could not defy the weak state of the international capital markets following the sub-prime crisis in the fiscal year. However, we are confident that our positive overall development and the convincing prospects for growth for GRENKELEASING will in the future be better reflected in the value of the stock. We thank you for your trust in us and invite you to join us in experiencing the future success of GRENKELEASING in Europe. Wolfgang Grenke Chairman of the Board of Directors

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11 09 LETTER TO SHAREHOLDERS 02.0 SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY

12 10 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 02.0 SUPERVISORY BOARD REPORT Prof. Dr. Ernst-Moritz Lipp Chairman of the Supervisory Board Dear Shareholders, During the fiscal year, the Supervisory Board performed its tasks in accordance with the law and the articles of incorporation of GRENKELEASING AG. It worked with the Board of Directors on an ongoing basis, providing it with regular advice, and monitored the management of the Company s business. The strategic focus of the Group was pursued in close cooperation between the Board of Directors and the Supervisory Board. Based on reports from the Board of Directors and minutes from its meetings, the Supervisory Board was provided with detailed and comprehensive information on the financial situation, strategic development, status of business planning, current events and the personnel situation. The Supervisory Board was directly involved in all fundamental decisions relating to the Company. meetings of the Supervisory Board included the approval of the financial statements and the consolidated financial statements as of December 31, 2006, the presentation of new methods for sales management, the situation and development of foreign sales, the acquisition and performance of the franchisees Grenke Leasing Ltd., Guildford, UK, and GRENKE LEASING Sp. z o.o., Poznan, Poland, as well as the German Corporate Governance Code, as amended, and the declaration of compliance with the version dated June 12, Where required by law and the articles of incorporation, the Supervisory Board voted on the reports and proposals for resolutions made by the Board of Directors following careful examination and consultation. It also received regular information on the Group s risk situation and on its risk management and its further development. Additional agenda items at the

13 11 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 02.0 In accordance with the articles of incorporation, the Supervisory Board of GRENKELEASING AG has six members. The members of the Supervisory Board in fiscal year 2007 were: Prof. Dr. Ernst-Moritz Lipp, Chairman Mr. Gerhard E. Witt, Deputy Chairman Mr. Dieter Münch Dr. Oliver Nass Mr. Erwin Staudt Dr. Brigitte Sträter terminating the contracts of employment with the members of the Board of Directors. The personnel committee met twice during fiscal year It discussed the appointment of Dr. Uwe Hack as Deputy Chairman of the Board of Directors and recommended his appointment to the Supervisory Board. At its meeting on April 30, 2007, the Supervisory Board appointed Dr. Hack as Deputy Chairman of the Board of Directors, replacing Mr. Konprecht. All members of the Supervisory Board have voluntarily agreed to observe the corporate governance principles effective in the fiscal year. In accordance with its rules of procedure and for the efficient discharge of its duties, the Supervisory Board has established two committees, the audit committee and the personnel committee (presidium committee). At the meetings of the Supervisory Board plenary session, the chairmen of the committees reported extensively on the work of the committees. The audit committee has three members with specialist accounting knowledge. It deals primarily with external and internal accounting issues, the Company s risk management, auditor independence, the audit priorities, and the fee arrangements with the auditor. The audit committee also prepares the Supervisory Board s resolution on the approval of the financial statements and the consolidated financial statements. The audit committee met three times during fiscal year The Supervisory Board met a total of four times in fiscal year All members of the Supervisory Board attended almost every meeting. Between its regular meetings, the Board of Directors provided the Supervisory Board with detailed information about significant events. As the Chairman of the Supervisory Board, I was personally in regular contact with the Chairman of the Board of Directors and the Deputy Chairman of the Board of Directors in addition to regular appointments and was kept informed of the major transactions and the current course of business. The financial statements of GRENKELEASING AG as of December 31, 2007 prepared by the Board of Directors, the management report for the Company for fiscal year 2007, the consolidated financial statements as of December 31, 2007 and the group management report for fiscal year 2007 were submitted to the Supervisory Board for review at its meeting on January 28, The proposal on the appropriation of profits of GRENKELEASING AG made by the Board of Directors was submitted to the Supervisory Board. The personnel committee has three members. It deals with the Supervisory Board s personnel decisions and is responsible for concluding, amending and

14 12 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 02.0 The financial statements were audited by the audit firm elected for the fiscal year by the Annual General Meeting on May 8, 2007, Ernst & Young AG, Wirtschaftsprüfungsgesellschaft Steuerberatungsge - sellschaft, Eschborn/Frankfurt am Main. The responsible auditor attended the audit committee s meeting to discuss the financial statements and explained the significant findings from the audit. The audit committee satisfied itself of the auditor s independence. The accounting policies used in preparing the separate financial statements of GRENKELEASING AG were in keeping with the provisions of German commercial law. The audit of these financial statements for the year ended December 31, 2007 was conducted pursuant to Sec. 317 HGB [ Handels- gesetzbuch : German Commercial Code] and in compliance with the generally accepted standards for the audit of financial statements set forth by the 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, 2007 were prepared in accordance with Sec. 315a (1) HGB and based on International Financial Reporting Standards (IFRSs) as adopted by the EU. The audit of the consolidated financial statements was conducted pursuant to Sec. 317 HGB in compliance with the generally accepted standards for the audit of financial statements set forth by the Institute of Public Auditors in Germany (IDW AuS 200). An unqualified audit opinion was rendered on both the financial statements of GRENKELEASING AG and the consolidated financial statements of the GRENKELEASING AG Group. The Supervisory Board reviewed the financial statements presented to it by the Board of Directors and the auditor and discussed the results in its meeting on January 28, The auditor attended the meeting and reported on the main audit findings. Having duly conducted its own examination, the Supervisory Board raised no objections to the findings from the audit of the financial statements conducted by the auditor and thus approved and adopted the financial statements of GRENKELEASING AG and the consolidated financial statements of GRENKELEASING AG on January 28, The Supervisory Board concurs with the proposal for the appropriation of profits made by the Board of Directors. At the meeting on January 28, 2008, the Supervisory Board also addressed the mandatory disclosures pursuant to Secs. 289 (4) and 315 (4) HGB and the report regarding these disclosures. Reference is made to the relevant explanations in the management report of GRENKELEASING AG and in the group management report. We reviewed these disclosures and explanations, which the Supervisory Board believes to be complete, and adopted them. The aforementioned documents and proposal for the appropriation of profits made by the Board of Directors were distributed to us in due time by the latter. The Supervisory Board reviewed the financial statements presented to it by the Board of Directors and the auditor and discussed the results in its meeting on January 28, In the past fiscal year, the GRENKELEASING AG stock was unable to escape the crisis on the financial markets, despite the fact that our business performed as planned. In fact, the foundations of our business improved both in terms of quality and quantity. In terms of its structure, the leasing business is a growth industry in the European economy.

15 13 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 02.0 Based on costs per contract and the cost-income ratio, GRENKELEASING has significant cost advantages on a European scale compared with institutional competitors such as banks. Foreign operations are expanding strongly, some of them at high, double-digit rates. The new business divisions Factoring and Auto Fleet Leasing have also developed positively. We therefore share the disappointment of our shareholders over the performance of our stock. Despite the difficult refinancing conditions, the Company s refinancing is not at risk and has not become significantly more expensive. Due to our low-risk business model with a wide spread of minor individual risks and a highly professional risk management system which has a long-standing track record, we do not see any reason to change our assessment for the future. The Supervisory Board would like to thank the members of the Board of Directors and all company employees. The Group s continued success would not have been possible without their personal commitment in the past year. Baden-Baden, Germany, January 28, 2008 For the Supervisory Board Prof. Dr. Ernst-Moritz Lipp Chairman

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17 15 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 03.0

18 16 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 03.0 CORPORATE GOVERNANCE The principles of value-oriented and transparent corporate governance are very important for the assessment and rating of listed companies. The Board of Directors, Supervisory Board, and executive employees of GRENKELEASING AG identify with these principles. Responsible corporate governance is a top priority at GRENKELEASING. We consider our commitment to corporate governance to be an important measure to build confidence among our present and future customers, shareholders, lenders, employees, business partners and the general public. GRENKELEASING AG complies with all of the recommendations of the German Corporate Governance Code as amended in June The Board of Directors and the Supervisory Board have addressed compliance with the Code at their meetings and adopted the declaration of compliance with the German Corporate Governance Code reprinted on page 18. This declaration is found on GRENKELEASING AG's website. Group Management and Monitoring GRENKELEASING AG has a Board of Directors comprising five members and a Supervisory Board with six members. Supervisory Board In fiscal year 2007, the Board of Directors regularly provided the Supervisory Board and its committees with detailed and comprehensive reports on the economic situation, the status of business planning and recent events at the Company. The Supervisory Board coordinated the strategy and discussed issues relating to risk provisions and risk management with the Board of Directors. The Supervisory Board s functions include appointing and monitoring the directors, approving the financial statements of GRENKELEASING AG and the Company s consolidated financial statements with due regard to the auditor s audit reports and the audit findings by the audit committee (cf. the report by the Supervisory Board on page 10). The Supervisory Board s rules of procedure stipulate the formation of committees. The Supervisory Board of GRENKELEASING AG has set up two committees. Audit Committee The audit committee has three members with specialist accounting and compliance knowledge. It deals primarily with external and internal accounting issues, the Company s risk management, auditor independence, the audit priorities, and the fee arrangements with the auditor. The audit committee also prepares the Supervisory Board s resolution on the approval of the financial statements and the consolidated financial statements. Beginning in fiscal year 2008, an additional responsibility of the Audit Committee within the scope of the tasks of the Supervisory Board according to the German Corporate Governance Code is handling compliance issues. In this regard, the Board of Directors will also report regularly on the compliance situation in the company in addition to its regular reporting obligations. Personnel Committee (Presidium Committee) The personnel committee has three members. It deals with the Supervisory Board s personnel decisions and is responsible for concluding, amending and terminating the contracts of employment with the directors. The personnel committee also performs the duties of the nominating committee.

19 17 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 03.0 Board of Directors The Board of Directors is responsible for managing the Group and determines its strategy and business policy. It is also responsible for the preparation of the quarterly reports, the financial statements of GRENKELEASING AG, and the consolidated financial statements. The Board of Directors informs the Supervisory Board regularly and in detail in its directors reports and discussion papers on the Company as a whole, questions of strategy and its implementation, planning, performance, financial position and results of operations, and on business risks. The Board of Directors rules of procedure list a number of transactions that require approval. Major directors' decisions, e.g. on acquisitions and financial measures, are subject to 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 a negligent breach of the duty of care. GRENKELEASING AG has concluded a directors and officer s liability insurance police with a reasonable excess for the Board of Directors and the Supervisory Board. Compensation Structure and Remuneration of Directors and Supervisory Board Members The compensation system for the Board of Directors provides for a fixed basic annual payment and a variable compensation component. Variable compensation is calculated with reference to the Company s earnings for the current year and criteria which are of relevance for the Company s long-term success. The individual composition of the remuneration of directors is broken down into fixed and variable components and stated in the management report. Stock Option Programs The first employee stock option program (IPO stock option program) was launched in connection with the flotation of the GRENKELEASING AG stock. A second stock option program was launched in These employee stock option programs are intended to allow members of the Board of Directors and the other employees of the Company and of its affiliated companies to participate directly in the future growth in corporate value. The stock options exercised by directors and the valid options still held by directors as well as detailed information on our stock option programs are stated in the management report. Supervisory Board Remuneration The compensation paid to members of the Supervisory Board is defined in the articles of incorporation and was determined by the Annual General Meeting. In accordance with the articles of incorporation, the members of the Supervisory Board receive a fixed annual compensation of EUR 6,000, the Chairman receives EUR 9,000. On top of this, a variable component is paid if a dividend in excess of EUR 0.20 per share is paid to shareholders. In this case, the fixed compensation is increased by one quarter of the percentage by which the dividend per share exceeds the amount of EUR The variable compensation component may be no more than 50% of a Supervisory Board member s fixed compensation. Supervisory Board members who sit on a committee receive an additional EUR 600 and the chairman of a committee receives EUR 900 each fiscal year. The individual composition of the remuneration of members of the Supervisory Board is broken down into fixed and variable components and stated in the management report.

20 18 LETTER TO SHAREHOLDERS SUPERVISORY BOARD REPORT CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY STOCK AND INVESTOR RELATIONS GROWTH STRATEGY BUSINESS MODEL AND HISTORY OF GRENKELEASING GLOSSARY 03.0 Accounting, Auditing and Financial Disclosure The group accounts for the fiscal year from January 1 to December 31, 2007 are prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the EU. In addition, in preparing the consolidated financial statements and the group management report, the Company must observe the provisions of Sec. 315 a (1) HGB [ Handelsgesetzbuch : German Commercial Code] and has done so. The audit of the consolidated financial statements was conducted pursuant to Sec. 317 HGB in compliance with the generally accepted German principles for the audit of financial statements adopted by the Institute of Public Auditors in Germany (IDW AuS 200). The audit committee ensures that the auditor is independent and nominates an auditor to be elected by the shareholder meeting. The auditor is elected by the Annual General Meeting in accordance with the relevant legal requirements. Transparency and Shareholder Information GRENKELEASING uses the internet to provide detailed and timely information to all shareholders, capital market participants, financial analysts, shareholders associations and the media. We publish all ad hoc releases and press releases, annual and quarterly reports, and reports made in accordance with Sec. 15 WpHG [ Wertpapierhandelsgesetz : German Securities Trading Act] in German and English. Our declarations of compliance with the Corporate Governance Code are published on our website. Our shareholders can find information about the Group, its management and organizational structure on the internet. The Company s announcements are published in the electronic version of the Bundesanzeiger [ German Federal Gazette ]. At the Annual General Meeting, shareholders can watch the Board of Directors report and the general discussion on the internet. Company-appointed proxies can be asked to exercise voting rights, also in the shareholder s absence. The dates on which the regular financial reports are published are listed in the financial calendar. We report in detail on the GRENKE share in the chapter entitled The GRENKELEASING Stock in 2007 on page 26. Financial Control and Risk Management The risk management system at GRENKELEASING AG has the function of systematically identifying, assessing, documenting and disclosing risks. It is designed to enable employees and management to address risks responsibly and make the most of the opportunities that present themselves. The risk management system introduced in 2003 has been continuously expanded and is operated using a risk management tool on the GRENKELEASING Group s intranet. The function of the risk management system and the result of measures taken are reviewed by the internal audit department. The internal audit department reports directly to the Board of Directors. Details regarding the risk management system are stated in the management report. Declaration of Compliance The Board of Directors and the Supervisory Board of GRENKELEASING AG issued the following declaration of compliance on April 30, 2007: The Board of Directors and the Supervisory Board of GRENKELEASING AG declare in accordance with Sec. 161 AktG [ Aktiengesetz : German Stock Corporation Act] in conjunction with Sec. 15 EGAktG [ Einführungsgesetz zum Aktiengesetz : Introductory Act of the German Stock Corporation Act]: